Rafi Farber: Were Rounding the Corner to The End Game Sprint

➡ The article discusses the rising prices of gold and silver, hinting at a possible economic situation similar to 1978-79. It also mentions the potential for conflict between Israel and Iran, which could be funded by the dollar. The author hopes for the dollar’s collapse to prevent the war. The article also talks about inflation and the Federal Reserve’s attempts to control it, comparing it to the 1970s situation. Lastly, it discusses the performance of Fortuna Silver Mines, a mining company that has seen increased production and has paid back a significant portion of its debt.
➡ The article discusses the shift in the silver and gold market, with companies like Sigela and FSM focusing more on gold. It also mentions Costco’s role in normalizing the purchase of gold bars, potentially leading to a rise in gold prices. The article further discusses the relationship between the Japanese yen and the U.S. dollar, suggesting that as the yen weakens, gold and silver prices may increase. Lastly, it emphasizes that despite market fluctuations, gold and silver remain stable investments.
➡ The article talks about a dangerous curve on a Florida road, comparing it to the current economic situation. The author suggests that central banks’ actions are leading to higher prices, regardless of whether interest rates rise or fall. They also mention potential global conflict, but believe it’s mostly media exaggeration. The author encourages readers to stay sane amidst these challenges and invites them to check out their free art and writings.

Therefore, lower rates equals higher prices. And higher rates also equals higher prices. There is no escape. And that’s it. The land of Arcadia. Well, hello there, my friends. RAF here from the endgame investor with this week’s silver report for Arcadia Economics. Another week and gold keeps on rising to new all time record highs. It’s around 2400. As I’m recording this, silver has just passed $29 once we get to 30 and push higher than that.

Once we break 30, basically we could be in 1979. I’ve said we’re in late 1978 when it comes to the gold and silver markets. Once silver pushes past 30 and silver broke to new highs in 1979. So that would be the rough technical equivalent. Then we’d be starting 1979, which is when things really got heated up. I don’t know if that’s what’s going to happen this time, but we’re getting really close.

It is now a race between what looks to be World War three and the dollar collapsing. Because you know what funds Iran. And those asking for a quick update on what’s happening in my area in northern Israel. We don’t know, but the Wall Street Journal reports today that iranian attack expected on Israel in the next two days. And get this, Israel is preparing for a direct attack from Iran on, get this, southern or northern Israel, either the south or the north.

That really narrows it down. Thank you. As soon as the next 24 to 48 hours, according to a person familiar with the matter. Well, person familiar with the matter, can you tell me if it’s going to be southern or northern? Because that might help a little bit. Actually won’t, because I don’t plan on moving anywhere. We’ll see what happens. Could start world War three. So we would hope that the dollar collapses before then because what really funds Iran and all of the war that goes on over here, including in Israel, the dollar.

The dollar funds at all. And the sooner that goes away, the sooner this war ends because there won’t be any resources to fight it. And that’s what we’re hoping for. So come on, gold and silver keep moving up. We’re going to start with the inflation, the CPI, inflation statistics that came out on. Was it Thursday? It was yesterday. It was Thursday. And I want to focus on a part of it that not many people focus on.

So this is, I’ve done this before. I’ve gone through this before on silver reports. That’s the sticky price inflation, inflation indicator. This is put out by the Atlanta Fed, headed by, I think, Rafael Bostic, who is my namesake. And I’m very proud of that. We’re very closely related. Anyway, the sticky price inflation is composed of stuff that doesn’t change price very frequently or easily. And I didn’t zoom in on this, but you can take my word for it.

This little orange line is the sticky price inflation and is now at 4. 5% annual from 4. 4% in February, or was it? Yeah, in February was 4. 4 and now 4. 5. So we have first uptick in sticky price inflation, the biggest component of which is owner’s equivalent rent, which isn’t even a price of anything that exists. But it changes the prices, it changes price the slowest, and it has the highest weight on the sticky price inflation indicator matrix, whatever we want to call this.

So we’re headed back up on this metric. This, I think where we are here on this is summer 1970, 719 78, when we saw the second wave of inflation. And I wanted to get into that second wave for a second by reading this article from Yahoo Finance. This is entitled why the Fed risks relearning the painful inflation lessons of the 1970s. And this is from Jared blickery, the only guy that I trust on Yahoo finance.

