So, if the CBI was to put the dinar (in Iraq) under a program rate 1:1 with the dollar or over the dollar this still would not be the solution unless they also reinstate it back to FOREX.
Yes, the merchants already can legally use the dinar to pay for imports but is it feasible right now to do so?
Why are they still going to the currency auctions for dollars like before?
I thought these dinar reforms allowed them to import and pay in dinars?
But who the hell wants the dinar outside Iraq at 1/6 of a penny and when it is still under OFAC sanctions.
Instead, businesses would have to see liberation of the dinar to create that demand.
They would have to have sort of a “fresh start” with the newer lower denominations.
Then once liberated and investors begin to suck it up, the merchants in Iraq could then “successfully” use the “national currency” of the dinar to pay for imports.
Then the dollar in Iraq would no longer be useful.
Even if the black market did get ahold of the dollars who would want them when they are worth less than the dollar?
So, the question now is this – Don’t you think the US Treasury knows everything I just told you?
Don’t you think they see it too?
So, can you now also understand how the US Treasury can just liberate the dinar and pop out the FOREX rate?
This bullshit by many gurus telling you that Iraq first has to build up their economy to strengthen the dinar are crazy people and don’t fully understand the situation.
Waiting for the economy to grow, the dinar would never, never RV to the rate we want and would stay on the program rate forever and maybe never even get back to FOREX.
So, in today’s news, the economist Nabil Al-Marsoumi said in a follow-up post Alsumaria News and I quote – “the only solution currently available to address the current exchange rate crisis is to return the dollar exchange rate to the pre-pandemic level corona that is, to the level of 1180 dinars per dollar.”
Do you see how they don’t even want to address the possibility that the delay and lack of liberating the dinar back to FOREX could be at the heart of the problem here.
Because they have been on this damn program rate and currency auctions too long they forget about what the dinar used to be and how they didn’t have these problems prior to the 1991 invasion.
These currency auctions were meant to be “temporary”.
But Pres. Obama changed all the rules in the process to liberate their currency and return it to them.
He made it extremely difficult and this been part of the problem since 2012-2013.
Coincidental how Nori al-Maliki raided the CBI under Dr Shabibi?
Why do you think Dr Shabibi could have liberated the dinar way back in 2012-2013?
So, this alone is evidence of the screwed-up mindset and thinking about the dinar.
They are caught up in a nasty paradigm and somehow, they must step out of it and wake up.
I believe the US Treasury has stepped in since last fall 2022 and is trying to help.
The VERY good news, however is that the honest Iraqis are waking up and it will very soon become public knowledge that they MUST liberate the dinar and this is the real and only solution.
When I talk to my CBI contact I am still told that the Project to Delete the Zeros is “not off the table” and is going to be executed shortly.
The citizens of Iraq are protesting outside the CBI headquarters building this week.
They want solutions not more run-around.
They are tired of promises and so this situation is going to have to change with solid solutions and not more promises.
The Governor of the Central Bank, Ali Al-Alaq, revealed on Wednesday, measures that will contribute to the stability of the exchange rate, and while revealing the diagnosis of those involved in speculation in the market, he also pointed out that the new proposed 20k note has been dismissed from printing the category of twenty thousand dinars because of the existence of a category of 25 thousand dinars, and we do not wish to expand the current categories, because the project to delete zeros still exists.
I have waited since Ali Alaq took over the CBI again for him to say these sweet, sweet words.
Do they move ahead and finally go for it?
It is coming soon and this is yet another good sign that the new governor Ali Alaq is on the reform side and wants what we want.
PARLIAMENTARY INTEGRITY COMMITTEE, CALLED TO END THE ASSIGNMENT OF THE CENTRAL BANK GOVERNOR, ALI AL-ALAQ
Baghdad Today – Baghdad
Today, Wednesday (July 26, 2023), a member of the Parliamentary Integrity Committee, Hadi al-Salami, called on Prime Minister Muhammad Shia’ al-Sudani to end the assignment of the Central Bank Governor, Ali Al-Alaq, and to appoint a replacement for him, due to the latter’s failure to prevent currency smuggling and control the dollar exchange rates.
