The Return of the Bond Vigilantes?

Bloody Awful! While copper and oil continued to rise and the Rogers Raw Materials posted a strong gain this week, the Biden Treasury and friends made sure price discovery for gold and silver, which compete as money with fraudulent fiat, was denied. The paper markets once again smashed those honest money metals and it wreaked havoc on our Model Portfolio, which, prior to this week, had been outpacing the S&P 500 by a wide margin.

Let me comment quickly about my IRA trades this week, because they reflect my gut feeling about the dangers that we are facing now that my worst fears seem to be unfolding.

What are my worst fears? They are that we will have a replay of the 1970s when the Fed lost control of interest rates. A new term, “Bond Vigilantes,” was invented then to describe the market forces that drove interest rates higher despite massive attempts by the Fed to hold them down by printing ever-increasing amounts of dollars. The 1970s were a horrific time for stocks. In fact, when you factored in double digit inflation, the 1970s were actually worse than the 1930s for stocks.

So, what does that mean for the gold and silver stocks covered in this letter? Longer term it should be very good news, as it was in the 1970s. However, if the Fed is falling behind the interest rate curve so that the bond vigilantes that had been hibernating since the 1970s come back to life, it could mean that stocks could come under some very severe pressure, like we started to see this week. And when stocks come under pressure, gold and silver and gold and silver stocks also get whacked, as they did this week. It could be that this will pass over with very little damage, but as a seasoned veteran who has regretted not taking profits when I had them in my younger years and then not having cash to get back into the market when significant bargains were to be had, I wanted to make sure I didn’t make the same mistake again. After all, as I near my 74th birthday, I have to know this is likely to be my last rodeo. I want to make the most of it, and there is no better place than in an IRA to do that, because your gains are not taxed until you are forced to take the money out of your account.

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