The Flying Frisby - money, markets and more

What are you getting people for Christmas this year?I have the solution.Forgive me for going full salesman, but read on and you’ll see why I do that. This is life mission stuff. First, there are all sorts of goodies in the Dominic Frisby shop, which I think you may like. We have CDs of all my various albums, the latest (and probably best yet) being Gammon and Proud. Digital versions are also available at Bandcamp.There is Contains Swearing, an EP of unbroadcastable songs for the discerning listener. I daren’t release digital versions of this online for fear of the repercussions. You can only get the CD.My other albums are there in the shop too.The best thing I’ve ever doneAnd so we come to Kisses on a Postcard, which is the musical based on my dad’s story of his experiences as a vacky in World War Two, that I’ve been working on for so long. It has been my life’s mission to get this made and I consider it to be, artistically, the best thing I’ve ever done or been involved with.But trying to get people to listen to it has been really hard. In the last few weeks, however, I’ve appeared on Triggernometry, James Delingpole and Lawrence Fox’s shows to talk about it and, suddenly, some real interest has ignited. I am getting constant notifications on my phone telling me we have sold another CD and I have been getting some of the nicest messages“I spent most of today binge-listening to the podcast on the Apple platform and it has been one of the happier days of my life thus far,” Daamini from Dubai“I just wanted to congratulate you on such a wonderful and beautifully touching musical. I was enthralled, I cried, I laughed, I spent my whole Sunday GLUED to this amazing show. A real quality production. I think this should be essential viewing for younger generations. It HAS to be in the West End, just HAS TO BE”. Angela from Ascot.“A heartwarming, delightful musical that keeps you right to the end. The characters are wonderful. There is tragedy, heartbreak, bigotry, compassion, courage, joy and laughter and it is narrated beautifully. Thank you for giving it to us to enjoy, a real gift”. Nat from PenrynPeople really like it - and that’s because it is really good. As I’ve said, artistically, Kisses on a Postcard is the most special thing I have ever been involved with, I urge you, if you haven’t already, to listen.A Kisses on a Postcard CD - first edition - will make the most special Christmas present, especially for anyone you know who was some way connected to the evacuation. The artwork, says Ian from from Cheltenham, is “wonderful. Such a special gift.”So I hope you don’t mind me going full salesman, but you can probably see how much I care about this project. You can find out more at the website here and you can order CDs either there or in the Dominic Frisby shop. Thank you. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

Some interesting developments in the murky world of geopolitics to report on this week, as the currency wars heat up.WWIII has already started. So says US economist Pippa Malgrem, who was Special Assistant to US President George Bush for Economic Policy and a former member of the President's Working Group on Financial Markets.“We are in a hot war in cold places: Space, Cyberspace, Underwater, and high places, including the Arctic, and the Himalayas, and in proxy conflicts in places the media give a cold shoulder to like Africa.” (Not to mention the Pacific). A cold war in hot places then - as well as a hot war in cold places.We are also, of course, in a very hot currency war.Vladimir Putin goes down the bitcoin rabbit holeThis week, with the aim of limiting Russia’s ability to finance its war in Ukraine, the G7 Nations, the European Union and Australia set a price cap of $60 a barrel on Russian crude oil. This follows the EU's embargo on Russian crude imports by sea, with similar pledges from the US, the UK, Canada and Japan.As you would expect, Russia has said it will not abide by such price caps, even if it has to cut production.Meanwhile, the world’s largest oil importer, China, seems to be slowly opening back up. Cities are easing COVID-19-related restrictions in the wake of recent protests, and it seems the country is set to further relax curbs as soon as today. I think it’s fair to say that if China had not locked down, oil demand would have been a lot higher - and so the oil price would have gone a lot higher. Same goes for metals, in fact most other commodities. And then we have another part of the puzzle. Russia’s President Vladimir Putin did his best bitcoin maximalist impression last week, as he called for an international, independent, blockchain-based settlement network. (Spoiler alert: it already exists. It’s called bitcoin).“The technology of digital currencies and blockchains can be used to create a new system of international settlements that will be much more convenient, absolutely safe for its users and, most importantly, will not depend on banks or interference by third countries,” he said. “I am confident that something like this will certainly be created and will develop because nobody likes the dictate of monopolists, which is harming all parties, including the monopolists themselves.”Here’s the link to bitcoin.org, Vladimir, in case you have self-googled and are now reading this.Where is this all going?I have a few ideas. So does Credit Suisse’s answer to Led Zeppelin, analyst Zoltan Pozsar.Tell your mates about this amazing article.You want my oil? Give me your gold.“The oil market is tight,” he says. The oil price is lower than it might otherwise be not just because of China lockdowns, but because of the US release of its strategic reserves (SPR), as well as from OECD countries. But Saudi Arabia is now low on spare capacity and the SPR is finite. You can’t print oil after all. “Recent releases have brought reserves down to levels we haven’t been at since the 1980s. The 400 million barrels left in it isn’t much: it could help police prices for a year if we released 1 million barrels per day (mbpd), half a year if we released 2 mbpd, and about four months if we released 3 mbpd”.Short of a sudden new surge in supply (where from?) or a sudden reduction in demand, it would seem then that the oil price is going higher.Russian crude already sells at a $30 discount relative to Brent, which currently sits at $83, he observes with China and India the main buyers. “In the case of India, it is widely understood that Indian refiners are turning some of the imported oil into diesel for re-export. Buying Russian crude at $60 per barrel (pb) and selling diesel at $140pb makes for a nice crack spread, the petroleum market’s equivalent of 100 bps of spread in the land of OIS-OIS cross-currency bases. India and China thus serve as matched-book commodity traders (instead of Glencore or Trafigura), the former dealing in oil and the latter in LNG, keeping commodities in circulation.”But Putin may be happy to sell to India or China at that discount - he won’t however cap prices to sell to Europe on point of principle.Meanwhile, the US needs to replenish the SPR, especially if it wants to control domestic oil prices. “Gone are the days when the U.S. Deputy National Security Advisor warned India and other countries of sanctions if they bought Russian crude oil. The change in tune could be one backdoor mechanism to refill the SPR, and given the $30 dollar discount to Brent that India is paying for Russian oil, this would be below President Biden’s $75 target.”But if Russian oil is exported for the purpose of replenishing the US SPR, Putin’s not going to like that either. What to do then? Only accept payments in gold, says Pozsar, not dollars or rupees. Sound a bit fantastic? “No it is not”, says Pozsar. “Look at the tit-for-tat measures so far: you invade Ukraine, I freeze your FX reserves; you freeze my FX

Today we consider the coldest substance on earth.Which is?I knew you knew. Liquid helium. I have been covering helium for several years now, and it’s time to revisit the theme today. The reason? I keep reading articles about helium shortages (and these have nothing to do with the controversial cryptocurrency of the same name).Bull markets come along every few years in some niche but strategically important commodity. I’ve seen it in cobalt, lithium, graphite, phosphate, uranium, rare earth metals, tin and others besides. The story is almost always the same. Years of underinvestment have led to a shortage of supply of the said commodity. Government stockpiles are exhausted. And, now, suddenly, the commodity is essential to some new technology. Cue the bull market. What do we need helium for - and why is there a shortage?Helium is the second most common element in the universe, so how can there be a shortage?You could say the same about hydrogen and that’s even more common. There may be plenty of it up there, but there isn’t plenty of it down here and down here is where we need it.Nor is helium a huge market. Annual global demand is estimated at around 6 billion cubic feet (Bcf) or 170 million cubic metres (m3). It’s hard to establish just what the current price is because prices tend to be agreed by contract between buyer and seller, but Cliff Cain, CEO of rare gas consultancy Edelgas Group, which studies the market and consults with most of the companies operating in it, gives me the figure of $1,800 per thousand cubic feet (mcf). A year ago the price was closer to $500/mcf.The entire global market for bulk liquid helium is probably around $3bn.Demand keeps growing though, mainly from the medical, tech and aerospace sectors, and “it will keep growing”, says Cain.Helium is seven times less dense than air. Replace the air in a hard drive with helium, there is less turbulence, the discs spin better and so more discs can be packed into less space, while consuming less power. Helium-filled hard drives increase capacity by 50% and energy efficiency by 23%. Thus almost all high-quality data centres now use helium-filled high-capacity hard drives. It’s also used in barcode readers, computer chips, semiconductors, LCD panels and fibre optic cable.Another rapidly growing industry that’s gobbling up helium is the space sector. Helium is used in fuel tanks for rockets and satellites. Physics requires it in particle accelerators. Its low density means it also finds use in deep sea diving, but perhaps its most essential use is as a coolant, especially for the magnets in MRI (magnetic resonance imaging) machines. They must be kept near absolute zero to maintain the magnets’ quantum properties and not lose their potential. A typical MRI machine needs 2,000 litres of liquid helium.As someone who has recently broken his ankle, and also only discovered that I broke my neck in my younger days (it was never properly diagnosed), I can tell you the importance of MRI machines and the diagnostic clarity they bring. Some 38 million MRI examinations were carried out in the United States last year. Forbes suggests helium shortages may be the world’s next medical crisis.“Given the importance of MRI in the medical profession,” it says, “the helium crisis should be front and centre for politicians, policy makers, physicians, patients, and the general public to discuss and find sustainable solutions for. The scarcity of helium is a serious matter and affects all of us directly or indirectly.”And then there are the party balloons.Subscribe now to this amazing publication.Where do we get helium from - and why its price is going upAs Cain points out to me, if you are an aerospace company whose business relies on putting satellites in space, ideally as many as possible, or an MRI manufacturer whose business relies on selling MRI machines, you are not going to let helium shortages get in the way of your business. You are not going to stop producing the machines you produce - you are going to want to produce more and more of them. You will pay whatever price is necessary for the helium and pass the cost on. “Phones, computers, all modern life – it requires helium,” says Cain. “There’s no substitute. Without it, we go back to the Stone Age.”Helium is produced as a byproduct of natural gas refining. The world’s largest producer is the United States (roughly 40% of supply), followed by Qatar, Algeria, and Russia. However, the world’s largest single source of helium for the past 70 years, the US National Helium Reserve, recently stopped its supply. It is letting its staff go and the pressure has come off in its pipelines. “It is now at 700psi when it needs to be at 1,200 to be producing,” says Cain. The system is now for sale, at least in theory. The paperwork has met with delays in the White House, this is likely to take some time to resolve and we won’t see any market until it does. Prospective buyers should also beware of contaminated supplies a