He is sympathetic to the austrian school, and he wrote something that I didn’t even realize. He writes here, as Apollo Global management chief economist Thorson Slock noted to clients, the year over year change in super core inflation, super core is now running at 5%. Whatever that. I don’t know what super core inflation. It sounds really awesome though. While the three month changes jumped to 8%, not far from its early 2022 peak, which was then a 40 year high.

So yeah, super core, I guess you could call that sticky or something like that, or something close to it. It’s headed higher. And this is polygonal management sounding the warning on inflation. Now here Jared Blue writes, the Fed aims to avoid repeating the double inflation episode that rock the 1970s and early 1980s. That was that inflection point that I noted on the sticky price inflation chart that I just showed.

You were around there. 1970, 719 78, could be 1979. Depends exactly. Nothing is exact here, he writes, after price inflation spiked to 12% in 1974, the Arthur Burns led Fed was quick to keep the policy relatively low even as inflation rose again. So the policy rate is still relatively low because real interest rates are still very, very low, even though they’re positive. Positive doesn’t mean high. He writes about Volcker, and this I didn’t realize about Volcker in 1979, after price inflation poked above 10% again, Paul Volcker, notice how he uses the term price inflation, Jared Brooklyn, not inflation.

You see how he’s sympathetic to the austrian school and he’s trying to keep his definitions relatively straight. I commend him for that. Paul Volcker was installed as Fed chair to put the inflation genie back in the bottle for good. But even Volcker got it wrong. This is key in these early days as Fed chair. Less than a year into his eight year tenure, the Fed funds rates stood north of 20%.

As CPI peaked at 15%. The Volcker Fed quickly lowered the policy rate to 9% over a few months, only to throttle it to 20% in 1980. From there, the Fed dropped into 16%. The central bank was again forced to raise benchmark to 20%, the third time in just over a year. So Volcker raised rates three times to 20%, and only the third time did the price inflation statistics get knocked down for long enough that he was safe in cutting rates.

But the thing is, there is no way, no possible way. Even if Volcker was chairman now, there’d be no possible way for him to do anything, because raising rates to anything close to that will bankrupt the entire planet. Because the entire planet is based on the dollar, and the dollar is 93% backed by treasuries and mortgage backed securities. So raise rates and the dollar goes down. We’ll get to that in the last slide.

Let’s continue with these slides. Now, people have been asking me, is it a good time to get into the miners? Am I chasing price? Is it too risky? Look, you could be chasing price, but is that really such a bad thing? Relatively. I mean, that depends on your financial situation. I’m not giving any advice to anybody, but I’m just showing you that mining stocks, including our sponsor, Fortuna silver mines, which we’ll get to in a minute, they are still incredibly low priced relative to the price of gold.

Here we see that this is the hue to spot gold ratio. The lower it is, the lower that gold stocks are priced relative to the price of gold. We have a tiny, tiny little rally here, but really it’s, it’s nothing. We haven’t even gotten to the 2008 lows yet. From a long term perspective, the gold stocks are still incredibly undervalued. When does that change? It changes when gold has a rally relative to other commodities and come into a monetary crisis, at which point, I believe this will correct itself very quickly and spectacularly.

It could be something like this in 2008, but in the opposite direction. We saw here from 2000, from the gold bottom until 2004, the prices of gold stocks was about. By a factor of six, right. From about 0. 10. 15 to 0. 65, something like that. So a factor of five or six in what was it, less than three years? About three years. So we’re going to see something similar to that, but I think even more extreme.

And do your own research and consider your own finances. But this is what I think that brings us to our sponsor for this silver report, and that is Fortune silver mine symbol FSM. April 8. Fortune reports strong gold equivalent production of 112,543oz in the first quarter of 2024. I just wanted to note some of the highlights here. So we have $40 million paid back on the company’s credit facility, resulting in a total $121 million paid since Q three of 2023.

It’s best to get rid of debt now or lower as much as possible for interest rates really skyrocket. Gold equivalent production a 20% increase compared to Q 120 23. And a 17% decrease compared to Q 420 24. I think that has to do with their silver mines in Mexico and some kind of labor dispute. So I don’t think it was endemic to the company. Gold production of 89,678oz, a 49% increase compared to Q 120 23.

So here we see that, yes, the decrease in gold equivalent ounces is due to a drop in silver production. Sigela is really taking over. And FSM fortune of silver mines is becoming very gold focused, which I think is pretty wise in this environment. And it will, of course, maintain its exposure to silver as well, making it a pretty good mix and one of my favorites. This is just my personal opinion.

