Rafi Farber: 1970s Are Repeating and That Is Good News for Gold

I’ll show you two triangulating charts that suggest this. Don’t prove it, but suggest that we are still on track for a financial crisis by the end of this year, which will lead to the next money printing round. My extension should lead to stagnant stocks and a rising gold and silver price, very much like the 1970s, which was actually worse than 1930s in terms of stocks relative to gold and silver. Because remember, in the 1930s, the dollar was gold. In the 1970s, it wasn’t. We have a huge triangle in gold to stocks ratio that looks that is going to break out in the next few months.

And we’re going to take a long-term look at the gold stocks ratio and what I call the bikini of doom for stocks. You’ll see why. And even if quantitative tightening completely stops and the Fed’s balance sheet remains stable from here on out, that only brings us to the beginning of 2025 for a crisis as determined by the balance sheet relative to the curve that the Fed must maintain to avoid a financial crisis. Why has the CPI leveled out at 2.93 percent a year? Well, that’s because of one thing, and that is used cars.

Assuming you’re not buying used cars, inflation for you is much worse. And the yen carry trade is not over. We just saw the yen collapse by two full handles from about 147 to 149 in a few minutes. And this is on the resignation of the Japanese prime minister who was resigning because inflation is too high in the country and people are suffering the Japanese. They’re not reproducing and they’re spending too much money and they’re running out of people. So all in all, a failure by the Japanese prime minister who is not running again for office.

And before we begin, this week’s silver report is brought to you by Fortuna Mining. And I’m going to show you something that I haven’t showed you before, and I only found out about this this week. This is from Peter Schiff’s website, europacificfunds.com. If you take a look at this mutual fund, E-P-G-I-X, you look at the top 10 holdings of this fund. And number one, who do we have here? Well, they didn’t update the name yet. They really should fix the name here because it is no longer Fortuna Silver Mines Inc. It is Fortuna Mining Inc.

And the top holding of E-P-G-I-X is none other than Fortuna Mining symbol F-S-M, followed by Pan American Silver, Ocisco Goldroids, Oilties, and Agnico Eagle mines. I think Ocisco just got bought out. We’re going to see more of these consolidations. Maybe Fortuna will be on the consolidating side as it acquired Roxgold. Perhaps it will acquire another mine soon. I don’t know. I’m not saying this based on any information. I’m just speculating maybe. But you can see here that Fortuna is above Wheaton. It’s above Barrick. It’s above Franco, Nevada. It is the number one holding of Adrian Day who manages the Schiff fund.

And so we’re not the only ones who think that Fortuna is a top company. So does Peter Schiff and his manager of the Europacific fund, Adrian Day. On a related note, people have been asking me, well, if the Great Taking is real, I believe it could be real. And then what’s the point of owning any gold or silver mining shares if they’re all going to be taken away from you? I don’t think they will. But a safer way to hold gold and silver mining shares like Fortuna would be to hold them through a broker that you trust, such as Schiff, who I trust will not forcibly take away my shares if I own them through him.

And so if you want to take away a few layers of kleptomania that could lead to a great taking, Schiff’s mutual fund is probably a safer way than Robinhood to own your mining shares. And with that, you can own a nice chunk of Fortuna mining. Simple FSN. But anyway, let’s continue with this week’s slides. This is the silver report after all. So we will begin with silver. I have here a chart going back to the 2011 silver top relative to the CRB. So silver relative to the CRB. We hit here, it looks like major resistance.

The only time we broke through this resistance at what is this number, point one, one, four, five or something like that. We’ve hit this resistance many, many times before. The only time we broke above it is in the 20 2011 top at 50. And during the lockdown phase over here, which we hit an all time high. Other than that, other than those exceptions, this is the major resistance. And we’re coming on to it for a fourth or fifth time, depending on how you count it. And now we are coiling off the 200 week moving average.