This was supposed to go out to one and all last week, but for some reason it didn’t. So today we try again - and the article can also be the Sunday morning thought piece.What problem does bitcoin solve? How does it make the world better?Merryn posted those questions on Twitter yesterday.It being Twitter, as you might expect, as well some measured, sensible stuff, it met with a barrage of outrage too, with responses ranging in scope from “it’s a Ponzi scheme” to “it’s destroying the planet” to “it’s going to give us world peace”.I thought I’d answer Merryn’s questions today, sheltered from the mania of Twitter, in the calm surroundings of this blog.I have been trying, on and off, to orange-pill Merryn since about 2014 and I think it’s fair to say, Merryn gets it. She gets fiat money, inflation, money printing, the harm it does, all that stuff. Not only does she get it, she was several years ahead of most of us on that one. She gets the need for apolitical money, lower taxes, less state, less central banking, fewer capital controls - all that stuff too. Cripes, she’s been writing about it all long enough.She just isn’t crazy about bitcoin. I don’t want to put words in her mouth, but I think her objections come, broadly speaking, under three main headers.First, she doesn’t like all the Wild West scams, blunders and ensuing losses that have accompanied this new financial technology. The FTXs, the Mt Goxs, the hacking, the extortions - and all the rest of it.Yes, these are not bitcoin, but bad actors operating in and around bitcoin, but bitcoin has still been the enabler. Two, she doesn’t like the volatility. The price needs to be more stable, if it’s to be a legitimate form of currency or cash.Three, even though bitcoin is, in theory, open to all, in practice it is only open to those technologically savvy or organised enough to be able to store keys, passwords, wallets, seed phrases and so on safely. Those - and there is no shortage of them - who are not comfortable with all of that tend to use third-party providers, which, in the unregulated world of crypto, leaves them vulnerable to those factors listed under “First” - and we are in a loop.I think/hope I’ve summarised Merryn’s core objections - there’s probably something I’ve missed. They are all though, I think, legitimate.So … here, in no particular order, are 17 ways bitcoin makes the world better. Tell your buddies about this amazing article.1. It separates money and state.If one body in a society has the power to create money at no cost to itself, while the rest of us must expend energy to earn it, it is inevitable that body will have disproportionate power and influence within that society. If you want to know why Western states have grown so large, bloated and invasive, look no further than fiat money systems and the power they give to the state. That money goes on welfare, waste, wars, wokery, whatever. You might agree with some ways that money is spent, or you might not; depends on your politics. Doesn’t matter: fiat centralises power in state.Bitcoin removes the ability of the state, and those who operate in it, to print or debase money for their own political agenda.Money, therefore, remains money. It cannot be a political tool.2. It provides a lifelineYou tend to see high bitcoin use under regimes that have seen the greatest destruction to their national currencies - Turkey, Venezuela, Argentina. Bitcoin has provided citizens with an escape. 3. You can send any amount anywhereSending money across borders is hard, even today, whether for large amounts or small. If I want to return the five dollars that somebody in New Orleans gave me last month when I forgot my wallet, or a pound to my friend in India to buy him a cup of coffee, or a thousand pounds to my friend in Iran, I am not entirely sure how I would do all those things. There are forex and other charges. There are processing fees. There can be capital controls. There might be a lot of admin and forms to fill in. Bitcoin is international, borderless, instantaneous and cheap.4. No more capital controls.Governments cannot control the flow of bitcoin capital in or out of the economy. 5. It obviates central banking.The bitcoin inflation rate is transparent and set in code. The central bank can’t start using dodgy inflation measures. It can’t set the price of money too high or too low for too long. There is no scope for human or policy error.6. It increases financial inclusionAround a quarter of the adult population remains unbanked. Around 1.5 billion people around the world (more women than men) still do not have access to basic financial services, such as a bank account. This, more than anything, roots them in poverty. Yet almost everyone (over 90%) now has a smartphone. All you need to participate in crypto, to start sending and receiving money, is an internet connection. Bitcoin banks the unbanked.7. It provides privacy. As the world goes cashless, your every transaction now relies on third pa

You can read an update to this article here.Over the last year, I’ve lost over 2 stone - 14kg or 30lb, to be precise. I say over the last year, truth is I’ve been trying, unsuccessfully, to lose weight for three years - in fact, since practically forever. Given that most of us want to be somewhat lighter than we are, I thought I’d share my experiences with you today. They may be of some use.BackgroundWhile I don’t really like going to the gym, I do quite a lot of exercise, I always have. I run, I play football, I walked the dog, but I always seemed to be 5-6kg (about a stone) heavy than is ideal. I have a sweet tooth, but not as bad as some. I like beer and I like wine (not so much of a spirit man). I also have a tendency to eat and drink late at night, particularly coming home after gigs. I suspect it was a combination of eating too late at night and booze which left me in that semi-permanent state of slightly heavier than I would like.I’ve tried all sorts of diets in the past. I lost loads of weight on the Atkins diet back in the early 2000s - that’s basically a low carb, high protein diet - but I also felt fatigued, weak and, as soon as I stopped, I put all the weight back on again and more.I also lost loads of weight on the 5:2 diet in the 2010s. Again as soon as I stopped fasting, I put it all back on again. I would also piss off my partner on fasting days, by not participating in the communal activity that is eating.After seeing Fat, Sick and Nearly Dead five or six years ago, I did the juice diet and lost more weight more quickly than with any other diet I have done. You can lose as much as a kilo (2 pounds) a day. It’s very hard to sustain though, and your kitchen quickly gets swamped with juiced vegetable remains. Again, a few months after stopping, I was back where I was weight-wise and some.Between 2020 and 2021, I took up the 16:8 diet, where you fast 16 hours a day and eat only in 8 hour windows. I would have my first meal at lunchtime - 12-1pm and try not to eat or drink anything after 8 or 9. However, this is hard when you’re doing gigs and I often found myself breaking the rules. I lost a couple of kilos, then plateaued. It meant, though, that I got into the fasting state every day, and I got used to the feeling of being hungry. It became normal. Then I actually started putting on weight. I think it’s because my body got used to fasting, so it did all the things it did - conserve energy and calories - then I would consume too many calories in the evening, close to bed-time, and so, in this state of efficiency and fasting, the body conserved more calories than it otherwise would have and I ended up putting on weight.I was fatIn September 2021 I went the wrong side 90kg (over 14 stone or 200lb). Too much for a man of my 5ft9 frame. A change of strategy was needed. 16:8 wasn’t working, but I was convinced of the efficacy of fasting, so I went back to 5:2.Within a couple of weeks I shed 3-4kg (half a stone), but then I plateaued again. For many months. There was probably still too much of the eating and drinking in the mid to late evenings, especially after gigs, on non-fasting days. I was presenting Headliners on GB news at the time, and I would get home at 1am, not want to go to bed and often then crack open a bottle of red wine. To avoid doing this, I took up fasting on the days I was presenting Headliners. On fasting days, it’s best to go to bed early. Presenting a TV show at 11pm having not eaten all day meant I was almost falling asleep, as it ended. Not ideal.I left the show in March or April, and it was after that that the big weight loss suddenly accelerated.In my new less employed state, I had a bit more time on my hands and I took up playing tennis twice a week with a chap I met on Facebook. I had fewer late night gigs, so less late night calorie consumption. I then got involved in a swimming challenge, so I started training for that. I also continued playing football once a week.It was the combination of increased activity and fasting on the same day that made the weight fall off me. I got caught in this virtuous loop. As I started to feel fitter, on my way to tennis, I would cycle up a really steep nearby hill four or five times and get in some HIT. On non-fasting days I now found myself consuming less anyway. I would skip meals, especially breakfast, so found myself doing a mild version of 16:8 as well.England cycling coach Philip Brailsford used to talk about the “aggregation of marginal gains”. So it is with dieting. There are lots of small things you can do, but it is when you put them altogether that the big changes occur. (The same happens in reverse).So here in bullet points is the Dominic Frisby Diet.Subscribe to this amazing publication.1. Indoctrinate YourselfI would say this is almost the most important part. Find a diet that works for you. A lot of people swear by protein diets, for example. I find them too hard to practically sustain. I like fasting. It works. It’s prov

I’m delighted to report that The Flying Frisby is now a Substack Bestseller. Thank you to everyone who supports this bestselling publication!By popular demand, today we consider bitcoin - and the amazing story that is FTX.Gosh, this is some story - it’s difficult to know where to start. The more you dig in, the more that comes out. It’s a cautionary tale of the madness that engulfs crowds during investment manias and bubbles, of greed, delusion, risk, and more besides.I’m sure many of you already know the story, even though there are new developments every day, so I’ll recap it quickly, before moving on to what it means for bitcoin.Tell everyone you know about this amazing article.The story of FTXSam Bankman-Fried was a geeky young crypto “entrepreneur”, born to an upper-middle-class Jewish family in California. His parents were both professors at Stanford Law School. Ironic.In 2017 he set up the quantitative trading firm (that would be trading based on mathematical models) Alameda Research . Then, in 2019, came FTX, a crypto exchange that became phenomenally successful, phenomenally quickly. In July 2021, barely two years into its existence, FTX raised $900m at an $18bn valuation. That was Series A. Three months later came Series B - $420m at a $25bn valuation. Three months after that, in January of this year, it raised another $400m. This time the company was valued at some $32bn.To put those numbers in some kind of context, the likes of Barclays, Soc Gen and Deutsche Bank - banks that have been around forever - all have smaller market caps in the $20-30bn range. $32bn would be more than the UK collects in stamp duty in a year. Or fuel duty or alcohol and tobacco duties. It’s roughly five times what it collects in inheritance tax.Bankman-Fried himself was worth $16bn, and at the age of 30, was on the front cover of Fortune Magazine, along with a headline asking if he was “The Next Warren Buffett?” FTX’s blue-chip and “smart money” investors included Japan’s SoftBank, venture capital firm Sequoia Capital and hedge fund Tiger Global. Even the Ontario Teachers’ Pension Plan put in $95mn. (What has your pension fund manager been doing with your money?)There were rumours of another $1bn raise in September. However, that didn’t materialise and the bitcoin bear market meant the tide was going out in the crypto industry. We would soon learn who had been swimming naked.Subscribe to this amazing publication. It’s a Substack bestseller.FTX suffers in the bitcoin bear market Some started asking questions about FTX’s accounting and other practices. Short sellers also started taking notice - they expose frauds more quickly than anyone. Negative coverage started to appear. On November 6 an article at Coindesk raised doubts about the balance sheet of Bankman-Fried’s sister company, Alameda. Then things started to unravel quickly. Changpeng Zhao, CEO of Binance (the world’s biggest crypto exchange), which had been an early investor in FTX, announced that Binance was selling all its FTT coins - as much as $2bn worth. (FTT coins are part of the plumbing of the FTX exchange). The value of FTT started to fall.Suddenly there was a scramble to withdraw assets from the exchange. It was thought to have had the assets to back the liabilities, Bankman-Fried tried assure everyone that client funds were safe, but it seemed this was no full reserve exchange and FTX didn’t have the funds to meet the run. In fact, it seems FTX had been using some of the funds - as much as $10bn - to shore up sister company Alameda, which had suffered significant trading losses over the past year. (Watch the interviews with 28-year-old Alameda CEO Caroline Ellison - said to be in a polyamorous relationship with Bankman-Fried - describing how she “doesn’t like stop losses”. Turns out she had barely any risk management at all).Chain analysts noted that FTX didn’t have the funds to cover withdrawals. On November 8th Bankman-Fried said he had “enough to cover all client holdings” and that “he doesn’t invest client assets”, but the run continued. That evening withdrawals were halted. In an attempt to restore confidence, Zhao and Bankman-Fried announced that Binance would be acquiring FTX soon after. However, the following day, Zhao said that having done his due diligence, Binance would not be acquiring FTX. A day later, FTX filed for bankruptcy. Easy come, easy go: Bankman-Fried’s net worth went from $16bn to zero in barely 72 hours. Reports are FTX had $900m in assets against $9bn in liabilities.And then, the day after that, some $600m in crypto was hacked from FTX’s wallets and syphoned lord knows where - Panama, Bermuda and Cayman, presumably. Apparently the hacker isn’t even that sophisticated and numerous Twitter feeds are now following the stolen crypto.This story’s amazing - you need to share it on Twitter, LinkedIn or Facebook.As FTX unravels stories start to emerge Since then all sorts of stories have emerged. Weird sexual goings on at the companies