This is not advice. Nothing is. Now we’re going to go into Costco, and I’ve actually got one of these. I have a 2. 5 grams one, not a 1oz one. This is a pamp thing. Somebody gave it to me as a gift. So anyway, Costco run on gold starting now. The numbers here are not that impressive. However, I will show you something that is impressive in the next slide.

Pampit. Pamp apparently is a brand of gold. Something with a girl with, like, seashell hair. I don’t know what that is. Is that some kind of persian goddess or something? Ishtar, maybe? Pamp it. Costco selling up to $200 million in gold bars per month, Wells Fargo estimates. So whatever the numbers are, that doesn’t really matter. The point is at the bottom here. I put in the line, Costco normalizes gold buying.

Because, look, when you go to a place like Miles Franklin or any coin shop or an online coin retailer. Those are really for gold bugs and they know what they’re doing and they’re comfortable going to a gold focused or a silver focused site and buying a bunch of coins to a normie, that’s a little bit strange and they’re not comfortable doing it. But going to Costco, they go all the time.

If they see gold bars there, it will normalize the purchase of gold in the eyes of the normies. And the normies are the main market here. And they are what will bring gold up to about 30 40,000 in the end game, and silver to about around a 15 to one ratio to wherever gold ends up trading. To cover the Fed’s liabilities on its balance sheet, we need to normalize the buying of gold and silver by the normies.

And Costco is a great place to do it. And now I’m posting a Twitter tweet thing, x whatever that I put on x Twitter and the responses. So I said, can any Costco members tell me the listed price of the 1oz pamp gold bar? So I got a whole bunch of responses here. And one says, logged in online as a member says, product is not available with no price shown.

And here it says, product not available. So here, David Hartley tweets back to me, radio. By which he meant Rafi, because of autocorrect. And so my name is radio now you can call me Radio Farber. That’s perfectly fine. Here in UK, they don’t have the Pampa 1oz bar for sale, but a 50 grams. Baird and co bar is listed at 30 119 99 pounds. Current spot price for 50 grams is $29.

82. So I calculated that that’s a 4. 6% premium on gold. And that’s pretty close to the 4. 93% premium the gold american eagle. I think this is data from Apmex, if I’m not mistaken, that GCRU gold charts r us takes it from there. So the premiums are about the same, a little bit lower on Costco than in other sites. But the pricing structure is a lot more jittery because they sell at whatever price they listed until they sell out.

And they don’t move every day with the spot price like, like coin shops do when they advertise such and such percent over spot, throw over melt. Costco doesn’t do that. They price their stock and then they sell out and then they price it again when they get more. See here that transparent gold holdings. How are the paper gold funds doing? They’re still falling. Gold moving to new highs and new highs is not attracting the retail crowd, not ETF’s, not in other paper funds.

This is still a banker war, our family office war. I don’t know if central banks are involved in it or if options trading. Some rumors are options trading and like gamma or delta hedging. I don’t even know what that really is so much. Chris probably knows more about that than I do. But it’s a bank or war that’s going on right now. It’s not in the retail market yet, and Costco might change that, but we’ll see.

I wanted to put this chart out there. This is gold relative to the CRB, which I’ve shown before, but from a slightly different perspective. So I want to show you a long term perspective from 1990 here. So 1990 to about 2006, gold relative to other commodities. Gold’s real purchasing power relative to other commodities is very, very stable from 1990, probably from about 1983, if we go all the way back, but I don’t have data from that far.

So for, let’s say it was 86, so about 20 years. Gold is very stable relative to other commodities. And then from 2006, that’s when the bull market starts. And it goes until with some pullbacks, some short pullbacks. You could call this a bear market, fine, but let’s just call it a correction in a secular bull. And so the bull began in 2006 and it ended in 2016. Now, if it ended in 2016 and we’re still at that same ratio, this was, I would just blame it on the lockdowns.

Lockdowns are going to bring commodity prices very, very low because you don’t use commodities when you can’t leave your house. And then gold was gaining value relative to other commodities because we were in a monetary crisis. But if we just iron this out for a minute as some kind of insane spike from some crazy policy, then gold has been steady relative to other commodities since 2016. So we’ve been in a ten year steady market.

There’s been no real bear market. We were in a steady market then a ten year bull market, and then a steady market for about nine years now, since from 2016 until now. And we’re going to head to another bull market in gold relative to commodities very soon, if we haven’t even started already. And silver is going to show you a similar chart, but a little bit more wobbly, obviously.

