Moments Of Financial Impact

For those global citizens born in the early 1950’s, it is no surprise that you all remember where you were when a number of significant events occurred in your lifetimes. For me, I have a number of traumatic events that shaped not only my thoughts about North American society but also global society with the first and foremost being the murder of U.S. President John F. Kennedy in November 1963. It was a Friday, and I was an innocent 10-year-old sitting in the home room class of Mr. David Storey, a wonderful teacher, gentle and kind and totally appreciative of my highly competitive nature despite the fact that he was about as effeminate a man as I had ever met by that point in my life. It was during our last class of the morning of November 22nd, 1963, as Mr. Storey was conducting “music class” playing Carl Perkins’ “Blue Suede Shoes” on his vintage “recorder” when a sudden crackle erupted from the speaker that sat just below the portrait of the Queen of England and just above the clock. The newscaster told us all that “The President is dead” and as it was a Friday, it was a total testimonial to the event when we were all told that classes were cancelled and that we were to return to out homes immediately due to the rising likelihood of a nuclear holocaust.

My pals and I spent the weekend playing road hockey (because the backyard rinks had not yet been frozen) and it was on Sunday afternoon that my mother came running out to the street to tell me – very quietly so as to not frighten the other children – that the suspected assassin had been also gunned down by a nightclub owner.

Watching my mother’s terror was a seminal event at that point in my life journey; it marked at once the dank contrast between my mother’s acute attention to the world condition and my father’s total rejection of any obligation nor interest in the plight of the world citizenry. Dad was a RCAF navigator that airlifted food into Berlin in 1944 to save the German population from starving and while he and my paratroop uncles that also served in WWII had nothing but total respect for the German soldier, they had zero respect for the evil that sent these fine young German patriots into action with little other than “blind faith” as their divining rods.

I authored an essay in 1967 to my history professor Brian Harrison that delivered the argument that “while that fatal shot destroyed JFK’s brain and ended his life, it also destroyed the hopes and dreams of an entire generation of Babyboomers around the world”. No longer was a two-car driveway and “a chicken in every pot” considered a birthright; no longer could mothers stay at home to raise their children because of the escalating cost of living brought about from financing foreign wars in the name of “democracy”.

In recent times, younger generations have the Challenger Disaster and the 9/11 terrorist attacks etched in their memory banks for posterity while financial events, predominantly market crashes like 1987, 2001, 2008, March 2020 remain vividly framed as seminal moments for all investors and speculators in the understanding of risk.

What prompted me to go down this sullied laneway of history is this thoroughly annoying narrative that saturates the social media outlets that occurs every single time that gold and silver go through corrective phases. From November 4th to November 12th the gold market tacked on roughly $100/ounce and had the effect of drawing out thousands of closet gold bugs all praising the ability of the precious metals to finally “get their due” in a raucous display of celebratory victory tweets. Then, starting on November 13th, to the abject horror of the Wall Street Silver crowd, traders (which undoubtedly included bullion banks) began selling the overbought markets in gold and silver. As the cavalcade of blogosphere protest exploded throughout the twitterverse, nowhere was it mentioned that the U.S. dollar index was embarking on a vertical ascent in response to taper-driven rises in bond yields. I read nothing of overhead resistance in gold and silver nor the topping process lurking in crude oil prices, the one commodity that has been a driver for “cost-push” inflationary expectations for most of 2021.

To be clear, I am in no way disputing the shenanigans that have exhibited the absolute mastery of illicit trading techniques, the uncontested (and unregulated) domain of the bullion bank traders, the NY Fed, the Bank of England, and virtually the entire Wall Street infrastructure. Gold is to the Wall Street establishment a lethal threat to their monopoly on money and power so once the neophytes to precious metals get this through their young (as opposed to thick) skulls, the sooner we can be rid of this constant whining about interventions, interference, and illegality. Rules broken in the name of “National Security”, constitutional or not, are violations to be not only justified, but ignored. To their absolute credit, it is both and an explanation and a testimonial to the ingenuity of the new generation of investors that cryptocurrencies like Bitcoin have risen to cult-like prominence. It took an entire decade (the 1970’s) for Wall Street to finally identify gold as “the enemy” and once they did, they engaged the finest traders and most influential media groups to build a firewall around gold and silver in a manner reminiscent of the first lunar landing or the invention of the world wide web. Seeing this formidable wall of institutional Babyboomer opposition to alternative asset classes like gold, the younger geniuses in the new investment generation designed the ultimate bypass – a method of payment and savings residing out of the purview and control of Wall Street – a digital alternative to precious metals that could not be controlled by bullion banks, legislators, or regulators and most certainly out of the grasp of the most nefarious if them all, the central banking syndicate running the largest Ponzi Scheme in history.