A number of people have asked me to cover bitcoin after this week’s insanity - and I will very soon, I promise, but today we consider fossil fuels once again.While the oil and natural gas prices have not done a great deal these last six months - up a bit, down a bit, then sideways - the associated companies have done very well: the producers, the service companies and so on.Many years of bear market and belt-tightening are now paying off.However, we are not yet, I would suggest, at that point of excess and decadence that marks the end of a cycle - crazy mergers and acquisitions, insane valuations and Bacchanalian behaviour from the executive classes. So I venture today, as last week, that there is still plenty of gas left in the tank of this bull market.With that in mind I wanted to share a few charts with you today that give an idea of what is possible.Oil and gas stocks are on the rise The first of them shows the ratio between energy stocks and the rest of the market. Indeed, without energy stocks there would not be a rest of the market. A simple point that many, especially those who make policy, seem oblivious to. The world we live in today and the economic benefits we enjoy, relative to our ancestors, have been made possible by fossil fuel.So here is the energy sector relative to the the S&P 500. The higher the chart goes, the bigger the relative market cap of energy stocks. You can see that, even with the rally we have seen in energy companies since 2020, on a relative basis, energy companies are, give or take, where they were at the turn of the century, when oil itself was around $10/barrel and that secular bull market was only just getting started.You can also see that we are in an uptrend. Energy stocks are increasing in value, while the broader S&P500 is flat or falling.It’s also worth noting that the relative market cap was almost three times as large in mid 2008, when oil went to $147/barrel. The inference is that the bull market has a lot further to run.Tell the world about this amazing article.Oil versus stocksNext we consider the ratio between oil - West Texas Intermediate - and the S&P 500. You would expect this chart to trend lower over time because oil production and extraction techniques should improve over time, while broader economies and the companies who operate in them grow. Nevertheless we are below the levels we were in the early part of the century. You can see how high this ratio went in 2008 - and how low in Corona panic of 2020, when oil futures, somehow, went into negative territory.It feels a bit like, as far as this ratio is concerned, we are in late 2003.Relative to the S&P 500, oil is roughly where it was three or five years ago - I’d say it’s at its 3- or 5-year average. And it’s a lot cheaper than it was throughout that entire 2003 to mid-2014 timeframe. So even with the gains of the last two years, oil does not look expensive relative to the S&P 500. It is at the cheaper end of the range. Another sign there is more gas left in the bull market tank.Here now we look at oil relative to gold. These two - as hard commodities - tend to trade in a much tighter range over time, but my observation again is that it is in the low to middle of the 20-year range and not at one of those points of extremity whereby you might consider rolling out of one and into the other.For sure we are nothing like where we were went oil went to $147 in 2008. In fact, we are below where we were for most of the 2000s. On the basis of this chart, oil is probably the cheaper of the two.Trade of the lustrumAs regular readers will vouch, oil is a drum I have been beating since 2016 when it was $25 or so, declaring it our “trade of the lustrum”. A lustrum is a five-year period - a useful and underused word I’d say.That lustrum is now becoming a decade. We continue to beat the drum on oil, gas, coal and the related companies. Fossil fuel demand will continue to grow until at least 2030, the IEA has forecast (2040 in the case of natural gas). That means it is not just enough to maintain current production levels, they need to increase. Yet there have been seven or eight years of underinvestment - leading to today’s shortages. Partly because of ESG deterring investment, partly because so much capital has gone into green energy related companies instead and partly because of the excesses of the previous bull market still needed to be purged. The bull market conditions are still good and longer term, I think fossil fuel stocks go higher.I’m a big believer in narratives within markets. The fossil fuel story is only slowly starting to change. Many are realising just how important they are and what they have made possible. Indeed, that there is a strong moral case for them, not against them.But the narrative is not yet at end-of-cycle levels. When people start talking about Peak Oil again - that’s the sort of thing you want to be looking out for. That the need for alternative energy sources is not because fossil fu

Today’s missive comes to you from the Galapagos Islands out in the eastern Pacific, where two stories of noble energy initiatives reflect the broader realities of energy policy around the world. We tell these stories with a specific question in mind: how much gas, so to speak, is left in the tank of this energy bull market?The Galapagos population is only around 30,000, but, as a fully functioning society, the same dynamics observed in this small ecosystem occur elsewhere, even if less visibly, so it serves as a useful case study.So we come to the first of our two stories.Not so green transport in GalapagosIn order to limit traffic, protect the environment in this most ecologically delicate of places and protect the taxi industry, the local government made it extremely difficult to get a vehicle licence. All sorts of problematic bureaucratic hurdles had to be jumped, and most people ended up using bikes or public transport.But then in 2016 the powers that be, with a brighter, greener future in mind, decided that anyone could get a licence to own a vehicle, no permit required - as long as it was an electric vehicle. There was just one condition. The buyer had to have a family. Given that most people on the islands have relations, that was a pretty easy condition to meet, even for the single folk. There was a great deal of PR and fanfare about this new initiative: clean, green, sustainable - all that stuff - and a blind eye was turned to the increase in traffic, or of roadkill to the many tame birds on the streets of the island (this is a major problem).At this point it’s worth reminding ourselves that there are, around the world, three main areas of energy consumption - transportation, heating and electricity. While cleaner forms of energy, such as nuclear or wind, might be increasing as sources of electricity, 84% of global energy still derives from the burning of fossil fuels, as the graphic below from Our World In data shows.Even electricity, despite its green credentials, still relies on fossil fuels. The burning of the fossil fuel may be out of sight and, therefore, out of mind, but over 60% of global electricity still derives from it, as our second graphic shows. Wind and solar between them account for barely 10%.Sign up to The Flying Frisby.As we are all now discovering to our cost, despite many years of considerable investment, some might say over-investment, in green energy, there have, simultaneously, been many years of underinvestment in fossil fuel exploration and extraction, nuclear power (the use of which in electricity has, on a relative basis, been declining since the 1990s) and public grids. Hence the current energy shortages especially in Europe. The Galapagos Islands followed the international trends in this regard - which is one reason this story makes for such an interesting case study.Here on the Galapagos Islands, the majority of electricity, despite what you may read, is produced by burning diesel. And at this point we deviate to story number two.The Galapagos wind turbines.There were, once upon a time, some wind turbines built by a consortium of overseas energy corporations, looking to advertise their green credentials to the world. Said corporations conducted a one-year study of wind on the island and concluded that next to the airport (where they would also conveniently be seen by everyone arriving at and leaving the islands) was the best place to erect the turbines. The turbines were duly installed, the publicity was had - here is the world’s first airport that runs 100% on wind and solar, all that stuff - and the energy companies retired back to their nation states.It turned out that year of the study had been an outlier for winds, and they hadn’t built the turbines in anything like the windiest spot. Then the wind turbines stopped working, but nobody on the islands knew how to fix them. Nor was it clear whose responsibility they were. Ever since, the turbines have sat there, stuck - even when the wind is blowing up a storm. Ask a local for the story, and you’ll get a wry shake of the head and a smile at the stupidity of it all. Lord knows how much fossil fuel was burnt mining the necessary materials, manufacturing the turbines, transporting them to the islands and erecting them, only for them not to work, but that is, despite the good intention, what has happened. There they remain, motionless, like statues from a fallen empire. But how now to get rid of them?The episode is neither clean, green nor sustainable.Tell the world about this amazing articleSo back to story number one and the attempt to make the islands greener with electric vehicles (EVs). With the easing of regulation in 2016, the locals who had previously wanted a vehicle but couldn’t get one (a lot) piled in and bought electric vehicles, much to the benefit of the EV manufacturers.But as diesel is the major source of electricity on the islands, so more diesel than ever was now burnt. Again, neither clean nor green.

The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self- sufficient.But our systems of state charity - aka welfare - have too frequently had the opposite effect: they have actually created dependency. It is time to re-think the way we help people.I suggest something that may be heinous to some, but it’s this: welfare would be more effective, more varied, more widespread and affordable if there were no state involvement.People instinctively think that without a welfare state, the poor and needy would not be looked after. At such an unacceptable prospect, people then become fervent in their defence of state welfare systems. You can see the passion people feel about this erupting all over the Twitter and the blogosphere.Before we start, I want you to get your head around one thought - suggesting that the welfare system is not working and that we should do away with it is not the same as suggesting the poor and needy should not be looked after. Not at all - in fact, quite the opposite.The provision of care is a delicate, complicated and unpredictable process. Sometimes money might help the recipient towards self-sufficiency, but sometimes not. Giving money might lead to a temporary lessening of suffering, but often it can lead to greater dependency and less self-reliance. Sometimes something local is required, sometimes something practical, sometimes something psychological or emotional, sometimes something specific to the individual's circumstances - sometimes what's needed is a proverbial kick up the backside. Different circumstances require different forms of care.The dignity of the recipient also needs to be considered. It can be demeaning to receive charity. On occasion anonymity might be required - but on other occasions it might not be.How on earth can anyone hope to design a top-down, one-size-fits-all, system of state welfare that can meet all these varying needs consistently over time?Then there is the matter of the giver. He or she must also be considered.Compassion, care and the giving of charity and care are essential human functions - they are a part of human nature. People need to give as much as they need to receive. You just need to see the pleasure children get from giving as evidence of this. Even perhaps the most ruthless, murderous drug-trafficker that ever drew breath, Pablo Escobar, was a prolific giver. He built houses, churches and schools in his native city of Medellin on a scale unmatched by the Colombian government.In the charitable process, the giver has needs too. Sometimes the giver wants to be anonymous - sometimes they want recognition. Sometimes he or she likes to be involved with the recipient in some way, sometimes not.But, in the process of state care, the giver's needs are not even considered. Taxes are taken and that is it. We are given no real say in how the money we have earned is spent, bar a vote of dubious effect every five years. Often the giver is morally opposed to what his taxes are being spent on!The forced giving that is taxation actually destroys the altruistic satisfaction that people get from giving voluntarily. To help others and to share with them is part of humanity. But, in a world in which government is responsible for the care of the poor and needy, that compassion is removed from life. As a result, the state now has a near monopoly on compassion!if you find this interesting, please share .In fact it is even more bizarrely specific than that: the pro-large-welfare-state left wing has the monopoly on compassion. Anyone who doesn't agree with the concept of a large, generous welfare state is deemed heartless and selfish.While you have to pay the government through tax to provide welfare (or heathcare or education) your ability to provide any of these things for yourself or your family is reduced, because you have less money. After taxes are taken from you, you often you can't then afford to pay for your children's school, your doctor, your hospital, your home, or your charity to others - so you find yourself depending on the state help in some way. And so more and more people, in some way or other, are caught in the ever-growing dependency net.What's more, if the state is providing care to the needy, you are then absolved of the responsibility to do so.Meanwhile, government welfare, as well as being inflexible, is expensive . The large organizations, such as the NHS or the DWP, through which care is administered can be inefficient and wasteful. Worse yet, they are be prone to corruption and rent-seeking (people gaming the system in some way).If you look at food, clothing or technology - essential human needs that, largely, are not supplied by the state - we have, over the last thirty of forty years, seen dramatic falls in price and dramatic improvement in quality. Competition has driven costs lower. Yet welfare has not experienced the same improvements. Why not? Because

Money evolves constantly. Every day there is some tiny new fintech development, but it’s only when you take a step back and look at the ten-, twenty- or thirty-year picture that you realise just how much things have changed. What is money today is a far cry from what was money when I was a child. Digital technology barely existed back then. We used cash and these things called cheques. You’ve probably heard of them.It’s not just what we use as money that evolves. How money is created - that changes too. And just this decade there has been a major evolution. That’s what I am going to talk about today.Thank you for reading The Flying Frisby. This post is public so feel free to share it.The creation of money and debtOnce upon a time you would create money by mining gold and silver. But debt-based money systems have also existed since the dawn of civilization, when clay tokens representing valuable items such as barley or sheep would be baked inside clay balls. When the debt was settled the clay balls would be smashed open.Humans, being the ingenious folk they are, especially when it comes to money, soon found that it was quicker to simply inscribe the clay with pictures of said items and so did the first systems of writing develop - hieroglyphics. Coins came along, and then the printing press, both remarkably long-lived technologies, but behind it all there was always metal.Western Europe abandoned gold in 1914 so it could print the money to pay for the First World War, and the United States did the same in 1971 amidst spiralling welfare costs and the conflict in Vietnam. Both years were landmarks in the evolution of money creation.This became the fiat era, when money became debt. Some physical cash was printed or minted, but money for the most part was created when loans were made. You borrow a thousand pounds to buy a house, the bank created that thousand pounds using the house as collateral and suddenly there was a thousand pounds in the housing market that wasn’t previously there. That’s why houses kept on rising in value - the constant introduction of newly created money through mortgages. Introduce debt into a market and prices rise. If houses were cash based, they’d be a lot cheaper. Something similar happened in the bond markets and the financial markets with the use of leverage. Leverage is just a fancy term for debt.There were occasional moments of credit tightening, but the broader trend, especially as economists and governments became obsessed with what they call growth, was for ever expanding credit.Human beings, being the greedy folk they are, especially when it comes to money, took the whole thing too far, 2008 came along and the bubble went pop.Then a whole way new to create money was invented: Quantitative Easing. Central Banks now started creating money, and they bailed out the financial system with it. Then they started using the money to buy government bonds - so they effectively printed money to pay for government spending. They also bought other financial assets. And so lots of newly created money went into the financial system and from there to the expensive houses in which many of those who work in finance live, and we got another decade or more of rising prices.But because all this newly created money went into financial assets and housing, it didn’t show up on the inflation numbers. Central bank inflation measures don’t include houses or financial assets. So they said there was no inflation. Then Covid came along. Central banks could now print money and it doesn’t create inflation, they thought. They forgot about the sleight of hand that was their inflation measures. So they printed more money and the government handed it out to people. That money made its way into the real economy and now we have inflation. And they are all scratching their heads and blaming Vladimir Putin.But the nature of money creation has changed. Now money is not just debt. Governments are creating it to fund their activities. And when central bank digital currencies come along, they are going to do that even more. As a result governments, are going to play far greater role in where capital gets allocated. We turn to the wise old owl that is financial historian Russell Napier. “By issuing state guarantees on bank credit during the Covid crisis, governments have effectively taken over the levers to control the creation of money”. They said it was temporary, but, to quote the great Milton Friedman, “nothing is so permanent as a temporary government programme”.We now have the War in Ukraine and with it spiralling energy costs - another emergency. How to deal with it? Keep with the programme. Lend money and guarantee loans. Russell Napier again: “By telling banks how and where to grant guaranteed loans, governments can direct investment where they want it to, be it energy, projects aimed at reducing inequality, or general investments to combat climate change. By guiding the growth of credit and therefore the growth

