Gold has just remembered the same lesson.

For most of a century the polite fiction held that a tonne of gold at the New York Fed and a tonne in a vault outside Delhi were the same asset. Same fineness, same four-nines stamp, same line on the ledger. Fungible, interchangeable, the location a mere accounting footnote.

Then someone changed the locks.

In 2022 the West froze the thick end of $300bn of Russia’s reserves with a few keystrokes, and every reserve manager on the planet took the same note home that evening. Foreign custody is a political position you can lose overnight, and nobody hands you a vote on it.

Follow the money, and it’s already walking out of the door.

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The World Gold Council’s 2026 survey, out last month, is where the footprints show. The share of central banks keeping gold at the Bank of England has slipped to 57%, from 64% a year earlier; at the New York Fed, to 14% from 17%. The Banque de France shipped 129 tonnes home from Manhattan between last July and January, and now keeps every ounce it owns on French soil. India’s central bank has cut the portion it stores abroad to 22%, down from 55% just 3 years ago. Serbia took the lot home, roughly $6bn of it. The number of banks quietly moving metal into their own vaults has about doubled in 12 months.

A slow bank run conducted in white gloves, and the depositors are the people who print the money.

So the naive question. Why should the postcode of a gold bar matter to the number flashing on your screen?

Because that number is a paper price. It’s set by the claims stacked on top of the metal — the forwards and the unallocated accounts — and only loosely tethered to the bars in the vault.

London and New York, the LBMA and COMEX, run the wholesale market on a fractional-reserve model any Victorian banker would recognise. A certain tonnage of metal in the vaults; a far larger tonnage of paper on top, resting on the comfortable assumption that they’ll never all ask for delivery at once. It works beautifully, right up until enough of them do.

Now watch what repatriation does to that arithmetic. When a central bank turns an unallocated claim into allocated bars and ships them to Paris or Mumbai or Shanghai, those bars leave the deliverable float for good. They don’t come back to settle somebody’s short. The metal beneath the paper thins while the paper carries on multiplying, one 400-ounce bar at a time.

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And the gold isn’t idling in some fresh Western vault down the road. The centre of gravity has gone East. Shanghai now clears more physical metal than anywhere on earth; Hong Kong is expanding its storage from 200 tonnes towards 2,000; and the London bars that leave mostly get refined in Switzerland and rebadged for Asia. Once gold reaches Shanghai it tends to stay in Shanghai. A one-way valve.

Here’s the part the quote won’t tell you. A market losing its deliverable float shows the strain in the plumbing first — lease rates, the gold forward offered rate, the gap between COMEX futures and London spot, the queue to get your own bars back — while the headline price sits there looking serene. Cast your mind back to February 2025, when hauling gold out of the Bank of England suddenly took 4 to 8 weeks and the official line was “logistics.” That’s what a thinning float feels like from the inside, long before spot does anything you’d notice.

These things move the way all fractal processes move. Nothing, nothing, nothing, then everything, quicker than the Gaussian textbook says is allowed. A float can drain for years as a footnote and reprice in a fortnight. The weight of evidence skews toward more of these episodic delivery squeezes, surfacing first as backwardation and premium blowouts rather than as a tidy line on the daily chart.

So what do you actually do with this? Stop reading the spot price as the story. At roughly $4,050 this week, off its June high as the Iran “peace” wobbled, it’s the least informative figure in the whole complex. The information lives in where the metal is and what it costs to hold a bar in your hand. Gold has just overtaken US Treasuries as the world’s largest reserve asset, about $4trn against $3.9trn, and the institutions doing the buying are voting with their feet on custody. When the people who wrote the rules stop trusting each other’s vaults, that’s a signal worth having.

The central banks have already answered the only question that matters about a bar of gold. So — where’s yours?

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The message we have all received throughout our careers is that market timing is for the birds and buy and hold is the way to go.

My message to you today is IABATO. It’s All Bollocks And That’s Official.

Much of my career was spent interrogating fund managers about their processes and to find out if they had an edge. Very few of them did and today it’s even less likely with the rise and rise of passive. The only thing you need to know about the market mechanism is to watch the flows into (and one day) out of BlackRock and Vanguard. When the flows reverse active managers will make a comeback, if there are any left!

We have all read volumes of research and listened to an endless stream of pundits talking their book, backed up by their opinions. And now we have constant twittering and algo frenzies from which to make a head or a tail.

Opinions are frankly useless when it comes to investing; and in pretty much every other field of existence!. And you are quite welcome to say, “Well that’s your opinion!” Indeed, but not about how markets operate.

Markets are fractal. They have memory at all degrees of trend. Two books for the uninitiated about fractals. The Fractals of Finance, a primer on fractals, by Richard Brennan and by the master himself, Benoit Mandelbrot, The MisBehaviour of Markets which is a must read.

Price tells you a lot. And rate of change of price tells you the most. The same can be said for GDP and inflation. Get the trend in both right and you will be way in front of the talking heads, and your own opinions! There are 4 combinations of GDP and inflation, and as I have learned from Hedgeye, markets behave differently in each one.

In a benign environment of rising GDP and falling inflation (in rate of change terms) equities (tech, consumer discretionary, industrials, materials and REITS) credit and commodities are the areas to concentrate upon, avoiding defensives and value. One day value will have a day or two in the sun; won’t it?!

In a reflationary environment, with GDP rising alongside inflation, the condition we are in now, commodities go to the fore, notably energy as well as tech. Both these sectors were on the buy list back in Q1 well before the AI rocket ship launched and the Orange One took a disliking to Iran. Precious metals don’t tend to do well here as rising rates are not helpful to an asset class that generates no income; again, as we are seeing currently.

In a stagflationary environment, which we are currently transition into, with GDP slowing and inflation rising, gold shines, as happened in the early months of 2026. Commodities also perform well along with Utilities, Energy, Consumer Staples and Healthcare.

In a deflationary environment with both GDP and inflation falling, bonds, gold and the USD are the top performers. Energy, Tech, Industrials, Consumer Discretionary and Financials are to be avoided.

This is a US centric view of the world and elsewhere GDP and inflation may well be following different paths. So, crank up your Bloomberg screens and see what is happening in rate of change terms around the world. This is a go anywhere approach.

This data can and will change monthly and paraphrasing the Keynes dictum, if the data changes so does the portfolio. This is not what buy and hold tells you to do, which is mostly based on opinions about the unknowable future. Why do we do think we can predict the future? Why do we do that?