(Remember he was given a 90 day proxy position to help with the situation. So, it could be easy for them to fire him. But who will take over? Who is more qualified? Dr Shabibi passed so please don’t say Dr Shabibi…lol..lol..lol.. 😊)
More news….
A GOVERNMENT SOURCE: ERBIL AGREES TO HAND OVER OIL TO THE FEDERAL GOVERNMENT
A government source revealed, on Thursday, that Baghdad and Erbil signed an agreement that guarantees that the regional government will hand over oil to the Federal Ministry of Oil.
(Here comes the Oil and Gas law 😊)
More news….
OPENS 8 FILES WITH THE GOVERNOR OF THE CENTRAL BANK
The Governor of the Central Bank, Ali Al-Alaq, revealed today, Wednesday, measures that will contribute to the stability of the exchange rate, and while revealing the diagnosis of those involved in speculation in the market, he announced the delay in printing a new currency of the 20 thousand dinars category.
He pointed out, “It has been dismissed from printing the category of twenty thousand dinars because of the existence of a category of 25 thousand dinars, and we do not wish to expand the current categories, because the project to delete zeros still exists.”
STATUS OF THE RV
No RV yet. Who told you it was over? It is not.
So, we heard news in my last Newsletter of the 14 banks sanctioned over the weekend against selling the dollar. Good news no doubt. But here is the problem with this. This was NOT officially done by the CBI but by the US Treasury through the CBI. I have to keep asking important questions. So here are a few – Why didn’t the CBI by itself sanction these banks? Why didn’t they audit them? Why did they wait for the US Treasury to step in? Do you see the corruption and lackadaisical attitude of the CBI? Yes, this is part of the issue too.
Then, when the US Treasury does step in to help, out of desperation, the corrupt step in and bash the US for their help and insight. This is part of the problem too.
The Nori al—Maliki crooked and fake news media channels then interview these also crooked economists and politicians who are benefiting from the corruption $$$$. They try to give convincing views of solutions. None of these solutions are of course are really going to work, and I think they know it. It would just be another cycle of going around and around again on the dinar merry-go-round. You know why? It because the ONLY solution is to finally liberate the dinar back to FOREX. Let us explore why I say this.
Now I can see many of you other intel gurus may not like what I just said and disagree because you think that liberating the dinar on FOREX is not going to solve all their issues. I agree – it won’t ! 😊 But surely if they can put the dinar back on a level playing field with the rest of the global currencies or just the currencies in the middle east, at least for now, it would help.
So, if the CBI was to put the dinar (in Iraq) under a program rate 1:1 with the dollar or over the dollar this still would not be the solution unless they also reinstate it back to FOREX. I can’t emphasize this enough. Yes, the merchants already can legally use the dinar to pay for imports but is it feasible right now to do so? Why are they still going to the currency auctions for dollars like before? I thought these dinar reforms allowed them to import and pay in dinars?
But who the hell wants the dinar outside Iraq at 1/6 of a penny and when it is still under OFAC sanctions. Who wants the very large notes and the terrorist, corruption stigma associated with them. This stuff lingers in the mind.
Instead, businesses would have to see a liberation of the dinar to create that demand. They would have to have sort of a “frsh start” with the newer lower denominations. But what comes first the chicken or the egg. Get it? Then once liberated and investors begin to suck it up, the merchants in Iraq could then “successfully” use the “national currency” of the dinar to pay for imports. Then the dollar in Iraq would no longer be useful. Even if the black market did get ahold of the dollars who would want them when they are worth less than the dollar?
So, I know this was a long-winded explanation but these issues take time to explain and are not that simple. So, the question now is this – Don’t you think the US Treasury knows everything I just told you? Don’t you think they see it too? I am not even an economist /expert and I can see it.
So, can you now also understand how the US Treasury can just liberate the dinar and pop out the FOREX rate? This bullshit by many gurus telling you that Iraq first has to build up their economy to strengthen the dinar are crazy people and don’t fully understand the situation. If this was the case you may as well take you dinar and burn them ☹. But his is NOT the case. Get it?