I do think we’re going to break through this resistance finally, not for any lockdown reason or for any spectacular bull top reason like we had in 2011. I just think silver will continue to climb until it catapults in a monetary crisis, which is coming up in the next few months, in my opinion. Let’s move to the gold to stocks ratio. We see here that we have a major triangle that has formed since 2000 here. The lower this goes, the higher gold relative to stocks, the lower stocks relative to gold. And we can see that stocks have been falling relative to gold, pretty spectacularly since 2000, 1999, 2000.

And we’re going to break out of this triangle, I think lower. And we should head past the low here, which is somewhere between one and zero. I don’t know exactly where, but we are going back there. This is a longer term chart of this thing over here. This is the same chart going back to 1900. Not exactly the same. This is the S&P 100 and this is the Dow, but it’s basically the same chart. I think I have the S&P in the next slide. So you’ll see that too. You can see here, this I call the bikini top of doom for stocks, because why not? This looks like a bikini top or glasses, but bikini top just sounds better.

I know they’re not even, but you know, they never really are perfectly. So we have here, it looks like a triple move where we had lower highs going in the 1960s and 1970s of the Dow relative to gold. And then we had a major top here in 2000 that we’ve never even gotten close to. And now we have like an echo bubble of the same sort of pattern of high of lower highs. One here, one here, one here, and it’s continuing to fall. So I do expect that we will get to the 1980 lows here, which are reflected in 1931 lows over here, slightly lower than that.

But this ratio is headed down. I think this is this top here is not going to be repeated. It means that stocks are going to fall hard relative to gold and harder relative to silver. Those silver will catch up at the end as it always does. This is the S&P 500 relative to gold. Sorry. So the lower this goes, the lower the S&P 500 goes relative to gold. And you can see a very similar chart here of lower highs and lower highs and head and shoulders. And this is also a bikini of doom.

And now I said in the introduction that I would explain why I think that the end of the year is still right for the final financial crisis, which will result in the final printing round, which will be bigger than 2020, which is bigger than 2008, which is bigger than 2001, et cetera. So here we have a chart from a friend of mine, a subscriber to the end game investor on Substack, Dr. John Gideon Hartnett, who Chris has also spoken to. He’s a physicist and a very wise man. It says here, I titled it, even if QT stops completely, that takes us to February 2025.

I’ll explain this chart in a second here. So this curve here is a double exponential. What John did, Dr. John Gideon Hartnett did was he plotted Fed liabilities going all the way back to 1913. This is one section of that graph and found that the liabilities had to plot a double exponential curve. This is number two here, as you see. And every time that the Fed falls below the curve a certain amount, you have a financial crisis. And we find that point to be in 2019 during their apocalypse, 36% below the double exponential curve.

And the Fed went back above the double exponential curve during the 2020 printing round. And when it went below it again, there was a minor regional banking crisis. And now we’re headed towards the 36% below crisis line over here and had QE, this is QT, sorry, QT. This was the line of the trajectory of QT from the time post-regional banking bailout until now. If it had continued on the line that it did, you can see QT slows down slightly over here. Had it continued at the rate it had gone post-regional banking bailout, then we would have hit the 36% below crisis line at August 31, 2024.

And now we’re slightly below that rate, so it’s going to stretch out. And what I did was I added the calculation that even assuming QT completely stops, meaning the amount of liabilities stays the same on the Fed’s balance sheet or assets liability, same thing, we will only be able to stretch out to about February, January, February 2025 until we hit the next crisis. Why? Because the double exponential continues to move higher and higher, and the Fed’s liabilities must match that. And if they stay stable, we only have a few months left until the next crisis anyway, even if QT completely stops.

So this is what Dr. Hartnett wrote over here. You can check out the full post at this URL, pause it here, and check it out. And now this is another way to measure the same thing, the 36% below the curve mark, which has triggered crisis in the past. I’ve shown this before, repos as a percentage of reserves, and the repo volume keeps rising every week. We are now at an average of about 2.1 trillion per the further week, and next week it should be even higher. And reserves are steady, but even if they are steady, if repos keep rising, then this ratio keeps rising as it has.

