“The template behind all existing headlines is the following. Just a few years ago, all governments in the world caged their citizens pending the arrival of a magic potion that would kill the virus extant. The result was disastrous on every level.
“We are still waiting for a reckoning but meanwhile, the world is on fire. The topic is still taboo. Everyone talks around it but not about it. And yet reputations have melted and regimes have followed. We are seeing this unfold in the US today, as all the old rules and practices seem to have been blown up.
“The Trump administration just completed the most revolutionary ten days in living memory. It has taken aim at DEI, censorship, central bank digital currencies, deep-state control, and the whole of the Leviathan state, and done so with a shocking degree of alacrity.
“The opposition has been wholly confounded in ways that no one ever imagined possible. Again, behind the chaos is the fundamental truth: trust in experts is toast. It’s a paradigm shift. The old powers are discredited and new ones are fighting their way to the fore.”
“The old world is dying, and the new world struggles to be born: now is the time of monsters.”
Get your Free
financial review
The Global Financial Crisis revealed to the world just how self-servingly corrupt Wall Street was – not that any of us really needed to be told. (What some of us, including this correspondent, failed to appreciate at the time was that Big Finance was not so much the outlier as the role model for the rest of Big Business, not least Big Pharma.) What is disconcerting, as the investor and author John Rubino points out, is that the casino has got even more maddeningly complex in the years since 2008 and Wall Street’s (so far inconclusive) reckoning with reality:
“Finance hasn’t been simple for a long time. Starting more or less in the 1980s, traditional instruments like stocks and bonds were joined by futures, options, private equity, junk bonds, and bespoke derivatives like credit default swaps.
“Quants” now build “black box” trading algorithms to arbitrage the relationships between these things, and clients place bets on the results without knowing how the numbers are crunched. Very little of this has anything to do with value creation in the real world, and calling today’s financial markets a “casino” is not hyperbole.
“But we haven’t seen anything yet. The invention of cryptocurrencies, distributed ledgers (i.e., blockchains), and tokenization has opened the floodgates to a whole universe of new instruments and strategies that few investors over the age of 50 can ever realistically hope to understand..”
Rubino cites some examples:
Options on Bitcoin futures to begin trading Feb. 24
“Building on the success of our Bitcoin Friday futures, the smaller size of these contracts, along with daily expiries, offer market participants a capital-efficient toolset to effectively adjust their bitcoin exposure.”
New ETFs that combine bitcoin exposure and options are coming in 2025
“For folks looking to access [the bitcoin] space, they want to do so in a risk-managed framework, or something that makes a little more sense for their portfolio.”
After listing assets that can now be tokenized (equities; funds; debt; physical property; intellectual property), Rubino goes on to critique undue faith in the sophistication of financial experts:
“Notice how “real-world assets” (RWEs) have become just another asset class. Also notice the emphasis on “risk management.” This is a standard sales pitch for hypercomplex instruments that seems to work on traditional money managers who assume that if they can’t understand what a mathematician is telling them, it must be true.
“An infamous example of this is Fed chair Alan Greenspan trying to justify derivatives in 2005, just before the biggest derivatives bust in history:
“The use of a growing array of derivatives and the related application of more sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions… Derivatives have permitted the unbundling of financial risks.
“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.”
Rubino states clearly:
“This Is Not a Criticism of Cryptos or Blockchains
“It’s a criticism of hyper-complexity and our weakness for smart-but-unwise people offering higher returns and/or lower risks if we just trust them. The derivatives bust of 2008 nearly wiped out the global financial system. And compared to the “peak complexity” world that’s clearly coming, those were much simpler (read: less-risky) days.”
Separately, gold specialist Alasdair Macleod addresses the apparent run on gold bullion occurring in London (and also in Canada):
“Before reading this article, it is worth reading a link posted on GATA to an article by Kevin Bambrough, who worked for Sprott between 2002—2013. It is a saga of major bullion houses using every excuse under the sun to justify non-delivery of bullion to Sprott. 5-day deliveries were not completed and turned into “a nine-month odyssey of excuses and misdirection”.
