- Jim Rickards: Even the stock market abhors a vacuum
- But an undecided election isn’t the biggest financial threat
- Are Wall Street insiders telling clients what they want to hear?
- Waking up to Rickards’ “Axis of Gold”
- A long-standing maxim of direct marketing… “No, Ms. Oster, we will not forgive you”… and More!
We pick up where we left off yesterday with Jim Rickards’ pre-election observation: “The stock market can deal with Republicans or Democrats. It cannot deal with uncertainty.”
Which brings us to a peculiar passage during Joe Biden’s latest “democracy in danger” speech on Wednesday night…
In some cases we won’t know the winner of the election for a few days – until a few days after the election. It takes time to count all legitimate ballots in a legal and orderly manner. It’s always been important for citizens in a democracy to be informed and engaged. Now it’s important for a citizen to be patient as well. That’s how this is supposed to work.
The speech “was not a campaign speech,” tweets the writer Walter Kirn. “It did not have any real persuasive value or political intent. It was a speech specifically meant to manage and mold expectations about the vote-counting process.”
“Telling people in advance the results will take a long time, when the polls look dire, will massively increase paranoia,” adds Kirn’s podcasting partner, the independent journalist Matt Taibbi.
Right? Every indication is that Tuesday is shaping up as another “wave” election – a massive midterm rejection of the incumbent president’s party, like 2006 or 1994. Why set up expectations for a long, drawn-out process of counting and court challenges?
You might be tempted to think this is the stuff of third-world countries…
… But as we mentioned on the heels of Election Day 2020, many developing countries tally their results much faster and with less question about their validity.
That includes the most populous nation in Latin America.
“Brazil — a much poorer and less technologically advanced country than the U.S., with a much shorter history of democracy — holds seamless, quick vote counts about which very few people harbor doubts,” wrote the American journalist Glenn Greenwald, who took up residence in Brazil around 2005 or so.
“For the 2018 presidential run-off election that led to Jair Bolsonaro’s victory, 90% of all votes were counted and the results released by 6:00 p.m. on the day of the election: the time the last state closed its polls. The full vote tally was available within a couple of hours after that.”
The 2022 presidential run-off was held just last Sunday. The results were known well before bedtime: Bolsonaro lost narrowly to former president Luiz Inacio Lula da Silva.
Bolsonaro kept a stony silence for about 48 hours – but then said he’d peacefully step down, even if he didn’t actually concede the result. Simple, clean, decisive.
Back in these United States, it appears we’re being set up for a weeks-long mess. There’s new import to what Jim Rickards wrote his readers last week: “If, after Election Day, control of the Senate is uncertain because it hangs on undecided races, you can expect a strong negative reaction from markets.”
But an undecided election isn’t the biggest threat facing the markets and the economy going into the winter: No, Jim says that distinction belongs to the Biden administration’s attempts to cover up “a massive economic issue” in advance of the midterms.
Once we get past the midterms, Jim says all hell will break loose. “What’s coming will make the 8–9% inflation we’re seeing look like child’s play. What’s going to happen this winter could be the equivalent to 10–15 times what we’re seeing now in terms of rising costs.”
That’s why for a second week in a row, Jim is convening a Sunday-night emergency briefing. This all-new pre-election edition is packed with information you haven’t seen before.
Jim goes live this Sunday night at 7:00 p.m. EST. Don’t miss out: Click here to sign up for instant access. We’ll take care of the rest.
To the markets, which are not reacting as you’d expect to the October job numbers out this morning.
The wonks at the Bureau of Labor Statistics conjured 261,000 new jobs for the month. That’s substantially more than the “expert consensus” among dozens of economists polled by Econoday – the average guess was 210,000. What’s more, the September number was revised up big-time. Meanwhile, the official unemployment rate inched up to 3.7%, still historically low.
Nope, nothing in there to dissuade the Federal Reserve from continuing to jack up interest rates.
Elsewhere, the report shows average hourly earnings grew 4.7% year-over-year – well below the official inflation rate of 8.2%. Which might go a long way to explain the labor shortage: If you don’t have to be a W2 wage slave – if you can scrape by on savings or in the underground economy or whatever – why would you bother?
Back to the 261,000 new jobs: Wall Street’s guesses on this number have been consistently low for a year now – 10 out of 12 times, according to Bianco Research chief Jim Bianco.
Bianco rightly wonders if these lowball guesses result from an objective analysis of the labor market… or if Wall Street economists are telling their clients what they want to hear – “crappy payrolls so the Fed can back off and stocks moon?”
At least for today, however, good news is actually good news.
At last check, the Dow is up 600 points or 1.9% – back to 32,603. The S&P 500 is up 2% and only five points away from 3,800. The Nasdaq is up 2% to 10,549.
Precious metals are sharing in the risk-on party – gold bouncing $45 off multiyear lows to $1,675 and silver up more than a buck to $20.61. Crude has leaped nearly $4 to $92.15, the highest in nearly four weeks.
Even bonds are rallying a bit, pushing yields down. The 10-year Treasury is at 4.12%.
The mainstream is starting to wake up to Jim Rickards’ “Axis of Gold.”
Jim first posited this theory in 2018. “Russia, Turkey and other nations are ready to join Iran and China in a new Axis of Gold designed to create a robust multilateral payments system that is free of hacking, tracking or interdiction by the U.S., and free of U.S. dollars. This gold-based payments system will dilute and ultimately eliminate the impact of U.S. dollar-based sanctions.”