Waiting for the economy to grow, the dinar would never, never RV to the rate we want and would stay on the program rate forever and maybe never even get back to FOREX. In fact ,many corrupt politicians in Iraq want it that way. They do not want progress. They are very happy with their little goose that is laying the golden eggs.
As much as I do not like the bullish and arrogant personality of this guy TNT Tony, I will say he does have it correct in some ways and we are on the same page about how this process is going to work. He agrees with me in that building the economy does not matter. He too sees what I just told you. What I don’t like sometimes is his lack of common sense and over-speculating. For some reason he does not have the ability to see through the fake news he gets about bank sources, memos, etc, and how he is being manipulated and used. I know this as a fact because I know the people who are doing it to him. He seems to be more concerned about hyping it up and spreading rumors rather than realistic attitude.
So, in today’s news, the economist Nabil Al-Marsoumi said in a follow-up post Alsumaria News and I quote – “the only solution currently available to address the current exchange rate crisis is to return the dollar exchange rate to the pre-pandemic level corona that is, to the level of 1180 dinars per dollar.” Do you see how they don’t even want to address the possibility that the delay and lack of liberating the dinar back to FOREX could be at the heart of the problem here.
Because they have been on this damn program rate and currency auctions too long they forget about what the dinar used to be and how they didn’t have these problems prior to the 1991 invasion. Get it? These currency auctions were meant to be “temporary”. But Pres. Obama changed all the rules in the process to liberate their currency and return it to them. He made it extremely difficult and this as been part of the problem since 2012-2013. Coincidental how Nori al-Maliki raided the CBI under Dr Shabibi?
Coincidental that Pres. Obama just began his second term after getting his feet wet from his first term in office. Why do you think Dr Shabibi could have liberated the dinar way back in 2012-2013? So, this alone is evidence of the screwed-up mindset and thinking about the dinar. They are caught up in a nasty paradigm and somehow, they must step out of it and wake up. I believe the US Treasury has stepped in since last fall 2022 and is trying to help.
Be careful of these economists since they too are probably part of the problem. They too probably have their hand in the proverbial cookie jar ☹.
The VERY good news, however is that the honest Iraqis are waking up and it will very soon become public knowledge that they MUST liberate the dinar and this is the real and only solution. When I talk to my CBI contact I am still told that the Project to Delete the Zeros is “not off the table” and is going to be executed shortly. Of course, jokingly I say will be it be in my lifetime? So, you can see I too am getting a bit sarcastic and impatient.
The citizens of Iraq are protesting outside the CBI headquarters building this week. They want solutions not more run-around. They are tired of promises and so this situation is going to have to change with solid solutions and not more promises.
The Governor of the Central Bank, Ali Al-Alaq, revealed on Wednesday, measures that will contribute to the stability of the exchange rate, and while revealing the diagnosis of those involved in speculation in the market, he also pointed out that the new proposed 20k note has been dismissed from printing the category of twenty thousand dinars because of the existence of a category of 25 thousand dinars, and we do not wish to expand the current categories, because the project to delete zeros still exists. Oh boy I don’t know about you but I have waited since Ali Alaq took over the CBI again for him to say these sweet, sweet words. Now where do they go from here now that the cats out of the bag. Do they move ahead and finally go for it? All we can do is sit tight and wait. It is coming soon and this is yet another good sign that the new governor Ali Alaq is on the reform side and wants what we want.
Am I going to lie to you and give you what I heard from the CBI myself this week. Nope! I am not going to fall into that trap again. Until I see stronger evidence of a move by the CBI and not just words I will keep it to myself. But I will say this – they told me it is soon not years away! 😊
Every investor seeks to reap the rewards of their stocks; otherwise, they wouldn’t be involved in the markets. However, discovering the ideal investment, one that will yield profits, can prove to be a challenge, particularly in today’s market environment.
To ensure solid returns, investors can follow two straightforward strategies. The first is to buy low and sell high. That is, find a cheap stock with sound fundamentals and good prospects for growth – and buy in to take advantage of the growth potential. The second strategy is to invest in dividend stocks, which provide regular payouts, allowing investors to earn returns on their investment.