Here at the New Orleans Investment Conference, I met up with veteran geologist and mining newsletter writer Brent Cook of Exploration Insights together with not-so-veteran, but equally on-it investor Kai Hoffmann of SF Capital. What followed is a 20-minute chat about the state of the mining markets. Those of you that are interested in the state of mining - enjoy! This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

Back in the 90s, when we were in our 20s, all my university buddies and I wanted to do was travel. We wanted to go everywhere and see the world. The problem was how to pay for it.My solution was to work all year, save up, then, having spent Christmas with my folks, get a flight somewhere on Boxing Day or the day after (flights were always cheap then) and come back at the end of January. The business I was in at the time – voiceovers – never really got going until mid January, so I would end up with almost six weeks of backpacking and only miss a couple of weeks of work, if that.My best buddy, who is now a big cheese at Channel 4 so I won’t mention his name, went several stages further. He got a job compiling guide books for many years. As a result, he has been to more places than anyone I’ve ever met – across Asia, Africa, Europe, the Americas, you name it. And, of all of them, he says he reckons New Orleans was the best.So, imagine my delight when I got an invitation to come and speak at the New Orleans Investment Conference this year. Do I want to come? You betcha!The conference took place last week and I thought it might be of some use or interest to you if I shared some of my observations.Will the Fed keep raising interest rates?First up, I had a great time. The conference, organised by Brian Lundin of the Gold Newsletter and his supremely competent team, lasted four days. There were workshops and events galore, plus a host of great speakers – from celebrated resource investors such as Rick Rule, Brent Cook and Sean Broderick to macro strategists such as Danielle DiMartino Booth, Peter Boockvar, James Grant and Jim Iuorio to the unorthodox with the likes of Jim Rickards, George Gammon, Dave Collum and Robert Prechter. Over 600 people came and there were 100 exhibitors. I would say the bulk of the attendees were American, over 50 and male. There were a lot of gold bugs in the room. I felt well at home. Plus there was plenty of fun to be had in this most musical of cities by night – and great food too.I would say the overriding theme of the conference – the subject that would not go away – was the Federal Reserve Bank. How long does it continue to raise rates for? When does it pivot? At what point do debt levels become unsustainable? The US has interest to pay on $31trn of debt – that surely caps how much further it can raise interest rates? But then it has made it clear that fighting inflation is its number one priority. Round and round the subject went. Some argued that it pivots, others that it keeps on raising.There was also plenty of talk about falling real estate prices; commodities – especially base and battery metals, not to mention energy; the strong dollar and the Ukraine war. I found myself on a panel with George Gammon and Jim Rickards about the threat of imminent nuclear war that got very tin-foil hat. When I suggested that, to everyone’s surprise, Russia was losing the war in Ukraine, Rickards declared that I had fallen for the propaganda and had become a mouthpiece for the globalist agenda and the New World Order. Each to their own, I guess.Opportunities for investors in the UKAnother theme that cropped up a couple of times was investing in the UK and the opportunities there – or here, I should say. The yields on real estate investment trusts (Reits) are incredible, said Peter Boockvar, and, unlike New York where a lot of commercial property is sitting vacant, while many continue to work from home, in the UK it’s mostly being used again. Perhaps most importantly, UK property is looking very cheap to our transatlantic friends thanks to the strong dollar. I warned about the potential for rising rates here in the UK and the damage it could potentially do to real estate, whether commercial or residential, but Boockvar still felt the UK is looking like an attractive proposition at the moment. We have a tendency to denigrate ourselves here in the UK, which is why it’s so good to go abroad and meet people who see the UK in a much more favourable light.A lot of North American money is going to make its way to Europe and the UK, not to mention Japan, in the not too distant future, I would venture.I focused my talk on subjects that I have been covering quite extensively on these pages in recent weeks – energy; gold and its relevance (or lack thereof) in today’s world and China’s monumental gold holdings; and the strong dollar superseding all.There were plenty of mining companies there too exhibiting their wares. I think my favourite was probably a silver mining company by the name of Sierra Madre Gold and Silver (TSX-V.SM), which has a dynamic young management, good broker backing, some promising exploration properties and has just acquired a silver mine from First Majestic Silver (Toronto: FR, NYSE: AG) that it is now putting back into production. Pending the closing of this transaction, the stock is currently halted, which is what all silver companies should be – it removes the temptation to buy th

I was listening to an interview the other day with entrepreneur Balaji Srinivasan, in which he argued that there are two ways by which you can raise capital: one is through investment, the other is through charity.If you are raising capital through investment, the incentive is to demonstrate strength, competence, ability, prowess, honesty and many such other qualities. The more competence you demonstrate, the more likely people will invest in you and the more they will invest. Broadly speaking, this applies to gaining employment too.On the other hand, if you are looking to appeal to people’s charity, then the opposite applies. You must demonstrate that you need and deserve this charity, and so the incentive is to demonstrate weakness, affliction, victimhood and so on. Many of these messages of affliction have made for some of the most powerful ad campaigns ever conducted. Young children and animals are probably the most evocative - from the starving Ethiopian children that inspired Live Aid to the battered seals of anti-fur campaigns.Welfare and, to an extent, healthcare can be seen as forms of charity, even education in a way. In the 19th century responsibility for the provision of welfare, healthcare and education mostly lay with the church, the friendly societies and other private bodies, but in the 20th they, for the most part, became the domain of the state.Today there are countless institutions that rely on government subsidy for their existence - from those fighting climate change or promoting green energy to those fighting perceived inequalities such as Stonewall to many in the arts. All rely on demonstrating affliction to fund themselves and exist. Meanwhile, charity has become an enormous business in the developed world, and all sorts of scandals are starting to emerge of corruption, of the huge salaries many of those who work in it enjoy (get paid lots and be virtuous) and the fact that so little of money donated actually reaches the intended recipients - less than 50% is the key stat from the David Craig book, The Great Charity Scandal: What Really Happens to the Billions We Give to Good Causes? Some charities rely on donations and subscriptions, many rely on the state and its subsidies, many on both. And the industry is heavily regulated by state (with questionable results if the above is to be believed). Regulation also costs a lot of money to adhere to.As those who read my stuff, especially Life After the State, will know, I constantly argue the state is not the best means to provide these things to the highest possible standard at the lowest possible cost, that in fact, for all its good intentions (let’s assume they’re good) the state often causes more harm than good and its role in exacerbating the health, wealth and opportunity gaps is demonstrable and large. Thus we should shrink the state as much as is possible.But because the state has grown so bloated in the West, and because it is the main provider of this second form of capital - charity - whether by subsidy or through its other systems, and because the solution to pretty much any social problem that arises is that the government “must do something”, I suggest we are getting caught up in an extremely unhealthy psychological loop. Rather than incentivising strength, competence, excellence and so on, our systems are incentivising behaviours by which that second form of capital be raised - weakness, victimhood and so on. That’s why there is so much of it about.New afflictions are being found all the time, as “entrepreneurial” spirits try and find new means to secure special favour, protection and subsidy.Thus, by shrinking the state do we shrink victimhood. We want people to be the best they can be, surely? Not the opposite.Thank you for reading The Flying Frisby. This post is public so feel free to share it. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

Today we turn our attention to the physical gold markets.There is, as veteran dealer Ross Norman of Metals Daily puts it, a “disconnect between the gold price and what is happening in the physical markets.”“Our biggest challenge,” says Joshua Saul of the Pure Gold Company, “is finding enough stock on a daily basis to sell. There is a long line of demand, but very little supply. There’s more demand than at the height of Covid.”These situations don’t occur very often, but they do occur. The gold price is falling, but demand for physical gold is highI remember 2008 like it was yesterday. Gold cratered along with everything else in the second half of that year. It lost around 30% – falling from north of $1,000/oz to $720/oz. The mining companies fell by a lot more.Yet there was a scramble in the physical gold markets. Bullion dealers had never been so busy. The general public were rushing to get their money “outside the system” into an asset that was nobody else’s liability. Gold would later turn up long before most other assets. November was the low, while the S&P500 carried on lower until the following March. But the fact was there was a scramble to buy physical gold even as the price was falling.It happens. “Coins and bars,” says Norman, “are just a subset of a much bigger industry.” That industry includes the futures markets, exchange traded funds, institutional buying and selling, central bank buying and selling and, of course, jewellery. Ordinary investors may look at the state of the world and think, “I need to buy some gold”. They may be doing that at unprecedented levels. But that is not enough to balance out institutional investors who are, says Norman, “selling three to ten tonnes a day.”As I say, these disconnects do happen, but they don’t necessarily last.The US dollar has stolen the showIt’s all about the US dollar, as we have been saying on these pages for many months. In the year to date, gold is up around 13% in sterling. That’s an almost stellar return compared to stock and bond markets. But against the dollar it’s down some 8%. How long does the dollar stay so strong? That’s the question we must ask ourselves. On current form, a while longer it would seem.Norman, who has an extraordinarily good forecasting record, agrees. “The rampant dollar looks like it might be here for a while,” he says.You don’t need to look further than US interest rates relative to European interest rates and US energy dependency relative to Europe’s, to understand why we are where we are.“Never in my career did I think we’d see the circumstances we are now in and gold behaving like it is,” says Norman. “It’s extraordinary. The dollar has stolen the show. But nuclear war is a real possibility!”Gold, by the way, will survive a nuclear explosion, and none of the three types of radiation that follow – alpha, beta and gamma – will affect it.Smart investors are still buying gold bullionBut one of the few bright spots in this market is what Norman calls “the literate investor” who continues to support it.Saul of Pure Gold makes a similar observation. His company makes a point of talking to clients as they buy and sell, to understand their motivations. As a result, they build up a lot of qualitative data.“Everyone’s looking to protect their wealth in a time when things are really uncertain”. But there have been two notable trends he has observed.First, there has been a notable increase in buyers from the financial world. “Traders, investment bankers, financial services, accountants, lawyers – they’ve been buying large sums. I find this notable: “Their trade sizes are bigger. The median trade size is probably three times bigger than it was a year ago – and during Covid.”Saul says many of them are worried about what is going on behind the scenes at the banks. “These are considered investments, where there is a lack of alternatives.”The Flying Frisby is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.Money is moving out of property and in to goldThe second notable trend is the exodus of money from real estate – whether commercial or residential.“Property investors normally like to remain liquid, so they have cash on hand ready for the next deal. Buy-to-let landlords, commercial landlords, people who buy big buildings and let out floor by floor, developers. Companies and individuals. A lot of them have a lot of cash. They have an appetite for debt, but the increased cost of debt, plus the possibility that the underlying asset will fall in value means there is too much risk for them. They’re now parking that cash in physical gold.”“We are also seeing a growing amount of people with properties on the market, who when their property sells will move their capital into gold. Many are removing their exposure to debt that they might have taken two or three years ago.”What we are seeing then is capital flowing from finance and from real estate into gold. I find that te