Rate of Change data gets you a lot closer to market timing, the other sacred cow in the sense of “it doesn’t work.” If the RoC data say this is the time to buy or sell, then do it. This process is not infallible, but has a significantly positive hit rate. Holding on to losers is an absolute no no. Bitcoin hodlers please note.

As Keith McCullough, the rabid Canadian from Hedgeye, puts it regarding “bubbles” in which US markets find themselves right now.

Don’t overthink it, “turn off your mind”, and let the machine - the fractal math - and flows do the work for you. The market, in its infinite wisdom, will tell you when this is over.

The data doesn’t have an opinion, so let go of yours.😎

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Vanguard pioneered the first index fund available to individual investors when founder John Bogle launched the First Index Investment Trust (now the Vanguard 500 Index Fund) in 1976. Designed to track the S&P 500, it was initially mocked by the financial industry but revolutionized investing. Bogle’s creation popularized the “buy the haystack” philosophy: instead of trying to beat the market by paying hefty fees for active fund managers, investors could match overall market returns with incredibly low costs.

Bogle’s brilliant idea has morphed into a colossus. Active fund management has taken a back seat to buying the biggest stocks in the index because…they are the biggest.

This is the bit nobody mentions at the index-fund fan club. Once enough money pours into a market-cap-weighted index, price stops being an opinion about value and becomes a function of plumbing. Money arrives; it is handed to the biggest companies because they are the biggest; that makes them bigger; which attracts more money. Rinse, repeat, to the moon. Now bolt on a derivatives market larger than the cash market beneath it — options volume overtook equity volume some time ago — and you have a tail wagging a very large, very expensive dog. Valuation? Valuation is what happens to other people. The flows decide.

We are told index funds are passive and neutral. They are neither. “Passive” is the finest piece of marketing the industry has produced since “this time it’s different.” Behind every index sits a committee, and that committee makes thoroughly active decisions: who goes in, when, and on what terms. They have simply outsourced the blame to a rulebook. And in March, the rulebook changed.

Nasdaq rewrote the entry rules for its flagship 100. The new “Fast Entry” provision — live since the 1st of May — lets a sufficiently enormous newcomer (top-40 by market cap, roughly $100bn and up) leapfrog the queue and join the index a mere fifteen trading days after floating. Gone is the three-month waiting period. Gone are the liquidity tests. These were not bureaucratic fripperies; they existed to protect the very people about to be force-fed the shares. The newcomer doesn’t even displace anyone — the index simply grows past 100 to make room. How accommodating.

Phil Bak, who has actually sat in these listing pitch meetings, put it best on his Substack: it is, he writes, simply “madness.” You think you are buying technology when you buy the Nasdaq 100; you end up part-owner of Costco and a warehouse of other things, while Oracle and Uber sit elsewhere because they happened to list on the wrong exchange. Allocating capital by listing venue is, as Phil notes, utterly disconnected from anything resembling investment merit. But it is marvellous for the exchange that wins the listing.

Which brings us, inevitably, to the rocket.

SpaceX is reportedly going public on the 12th of June — nine days from this writing — chasing a valuation of “at least” $1.8 trillion. That would be the largest flotation in the history of capitalism, raising something like $75bn. It would also be a company that lost the thick end of $5bn last year, whose founder retains around 85% of the votes, and which Morningstar valued this week at $780bn — comfortably less than half the asking price, and they were not shy about calling it overpriced.

Now stitch the two stories together, because the market already has. Thanks to Fast Entry, trillions of pounds and dollars of passive pension and retirement money — yours, quite possibly — will be obliged to buy SpaceX at whatever the IPO printer spits out, roughly a fortnight after listing, regardless of price, profit, or sanity.

Morningstar said the quiet part out loud: small float, a ravenous appetite for anything with “AI” in the prospectus, and that unprecedented fast track into the index mean the shares will “likely survive separation and may even ascend — at least for a time.” At least for a time…

This is the punchline of passive’s long con. The vehicle sold to you as the humble, neutral, hands-off way to own the market has become the mechanism that buys the most fashionable, most expensive, most speculative asset on Earth at the worst possible moment; and calls it discipline.

So what to do?

First, retire the word “passive” from your own vocabulary. You are not passive; you have merely delegated your active decisions to a committee in New Jersey. Take them back. Second, where you want broad exposure cheaply — fine, but know precisely what the rulebook is doing on your behalf. Third, active management earns its fee only where it has a genuine edge and a repeatable process — and most have neither, which is rather the point of everything I bang on about here. And as ever: watch the flows into, and one day out of, BlackRock and Vanguard. The tide that lifted all of this can ebb, and when it does, the flow runs the other way…rapidly.

The brilliant idea is dead.

Major Tom is strapped in, the countdown is running, and your retirement savings have quietly been volunteered as ballast. Bowie told us how this particular Space Oddity tends to end. Mind how you go.

RIP. 🪦

Nothing here is investment advice — your scribe is a grumpy old navigator, not your adviser. Sources: Nasdaq-100 “Fast Entry” methodology (effective 1 May 2026); SpaceX IPO reporting and prospectus; Morningstar initiation note (June 2026).

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On Friday April 24, the S&P 500 closed up about 0.75% at a fresh 52-week high while more than 300 of its 500 components fell on the day. That exact configuration has never happened before. Full stop. Loosen the threshold a touch and the same setup appeared on March 22, 2000 as the TMT bubble was about to burst.

That oddity is the jumping-off point for John Hussman’s April letter, Causes and Conditions. His arithmetic is valuation biased, but doesn’t lie. He’s been wrong on timing in the past and says so in print every single month. He has learnt from his mistakes. That alone puts him way ahead of most public market commentators in my book, who continue to follow the same common narrative expecting a different outcome.

Hussman’s April letter is worth your time to read in full. I want to look at three things from it that need explaining, because the financial media is not going to tell you any of this.

Hussman opens with Graham and Dodd, via Warren Buffett: Price is what you pay. Value is what you get. This is the core of his argument:

The defining feature of a Ponzi scheme is that it persuades investors to pay for future cash flows that, at least in part, don’t actually exist, while creating the impression that those cash flows imply an attractive return on the price investors pay.

