Market chaos. How government does science. Obstacles to armaments for Ukraine
20220615
Longtime friend and subscriber Dennis is surprised that I'm quiet about what's happening in the financial markets. I have never been a speculator and haven't even considered myself an investor for about 15 years. I have held precious metals ETF's as a hedge against inflation I expected was coming. It was a much longer wait than I anticipated, but it seems to be here.
My precious metal ETFs have been pounded along with the stock market in general and crypto in particular. I remain optimistic about precious metals because there are so few alternative means of preserving value in a depression. Let me name them.
1) Collectibles such as artwork and old cars. Generally this takes a lot of money and you have to know what you're doing. The only thing they have going for them is scarcity. Transaction costs are high.
2) Crypto currencies have three attributes to recommend them: limited quantity, the ability to transact them across borders, and a bit of anonymity. On the other hand there is absolutely nothing there. As we are seeing in real time.
3) Real estate also benefits from scarcity. However, declining birth rates, and especially a decline in the sides of the cohort forming families, will dampen demand. Prices are sky high because interest rates have been low. They seem likely to fall.
4) Which leaves precious metals. They offer risks however you play them. Holding through ETFs, as I do, requires faith than the people that run the ETFs. You have to trust that they are not loaning out the physical metal that they claim to have on hand. Holding physical metal in overseas vaults is probably a bit safer but it entails monthly costs. Moreover, governments know that the gold is there. They may demand to buy it at a depressed price. Lastly, one can hold precious metals at home. Not a good idea for me with the Russians breathing down our necks.
At the end of the day the only real security a person has is his ability to perform some service for which other people will pay. My grandfather the doctor did well during the depression.
Those are long-term considerations. A lot of the havoc we are seeing in the short term is probably due to the leverage of financial instruments. Futures investors and people who have bought metals and crypto on credit are being forced to dump on account of margin calls. My guess is that this affects crypto more than metals, because a majority of the holders of metals have them in the form of jewelry, coins and sovereign assets.
So to answer Denny's question, my approach is to hang onto what I have in the expectation that these short-term perturbations will shake out and the long-term value of inflation hedges, 1) through 4) above, will remain.
One of you readers recently recommended that I read an article in Science Based Medicine, and as I reported, I did. This morning's mail brings an interview of Toby Rogers, whose Substack posts as Utobian I have long admired. Good to see the man's face at last. He describes how the science is being done by the supposed experts in the US Government, most recently from his watching the nine hours of Vaccines and Related Biological Products Advisory Committee (VRBPAC) proceedings as the FDA approved the clot shots for children. Gruesome!
In a note about Google's dominance, I tried to paste it just the link for the Toby Rogers interview. If it had worked like YouTube you would have seen his face. But because it is Rumble, you have to click the underlined hyperlink above.
Fast forward to minute 22 for an account of how two government reviewers, Tom Shinabukuro and John Su, did Moderna's lying for them. Rather than force the company to fudge the data themselves, these guys performed statistical sleight-of-hand to make glaring problems go away.
In related news, Pfizer admits to fraud and perjury but it doesn't matter because the government was a co-conspirator. Interesting.
https://rumble.com/v18ie08-attorney-robert-barnes-who-represents-brook-jacksons-case-against-pfizer.html
I get the following insight on the problems of receiving NATO armaments from a Ukrainian-American friend
The western, United States, weapons systems are critical, but crews have to go through NET/DET (New Equipment Training/Displaced Equipment Training) to be able to familiarize and qualify on the new weapons systems. In addition, Ukrainian doctrine has to adapt to the changing Russian tactics. The support being provided by the United States and allies has not slowed down, but the re-education of Ukrainian regulars as well as Territorial Defense Force does not happen overnight. This is a challenge being handled by flag officers in and above European Command, so don't fool yourselves that this is any kind of deficit, but rather it is reality. Unfortunately some of the equipment that was supplied later was not supplied earlier because the Verkhovna Rada never enacted reform of Ukroboronprom, which is a third party entity handling at least 80% or defense procurement (Soviet legacy). The US Department of Defense has been warning Ukraine since March, 2015, to get rid of it because US taxpayers are not paying a dime to third parties for capital items, but DoD direct to Ministry of Defense only. What a shame- but a big lesson learned on the Ukrainian side.
During this phase, the strategic plan will be key, and the Ukrainians have the clear advantage. But they have supply problems, something that has been systemic with them for the past three decades, that need to be solved immediately. The United States Lend Lease may be the saving grace for this issue.
That's the news from Lake WeBeGone, where the strong man is having time to finish a long overdue article because the good-looking woman found daycare for Zoriana. Eddie is reading Ukrainian history and doing math for me, but will no doubt find a way to be out playing with his friends this afternoon. Marianna continues to blossom, proving the thesis of one of my favorite books, No Two Alike. Although we love Zoriana very much, two of her would have been quite a load. Time for something new!