I stumbled across this 2013 blog earlier today. I’m posting it because I thought you might enjoy it, and partly because it’s relevant to a thought piece I’ve been working on that I’ll be posting later in the weekOoh, what fun There's nothing surer The rich get rich and the poor get poorerPeggy LeeMost of us now enjoy luxuries that would have been unheard of a hundred years ago - running water, electricity, computers, phones, cheap food and clothing. Yet, despite all this, there is discontent. Huge amounts.The problem is inequality. Inequality is everywhere, it is increasing and it comes in many different forms.There is the wealth gap.The wealthiest 400 people in the world are worth more than the poorest 140 million.70% of the land in the UK is owned by less than 1% of the population.When once CEOs of major corporations earned 20 times more than their employees, now they can earn a thousand times more. A Burberry sales assistant (according to Glassdoor) earns £16-17,000 including commission. The Burberry CEO, Angela Ahrendts, received £16.9 million last year. I shudder to think what the Burberry factory worker is getting.Over fifty per cent of young people believe they will never own a house, while the average age of the first-time buyer in London is now over 40. He or she'll be a pensioner before they can start a family.We can build a decent house for less than a hundred grand, and only 2.5% of the UK is actually built on, so how can we have a society in which houses have got so expensive that most young people think they will never own one?There is the health gap.Unbelievably - and despite best intentions - health inequality, as measured by life expectancy, has actually increased since the founding of the NHS in 1948. There is also huge discrepancy in the quality of care received between the top and bottom of society.And we have the opportunity gap.Despite billions being spent on education, despite more and more taxation, subsidy, legislation and regulation all with the intention to spread wealth and bring equality of opportunity, the top positions in just about every area of the economy you can think of - politics, law, media, finance, medicine, even manufacturing - are dominated by the 7% of the population who went to public school.Even in the Olympics you were five times more likely to win a medal if you went to public school.Something is wrong. People are, rightly, angry about it.Tax the rich more. Stop companies like Google evading their tax. Clamp down on immigrants. Stop benefit cheats. Spend more on education, on health care, or is it infrastructure? Increase regulation of banks. Build more houses. Subsidize wind farms or environmental initiatives. More austerity. Everyone has their own idea about what needs to be done and over the last decade a huge ideological battle has been unfolding as people argue about it.But all these ideas and many more besides, some of which come from the left and others from the right, all involve the same thing: that the government does more, that it takes action.I suggest the opposite - that the ONE thing government should do is LESS. I suggest that, counter-intuitive though it may seem, the huge rise in inequality is BECAUSE of government and the unintended consequences of its actions.For a hundred years the state has got more and more involved in our lives. It now look after our birth, our education, our health, often our employment, our old age, even our burial. Through its money and interest rates, through its taxes and subsidies, its rules and regulations, it looks after our economy. The more it does, the greater these gaps have all grown.It's time to try something else - Life After The State.Life After The State by Dominic Frisby is available on Amazon. The audiobook is available at Audible.And if you happen to be in the Louisiana neck of the woods next week, or fancy a trip, I’ll be speaking at the New Orleans Investment Conference, which runs from October 12-15, at the Hilton New Orleans Riverside. There are lots of big names on - Rick Rule, James Grant, George Gammon, Jim Rickards, Doug Casey and many more besides. Come and say hi!The Flying Frisby is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

We’ve seen incredible rallies across the board this week.After a worrying sell-off late in the day and into the close on Friday, the Dow and S&P500 all both took off on Monday, rallying by over 3%. They then followed through with gains of another 3% on Tuesday.The Nasdaq was up by even more.Given that tech was so totally beaten up, I guess the bigger rally is no surprise. You could apply the same logic to precious metals. Silver, sold down into the abyss, rose by eight and a half percent on Monday. The call for a multi-week rally in silver is looking good.Even the once internationally sought-after currency that is sterling has seen a barnstormer. A week ago everyone was talking about parity with the US dollar. It was all over the headlines (which usually means it’s time to take the other side of the trade). Even Turkey’s President Erdogan, with a display of hypocritical chutzpah that would capture the admiration of even the most duplicitous of tyrants, was deriding it. It has “blown up”, he said. He’s not been looking in the forex mirror lately at his own lira, it seems.Sterling went from $1.03 almost to $1.15.What we’re looking at is a typical short squeezeI want this bear market over as much as you probably do, and I hate to go all prophet of doom on you, but these kinds of rip roaring rebounds are just that: rebounds. They are not so typical of bull markets.Let me give you some depressing stats. 1929, 1931, 1932 and 1933 were among the worst years of in US stockmarket history. Famously so. Yet, on a percentage basis, the ten biggest rallies in the Dow Jones Industrial Average i n the first half of the 20th century all took place in those years.Prior to this decade, the best days in the stockmarket since 1950 were, says JC Parets of All Star Charts, in 1987, 2002, 2008 & 2009. Again, 2009 aside, not a great time to buy stocks.These kinds of spikes are not typical of bull markets. That’s not to say they don’t happen in bull markets, but they are more typical of bear markets. Bull markets tend to grind higher. Increased volatility, heightened fear and risk, big up days and big down days, short squeezes: these are all things you see in bear markets.Indeed, it’s a typical short squeeze. There have been lots of sellers. There are lots of people with big bets that prices will continue falling – a lot of shorts – and suddenly there are no more sellers in this crowded market. As the price turns, the shorts quickly cover their positions – which means there are suddenly lots of buyers – and the market rockets higher. It’s the sudden and rapid covering of positions that causes the spike up.Of course, sometimes you get these spikes at the final low. March 2009 was one example. March 2020, at the height of the Corona panic, was another. The problem is that on the way to that final low there have been many such up days and down days, so, in real time, you don’t actually know which this is the final one.“From false moves come fast moves in the opposite direction” is a phrase you may have heard me utter on these pages several times. Friday’s move down was one such example. A break down to new lows, below the June lows, everyone thinks we are going lower. Rumours are flying about. There’s an emergency meeting of the Federal Reserve Bank on Monday. Credit Suisse is going under. The implications of this are bigger than Lehman in 2008. Then the market turns around and rips everybody’s faces off.Rip-roaring up-days are are normal for bear marketsAs I write now, most markets have turned down again – though at present it looks more like consolidation action after the gains of the last couple of days.Here’s the S&P500 over the past year. Just look how many rip roaring up-days there have been in 2022, and yet it has been a horrible year for longs.An obvious magnet for this move is that falling blue trend line just around 4,010. Another potential target would be the 3,850-3,900 area.I’ve also shown that false move from which this fast move has come: the break below that dashed blue line which marks the June lows. What do you think? Is the final low or have got more bear market action to come?Price action tends to set the narrative, and the stockmarket tends to lead the broader economy, so even if you are of the mind that this economic downturn is not over, the stockmarket can still quite easily go higher. We are going into a good seasonal period for stocks. There’s probably too much pessimism about. We have the US mid-term elections in a month, which will give us a better idea of where things are going politically. I’ll change my opinions as events develop. I always do. We all do. But for now I think the likelihood is that this is a bear market rally.And, as for silver, I don’t think this is the beginning of the big kahuna to $50. Low- to mid-20s is my target.And if you happen to be in the Louisiana neck of the woods next week, or fancy a trip, I’ll be speaking at the New Orleans Investment Conference, which runs from October 12-1

Back in 2007 comedian Susan Murray phoned me up with a question.She was just arranging a new mortgage and she wanted to know where I thought interest rates were going. Should she get a fixed or a variable rate mortgage?I couldn’t make that decision for her, of course. But I could see there were underlying problems with the economy – quite serious ones – so the safest option, if there was affordable, seemed to be a fixed-rate mortgage. In the event something goes seriously wrong in the broader economy, at least she was protected against spiralling interest rates.Susan went and fixed her mortgage at 6%. Turns out it was pretty much the top of the market for mortgage rates. They duly plunged as central banks slashed rates and then printed money following the financial crisis. She’s never forgiven me. “Cost me a ruddy fortune that bloke” she always complains whenever my name comes up.Cheaper mortgages mean more expensive housesI may have seen 2008 coming – I was such a gold bug at the time – but I did not foresee quantitative easing nor the extent to which interest rates would fall. Money got so cheap.By September 2021, barely a year ago, you could get a five-year fixed rate deal for 1.3%. It seems inconceivable today that money could be so cheap. To be fair, it seemed almost inconceivable at the time. No wonder everyone levered themselves up the eyeballs.I have long argued that, more than anything, it is cheap money that has driven up house prices. Everywhere you look the standard solution to unaffordable housing is that we need to build more, especially in and around London. But London has been a building site for a decade or more. Goodness knows how many new build flats there now are, but all that new build hasn’t brought prices down. As I’m forever quoting: between 1997 and 2007 the housing stock grew by 10%, but the population only grew by 5%. If house prices were a function of supply and demand, they should have fallen slightly over this period. They didn’t. They rose by more than 300%.Then you see that mortgage lending over the same period went up by 370% and you quickly realise it was newly created money that pushed up prices in a decade of loose lending, which gave birth to the national obsession that is house prices. Houses were no longer places to live, but financial assets. If you introduce new debt into a market, the higher prices will go. Look at student loans.Mortgage lending doubled again in the ten years from 2009 to 2019 and house prices rose by over 50%.Cut off the tap that is cheap money, and house prices will quickly come to levels concomitant with earnings. The two have long since been distant friends.In 1995 the house price to income ratio was below three – even in London it was only just above. Now it’s seven. The average house is seven times average income. In London it’s 11. And we wonder why families have got so small.Are interest rates only going one way from here?With inflation spiralling, bond rates rising and the US dollar spiking, money is suddenly not so cheap any more. And it’s getting more and more expensive. The UK is not alone in this, by any means, but the problem is more acute here because our economy is so geared to house prices.The Bank of England has made an absolute mess of protecting the currency, declaring it will not hesitate, while hesitating. Rather like the way it broadcast its gold sales to the market between 1999 and 2002, thereby sending the gold price to all time lows around $250/oz, so it is now broadcasting its gilt sales and quantitative tightening – and it has sent that particular market plunging too. The announcement sparked the sharp sell-off in gilts that began the day before Chancellor Kwasi Kwarteng’s mini-Budget. It’s as though the two departments – the Treasury and the Bank of England – don’t coordinate.The trigger may have been the Bank of England’s announcement, or Kwarteng’s budget. Whatever. The cause is over ten years of QE, zero interest policies and all the rest of it.It’s interesting through. At the first signs of panic, they started printing again. That tells us where they will go. Yesterday morning I would have said that interest rates can only going to go one way, and that means the cheap money taps that drive house prices to such unaffordable levels are now being turned off. Lenders clearly felt the same way. I gather over 900 mortgage products were removed from the market in under 24 hours. Smashing the record around 400 set during the Covid panic.But then the Bank of England started printing again.The UK housing market, particularly in and around London, has been an irrational, insatiable monster for decades. Anyone who calls the top has ended up with egg on their face. But we are levered up to the eyeballs. It’s not just a matter of no more cheap money coming in. There is also the other side of the coin, something I remember from 1989-1993. People can’t make their interest payments, so they start to sell. If house prices come down 10

