The Trump of Italy and the Next Big Shock

  • Brexit, Trump… and now Italy? Rickards on the next political earthquake
  • OPEC has a deal, and it ripples through every asset class
  • Swamp-draining update: Goldman scores another Treasury Secretary
  • Americans earn more, and even salt some of those earnings away
  • The gold thief who probably can’t figure out what to do with his haul
  • “Fake news,” continued: A theory about the origins of PropOrNot

First came Brexit. Then came Trump. And on Sunday, Italians will likely deliver the third major rebuke to the global elites this year.
As promised on Monday, Jim Rickards is joining us today for insight into this next political earthquake. And who better to ask? Jim was among the few who wouldn’t rule out the possibility that Britons might choose to leave the European Union. Then he really stuck his neck out and forecast a Trump victory.
On Sunday, Italians go to the polls to say yea or nay on constitutional reforms. “The vote,” Jim tells us, “has morphed into a referendum on the pro-EU leadership of Italian Prime Minister Matteo Renzi. In effect, this referendum is a kind of ‘Italian Brexit’ vote, although a ‘no’ vote would not cause an immediate exit from the EU.”
But it would prompt Renzi to resign. He’s said so. “That would necessitate new elections,” Jim goes on, “which could facilitate the rise of the Italian Five Star Movement. Five Star is an anti-EU, anti-immigration nationalist party.”
“The Five Star leader is like the Donald Trump of Italy,” Jim adds.
Indeed. This morning’s Wall Street Journal tells us of a video posted by Five Star leader Beppe Grillo, who got his start in public life as a comedian.
“An era is going up in flames,” Grillo says — with Trump’s election-night victory speech playing in the background. “It’s the risk-takers, the stubborn, the barbarians who will carry the world forward…We will end up in government, and they will be asking, ‘How did they do it?’”

Beppe Grillo, champion of “the barbarians.” Dig the hair!
[Youtube screengrab]

Back to Jim: The fear is that the fall of Renzi and the rise of Five Star could lead eventually to Italy’s withdrawal from the EU and the breakup of the euro.
“Of course, that kind of turmoil has negative implications for Italian and German banks that are facing insolvency for other reasons. In a worst case, a breakup of the euro and collapse of European banks could ignite another global financial crisis.”
The Renzi government is planning some large bank bailouts. His resignation would put those plans on hold. Thus the Financial Times story we mentioned on Monday, in which anonymous “insiders” warned that if Italians vote “no,” it could bring down eight shaky Italian banks… and by extension, the sickly German giant Deutsche Bank.
Key point: Unlike Brexit and Trump, the polls already show a “no” vote is a near-certainty.
“The Italian referendum is important, but the fears are overblown,” says Jim.
[Heh… Bet we threw you for a loop there. Who says we’re all about doom and gloom?]
“Italy is a core member of the EU and the eurozone,” Jim explains, “along with Germany, France and the Netherlands. Leaving the euro is almost inconceivable under any circumstances. In fact, the people of Italy support the euro because they recall the bad old days of the Italian lira and government theft of savings through continual lira devaluations.”
And Jim goes a step further: “The situation in Italy is far less precarious than Greece in the 2010–15 European sovereign debt crisis.
“When it came time for a showdown in June 2015, Greece chose to remain in the euro and accept austerity rather than go back to the Greek drachma. Italians will do the same, while suffering far less austerity than the Greeks.”
So there. Italy will be the third great shock to the political system… but the financial impact will be less than the mainstream hand-wringers would have you believe.
But… Jim still has a third major prediction to unveil here in 2016, on the same scale as Brexit and Trump.
Bigger, really… because this prediction foretells “a devastating time for a majority of Americans… The price of gold could go up more than $100 an ounce per day.”
Indeed, Jim has a revised outlook for the long-term gold price. What was $10,000 is now knocking on the door of $15,000.
That might sound outrageous… but Jim called Brexit and Trump. Before you dismiss Jim’s “Third Prophecy” out of hand, you might want to see him make the case for yourself.

Click here for Jim’s “Third Prophecy” after Brexit and Trump…

Huh — OPEC went and did it. At its semiannual meeting in Vienna, the cartel cut a deal to pare back its members’ oil production from 33.6 million barrels a day to 32.5 million.
Somehow — perhaps the details will emerge as the day wears on — the Saudi Arabians twisted the arms of their archenemies in Iran to go along with a production cut; the Iranians would just as soon pump like crazy, making up for lost time under years of Western economic sanctions that are slowly lifting.
Crude prices — which seesawed almost daily with every new rumor about the negotiations — are up 8.5% as we write, a barrel of West Texas Intermediate fetching $49.09. That’s the highest since July of last year. Hope you topped off the tank within the last couple days.
And there are spillover effects on nearly every other asset class…

  • The major U.S. stock indexes are mostly in the green; earlier in the morning, the Dow crested 19,200 for the first time
  • The dollar index has strengthened to 101.7 — another 13-year high
  • Gold has sunk to another low last seen in early February, $1,172
  • Treasury rates are zooming higher, the 10-year note now at 2.39% — territory unseen since the summer of last year. Hope you refinanced your mortgage before Election Day.