Keeping these strategies in mind, we’ve used the TipRanks database to identify two stocks that offer dividends of at least 11% yield – that’s more than 6x higher than the average yield found in the markets today. Both of these stocks have received Buy ratings and have positive analyst reviews on record. And all that for a cost of entry below $10. Let’s take a closer look.
First up on the list is Nordic American Tanker, a Bermuda-based operator in the shipping industry that specializes in transporting crude oil and other petroleum products. Nordic operates a fleet of 19 Suezmax-sized tankers, the largest vessels that can safely transit the Suez canal. These ships, all weighing in between 150,000 and 160,000 tons, are workhorses of the global tanker fleet, using the Suez route to shorten travel times between the Middle East and Asia to Europe and the North Atlantic.
The global tanker business took a hit earlier this month, when Saudi Arabia announced oil production cuts up to 1 million barrels per day. The cuts are intended to boost prices for the OPEC cartel – but will also reduce volumes on the world’s trade routes, cutting into tanker companies’ revenues. Nordic, however, with its fleet of mid-sized tankers, is well-positioned to capitalize on continued demand for oil along the world’s secondary petroleum trade routes – and to offer a more efficient option for Middle East traders who might have difficulty filling a 300,000 ton Very Large Crude Carrier to full capacity.
So, Nordic American is looking at a unique opportunity going forward. Looking back at the first quarter of this year, we find that the company reported $87.09 million at the top line, more than $5.5 million over the estimates. At the bottom line, Nordic’s 22-cent non-GAAP earnings per share came in 2 cents better than expected. These results were supported by time charter equivalents (TCEs) on the company’s 15 spot vessels that exceeded $60,000 per day per ship.
The company’s operating costs come to about $8,000 per day per vessel.
In response to the strong quarter, the company declared a Q1 dividend, which was paid on July 6, of 15 cents per common share. Nordic has a dividend history stretching back to 1998, and has a policy of basing the current payment on the previous quarter’s earnings. The current dividend annualizes to 60 cents per share, and gives a sky-high forward yield of ~16%.
In his coverage of this stock for B. Riley, 5-star analyst Liam Burke notes how the current Saudi production policy will impact Nordic, writing, “Although VLCC vessel demand will be weaker as a result of the Saudi supply cuts, there will be an increased need for smaller crude carriers and favor operators such as Nordic American. It is anticipated that the Saudi supply gap will be filled by other Middle East producers as well as the U.S., Brazil, and Mexico and shift trade patterns towards producers that are traditional markets for smaller crude carriers such as Nordic American’s Suezmax vessels. The production shift further increases overall crude vessel ton-mile demand. The company has also capitalized on a strong spot rate environment to reduce earnings volatility by fixing a percentage of its fleet on longer-term fixed-time charters.”
Burke goes on to rate Nordic shares as a Buy, and his $5.50 price target suggests a one-year upside of 45.5%. Based on the current dividend yield and the expected price appreciation, the stock has 61.5% potential total return profile. (To watch Burke’s track record, click here)
Overall, there are 3 recent analyst reviews of this stock, and they are all positive – for a unanimous Strong Buy consensus rating. The shares are selling for a $3.78 with an average price target of $4.63, pointing toward a 22.5% upside on the one-year horizon. (See NAT stock forecast)
Shifting focus, we turn to BrightSpire Capital, an internally managed Real Estate Investment Trust, or REIT. There’s no surprise finding a REIT listed in a space about high-yield dividends; these companies, which buy, manage, operate, and lease various forms of real properties, use dividend payments to comply with regulatory requirements on capital return.
BrightSpire, which holds a portfolio made up of 100 loans and having an undepreciated value of $4.8 billion, is a leader in commercial real estate financing. The company works mainly with apartment complexes and office buildings; 40% of its total portfolio is in multifamily dwellings, and 38% is in office space. Another 10% of the company’s investments are in hotels. Currently, 100% of BrightSpire’s portfolio is made up of floating rate loans.
This portfolio brought the company total revenues of $58.56 million in the first quarter of this year, a total that beat the forecasts by $3.26 million. At the bottom line, BrightSpire’s adjusted EPS of 27 cents per share was 3 cents better, or about 12.5%, than the expectations.
