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Predictions for 2022

In my last post I wrote about my 2021 reading list because it was an easy way to get started with writing again, and is a common theme for bloggers and influencers or even just folks, like me. Here’s another popular blog post subject I see people writing about this time of year: predictions for the coming year, and beyond. 

This topic is a favorite of mine. I used to do this every year, before I started this blog, and share my predictions among a small handful of friends, who would do the same with their own forecasts. Forecasting the future was a natural thing for me to enjoy, since a lot of my work as a professional involved business planning and forecasting, trend-watching, and being alert for shifts and changes. 

With that said, predicting the future is always humbling, and when I go back and look at my previous forecasts, I can see that I have no greater insight than anyone else once I am predicting things outside my control or influence. For example, as I look back on some of my predictions, I see that in 2016 I predicted Hillary Clinton to win the presidential election (wrong), but that I also predicted this would little change the current course of regulatory capture and political graft (right). In 2017, which is the last year I had written my forecast, my predicted S&P 500 closing level was 2,500, which would have been a 10% up year for the index, and the actual closing level was about 2,684; directionally correct. On GDP I did better, predicting a 2.2% annual real GDP versus 2.3% actual, based on the 3rd estimate published by BEA in March of ‘18. I had predicted Bitcoin would close 2017 at about $2,000 (it was trading in the $900 range at the time I was writing). It finished 2017 at about $14,000. 

A few really interesting things pop out to me from my 2017 predictions. At that time, the annexation of Crimea by Russia was still fresh in the political consciousness, and I had predicted that this possession would get normalized, leading to a more aggressive Russian posture in Ukraine. As happens with me often, it looks like I wasn’t wrong, just early.

In 2017 I was still working actively in the mortgage banking industry. I had guessed that the big government agencies that own and control that industry, Fannie Mae and Freddie Mac (don’t make fun of me, that is really what they call them), would make meaningful moves away from the Fair Isaac credit reporting score (FICO score) as a primary qualifying tool for loan approvals. Not sure I got that right at all. My other big industry prediction was that the exciting, emergent technology upon which #Bitcoin is built, blockchain technology, would threaten title insurance as an industry and render that business obsolete. Once again, it appears I was right, but really, really early (hint: a blockchain called #Ravencoin is the answer)

So consider that preamble my disclaimer: I am not responsible for anyone taking any action of any kind, financial or otherwise, based upon my predictions. Now, what will happen in 2022? Here is what I am 100% sure of (jk, see disclaimer above):

Broadly, I think we will see that stagflation is our destination. We may not reach the fullest expression of this stagflationary cycle in 2022, but this word will start to take the place of ‘inflation’ on the lips of the pundits and talking heads as we see persistently high, or even rising consumer price levels against a backdrop of low (and probably falling) interest rates, slowing economic growth, and missing real wage growth. Three big factors that will exacerbate our circumstances are: 

  1. The ongoing supply chain logistical problems originating out of the response to the COVID-19 flu, and the attendant production, delivery and inventory management changes underway to insulate against such disruptions in the future. Change takes time, and in this case, it will take investment, too. The slower the investments are in coming, the more time this disruption will take to resolve.
  2. Geopolitical tensions. There is a toxic combination of territorial disputes (mostly stemming from the events of the 20th century) and a legitimate loss of faith in the United States as a balanced actor in world affairs. It appears as though we may no longer be the respected authority offering thoughtful solutions backed by a big stick, and instead are perceived more as a blindfolded child, swinging a big stick.
  3. Political graft and fecklessness. There are no adults in this room. Just thugs and pickpockets, coached in lying, and the human remora swimming around them. As near as I can tell, this is a global problem, not just domestic.

What will it look like specifically? I take a lot of my queues from a handful of really smart people. These are the folks I follow whose arguments and information I find most credible. My preferred arguments come from Jeff Snider of Alhambra Investments, Tracy Shuchart of HedgeFundTelemetry.com and David Rosenberg of Rosenbergresearch.com. I try to ingest as much of their freely published content as I can, along with a pretty good clutch of others. 

