- Jim Rickards on “a clear-cut effort” toward de-dollarization
- Domino falls on Russian default
- Commodities and “emergency liquidity support” (uh-oh)
- New China lockdown scare of the day
- AMC Entertainment CEO plays to the Robinhood crowd
- Daylight saving time: Good news, bad news
- A reader calls for insourcing… Heaven or hell?… And more!
We’re hitting “send” on today’s edition at precisely 2:00 p.m. EST — because it’s at this instant the Federal Reserve is setting events in motion that will trigger the next epic market crash.
The Fed just wrapped up its March meeting. The widespread expectation is that the Fed will raise the fed funds rate from near-zero to a little over 0.25%. There will undoubtedly be some details and nuances that we’ll unpack tomorrow.
But make no mistake: In Jim Rickards’ estimation, the next crash is now baked into the cake. That’s based on an exhaustive study of market history dating back more than a century.
As they say in the official warnings when a hurricane is bearing down on the Atlantic or Gulf coasts… “Preparations should be rushed to completion.” Jim’s warning expires at midnight tonight: Click here and take action while you still can. The rest of today’s 5 will be waiting for you when you’re done…
In the meantime, everything Jim Rickards prophesied in his 2011 book Currency Wars is coming to pass this month.
In that volume, he described his participation in the Pentagon’s first-ever “financial war game” during early 2009.
“The scenario I presented at the time,” he says now, “was that Russia and China would accumulate large gold reserves, pool their gold and launch a new digital currency backed by gold in place of the U.S. dollar. Russia and China would then insist that any purchases of Russian energy or Chinese manufactured goods be paid for in the new currency.
“It was a clear-cut effort to get out from under U.S. dollar hegemony and to protect themselves from U.S. dollar-based economic sanctions. Of course, that’s exactly what’s playing out today.
“Now the Biden administration has awakened to this threat,” Jim says, “but it may be too late.”
As you might be aware, the president has ordered scads of federal agencies to look into the rise of cryptocurrencies and the potential impact. In addition, those agencies will look into the creation of a CBDC — a central bank digital currency. That is, a sort of crypto-dollar.
“The problem with Biden’s order,” Jim explains, “is that a U.S. digital dollar is still a dollar. It may exist in digital form and be held in a direct account with the Fed accessed through your iPhone, but it’s still a dollar.”
And dollars are turning into toxic assets. As we mentioned again just yesterday, Biden crossed an economic Rubicon on Saturday, Feb. 26 — freezing a huge quantity of the foreign exchange reserves held by Russia’s central bank. It was an unprecedented act — “the steepest financial sanctions ever,” Jim says.
“That was the last straw for Russia and the world. If dollar reserves are no longer a safe haven, then who needs dollar reserves?” Jim asks rhetorically.
“The Biden administration is so ignorant of how the financial world actually works that it continues pushing sanctions while going through the motions of planning for a future digital dollar. The problem is that they are destroying the value of the dollar by abusing sanctions.
“In the future, the dollar will not be that important whether it’s paper, digital or crypto.
“Investors can prepare for the coming collapse of the dollar by increasing their allocations to physical gold. That’s the one form of money you cannot freeze or seize.”
[Ed. note: As if that’s not enough turmoil, Jim says the Fed’s move this afternoon to start raising interest rates is sure to touch off a chain of events leading to the next stock market crash.
How can he be so sure? Because it happened before the housing bust… the dot-com bust… the crash of 1987… indeed, basically every crash going back to 1919.
Prepare now. Watch this presentation for, among other things, a FREE recommendation that can make you 10X your money while everyone else is panicking. Again, this is time-sensitive information now that the Fed is making its move. Watch it right away, because we’re taking it down at midnight tonight.
To the markets, which are contending with any number of cross-currents apart from the Fed’s moves this afternoon.
Barring unexpected developments, Russia’s government will miss an interest payment on its debt today. Technically, Russia won’t be in “default” for another 30 days, but does anyone really expect Moscow to find enough change in the sofa cushions to meet its obligations?
Then the question arises: Who does Russia owe? Who’s holding the bag? A week ago, Jim Rickards said it “takes about a week for bodies to float to the surface.”