Bitcoin was built in reaction to all the money printing that went on in the wake of the financial crisis. The Times’ headline “Chancellor on Brink of Second Bailout for Banks” was even embedded into the very first block in the blockchain – the genesis block. Here was a money system that nobody, whether government or hacker, could print or debase. The rules were set in code. The inflation rate was clearly laid out. And the system, rather than rely on trust – whether in banks, central banks, payment providers or governments – was based on mathematical proof and computer power.So here is an apolitical, censorship-resistant, trust-less, hard money.And we saw a very good use case for it this week.PayPal plays the cancel gameJournalist Toby Young, who is associate editor of The Spectator, has, for as long as I’ve known him, been setting up organisations to try and improve people’s lives. Disappointed with the lowering of standards in schools, he was one of the founders of the first Free School in West London. In 2020 he set up the Free Speech Union to help defend people threatened with cancellation. And his news and commentary website the Daily Sceptic was born in reaction to all the misinformation and censorship, especially by big tech, that emerged during Covid. Young’s views are actually pretty moderate. He’s a centre right, old school Conservative. But his ideological enemies do not like him at all and they work tirelessly to bring him down. He has lost something like five jobs because of what he calls the “offence archaeologists” digging up things he said decades ago, quoting them out of context and then being offended.Last week, PayPal, out of the blue, closed down his personal account for “breaching its Acceptable Use Policy”. Then, barely a few minutes later, it shut down the account for his news and commentary website the Daily Sceptic. Then a few minutes after that it closed down the accounts for the Free Speech Union.This is no small disruption, and it undoes the many hours, days, months and years of hard work his team have put in building up their subscriber bases. About a quarter of the Daily Sceptic’s donor revenue arrives via PayPal and a third of the Free Speech Union’s 9,500 members pay their dues via PayPal, Young says.Young says, “I did some Googling and discovered that numerous organisations and individuals with dissident political views have had their accounts closed by PayPal recently, particularly on the three issues you’re not allowed to be sceptical about: the lockdown policy and other Covid restrictions, the mRNA vaccines, and the ‘climate emergency.The Daily Sceptic frequently publishes articles on those subjects and the Free Speech Union may have fallen foul of another taboo – defending people who’ve got into trouble with HR departments for expressing their gender critical views.” How is PayPal able to do this without warning? Because it can.Young is by no means the first. It did the same thing to Wikileaks in 2010, probably under pressure from the US government about whom Wikileaks was disclosing unwanted information. (Unfortunately, this backfired as donors began using bitcoin and the bitcoin Wikileaks received rocketed in value to make Wikileaks a potentially very rich organisation (assuming it managed to hold on to some of them).It did the same to Alex Jones. Earlier in the year it cancelled academic and biologist Colin Wright for articulating his criticisms of the view that sex is a social construct. Just yesterday Us For Them, the parent group which campaigned to keep schools open during Covid lost their account, and so did another group Gays Against Groomers.PayPal founder Peter Thiel is an outspoken libertarian and probably on the same philosophical side of the argument as Young, but he is also a businessman. Paypal will do whatever is asked of it in order to survive. You can be sure that, in order to survive as a business and effectively become a challenger bank, especially early in its evolution, it will have had to demonstrate that it could not be used as a vehicle for any kind of illicit activity, especially money-laundering, and this is why it can be so stringent. It will toe the line wherever necessary.But Thiel is no longer Paypal’s CEO and, like so much of big tech, what started out one way is now not on board with the free speech ideals of its founders, as evidenced by all the censorship that goes on. Indeed more and more evidence is growing that big tech, especially Twitter, is censoring content according to the instructions of the US government.A number of prominent individuals have spoken up in favour of Young - from Lord Frost to Joanna Clery to Luke Johnson - and a number of others have closed their PayPal accounts, so it may be that the Young accounts get re-instated under pressure.But the moral of the tale remains. You are using trusted third parties that can no longer be trusted. If you use non-government money - ie bitcoin - the taps cannot be turned off quite

About 25 years ago, I was giving a speech at my father’s 65th birthday party. There were seventy or eighty people at the dinner and, as Dad was a playwright, most of them were theatricals.I’m a comedian, it was a fun occasion, so I wanted the speech to be funny. There were a few entertainment VIPs in the room, so there were professional as well as personal reasons to make sure my speech was as good as possible. But it was also a very personal occasion - a landmark in my dad’s life - so there was no way I was going to crowbar in bits from my act. I wanted the speech to be special: I love my Dad very much and I wanted to say so publicly. But I also didn't want the speech to descend into an embarrassing, gushing, sentimental affair. It was by no means the hardest speech I've ever had to give, but there was still a balance that I had to get right, and I felt a bit of pressure because there were so many professional performers in the room who were way more experienced than me.As I was speaking, and I guess I was feeling a little nervous, I noticed someone looking at me. Of course, the whole room was looking at me, but this was the only person I noticed. He had friendly blue eyes, narrowed in a frown of intense concentration, and he seemed deeply interested in what I had to say, and very sympathetic to the difficulties I was having making such a speech. I don't know if I was projecting my own imagination, but there was a wise, kindly look to him. I’d never noticed anybody listen like that before.It was a few moments before I realised it was the actor, Timothy West. Thinking about it later, it made sense to me why Timothy West had been such a popular actor with his peers. He listened so well. In a room of eighty people all doing the same thing– his was the listening I noticed.(Any aspiring actors reading this: work on your listening. It’s a crucial, yet underrated skill and one that is rarely taught. Teaching is concentrated around the bits when you are doing the talking. Watch what wonderful listeners many great actors are.)Fast forward a couple of years and I was doing a set on the Radio 4 show, Loose Ends. This was around 1999 and, in those days, the show was recorded live, but the only audience you would have were the four or five other guests on the show who would be sitting in the studio with you, along with the host, Ned Sherrin. You got some real VIPs on that show - I used to do it quite a bit. Off the top of my head, I remember appearing with Jackie Collins, Danni Minogue, Divine Comedy, Mariella Frostrup, Sir Humphrey Burton, The Proclaimers, and many more besides. But most of them would be thinking about their own bits, so doing comedy in that little studio to four or five people who weren’t that interested could be a bit like doing comedy into the void. Comedy is hard without an audience - even if by the time it made it out of the radio, it seemed to work. I think it was the first time I had done the show, so I was nervous. There I was, doing my Ludwig The Bavarian act, all dressed up in my lederhosen costume, with all sorts of nerves rushing through my head as I did my act to no audience, when there it was again. The look. The kindly, listening, I-know-what-you’re-going-through-and-I’m-on-your-side look. This time it was Michael Parkinson, one of the guests on the show. While all the other guests, and, to an extent, Ned, were wrapped up in their own stuff, Parkinson took time out to listen to me. Straight away I understood why he had been such a successful chat show host.Thank you for reading The Flying Frisby. This post is public so feel free to share it.The Today ProgrammeWe move on over ten years to 2012 and my first book, Life After the State, which, as the title suggests, makes the case for a lot less government in our lives. On the day it was published I was invited onto Radio 4's Today programme to talk about the role of the state. My publisher, Dan Kieran of Unbound, told me 'getting on the Today programme is the Holy Grail for an author. You’re very lucky. You’re on at the best time, peak listening time, just before 9. Everybody will be listening. The prime minister will be listening.”To say I was nervous is an understatement. 'This is the Today programme,' I told myself. 'For really clever people. It’s not for comedians who’ve decided they want to write about economics. It’s the BBC, the Ministry of Media. The last thing they’ll suffer is some non-economist comedian calling for a smaller state. You are so going to be found out.’In the Green Room beforehand, I could barely speak. 'Would you like a cup of coffee?' 'Oh, no thanks. Actually, yes please. Er no, no. Actually, yes. Erm, not sure.' ‘I’m sorry?’I was to be interviewed by James Naughtie and there was a nice chap by the name of Neal Lawson from left-wing think tank, Compass, who would take the opposing side of the debate. There were various other people in the studio, all deep in notes and preparation for their next slot. None of them

US inflation numbers came in on Tuesday at 8.3%. The markets were expecting something lower – after all, the oil price had fallen back, not to mention most commodities.8.3% was above expectations and the markets did not like it one bit. Down they went like liquid through an open sluice. Hopes and dreams of a sustained recovery since the June carnage went with them.Actually, not totally.While the S&P 500, which I use as a barometer for global markets, has been making a sequence of lower highs since the beginning of the year – ie, the broader trend is down – it has also been making a series of higher lows since June, meaning the intermediate trend is up.Yesterday’s lows are still higher than last week’s lows, which were higher than the July lows, which were higher than the June lows. So there is something of an intermediate term up-trend in place.If you draw a trendline off both the lows and the highs, they are both still intact and you end up with something of a wedge pattern, as the chart below shows.If you dabble in such dark arts as day trading, or short-term flips, I would wager that the odds – in the short term – favour going long with a stop just below that rising trend line, with a target somewhere near the falling blue line around 4,200. That said, as we have just seen, rallies could fail at any time, so if the market moves in your favour, you would want to keep moving your stops up to protect any gains.Unlike some patterns – double tops, head and shoulders highs and lows, for example, which I find quite useful – I have over the years found wedges to be utterly useless as predictive tools. So I am not going to forecast off the back of it.A long-term downtrend will, in a month or two, assuming both those trend lines hold, which is some assumption itself, shortly butt up against a jittery, shorter-term uptrend and one of them will prevail. Seasonally, we are in a bad time of year for markets. The last four Septembers have all seen sell-offs of between 5% and 20%, so stockmarket-wise, I do not see this as a time to be taking huge risks or making large bets. It’s a time for prudence and capital conservation.Silver – huge potential that’s never realisedI was, however, encouraged by the action in precious metals, in particular the dogs of recent months silver and platinum. Yes, they sold off, but on a relative basis they help up well.This comes on the back of an extraordinary day on Monday when silver rose some 5%. My ambivalence towards silver is long since documented. There is no other metal with as much potential. It is both a monetary metal and an industrial metal, used in virtually every computer related application you can think of – every phone, every computer contains silver – not to mention all the bio and other tech.It “should” be a play on both currency debasement and technological progress. Yet in practice it proves to be neither and, at $19, is trading at the same price it was in 1980. There is about 15 times as much silver in the earth’s crust as there is gold, hence there is an argument that silver should be 1/15th the gold price, which is what it was historically – over $100, in other words. But I have been listening to such arguments for 20 years and the metal never delivers.Silver aficionados scream manipulation, but they have been screaming that since the 1970s. Why would you want to own something whose price is deliberately suppressed by powers far greater than you? Surely you would want to own something whose price is artificially boosted. There’s more profit in it.I own silver, quite a bit in fact, and I own some silver miners. Because one day, you never know, it might actually go to the moon. That’s its planet after all. I want to make sure I’ve got a seat on the rocket if it does. I don’t think I could live with myself if it went there and I didn’t have exposure, having written about it so much over the years. But I’ve long since stopped holding my breath. Thank you for reading The Flying Frisby. This post is public so feel free to share it.Silver could be about to go on a multi-week bull run That said, I do think silver could enjoy a multi-week rally from here and I’ll explain why. The COMEX is the world's largest futures and options trading exchange for metals. There are three groups of traders: the commercials, the large speculators and the small speculators. The commercials tend to be seen as the smart money, and, as they are often acting on behalf of miners, they tend to be sellers and so they tend to be short.Every Friday evening, the positions of the various traders the previous Tuesday, three days before – the open interest, as it is known – is announced. On Friday we discovered something extraordinary. That the commercials are net long – ie buyers – for only the third time in 40 years. That suggests a genuine shortage of metal. Meanwhile the speculators, who for the most part do not have metal to deliver, are net short. This opens up the possibility for a short squeeze. Ane