Cribbing mostly off these peoples’ greatness, I am looking for US ten year treasury yields near 1% by the end of 2022, with real yields remaining strongly negative. I believe this is the intended policy outcome, and the only way forward for the administration (any administration) and the Federal Reserve. Despite and in contradiction with my expectations about low interest rates, I expect the dollar to remain stubbornly strong. Maybe not DXY to 106 strong, but also not DXY < 89 weak. I won’t be surprised to see the dollar remain between 96 and 102, and I expect this range will be sufficiently frustrating to policy-makers, and difficult for emerging markets. It should go without saying that I expect all talk of a Fed rate increase to always remain just talk. I just don’t see it happening. If the Fed does hike, I will view it as evidence of an intentional ‘controlled destruction’, where the ‘controlled’ part is far from certain.

In a similarly paradoxical way, I expect oil to reach $130-$135. It could take into the first half of 2023 to get there, but I think probably before the end of the year. This despite the strong dollar and what I expect will be a slowing or even recessionary economy.

I expect residential housing to remain strong, but with more normal levels of price increases. I anticipate this will be accompanied by a large increase in multi-family projects coming to market, helping to contain inflation in rents (contain, not eliminate or reverse). 

I don’t have any new reason to think so, but I have long thought gold and silver should catch a strong bid, and maybe this will be their year. I hope so!

And while I am hoping, I genuinely thought bitcoin would hit $100K before the end of last year. I am still a believer in the fundamental relevance of the stock-to-flow model, which calls for an average bitcoin price of $100K for this entire halving epoch. So at this point, I am kind of expecting a pretty wild spike to bring that average up. We are about half way through this cycle, so prices significantly above $100K at times during the next two years are called for, if that model is to be validated.

Moving from macro to politics, I think what everyone else thinks about the midterms: the Democrats are getting swept. Just absolutely destroyed. If I am wrong on this, so are a lot of other people. That said, I don’t expect a bunch of new Republicans in congress to do anything to ameliorate the corruption and fecklessness I mentioned above. 

One prediction I have been making since 2020 is that Joe Biden will not finish his term. Again, I believe probably a lot of people have been thinking this from the start, so maybe this is not a big prediction, but I think we see President Harris at the wheel, and possibly this year (though year three seems more likely to me). Just this evening I saw Bill Kristol postulate that Harris will be the next Supreme Court nominee, freeing up the Vice Presidency to a Mitt Romney nomination. This is the exact kind of outcome that is hard to foresee, and still likely to happen. I do not discount this as a thesis. I still think it culminates in Joe not finishing the term.

Finally, while I hate to be a pessimist, I am expecting at least one and probably a series of nasty crises this year. There are just too many people in power and too many countries with too many intractable problems. I expect serious drama involving technology, whether it is the much anticipated cyber pandemic or a more overt attack by governments in traditionally liberal democratic countries, like the United States, on individual access and privacy. It is hard not to expect some major escalation of armed conflict around existing tensions, and there are dozens to choose from across the globe, with Russia/Ukraine standing prominently as I write. And I will not be surprised if the newly formed task force on domestic terrorism doesn’t also need a newly formed domestic enemy or crisis to justify itself.

I know. This is not the most cheerful forecast for 2022, the year of the black water tiger. But, whenever one zooms out beyond a few years, or zooms in to see the individual, family, and local community experience instead of looking at the broad, one-year macro view as I have done here, there are millions (billions?) of positive and hopeful things to see and think.  I take comfort that these times are transitory (no Fed pun intended). We will get through them, and be better for it on the other side.

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My 2021 reading list

OK. Let’s dust off this old blog and get something good going in 2022. New Year’s resolution. Let’s start with something easy. A popular thing to post and share on social media is your prior year’s reading list. I’ll start off the year with that. The books I read last year. The list is pretty thin, even for me. I try to get twelve books in a year, and usually do much better than that, but…not last year. Who knows the reason. I just didn’t give it the time, and so only read a few books. 

All of the books I did read were books that came into Good Find Stores with consignments. Because of that, all of the books were a little special as objects. That is to say, they had some special physical quality beyond the content of their written word. Most of the books, in fact, all of the books that were written in the last 30 years, were signed by their author. Let’s look at each one.

My first book, The Jasmine Trade by Denise Hamilton. Hand signed by Denise, and an enjoyable fiction read. What I really liked about this book is how it gave me a flavor of Los Angeles at its specific moment in time, and a feeling for the mood, opinions and attitudes like a snapshot of twenty years ago (the book was originally published in 2001).