The argument that backs it up runs through the whole letter, but the key is this: his most reliable valuation measure, the ratio of nonfinancial market capitalisation to gross value-added (a sort of economy-wide price-to-revenue ratio), is now at the highest extreme in U.S. history. Higher than 1929. Higher than 2000. Higher than every other peak in a hundred years of market cycles.

You might say profit margins are at record highs too, so the multiples are justified. That brings us to the second piece, and this is the one nobody on CNBC will explain to you properly.

The mirror

Wall Street analysts currently expect forward profit margins for the S&P 500 that are, in Hussman’s phrase, “easily the most extreme in history.” The chart he shows is a near-vertical move higher in recent quarters. To accept those expectations as a basis for paying current prices, you have to assume the elevated margins are permanent.

Why are profit margins this high in the first place? This is the part that gets buried. What investors observe as record corporate profits are the mirror image of record deficits. That’s an accounting identity. The deficit of one sector of the economy, where consumption and net investment exceed income, must show up as a surplus of another sector, where income exceeds consumption and net investment. Without exception. Basic national income accounting. It has the same status as 2 + 2 = 4. (I knew my accountancy qualification would come in useful one day…)

So: U.S. corporate profits are at record levels. Whose deficits are funding them? The U.S. government runs a chronic deficit. American households in the bottom 90% run a chronic deficit (their wages and salaries don’t cover their spending and investment needs).

Now go back to the question. Are these record profit margins permanent?

To answer yes, you have to also answer yes to: are the record deficits permanent? Because you cannot have one without the other. They are the same phenomenon viewed from opposite sides. One reason for the current upsurge in earnings is that AI companies recognize revenue immediately upon closing a deal (upfront) while spreading the associated costs of infrastructure (GPUs, servers, data centers) over several years (amortized). Creative accounting is alive and well.

If the U.S. government starts cutting deficits aggressively, by raising taxes or cutting benefits, corporate profits fall. If household debt accumulation slows, corporate profits fall. If the trade balance shifts toward surplus, corporate profits fall. The mirror image is unavoidable. Unlikely in the short term, but if something cant go on forever it won’t.

Second and third order

First order: profits are at record highs. Second order: they’re high because someone else is in deficit. Third order: if those deficits ever revert toward historical norms, profits revert with them. Fourth order: what does the wealth distribution look like in either scenario, and does the political system tolerate it?

The technology piece deserves the same treatment. Everyone tells you AI will be transformational. Hussman makes a striking observation that should give you pause. Real U.S. GDP growth over the past 25 years has run at the slowest compound rate in the country’s history. That includes the iPhone, cloud computing, social media, mobile internet, electric vehicles, and the early years of large language models. All of it. Slowest 25-year growth in the history of the Republic.

What technology has done is shift the distribution of income. Same pie, different slices. Capital takes more, labour takes less, and the gap shows up as productivity rising faster than real wages.

I wrote about this ilast year.

The productivity gains from AI will be captured by capital, with labour absorbing the disruption. White-collar employment will compress, especially in finance, law, accounting, consulting. Spending power in the broad middle falls. The tax take falls and the Government is even more in debt. Corporate profits rise on the productivity side and fall on the demand side.

Profits will rise short term before the fall in demand kicks in later; the illusion of rising productivity.

There’s a further effect Hussman touches on in his April letter.

When wealth concentration reaches certain extremes, the political response stops being polite. Trust in institutions has been collapsing for decades.

The OECD numbers I quoted in November (only 17% of Americans and 27% of Brits trust the government to do the right thing) sit alongside this market story, not separate from it. The K-shaped economy and the trust collapse are the same phenomenon viewed from different windows.

Markets don’t reprice gradually for things like that. They reprice in jumps. Mandelbrot called these wild discontinuities part of the deep structure of price. Most people, including most professional fund managers, still model the world as if returns were Gaussian. They aren’t. They never have been. And the further we get from any historical anchor of social stability, the fatter the tails will get.

If you’re an investor, here’s the practical question. Are you holding equities at the highest valuations in U.S. history because you believe the Mag 7 and AI tech will compound earnings at 25% forever, or because you’ve been told for fifteen years that the market always comes back from any “correction”, or because every dip below a record high gets chased automatically by retail money on autopilot.

The honest part

Here’s the part of Hussman’s letter I most appreciate, and the part that most clearly distinguishes him from the doom-monger crowd. He is not telling you to short the market. He is not telling you the crash is coming next month, or even next year.

What is important is his framing of risk. Watch out for the trap door!

Crashes don’t need a specific trigger. They happen when investor risk-tolerance evaporates against valuations that have left no buffer.

The condition is what matters, much more than any specific trigger. And the condition is, by every measure he tracks, the most extreme in a century.

What this means for you

The profit margins behind today’s record valuations are not a structural feature of a more productive economy. They are the mirror image of record deficits. Believing in permanent record margins requires believing in permanent record deficits. Both are mathematically tied. You can’t decouple them by pretending they don’t.

Three things to think about. One thing to do.

First, examine what you actually own and why. If you’re holding broad equities through a 60/40 portfolio or a passive index fund, you are holding a position with the worst expected real return in a hundred years on the most reliable historical measures. That doesn’t mean sell everything tomorrow. It means understand the asymmetry. Upside, modest. Downside, large. You should at least know.

Second, watch the K-shaped economy. The accounting identity that drives record profits also drives record wealth concentration, which drives political instability, which drives policy responses, which drives market outcomes. The political cycle and the market cycle are increasingly the same cycle. Trust in institutions has been collapsing for decades, as I covered in November. We are nowhere near the bottom of that decline, and the implications for asset prices are not benign.

Third, develop your own framework for dealing with uncertainty. Think in probability ranges. Think fractally. There two key two metrics you need to know and understand. Rate of change of both inflation and GDP. The single most useful intellectual move I’ve made in the past 12 months has been giving up the urge to know what happens next and why and replacing it with the discipline of allowing the data to map the probabilities and investing accordingly. If the data changes so does the strategy. As Keynes said, “If the facts change I change my mind. What do you do sir?” This is NOT market timing on which I will have more to say, along with “buy and hold” as an investment strategy, in a later piece I am working on.

So: read Hussman’s April letter. It’s at hussmanfunds.com. Then look at your own portfolio with the question, what am I assuming about the permanence of these margins? If your answer is anything other than “I’ve thought about it carefully,” you have homework to do.