Fast-forward to the present and a Bloomberg story that begins thus: “A normally dry research report jolted the gold market this week, when it pointed to massive but so far unidentified sovereign buyers.”
The report is the World Gold Council’s quarterly ”Gold Demand Trends” update. It said central banks loaded up on 399 tons of bullion during the third quarter of 2022 – almost double the previous record.
“The WGC, a lobby group for the mining industry, uses data from consultancy Metals Focus Ltd. to produce its estimates,” says Bloomberg. “It in turn relies on a combination of public data, trade statistics and field research to provide figures for demand from different sectors of the gold market.”
Thus, there’s a certain black-box quality to the numbers: Specifically, less than a quarter of that record total went to central banks that can be identified publicly.
So who are the “gold market whales” – the mystery buyers that can make such enormous purchases?
Bloomberg identifies four possibilities, starting with China. Bloomberg points out the Chinese central bank hasn’t updated the size of its gold reserve since 2019 – while neglecting to point out the official numbers have probably been understated for years.
Still, Bloomberg recognizes that “for China, the need to find an alternative to dollars, which dominate its reserves, has rarely been stronger. Tensions with the U.S. are high following measures taken against its semiconductor firms, while Russia’s invasion of Ukraine has demonstrated Washington’s willingness to sanction central bank reserves.”
Russia has been much more transparent in the past about the size of its gold reserves… and as Jim Rickards has said for years, its stash is the biggest in the world measured as a percentage of its economy. And while Russian gold is subject to Western sanctions, it’s a lot easier to evade sanctions with physical gold than with electronic transfers of fiat currency.
Next, Bloomberg says oil exporters “may have looked to gold to diversify” their sovereign wealth funds. Note also that Saudi Arabia is willing to sell oil to China and take yuan in return – not dollars.
And finally, India is mooted as a possibility – although given the pressure on the rupee this year, it’s a less likely possibility than the others.
Bloomberg doesn’t use the word “de-dollarization,” but it doesn’t have to: As governments increasingly choose up sides, it seems everyone wary of U.S. sanctions, trade embargoes, etc. is diversifying into gold.
Which, apropos of nothing, reminds us of an amusing meme we ran across this week…
To the mailbag: “I watched Jim Rickards’ latest video, but after 10 minutes of going nowhere I quit,” a reader writes.
“After all, I know that at the end Jim is just going to ask us to pay more to join some exclusive membership club. At least some other vendors give the option to opt out of the video and read the presentation, skipping to the end. Jim just needs to state his position and get to the bottom line with a minimum of hyperbole – way too much crap we’re not interested in hearing.
“Please make video presentations no longer than several minutes – we lose interest fast.”
The 5: We sympathize with your plight. Unfortunately, there just aren’t enough folks who share your view.
It’s a long-standing maxim of direct marketing: “The more you tell, the more you sell.” Across decades of A/B testing, longer sales copy almost always wins. That’s whether we’re talking about a printed sales letter sent through the U.S. Mail in 1982… a plain text email in 2002… or a slick video presentation in 2022.
Of course, we want to stay on top of an ever-changing marketplace, so we’re always open to the possibility that shorter messages will deliver better results. If that possibility materializes, rest assured we’ll “pivot” a heckuva lot faster than the Federal Reserve!
“No Ms. Oster, we will not forgive you,” writes a reader after our take on the proposal for a “pandemic amnesty” published this week in The Atlantic.
“‘Brown University health economist.’ Oh, she must be one of the elite grifter overlords. Justice, restitution and a guarantee can’t come soon enough!”
Adds another reader, emphatically: “No amnesty – YES WE WANT JUSTICE FOR ALL THE HARM DONE TO US.”
The 5: Believe it or not, Oster was one of the more “moderate” among the control freaks and power trippers; we cited her kinda-sorta approvingly one day in late 2020.
She was much earlier than the rest of the mainstream in suggesting a return to in-person schooling – in part because she actually had school-age children, in contrast with most of the lockdowners who very much enjoyed their newfound laptop-and-jammies-and-DoorDash lifestyle.
But when push came to shove last year… and her own research suggested there was no point to the continued masking of schoolkids… Oster basically disowned it so she could stay on the good side of her fellow Ivy League cognoscenti.
We give the last, blunt, word to the German blogger writing on Substack under the pen name Eugyppius: “Emily Oster may have said a few reasonable things in the depths of her pandemic moderation, but she can take her proposal for pandemic amnesty and shove it all the way up her ass. I’m never going to forget what these villains did to me and my friends.
“It is just hard to put into words how infuriating it is, to read this breezy trivialization of the absolute hell we’ve been through, penned by some comfortable and clueless Ivy League mommyconomist who is ready to mouth support for basically any pandemic policy that doesn’t directly affect her or her family and then plead that the horrible behavior and policies supported by her entire social milieu are just down to ignorance about the virus.
“We knew everything we needed to know about SARS-2 already in February 2020. The pandemicists and their supporters crossed many bright red lines in their eradicationist zeal and ruined untold millions of lives. That doesn’t all just go away now.”
OK, we can’t end the issue and the week on that kind of a downer. Enjoy a time-change meme…
Have a good weekend (Go Dawgs!),
The 5 Min. Forecast