20210124u Day 390: Personal Observations

2021-0124u-1200 Austin, TX

I wasn’t planning to write today. Something seems to be bubbling up and I’m not sure what it is. I hope that by writing my thoughts down now, whatever it is will reveal itself.

I just got off the phone with my beloved. We had a somewhat heated discussion about white privilege due to my not accepting my beloved’s belief in the importance that white privilege has played in benefiting me throughout my life. We found common ground in agreeing that racism exists in the world and the world would be better if it did not. We also agreed that many white people have benefited from white privilege. We also agreed that I have also benefited from white privilege. However, we disagreed as to the extent that white privilege played a role. I believe that the vast majority of my personal achievements would have been possible regardless of my race or skin color. I even believe that there’s a chance I may have benefited additionally as a minority due to affirmative action programs in existence during my education and early career. As I type this however, I’m becoming aware of certain times in which I felt “blessed”, or lucky, and I’m wondering now if my luck was due to the color of my skin, or my race, or being male, or some other discriminatory factor. I have to admit that there were times in my life that I have received large benefits and have not really been able to logically explain or understand from where these benefits came. I can accept the possibility that white privilege, male privilege, religious privilege, or some other privilege was a larger factor than I have previously believed.

Before my heated discussion, I watched a few videos – a press briefing from the new white house administration, and a couple videos on financial bubbles forming due to the easy money flowing through the system in response to the COVID-19 pandemic. I was pleased to hear Dr. Fauci present a reality that felt in alignment with the reality I believe to be true. I especially liked when he answered a question by saying he didn’t know the answer and that the Biden administration was adopting a policy of only answering questions for which there is a known answer – not making something up on the spot just to have an answer. For the financial videos, I was glad to see Dr. Ron Paul doing well on Kitco news and still promoting liberty, reduced government and sound monetary policy. I’m attracted to him because he does not pledge allegiance to either political party and has a consistent set of beliefs. I don’t agree with all of his beliefs, but at least I can follow his logic when he explains why he holds them. One of the other videos was an interview by Bloomberg news of an individual who seemed to be reading a prepared statement warning Robinhoodlers and Stonks purchasers that one day the FED will not come to their rescue.

Also, today, like every day this year, I had a conversation with my Aunt who is on the board of directors of my condo HOA. At the end of 2020, like a final kick in the ass, our HOA found out that our management company had been stealing our money for the last 5 years and that we were broke with over $30K in debt. I’m now in a universe in which I’m working full-time helping our HOA get back on it’s feet. I hope to use this full-time effort I’m putting forth to tunnel to a universe in which I’m putting in similar effort towards something meaningful AND also getting paid for it.

What are the chances? I just checked to see what was happening on Nov 1, 2016, the day that $25K was moved from the HOA money market to checking. The next day another $25K was moved and then all $50K was moved out of our control to another HOA. This was Election Day 2016! The same time period when most people around the world felt a huge shift from the normal time line to a very unexpected time line. The conclusion of this fraudulent activity ended about the same time that Trump left office. What are the chances? Synchronicity.

20201215T Day 350: Financial Market Predictions for 2021

20201215T-0637-AustinTX

Check-in: I woke up after 4 hours of sleep and it took me an hour to fall back to sleep. I was then got an hour of deep sleep before being awoken by a 6am alarm. I’ve now had some coffee – I’m still surrounded by universes in which I start my day with caffeinated coffee. Using a plastic filter holder, I filtered the freshly ground coffee into a mixture of half-n-half, cacao powder, and coconut oil. I spoke with my beloved yesterday and she is still feeling anxious about coming to Austin. She is highly sensitive to multiverse energies and her anxiety leads me to believe that the next few months will be chaotic as the northern hemisphere experiences moves through a surge of COVID-19 cases that will overwhelm many hospitals. I feel she will come in a week and stay for two.

The year 2021 will see value stocks outperform growth stock. Low debt value stocks will outperform high debt value stocks. Silver will outperform Platinum and Platinum will outperform Gold. Bitcoin will outperform Etherium and Etherium will outperform Silver. Both residential and commercial real estate will drop in real value but currency devaluation and low interest rates will keep prices from falling. Residential will outperform commercial real estate. Short-term bonds will outperform longer-term bonds.

These predictions are based on the current state of the financial market which has appearances of financial bubbles in various areas of the market, such as the bond market, popular index ETFs, celebrity stocks, speculative small cap stocks, and even most fiat currencies.

Using these predictions, and assuming that they will most likely be wrong, then a diversified financial portfolio might be weighted in the following order:

  1. Bitcoin
  2. Etherium
  3. Silver
  4. Platinum
  5. Gold
  6. Low debt value stocks
  7. High debt value stocks
  8. Growth stocks
  9. Residential real estate
  10. Commercial real estate
  11. Cash
  12. Short-term bonds
  13. Long-term bonds
  14. SP500
  15. Celebrity stocks
  16. Speculative small-cap stocks

I’m not a strong believe in crypto-currencies, but until these are outlawed by governments then the major ones will likely continue to outperform the “old school” stores of value silver and gold. There are universes nearby in which governments add Bitcoin to their reserves instead of outlawing crypto-currencies. It is these universes that cause Bitcoin and Etherium to top the list above.

