Hola from Meh-hico
Where a “tacometer” measures how many you can eat in an hour…
We had intended to stay for a month in Playa del Carmen and then we discovered that it resembles Southend on Sea with humidity, so we are now on the hotel strip in Cancun, in a condo, with views of the Gulf of Mexico (where the sea is bluer than blue - dare you call it the Gulf of America even if you wanted to? Not likely. They aren’t fans of Trumpistan down here!
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.
