Trivium Analytics Canada - Weekly Review - May 13, 2016

A hero is someone who understands the responsibility that comes with his freedom.”

Bob Dylan

“If there is ever a tomorrow that we are not together, there is one thing you should always remember.  You are braver than you believe, stronger than you seem, and smarter than you think.  But the most important thing is: even if we’re apart, I will always be with you in the heart.”

Winnie the Pooh
General Thoughts

Control is a fickle thing.  We live in a world that is increasingly becoming more chaotic and dog eat dog.  Every day we observe interactions between people that are blatantly one sided from a domination perspective.  The tone and underlying aggression is easy to witness from an outsiders perspective.  The dominant person gains energy from the subservient person. 

It’s interesting to witness and reflect on how energy shifts between individuals.  Recently I have had to deal with a person who holds a position in upper management of a large Canadian bank.  The guy is a sociopath.  He operates with an air of imperviousness.  He is condescending, arrogant and thinks of himself as righteous.  His shortsighted policies help the bank profit near term as immediate cost cutting measures give the illusion of long lasting savings.

When individual people are negatively impacted by the actions of management or people in positions of power, it leaves the impacted individuals with few options to ponder.  Do they give up and wallow in their misfortune or do they assess the situation, and take the appropriate course of action?

I find it fascinating to interact with incredibly callous people that do not realize that their actions will ultimately lead to their demise.  The old saying, “cutting one's nose off to spite their face” rings true. 

I’ve commented in recent weekly reviews that there are times in each of our lives in which we need to take the hard road and right a wrong.  To go further, it is important for each of us to be proactive and take responsibility for our own actions.  Realize how much power you hold. Every moment gives you an opportunity to do right.  

I look forward to elaborating on this evolving story over the 

coming weeks.  I am confident that an invigorating story is emerging.  

Gold Update

Gold and silver make so much sense to me.  When I contemplate the options available to me and everyone else I know; I always end up concluding that gold and silver are hard assets that are undervalued in our current paradigm.  Think about it for a moment.  Real estate has long been viewed as a store of value.  I do not believe current prices represent a store of wealth because there are too many people living in homes that they should not be able to afford.  Wages have been dropping while home prices have been increasing.  Furthermore, lending standards have deteriorated remarkably and interest rates are at all time low levels.  Interest rates are supposed to represent the amount of risk associated with lending to borrowers.  You can’t possibly tell me that borrowers today are in better shape, financially, than individuals 30 years ago.  30 years ago we still produced things.  Back then there were no free trade deals that stole our manufacturing jobs and offshored them to lower wage  jurisdictions.  

Stocks are ridiculously overvalued  Check out the chart below.  I really don’t need to add any other words to support my argument.  (courtesy of Bullion Management Group) 

S&P 500 ratios have been greater than today’s level only 1.2% of the time since 1871.  

Perhaps this time is different? Of course this time is not different. 

The moment you hear from a mainstream media pundit parroting any phrase pertaining to the broad based equity markets offering value and opportunity; I caution you to take what you have been told with a grain of salt.

Bonds offer little opportunity given that we are in the greatest bubble in human history.  Sure, near term very bright bond managers can maneuver through the mine field of options, but the list of people capable of navigating murky waters is quite petite.  

Most other commodities do not represent value because derivative paper contracts traded by algorithms, speculative traders and too big to fail banks have rigged prices that do not reflect the premise of economics 101: Supply and Demand.  

Some people may argue that currencies are a store of value.  Fiat currency is either paper or a digital entry.  Enough said. Fiat currency lost its way as soon as central banks began printing it out of thin air.  Governments have exceeded their ability to tax the population because there are too many people collecting benefits from a shrinking population of private sector workers.  There are more corporate deaths than corporate births.  Put differently, more companies are failing than starting up.  Private sector employers and workers provide the funds to support the hulking beast that is government and entitlement benefits.  The argument that; ‘we paid into pensions and other benefits’ does not hold water because the promises cost much more than what was paid in by entitlement benefit receivers.  I encourage you to study your CPP statement and notice what you paid into the pension plan over the years.  Contrast that amount with what you have been promised in the future.  You will see what I mean.  

Food is a good investment, but it’s not practical to purchase with ones life savings.  Investing in ways to save money is also good option, but overall it is not practical if you have a significant amount of savings.  Gold and silver production are unable to increase much because most of the ‘low hanging fruit’ has pretty much been picked decades ago.  Newer technologies are helping to meet demand, but any minor increase in demand will exceed supply.  Not only that, but gold has all of the key hallmarks for an asset that is a store of wealth and medium of exchange.  We are living in a period of time in which the emperor is being exposed for not wearing clothes.  Politicians, mainstream media and central bankers are losing the confidence of the masses. 

This is going to be an explosive era.  There is so much change taking place right now.  I encourage you to think for yourself, reach out to people you trust and do what is right.

