Wednesday, June 10, 2015

June 2015 Market Commentary

All bubbles are fuelled by artificially low interest rates, and strong money and credit growth. Therefore, prudent savers are no longer compensated sufficiently for their accumulated savings, which lose their purchasing power.

In other words, loose monetary policies (the government’s intervention into the price of money) lead to excessive speculation, bubbles and swindles, and other dubious practices, as an increasing number of people scramble to stay ahead of the ongoing asset inflation. As Walter Bagehot wrote, “Much has been written about panics and manias but one thing is certain, that at particular times a great deal of stupid people have a great deal of stupid money… At intervals … the blind capital … of the country … is particularly large and craving; it seeks someone to devour it, and there is a ‘plethora’; it finds someone, and there is ‘speculation’; it is devoured, and there is panic”

In China, “nothing is normal anymore,” and following the excess credit expansion driven boom over the last few years, the Chinese economy is “running out of air” and “the party is running out of booze.”

In the age of deceit and misinformation, manipulated markets, endless credit, and of increasing geopolitical tensions there is one asset class that clearly stands out as attractive: precious metals and mining stocks.