Category: simonblack

Over fifteen centuries ago, according to an ancient Sanskrit legend, a mythical Hindu priest named Sissa was ordered to invent a new board game to entertain the king of Taligana.

Sissa labored over the task for quite some time, but he eventually brought the King a military strategy game with a 64-square board and beautifully hand-carved pieces. Today we call this game chess. And according to the legend, the King was absolutely enamored with it.

So enamored, in fact, the King offered Sissa any reward he desired. So, the priest asked for a single grain of wheat to be placed on the first square of the chess board. Then two grains on the second square. Four grains on the third. Eight grains on the fourth. And so on.

The King of Taligana thought the request to be humble and cheap. After all, a little bit of wheat was nothing compared to the endless entertainment of this new game. So, he ordered his men to bring in the grain.

But as they continued counting, the numbers began to grow quickly.

One-quarter of the way through the board (sixteen squares), Sissa was owed around 131,000 grains– roughly four kilograms of wheat. No big deal.

But with every square the amount kept doubling. Halfway through the board Sissa is owed over 8 billion grains– about a quarter of a million TONS of wheat. And it keeps doubling from there.

By the final square, the amount of grain owed is far more than all the wheat that the world can possibly produce.

This is known in mathematics as exponential growth, i.e. when something grows at a faster and faster rate. Sort of like my kids. Or more ominously, the US national debt.

According to data just released by the federal government, interest on the national debt for Fiscal Year 2024 (which just ended last Monday, September 30) was roughly $1 TRILLION.

That’s just the interest bill.

And while that number itself is simply astonishing, it’s even more important to put it in context. $1 trillion is significantly more than the government spends on virtually EVERY other line item, including the military and Medicare.

In fact, Social Security is the ONLY federal program whose budget exceeds interest on the debt. For now. But within the next 5 years, interest on the debt will surpass even Social Security.

Just going back to FY 2020— which started pre-pandemic on October 1, 2019— the interest bill that year was “only” $345 billion. And in FY21, it only rose to $352 billion. That was just a $7 billion, or 2%, increase. No big deal.

But in FY 2022, it took a more significant jump to $475 billion. Then $660 billion. And now a TRILLION dollars.

So not only is the interest bill increasing, but the rate at which it is increasing… is increasing.

Just like grains of wheat on a chessboard, this is an exponential problem. At first it looks manageable. Even paltry. But around halfway through the chessboard, the problem starts to spiral out of control very quickly.

Technologist and author Ray Kurzweil actually refers to this phenomenon as “the second half of the chess board”, i.e. the part of the exponential growth model where the problem becomes too big to solve.

How did the most powerful nation in the history of the world reach this point?

For starters, a complete lack of discipline when it comes to federal spending. For decades now, the government has spent money as if there were no limit and would never be any consequences to increasing the debt.

This was most noticeable during the pandemic when they (and the media) engineered widespread fear and hysteria, shut down the economy, and then spent trillions of dollars to keep everyone afloat.

The national debt skyrocketed as a result. But at the time, interest rates were practically zero. So, the government’s borrowing costs were pretty negligible. That’s why the annual interest bill barely moved between FY2020 and FY2021.

But as you probably recall, rates soared in 2022. And so did the government’s interest bill.

Each year, in fact, much of the existing national debt matures; money that the Treasury Department borrowed five or ten years ago becomes due and must be paid back.

Naturally, the Treasury Department doesn’t have any money to pay back its lenders. So instead, they issue new debt to repay the old debt.

The problem, of course, is interest rates. The money they borrowed years ago was at 0% or 1%. Today it’s 4%.

Just this past Fiscal Year (2024) the Treasury Department refinanced roughly $5 trillion in debt at significantly higher interest rates… in ADDITION to the $2 trillion in NEW debt that they borrowed.

This means that NEXT YEAR’s interest bill will likely be even HIGHER.

You can see how this problem can quickly become a crisis. Again, five years ago the annual interest expense was $345 billion. Five years from now it could easily be $2 trillion.

Sure, the government’s overall tax revenue is also increasing. A bit. But the interest bill is growing much faster– at an exponential rate. You can’t have linear growth in your revenue and exponential growth in a major expense and expect to survive.

It appears that the US government has crossed the proverbial Rubicon into the second half of the chessboard. And their options are extremely limited.

On one hand, the government could slash spending, reform entitlement programs (like Social Security, welfare, etc.), and engage in a massive deregulation effort to boost economic productivity. But I’m not holding my breath.

Their other approach will be to increase taxes and print tons of money to keep interest rates artificially low.

This is already starting to happen.

The government released its new inflation data just this morning showing that core inflation is STILL on the rise. Inflation is not beat by a long shot. And yet the Federal Reserve is going full steam ahead in its rate cutting cycle.

Fed officials aren’t stupid. They know that 0% interest rates are the only hope for the US government’s financial survival.

And the chief consequence, of course, will most likely be some pretty nasty inflation.

This is why we keep saying that real assets make so much sense, i.e. crucial materials like metals, energy assets, and productive technology that are (1) useful and critical in the economy, and (2) cannot be created out of thin air by central banks or governments.

Historically, real assets perform extremely well and hold their value during inflationary times.

And the added benefit is that, right now, many of the businesses which produce real assets are at historically cheap levels. We’ll show you a great example tomorrow.

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Like most kids, I wanted to be an astronaut when I was little. Then a fireman. Then a pirate. Then a movie star.

My parents were pretty traditional so they hoped I would grow up to become a doctor. This is pretty typical; after all, parents just want their kids to be financially secure.

I think about this a lot with my kids— both of whom are extremely young. I give a lot of thought to what their world will look like in 20 years given the seismic geopolitical and macroeconomic shifts taking place.

America’s status as the world’s sole superpower is dwindling before our very eyes. The dollar’s role as the dominant global reserve currency is rapidly waning. And the rise of AI and robotics promises to upend just about every occupation imaginable, including white collar professional jobs which currently require advanced, outrageously expensive university degrees.

As my kids grow and develop, my plan is to focus on developing traits that machines cannot emulate, like genuine creativity, leadership, risk tolerance, big picture thinking, and bold decisiveness.

AI is a powerful tool they should learn to harness. But it will not be their master. After all, there’s a reason Captain Kirk was in charge of the Enterprise and not Spock.

However in terms of what the landscape for jobs or business opportunities might look like in a couple of decades, that’s anyone’s guess. I have no idea what will be the lucrative industries in a world where AI is pervasive.