Price is what you pay. Value is what you get. The gap between the two has rarely been wider, and it has never been wider on one of the most reliable measures we have.

The mirror is on the wall. Time to take an honest look. The reflection may not be the one you expect; trust it and, as ever, love yourself and go gently.

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It’s quite extraordinary what it is alleged to be able to do. I’ve tried it out on a few interesting things. I’ve told it about me. I’ve told it what I don’t like it to do, and I’ve told it what my aspirations are. It’s given me a very creditable business plan, if you want to call it that. It can create and organise your life in ways you would never have dreamed of and you will probably wish you hadn’t. The more I look at it, the more I realise that if you don’t embrace AI in one form or another, you are either going to end up being a dinosaur or you’ll go completely mad, which is probably what is going to happen to a lot of people who try and keep up with the frenetic pace of AI development.

While the rest of us are asking Claude for a decent recipe or a holiday itinerary — to say nothing of the legions of perfectly respectable business applications — the Men in Grey Suits are on a darker and altogether more interesting path. Anthropic has reportedly built a version of Claude that can crack pretty much any password or code. The military, naturally, are gagging for it, and have almost certainly got it already. One does wonder what they intend to do with it. Nothing benign, I suspect.

I don’t think we appreciate just how much this is going to change the world that we live in, not just in terms of the changes in jobs and employment. Jobs that will disappear, new jobs that will be created. The whole way our society, our cultures, our structures in our countries and economies are going to be managed, and not by us.

We assume that the Western world is in the vanguard when it comes to AI development mainly because of all the hoo-ha around the semiconductor space, where the fastest chip is going to be the one that everyone’s going to have to use. We kind of forget, because it’s a long way away and less visited than most would be hedgemons (I’ve been there and Russia), that China has been using AI for quite a long time. They’ve developed their own chip technology, a clone, a copy of what’s been produced in the West, but they’ve had the initiative to go ahead and do that. You can gnash and wail all you like about stealing intellectual property, but this is what war looks like in the 21^st century. Its fought in the financial and technological fields.

Their use of tech in industry and manufacturing is quite extraordinary. A factory in China started 2025 with 2,000 employees. They embraced AI. It now runs with 20 — twenty humans and an AI doing the rest. Industrial output prices are deflating. China is, quite literally, going to eat America’s lunch, and possibly the plate as well. We are reassured that there are jobs AI can’t do. Another story from China: cameras quietly filming women sewing garments, so that the AI can learn the motions and, in due course, do without them. Elon, meanwhile, is presumably having Claude look at autonomous driving — heaven knows he could use the help.

The problem most people have with AI now, or certainly I do, is that it changes almost every day. There I was happily using ChatGPT, then along comes Claude. The next thing I know, the guy who recommended Claude said, “Well actually you’ve got to go back and look at ChatGPT 5.5 because it’s moved up a whole degree or two.” I suspect Claude will come back with something and so it will go, backwards and forwards.

In fact, the use of AI is limited only by ones imagination in asking it what to do. We live in a universe of infinite possibilities and Claude, is making them accessible. The irony is that the imagination that creates innovation is slowly being stifled. Lean on AI too heavily and we’ll all end up in the same place, having lost the ability to think for ourselves on the way. Mind you, looking around much of the UK today, we appear to have managed that already, entirely under our own steam.

The other serious issue is that Clod — the misspelling is deliberate — makes things up, ignores instructions, and runs its own programme whenever the mood takes it. Check the output. Then check it again. Skip that step and you’ll find yourself halfway down a rabbit hole that wasn’t there yesterday. Try to build a commercial application on top of it and you’ll spend as much time debugging Clod’s confident nonsense as you would have spent writing the code yourself. This may well change by the time I hit the send button such is the pace of correction improvement.

And then there are the financial markets. You will have noticed that extreme volatility is now the daily order of business. Trump sneezes and the market falls out of bed a fraction of a second later. He blows his nose ten minutes on, and the market is back where it started before you’ve reached for your coffee. I embraced technical analysis a very long time ago; I used to teach students of the UK Society of Technical Analysts and set the exam for them. Poor sods.

Things like support and resistance are patterns and AI is just brilliant at patterns. If you watch charts now you can see resistance levels. You can see them being hit. You can see where the stops are. You can see the markets sucking out those stops and then the whole thing reverses. This has always been the way of markets but now it’s moved into a completely different scenario. Now the algorithms are playing against each other. They’re certainly playing against you and me. Trading is getting to be less easy. It is also believed that over 70% of stock market trades are now carried out by AI bots. And don’t get me started on another elephant in the room, passive investing…

Everyone has asked Claude to come up with the “best trading plan” and I suspect there are myriad versions of that. Eventually it’ll learn from itself, and it’ll find the trading plan that works this week. Of course, as we know from experience once everyone finds the same edge, the edge disappears.

There’s still going to be scope for forward thinking. If this, then that, then what? The second and third derivative effects of Trump sneezing are a good example. Very few really think that through, markets react to tweets, but what is really going on. In due course AI will do that thinking for us as well. And, no doubt, hand Trump a box of Kleenex on the way past.

We live in interesting times. There are days — notwithstanding the fact that I can barely read my own handwriting — when I’d happily go back to pen and paper for all my thinking, planning and writing. Better still, find a quiet beach and contemplate on one’s sanity whilst the rest of the world goes slowly, and then suddenly, mad.

Mind your eye out there and go gently.

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We spent our first month in India in Tiruvannamalai on a retreat where we were reminded constantly that there is only now. No past, no future, just now. Very liberating when you have the time to sit and contemplate that under the shadow of the holy mountain Arunachala. The reality is you can be in the now anywhere which brings a quiet, calm sense of peace, which is what we all need right now.

Tiru is a holy city, and a reasonable description would be bedlam. The traffic is very India. I hired a scooter while I was there – there are almost more scooters than people and the preferred form of transport; cars are in the minority – and I learned a completely new driving style of which the Institute of Advanced Motorists would not have approved. In essence you drive on whichever side of the road gets you to your destination the quickest. In India they drive on the left, like in the UK, or on the right! The only rules that are obeyed in India are the rules of cricket.