The next book I read was Unbroken by Laura Hillenbrand. Probably, everyone else in the world has already read this one, or seen the movie. I had not done either before receiving this copy, signed by Laura herself. Now I have done both. An inspirational read, for sure.

Following Hillenbrand, I read this fantastic collection of shorts from the master: Ray Bradbury. Not all Bradbury is wild sci fi, as Driving Blind demonstrates. And of course, signed by the man himself.

My final contemporary book last year was Blues in the Night by Rochelle Krich. Like The Jasmine Trade, this book is set in LA, and really captures the spirit of the city, or at least this author’s slice of it, in a way that transports one back to the Los Angeles of the early aughts. Krich also, through her story telling,  gives us some insights into her own, orthodox Jewish culture.

The remaining books on my reading list of 2021 are special, not because they are signed by their authors, which would be super cool, but because they are from the nineteen aughts. During the year I read Ralph Waldo Emerson’s Essays, Series one and Two. My vintage copy is undated, but I know because of the collection it came in with that it predates 1914. The book contains twenty essays, and the transcript of a lecture at Armory Hall. I did not read them in order, and it is possible that I have missed one or more, but I read a few of them more than once. I find, because of the language and the sheer density of Emerson’s expression, that it is easy to read the essays several times, and soak in it. Specifically, I read Self-Reliance and Nominalist and Realist more than once. 

Emerson’s Essays is not listed on www.goodfindstores.com because I go back to it sometimes and explore, but if you think you must have it, you may message me with your offer.

My final book of 2021 is George Eliot’s Middlemarch. OK, technically, this is the book I am still reading, and there is a good chance if I write a blog post about my 2022 reading list in January of next year, you might catch me double counting this one. In my defense, it is a pretty thick book. The edition I am reading was published in 1908, and my copy has never been read before. I can tell this because the pages are still uncut from the binding process. Every fourth page, I have to run a letter opener along the bottom to separate the two pages, which were originally printed on a single large page, and then folded into quarters for binding. So this copy of Middlemarch has been waiting on the shelf of a library for a hundred and thirteen years for someone to read it. I am happy to be The One.

I hope to read more books than last year in 2022. I enjoy it so much, and truly, I read a lot in 2021, just more articles. And, you know, Twitter. I am not making a resolution to read a certain amount. I have already made a resolution to be a better host to the hundreds who are following this thinly published blog, and I don’t feel that people can realistically keep more than one (or, possibly, two) real resolutions.

Happy New Year. I resolve that you will see more of me.


P.S. – My 1909 edition of George Eliot’s Middlemarch will become available on www.goodfindstores.com once I have finished it, but the pages will have been cut.

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Pinctada LLC

It is about twenty minutes after noon on Saturday, and I am at the store. It was three years ago this week that I resolved to take action and incorporate Pinctada LLC, with the dream of building and buying businesses in markets and industries which supported my interests, hobbies and passions, and which were organized around my vision of where we are heading in the future as a country and as a species. At its core, my thesis was that I could use the professional skills I’d built as a management professional working for others in legacy institutional configurations to do things I thought were fun and interesting instead. I thought that eventually this would be a more successful way for me to achieve my ambitious financial goals versus working another twenty years for ungrateful* owners and managers. (* a euphemism I am using for what I really think of some of the people who have served as my ‘betters’ over the years). I had learned the mechanics of corporate life too well. I was disillusioned and unhappy. I felt as though I could see the final 20 years of my productive life ahead of me, and while there was a chair for me to sit in and a steady paycheck that I didn’t really have to do any work for, all I could see was a long stretch of life during which I would need sedation. I didn’t want to sleepwalk to the end of my life.

I had lots of Big Ideas for transforming the mortgage industry where I had spent my career, and where I knew there were many structural weaknesses one could exploit. I dreamed of building seaweed farms and producing useful by-product materials. I had a lot of things that interested me, and which would be multi-year projects I could really sink into.

But more practically, I had dreams of building a community resale marketplace leveraging technology to access far-flung and super-niche markets, thereby improving my community’s access to liquidity for their abundant, better quality used items. I dreamed of bringing better quality used goods from wealthy, mature geographies to ‘emerging’ markets, whether in smaller, younger towns or to other countries. I dreamed of building systems for harvesting the incredible abundance of food and bio products that are everywhere around us, in our yards and gardens, parks and community spaces to build resilience and resources for neighborhoods and improve the quality of our supply chains. I could, I thought, start here. I would stand this business up, get a team, and move on to my next project(s). One month after incorporating Pinctada LLC, I incorporated what I planned to be its first holding: Good Find Stores.

