For the viewers, I would be looking for something that just comes out of left field.
If you remember them announcing Lehman Brothers, nobody knew anything about it.
Hi, this is Mike Maloney with Alan Hibbard once again. And Alan has prepared a presentation
on what will happen to certain asset classes under the new government. Alan, what have you got
for me? Hey, Mike, I've got a few things. Basically, I want to look at the short term
of fact from the election, basically what happened with major asset classes in the week
leading up to the election and the week since. And then I want to zoom out and look at the long term,
especially in the gold market. And really, I want to ask the question,
is the new presidential regime going to be good for gold or bad for gold or neutral? And I want
to answer that question using data. So first, let's dive into the short term stuff. And then
you've got a list of different assets that we're going to cover too, right? What are those assets?
Yeah, we'll take a look at stocks, bonds, the dollar itself, oil, gold, silver and Bitcoin.
Excellent. Okay. So first, I want to give you just a little bit of news, just a little tidbit
here. Russia's gold reserves surpassed $200 billion for the first time, now almost a
third of their total international assets. So nice chunk of gold for Russia. And of course,
as the price of gold climbs, the dollar value here increases. So this is the trend for pretty much
all of the world's central banks except for the West. Am I correct? Yeah, exactly. And China,
of course, is the number one producer of gold and importer of gold. Their holdings have been
going up pretty steadily. The US's holdings haven't changed. And I believe Canada is still at zero
gold. So I don't know what's going to happen in the long term, but that's the trend we're seeing.
Yeah. Okay. All right. Well, let's get into some of the charts. So first, I want to start with
gold, silver and Brent crude oil. And this is basically the price of each of these assets
in the week leading up to the election. And then this circle is election day.
And then the week cents. And it's index to this point here. Yeah. Okay. That's what I was going
to have you explain that is index to 100 at election day. Exactly. And so the scale here
is basically the percentage change. Exactly. Yeah, we're going pretty much plus minus 5%.
Yeah, exactly. Silver started around, you know, 105 on an index basis and slid down to 100 on
election day. That was the index point there. And then kept sliding about another 5% or 6%
afterwards. So it basically can, silver in particular, basically followed its trajectory
without being disrupted. You'll see that in just a second that some of the other asset classes
were disrupted. They were moving one way, and then they moved a different way. But golden silver
kind of continued unabated on the path that they were on. Crude oil, you know, in contrast was
rising, right? The price was going up. And then at election day, it started going down. So
very interesting. I don't know if you have any thoughts on oil or the other assets.
Yeah. One of the things that I want to mention is that
golden silver were coming off of all time highs. And it was sort of time for them to take a rest
and do a retracement. They had just been, you know, I had talked quite a while ago about the
panhandle or cup and handle that had developed. And in the handle, there was a
inverse head and shoulders pattern, a triple top that we were about to violate. And I said
there would be a slingshot move. And that's exactly what we got, a slingshot move. But
slingshot moves can't go on forever. So it was time for them to take a rest and a pullback. But
I see a very bright future coming up for golden silver. And we'll talk about that later.
Yeah, me too. I agree. So I don't think the election really affected them, to be honest.
Moving along here, we have stocks, bonds, we have the 10-year treasury, and we have the
dollar. So the S&P, you can see kind of was steady going into the election, but the day before,
compared to the day of, compared to the day after, it got a nice boost. So right here around
election day, plus or minus one day, the S&P had a nice boost and then sort of leveled off.
Didn't really do anything notable after that. So I wouldn't read too much into this.
And then with the 10-year treasury yield, we probably could have inverted this chart,
but that's okay. So it's kind of up and down and up and down all over the place.
The net result here is that yields are increasing in this two-week span.
I guess we can talk about it more as we go. But obviously, what the Fed is doing with
interest rates is going to affect this a lot. And the credit rating of the U.S. government is
going to be a major factor here. And the dollar is up a little bit,
which is usually negative for gold. Gold fell over this same time period that the dollar rose.
Yeah, exactly. So you could see here the dollar fell. Pardon?
But not by much. Yes, not by much. The DXY, so this is comparing it to a basket of other currencies.
Exactly. So the dollar fell a tiny bit. This has got to be less than 1%,
but then it bounced and rebounded maybe 2%, something like that. So this is one of those assets that
was on a certain trajectory. And then after election day, it sort of bounced and went the other
direction. So the dollar is strengthening relative to a basket of global currencies.