According to the World Gold Council global gold demand in Q1: 

– Gold was a top-performing asset in Q1 – up 17% in USD terms
– Gold demand surged to the second-highest level ever - highest since Q4, 2012
– Overall demand for Q1 2016 increased by 21% to 1,290t, up from 1,070t in Q1 2015.
– Global investment demand was 618t, up 122% from 278t in the same period last year.
– UK gold investment demand surges 61% – low base to 3.2 tonnes
– EU gold demand very robust at 58.4t and Germany remains largest buyer in EU
– Central bank demand dipped slightly to 109t in Q1 2016, compared to 112t in the same 
   period last year.
– Total consumer demand (primarily jewellery) was 736t down 13% compared to 849t in Q1 
– Global jewellery demand fell 19% to 482t versus 597t in the first quarter of 2015
– Demand in the technology sector fell 3% to 81t in Q1 2016.
– Total supply was up 5% to 1,135t in Q1 2016, from 1,081t in the first quarter of 2015. Mine 
   supply was up 8% to 774t.

Andrew Jackson Gets Booted from the $20 Bill – Here’s What He Had to Say About Central Banking - by Michael Krieger

Jeff Fitchett: I always appreciate Michael’s informative articles.  It’s interesting to note how historical figures viewed central banks and fiat currency.  

The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain. The corporations which create the paper money can not be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry. It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government. Some of the evils which arise from this system of paper press with peculiar hardship upon the class of society least able to bear it. A portion of this currency frequently becomes depreciated or worthless, and all of it is easily counterfeited in such a manner as to require peculiar skill and much experience to distinguish the counterfeit from the genuine note. These frauds are most generally perpetrated in the smaller notes, which are used in the daily transactions of ordinary business, and the losses occasioned by them are commonly thrown upon the laboring classes of society, whose situation and pursuits put it out of their power to guard themselves from these impositions, and whose daily wages are necessary for their subsistence. It is the duty of every government so to regulate its currency as to protect this numerous class, as far as practicable, from the impositions of avarice and fraud. It is more especially the duty of the United States, where the Government is emphatically the Government of the people, and where this respectable portion of our citizens are so proudly distinguished from the laboring classes of all other nations by their independent spirit, their love of liberty, their intelligence, and their high tone of moral character. Their industry in peace is the source of our wealth and their bravery in war has covered us with glory; and the Government of the United States will but ill discharge its duties if it leaves them a prey to such dishonest impositions. Yet it is evident that their interests can not be effectually protected unless silver and gold are restored to circulation.

– From Andrew Jackson’s Farewell Address, March 4, 1837

Chart Of The Day - by James Quinn

Jeff Fitchett: The future does not look bright for the majority of people. Canadians are not sitting any better than our American neighbours.  Click here to read Mr. Quinn’s article

Chaos & Volatility On The Rise: The systems that support us are breaking down
by Chris Martenson

Jeff Fitchett:  Chris Martenson is spot on with his assessment!

No, that’s not a ‘click bait’ sensationalist title. Things are getting ‘weird’ out there if you’re trying to be polite, and downright 'chaotic' if you're being blunt.  Everywhere we look, we see signs that the systems that support us are breaking down. 

The economy no longer spins off enough surplus for the elites to take what they consider their share with enough left over for everyone else.  So the wealth gap grows unchecked into politically and socially destabilizing levels.

The oceans are rapidly dying off: with corals bleaching, tide pools acidifying, and phytoplankton disappearing.  Weather weirdness is now so entrenched that all of the 50, 100 and 500-year events that happen each week are mainly reported on locally and garner little national and international attention.

Financial markets are increasingly volatile and dominated by an unruly universe of computer algorithms that now mainly play against each other, having driven off all the humans. 

Politically, we're seeing the former fringes of both parties increasingly come into power as they appeal to increasingly disenfranchised and disappointed electorates.

All of these are signs that the status quo has failed and continues to fail us. But the form of power expressed by our so-called ‘leaders’ today seems nearly incapable of healthy introspection coupled to correct action; preferring instead to do more of the same things that got us into this mess in the first place.

Those of us who can read the signs for what they are, not what we wish or believe them to be, have a special duty to first prepare ourselves for what's coming and then help others. To put on our own oxygen masks first, and then help the others around us.

Awakening to a Stark Reality - by Max Igan

Jeff Fitchett: This is a very important and well written article by Max Igan and posted by Zen Gardner.  I highly recommend their work and appreciate all that they do in the betterment of our civilization. 

People in the modern world are quite literally waking up in droves and it’s really no surprise. For many it comes as a slow or perhaps even a sudden realization that something is terribly wrong. And it soon becomes apparent what the problem is. 

Click to continue reading

Have a nice weekend!

Jeff Fitchett B.A., FMA, CIM
Analyst - Trivium Analytics Canada

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