I did the work. I built the financial models to see if what I thought made sense. I surveyed the resale market locally, regionally, and nationally. I built a roadmap covering three years, with the idea that I could open four stores in that time. In October 2018, I quit PennyMac to begin my new chapter as entrepreneur.

At first, things went very well. I looked at a few existing resale operations available for purchase, but also started looking at retail space. I ultimately signed a lease for a small retail space, and in December 2018 I opened for business taking consignment furniture, art, and housewares. I contracted with a website developer and built out a decent site. By February 2019 I hired my first part-time employee and by April I had two part-time people on the team. I brought aboard an outstanding PR/online branding professional. I bought advertising in popular local publications and sales grew each month. My costs were still low, and revenue was growing.

Then life happened: A divorce. A pandemic. My own bad choices that come from being too isolated, or in too much pain.

I am not successful. I had to let the staff go in September 2019 and I have worked the store myself since that time. Though there have been some successful months, the business is still not proven, and certainly I have not expanded into three more stores. There have been some deeply miserable times, and sometimes I think the periods of depression I experience will finally end me. I have lost my wife, my house, my dogs, and a consequential amount of my financial resources and personal property. My physical health has suffered, too.

This morning I was awakened by my phone’s programmed reminder to make my annual filing for Pinctada. That is what has had me reflecting on the last three years. My first thought upon waking and seeing the reminder was wonder. I was struck by how much life has happened in that time. It seems as though an entire epoch of human history has transpired. The next thing I experienced was a feeling of profound gratitude. For all that these last three years have not even remotely resembled my plan for them, I have lived them very deeply. Nested within my trials and hardships have been countless blessings. I have found new communities, made new friends and relationships, learned, and learned, and learned. Importantly, at my very core, in the space between my bellybutton and my heart and in the space between my left ear and my right ear, I just feel…better. I feel better about how I spend my days. I feel better about saying ‘no’ when something isn’t right for me. I feel better about a future with limitless possibilities, even though that future is entirely unstructured, and it is up to me to mold and shape it.  I feel better about being adaptive and changing. About being a dynamic character in my own story. I feel better living wide awake, with my whole heart.

Happy birthday Pinctada. Sit tight. This is how pearls are made.

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Clown World

It has been a long time, blog. It was just over one year ago, amidst the market chaos following the pandemic shut downs, that I first wrote. It was a scary, exciting and [insert an adjective much stronger than ‘strange’] time. It has been about eight months since I last voiced my thoughts into the internet void. There are a lot of reasons for that, but the main one is that I only had the same thing to shout each day: This is a stupid market. And to say so little, I could just shout that on Twitter each day at the market close.

During my blogging silence, the world has not, from my perspective, become less scary, exciting or [whatever word you used that is much, much stronger than ‘crazy’]. I, on the other hand, have had to adapt. I am now seeing things in a much more enlightened way. Now I can see that everything is fine. So, let’s have a look at the financial news then…

It is eight thirty in the morning on Thursday, and I am at the store. I have read a few paragraphs of financial news and so, am fired up to write about my indignation. Here is the object of my disgust:

Taking it from the top, here is where I have issues:

  1. Thursdays are big days for economic data, true. And equity markets were up strongly, true. Lower interest rates are not bullish. A bond rally and a stock rally are incompatible in the wild.
  2. A surge in consumer spending fueled by government direct payments is not really a positive. Depending on where one stands along the communist/capitalist continuum philosophically, one could even think government involvement will attenuate a bad situation.
  3. I will go and check to see, but my guess is a 10% climb, whether from the prior month or from the year earlier (which would be the first month of the lockdowns), might not be too strong of an actual, nominal increase.
  4. A decrease in weekly INITIAL jobless claims is a reason for optimism, yes. Not knowing if the improvement is due to economic activity in the real world or just government incompetence is not as hopeful a thought.
  5. And finally, INITIAL claims were still 576,000 NEW CLAIMS. DOWN FROM 769,000. THESE ARE NOT POSITIVE NUMBERS.