In fact the only occupation I can think of which will provide absolute financial security is that of a union boss.

I’m totally joking of course. But in all honesty, being a union boss certainly seems to provide a cushy lifestyle these days. And as long as there are delusional leftists in our midst, there will always be fat cat union bosses to steal from their constituents.

For example, on Friday we highlighted that the man in charge of the dockworkers union— which briefly went on strike last week, makes about a million dollar per year, lives in a mansion, and drives a Bentley.

He’s far from alone.

Stacy Davis Gates, the President of the Chicago Teachers Union (CTU), pulls in nearly $300,000 per year.

Despite being in charge of the teacher’s union for Chicago public schools, though, she sends her child to a $16,000 per year private school.

As head of the union, Gates understands where the most important investments are made. The CTU is the largest single contributor to Chicago Mayor Brandon Johnson’s campaign fund.

Which is probably why Comrade Mayor Johnson routinely caves to the demands of the teachers union… including their newest demand for another massive (totally unaffordable) pay increase.

Bear in mind that the city has some of the worst performing schools in the country. It’s beyond outrageous.

And the CTU is against school choice; they want kids locked into attending the failing schools in their neighborhood, as opposed to giving parents the option to send their children to better schools elsewhere.

To add insult to injury, the school district already has a massive, bloated budget. The district’s total budget has increased over 97% since 2012. Yet over the same period, test scores in reading, math, and science have plummeted.

In other words, the more money the school district spends, the worse the outcome for the students.

The Chicago Teacher’s Union is totally oblivious to this reality, and they are now demanding more than $10 billion in new incentives and compensation… because they’ve clearly been doing such a great job.

Gates has already given the order to Comrade Mayor Johnson, so the wheels are in motion to bankrupt the city with CTU’s demands, and bankrupt the students’ future.

It’s pretty obvious that Ms. Gates is the one calling the shots in Chicago. Bear in mind, this is not an elected official. She’s a union boss. But she has the Comrade Mayor’s balls in her purse.

Not to be outdone, Gates’s counterpart at the national level is Randi Weingarten, head of the American Federation of Teachers (AFT)— the second largest teachers union in America.

In 2022, she said that parents concerned about critical race theory and gender ideology in schools were spreading “misinformation,” and added, “This is the way in which wars start.’’

So according to Comrade Randi, being involved and concerned about what your children are being taught in schools is the moral equivalent of Pearl Harbor.

By the way, she makes about $500,000 per year, plus massive benefits and incentives. And she, too, has the ear of some of the most powerful politicians in the country, including President Jill Biden and her husband Joe.

There are so many more examples about the power of union bosses.

I wrote recently about how a steelworkers union boss was able to get Jill & Joe to kneecap a competitor— and eliminate billions of dollars being invested in the distressed American steel industry.

The head of the FTC, Lina “Ghengis” Khan, routinely cites union concerns as she goes after businesses, even though her charter is to protect consumers, not unions.

Is this how you protect democracy? By ignoring consumers, shareholders, parents, and voters, and taking orders from unions?

These types of unelected special interests are exactly why the graft going, why the deficits keep rising, and why the national debt keeps increasing.

America is full of highly paid, out of touch union bosses who steal productivity, distort capitalism, and divert resources to their benefit.

Obviously they lie through their teeth and pretend that it’s all about protecting workers. But if that were true, wouldn’t ‘the workers’ already be so much better off because of all the great deals their unions have made?

Except workers are consistently worse off.

So their union bosses are either totally incompetent… or (and?) they’re totally full of shit and don’t actually care about the workers at all.

Probably both. The union bosses are in it for themselves— for the highly paid, cushy lifestyle where they’re never held accountable for their failures. They rake in absurd salaries and massive union revenue, then use the money to buy politicians.

It’s a horrendous circle where the unions keep corrupt politicians in office, then the corrupt politicians use their power to protect the union bosses.

How ironic that the so-called party of democracy is controlled by unelected, incompetent, corrupt union bosses.

And all this does is add to America’s already gigantic financial problems.

We’ll talk about those more in a couple of days when the Treasury’s annual financial report is published.

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If you’ve ever been on a road trip through Pennsylvania, Ohio, or Indiana, you’ve probably driven past a billboard advertising Amish furniture, quilts, or cheese.

You may have even driven past a horse and buggy, driven by someone who looks straight out of the 1800s.

The Amish are a Christian sect known for their simple, traditional way of life, rooted in 17th-century Anabaptist beliefs.

Rejecting modern technology, the Amish believe that innovations like cars, electricity, and smartphones make life too easy, undermining their core values of hard work, humility, and self-sufficiency. They emphasize strength of the community over the freedom of the individual.

Different Amish groups pick and choose which technologies are acceptable to preserving their way of life. Some may appear to be living in the early 1900s, with limited electricity and even a community phone connection.

But other, stricter communities may shun every technology created after 1850.

And in this way, it struck me, that the Amish are a lot like unions.

You may have heard that the International Longshoremen’s Association, the dockworkers’ union, went on strike earlier this week.

The initial strike only lasted a few days; the companies quickly gave in to their demands, not so much out of principal, but in large part due to political pressure from the White House.

There are still a number of details to be worked out, but as it stands right now, dockworkers will receive a 62% increase in pay over six years.

Obviously any worker should be free to negotiate maximum pay with their employer. And the employer should be able to hire and fire at will based on employees’ performance and skill. That’s how a free labor market works.

But I was pretty surprised to learn that starting pay for a dockworker is over $81,000 per year. And with the increase of 62%, it will bring an entry-level dockworker to $131,000 per year.

In fact, you’d be hard-pressed to find better paid blue collar workers. According to port regulators, more than half the dockworkers at the New York-New Jersey port were bringing in over $150,000, and close to 20% earned over $250,000 per year.

Over on the West Coast, the average full-time dockworker earns almost $233,000.

I find it pretty ironic that the national jobs report came out today, as the dockworkers struck a deal.

The headlines are about blowout job gains. But when you look deeper, you see that the quarter million jobs created were, as usual, bartenders, waiters, and government employees.

Manufacturing jobs were down. And even those factory workers still employed don’t make nearly as much as the longshoremen.

But although the strike has ended, negotiations have not. This is just a tentative deal that allows further negotiations until January 15.

And as if the absurd increase in pay wasn’t enough, dockworkers are also demanding a complete BAN on automation at the docks.

