Uttin’ On the Itz!
To learn more about Epsilon Theory and be notified when we release new content sign up here. You’ll receive an email every week and your information will never be shared with anyone else.
The Latest From Epsilon Theory
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
“I am hard pressed to identify any Fed Chairman who has not incorporated into monetary policy the political preferences of whatever Administration happened to be in power at the time.”
Good stuff. Good article.
Ben, I must say your writings have really opened my eyes to the ways of the Fed in the last few years. Considering I still consider myself a novice, I would be really interested in your thoughts regarding why this is the wrong approach, especially when considering it seems our main competition - China - seems to be employing the same approach. Aren’t we just leveling the playing field? In addition, I would like to hear your thoughts on what you think the consequences will be down the line while taking into consideration our (USA) tendency to economically and militarily bully our way into getting our way, within both the contexts of a competition game and a cooperative game.
Not sure which is more depressing How well your note from 5.5 years ago mirrors the actions of this week or how poor the investment thesis proved.
Buying equities ended up great and holding gold painful, I know because I was in a similar mind set. So the question is what keeps us from the same results 5+ years from now?
“Eventually” being right it turns out is unfulfilling on a lot of levels.
You wrote " regardless of what political party may sit in the White House or control Congress in the years to come, it will become practically impossible and politically unthinkable to eliminate QE as it is to eliminate Social Security or food stamps". Well if the party of AOC, GND and MMT can win control in the years to come, we won’t have to worry about funding programs and and QE. We can just have the Fed supply the Treasury with an infinite amount of funds and quit worrying. To replay the theme song of FDR’s New Deal, “Happy Days Are Here Again”
Let’s hope that day never arrives and it probably won’t unless the current regime totally fouls up the next few years. But it’s definitely within the realm of possibility. Gold will be more than just an attractive option if that day arrives. It might be the only option.
I guess the only thing that surprises me is that after 30 years of interventionist monetary policy there’s anyone left who thinks the Fed won’t cave to Mr Market at the first sign of discomfort. In my circle we were taking bets back in October on how much of a market ‘correction’ would be required for Powell to do an about face. The estimates ranged from 5-20%. He at least made it interesting for a short while.
I think of what Ben said in 2014 and reflect that I have actually taken steps in the past two months to act on what I see as a trend. He said “Ultimately this all further strengthens the Narrative of Central Bank Omnipotence – the market-controlling common knowledge that market outcomes are the result of central bank policy rather than anything that happens in the real economy. How can you know if this Narrative starts to waver or shift? If and when gold starts to work. This is what gold means in the modern age … not a store of value or some sort of protection against geopolitical instability … but an insurance policy against massive central bank error and loss of control. So long as the dominant narrative remains that central banks are large and in charge, so long as global investors hang on every throwaway line that Draghi utters … gold doesn’t stand a chance.” In February, he said in the Hey Chester piece “It means that gold – or any asset whose modern meaning is an insurance policy against the Fed losing control – is a good buy right now.” That’s where my money is going and particularly into silver mining companies that are pulling it out of the ground right now.
Continue the discussion at the Epsilon Theory Forum