- ISIS makes a propaganda video featuring… who?!
- The globe’s most infamous terrorists take on the Federal Reserve
- Look who’s buying gold now (He didn’t own any before)
- Volatility reconsidered: What the VIX doesn’t show
- The 5 is lumped in with “the intellectual left media” (!)
“If ISIS adopts a gold currency, does that make gold owners terrorist sympathizers?” we mused in this space on Nov. 14 of last year.
That’s when ISIS — or ISIL, or Islamic State, take your pick — first announced plans to issue a gold dinar. Silver and copper coinage would be issued too, the better to get out from under the “tyrannical financial system imposed on Muslims” — in the words of an official ISIS statement.
By June of this year, ISIS said it would debut the new currency in the territory it now controls — what used to be eastern Syria and western Iraq — on July 17.
So far, we’ve seen no evidence of the coins’ circulation. Where the gold and silver would come from ISIS has never made clear, either. But it continues to talk up a gold-backed currency.
Indeed, this morning, the cheeky question we posed last fall is cutting a little too close to home.
Over the weekend, ISIS released a slickly produced English-language video, nearly an hour long, denouncing the “financial system of enslavement, underpinned by a piece of paper called the Federal Reserve dollar note.”
Hmmm…
“The dollar has in fact lost almost all of its value since the Federal Reserve came into existence,” the video asserts — which is true. A dollar today is worth only 4 cents measured in 1913 currency.
Perhaps not surprisingly, the video’s producers snagged a clip of Ron Paul when he was still in Congress.
But they also appropriated a clip of our own Jim Rickards, talking about the Chinese and Russians dumping their U.S. Treasury holdings. When Russia started selling U.S. notes and bonds, “that was a clear signal they were getting ready to do something to engage in financial warfare against the United States.”
There’s not much more we can say… other than to marvel at how a bunch of suicide bombers and head-choppers with their minds in the seventh century are using 21st-century technology to spread the word about how unsound money threatens the U.S. economy.
[Ed. note: Ominously, there’s an aspect of the story ISIS hasn’t figured out yet. You might think of it as the Federal Reserve’s dirtiest secret. When it becomes public, it’ll be the mother of all accounting scandals — 525 times worse than the Enron debacle of 2001, Jim figures. And every American will be affected.
Let Jim run you through the frightening numbers… and then he’ll show you how to protect yourself. There’s no lengthy video to watch — just some eye-opening facts that will affect you and your family, sooner or later. Here’s the link.]
One of the most successful investors of the last 30 years is piling into gold — Stanley Druckenmiller.
Druckenmiller was George Soros’ right-hand man for more than a decade. He’s a mainstream figure who in 2013 blurted out the truth about the Fed’s post-2008 policy when he said, “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever. Who owns assets — the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff?”
That said, Druckenmiller was quite successful before the Fed embarked on zero interest rate policy and periodic bouts of quantitative easing/money printing. “From 1981-2010, when he shut down his hedge fund Duquesne Capital Management, Druckenmiller’s annualized rate of return was 30%,” says Jody Chudley of our natural resources team. “That isn’t good; it is almost impossible to believe.”
Nowadays, Druckenmiller is content to manage his personal fortune — some of which is still subject to public-reporting requirements. He has to file a Form 13F with the SEC every quarter.
The latest one reveals $1.48 billion in publicly traded securities. Of that sum, nearly 22% is invested in the SPDR Gold Trust.
“This GLD position is more than twice as large as Druckenmiller’s next largest holding,” says Jody.
“In case you are wondering if this big GLD position of Druckenmiller’s is one that he has been sitting on and losing money on for the past three years, you will be interested to know that he didn’t own a single share of GLD prior to this past quarter.”
Druckenmiller’s rationale? Speaking to a group of money managers in North Palm Beach, Florida, last January, he tipped his hand: “Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we’re doubling down on the same policy that really put us [in the 2008 financial crisis] and enabled those bad actors to do what they do…
“This is crazy stuff we’re doing. So I would say you have to be on alert to that ending badly.”
We’ll spare you the trouble of scrolling up if you didn’t click to Jim Rickards’ latest expose the first time. Here’s the link again.
To the markets: As long as we have gold on our mind, we’ll check that first. Not much to say: At $1,133, gold priced in dollars is little moved from Friday.
Major U.S. stock indexes are mostly in the red, but not much. The Dow is off a third of a percent at 16,583. The small-cap Russell 2000 is slightly in the green.
The big mover of the day is crude. Again. It had pulled back earlier this morning… but the moment the Energy Department said U.S. production fell 1% during June, it reversed in a hurry. At last check, a barrel of West Texas Intermediate is up more than 5% at $47.57.
And with that, crude prices have recovered to where they were a month ago.
“Everyone’s favorite market volatility gauge is dramatically underestimating the amount of risk left in stocks right now,” ventures Jonas Elmerraji of our trading desk.
We noted last week that the VIX — a measurement of implied volatility in S&P 500 index options — had briefly popped above 50 last Monday. By Tuesday, it was already back to 32, and on Friday, it had settled down to 22.