Elsewhere the market, chatter is about Trump’s choice for secretary of the Treasury. We’ve been onto Steve Mnuchin for months now.
We took note in early May when Trump put Mnuchin in charge of his campaign fundraising machine. Goldman Sachs, we said, was keeping its bases covered — giving Hillary Clinton $675,000 to deliver three speeches, while worming one of its own into a key position with Team Trump.
Mnuchin was indeed a Goldman partner before striking out on his own as a hedge fund manager. His dad spent his whole career at Goldman.
Mnuchin would continue the long and not-so-distinguished line of Goldman alums who became Treasury secretary… notably elite power broker Robert Rubin, who helped lay the groundwork for the dot-com bubble… and Hank Paulson, whose improvised policy shifts set off weekly minipanics during the greater Panic of 2008.
No sooner did the transition team confirm the pick than Mnuchin went on CNBC to bow at the false god of GDP — a statistical abstraction that has zero relevance to your own standard of living: “Our most important priority is sustained economic growth,” he said, “and I think we can absolutely get to sustained 3–4% GDP, and that is absolutely critical for the country.”
Translation: It’s absolutely critical for generating the tax revenue Uncle Sam needs to remain marginally solvent. Besta luck…
[Just in: Current Goldman Sachs President Gary Cohn is under consideration for “a senior administration job” says Politico — perhaps White House budget director. That swamp water the president-elect claims he wants to drain is rising fast — heh.
In the meantime, we eagerly await the pushback from Trump fanboys in our inbox. HE’S PLAYING 11-DIMENSIONAL CHESS AND YOU DON’T REALIZE IT! FRIENDS CLOSE AND ENEMIES CLOSER! THE ART OF THE DEAL!]
Americans’ income grew big-time in October… and they didn’t all blow it on consumer-y junk, either.
The Commerce Department’s income-and-spend report shows personal incomes growing 0.6%… and consumer spending growing 0.3%. The savings rate moved up sharply from 5.7% to 6%.
This report also includes “core PCE” — the Federal Reserve’s preferred measure of inflation. For the third straight month, the number has held at 1.7%.
That’s shy of the Fed’s 2% target, but inflation hasn’t been proceeding at a clip like this in two years. It’s still all-systems-go for the Fed to raise its benchmark fed funds rate at its next meeting two weeks from today — which will set off a cascade of consequences. More about that later this week and early next…
We suspect one or two armored-truck drivers in New York are about to return to the job market… after a brain-dead-easy gold heist.
Police are looking for whoever lifted an aluminum bucket filled with gold flakes from the back of an unattended truck. It weighed about 86 pounds; the gold is valued at around $1.6 million.
The theft took place on Sept. 29; the cops have now released surveillance video…

There’s gold in that thar bucket…
[NYPD screengrab]

“An armored truck company was making a pickup and left the back of the truck open and unattended in front of 48 West 48th St. between 5th and 6th avenues,” according to a CNN account. “In the time the truck was left alone, a man was able to walk up and make off with some of its precious cargo.”
The question neither CNN nor the NYPD have tried to answer: How the heck do you pawn gold flakes — as opposed to coins or jewelry — without raising suspicion? Maybe the thief is still trying to figure that out two months later…
“Insult to injury for retired couples making over $170,000 per year?” a reader writes after yesterday’s item about Medicare Part B premium increases
“Ouch, that must hurt them so.
“You’re right, now I feel bad — about as much as they should.”
The 5: A little envy there?
“I have read most of these reports in The Washington Post and from other sources and have a possible explanation,” a reader writes on the “fake news” phenomenon.
“Right after the general election, it was reported that Soros, Bloomberg and others on the left were meeting to discuss how to counter some of the news organizations such as Judicial Watch.
“The references to the new blog PropOrNot and the secrecy surrounding it seems to be something that may have been dreamed up by those in this earlier meeting. I think those involved are adhering to the old adage ‘Let’s run it up the old flagpole and see how it waves’ before they take any credit for what has been published.
“No proof, but something to consider.”
The 5: “PropOrNot’s Twitter account,” writes Mathew Ingram at Fortune, “has only existed since August of this year. And an article announcing the launch of the group on its website is dated last month.”
Meanwhile, media critic Adam Johnson from the lefty-but-often-insightful group Fairness and Accuracy in Reporting has pointed out another aspect of the Washington Post story that breaks from long-standing journalistic norms — the reliance not on an anonymous source, but an anonymous expert analyst.
Good point. Usually these think-tank types are falling all over themselves to put their names out there so they can secure more lucrative positions in government or ultimately as lobbyists. The fear-of-Russian-hackers excuse looks like a mighty slender reed to grab onto…
“Dave, you do know what a Post is for,” writes one of our regulars — “for dogs, and sometimes drunks, to piss on.”
The 5: And newspapers are ideal for training a puppy, no?
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. If the anonymous PropOrNot crowd, aided and abetted by The Washington Post, is smearing David Stockman’s website as “Russian propaganda”… they sure as heck don’t want you reading David’s new book, Trumped! A Nation on the Brink of Ruin… and How to Bring It Back.
Amazon is peddling it today for $17.86. But you can get it through Agora Financial for just $4.95 shipping and handling. And we’ll give you a bonus chapter identifying the No. 1 investment to own during the first 100 days of the Trump presidency.
Got your copy yet? Heres where to get it.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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