It’s a bit like the Amish; they want to reject new technology… though not for religious reasons or some statement on work ethic. It really comes down to protecting their jobs.

The Union bosses understand that the 62% pay increase will create strong incentives for the transportation companies to automate. AI, robotics, etc. will be a LOT more cost effective than paying people hundreds of thousands of dollars per year… with the added benefit that robots don’t unionize.

So the unions essentially want to get rid of the competition. This will keep prices higher at the docks… which ultimately passes on additional costs to consumers for everything from food to furniture.

Maybe Kamala and Joe Biden have a point when they blame inflation on “greed”. Except in this case, it’s not corporate greed. It’s union greed.

Like I said, I have no problem with employees demanding higher wages. That’s part of the most basic tenets of capitalism.

The problem is with corrupt union bosses who distort the market, make the world less productive, and drive higher inflation for everyone else.

Automation is exactly what America needs to pull itself up by its bootstraps, and get the economy humming so that its debt and deficit problems melt away.

But there are clearly some very politically powerful forces doing everything they can to stop that.

Given that Kamala’s administration pressured the employers to offer workers an enormous pay increase, I have to assume she cares more about cushy union jobs than bringing costs for consumers down, or spurring the US economy.

Adding to the irony of the poor dockworkers strike, is that the man with the megaphone, the head of their union, makes nearly $1 million per year, lives in a 7,000 square foot mansion in the suburbs of New York City, and drives a Bentley.

Both the Bentley-driving union boss, and the fact that Kamala sides with him, shows you exactly what type of leadership this country currently relies on.

Unfortunately, that makes it unlikely that the country starts moving in the right direction anytime soon. And that’s yet another reason is makes sense to have a Plan B.

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The “green energy” revolution is one of the biggest fantasies of today.

For example, they tell us that fossil fuels are going away, that the gasoline powered internal combustion engine is a thing of the past, and that everyone wants to drive an electric vehicle (EV).

Clearly, that’s why over 90% of consumers still choose gas powered vehicles…

So the government instead has to step in to mandate electric vehicle use, attempting to force manufactures to sell 50% electric vehicles by 2030.

They conveniently ignore the fact that the American electric grid cannot handle that kind of power demand.

And if the $1 billion per EV charging station Secretary of Transportation Pete Buttigieg is spending from the trillion-dollar infrastructure bill is any indication, we’re not going to get there in six years.

Meanwhile, auto manufacturers are actually scaling back EV production as demand slows and infrastructure gaps remain vast.

Governments and activists may wish it were otherwise, but fossil fuels are not going away for decades. Yet, the belief that they are has led to massive misallocations of capital into renewables.

We’ve talked about this in regards to oil, natural gas, and the uranium required for nuclear power. All of these energy assets have been ignored by investors, or demonized by activists and governments, despite remaining absolutely critical.

And the same thing is true of the metals necessary to build traditional internal combustion engines.

Mining companies are obsessed with finding more metals like nickel and cobalt for the “green energy” revolution. Meanwhile, the specific niche metals required for gas vehicles have been neglected.

I’m talking about platinum group metals (PGMs). These include six metals—platinum, palladium, rhodium, iridium, ruthenium, and osmium—renowned for their high melting points and corrosion resistance.

Over 80% of palladium and 90% of rhodium is used in gas vehicle emissions control systems to convert toxic gases into less harmful substances.

And it seems investors have believed the lies of the climate fanatics, assuming that demand for these metals will drop precipitously as everyone flocks to electric vehicles.

This ignores, first, the actual reality that people still prefer gas vehicles.

Second, the fact that hybrid-electric vehicles are actually the most popular alternative to gas-only vehicles.

And while the EPA-regulation wants everyone to drive electric vehicles, hybrids also satisfy its 50% mandate.

Already, hybrid vehicles account for about 25% of vehicle sales in the US. And they actually use more PGMs per vehicle than traditional combustion engine cars.

But the supply of PGMs is shrinking.

South Africa, the dominant producer of platinum and rhodium, has struggled with power shortages, labor strikes, and declining investment in its mining sector. Russia, another major player, faces sanctions and geopolitical uncertainty that disrupt its palladium production.

With these two countries controlling the vast majority of global supply, the market is heading for significant deficits in the coming years. The numbers are already telling: in 2023, the platinum market ran a deficit, and so far the same is true in 2024.

Despite this looming shortage, prices for PGMs have plummeted.

Palladium is down 66% from its 2022 highs, and rhodium has crashed by 80% since 2021. This collapse in prices has put major PGM producers on the back foot, forcing them to cut jobs, and even shut down some operations.

Investors, spooked by the drop, are shorting palladium at record levels, convinced that the future belongs to EVs. But they’re missing the bigger picture.

False narratives like these are one reason why many real assets are historically cheap right now.

Real assets are physical, tangible goods like certain commodities and natural resources which have intrinsic value tied to real world uses. This includes energy assets like oil and uranium, productive technology, and fertile farmland.

It also includes critical minerals and metals, like the ones we have been discussing.

Unlike financial assets and paper money, they cannot be conjured out of thin air by central banks and government. Which is why they protect wealth against inflation.

And the type of conditions present in the PGM market is a classic example of finding a historically undervalued real asset.

A crucial, critical resource with limited supply? Check.

A burgeoning shortage, with no movement in the markets to remedy it? Check.

A historically low price for the critical resource? Check.

That’s why this summer we wrote to subscribers of our investment research service, The 4th Pillar, about a company which mines PGMs.

But rather than traditional mining, it extracts these metals from tailings— the waste left over from other mining operations.

And that means it actually gets its source material delivered to it for free…

This company has a deal with a chrome miner for the exclusive right to process the chrome mine tailings. It gives back the recovered chrome, and keeps all the extracted PGMs for itself.

It’s a symbiotic relationship with no money exchanged, no profit share, and no royalty owed.

This low-cost, efficient business model has allowed the company to stay profitable even as PGM prices have cratered.

With a rock-solid balance sheet and minimal debt, it is perfectly positioned to weather the current downturn and capitalize when the market inevitably turns.

But again, this isn’t just the story of PGMs and vehicle markets.

Everywhere you look, real assets are historically cheap.

Often these same conditions exist— the market for a critical resource has been ignored by investors, or demonized by activists, cutting into supply, while demand stays steady, or even grows.