“What most investors don’t realize,” says Jonas, “is that the VIX doesn’t actually measure true statistical volatility in the market. It only measures how much volatility those S&P index traders are pricing in. That means that, occasionally, the VIX can become disconnected from the observed volatility levels in the market.”
Which is what’s happening now…
“In the chart above,” Jonas goes on, “the VIX is on the top, while an indicator called Bollinger Bandwidth, which measures the actual statistical volatility in the market, is on the bottom. As you can see, they tend to move in line with one another.
“But last week, the VIX almost halved itself as the market rebounded, while Bollinger Bandwidth remained at multiyear highs. What’s happening here?
“Remember, the VIX measures traders’ emotions,” says Jonas.
It spiked when the market started selling off earlier this month. Then it moved back down again when the market recovered after the Dow opened down 1,000 points last Monday.
“Thing is, that fast upward bounce in the market at the end of last week was a very volatile move itself,” says Jonas. “It didn’t make the stock market less volatile — it actually made it more volatile.
“The talking heads on CNBC are going to be talking about the VIX a lot in the next couple of weeks — and a lot of investors are going to think that things are settling down when they’re not.
“The good news is that with September trading kicking off tomorrow, we’re heading out of ‘summer doldrum’ territory for stocks. In the meantime, I still think it’s smart to trade defensively — market volatility is a lot higher than most people realize.”
“Last Monday’s action was odd to say the least,” a reader writes, “and there are a few contradictions that beg for an explanation.
“Selling was so heavy that the ‘circuit breakers’ shut down trading many times, which has been described many times. So who were the brave buyers willing to step in front of this stampede that had sent the Dow down almost 1,100 points in the first 15 minutes of trading and wagering their money the pattern would shift in their favor and recoup almost 900 points on the Dow in the next 30 minutes?
“I find it difficult to believe the average investor or mutual fund manager would have been willing to do this. So who’s left?”
The 5: Very possibly the same hedge funds and algorithmic traders (i.e., computers) that were dumping stocks so furiously first thing in the day.
The results of that swoon were just ridiculous: The S&P 500 was down 6% on the open, but ETFs that (theoretically) mimic the S&P lost a third of their value — if only briefly.
Ironically, the people who fared best during August were retail investors who hung in there, says money manager Barry Ritholtz: “Mom and Pop were content to ride out the market’s volatility this past month, more or less sitting tight. Meanwhile, the pros were driven to the point of near panic.”
“Frankly, I’m sick of stories like this,” writes a reader objecting to our offbeat item Friday about law enforcement taking aim on a couple of sky-watchers armed with nothing more than a telescope.
“Either you have become one of the intellectual left media (berating the police for doing their job),” complains another, “or you didn’t see the article about the policeman pumping gas into his car getting shot several times execution style from behind.
“Also, I figure you were never in the military either or you would have known you had to distrust your opponent, no matter their age or sex.”
The 5: When did you and I cease being police officers’ fellow citizens and become “opponents” instead?
When police are trained to see threats everywhere, they’re going to — well — see threats everywhere.
“I interviewed lots of police officers, police administrators, criminologists and others connected to the field of law enforcement,” says author Radley Balko of his 2013 book Rise of the Warrior Cop: The Militarization of America’s Police Forces. “There was a consensus among these people that constantly telling cops how dangerous their jobs are is affecting their mindset. It reinforces the soldier mentality already relentlessly drummed into cops’ heads by politicians’ habit of declaring ‘war’ on things.
“Browse the online bulletin boards at sites like PoliceOne (where users must be credentialed law enforcement to comment), and you’ll see a lot of hostility toward everyone who isn’t in law enforcement, as well as various versions of the sentiment ‘I’ll do whatever I need to get home safe at night.’ That’s a mantra that speaks more to self-preservation than public service.”
And yet when it comes to death on the job, loggers and commercial fishermen die at far higher rates. Indeed, law enforcement doesn’t even make the top 10…
“I read with a bit of amusement,” a reader writes, “the comment regarding the Chinese and how they have been cutting interest rates lately.”
Our reader especially got a chuckle out of Chuck Butler’s remark here last Tuesday that “interest rates in a country shouldn’t be set by a central bank, but rather the markets.”
“I have watched most of the major markets for some time now,” the reader goes on, “and I am not aware of any major market where the interest rates are not controlled by a central bank, with the exception of one, the USA. Here our interest rates are controlled by a private bank, called the Federal Reserve Bank of the United States. A for-profit corporation that has been manipulating interest rates in the USA since 1913.”
The 5: Hey, you might have a future making ISIS propaganda videos!
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “Once you see all the details of what I uncovered, you’ll understand why millions of Americans will become poorer overnight… much like Enron employees did,” says Jim Rickards of his newest expose.
“During private conversations, two members of the Fed have privately admitted to me: ‘Yes, the Fed is broke.’” And Jim has the numbers — from official government documents — to prove it.
When will the rest of the world catch on? What will happen to your hard-won savings then? And what should you be doing in the meantime? Answers here