I’m sure this market is super smart, and everything is fine.

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Have We Got a Long Way to Run?

It is ten minutes after one in the afternoon on Sunday. I am at the store. Last week was an exciting one in the markets, with many S&P cos reporting earnings including all of the tech giants. Readers may recall I had a small speculative bet on silver, with option expirations on the 17th, which I wrote about here: http://rwhadvisoryllc.com/animal-spirits-or-spirit-animal/

Sadly, my calls expired just as the trade was coming into the money, but I did get shares put to me as the price crossed $19 and have enjoyed the gains on the way up. I maintain my long position in silver and continue to accumulate physical at the store. I don’t really have a price target at which I will sell. I view this, like gold and #bitcoin, as an easy trade for the foreseeable future and will probably only sell for reasons of necessity. If we see $48, I will probably take some profits and reallocate. Recall that I took only a very small position.

I should also follow up on this note I posted in between blog entries: http://rwhadvisoryllc.com/note-to-self-when-to-sell-dollars/ . Since then, the dollar has, in fact, dropped below 94.5. In fact, is reached about 92.64 before turning around to end the week at 93.46. I have dutifully reviewed my dollar long position and left it in place. I have not previously disclosed or discussed my dollar long position, so let me start with that.

I am fundamentally in the camp which says the dollar is going to go up, and will become very strong, i.e. the deflationary camp. I have found strong thinking on both sides of the inflation/deflation debate, and I squirm a little knowing how smart some of the people are saying that the dollar is crashing, but when I weigh these arguments on my own scales I have assayed that the dollar will experience a very strong rise before any final capitulation, should final capitulation occur. Also for the record, I think final capitulation will occur, just not now and not next. For insights into one of the strongest influencers on my long dollar thinking follow @jeffsnider_aip on Twitter and watch his Eurodollar university series on youtube: https://youtu.be/P0q7W9Hqk0M

But that isn’t the only reason I went long USD. I am thinking of it as a little bit of a paired trade with a bullish spread on CVX. I think we will be seeing some real volatility in oil over the next 12 to 36 months, ultimately with much higher overall prices. CVX, which was hammered after a negative earnings report last week, is a business I am familiar with and have traded or owned in the past. I expect the volatility in the dollar to show its reflection, both positively and negatively, in the overall stock performance of CVX. In the longer term I am expecting to shed my dollar long, and in the meanwhile look for gains and losses to partially off-set between these two trades. I don’t expect it to be a very direct kind of hedge. Just a little bit of a paired trade. I will be looking for USD to reach at least 104 before I think about selling.

Here are the details on my CVX spread:

I was able to spend some quality time with the earnings release by NRZ this week, but since I have already carried on quite a bit, I will post my thoughts separately. PennyMac will release earnings this coming week, currently scheduled for August 6th and I am looking forward to hearing what they have to say. Broadly, for this group of companies, my themes are:

  1. Transferring the bag, i.e. – shifting shares to public float, insider selling, loading up on debt, special bonuses and payouts to executives, etc.,
  2. The attendant pumping behaviors that go with (1), above, especially an emphasis on the current and next quarterly outcomes, which will all be very strong, a reluctance to recognize known or knowable costs and impairments in the current period and an unwillingness to acknowledge the potential severity of our current economic situation,
  3. The lack of self-awareness, avoidance or denial of the fact that huge profits are currently being privatized at the cost of taxpayers due to government manipulation of the markets and nationalization of mortgage banking risk, while privatizing profits, and
  4. The structural weakness and obsolescence of residential loan servicing and correspondent lending as activities at all.

I will look forward to digging in deeper on those themes this week. Meanwhile, stay informed with these two fantastic podcasts from this past week (I am not compensated in any way for posting these links):

Pomp Podcast #351: Roger Ver on Personal Freedom and the Early Days of Bitcoin

https://www.youtube.com/watch?v=P9oC_goIX8I&feature=youtu.be

Danielle DiMartino Booth with Jeffery Gundlach

https://www.youtube.com/watch?v=WQQA74TtWao

What’s that? You WANT to compensate me for clicking on some links? Click on the link below and add Lolli to your browser extensions. Earn large cash back on purchases in addition to your credit card cash back reward program. Get paid cash back in #bitcoin, or move it to your bank account as USD. There isn’t a good reason not to @trylolli :

https://lolli.com/ref/G3qkhczpGf

Final thought, and it is a difficult one: as of August 1 we had about 155,000 covid-19 related deaths in the United States. This has played out almost exactly as I had guessed when I wrote this: http://rwhadvisoryllc.com/another-blog-post-about-covid-19/ . Now we can see with hindsight that it has coalesced in the public consciousness only very slowly, and in the face of unimaginable denial. And arguably, sadly, this amount of death has not yet been sufficient to fully bring about that coalescence, as politicians, press, and common people all battle over every aspect of the disease and our response, leaving us without a uniform plan. Have we got a long way to run? Yes.