While frustrating, these lies create enormous opportunity. The best way to capitalize is by investing in critical real asset companies at historic lows. As inflation rises and markets correct, those who invest now stand to benefit immensely.

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At a campaign rally earlier this month, President Trump promised that if he is elected, “We will keep the US dollar as the world’s reserve currency. It is currently under major siege. Many countries are leaving the dollar.”

What he’s referring to is the extreme privilege that the US has, i.e. that central banks around the world hold the US dollar in reserve as form of savings.

The entire world also conducts trade in US dollars. Since World War II, the vast majority of cross-border transactions among international businesses have been settled using US dollars.

Today, US dollars account for 54.8% of central bank holdings around the world. That’s still a lot, but it’s down from around 70% in the late 1990s, according to the latest IMF data.

And the US dollar is currently used for 42% of international trade, down from 52% in 2014, according to SWIFT, the Society for Worldwide Interbank Financial Telecommunication.

The dollar is still dominant, but it’s not a good trajectory.

This is a huge problem because, when foreign central banks hold US dollars, they generally do so by holding US bonds— which means they buy US debt.

With $35.5 trillion of debt, equal to about 123% of GDP, the US desperately needs big buyers of its bonds.

If foreigners decide to stop using the dollar, this ultimately means they won’t be buying as much US government debt… And the only real option at that point would be for the Federal Reserve to ‘print’ the money.

We all saw what happened when the Fed printed about $5 trillion during the pandemic— we got 9% inflation.

Well, the US government’s own conservative estimate is that it will take on another $22 trillion in debt over the coming decade. If the Federal Reserve had to print the majority of that, who knows how high inflation would go.

This is one of the reasons why it’s so important to the US economy that the dollar remain the world’s dominant reserve currency.

Trump is the only remaining Presidential candidate who is even acknowledging this massive risk for the US. (Bobby Kennedy also understood the issue, but he has effectively withdrawn from the race.)

But his solution doesn’t really cut it.

In the same stump speech, Trump says that he will threaten and bully countries into continuing to use the dollar. For example, if other countries say they want to “stop using the dollar,” then he could impose higher tariffs or even outright bans on imports of that country’s good and services.

But that doesn’t really work. The decision to use (or not use) the US dollar for trade isn’t made by Trump. Or Xi Jinping. Or most other world leaders and central bankers. It ultimately comes down to businesses and individuals to decide for themselves what currency to use.

If Apple decides that they want to pay TSMC (Taiwan Semiconductor Manufacturing Co) in New Taiwan Dollars, that’s a decision which those two companies will make between themselves.

And that sort of decision wouldn’t even be a high level executive, i.e. CEO or CFO level discussion. It would most likely be a mid-level manager in the finance or corporate treasure department.

They look at a number of factors, including what their vendor partners want, and what’s best for business— for example, accepting and holding certain currencies give higher rates of return.

These aren’t political decisions. They’re financial decisions. Business decisions.

Similarly, you could put your house on the market today and demand to be paid in Bitcoin. Or gold. Or perhaps a potential buyer is from Germany and wants to pay you in euros. It’s entirely up to the buyer and seller to decide on the settlement currency.

So the best way to keep the world using US dollars it not with threats, but through incentives. Much more carrot, much less stick.

In fact, threats are among the reasons why so many places around the world are interested in finding an alternative to the US dollar.

But if, on the other hand, the US government was just a little less dysfunctional, and engaged in a little more cooperation…

If politicians weren’t trying to imprison rivals from the other party, if they could recognize problems, compromise on sensible solutions, stop spending so much money, and keep the currency from suffering high inflation…

Then the world would be a lot more interested in continuing to use the US dollar. There would be a lot more trust and confidence in the US financial system.

But that doesn’t seem to be on too many people’s agenda.

It’s because of that, we anticipate the dollar will continue to lose share of global reserves, leading to (as I wrote above) more debt and inflation.

Certainly there are a few, limited scenarios in which that outcome can be avoided. And one can hope. But I’m not holding my breath.

That’s why is makes so much sense to have a Plan B.

Think about it— even central banks have Plan B. That’s why they’re buying up so much gold.

Over the past couple years, they have traded about $80 billion worth of excess US dollar reserves for gold, and that has driven the price of gold to an all time high.

Just imagine what will happen to the gold price if they buy another $300-400 billion…

Bear in mind central banks around the globe currently hold about $8 trillion in US dollars.

Converting just 5% of that to gold could easily make the price shoot past $10,000 an ounce.

And that may just be the beginning.

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Let’s play a game. I’ll give you some recent headlines, and you guess the well-known magazine.

• Here’s What the ‘Manosphere’ Gets Wrong about Cuckoldry
• How a Zombie Law Could Ban Abortion Nationwide If Trump Is Reelected
• Meet the New Autocrats Who Dismantle Democracies from Within
• Finding Math’s Beauty and Power with Drag Queen Kyne Santos

Where do you think these come from? If you guessed Teen Vogue, or even Newsweek, it would be understandable. But incorrect.

No. These headlines are from one of the premier “science” publications in the Land of the Free— Scientific American. And we didn’t even have to comb through years of articles to cherry pick those few. In fact everything we listed above was just from the last few weeks.

This is why it’s so hilarious that Scientific American endorsed Kamala Harris last week; they wrote “Vote for Kamala Harris to Support Science, Health and the Environment.”

So the publication which thinks sex fetishes, abortion, drag queens, and left wing political ideology count as “science” believe that Kamala is the pro-science candidate. Hilarious.

Even the few articles that are actually about real science have a woke, leftist bend. For example, one article is “Florida Surgeon General Spreads COVID Misinformation in Booster Guidelines.”

They go on to slam the state’s top public health official for telling people that new COVID boosters have not been widely tested on humans. So Scientific American decided that he is spreading misinformation… even though (quite bizarrely) they acknowledge in the very same article that the boosters have not, in fact, been widely tested on humans.

It’s especially ironic because one of the only other articles dealing with science is a story about a heroic scientist from the FDA who stood up against the “consensus” among the medical community in the 1960s.

Back then, all the “experts” believed that an untested drug called thalidomide was safe. This one woman questioned the science. And she was right— thalidomide caused monstrous birth defects when it was administered to pregnant women.

So, according to Scientific American, a woman who raised awareness about an untested drug is considered heroic. But Florida’s Surgeon General who is raising awareness about untested booster shots is spreading misinformation.

This double standard appears completely lost on them.

