Fiat Money Enriches The Elite

For Wall Street and Government, fiat money is a marvelous invention. It allows them to pick the pockets of 330 million Americans with not one in a million Americans understand­ing that fiat money is designed to rob the masses through inflation. The elites who profit from fiat love when stocks and bonds rise with monetary growth. But they worry when the pain of inflation leads to revolution.

So, the first few weeks of this year have been fantastic for Wall St. and Washington. Stocks and bonds have rallied while commodity prices have fallen leading to a reduction in the rate of inflation.

The decision to raise rates by just ¼% and soothing words from Chairman Powell triggered a Pavlovian response on Wall Street this past Thursday. Not only did stocks rally but the 10-year T-Bond rate fell dramatically to the 200-day average at 3.382 on Thursday. (Yellow line – chart on your left) But when the Pavlovian bell stopped ringing as three major company earnings disappointed on Friday, the 10 Yr. Treasury yield rose to 3.519% and the S&P fell 1.03%. to 4136.48.

After the market’s manic rally on Thursday, Michael Oliver put out an article headed up with “The Rally that Must Be?” which brings to mind an old adage Richard Russel used to remind his readers of. “In a bear market, the bear tries to lure as many bears into her den as possible so she can maul that the maximum number of investors. On February 2, Michael showed charts of two past countertrend rallies that lured millions of investors into the bear’s trap. One was in 2000 when a decline from over 1500 to around 1350 was presumed to be bottom when the S&P rallied above its downtrend. But after a few weeks that rally proved only to be a countertrend event. From around 1350, the S&P shares plunged to 770!  

The second event Michael noted was in 2007-2008. After a decline from 1550 to 1250 followed by several months of choppy sideways movement, the S&P broke above the structural ceiling in the spring of 2008, leading a large number of investors to once again be lured into the bear’s den as they imagined they heard bells alerting them to a new joyous new bull market. But those hearing that bell had to put away their joy after just a few weeks. Momma bear feasted on those suckers sending the S&P down to 667.

These are very tough markets made tougher by a Fed that has rung a Pavlovian bell, time and time again that did reward investors who “bought the dips” starting with the Greenspan Put after the 1987 stock market crash. Investors have been conditioned to believe the Fed has their back. But the elite are now worried about revolution. So, the pain will surely come as the inflation dragon has not yet been slayed. I confess this has been a very challenging market for me personally, which is why I reduced holdings of some of my favorite evolving gold and silver shares to build cash. When gold was slammed hard on Friday, I used some of that cash to buy gold bullion through OUNZ and to buy SH to short the S&P 500. Many penny gold stocks are hard to sell in markets like this, even though I think highly of the exploration prospects of many of them. My belief is we will be looking back sometime in the near future to February 2023 as one of those countertrend rallies when we will be happy, we were not suckered into the bear’s den and out of gold and gold shares.