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Note to self – when to sell dollars

It is quarter-to-eight on Tuesday, and I am at the store. Just a note to myself that a 94.50 on DXY means I need to re-evaluate my bull case for the dollar, in the intermediate term. Totally normal to think this at quarter-to-eight on Tuesday.

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Surrogate Market Forces for Loan Servicing

It is ten thirty at night on Sunday and I am at the store. I have mentioned before that Sunday is a day I like to spend reading, studying and learning. Most of my day was preoccupied by other demands, but I am finally able to settle in for some study, and especially with an eye on the markets and tomorrow’s open. To that end, I have been looking at TZROP. I have been through their public report, and done some other reading, but still in learning mode.

Another topic I have touched on tonight is my favorite: mortgage banking. Readers will know, I have a dim view of loan servicing, especially as an asset to invest in, but also primarily because it is wholly unsupportable from the perspective of both mortgagor and investor. The actual task of receiving, applying, and remitting mortgage payments into a bond structure is so stupid simple that no customer would ever pay the mortgage servicing fee, if they ever knew they were paying it, and had a choice. That means, yup, the only ones benefiting are the servicers.

The Covid-19 pandemic has forced changes on servicers which bring their (lack of) utility into focus. These are basic changes of work-from-home, and customer self-service which 1) should have been made ten years ago, but for the problem that it 2) undermines the idea that the utility provided supports the amount paid by borrowers. As servicers move their teams to work from home, they will enjoy reductions in overhead costs at their facilities. Their decentralized workforce will demonstrate that the tasks of loan servicing can be largely crowdsourced, when human intelligence is required. Servicers are accelerating the already purposeful programs migrating customers to perform much of the work of servicing themselves, using self-service options online.

So, when will the servicing fee come down? When will we start to see some price wars with servicers trying to attract borrowers to their platforms with discounts and incentive? When will we see agents paying premiums and incentives to mortgagors in exchange for rights to transaction information about tax and insurance payments, or other personal information? When will borrowers be able to choose? My answer is: we will see things like this before your current MSR’s expected duration is up.

The drum beat I am pounding is that servicing is an anachronistic institution. One which we are doing out of habit, because the people paying don’t really know they are paying it, and because there is no real incentive for the servicing industry to innovate, except on cost of regulatory compliance. Because of this, it is structurally weak, and ready for a fall. For those who knock it over, there will be opportunity.

In other news, I will again recommend Peter McCormack’s four part docu-series about our current Treasury Secretary, Kip Mnuchin, which you can find on YouTube here:

https://youtu.be/CEDGVatau5A

Final thought:

Our hearts beating on

Gentle shores and crashing cliffs

Ocean’s timeless way

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Bitcoin, the Dragonslayer?

It is about ten o’clock in the morning on Sunday and I am at the store.

There is a cute scene in the 1981 Disney classic “Dragonslayer” which I am reminded of often now. The story is a classic knight-saves-maiden-from-human-sacrifice tale, with our maiden selected from among the virgin girls to be fed to the dragon for the greater good. The scene I am reminded of takes place the evening before the scheduled, ritual feeding-to-the-dragon, and the knight, Galen, will almost surely be killed as he readies to face the dragon in its lair. Oh, if only there were another way out of this terrible dilemma for them both. The film makers of course are very aware there is another way out, and there is a little moment in the film to acknowledge it in an unspoken way. It’s cute. I keep having that same feeling as I listen to different podcasts and financial news outlets ponder the US dollar’s reserve currency status, where I think: ‘awe, isn’t that cute? They are talking about bitcoin but we are all playing it coy for the kids and not saying bitcoin. So cute!’. Of course, plenty of the pods are saying bitcoin, but the closer one gets to what I think is fashionably called the middle of the Overton window, the coyer the discussion. Just like movie theater audiences will invariably think to themselves (and one or two will invariably yell out) ‘Galen and Valerian should just have sex, then she won’t get sacrificed!’ I feel like yelling into my phone at these interviews: ‘oh, yeah, and there is already a politically neutral, high-functioning alternative with a booming financial services eco-system growing all around it!’. But they know that.