And speaking of double standards among leftist buffoons, the greatest investor of all time scored another big win recently.

Forget Warren Buffet. I’m talking about Paul Pelosi (husband of the former House Speaker and current Congresswoman from San Francisco, Nancy Pelosi) whose track record is virtually unbeatable.

This guy just has a special knack to sniff out amazing investments.

For example, Mr. Pelosi famously purchased very high-risk call options in Microsoft back in 2021; less than two weeks later, Microsoft announced a $22 billion contract with the US military… and Pelosi made an enormous profit.

It must have been a crazy coincidence.

Similarly, he loaded up on more high-risk call options of various semiconductor stocks in 2022, shortly before Congress announced the CHIPs Act (which poured billions of taxpayer subsidies into those same companies.) The companies’ stock prices soared, and Pelosi made a ton of money.

Another crazy coincidence for sure.

Just recently, Paul Pelosi decided to sell about $500,000 worth of Visa stock. And wouldn’t you know it— this week the Justice Department announced an antitrust lawsuit against Visa for illegally monopolizing the debit card market.

Visa’s stock price tumbled. But hey, Paul Pelosi had already sold. Incredible timing on his part… which, once again, must be a total coincidence.

Apparently everyone in the Washington establishment believes this to be true, because there has never been any serious investigation into the Pelosi’s potential impropriety. And if anyone so much as suggests that Pelosi has used her position for personal gain, it’s immediately labeled as “disinformation” or “misinformation.

New York City Mayor Eric Adams probably wishes for the same special treatment. Yet Adams was indicted this week on corruption charges for using his office for personal gain. I read the 57-page indictment, and the evidence against him is strong.

But the evidence against Pelosi is also strong. As is the evidence against “the Big Guy” profiting from Hunter Biden’s deals in Ukraine.

All of these people have long histories of improperly benefiting from their offices. And they’re all wrong. All of them. Yet only Eric Adams has been charged… which is pretty ironic for a party that claims to champion anti-racism.

They’re sending the black dude to jail while the old white people get to continue ripping off the public. Eric Adams is a criminal. But Paul Pelosi is the greatest investor of all time.

Just like Scientific American, the double standard is completely lost on them.

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In the 6th century BC, during the reign of Nebuchadnezzar II, Babylon flourished as a center of power, culture, and commerce.

We know this because the Babylonians were exceptional record keepers. And they chiseled everything down onto cuneiform tablets, many of which have survived through today.

Sadly the tablets aren’t tabloids. They don’t contain any juicy gossip or colorful stories of ancient times.

But they do offer extremely detailed– though often boring and mundane– records of everyday economic transactions, legal contracts, and administrative activities.

Just like future historians centuries from now should easily be able to see this evening’s closing stock prices for Apple and Tesla, we can also read about daily grain prices in ancient Babylon.

One important tablet from the reign of Nebuchadnezzar II highlights the interchangeability of gold and silver in Babylonian commerce. It records a transaction where 5 shekels of silver were considered equivalent to half a shekel of gold.

(The shekel was an ancient unit of weight approximately equal to 8.33 grams.)

This exchange rate implies a silver-to-gold ratio of 10:1.

The formal establishment of fixed exchange rates between gold and silver took a significant leap under Darius the Great in the mid-6th century BC.

Ruling over the vast Achaemenid Empire, Darius borrowed the concept of minting coins from the Lydians and introduced a bimetallic standard. He decreed that one gold “daric” coin was equivalent to 20 silver coins, creating one of the first examples of an official, fixed silver-to-gold ratio.

Over time, the ratio fluctuated due to advancements in mining techniques and changes in supply and demand. And by the era of Alexander the Great in the 4th century BC, the ratio had shifted to 13:1.

Similarly, in ancient Rome, Julius Caesar established a 12:1 ratio.

Even in the early history of the United States, The Coinage Act of 1792 legally defined the US dollar in terms of specific weights of gold and silver—1.604 grams of pure gold or 24.1 grams of pure silver—establishing a ratio of approximately 15:1.

 

Of course, today, the silver-to-gold ratio is whatever the market decides. Ever since the dollar was removed from the gold standard more than five decades ago, the market ratio between silver and gold has ranged from about 25:1 all the way up to 120:1. Right now it is about 85:1.

Many people have an idea about where this ratio should be. Some people think that it will inevitably fall back to 50:1 which would price silver at around $53 per ounce.

Silver could certainly rise to $53 and far beyond. But not because of some preordained ratio.

Remember, there is no fixed rule or law regulating the silver/gold ratio. There’s nothing stopping it from rising to 500:1.

And frankly I think it’s likely the ratio could rise much higher from its current 85:1.

Just think about the catalysts that could drive both gold and silver prices much higher.

Gold prices over the past few years have been pushed to all-time highs by central banks. And as I’ve argued, this is a pretty clear sign that they anticipate moving on from the US dollar as the global reserve currency.

As the US national debt continues to explode higher and the federal government appears increasingly dysfunctional, it’s becoming likely that the US dollar’s global dominance could come to an end within the next several years.

What does the post-dollar global financial system look like? What will the next reserve currency be? No one knows.

And that’s why central banks are buying gold. Because they have $8 TRILLION worth of US dollar reserves that they need to convert into something of value.

Gold, for now, represents that value. So central banks are buying it by the metric ton.

But (with minor exception) central banks do not buy silver. The market is too small, making it extremely difficult to invest billions of dollars all at once.

Silver prices are influenced more by industrial demand… and investor speculation. I’ll come back to that.

I’ve said before that a Kamala victory will likely spell the end for the dollar’s reign. This is a person who thinks that inflation is caused by “greed” and whose answer to every problem is more government spending.

 

The Harris deficits and inflation will likely be the proverbial straw that breaks the dollar’s back. And the consequent surge in central bank gold purchases could easily send the silver/gold ratio soaring past 200 or more.

Again, while 200 is far beyond the historical average, there’s no reason why it can’t be even higher. Historical averages are merely data points, not firm rules.

It’s far more important to pay attention to price catalysts. And gold has a major catalyst in central bank purchases.

That doesn’t mean the price of silver won’t rise. In fact, a climbing gold price alone is very like to increase the price of silver, simply because investors will speculate that it will rise.

This becomes somewhat of a self-fulfilling prophecy; investors buy an asset believing that it will rise. That increased demand causes the price to rise, encouraging more investors to buy.