The adjusted EPS fully covered the company’s quarterly dividend payment, which was declared in June for 20 cents per common share. This dividend annualizes to 80 cents per share, and gives a yield of 11.1%, far above the market average and nearly 4x higher than the current rate of inflation.
This stock caught the eye of Raymond James’ 5-star analyst Stephen Laws, who likes its diverse portfolio and positive exposure to the current increased interest rate regime. Laws sets out his opinion of BrightSpire in a clear note: “Our Outperform rating reflects the portfolio diversification, attractive loan portfolio characteristics (floating rate senior loans), benefits of increasing interest rates, our portfolio return estimates, and the strong dividend coverage. While there is material upside to our target, we believe our rating is appropriate given our expectation of little, if any, near-term growth and sector headwinds persisting.”
These comments back up Laws’ Outperform (i.e. Buy) rating, while his $8 price target implies ~11% upside potential for the coming year. (To watch Laws’ track record, click here)
BrightSpire has stayed relatively under-the-radar, with its Moderate Buy consensus rating breaking down into 1 Buy and 1 Hold. The stock is selling for $7.22 and its average price target, at $9.50 per share, suggests it will gain ~32% in the next 12 months. (See BrightSpire stock forecast)
The Iraqi Dinar Loses 17% Of Its Value.. Bloomberg: There Are No Additional Sanctions On Iraqi Banks
Posted On2023-07-28 By Sotaliraq Today, Friday (July 28, 2023), the Bloomberg Economic Network confirmed that the Iraqi dinar lost about 17% of its value as a result of the sanctions issued by the US Federal Reserve against 14 Iraqi banks last week, declaring that there are no additional sanctions.
The network said, according to what was translated by “Baghdad Today”, that the US Federal Reserve “does not show any current indications of its intention to add more Iraqi banks to its sanctions list,” explaining, “It is now unlikely that the US Federal Reserve will add sanctions that threaten diplomatic relations between the two countries.”
It is noteworthy that the media published information during the past week that talked about the intention of the US Federal Reserve to impose more sanctions on Iraqi banks amid widespread demonstrations of beneficiaries of the services of banks that the US Federal Reserve imposed sanctions on as a result of losing part of their financial assets. LINK
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US State Department: We Did Not Impose Sanctions On The 14 Iraqi Banks
Posted On 2023-07-28 By Sotaliraq US State Department to Rudaw: The US State Department confirmed that it did not impose sanctions on the fourteen Iraqi banks, but rather removed them from the list of the Central Bank of Iraq. On Thursday (July 27, 2023), US State Department deputy spokesman Fidan Patel told the Rudaw Media Network correspondent in Washington, Diyar Korda, that his country did not impose sanctions on the 14 Iraqi banks at the beginning of this July, but rather they were removed from the list of the Central Bank of Iraq.
He stated that "the US Federal Bank and the US Treasury Department removed the names of 14 banks from the list of the Central Bank of Iraq," noting that "these measures limit the ability of parties seeking to launder the US dollar."
The following is the text of Rudaw Diyar Korda correspondent's questions and Fidan Patel's answer to them:
Roudao: I have two questions about Iraq and the region. With regard to the sanctions imposed on Iraqi banks, which caused protests in Iraq and affected the value of the Iraqi dinar, why did America impose sanctions on those banks, and did you warn Iraq against the exit of the dollar to the countries neighboring Iraq?
Vidan Patel: Let's go back a little to be more clear. Since the beginning of July, the US Treasury Department and the US Federal Bank have removed 14 banks from the list of banks that can obtain foreign currency from the Central Bank of Iraq, and these measures have helped limit the capabilities of bad people who launder The US dollar, benefiting from the Iraqi homeland, and evading US sanctions. I also want to point out that corruption causes challenges for the Central Bank of Iraq.
Our government is working with the Iraqi government to overcome these challenges, and that the Prime Minister, Muhammad Shia' al-Sudani, takes the integrity of the Iraqi financial system seriously, and all procedures are followed in coordination and parallel with the vision of the Iraqi Prime Minister, that the Prime Minister is fighting corruption and modernizing the Iraqi financial sector.