And that makes sense. And Trump and his administration are calling for tariffs and
strengthening of the U.S. dollar and so forth. Yeah. I'm not a big fan of tariffs when you
limit. International trade reduces the risk of war, regardless of how much you may dislike
your opponent. If you're doing business with him and your economy relies on him,
you're less likely to get into a fight. Yes, exactly. Yeah, not to mention that tariffs
are really a short-term solution to a long-term problem, which is basically like
competitiveness in a global landscape. So yeah. So anyways, maybe we can do tariffs in a separate
video. So I want to put all those assets on one chart just in case anybody wants to see them all
together. It might look a little busy, but this is sort of a comparison of all of them. And I do
want to add Bitcoin as promised. So Bitcoin is the orange line. And you can see that after
election day, it took off like a rocket. It is actually off the chart here, the way I have
it scaled. So I want to rescale it just a little bit. And you can see just how dramatic this rise
in the price of Bitcoin has been in just one week. So at one point intraday, it was up 30%
from the price of the election in maybe five or six days, something like that. So
pretty remarkable, Mike. Any thoughts on this? Well, we did a video several weeks ago,
Gold, Farmland and Bitcoin. And I think that those are cryptos and precious metals are part of the
places to be. But I absolutely, absolutely believe that the economy is too warped and too out of
balance. And those pressures that build up when it's out of balance, that's like an energy
potential. And that we are headed for some sort of crisis. I thought it would happen before the
election, but is it going to happen between now and inauguration day? There are things that
are suggesting yes. But for the viewers, I would be looking for something that just comes
out of left field. If you remember them announcing Lehman Brothers, nobody knew anything about it.
It's just that, you know, here's the secretary of the Treasury and the chairman of the Federal
Reserve. And then they're on TV on a Monday morning announcing the biggest failure in history.
And if something happens, it'll either have to do politically or economically,
like Lehman Brothers, but it'll be coming out of left field. And so very suddenly,
the rush to safe haven assets will change from just a trickle to a flood is my feeling.
Okay, let's move on. I agree with you. Yeah, perfect timing. I do want to actually zoom out here
because we're focusing on price movements for just a week or two. And it's interesting to think
about an entire presidential administration four years, or even longer, of course, as we
say for retirement in the long term, we're thinking in terms of decades. So let's zoom out
a little bit. And I want to look at basically the two major bull markets that we've had in gold.
And I've shown this chart before. Basically, you can see a red box around the gold bull market of
the 1970s, and then a red box around the gold bull market that we've really been in since roughly
the year 2000, maybe 2001, depending where you start it. And what those two bull markets have in
common is that we had negative real interest rates for the majority of those two bull markets.
Yeah. So, and for anyone who's unsure about what that means, a real interest rate is basically the
Fed funds rate minus the CPI. So basically, take the Fed funds rate and subtract the rate of inflation.
And when inflation is greater than the Fed funds rate, we have a negative real rate. And
that's what I've colored in red here. And basically, my argument is that the bull market
in gold is going to continue regardless of who is president and regardless of their policies,
as long as we have negative real rates. It just seems like such a reliable indicator. Is that
kind of your sense as well, Mike? Absolutely. We know the Fed's playbook. I do believe that there
is something else around the corner. And the longer it takes to happen, the worse it will
be because the greater the warping of the economy and the pressures that are building up.
And so the Fed's playbook is drop interest rates to zero, create a whole bunch of currency. The
currency then creates inflation. And because the rates are being artificially held too low to try
and pump the economy back into bubbles, because that's what they've done for this entire century.
All of those negative rates are the are an attempt to pump bubbles. It started with the
NASDAQ crashing in the year 2000. And they do this this negative real rate causes bubbles to inflate
and then the bubbles pop. And so they go they double down on the negative real rates. I mean,
you can see that after 2010, the residual from what was happening with the the global financial
crisis, pumping to get the world economy going again, cause that first thing. And then
with COVID, the negative real rates there are just insane. And so we know the Fed's playbook,
they've been doing it now for more than 20 years. And as soon as a bubble starts to pop,
they're going to try to reflate that bubble. And it just keeps the economy warped and causes
these booms and crashes to become much worse and more distorted. The booms have been limited
to the places where currency creation goes to first. They create a boom in the stock market
or a boom in real estate. With low interest rates, it's a boom in real estate. With currency
creation, it's a boom in the stock market. It's wherever that currency goes first. If the banks
are loaning the currency into existence, that's usually for real estate and for margin loans.
If it's the Federal Reserve creating currency through QE, that's just going directly into the
stock markets. And so we know the playbook. If anything happens in the economy, this thing will
turn red again. That's my analysis. So it's going to look very much like the 70s, where it's red,
gray, red, gray, red, gray, but mostly red. But even more so than the 70s, like it already
does look. And until they get things really under control, and they're not, they're out of control,
this will persist, meaning the bull market in precious metals will persist.
Yeah. My thoughts as well. And you mentioned two things, cutting rates and just running the
currency printer, like creating inflation. So I actually want to zoom in on those two things
so we can see the trends. So the Fed funds rate was up here at 5.3%, between five and a
quarter and five and a half. And then we got that 50 basis point cut in the second half of September.