We’ve seen this type of feverish speculation with plenty of asset classes in the past– including silver more than a decade ago.

But in the end, if there aren’t real demand fundamentals to support the price, the speculative mania always fades.

Bottom line, gold has clear demand from central banks that could send the price to absurd levels. Silver does not share the same catalyst.

Silver prices could absolutely skyrocket. But this would be far more likely due to temporary speculation (and those buyers tend to be finicky and sell quickly) rather than from true long-term industrial or investor demand.

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On October 23, 1944, a formidable US naval fleet sailed past the Philippine island of Leyte with more than 300 battleships, aircraft carriers, cruisers, destroyers, and submarines.

Their objective was to secure the island’s strategic gulf to support the Allied amphibious invasion (which would ultimately liberate the Philippines from Japanese occupation). Plus they intended to cut off Japan from vital resources in Southeast Asia.

The Japanese high command knew that losing the Philippines would be devastating to their war effort, so they sent the Imperial Navy to engage and destroy the American fleet in what would become the largest naval battle in world history.

The Japanese had a strong fleet, for sure. But at that point the US Navy was battle-hardened and highly experienced in complex maneuvers.

During the battle, in fact, the American fleet was able to execute a series of complicated and challenging movements known as “crossing the T”.

This tactic allowed the US Navy to unleash devastating broadsides with minimal return fire from the Japanese, effectively crippling the imperial navy. And after three days of intense fighting, the Allies won the battle. They soon regained control of the Philippines, all but ensuring their victory in the Pacific.

This Battle of Leyte Gulf was not only a major turning point in World War II, but it was also the last major, conventional battle for the United States Navy.

Certainly the US Navy has been deployed plenty of times over the past eight decades, but for th most part its role has been limited. They’ve carried troops, provided fire support, launched aircraft, managed logistics, and conducted exercises as a ‘show of strength’.

There have also been plenty of minor skirmishes, especially involving small patrol boats during the Vietnam War.

But in terms of actual large-scale surface warfare, i.e. fleets of ships trying to out-maneuver and fire upon one another in the open water, the last conflict was eighty years ago… meaning there is no one serving in the Navy today with any first-hand experience in such complex tactics.

Yet any potential conflict with China— which hopefully never comes— would involve precisely this type of old-school surface warfare. And that’s a big problem for America’s navy.

Forget about strategic maneuvers while guns are blazing in the heat of battle; lately it seems that the Navy can’t even steer its ships properly on calm waters in broad daylight.

This is about the most humiliating thing that could happen for a naval commander. And yet, a few years ago during a single four-month period, the Navy suffered three completely avoidable collisions, two deadly.

The USS Fitzgerald collided with a container ship off the coast of Japan due to navigational errors and procedural failures, resulting in the deaths of seven US sailors.

And two months later, the USS John S. McCain collided with an oil tanker near Singapore due to inadequate training and crew confusion, leading to the deaths of ten US sailors.

There is also clear rot in the highest levels of Navy leadership.

For example, in May, federal authorities arrested retired Admiral Robert Burke, former Vice Chief of Naval Operations— the second highest ranking Navy officer— and charged him with bribery offenses.

He’s accused of steering lucrative contracts towards a company in exchange for a $500,000 per year job, which he was given when he retired. (He should have run for Congress— they do this every day and are never arrested for it.)

Ironically, the company offers leadership training. So the corrupt Admiral hired the corrupt company to train the next generation of the Navy’s leadership. Great.

Whoever runs the Navy’s website is also apparently incompetent, because (as of today’s date which is months after his arrest and indictment) Burke’s profile is still live and boasts about his distinguished career.

Aside from embarrassing levels of incompetence and corruption, the Navy’s mission readiness is also a problem.

For starters, the Navy is shrinking. The 2018 National Defense Authorization Act (NDAA) established a policy for the Navy to have “not fewer than 355 battle force ships.”

Yet the Navy’s own website says it has roughly “280 ships ready to be deployed.” That’s 20% below the minimum target, which is especially concerning given that the existing vessels are getting old and obsolete.

The oldest ship that’s still on active duty— the USS Blue Ridge— was originally commissioned 54 years ago in November 1970. The average destroyer is 20 years old. The average aircraft carrier (the type of vessel which will be absolutely critical in a conflict with China) is 31 years old.

Yet top brass in the Navy intends to continue expanding the lifespan of these ships— while China aggressively grows its fleet with brand new ships, bigger guns, and cutting edge technology.

To make matters worse, US munitions stockpiles are also old and dwindling.

And that’s not even getting into the personnel issues in the Navy— including the full blown recruiting crisis.

In short, not enough people, not enough ammunition, not enough ships, plus rampant corruption and incompetence… all while a looming adversary continues to grow its fleet and combat capabilities.

The US Navy has a lot to fix. So what’s their big priority now?

Gender inclusivity, of course.

Last week the Navy excitedly announced that launch of its first co-ed submarine— the USS New Jersey, i.e. “Jersey Girl”. That’s literally the nickname. And the Navy called it “a testament to the strength that diversity brings to our Navy,” and, “a symbol of progress, breaking barriers.”

The video concludes saying, “The future of Naval warfare starts here, and it’s more inclusive, stronger, and more capable than ever.”

Back in 2020, I joked that, “Our enemies will tremble at the sight of our diversity and inclusion…”

Now the Navy is actually putting that in its marketing.

It’s extraordinary how short-sighted these people are. The future of Naval warfare isn’t “more inclusive”. It’s deadly. It’s bloody. It’s serious business. And it requires serious leaders who understand real world threats; who can competently develop and execute strategic plans to meet those threats; and who can maximize the value of every dollar they’re given.

These people blow through money like, well, drunken sailors. And they demonstrate over and over again that they have no clue about the real challenges that America faces.

This absurd concept of ‘inclusive warfare’ is just the latest example of how Joe Biden’s DEI obsession has set deep and dangerous roots that will continue to harm America for years to come.

We can only imagine how much worse this will become if Kamala wins… which is why it makes so much sense to have a Plan B.

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At some point early in 2011, I received a frantic phone call from a woman who was terrified that then-President Obama was going to “close the borders”.

She had apparently been reading some pretty dark forums on the Internet which had convinced her that Obama was going to prevent all US citizens from leaving the country… and she was intent on getting out of the country before that happened.

I spent the first part of our call trying to disabuse her of the rumor. While I acknowledge that anything is possible, I’m also a data-driven person… and there was simply zero credible evidence to suggest that President Obama was going to restrict all traffic into and out of the United States.