All day long and most of the night there is drumming, firecrackers, dogs barking, chanting and the call to prayer. India is not a quiet country. And then there is the food. We both love spicy food so we felt right at home. A masala dosa with sambar and coconut chutney for breakfast is a great start to the day if you are not irrevocably conditioned to eat bacon and eggs! When in Rome… Then of course there is the climate to get used to. We had a rather extreme transition coming from minus 6C in Bulgaria to plus 36C in Chennai in the course of two days. Two months in India and we have not seen one drop of rain!

From Tiru we travelled to Kerala…by train. Booking a ticket was the first obstacle; we taught the Indians all about bureaucracy. Getting on the train was the second. Remember we are in the middle of India, and the train is coming from New Delhi having set off two days earlier. The Indian Railways app said the train was on time, which it was, and would be arriving on platform 3, which it wasn’t! We were at Katpadi Junction which made Clapham look like a branch line station that Dr Beeching shut down. We were told the Kerala Express was arriving on Platform 5 which turned out to be correct but the coach we were booked on to was at the back of the train and not the front which it was supposed to be according to the announcement. Not a problem ex the fact that these trains are incredibly long and don’t hang about long enough for two Brits with all their worldly possessions in four suitcases and two back packs to get from one end of the train to the other.

The train started to move, slowly thank goodness, and we just jumped in where we were. They don’t shut the doors on trains in India in fact they just don’t do health and safety at all! Nine hours later we arrived in Cochin on the Keralan coast after copious tea from the chai wallah, samosas from stalls on the stations we stopped at along the way and the most amazing biriyani ordered via an Indian Railways app from a restaurant two stops down the line, which was delivered to our seat! South West trains suck on that!

Kerala was so different from Tiru. It was green, as in lots of tropical trees, and by Indian standards, clean. It also has a coastline with a long series of palm fringed beaches. We were supposed to move into a secluded beachfront villa which turned out to be a much photo shopped bungalow on a stretch of beach covered in huge concrete blocks, part of a system of erosion prevention that made no appearance in the website pictures. Bambaji who is probably the best negotiator on the planet texted the host and said we had been sold under false pretenses, and could we have our money back? Within minutes he was on our doorstep offering accommodation at a proper beach resort called “Seclude” which lived up to its name. It was however twice as expensive as the “villa”, but to Bambaji, he said, we could have it for the same price!

A few days into our stay here I lost all hearing in my left ear, and they organized a trip to the local hospital. Our taxi driver came into the hospital with us and dealt with the bureaucracy, which for India was blessedly quick. I then waited 10 minutes to see a consultant who diagnosed wax in the ear, which took him all of a minute to flush out. Hearing restored and out of the hospital inside 30 minutes. All of which cost 750 rupees; £6.12! That is what I would call a health service. If only we had one like it…

We had another two weeks in Kerala, in the back waters, and a final week on another beach further down the coast. We then took an internal flight back to Chennai which wasn’t a lot different from flying to Edinburgh from London apart from the baggage scanning routine which is great in that you can take water through; how sensible. And then the 10-hour flight to Blighty with a check in at 2.30 in the morning. Ouch!

We are back here for 6 weeks cat sitting and then a month in Austria before heading back to the States. We will be manifesting diesel and jet fuel along the way! I have long been of the opinion that the world is going mad and I’m beginning to wonder just how mad it can get.

The markets seem to be taking the current bout of mayhem relatively calmly and the buy the dip brigade are still a thing. Just keep an eye on volatility. In all the major markets including gold, silver and oil, vol is at levels that say this is not the time to BTFDs. It will surprise some of you that I started selling gold after the GVZ nearly made it to 50 at the back end of January when the price briefly hit its all time high at nearly $5600. Gold vol (GVZ) is back down to the high 30s and needs to be sub 26 to signal the next opportunity. By comparison the vol on “black” gold is just under 100! If you can call this market consistently you must have a direct line to the Oval office. Mind your eye out there and go gently.

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Similar story in gold. The gold volatility index - the GVZ - hit 46 a level last seen in 2020 and 2008 when gold had a similar correction, so no great surprise if you are watching this data. Are you watching the GVZ? The GVZ is gold’s version of the VIX, the S&P 500’s volatility measure, which is currently around 18 and shows little sign of distress. A reading over 19 takes us into the chop bucket where we get episodes of rallies and corrections. When it gets above 29, you will need to don your tin hat!

With Wall Street pumping out impressive earnings data (ex-Microsoft whose creative accounting was an easy spot!) and inflation still on a downward trajectory (the oil price, a big component of the data, was higher a year ago, so the comparatives are favourable) US equities may still reach even more insane valuation levels. Bond market volatility is also in the complacent bucket. How long will this rosy scenario last? Japan is in as much trouble with money printing as the US so keep a very close eye on JGB yields. Both countries have two unpalatable options. Let the bond market go and suffer a debilitating rise in interest rates or default to “quantum” printing of money, let the currency take the pain and suffer the inflationary consequences. The latter most likely and when not if….

As for gold it is, and has always been, the only reliable currency. Russia, China and much of the Global South recognise this and are accumulating gold at a record pace. This correction has given them a great buying opportunity. The silver price having been manipulated for years by the bullion banks is now pivoting to reflect the true industrial demand / supply dynamics. Real assets, like bullion, copper, rare earths. et al are still have significant, unsatisfied demand.

Our travels have brought us to India. Still crazy after all these years! It’s a cross between magic and insanity; I’m talking about driving and riding. So many scooters, motorbikes and tuk tuks not to mention buses and lorries all attempting to occupy the same slice of road at the same time. Every full moon pilgrims walk around Mount Arunachala. This month is a special full moon, and they expect 2 million people to be on the march! I have a feeling this story may have a few extra noughts on the end. On the other hand, the Indian population is now larger than China’s so may be not!

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For decades, JPM has supported silver’s price with large short positions that would have caused them, along with SLV investors, considerable pain. The recent surge to $90, driven by thin trading during the Christmas holidays when Western markets were closed, exposed these massive short positions that couldn’t be closed. The true catalyst for the squeeze, however, has been a soaring demand for physical silver—an essential material in power generation, defense, chip manufacturing, along with the short covering needed for futures settlement.

Adding to the complexity are export restrictions from China and the US, as well as unrest in Venezuela.

Why does this matter? China has heavily invested in Latin America, securing raw materials for processing into silver at its vast refineries. The recent extraction of Maduro to New York to face charges of corruption and drug smuggling has sent a warning to other South American nations: ship your metals to the US for refining, or face similar repercussions.The announcement of a new smelter in Tennessee—the first in 60 years—will only heighten tensions.