20200428T Day 119: Oil, Gold, Silver, and Dollars

Blue Rhino Natural Gas Dispenser at Santa Cruz CA Gas Station Broken Into – April 28, 2020

Even though gas prices at the pump are cheap, relatively speaking, there are still those for whom the price is not low enough. Propane tanks were stolen recently from a Blue Rhino gas dispenser. This event is closer to a universe where goods are scarce, such as a universe I blogged about yesterday in 20200427M Day 118: Who Is John Galt?, before filling my car up with gas today. It was interesting how I came to notice. I saw the Blue Rhino dispenser and, for some unknown reason, was drawn to go look at it even though there was no damage from the exterior and no real reason for me to go check it out. As I walked towards it, a guy with a mask on started whistling at me from outside the gas station. When I turned to notice him, he told me that the dispenser had been broken into. It was then that I decided to investigate it further and see how the back of the dispenser had been pried off.

A few days ago I was moved to take a picture of a man blowing bubbles along West Cliff (20200423h Day 114: Bubbles in the Air). I wonder now if the US dollar is in a bubble. The value of the US dollar has remained strong, relative to other currencies, and has even held up fairly well against the price of gold. Investigating some ratios involving oil, gas, and the US dollar will help us understand the universes around us.

Screen Shot 2020-04-28 at 12.09.40 PM
Figure 1: Barrels of Oil that can be purchased with a $50 American Gold Eagle (1 oz gold) – Courtesy macrotrends.net

In Figure 1, the recent drop in the price of oil due to the supply/demand imbalance can be easily seen, even when priced in ounces of gold. Apparently, the demand for gold has not dropped, or at least not dropped more than the supply of gold.

sp500-to-gold-ratio-chart-2020-04-28-macrotrends
Figure 2: S&P500 value when priced in $50 American Gold Eagles (1 oz Gold) – Courtesy macrotrends.com

In Figure 2, it’s interesting to see how much of the S&P500 increase in value is over the long term is actually due to the decrease in the value of the measuring stick – the US Dollar. When the S&P500 is measured in the closest thing we have to a gold-backed currency, $50 American Gold Eagles, then a more real evaluation of the value of the S&P500 over time can be seen.

gold-to-silver-ratio-2020-04-28-macrotrends
Figure 3: Gold/Silver Ratio since 1915 – The rough number of $1 American Silver Eagles (1 Oz Silver) you can exchange for a $50 American Gold Eagle (1 Oz Gold). Notice how the ratio deviates between half and double the par value of 50. Courtesy macrotrends.net

Figure 3 is evidence for why I am currently long Silver. I primarily purchase Silver through the ETF $SLV because I can purchase using my retirement account and quickly move in and out of a position without worrying about loading up a truck.

historical-gold-prices-100-year-chart-2020-04-28-macrotrends
Figure 4: Gold Price in Inflation Adjusted Dollars (via Consumer Price Index) – Courtesy macrotrends.net

Figure 4 is interesting because it values the price of gold in inflation-adjusted dollars. This, of course, hides the depreciation of the US dollar. If CPI is to be believed as an accurate measure of this depreciation, then gold appears to be over-valued at this point. I think it is more likely that the CPI is lower than the actually inflation rate. The way CPI was calculated was changed in 1980. If CPI were still calculated in the same way, it would be higher (see Figure 5).

sgs-cpi
Figure 5: Consumer Inflation alternatively measured – Courtesy ShadowStats.com

What seems likely to happen in the short-term is:

  1. Demand for oil will increase as the world economy comes back online. This will cause the value of oil to return to it’s pre-pandemic value;
  2. The Fed will continue to prop up the bond market, including mortgages and corporate bonds, thereby preventing a deflationary implosion that would result otherwise;
  3. The “free money” that businesses and people receive through unemployment and stimulus checks will also prevent deflation from spiraling out of control;
  4. The supply/demand ratios for goods and services will both decrease and, once the economy is back, this will cause an increase in prices; and
  5. The Fed will hesitate to raise interest rates too fast and this will result in cheap money flooding the financial system, which will encourage what will look like speculation in the financial and housing markets.

In the longer term, there is a measurable probability that real inflation will finally get above 2% and possibly even get out of control. This definitely happens in some nearby universes – just not sure now how prevalent these universes are.

I’d like to end with some quotes from fellow wordpress.com bloggers:

From 2020-04-17 notayesmanseconomics: We are facing both inflation and disinflation at once

Regular readers will be aware that a feature of my work is to look at the impact of inflation on the ordinary worker and consumer as opposed to central bankers who love to torture the numbers to get the answer they wanted all along

From 2020-04-21 Lorne Anderson: Inflation

I had thought that given the neighborhood the house, despite its small size, would sell for about $400,000. That would be a sizable increase from the price it sold for 60 years ago. I was wrong though. Asking price is $599,900, 50 times what my parents paid for it. No wonder my mother and I were a bit discombobulated.

From 2020-04-17 Jay Currie: Depression, Inflation, I’m So Confused!

A grand inflation in front of a depression is pretty much the end of an economy. If the government prints money in serious quantities and issues debt in more or less unlimited quantities the game is over. The gold bugs will have won.

A rather smart investor named Rick Rule once said, “We don’t want to live in a world with $10,000 an ounce gold.”

Right now there is a greater than zero chance that this will be exactly the world we live in.