But, still, she wouldn’t listen. So I asked her what she wanted to do. She told me that she intended to pick up her entire life and move to Uruguay within the next 48 hours.

Well. Uruguay is a nice enough country. I lived there many years ago for a bit— it’s quiet, pastoral, and, well, there’s absolutely nothing going on. Which is fine. Some people like it that way.

Problem is, the woman I was speaking to had never been to Uruguay. In fact she had never even left the United States before. She didn’t even have a passport.

Not to mention she didn’t speak Spanish, barely knew the first thing about Uruguay, and didn’t know anyone living there.

Worst of all, she was planning on bringing her elderly mother who needed specialized care… without the first idea of how her mother would even be able to obtain the right medication in a foreign country.

But in her mind, these were all trivial concerns. Her fear of Obama closing the borders was the biggest threat in her life, and she had to act quickly.

I was pretty emphatic on the phone and told her that she was would be making the biggest mistake of her life. Fortunately, in the end, reason prevailed, and she didn’t go.

None of this is a knock on her; I’m sure that under normal circumstances she’s a perfectly intelligent person. But that phone call was a pretty stark case study in how powerful certain emotions can be.

Love (or at least infatuation), for better or worse, is one emotion that can make us do some completely irrational things… especially when we’re young and naive.

Hope is another overpowering emotion that can make people ignore obvious risks and dangers.

But perhaps none is more overwhelming than fear. Fear can paralyze us. It can make us lose all sense of reason. Our primate fight-or-flight response kicks in, and the human brain seems to turn off completely.

And given the sheer volume of gargantuan, looming risks in the world right now, it’s pretty easy to feel a certain degree of fear.

For starters, there’s been a lot of talk of “World War III” brewing. And, if we’re intellectually honest, this isn’t crazy. Between conflicts in the Middle East, growing tensions with Iran and China, the never-ending war in Ukraine (including Vladimir Putin’s threats to use nuclear weapons), etc., the prospect of a wider global war breaking out is completely reasonable.

The US national debt is another enormous problem— and not just for America, but for most of the world. It’s extremely likely to result in significant inflation, global economic hardship, and the loss of the US dollar as the world’s reserve currency.

Add to that the border crisis, rising crime, and economic malaise— all of which apply to both the United States and much of Europe.

And I doubt the current state of the US Presidential election, not to mention TWO assassination attempts, is making anyone feel any less fearful.

This is why we’ve been talking about the concept of a Plan B for over 15 years.

But the key is taking rational, sensible steps that put you in a position of strength, no matter what may or may not happen next.

There’s no magic pill, no single action that will solve every problem or eliminate all risk. But there are clear, common-sense approaches.

If Kamala Harris wins the presidency, for example, it’s highly likely that taxes will increase. They literally don’t have to do anything, and the 2017 tax cuts will expire next year.

That means more money out of everyone’s pockets going to feed a government beast that wastes taxpayer money on the most insane ways imaginable.

They’ve spent billions of dollars to build a whopping SEVEN electric vehicle charging stations. TENS of billions have been given away to their sworn enemies in Iran and Afghanistan. Hundreds of billions were spent to pay people to stay home and NOT work.

This is how they spend your hard-earned money. Yet if you plan head, there are plenty of completely legal ways to reduce your tax burden, now and in the future.

Inflation is another looming problem, especially with at least $22 trillion in new debt expected over the next 5-10 years.

But there are ways to mitigate inflation’s impact as well. Real assets are trading at historically low valuations (and we’ve been especially bullish on the prospects of gold mining companies, which are incredibly cheap at the moment).

Our premium subscribers also hear all about sensible asset protection strategies, because in a struggling economy, frivolous lawsuits become more common risk.

And with general security threats like rising crime and the possibility of war, it makes sense to have a second residency.

That doesn’t necessarily mean you need to buy a house abroad. But going through the process of obtaining legal residency in a safe, peaceful country, far removed from these issues, is a smart move.

I have a close friend who recently obtained legal residency in New Zealand. His reasoning is that if World War III breaks out and the nukes start flying, that’s where he would want to be.

His reasoning is sound. But notice that he’s not picking up his life tomorrow morning, abandoning all caution, and heading to a new place that he doesn’t know.

He’s traveled to New Zealand many times. He already has a small network. He knows where he would live. He has already filed the paperwork to obtain residency.

So if the proverbial ever hits the fan, he’ll already all the basics in place. If not, he still has residency in a country that he enjoys spending time. There’s not much downside to his plan.

The same thinking applies to second passports.

For example, you might be surprised to find you’re already eligible for a second passport through ancestry.

There’s rarely* any downside to obtaining a second passport. Think of it like fire insurance on your home— you might never need it. But you’ll be damn glad you have one in case the need ever arises.

And in many cases, a second passport you obtain today can also be passed down to your children and grandchildren, so that future generations can obtain the same benefit for decades to come.

But remember the key to a Plan B is staying rational and not letting fear take hold. Making fear-based Plan B decisions is almost always a colossal waste of time and money.

As an example, I recently found out that there are some people on the Internet selling Pakistani citizenship. And when I heard about this initially I thought it was a joke. It’s not.

There are far more legitimate places in the world where one can obtain citizenship in exchange for a financial investment in the country, so-called “Economic Citizenship” or “Citizenship Investment Programs” (CIPs).

St. Kitts, as well as several other Caribbean nations, are famous for their citizenship by investment programs, which start around $250,000 these days.

But if that’s way too much money for you, and you don’t qualify for citizenship by descent, the most rational approach is to pursue legal residency. It’s a perfectly reasonable option.

In places like Mexico, Costa Rica, or, yes, even Uruguay, residency costs almost nothing.

There are far more legitimate places in the world where one can obtain citizenship in exchange for a financial investment in the country, so-called “Economic Citizenship” or “Citizenship Investment Programs” (CIPs).

St. Kitts, as well as several other Caribbean nations, are famous for their citizenship by investment programs, which start around $250,000 these days.

But if that’s way too much money for you, and you don’t qualify for citizenship by descent, the most rational approach is to pursue legal residency. It’s a perfectly reasonable option.

In places like Mexico, Costa Rica, or, yes, even Uruguay, residency costs almost nothing.But I’m sure some people are fearful enough right now that obtaining a Pakistani passport seems like a good idea.