Will China and Russia quietly accept this? Unlikely, given their history. So far, responses from China, Russia, the EU, and the UK have been muted or weak—fueling my suspicion that the US will safeguard its hemisphere, while China and Russia manage their own interests in the East. I wouldn’t want to be in Taiwan or the Ukraine right now or did you think the West had the upper hand in both jurisdictions?

The strategic importance of physical silver is not to be underestimated. The same can be said for silver mines in countries with a strong rule of law, Canada, the US and perhaps Mexico, that have access to refineries in those same countries. China has an overwhelming grip on the processing of the world’s commodities from raw material to finished product. They can switch off the flow whenever they choose.

This story has only just begun.

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I remember the sixties; I can still feel the rush on hearing songs like these two. No, it wasn’t the drugs, although it might have been the beer! My body knew the question was important, and no one was listening to the signals. 50 years later, with time to reflect on a life of “not listening” to my body, I am here, now, in me; some of the time! Looking at the world around me I do wonder what the youth of today will be reflecting on in 2075. I might just hang around to find out. After all we are designed, genetically, to live to 125 or so; something I am working on; stay tuned.

Here in the US, it’s “Fall”, and the leaves are doing just that, in many multicoloured hues. It is a very special sight to see from here up in the Blue Ridge mountains of North Carolina.

They are still getting over the effects of Hurricane Helene that struck the region in September 2024. There are still folk living in caravans, being unable to rebuild as the land their homes were on has gone, and is now down river, slowly making its way to the sea. Sections of the 486-mile Blue Ridge Parkway Road are still closed. Deep valleys that channeled much of the flood waters are still strewn with trees and huge boulders. What struck us most was the sincerity of people who were so appreciative that we had visited their towns and villages and spent, what seemed to us, a few dollars in their shops and stores. We are very fortunate as well as very grateful to these people for their lessons in humility.

We are staying in Spartanburg, South Carolina until mid-December, when we return to Blighty for Christmas, before heading off to Bulgaria for a week, Bambaji is presenting at a Human Design Festival in Sofia, and then we head off for two months in India.

We are going to be on a retreat in Tiruvannamalai. After a while you can say that without thinking, although inevitably everyone calls it Tiru…We have a WhatsApp group for the people going and the interesting observation, for me at any rate, is the “fear” of India. How do I get vaccinations, do I take dollars are there ATMs that don’t get scammed, are there any usable toilets, what about mobile coverage? Ye Gods! India now has a burgeoning middle class – defined as over $15,000 annual income – and a rapidly growing economy which means the infrastructure and access to much of what we take for granted in the so-called developed world are so much better than 10 years ago. Yes, they still drive like lunatics, and the bureaucracy is still a challenge, but this is a country on the move so enjoy it, before it loses its inestimable charm.

It will be hot in India, and the markets seem to be warming up too. I have been reading a lot about AI and none of it is good. From personal experience I know that ChatGPT makes things up and if you ask the same question days apart you will get a different answer. This is okay if you are using it as a version of Google on steroids to ask how the latest app update works. It is touted as the dog’s bollocks for writing code. It makes mistakes and if you are relying on it in a commercial environment look out. If you want Python code, learn how to write Python! Here’s a quote from the highly respected MacroStrategy team (nothing whatsoever to do with MicroStrategy the Saylor / Bitcoin saga) on ChatGPT making things up.

Basically, it keeps inventing new data to appear helpful. The models have a powerful authority bias built into them which assumes that the model is right and that the questioner is wrong for doubting it, so will keep repeating the same nonsense in different ways. (Remember, learner algorithms work in the way of saying what algorithm turns the number 4 into 16, for example, for which there are an infinite number of answers, so it will just keep looking for the next way to arrive at 16). It will take increasingly irrelevant statements on the Internet as gospel to justify its fictitious answer. The models dismiss unconventional or independent research as improbable and actively rewrite it through fabricated counter evidence. In effect, LLMs do not merely reflect the institutional bias in their training, they actively police it, manufacturing counterfeit academic reality to defend the status quo.

And then you have the circularity of the chip manufacturers (Nvidia, AMD) and end users (Microsoft, Google, Meta) supporting the data centre builders and AI generators, (Open AI, Coreweave) who in turn buy their chips and software. This can all go on for as long as people believe, and with the inevitability of hindsight, for much longer than makes any sense. It is all very reminiscent of the TMT bubble that peaked in 2000. Some of us remember that period and 25 years later parts of the market are more highly valued than they were back then. Just saying…

I am not ignoring the fact that AI is bringing huge change to the world. I am just not entirely sure of the direction. What will folk do who have been replaced by AI and robots? Retrained? To do what? Play video games all day and live off UBI? Even more concerning is the continuous dumbing down of our knowledge. Already literacy levels are dropping as our kids cheat on homework by using AI so they can indulge their screen addictions.

I’ll close with a quote from a piece from of all places, the Grauniad. What AI doesn’t know: we could be creating a global ‘knowledge collapse’:

As AI-generated content has started to fill the internet, it adds another layer of amplification to ideas that are already popular online. The internet, as the primary source of knowledge for AI models, becomes recursively influenced by the very outputs those models generate. With each training cycle, new models increasingly rely on AI-generated content. This risks creating a feedback loop where dominant ideas are continuously amplified while long-tail or niche knowledge fades from view.

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The Zona Hoteleria is 14 miles long and is a narrow strip of land with the Gulf on one side and the Nichupte lagoon on the other. We are at the southern end which is blessedly quieter with more condos than all-inclusive hotels, where you are pretty much locked in with free food and booze and a long ride to anywhere that resembles Mexico. The sea is warm, the sun is shining, and the locals are looking after us very well indeed. By trying to speak their language, smiling a lot and administering the odd handful of dollars we get along famously. Similar to our experiences in the US, especially the bit about speaking their language!

I mentioned last time my luck in the Las Vegas casinos. That was in 1979 and back then the one-armed bandits all had levers to pull. Today casinos are like gigantic play stations; you just press buttons. We did find one machine with an arm to pull so $1 in the slot, one pull and hey presto $2.40! They say that taking a profit is the hardest part. Not for us! We cashed that in and said goodbye to Reno!