I’m as guilty of this as anyone, but many of us make life more difficult than it needs to be. Achieving basic happiness, or at least avoiding what depresses us, might actually be quite simple.Is happiness, simply, when reality exceeds expectation?When I was a young man I was chronically ambitious. I would lie in bed as a student, dreaming about my future, making Faustian pacts, yet nothing would satisfy me. You could have offered me fame, glory, wealth, the keys to the city and more, and it would not have been enough. I wanted everything. When we discussed our futures, my friend, Gideon, gifted and hugely competent, but not remotely ambitious, used to say: “I just want to be happy.” I thought that was loser talk. Looking back, he was probably right.How often do you watch a film or a show because somebody was raving about it for it to turn out nothing like as good as you were hoping? You end up disappointed. But if you saw the same film with no or low expectations, and it’s pretty good, you might walk away feeling quite elated. Life is the similar. If reality comes in below expectation then we end up disappointed. If it comes in above expectation then we end up happy. Hence this useful formula:Reality > expectation = happinessExpectation > reality = unhappinessBy this formula, then, to achieve happiness you should simply lower your expectations.There is a lot to be said for that. But then there is also a lot to be said for ambition and optimism, which the mindset of low expectation negates. Ultimately, this way of thinking boils down to perception. Your life is no different - it’s the same film - it’s just a matter of how you look at it. Thus should we practice gratitude.Nevertheless, I’m not sure perennially low expectation is a way to live.We are all animalsDespite what we may think of ourselves, no matter how cultured, we are, when all is said and done, animals. If you keep a dog, you will know that, to be happy, a dog needs plenty of outdoor exercise and fresh air, regular and proper food, sleep, love and company. Absent any of these and the animal quickly becomes depressed. Human beings are the same. We have certain basic needs without which we end up depressed. The cause of depression is often (not always) the continued absence of one of these basics.With that in mind, here are seven animal essentials we all need to be happy. If you are depressed, it’s not unlikely one of these is missing in your life. Get it back and you might find other things fall into place. (The problem with depression is that you lose the motivation to do so).I’m not saying that you can’t be depressed or unhappy, if you have all of these things. You can. But a lot of the time, the cause is that one of these is absent. Get it back in your life, and you will find your depression sorts itself out.1 SunThe sun is the giver of all life on Earth, the source of all energy, of light, heat and gravity. Most of us do not get enough of it. We spend too much time indoors under artificial lights. The darker your skin, the more sun you need - and sun can hard to come by in colder northern European climes - but you need sun, whether you’re light or dark. Our ancestors spent most of the day outdoors. When the opportunity presents itself, get plenty of sun, all over your body. We need sun. Only use enough sun block to prevent burning. As soon as you can, wean yourself off. A close family member got herself into the most terrible depressed state last winter. I’m convinced it’s because she did not see sunlight for months, instead lying in bed all day watching crap on her phone.It’s no accident the sun is often depicted with a smile on his face. Get more sun.2 WaterIt’s as obvious a basic requirement as the sun, yet most of us don’t drink enough. Got a bit of a headache? Constipated? Feeling stiff? Allergic? Lethargic? Hungry when you know you’re not? Drink a large glass of water.Just under a pint should do it. That would be pound of water, roughly half a litre. You’ll be amazed how many niggles it clears up.A large glass of water should be the first thing you drink every morning, when you wake up. And don’t drink it cold. Drink it at room temperature or just below. 3 Food Two meals a day is plenty. Avoid snacks. Don’t eat crappy, processed food. Avoid seed oils and ingredients the names of which you don’t understand. Use simple foods - meat, fish, veg, fruit - close to their naturally occurring state (ie unprocessed). Spend time preparing food. Ideally, eat with other people - eating should be a shared communal activity. Regular eating times - routines - are good. And say grace before you eat - it focuses the table, it unifies the group, it expresses gratitude, helps mark where you are and grounds you. Doesn’t matter if you don’t believe in god, saying grace is still a good ritual.Also, rather than eat crap on the run, skip meals. Fasting is good.If you are overweight and want to lose weight, fast. The 5:2 diet works and, most importantly, it is su

“Pound crashes to weakest level since 1985 in blow to Truss” ran the headline on the Telegraph website yesterday.“The Bank of England had one job today”, as economist Shaun Richards put it, “which was to talk up the pound and instead their waffling sees it at US $1.14.” Theresa May Flash Crash aside, that’s a 37-year low.And that’s measuring it against the dollar. If you measure the pound’s purchasing power against essential basics such as energy or houses, its performance has been way more woeful.It’s not just the pound, even if it is one of the worst offenders. It’s all fiat money. I’ve been banging on about it for 20 years but I may as well bang on some more: fiat money and its devaluation is the greatest and most pernicious intergenerational theft in history. Devaluing your currency boosts assets but devalues labour When you devalue money, among numerous other things, you devalue salaries, which is to devalue labour. All the young have is their labour. You boost the value of assets meanwhile, which is what the old have acquired over the course of their lives. The net result is to transfer wealth from young to old. Compounded over decades, 5% one year, 8% another, this process has been devastating. Don’t get me started on the knock-on effects: smaller families started later in life and all the rest of it. So many people of my generation and above think they are business geniuses because they paid the market rate for a house 30 or 40 years ago. You are not. Systematic and incremental devaluation by successive administrations was “what did it”.The Bank of England, the Federal Reserve Bank, the European and Japanese Central Banks – central banking has a lot to answer for. It feels like we might finally be in some kind of endgame for fiat money now. Mind you, I thought we were in the endgame in 2008, so I’m probably wrong this time around as well. I’ve no doubt some new magic words even more unintelligible than “quantitative easing” are being conjured up as I write.Right rant over. I had to get that off my chest. Let us move on. Does a new PM mean you should go long the pound?We have a new government. Money is the issuance of government. The weak pound is all over the headlines. So I thought it would be an interesting exercise today to look, first, at the performance of the pound by successive governments over the past generation. And then to consider whether one should be buyer or seller here.“Buy on silence, sell on headlines,” is a good little investment motto that I’ve just invented. When something makes the headlines, there is often not a lot of narrative left in the tank, the story is mature and the next stage is exhaustion. It’s standard contrarian market psychology. Does the fact that the weak pound has made the headlines mean it’s time to take the other side of the trade and go long? Could be.We’ll start with a chart of the pound against the dollar – aka cable – since 1970. And by the way, the dollar has a much larger market cap than the pound, so what is going on on the other side of the pond tends to have a greater effect on cable than what is happening here. That is the case at present. The pound is weak, but so is the euro, the yen and any other number of currencies you care to mention – except the Russian rouble. Current pound weakness is as much a function of US dollar strength as anything. The chart of the pound against the euro over the last three years is much flatter.In any case, cable is the benchmark, so here is the pound against the dollar since 1970, when it was $2.40 (!).The broader trend is down, but there are periods of relative strength – 1976-1981, 1985-1991, 2000-2007. We’ve basically been in a downtrend since 2007, shortly after Tony Blair stood down and Gordon Brown became PM. It is what is known in the game as a secular bear market. Now we consider the same chart, but this time I have overlaid the government. Even though several prime ministers have led successive governments – Wilson, Thatcher, Major and Blair for example – for the sake of clarity and simplicity I have marked the chart by PM. Needless to say the dates of the red and blue lines are approximate. The first observation I make is that, despite their reputation for fiscal competence, the Tories have not been good stewards of the currency. In the case of Edward Heath and David Cameron, the pound was marginally stronger when they stood down than it was when they took office. Despite his presiding over Black Wednesday and the ERM fiasco, for John Major the pound was only a few per cent lower than it was when he started.But in the case of – and this surprised me – Margaret Thatcher, plus Theresa May and Boris Johson it was lower. Labour’s record is mixed. Harold Wilson saw it lower, Jim Callaghan higher (that surprised me too). Tony Blair has the best record of all – it went from roughly $1.60 to $2.10 – and Gordon Brown the worst.That said Blair was one of the few PMs – perhaps the only one – to stand down from a posi

Morning All,A slightly admin-y email today.First up: How Heavy? - the surprisingly popular "lecture with funny bits" I did at the Edinburgh Fringe this year- is coming to London’s West End for a short run later this month at the Museum of Comedy on September 28th and 29th.It's a show about the history of weights and measures, and is, I promise you, a VERY interesting subject. Weights and measures effectively determine how you perceive the world. It's a nice, early 7pm start. You'll be done by 8pm - free to go and have dinner or whatever you fancy - and will give your evening a strong intellectual foundation.Please come along. You can get tickets here.Second up: there have been some significant announcements by two of the companies in my portfolio - major holdings - in the last 24 hours. I will be updating paid subscribers on these asap, hopefully later today.Third up: this article was supposed to all subscribers last week, but due to a cock-up at HQ it only went out to paid subscribers. The YouTube version has been very popular - it’s obviously caught a nerve - so in case you want to read it, here is a link:Until next time.Dominic This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

My apologies if you have received this twice. Cock up at HQ.Over a Zoom call earlier in the week, I heard some people discussing the “Russian Davos” which they had attended back in June. I didn't even know such a thing existed, such is my Western, Ptolemaic view of the world. (Ptolemaic, by the way, to save you having to look it up, means you think you are at the centre of the universe, and everything revolves around you).So the Russian Davos, or as it’s properly known, the St Petersburg International Economic Forum, held in June, is an annual event that began in 1995 to signal the (then) new Russia. It would attract global political leaders, business titans, finance bigwigs and all the usual shizzle. The event went ahead this year, though, for obvious reasons, the VIP headcount was significantly down. Gone were the likes of (once) German chancellor Angela Merkel, ECB chief Christine Lagarde, Goldman Sachs' Lloyd Blankfein, Citi's Vikram Pandit and ExxonMobil's Rex Tillerson. Top billing went to presidents of Egypt (via video link), Kazakhstan, Armenia and other allied states.There were representatives from the likes of China, India, Iran, Serbia, Turkey, Venezuela, Egypt, Belarus, Central African Republic, Nicaragua and the United Arab Emirates. Quite a collection. Non-Western nations that have not imposed sanctions had greater prominence. The Western economy has been shaped by cheap commodity prices The official title of the forum was "New Opportunities in a New World", and the recurring theme was how to improve trade between non-Western powers in a US dollar controlled world of sanctions. "A new form of international cooperation: how will payments be made?" was the title of one such talk. Time and time again the conversation came back to a new, non-Western international currency.Which brings me to the second strand of thought that makes up today’s piece: the latest contribution from Credit Suisse analyst, Zoltan Pozsar. Pozsar has long since argued that Bretton Woods III, a new world monetary order, is happening before our eyes and that new money systems east of Europe will be based around commodity-based currencies.In his latest, War and Industrial Policy, Pozsar, who I am fast becoming a fan of, argues that there were three forces that shaped the western economy before Covid - cheap immigrant labour, cheap Chinese goods and cheap gas. Such a trinity is no longer possible in a world in which international trust is fast evaporating. “The “cartoon” version goes like this: China got very rich making cheap stuff, and then wanted to build 5G networks globally and make cutting-edge chips with cutting-edge lithography machines, but the US said “no way”. As a result, Chimerica is going through a messy divorce. The two sides don’t talk anymore.” Meanwhile, “Russia got very rich selling cheap gas to Europe, and Germany got very rich selling expensive stuff produced with cheap gas.” Those two sides aren’t talking any more either. “Chimerica does not work anymore and Eurussia does not work either,” he says and now, in the divorce, it seems Russia and China are “getting it on”. Meanwhile, out west, QE and zero interest rate policies are no longer possible in a world without cheap Chinese and Russian exports. There is now a rush to regain control of key technologies, especially microchips, and key commodities, especially oil and gas (and soon in my opinion metals and grains). Pozsar adds straits to the key list - the Taiwan Strait, the Strait of Hormuz, and the Bosporus Strait.“I think that four themes (re-arm, re-shore, re-stock, and re-wire the electric grid) will be the defining aims of industrial policy over the next five years … the global order is at stake.”Inflation or not, high rates or not, there is a commodity-intensive demand shock coming that “could easily drive another commodity super-cycle.”So to the third strand. “The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out,” Vladimir Putin said last month.In this regards we have former Kremlin adviser, now Minister in Charge of Integration and Macroeconomics of the Eurasia Economic Union (EAEU), and an influential economist, Sergey Glazyev. He is, according to some reports, supervising the adoption of a new money system for the EAEU and China. “The world’s new monetary system, underpinned by a digital currency, will be backed by a basket of new foreign currencies and natural resources”. “A currency like this can be issued by a pool of currency reserves of BRICS countries, which all interested countries will be able to join. The weight of each currency in the basket could be proportional to the GDP of each country (based on purchasing power parity, for example), its share in international trade, as well as the population and territory size of participating countries. In addition, the basket could contain an index of prices of main exchange-traded commodities: gold and other precious metals