But in the end game, silver is going to outpace gold, as it always does. Towards the end of rallies, we see here a very stable silver price relative to other commodities. For the same timeframe. 1990, to 2006 bull market that lasted until 2011. And then, fine, we can call this a bear market. And then we’ve been steady from about 2013 to now. So for about 1011 years, we’ve been steady in silver relative to other commodities, more or less.

But that’s going to end if it hasn’t already ended. This perspective also long term, just to give you an idea of where we are historically, so commodities never really recover. This is the same chart inverted, I think. So gold relative to other commodities in 1980. And I put a tiny little line here, a very thin line, so you can see. So this is the 1980 top in gold relative to commodities.

So the CRB relative to gold was at an all time low, meaning gold z and all time high relative to commodities in 1980. And look at that, we’re pretty much at the same level. So commodities have never recovered that well. I mean, they kind of recovered here in 2000. Yeah. So let’s say 0. 9 from about 0. 4. So yeah, it doubled. They did recover a little bit, but we’re back down to 1980 levels since around 2010 in gold relative to commodities and also silver.

Anyway, let’s continue. I wanted to close this week’s silver report off with the yen. The yen has broken. The resistance at 153 is now above 153, so it’s weakening relative to the dollar. And the price of gold and silver in the end, is starting to really climb because it’s climbing relative to the dollar and the dollar is climbing relative to the yen. So it’s on one of those moving walkways at the airport where you walk really slowly and it feels like you’re walking really fast.

So the final support here for the yen is at 159. 83. Here’s the high from 1990, and I think we’re going to break that. The thing with the yen is this. And this is the final two slides, sorry, that this graph of the red and the blue, it’s the ten year japanese government bond rate versus the USD JPY, the japanese yen relative to the dollar. So the higher the blue goes, the higher the yields go.

And the higher the red goes, the weaker the yen is. So you can see they’re correlated as ten year rates go up, so the yen goes down. Right up here means down, because relative, how many yen does it cost to buy a dollar? So we see that they’re pretty much tied together here. That’s because the bank of Japan owns like half the japanese government bond market. So they raise rates, the yen collapses, the lower rates, the end collapses.

There’s nothing that can be done. And everything will collapse relative to gold and silver. And here’s the points and should be understood. We are turning dead man’s curve. And dead man’s curve is from a road in Florida that I remember as a kid, 826. And there was a curve where it went from west to south, and it was a long curve, very blunt edge, and it took a while, maybe like a minute or two to get around it.

And it wasn’t that treacherous. But if there was an accident there, you wouldn’t see it because there was no visibility because of the curve, so you wouldn’t be able to stop in advance and there’d just be huge pileups. And I think that happened a few times there. So that’s where we’re going because we’re turning the corner. The dead man’s curve, from when higher interest rates mean lower consumer price inflation to when they mean higher consumer price inflation.

That’s because the central banks own the bonds that they’re lowering the value of which back the currencies that they’re trying to increase purchasing power in, and it won’t work. So here, first bull appointment. Central banks own a high enough percentage of the bond market, or as a percentage of their balance sheet, I should say. Then prices rise with interest rates. This is most evident in Japan, but it also applies to the dollar itself.

93% of the dollar is backed by treasuries and mortgage debt. The higher rates go, the lower the value of that 93% of the dollar’s backing. Therefore, lower rates equals higher prices. And higher rates also equals higher prices. There is no escape. And that’s it. I’m saying we are rounding the corner. We are headed for the endgame. It could take some time, and there could be some more little buckles and jiggers and whatever you’re supposed to call them, but we’re definitely headed there.

With World War Three looking that it could open up in the next few days, I don’t think it actually will. I think this is just media hype. I think it’s all a play and all a scam, and nothing you read in the news is there by accident, and it’s all coordinated by intelligence agencies. Who knows anymore? It just keeps stacking and stay sane. I’m trying not to take any of this too seriously, though, trying to stay safe.

You know, it’s a. It’s a hard dialectic to conquer, but I’m doing the best I can. I think I’m doing all right. I’ll see you guys next week. And don’t forget to sign up to the endgame investor at substack for free and check out my free art. I always put, like, you know, a paragraph or two free, and they’re funny. And I try to crack some jokes and try to keep myself sane and keep people laughing and maybe a little bit nervously.

So have a good weekend. .

See more of Arcadia Economics on their Public Channel and the MPN Arcadia Economics channel.