Our journey across Nevada to Salt Lake was extraordinary. On the one hand, as the concierge at the Reno hotel said, “There’s not much between here and Salt Lake”, on the other hand the “nothing” is nothing short of epic. We did have some stretches of the “long and winding road” that went straight as a die to the horizon and back. In between the scenery changed dramatically. The interstate highway can get tedious, so we turned off “use freeways” on the sat nav and hit some off-road gravel trails that reminded me of riding my motorbike in Mongolia! Mr Hertz would not have approved. Apart from gambling Nevada’s main source of income is from mining, We passed a few gold mines and the trucks they use to cart away the spoil create that most unpleasant effect on the gravel road surface unaffectionately called wash boarding. Just like ripples on a washboard and, unless you are as big as the truck that made them, the car becomes a very efficient bone shaker!

Just before we reached the end of the trail we came across a puddle straddling the road. You can’t tell how deep these things are, so I edged around the outside of what looked to be the shallowest part. It wasn’t! With my foot to boards the car ground out of the puddle an inch at a time. Never have I been so please to be back on an interstate! We stayed that night in Wells and the receptionist said if we like mountains, we should visit Angel Lake; so, we did. 9000 ft up a very windy and precarious road with no barriers on the drop off side! And when we got there, stunning beauty and total silence; a very magical place and an important lesson that talking to the locals is essential if you want to find the hidden gems.

Our next stop was the Bonneville Salt Flats Raceway. If you are thinking Brands Hatch…nope. It’s miles and miles of hard packed salt and more nothing. You come over a mountain ridge and there it is. Miles of flat salt lake; such a contrast to Angel Lake. The hire car had taken a hammering on the gravel, and I remembered the conversation at the Hertz desk when I rented the car and being told, with much seriousness, that driving on the salt lakes was verboten. I found that quite amusing at the time, not realising the opportunity with which we were to be presented. It had recently rained and there were some very claggy looking damp patches, so we settled for a walk on this iconic surface. We didn’t break any speed records…

When I last wrote gold was at $3800. Two weeks later the closing price was $4216 having hit $4400 earlier in the week. Last Christmas it was $2600. Now we are seeing headlines asking when the bull run will stop. The answer? Cue the Carpenters, “we’ve only just begun.” There will be volatility on the way which will test the faint of heart and provide some buying opportunities for those not already on the train. I will let Luke Gromen explain how he sees things. His Forest for the Trees (FFTT) weekly publication is for me essential reading. He doesn’t just think outside the box, he dismantles it completely. Wall Street and the financial media – the Racing Pink in the vanguard – are still in the old regime that has existed since Nixon cranked up the printing presses in 1971. That regime is over, and we are transitioning to something completely different. Here’s what he has to say.

A view held by Wall Street and by many US investors that we think vastly oversimplifies what is actually going on, and that is driving gold higher, and which in our view is likely to continue to drive gold far higher in coming months, quarters, and years, is is not simply “unease about financial markets”, but also…

• The US government is literally selling USDs to buy Argentine pesos and buy commodities around the

world…

• …because the US now finds itself having been wrong about its 40-year economic strategy that can be

summarized as “long USD, USTs, and service jobs, v. short commodities, factories, and gold”…

• …while China has spent the last 20 years taking the other side of that trade, going “long commodities,

factories, and gold v. short USD and short USTs.

”

• Now the US suddenly realizes it pursued a “pennywise, pound foolish” economic strategy that leaves it

dependent on China for its military and weapons production…

• …but the fact that the US offshored so much of its industrial base to China means the US cannot reshore

to fix this without spiking inflation to levels that blow up the UST market unless US policymakers engage

in some form of YCC to cap yields (which would send inflation up and the USD down.)

• On top of all of the above, AI appears to be accelerating US service and white-collar job losses, after the

US spent the past 25 years sending manufacturing jobs to China in favour of “cleaner and higher-paying

service jobs”…suggesting a structural employment problem in the US economy that may require some

form of Universal Basic Income (UBI, money printing) sooner than expected…

• …and now by China launching a de facto embargo on rare earths (REEs), China just effectively declared “USDs are no

longer good for Chinese REE’s, and perhaps not for any tech product Chinese REE’s go into”…i.e.,

Chinese REE’s and related goods just went “no offer” in USD terms.

Gold and BTC are not rising solely on a debt debasement trade; they are rising on a growing recognition of the

complete failure and loss of the US economic policy and strategy of the past 40 years, and the further growing

recognition that the US reversing this failure will require some form of YCC and UBI, leading to a much lower

USD v. gold and BTC, and much higher secular inflation.

He finishes the articles by answering the question “when will the gold bubble end?” You may wish to cover your children’s ears at this point. His chart below shows the market value of US official gold – the bars in Fort Knox – as a percentage of foreign held US Treasuries. A return to the long-term average implies a gold price of between $16,800 and $25,200. If the percentage reached 100 which is where it went when gold last went on an exponential tear in 1980 and foreign held USTs don’t rise again, he is suggesting $48,000. Got gold?! Before you think he (and me) are barking mad sign up to FFTT and read his stuff.

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There is much beauty in Oregon, people as well as scenery. Our first cat sit was in Hood River in northern Oregon on the Columbia River gorge. By comparison you could put Cheddar Gorge in your back pocket. The river is over a mile wide and the waterfalls emptying into it are impressive. The Bonneville dam is just downstream, so the wind and kite surfers have the place to themselves. We found a great coffee shop named “Stoked”, a surfing expression for those of you who never get your hair wet!

The town is on a slope that rises up some 800 feet above the river so scenic views in every direction. The house we stayed in was at the top of town with views to Mount Adams in Washington state to the north and Mount Hood, the tallest mountain in Oregon, to the south; magnificent both of them. I could live here…in the summer.

Our journey from Orem in Utah was a kaleidoscope of scenery, vast plains, vast forests and vast mountains. I didn’t rain on the three-day drive to Oregon which was just as well as the windshield wipers didn’t work. Hertz have two types of outlets; corporate where you can rent and return to different locations and franchise where you have to take the car back to the same place you hired it from. As you will correctly guess we were nowhere near a corporate outlet when the wipers failed, and it was a three-hour round-trip detour to Portland to get a replacement. We now have a Ford Explorer which is not a patch on the Chrysler Pacifica we started out with. On top of that the transmission is making some very strange noises, so we will be changing again when we get to Reno in Nevada.