In short, I try to think and act as if I am a bullion bank trader; I learned this years ago thanks to a memorable quote by Iron Mike Tyson in response to an interviewer remarking that Tyson’s upcoming opponent “had a plan” (to defeat the champ). Tyson replied with a snort in his high-pitched voice: “Everybody got a plan until they get punched in the mouth” and that is precisely how everyone should approach the precious metals markets. You can plan against all contingencies until the “Iron Mike” bullion banks punch you squarely in the mouth. When and if that happens, your “plan” evaporates in a blizzard of margin calls and agonizing drawdowns.

Turning to the events of late last week, I might as well continue with my cynically-pervasive view of a sudden magical onslaught of “Covid-variant” warnings that disrupted Thanksgiving Day serenity and threatened to send undigested turkey dinners back to their origins as bond yields, commodities, and stock prices all conveniently collapsed in what I am sure is the beginning of Wall Street’s clever ruse to change Jerome Powell’s mind regarding the Fed’s decision to “taper” purchases of corporate bonds (largely held by Wall Street banks and their hedge fund clients). Just as they did during the GFC and the COVID crash, they let everything crash until they seize the attention of the Fed. My proof of that was no better illustrated than on Election Night 2016 when Trump upset Wall St. favourite HRC and with stocks crashing, the Wall Street crowd suddenly stepped into the markets and within a few hours had rebranded Donald Trump from “anti-Wall Street swamp-drainer” to “free market tax-cutter” and stocks never looked back until a microbe derailed things for the Donald.

With Friday’s huge crash in commodities, the odds of a Wall Street hijacking of Fed policy just got a huge Pfizer boost while the “Stagflation Crowd” were introduced to Mike Tyson’s answer to their “electrification plan” as copper, nickel, lead, and silver all got taken apart but the big drawdown was in oil, which gave up 13% (over $10/bbl.) in a single session. This proven strategy of embarrassing the Fed officials by bludgeoning them with crashing risk assets should come as no surprise to anyone. Threaten a junkie with a cut-off in heroin and watch the reaction; violence and mayhem so commonplace in addicts manifests itself in financial markets where central bank hypodermic liquidity injections have created junkies of a different brand, but no less desperate. The Vegas bookmakers have already shortened the odds of the current taper lasting longer than sixty days after which it is “business as usual” and a return to the broadly unsound fiscal and monetary policies that have created the current regime of global economic fragility.

The GGMA 2021 Trading Account recaptured significant ground with the November recovery in the Junior Miner ETF (GDXJ:US) which was exited mid-month when the RSI moved into overbought territory. We were truly fortunate because at no time did I expect to see a $120 drop in gold during one of the strongest periods of seasonal strength for the PM’s. I would love to do a podcast explaining how brilliant I am, but the truth is that my November calls bought during the summer simply ran out of runway. Then again, to coin a phrase, you have to be good to be lucky and you have to be lucky to be good. In three words, I was good – er – lucky – er – good – er … oh well never mind.

I shorted the Energy ETF (XLE:US) by way of the January $55 puts a few weeks back and after Friday’s debacle, it looks like the legions of oil bulls will be screaming “Fed intervention!” but my only reason for making that move was the three-hundred bullish tweets, posts, and podcasts against the absence of even one of a bearish tilt – a simple case of taking the opposite side of a crowded trade.

The strategy that should work for the balance of the year is to own anything that represents collateral for the banking system. All of this debt issued by the member banks is vulnerable to a drawdown in the marked-to-market value of the collateral to which it is underpinned. However, the Wall Street blackmailing bluff artists have to create sufficient fear and loathing so as to force the Fed and the Treasury to blink – to throw overboard all this taper nonsense – allowing the printing presses to leap back into action. When that happens sometime between now and the end of January, assets that benefit from real economic needs and uses will set out on another epic run to new highs.

Until then, though, preservation of capital will be of paramount importance.

Disclaimer: This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

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