A week later, the mainstream is finally catching up. Bloomberg: “Signs of looming financial damage are becoming apparent at many of the world’s biggest money managers, including BlackRock Inc. and Pacific Investment Management Co.
“But it’s not likely to be limited to these giant funds. Because much of Russia’s debt was rated investment grade just weeks ago, the securities were pervasive across global fixed-income portfolios and benchmarks, meaning the impact could ripple across pension funds, endowments and foundations.”
But wait, there’s more!
The Chinese commodity tycoon known as “Big Shot” has finally managed to secure financing to meet his margin calls… and so after more than a week, nickel trading finally resumed today on the London Metals Exchange.
Except trading was halted moments after it began; nickel opened “limit down” as traders rushed to close out their positions. Oops.
Meanwhile, the giant commodity trading firm Trafigura is scrambling to raise capital from private equity outfits like Blackstone and Apollo Global Management. According to Bloomberg, Trafigura ended up facing billions of dollars in margin calls last week amid the extreme volatility in oil and other natural resources.
As we write, the Financial Times is breaking news that Trafigura along with oil giants like BP and Shell have issued a plea to European governments and central banks for, in their words, “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function.”
Gee, that sounds kinda serious…
But Wall Street is in rally mode on rumors of a ceasefire in Ukraine — rumors that emerged within an hour of Ukrainian President Volodymyr Zelenskyy’s emotional video plea to Congress for a no-fly zone. Huh?!
At last check, the Dow has added nearly 450 points to yesterday’s 600-point rally — and is back within spitting distance of 34,000. The S&P 500 is back above 4,300 and the Nasdaq easily over 13,000 again.
Treasury yields are moving up some more, the 10-year note now approaching 2.18%.
Precious metals are slumping again — not dramatically, but enough to put gold in danger of breaking below $1,900. Silver’s been knocked back to $24.50. Crude sits more or less where it did yesterday at $95.54. Bitcoin is approaching $41,000 and Ethereum is over $2,700.
The big economic number of the day is retail sales. The headline number grew 0.3%, a hair less than expected. But the real story emerges when you exclude auto sales (because they’re volatile month to month) and gasoline sales (because rising gas prices can skew the number artificially higher).
Here, the “expert consensus” among dozens of economists polled by Econoday was looking for a 0.6% jump. Instead, we got a 0.4% decline. Ouch.
New China lockdown scare of the day: The parent firm of KFC and Pizza Hut says Chinese sales plunged 20% during the first two weeks of March.
“The situation has rapidly deteriorated,” per a statement from Yum Brands’ Chinese unit. That’s on top of production shutdowns at Toyota, Volkswagen and Apple supplier Foxconn.
Beijing remains obsessed with its zero-COVID policy. Jilin province, home to 24 million people, is on lockdown. So is the city of Shenzhen, home to 12.5 million and widely regarded as “China’s Silicon Valley.”
While it’s way too soon to tease out the long-term implications, we’d be remiss if we failed to mention that meme-stock favorite AMC Entertainment — you know, the movie theater chain — is investing in a gold miner.
AMC is plunking down $27.9 million to buy a 22% stake in Hycroft Mining Holding — whose primary property is a mine in northern Nevada.
“One would not normally think that a movie theater company’s core competency includes gold or silver mining,” concedes AMC CEO Adam Aron.
But Aron sees in Hycroft “a company in an unrelated industry that appears to be just like AMC of a year ago. It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. Its share price has been knocked low as a result. We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours.”
In other words, Aron knows how to play to the Robinhood crowd — and he sees no reason not to parlay his carnival-barker capabilities in sectors besides movie theaters.
We’d dismiss the whole thing as a one-off fluke — were it not for the fact that AMC is joined in the deal by a metals-and-mining legend. Canada’s Eric Sprott is also taking a 22% stake in Hycroft.
That ought to make the most battle-scarred mining investor sit up and take notice. To be continued…
For the record: Sarah Bloom Raskin has seen the writing on the wall and withdrawn her name from consideration as the Fed’s top bank regulator.
As Jim Rickards alerted us in January, Raskin was eager to use the position to pursue a climate-change agenda — leaning on lenders to starve fossil fuel-producers of capital, favoring renewables instead.