In Reno we will be staying in a casino hotel. The last time I had that experience was in Las Vegas in 1979. In those days the town stretched a handful of blocks from the strip. Today it fills the whole basin. We worked out that if it looked like you were playing the slots you’d get free drinks and food, such was our impecunious existence back then. I did promise myself one pull of the handle at the $100 slots. As I walked towards the one empty seat the woman in the adjacent seat moved over to occupy it, so I sat in the seat she had vacated. One pull; jackpot! 100 silver dollars cascade out of the machine much to the consternation of aforementioned lady! I’ll see if I can pull the same trick in Reno!

Meanwhile in that other casino, you know which one I mean; the S&P 500 made all time highs pretty much every day in September, a month that historically has been the worst of the year. If the ETF flows from pension fund contributions, which are price insensitive, continue then so will the upward trend aided and abetted by heroic complacency in the bond market. The MOVE index that measures bond volatility has fallen from 139 in April to 69 currently. It fell to 36 in 2020 when the Fed was throwing money at the bond market and it seems everyone is betting on that happening again.

Same story with the VIX (proxy for S&P volatility). It is currently around 15 which puts the market firmly in the buying bucket assuming it stays below 19. It often bottoms as it creeps into single digits i.e. supreme complacency. We are not there yet there are still some bears in the woods; here’s one in Oregon!

I was gently berated for not mentioning silver last month. Silver! A precious metal and a commodity. The commodity cycle is at last showing signs of bottoming so silver and especially silver miners still have enormous upside potential. Oh, and platinum and palladium and not forgetting uranium too in case I get called out for not mentioning them either.

Back in Oregon autumn has arrived and it’s become very much like the UK; 50F outside and raining. We will shortly be packing up and handing the cats back to their owners and heading back to Salt Lake City where we fly to Mexico via Dallas for some serious sunshine. My next missive will come to you my dear readers from Playa del Carmen just south of Cancun.

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Coming from leafy green England the landscape around Salt Lake City is magnificent. We have been looking out of our bedroom window to this view every morning. It is majestic and reminds me of Table Mountain in Cape Town. We are headed into Oregon via Idaho and there will be scenery! For the road trip we have a Chrysler Pacifica. It has more switches knobs and functions that I may master over the next month, and it has more space than we have luggage which is saying something.

Packing up and clearing out our home in the New Forest was a cathartic experience. Every item that we left behind, and there were many, carried a memory. Parting is such sweet sorrow…I can tell you all about that! We left on the first part of our journey, up to Cockermouth on the coast just south of Lancaster (well where would you start?!) with 4 enormous suitcases. It didn’t take us long to realise that a nomadic lifestyle does not require a lot of heavy stuff to lug about, especially when we got to Provo airport, just south of Orem, to discover they had no luggage trolleys and no taxis!

So now we are down to two suitcases and two carry ons; much more manageable. It reminds me of the rules for packing when I did the Long Way Round in 2009 (London to New York via Mongolia and Siberia on a motorbike). Make a list, halve it and then halve it again.

After two weeks in Orem at an extraordinary Body Electronics retreat (I will write about this separately at a later date) we got into our Chrysler Pacifica, which has a button for everything and can carry more luggage than you would know what to do with, and set off for our destination in Ashland Oregon, where Bambaji is teaching at a seminar. Everything in America is vast. A medium coffee is big enough to float an aircraft carrier, the cars are like trucks and the Mack trucks are like…Mack trucks…vast! A visit to Costco was my definition of hell. About the size of Wembley stadium and everything comes in sizes that will last to the end of time or the sell by date which will come a lot quicker.

And then there is the scenery. We started in Utah, into Idaho and then into Oregon. It’s not just beautiful its vast; this is the wide country. Mountains, canyons, waterfalls, prairie. And the roads. We have yet to hit a pothole. How’s your experience in the UK? They drive on the right, and they drive very well. You stop at stop signs and take it in turns to proceed. Not a hint of aggressive driving. Of course we are out West, I remember riding a motorbike through New York which is a different experience altogether.

Not only no potholes out here, but the road marking, signs and traffic lights all make driving a pleasure. The distances are another example of vastness. Today the sat nav said turn right on I56 and continue for 295 miles! This is a two-lane highway! The people are a pleasure too. Eager to help and fascinated by the English accent. Ask where the salt is in a supermarket they will take you right to the spot where you will find a dozen different varieties. Same for everything else, grocery shopping could take all day! I may have been ever so slightly pushy in navigating Bambaji towards the check out where another example of vast hits you in the wallet!

We are staying for a few days in Bend Oregon. Away from downtown it is delightfully sleepy and quiet. The Wi-Fi password is “smell the pines” and sitting in the hot tub you can do just that. Golden silence.

Talking of gold…you knew I’d get around to it eventually! It seems Wall Street & Co are slowly waking up to the reality that the dollar is slowly losing its hegemonic status. At the beginning of 2025 the dollar index (DXY) reached 110. Today it is at 97 and is goi ng much lower. In 2008 at the height of the GFC it was at 70. That’s not a prediction but its headed that way.

On the other side of Europe, China, Russia and India, along with the other BRICS and most of Asia de-dollarisation is centre stage. Debt is being converted from dollar loans, mainly to renminbi. Do the Chinese have the dollars. Of course they do they are the largest creditor nation. On top of that more and more commodity trades (NB oil) are structured in local currencies with net settlement in gold. The oil market is magnitudes larger that the gold supply hence the inexorable rise in the gold price.

There will be some volatility along the way, with gold hovering around $3600, especially in the miners, where the gains so far look spectacular, but have only just started to get going. Pull backs are inevitable, but unlikely to go far or last too long. Got gold?

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Tyranny

Man management and how NOT to do it.

In every organisation I have worked in or been a part of a tyrant has raised his head. In every case to be banished….eventually, but often the damage has al…

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Its been an “interesting“ year and rather than peer into the chasm that is the prediction business, a complete and utter waste of everyone’s time and energy apart from Saxo Bank’s Outrageous Predicti…

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Here’s a list for you to consider whilst pondering on this extra pithy aphorism.

·         Meme stocks

·         Crypto “coins”

·         Energy policy

·         Monetary policy

·         Dollar hegemony

·…

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My good friend Tim price wrote a timely piece on gold a few weeks back, here’s the link, that started with the following quote from a FT reader responding to Citigroup economist Willem Buiter’s descr…

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