And then just last week, we got another quarter point cut, which almost went overlooked. I didn't
see a whole lot reported on this. It was two days after the election, we got another
quarter point cut. And the expectation in the markets from hearing comments from the Fed
is that we're going to get another five quarter point cuts in the next year.
So that's the expectation, obviously that could change. There's nothing guaranteed about that.
But the expectation is to basically lower interest rates by at least another full percent,
roughly a year from now. So this is exactly what we're talking about, cutting rates
and then creating inflation. So I don't know, do you think the Fed sees a recession on the horizon?
Or what do you think they're seeing in order to be cutting rates right now?
Well, they're seeing something in the economy that we are not.
Also, I do want to say that people think that the stock market rising was solely due to
the election results. But it's the election results plus this little boosting, this tweaking
that they gave it. And yes, this last rate cut sort of just like slipped in under the rug.
Nobody really noticed it. And so except the stock markets.
Yeah, exactly. And there is a greater than 50% chance that we get another rate cut
in December. So next month, markets are expecting I think maybe a 60 or 65% chance that we get another
cut in December. So this is the direction we're moving. We're cutting rates. So negative real
rates, that's bullish for gold. And with the CPI, I'm expecting the CPI to start increasing.
So folks who have been paying attention might remember that the CPI for the most part has
been declining for about two years. So it peaked in June of 2022 at 9% year over year and has been
falling for the most part since then. If you recall, the target is that they only want to
steal 2% from you per year. And we are currently at a theft of 2.6%. So they still haven't reached
their target. Yet they're cutting rates. Yeah. I mean, the whole thing's a scam, right? So there's
a lot I could say about it, but it doesn't make sense. Even if you buy their logic, which is
nonsense to begin with, even according to their logic, they're not doing what they're supposed
to be doing. So it doesn't really make sense at all. It's obviously theft. We know that.
So yeah. So why do I think that inflation is going to turn around and start increasing?
Well, basically the best predictor of inflation today is the M2 currency supply yesterday quote-unquote
or 18 months or two years ago. And if we look at M2 from about 18 months ago, we see it bottomed
out. So after the COVID rescue package, you might say, M2 started falling pretty substantially for
a couple years. And that I think is the reason why inflation has been falling since June of 2022,
as we just showed, from 9% down to 2.6%. However, for the last year and a half, the last 18 months
or so, M2 has been rising year over year. So that's about the amount of time, roughly 18 months.
That's about the amount of time it takes for that currency creation to show up in the CPI.
So I'm expecting the CPI to start increasing possibly today, maybe the next print we get,
next monthly print. So I'm going to modify Milton Friedman's famous quote then.
Inflation is always and everywhere a monetary phenomenon with an 18 month lag.
The monetary aspect came 18 months before we see the inflation on the average.
At least in the CPI. I mean, it shows up in other assets, like the stock market and so forth,
like almost immediately. So getting back to that chart we showed a minute ago of like,
will the gold bull market continue? Well, that's dependent on negative real rates.
I mean, the Fed funds rate is already coming down and I'm expecting inflation to go up. So
I'm thinking the bull market and gold is going to continue regardless of what Trump or his team
does kind of pretty much regardless of the policies. I think this bull market continues.
There are just larger structural forces at play that are bigger than any one president.
Yes. Okay. Most of this century, the bubble century, I call it, has been an emergency.
It's one emergency after another emergency after another emergency. And that's what caused all
that red for this century is the Federal Reserve's reaction to one emergency after another. And I
do believe that that is going to continue. I believe that the things that Ben Bernanke
set in motion with QE and interest rates and the way because the way that the Federal Reserve
manipulates the economy is very different prior to 2008 and after 2008. Everything changed when
once Ben Bernanke, so I believe Bernankeomics is storing more energy to cause an even greater crash
than was stored before 2008 with the warping, you know, the real estate bubble that we had
and mortgage backed securities and everything else. We've got a lot that is wrong with
the economy right now. And it's interesting every time something breaks, all of these people that
caused the warping say, the free market isn't working. We've got to do something. They manipulate
it and they make it. They set us up for the next big crash. And they have done that. The
reaction to COVID, you talked about currency creation. Well, each time they sort of have
to double down on it. I mean, Powell did as much in the response to COVID as Ben Bernanke did
over a period of years in QE1, QE2, and QE3. It was the same amount of the scale of currency
creation compressed into just a few months. And so with the deficits that we're currently
running the size of the national debt, everything else, this is going to the next great inflation
of base currency is going to be on a scale that matches the size of the national debt and everything.
So it's going to be something we've never seen before, just like the response to COVID
was something we had never seen before, just like the response to the global financial crisis of 2008
was something we have never seen before. So get prepared. That's my message. Absolutely. You said
it better than I could. So I want to leave everybody with a meme here. How big is inflation
really? Well, you told me.