Roudao: My question is about Russia's involvement in Syria. Will you respond to Russia's practices in northwest Syria against your drones?
Vedan Patel: I talked a little bit about this issue at the beginning of the week, and I want to stress the statements of the Pentagon and the White House that these Russian practices embody a violation of the announced protocol, and a violation of international laws. We call on the Russian forces in Syria to stop these dangerous and reckless actions immediately, and without a doubt we will follow the necessary measures to preserve the safety of our forces and the civilian people in the area. LINK
Whether you’re in retirement or not, generating consistent income can help you navigate the toughest market cycles…
That's especially true with 7.7% inflation here in the United States.
And that's only the official number…
I suspect the real rate of inflation is much higher than that given the fact that the government manipulates the factors that go into the “official” number.
So, what's the real number then?
Well… That all depends on the stuff YOU buy.
Are houses going up 7.7% annually? How about cars? College tuition?
I don't think so…
Here's what you can do about it though… You can buy high yielding dividend investments that pay at least 10% and give you potential price appreciation in the underlying stock.
Each of these three companies pays over 10% annually and can help you weather the ups and downs of the unpredictable market we find ourselves in today.
One even pays a massive 18.4% dividend…
No. 3: Starwood Property Trust, Inc. (NYSE: STWD)
Dividend Yield: 10.3%
Starwood Property Trust Inc, also an American real estate investment trust (REIT) is required to distribute at least 90% of its taxable income as dividends to shareholders. But instead of managing residential mortgages, Starwood originates, acquires, and manages commercial mortgage loans and commercial mortgage-backed securities in the United States and Europe.
The company operates a commercial lending segment, infrastructure lending segment, property segment, and investing and servicing segment. The former acquires and finances mortgages with primary lien positions.
The collateral for these mortgages is mainly office and hospitality properties in Western and Northeastern America. Starwood's investing and servicing unit primarily generates revenue from the acquisition and sale of commercial mortgage-backed securities.
And right now, the business is doing so well that STWD can afford to pay a solid10.3% dividend for the foreseeable future.
Starwood has also never missed a dividend payment since going public in 2009. In fact, the company has increased its dividend 4,700% – from $0.01 in 2009 to $0.48 today.
No. 2: Solar Capital Ltd. (NASDAQ: SLRC)
Dividend Yield: 11.6%
Solar Capital Ltd. is an investment company that primarily finances senior secured loans of private mid-cap companies to generate current income. Since senior secured loans are the first to be paid out in case of bankruptcy, it’s safer than all other forms of debt.
Solar Cap’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The company generates revenue primarily in the form of interest; dividend income and others. And that income is then distributed straight into shareholders’ pockets quarterly.
The business hasn’t missed a dividend payment since it went public back in 2010… And I don’t foresee it missing one in the foreseeable future, no matter which way the market turns next.
No. 1: Cherry Hill Mortgage Investment Corp. (NYSE: CHMI)
Dividend Yield: 18.4%
Cherry Hill Mortgage Investment Corp manages real estate in the United States. The company invests in residential mortgage assets with the objective of generating high current yields and risk-adjusted total returns for its stockholders over the long-term.
And since it operates as a REIT, it’s required to pay a minimum of 90% of all taxable income in the form of dividends to shareholders each year.
Cherry Hill generates most of its revenue from residential mortgage-backed securities (RMBS), in the form of Interest income earned for servicing mortgage loans.
Since going public in 2013, CHMI has also never missed a dividend payment. And right now, you can lock in shares for a massive 18.4% yield.
Long-time fans of the Beatles might recall that bizarre episode in 1969 when a global conspiracy theory emerged that Paul McCartney had died in a car accident.
Conveniently for the “theorists,” Paul had decided to step away from the spotlight during the fall of 1969 to spend some time with his wife, Linda, and their newborn daughter, Mary.
Into this void poured an endless flood of mystical insights and pure nuttiness. The Abbey Road album cover provided some of the most memorable “proofs” of Paul’s untimely demise. One theory held that the cover photo of the four Beatles crossing Abbey Road was obviously a funeral procession, metaphorically speaking, in which Paul was obviously the metaphorically deceased.