With the Senate deadlocked 50-50, Democrats couldn’t afford any defections. Then Sen. Joe Manchin from the coal-intensive state of West Virginia declared his opposition Monday. Raskin is done.
The good news: The U.S. Senate has voted unanimously to do away with twice-a-year time change. But yes, there’s bad news…
… They’ve opted for year-round daylight saving time.
Every now and then in these virtual pages, your aging editor laments the insidious stressors of time change — most recently last fall. We’ve regularly documented how it doesn’t save energy… but it does make for more workplace accidents, car crashes and heart attacks.
In 2020, the American Academy of Sleep Medicine, along with several other groups, published a position paper in the Journal of Clinical Sleep Medicine.
Its recommendation — year-round standard time, because that’s what would be “best aligned with human circadian biology and has the potential to produce beneficial effects for public health and safety.”
So of course the dunderheads in D.C. did the opposite — and are setting us up for a rerun of 1974, when an experiment with year-round DST failed spectacularly.
Washingtonian magazine published a retrospective on its website just yesterday…
Ironically, or maybe not, year-round DST was imposed amid a shock to global oil supply — the OPEC embargo of 1973–74. It was sold to the public as an energy-saving measure.
Quickly, however, Americans were appalled to discover their kids were going to school in the dark. “It was jet black,” parent Florence Bauer of Springfield, Virginia, told The Washington Post back then. “Some of the children took flashlights with them.”
Soon, Florida’s Gov. Reubin Askew took the lead in calling for Congress to repeal the measure — which it did just in time for the darkest months of the 1974–75 school year.
Go figure: The lead sponsor of the measure reimposing year-round DST is another Floridian — Marco Rubio. Born in 1971, he wouldn’t have been old enough to experience the original fiasco up close and personal.
But Senate fossils like Dianne Feinstein and Chuck Grassley — both 88 years of age? They have no such excuse. Heck, 21 senators, more than a fifth of the membership, were born before 1950 — so they have adult memories of the previous dalliance with year-round DST.
And they still voted for this debacle. We’ll see what happens when the measure goes to the House.
In the meantime, as the TV editorials of that era would conclude, “That’s our opinion — what’s yours?” Shoot us a line at feedback@5minforecast.com — this topic always makes for a lively mailbag.
To today’s mailbag: “Yes, the Western world is going to quickly notice as the supplies of grain, petroleum, strategic metals and other raw materials imported from Russia and Ukraine dwindle,” a reader writes, “but I wonder about one item that Jim Rickards often cites.
“It’s said that around 60% of the neon used by the semiconductor industry currently comes from just one place: Odessa, Ukraine. However, neon is extracted from the air, which is everywhere, and the only apparent reason that so much neon comes from Ukraine is because the semiconductor manufacturers found it more economical to buy it than to produce it themselves.
“Looks like another poster child for the principle of having – to the greatest extent possible – sources of critical materials located inside one’s own country.”
The 5: Well, yes and no.
We’re reminded of the old joke: “Heaven is where the police are British, the cooks are French, the mechanics German, the lovers Italian and it’s all organized by the Swiss. Hell is where the chefs are British, the mechanics French, the lovers Swiss, the police German and it’s all organized by the Italians.”
Point being, some people are better at doing certain things than others — “comparative advantage” is the economic term. So we’re not really fans of “autarky.”
But at the same time, it’s apparent global business got fat and lazy over the last 20 years — outsourcing as much as possible while relying on “just in time” delivery and inventory systems.
Ever since COVID lockdowns began, global business has gotten a clue-by-four — rediscovering there’s a trade-off between efficiency and resiliency.
The Ukraine war? It’s just making that trade-off even more obvious than it was before…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. So the Fed has gone and done its thing — embarking on a new rate-raising cycle, the first since 2015.
You can read about the Fed’s statement anywhere. But only here will Jim Rickards clue you in to the weird pattern that’s preceded every market crash since 1919 — and how the Fed just put it in motion again.
This is time-sensitive information now that the Fed has made its move. We can’t guarantee how long it will remain fresh and actionable. For that reason, we’re taking it down tonight at midnight. We urge you to follow this link and give it a look right away.