“I remember reading of a similar case several years ago, when an individual reported that by way of an experiment, he bought one futures contract and stood for delivery. Every excuse not to deliver was made and finally occurred after the individual showed persistence and tenacity, long after delivery was due. It was this experience that comes to mind as confirmation that Bambrough’s story has the ring of truth in it, and appears to confirm that bullion banks, who are dealers in credit and not bullion, don’t really have the bullion to deliver on contract expiry.”
A run on physical gold doesn’t augur well for global financial stability. What also doesn’t augur well for global financial stability is an objective assessment of valuations in the world’s largest equity market by value, that of the US. Our favourite metric here is the Shiller CAPE (cyclically adjusted p/e) ratio for the S&P 500 stock index. The CAPE currently stands at 37 times. Its long run average is less than half that (17.2 times). When the CAPE reached just over 30 times in 1929, the Dow Jones Industrial average proceeded to fall by 89% over the subsequent three years and did not regain its 1929 high until 1954. Perhaps it really is different this time.
History may change, but human nature never does. We input the phrase “tariffs 1930s” into Google, and here is what Generative AI instantly and reflexively provided:
“In the 1930s, the United States passed the Smoot-Hawley Tariff Act, which increased import duties on foreign goods. This act was a protectionist policy that aimed to protect American farmers and industries. However, it also raised prices and led to a decline in global trade.
“What was the Smoot-Hawley Tariff Act?
- The Smoot-Hawley Tariff Act was passed in June 1930 by President Herbert Hoover
- It increased import duties on more than 20,000 goods, including agricultural products and manufactured goods
- The act was sponsored by Senator Reed Smoot and Representative Willis C. Hawley
- It was widely opposed by economists, business executives, and the public.
“What were the effects of the Smoot-Hawley Tariff Act?
- The act raised prices for food and other items
- Other countries retaliated with their own tariff increases
- Global trade declined by 65%
- Economists believe the act was a major cause of the Great Depression..”
Perhaps the Trump administration 2.0 could file this response under ‘Be careful what you wish for’.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and also in systematic trend-following funds.
“The template behind all existing headlines is the following. Just a few years ago, all governments in the world caged their citizens pending the arrival of a magic potion that would kill the virus extant. The result was disastrous on every level.
“We are still waiting for a reckoning but meanwhile, the world is on fire. The topic is still taboo. Everyone talks around it but not about it. And yet reputations have melted and regimes have followed. We are seeing this unfold in the US today, as all the old rules and practices seem to have been blown up.
“The Trump administration just completed the most revolutionary ten days in living memory. It has taken aim at DEI, censorship, central bank digital currencies, deep-state control, and the whole of the Leviathan state, and done so with a shocking degree of alacrity.
“The opposition has been wholly confounded in ways that no one ever imagined possible. Again, behind the chaos is the fundamental truth: trust in experts is toast. It’s a paradigm shift. The old powers are discredited and new ones are fighting their way to the fore.”
“The old world is dying, and the new world struggles to be born: now is the time of monsters.”
Get your Free
financial review
The Global Financial Crisis revealed to the world just how self-servingly corrupt Wall Street was – not that any of us really needed to be told. (What some of us, including this correspondent, failed to appreciate at the time was that Big Finance was not so much the outlier as the role model for the rest of Big Business, not least Big Pharma.) What is disconcerting, as the investor and author John Rubino points out, is that the casino has got even more maddeningly complex in the years since 2008 and Wall Street’s (so far inconclusive) reckoning with reality:
“Finance hasn’t been simple for a long time. Starting more or less in the 1980s, traditional instruments like stocks and bonds were joined by futures, options, private equity, junk bonds, and bespoke derivatives like credit default swaps.