I think until about December, January 2025, until we hit the crisis level of 86, 87% as we did during their apocalypse over here. So same sort of timeframe, late 2024 for the next crisis, when we hit 87% on this, which is the same as 36% below the curve of the liabilities on the other chart. It’s all triangling to the similar timeframe. This is from Daniel Oliver’s latest research that you can find at mermechan.com. And he is my favorite golden silver analyst, as you would know, if you’ve been following me for any amount of time.

So Oliver says here is that the 70s stagflation was actually worse for stocks in the 1930s, and actually as good for gold. But in a different way, the 1920s bubble was simply a credit bubble. There was no monetary debasement. The S&P 500 crashed 88% nominal terms from peak to trough. That’s 1929 to 1932. In the 1970s, the S&P 500 from its peak to 1967 to its trough in 1980 fell only 14% nominal terms, but 94% in terms of gold, which is much worse than it fell in terms of dollars, which is also in terms of gold in 1930s.

If we are living through a repeat of the 1970s and the parallel seems so perfect, we should not expect the cataclysmic collapse in the stock market. Despite the ridiculous valuations, stocks would instead lurch higher and lower within a trading range for the next decade, ending in roughly the same nominal price, but worth 90% less. Gold, on the other hand, will reveal the carnage. It rose 24 fold from 1971 to 1980. Then we will look at it. Gold went from being 12% of the Fed’s balance sheet to 133% in the final dollar panic.

The gold currently represents just 8.8% of the Fed’s assets. So it would need to jump to 36% to 3,300 just to get to the 1970 low. So if we’re talking about a 24 fold increase, as we saw in the 1970s, a 24 fold increase from now, because we were below where the low was in the 1970s, would be what? 2,500 times 24. I don’t even know what that is. I can’t really do the math so quickly, but do it yourself. 2,500 times 24. That’s the high we need to get to just to reach the 1980 high in today’s terms.

And next, I want to go into the CPI. Why is it falling at 2.9% annual? There’s still price inflation. We’re still at 3%, which is above the 2% federal reserve mandate or whatever it’s called. So you can see here in the list, if you go to used cars and trucks, that’s pretty much the only thing that’s really falling. 2.3% month over month. And if you go here to the year over year numbers, you have almost 11%. And why is this? Well, you had huge supply changes, disruptions during the lockdowns that took several months to clear out and they’re clearing out now.

So assuming you’re not buying any used cars, inflation for you or price inflation rather, is much worse as it is for almost all of us. But yeah, used cars. Nobody comes down and buys a car for me the next hour. I’m gonna clump this baby seal. That’s right. Used cars. Well, how much would inflation be or how much would the CPI be if used cars are not counted in the CPI? Well, I actually tried to figure this out. What was me? And I came up with this. Well, you see here in the CPI, measuring price change, inflation in the CPI, used cars and trucks.

So how do you do this? How is it calculated? Well, you look down here and you see here, here’s the equation, depreciation, adjusted price equals P to the T to M comma V times all this stuff to the N over 12, where P T to the MV is the price of the period T for making the model. And then if you all carry that over the one and something, you can come up with the equation that will solve all of life, the universe and everything. And the answer is 42. But dig this multiple can here.

But the one field, that must be what corrects the paradoxes. But that mom arises exponentially. It could rupture the very fabric of cardinality. And finally, we have here the carry trade in the Japanese yen is not over. We had the Japanese Prime Minister Kishida. I think his name is he resigned where he resigned over here when the yen went from 147 to 149 overnight, not even overnight within a few minutes, maybe an hour, something like that. So yeah, the carry trade is not over. The yen will continue to weaken as the Bank of Japan falls and says that it does not want to like rates.

But with that mathematical note of Keynesian genius, I will leave you guys to the markets and say farewell for this week. And if you haven’t yet, please subscribe to the end game investor on sub stack. And speaking of sub stack, keep sub stacking and stacking and other things related to stack. [tr:trw].

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