Vlad and Elvira Sell Dollars and Buy Gold, Should You?

Russia is not alone in lightening up on dollar exposure. In the 4th quarter of last year, “reserve managers actively decreased their allocation to USD—the share of USD reserves declined despite modest Dollar appreciation—while they actively added to EUR and CNY reserves. According to Goldman calculations, the drop in Q4 USD reserves was equivalent to just over $50 billion in dollar reserves sold,reports ZeroHedge.com.

Banks’ Unrealized Losses soon to be Realized

The folks at GNS Economics, in their “Q-Review 1/2019” report, contend, contrary to the president, “the global economic recovery since 2009 has not been real. It has been achieved with massive debt and monetary stimulus, which has created an economy where normal rules of the market economy do not apply.”

The Trouble with Complacency

Everything is A-OK and warm and fuzzy for the investing public.  “Social optimism is evident everywhere,” writes Prechter. “Optimistic investment in stocks and junk bonds remain at historically high levels. Indebtedness is also historically high. Student loans are at a record. Auto loans--many of them for SUVs, muscle cars and tricked-up trucks--are at a record.”

The Transportation Boom Ends

 Less shipping means less buying, selling, and producing. Government interference in the form of low interest rates and the threat of tariffs pulled economic activity forward. However, now the economy is digesting that bubble of activity.

Synthetic Danger, Again

The whole idea of capital relief, as the name would imply, is to lower the amount of equity required and increase leverage.  What’s a banker to do when a pension or hedge fund rep stops by and offers to unlock some of his or her bank’s idle capital?

The Value of Work

Gill’s book, “How Starbucks Saved My Life: A Son of Privilege Learns to Live Like Everyone Else”  is a love letter to Starbucks’ employees and customers in between ruminations about his childhood, career, and past mistakes that left him an unemployed, broke white man in his early 60’s.  

Housing Affordability Down, Inventory Up

For those believing this is the pause that refreshes, James Stack thinks otherwise. “Housing could be heading for its worst year since the last housing crash," Stack, 67, said told Bloomberg in a phone interview. “Expect home sales to continue on a downward trend in the next 12-plus months. And there’s a significant downside risk to housing prices if a recession takes hold.”

End This “Expansion” Now Chairman Powell!

The central bank creates expansions and then murders its darlings, to borrow a phrase.  Austrian economists say booms are the problem, with low interest rates breathing life into ill-conceived ventures and, once hatched, keep them from death’s door, wasting capital to the detriment of society.  Recessions and depressions cleanse the economy of these malinvestments, re-aligning production with society’s collective time-preference.

Trump's Gut Feeling

The fact is, our bodies react to news and risks quicker than our brains do. Conscious thought is left in the dust when we react and especially when we take risks. Of course neoclassical economists would poo-poo the notion of our bodies reacting to threats and risks, after all, we’re all rational beings, doing what’s rational at all times. Yeah, right.  

The Old Fashioned Fed Chair

Trump would like Volcker’s height, 6 foot 7 inches, as opposed to Janet Yellen, who was fired for her lack of it, at 5 foot 3 inches.  However, while Trump has his eye on the stock market, Volcker always kept his on the price of gold. The ex-Fed Chair mentions the yellow metal often in “Keeping at It: The Quest for Sound Money and Good Government.”   

Less Fed, Less Bubble

We often hear that rich are getting richer and everyone else is being left behind.  However, it is only the Austrians who point to the Fed’s policies as creating this great divide in wealth and incomes.