“Quants” now build “black box” trading algorithms to arbitrage the relationships between these things, and clients place bets on the results without knowing how the numbers are crunched. Very little of this has anything to do with value creation in the real world, and calling today’s financial markets a “casino” is not hyperbole.
“But we haven’t seen anything yet. The invention of cryptocurrencies, distributed ledgers (i.e., blockchains), and tokenization has opened the floodgates to a whole universe of new instruments and strategies that few investors over the age of 50 can ever realistically hope to understand..”
Rubino cites some examples:
Options on Bitcoin futures to begin trading Feb. 24
“Building on the success of our Bitcoin Friday futures, the smaller size of these contracts, along with daily expiries, offer market participants a capital-efficient toolset to effectively adjust their bitcoin exposure.”
New ETFs that combine bitcoin exposure and options are coming in 2025
“For folks looking to access [the bitcoin] space, they want to do so in a risk-managed framework, or something that makes a little more sense for their portfolio.”
After listing assets that can now be tokenized (equities; funds; debt; physical property; intellectual property), Rubino goes on to critique undue faith in the sophistication of financial experts:
“Notice how “real-world assets” (RWEs) have become just another asset class. Also notice the emphasis on “risk management.” This is a standard sales pitch for hypercomplex instruments that seems to work on traditional money managers who assume that if they can’t understand what a mathematician is telling them, it must be true.
“An infamous example of this is Fed chair Alan Greenspan trying to justify derivatives in 2005, just before the biggest derivatives bust in history:
“The use of a growing array of derivatives and the related application of more sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions… Derivatives have permitted the unbundling of financial risks.
“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.”
Rubino states clearly:
“This Is Not a Criticism of Cryptos or Blockchains
“It’s a criticism of hyper-complexity and our weakness for smart-but-unwise people offering higher returns and/or lower risks if we just trust them. The derivatives bust of 2008 nearly wiped out the global financial system. And compared to the “peak complexity” world that’s clearly coming, those were much simpler (read: less-risky) days.”
Separately, gold specialist Alasdair Macleod addresses the apparent run on gold bullion occurring in London (and also in Canada):
“Before reading this article, it is worth reading a link posted on GATA to an article by Kevin Bambrough, who worked for Sprott between 2002—2013. It is a saga of major bullion houses using every excuse under the sun to justify non-delivery of bullion to Sprott. 5-day deliveries were not completed and turned into “a nine-month odyssey of excuses and misdirection”.
“I remember reading of a similar case several years ago, when an individual reported that by way of an experiment, he bought one futures contract and stood for delivery. Every excuse not to deliver was made and finally occurred after the individual showed persistence and tenacity, long after delivery was due. It was this experience that comes to mind as confirmation that Bambrough’s story has the ring of truth in it, and appears to confirm that bullion banks, who are dealers in credit and not bullion, don’t really have the bullion to deliver on contract expiry.”
A run on physical gold doesn’t augur well for global financial stability. What also doesn’t augur well for global financial stability is an objective assessment of valuations in the world’s largest equity market by value, that of the US. Our favourite metric here is the Shiller CAPE (cyclically adjusted p/e) ratio for the S&P 500 stock index. The CAPE currently stands at 37 times. Its long run average is less than half that (17.2 times). When the CAPE reached just over 30 times in 1929, the Dow Jones Industrial average proceeded to fall by 89% over the subsequent three years and did not regain its 1929 high until 1954. Perhaps it really is different this time.
History may change, but human nature never does. We input the phrase “tariffs 1930s” into Google, and here is what Generative AI instantly and reflexively provided:
“In the 1930s, the United States passed the Smoot-Hawley Tariff Act, which increased import duties on foreign goods. This act was a protectionist policy that aimed to protect American farmers and industries. However, it also raised prices and led to a decline in global trade.
“What was the Smoot-Hawley Tariff Act?
“What were the effects of the Smoot-Hawley Tariff Act?
Perhaps the Trump administration 2.0 could file this response under ‘Be careful what you wish for’.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and also in systematic trend-following funds.
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