Well, a few paragraphs earlier I wrote that there’s rarely* any downside to obtaining a second passport. Note the asterisk. Pakistani citizenship is one of the few exceptions where there actually is downside.

Sure, for an EXTREMELY limited group of people, Pakistani citizenship might make sense. If your dream is to move to Karachi, then, great, go for it.

But for the vast majority of people, paying $20,000 for a Pakistani passport is— AT BEST— a total waste of money.

If you’re a US citizen, then most likely you’ll end up getting a knock at the door from the Department of Homeland Security. They’ll assume you’ve been radicalized and are operating some sleeper cell, so you and your family will probably end up on some terrorist watch list.

As a matter of fact, the latest moron who tried to kill Donald Trump this week had apparently planned to purchase Pakistani passports in some bizarre plot to recruit people from the Middle East to fight against Russia for Ukraine.

In a separate incident, a Pakistani national had traveled to Iran, before heading to the US, where he tried to hire hitmen to kill Trump… but ended up in an FBI sting.

Suffice it to say, red flags go up around Pakistani passports. This is not a country where most people should want to obtain a second passport, and there’s zero upside in investing a single dollar or minute of your time on such a terrible idea.

Remember, the name of the game is Plan B. Not Plan Stupid.

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This is an anomaly we haven’t seen before.

Gold just hit yet another all-time high. But what’s strange is that, if you look at gold’s supply and demand fundamentals, the price should almost be falling. Not rising.

I’ll explain—

On the supply side, gold production is actually increasing slightly. The largest miner in the world, Newmont Mining, produced nearly 30% more gold in the first half of 2024 compared to 2023. And across the entire industry (according to the World Gold Council), global gold mining output is up slightly over 2023.

So much for shrinking supply.

But what about demand? Well, this is usually broken down into four main segments.

The first and (by far) largest segment of demand is jewelry. But global jewelry demand is down.

Signet Jewelers (which owns major jewelry brands like Kay, Zales, Jared, Blue Nile, and many others) has reported an 8.5% drop in revenue so far in 2024 versus 2023. Meanwhile China’s Gold Association reported a 27% decline in gold jewelry purchases in the first half of 2024.

Even on the high-end side, LVHM’s jewelry division (which includes the luxury brand Tiffany’s) also reported a 5.1% sales decline due to “an uncertain economic and geopolitical environment. . .”

So overall jewelry worldwide (which is THE biggest component of gold demand) is down. Worldwide.

The next segment which drives gold demand is investment demand, i.e. individual investors who buy bars and coins… but most often invest via Exchange-Traded Funds.

Well, the largest ETFs in North America (GLD and IAU, which comprise 80% of the market) are DOWN for the year, meaning they have been net SELLERS of gold, rather than buyers. Even in the month of August, these two combined for a big fat whopping 1.7 metric tons of net purchases, roughly $200 million.

That’s nowhere near enough to move the gold price.

Meanwhile, across the Pacific, all of Asia’s gold ETFs COMBINED only purchased a net 0.3 metric tons (i.e. $30 million) last month. Again, this is simply not enough demand to move the gold price.

And so far for the year, worldwide, gold ETF holdings are DOWN by about 44 metric tons.

The third category of gold demand is industrial use. You might already know, for example, that there’s about 50mg of gold in your mobile phone thanks to gold’s unique chemical properties as an electrical conductor.

So mobile phone producers (along with certain medical device manufacturers and handful of other industries) also buy gold. It’s pretty small demand, though— industrial and technology use only makes up about 10% of global gold demand.

That said, it’s worth pointing out that iPhone sales (which is a good proxy for global mobile phone production) are down substantially, from a peak of $48 billion in Q1/2021 to just $39 billion in its most recent quarter.

So, to summarize, jewelry demand is flat or down. Investment demand for gold is flat or down. Industrial demand is too small to matter, but even that is down. Meanwhile, supply is rising.

Rising supply and falling demand? It seems like gold prices should be falling right now. And yet gold just reached yet another record high. What gives?

Well, as we’ve said before, the answer is central banks.

Poland is a great example; despite being a relatively small country, it bought 19 metric tons of gold last quarter alone. And it plans to buy at least another 125 tons in the future. That’s a lot of gold.

This is a trend taking place worldwide; central banks including China, Turkey, Qatar, India, Czech Republic, etc. have loaded up on gold this year. And in the second quarter of 2024, central banks purchased 183 metric tons of gold… which is far more than usual.

Central banks typically buy small amounts of gold, i.e. a few metric tons here and there. But over the past two years, they’ve been buying gold like crazy.

It’s pretty obvious why. They’re concerned about the world, and they’re concerned about the fate of the US dollar and US government finances.

Think about it— central banks around the world own TRILLIONS of dollars worth of US government bonds, i.e. US dollar foreign reserves. And they’re obviously worried.

Congress and the White House run outrageous budget deficits every year. The federal government’s dysfunction is a constant national embarrassment. The US national debt is set to soar by AT LEAST $22 trillion over the next decade. And inflation is far from being solved.

Foreign central banks know this. And they realize that, in a few years time, their trillions of US dollar reserves will be worth a lot less.

So they’re trying to do something about it now. And that means trading at least SOME of their dollars for gold… hence the feverish central bank gold purchases, and the all-time record high in the gold price.

We’ve already suggested that gold could easily go much higher.. especially if Kamala wins. I think that’s easily a $10,000 gold price, which would suggest only a small percentage of US dollar foreign reserves invested in gold.

That doesn’t mean the gold price can’t fall in the meantime. Gold prices have been rising for so long, and, realistically, nothing goes up or down in a straight, uninterrupted line.

Some central banks will continue buying gold irrespective of its price. Others will be more conservative and try to play the market. Singapore’s central bank, for example, actually sold a bit of gold recently and are probably hoping for a pullback in prices to buy more.

But over the longer term, gold is still an extremely sensible hedge with a lot of upside.

Having said that, the real value we see right now is in gold miners.

Look at Newmont mining— and, this is not a recommendation, but just an example. Newmont is the world’s largest gold miner, i.e. more than 80% of its revenue is essentially gold.

Gold is at an all-time high, yet Newmont’s stock price is about 40% below its record high from a few years ago.

Sure, it’s a much more complicated story; you have to consider gross margins and mining costs and country risk, etc. But the larger point is that gold stocks (especially relative to gold) are very cheap right now… especially when you consider where gold could be a few years from now.

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