When I hear the discussions about secular transitions from deflationary to inflationary episodes, I have the view that bitcoin brings a lot of gravity with which to affect the process. So, within a framework of dialogues where participants seem to agree, more or less that 1) there will be a big impact from monetary and fiscal actions, 2) that impact should generally be negative effect on USD’s relationship with world trade, that 3) the timing and severity of the negative impact are ameliorated, domestically, by USD’s status as the pre-eminent global reserve currency, and 4) that the transition away from dollar denomination hinges on the lack of an alternative, it makes me think of Galen.

For those interested, I can think of two places where I have recently heard some strong discussions about macro trend shifts, where the discussion of USD’s global reserve status seems to blush toward bitcoin. Both are on Macrovoices podcast. One of those I mentioned previously on Twitter, where you can follow me @goodfindstores Check it out here: https://twitter.com/GoodFindStores/status/1265462553011871744?s=20

The other is a Macrovoices episode I listened to just last night. Check out guest Harley Bassman at about minute 41:00 as he gets into explaining the dynamics he thinks will impact the secular transition:

https://www.podbean.com/ew/pb-sbzi6-e12334

I mean, he even says “there is no plan B”, as if a coy nod to the prominent analyst, thinker and writer from bitcoin Twitter, @100trillionUSD, and all of the bitcoin community.

Mentioned in this episode are a couple other themes I am following, and which are coming up more and more. The first is the idea of investing in art, jewelry, and other stores of value as a hedge against the risks of holding cash during an inflationary episode. It just gets a passing mention in this episode, but this subject is very germane for me since I am naturally long both fine art and jewelry through my resale store. I think antiques will also see a resurgence, if not for their value as decor, or utility items, then for their scarcity of material and construction. The second is the spread trade Mr. Bassman talks about putting on the SPY, to get strong trading leverage on a macro thesis in this messed up market. These are the exact kinds of trades I have been using to deal with the environment, and my speculative objectives. I think even my most recent post about SIVR fits this model of trading, which I wrote about here: http://rwhadvisoryllc.com/animal-spirits-or-spirit-animal/ . So, nice to hear such an experienced voice advocating the strategy I have been using. I have been hating the high cost of premiums on SPY, but maybe will fish around there and some other broad indexes for an appropriate spread trade when the markets open tomorrow.

Final thought:

No day is complete

No cycle can be all through

but for some changes

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Animal Spirits, or Spirit Animal?

It is about twenty minutes after eight in the evening, and I am at the store. This morning while doing my financial markets reading, I was caught up in the animal spirits. I made my usual, daily entry in the record books that the market is stupid; it was another nice up day, of course, because now those are the only kind. And I read a few pump articles on Seeking Alpha about one of my favorite subjects: silver. Gold looks like it is trying to push and stay higher. Like I said, animal spirits. So I have made a little wager on the potential for a silver rally between now and July expiry. Here is (approximately) the trade:

I have a real hate for this market, and see many areas of weakness that beg for shorting, but with interventionism and the potential for truly major currency issues, this small, short-time frame bet in a familiar category was all the more animal spirit I could muster. And for the record, I only did this trade 2X, so sold 2 of the puts, etc. Come July expiry, if it has not paid off, I will seriously consider rolling the trade, just because I think this is a thing that is going to happen.

What sort of dynamics might the turbulence of the current climate cause in the silver markets? If there truly is a ‘V’ recovery, and industrial demand for silver recovers to pre-covid levels, will there be a supply crunch due to mining interruptions? What if industrial demand does not recover? Glut, and price crash? Could consumer demand off-set significant decreased industrial demand? Will silver ever have a place on the currency, collateral or savings technology spectrum again? Will we have major, state-sponsored infrastructure and industrial spending initiatives as a part of this cycle, which will fuel demand for silver in the longer term? Most of these questions can’t be answered within my option period, but silver continues to feature in my thoughts for its potential.