Elsewhere in the same photo, the license plate of a nearby VW Bug provided corroborating evidence that Paul was dead. The auto’s plate read: LMW 28IF, which clearly stood for “Linda McCartney Weeps” because Paul would be “28, if” he was still alive.
Mercifully, Paul eventually emerged from seclusion to prove the conspiracists wrong… and he did so just as the Beatles were breaking up and going their separate ways. As a result, a kind of creative rebirth would soon begin for McCartney.
After his 1969 “death,” he would proceed to record another nine No. 1 hits and 14 other “Top 10” hits, including memorable ones like “Maybe I’m Amazed” and “Live and Let Die.”
For perspective, the Rolling Stones have scored only eight No. 1 hits during their five decades together. In other words, the 1969 vintage Paul McCartney had a lot of life left in him… and so does gold today.
Is Gold “Due” for a Rally?
Admittedly, the yellow metal is barely registering a pulse at the moment. Most of the wax figures inside Madame Tussauds Museum seem more vibrant and lifelike.
But that’s simply how gold behaves from time to time. It “does nothing” for such extended periods of time that investors begin to doubt it could fog a mirror.
Gradually, they turn their back on the comatose metal and leave it for dead. But that’s usually about the time it comes to life. In this way, gold is probably less like Paul McCartney than like a cicada — the insect that lies underground for years at a time before emerging and swarming around for a few weeks.
After gold’s decade-long dormancy from 1991 to 2001, for example, it suddenly sprung to life and soared 500% over the ensuing decade.
More recently, the gold price drifted 40% lower during the seven-year span from 2011 to 2018. But then it revived once again and rallied as much as 70% from its 2018 low.
That rally was probably the first phase of what will become a much bigger move. Now that the gold price has spent more than a year going nowhere, it has gained plenty of rest for its next major move higher.
Importantly, the last year of non-action has also fostered so much negative sentiment toward gold that, from a contrarian perspective, it is “due” for a rally. The gold market, just like the stock market, tends to lurch higher at the moments when most investors dismiss that possibility.
The present moment would certainly qualify. As the chart below shows, most folks want little to do with gold at the moment. On a net basis, investors have withdrawn more than $15 billion from the SPDR Gold Shares ETF (GLD) during the last 12 months. That’s the most rapid and sizeable retreat from this gold ETF since 2013.
To summarize today’s approximate investor attitudes, they like stocks, adore cryptos, and feel sorry for gold.
Such are the moments that often ignite a gold rally… especially if the yellow metal has a good reason to make a move, like if inflation is on the rise and/or government deficits are soaring.
Both of these trends are well-established today… and they are both intensifying.
After topping $4 trillion last March, the 12-month federal deficit has declined to “just” $2.8 trillion — a number that is equal to 12.5% of U.S. GDP.
That’s a big number.
Meanwhile, the six-month average U.S. inflation rate is hitting its highest levels since “Dances With Wolves” won an Academy Award 30 years ago.
Historically, great, big governments deficits, coupled with great, big inflation readings, trigger great, big gold rallies. Perhaps this time is different. But there’s a reason why many seasoned investors say that “this time is different” is the most expensive phrase in finance.
Because it is.
Gold may not rally immediately, but I suggest pausing awhile longer before administering its last rites.
I realize that gold seems utterly irrelevant in a world dominated by Bitcoin and other cryptocurrency marvels. But I suspect the “barbarous relic” still possesses some relevance in the modern era… at least as a hedge against obvious risks like inflation, or against less obvious risks like a sudden stock market sell-off or a cryptocurrency flameout.
Every generation of investors contains a bunch of folks who pooh-pooh gold as a useless bauble. But history has not been kind to gold-haters; the naysayers usually encounter moments of regret.
Gold might seem as irrelevant today as a complete set of Encyclopedia Britannica. But don’t be surprised if it returns from irrelevance to score a few more “Top 10” portfolio hits in the future — perhaps something catchy like, “All You Need is Gold” or “While My Portfolio Gently Weeps.”
Bottom line: The hedge almost no one seems to want may still be one of the best ones to own during the uncertain times ahead.