While on holiday in Sark this week, I stumbled across a book in the local post office: “Silver Mining On Sark” by David Synnott, which describes an ill-fated mining operation on the island between 1836 and 1847. Books are distilled knowledge, and I love the stuff you can find in them. Often stuff you don’t find online.“Plus ça change, plus c’est la même chose”, runs the old French saying. It applies to mining, it seems, as much as anything. We don’t use canaries any more; mines are powered by diesel and electricity, not horse-, donkey- or and manpower; helmets have torches instead of candles and there is underground lighting; and a higher premium is placed on human life than in the early 1800s, when workers were much more disposable. But the game is exactly the same: you’re trying to extract metal from rock and sell it at a higher price than you mine it for. The tricks of the trade, aka scams, are the same too. So let me tell you the story of Sark’s silver mine. How a silver mine brought the boom times to a tiny island Sark, by the way, is a tiny island about two miles square, located between Guernsey and Jersey in the English Channel – much closer to France (25 miles) than England, which is over 200 miles away. Remains show the island was inhabited in Neolithic times, but for many periods in the island’s history there was nobody here at all. Today it has around 500 residents. There are famously no cars on the islands – only tractors, horses, bikes and mobility scooters – and no street lights, giving you probably the best view of the night sky in Europe. It’s famous for its harsh, windswept landscape with sheer cliffs and jagged rocks. It still has a feudal lord – who, by the way I beat at table tennis – and its own parliament. In the early 1800s the language spoken here – the patois – was similar to Old Frankish. Very different from the Cornish spoken by the miners who would soon settle there. If you take a boat trip round the island, there are visible copper salts leaching in the cliffs – which no doubt explains its appeal during the Bronze Age – and it was these visible salts that attracted prospectors to the island in the early part of the 19th century. The Cornish at the time had one of the most evolved mining cultures in the world (also dating back to the Bronze Age), and they were operating mines as far afield as Argentina, North America (especially California, Wisconsin, Pennsylvania, Michigan and Virginia – in Chesapeake they even have a Cornish accent) and South Africa, where they operated the world’s largest copper mine at Okiep, 300 miles north of Cape Town. They were in Australia and New Zealand as well.Even the great Mark Twain – he of “a mine is a hole in the ground with a liar standing next to it” fame – was of Cornish descent. In 1835, funded by an English mining adventurer called John Hunt – adventurer is a far better term than entrepreneur, is it not? – a team of Cornish miners arrived on the island to mine the copper. They soon found lead and silver nearby, and began mining that too. And so was Sark’s Hope Mine built. They should have called it the No Hope Mine – what was prospering in 1839 went badly wrong. How? Profits erased by extravagant dinners and lax accounting In the age old tradition of mining, management misled the shareholders. When the ore body was clearly not enough to support the mine, the mine captain deceived where possible to keep the game going. Management had a vested interest in doing so, even if it was no longer profitable. Their salaries depended on it. There were also some two hundred Cornish workers were employed by the mine, together with their wives (who may also have been employees – “bal maidens”, they were known as) and their families. Sark’s population soared to 790, the highest ever recorded. Management no doubt felt loyalty to its people, as well as their own salaries.As they chased ore, expanding the mine with the promise of finding more silver, the mine extended some 800 yards and with tunnels 300 feet out to sea where they were mining 20 fathoms – 120 feet – below sea level. You can imagine the noise in those tunnels when there’s a storm blowing overhead, waves crashing and all the rest of it. They actually had quite an ingenious device in play should the mine ever flood that would save the mine and some of its occupants. General equipment could be brought in from Guernsey, but the speciality stuff had to be acquired from Cornish suppliers, with the effect that Guernsey and London shareholders capital went to the “picks and shovels” suppliers in Cornwall. Management would go on jollies to Guernsey for their count house dinners, a tradition they had brought over from Cornwall – dinners which acquired legendary status for their extravagance – where news of the mine would be delivered to shareholders. (The count house is the mine office, where the managers worked and where the miners were paid. You’ll still find pubs or estuarants in Cornwall called the C

A interview in today’s programme with a highly eloquent young man, Peter Young, of the Free Cities Foundation. Peter discusses China (he lived there for ten years), the Free Speech Foundation and, finally, whether today’s young will end up poorer than their parents. For details on Peter’s October conference in Prague, visit Life Time Liberty.The Flying Frisby is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

There have been some developments behind the scenes at The Flying Frisby, which are going to add considerable value. In addition to my own contributions, starting this week, once per month for paid subscribers only, Dr John Wolstencroft is going to be writing for this Substack, sharing some of his investment ideas and research.I first met Dr John in 2006 at a dinner and talk by commodities trader Mark Shipman for a spread betting company. It was clear then that here was a formidable intellect and we discovered a shared interest in junior mining companies. John’s a doctor in computer science, by the way, not medicine, and at another dinner in 2007 - this time for a silver miner in which John had invested (and did extremely well in making 20 times his money) - John coined the expression “global margin call” to describe what he thought might be ahead. 2008 and the Global Financial Crisis duly followed and John began to acquire prophet-like status in my perceptions.I interviewed him many times on my podcast - then called Frisby’s Bulls and Bears - and in particular I remember one interview - 18 Steps to Mining Ruin - (YouTube version here) - in which he described how a junior mining company can take itself from a p/e of just 1 to a p/e of 100 in 18 easy steps. We were in the early stages of the mining bust, so again his words were prophetic. Many companies unwittingly followed his model.He might have these visionary qualities, but he can’t pronounce his own name. The L of Wolstencroft is, I argue, silent - as in calm, yolk or Holborn - and so Wolsten should almost rhyme with Worcester. John, however, smiles patronisingly and reminds me that it’s his name and not mine - the subtext being that he’ll pronounce however he damn well likes.Since the 2012-13 mining bust, John has taken a much more cautious, risk-averse approach to investment - seeking out safety, value, yield and so on. He is a great champion of investment trusts, a sector he follows closely. Penny stocks and the like are not for him. Well, they are. But not here .With this in mind, I have asked him to contribute to The Flying Frisby, as I felt he would add value for paid subscribers. While I can focus on the racier stuff, as well as bullion and bitcoin - all of which can multiply manifold in times of plenty - John will focus on much lower-risk investment trusts and the like, which will be more defensive and preserve capital in trickier times (such as now).John will be writing for The Flying Frisby roughly once per month, with the first of his missives - on oil and gas - to be published later this week. So look out for that. I’m thinking of calling his letters - Sensible Investment Trusts With Dr John - or something like that.This is still an experiment, but I think it will work out.Welcome Dr John.The Flying Frisby is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

After a month or so of welcome respite, the dreaded US dollar has got stronger again. It really is the scourge of everything.Stockmarkets have been walloped, the yen, pound and euro have been walloped, and commodities have been walloped. Again.The US dollar index shows the dollar against the currencies of its major trading partners – the yen, the euro and so on – so it is perhaps the most useful vehicle to study the dollar. Given the magnitude of foreign exchange markets and the fact the US dollar is the global reserve currency, I see its price as the most important price in the world. Here we see the US dollar index over the past three years. You can see that textbook double bottom it made in 2021, with the pattern completing in June. We were writing about it – see here and here.Since then, through all of the financial and inflationary turmoil of the past year, it has marched inexorably higher. Now it’s retesting its highs around 109.My stated fear for some time is that it goes to 120. Why 120? There is some history there.Here is the dollar since 1980. You can see that 120 is the level it got to shortly after the turn of the century – and where it peaked around 2001-2002, helping to usher in that epic bull market in commodities.It actually got to 165 in 1985 – after Fed chair Paul Volcker tightened a lot quicker and harder than anybody else (not unlike what is happening now). The G5 nations – France, Germany, Japan, the UK and the US – then agreed to weaken it so as to reduce the mounting US trade deficit. What followed were epic bull markets in both the Japanese yen and the German mark, and the stage was set for Japan’s “lost decade”.This agreement was known as the Plaza Accord. I don’t think we are quite at Plaza Accord levels of concern yet, by the way. Heaven knows what happens to the UK and Europe if the dollar goes to 165 again. But if it gets through 109, I would say 120 is back on the cards, possibly even this year, more likely early next.The US dollar is the best of a bad bunchThe euro just slid below parity with the dollar yesterday. The last time that happened was around the turn of the century (when it got to $0.82). It’s at 20 year lows. The pound’s at $1.17 – that’s flash crash, Theresa May Conservative Party Conference depths of rubbish.The reasons the US dollar is rising are fairly obvious. Capital is panicking and the dollar is the first place it goes to in a panic. It “should” be gold that capital flees to, really, but it isn’t. It’s the dollar. Then there’s the fact that the Federal Reserve Bank, America’s central bank, is tightening faster and more aggressively than the Bank of Japan, the Bank of England or the European Central Bank. Europe and the UK, meanwhile, have a plethora of gas-related problems and looming winter crises that they could do without.Forex-wise, the US dollar is the best house in a bad neighbourhood. You could say the same about its economy more generally.Yesterday was a grim day in the stockmarket, but there were some observations I was happy to make. First, that base metals – copper, zinc, tin, iron ore, and so on – which took one hell of a beating in June, actually held up quite well. That would suggest that they may have already made their lows.The action in precious metals – platinum and silver especially – over the past week has been less encouraging. Ditto bitcoin.Oil, meanwhile, looks like it is making an interim bottom and turning up. The last thing central planners want now is higher oil prices, but the market gods will care very little about that.Might be time to load up again on oil stocks if you are not already loaded. But more broadly speaking, these are risky markets, to put it mildly. Stay defensive, conserve capital, hunker down and await more benevolent financial times.If you are in or close to London towards the end of the month, I will be performing my lecture with funny bits, How Heavy?, about the history of weights and measures at the Museum of Comedy in London on September 28 and 29. You can buy tickets here.The Flying Frisby is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.This article first appeared at Moneyweek. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

How did gold come into existence? No one really knows.Its origins are thought to lie in supernovae and the collision of neutron stars. It was present in the dust which formed the solar system four and a half billion years ago and came to earth via the asteroids that then bombarded the planet.According to the Bible, gold and silver are products of God. “The silver is mine, and the gold is mine, saith the Lord of hosts” in the book of Genesis. Although - given that in those days the distinction between God and King was not that always that distinct - that might he been a ploy to control capital.Given its unique characteristics - beautiful, eternal, immutable - it is no surprise that gold found special status at the dawn of civilisation. Our prehistoric ancestors cherished gold even before they were able to speak. Nor did that captivation fade after pre-history. Whether Asian, African, American, Mediterranean, Germanic or Celtic, gold occupies a place in the history, legend, mythology and folklore of almost every ancient culture: the most prized of all metals. Today we know of 90 or more metals. Many you’ve probably never heard of, let alone touched or seen. The likes of Cesium, Nihonium, Flerovium, Moscovium, Livermorium, Yttrium or Zirconium. But until the 13th century we knew of just seven: gold, silver, copper, tin, lead, iron, and mercury. There were also only seven known celestial bodies: the sun, the moon, Mars, Mercury, Jupiter, Venus and Saturn. Each metal came to be associated with a celestial body - silver, light and shining, with the moon, iron, rusty and red, with Mars, Mercury with its namesake, Jupiter with tin. With its glimmering yellow colour, gold was associated with the sun.To the ancient Greeks, and other cultures besides, the sun was a golden chariot driven by the sun god, Apollo, across the sky each day. The Egyptian sun god Ra was depicted as a yellow blaze of gold. The Incas of South America believed gold to be the “sweat of the sun.” The Latin word for gold, aurum, derives from Aurora, the goddess of dawn, who rose each morning to announce the sun’s arrival. The root of the word by which the Celts and Greeks referred to gold was the Sanskrit “Harat” which means colour of the sun. The symbol for the Sun (a circle with a dot in it - ☉) was once the alchemical symbol for gold. Plato and Aristotle both thought gold was obtained by combining intense sunlight with water. We actually find gold in tiny particles embedded in ancient rocks, or as grains or nuggets in riverbeds where it collects after rushing water eroded away the rocks.There are seven days of the week too, and so did each metal come to be associated with a day. Gold’s day, of course, was Sunday.Unlike feminine silver, gold is a masculine metal, connected not just with the sun but with the lion, a symbol of strength. It represents wealth, prosperity, authority and charisma. It was an aid to healing, to protection, to growth, and knowledge - all qualities associated with the sun and the gods of the sun. The ancient Greek sun god Apollo was also the god of healing and diseases, while his son, Asclepius, was the god of medicine. Apollo delivered people from epidemics. What’s that about Vitamin D (which we get from sunlight) being an aid against COVID, while Vitamin D deficiency is linked to more severe cases? Apollo was also a god who could bring ill-health and deadly plague.Gold, like obscurity, is immortal. It is permanent, never rusting, nor tarnishing. In the museums of Cairo you will find a golden tooth bridge made 4,500 years ago for a pharaoh and it is good enough to go in your mouth today. Gold represented perfection, purity and excellence - “neither moth nor rust devoureth it”, said an ancient Greek text. Because of gold’s imperishable characteristics many imbued it with divine qualities, and it is forever associated with the eternal, the permanent and the incorruptible. Kings and queens decorated their bodies with gold to demonstrate their power, to impress, to dazzle, to command and to authenticate their god-like status. In ancient Egypt gold was a royal prerogative and pharaohs were buried with their gold to aid their travel into the next world. Tutankhamun, whose father was the sun god, Ra, was buried in a golden shrine. Gold was a gift from and given to the gods. Indeed it was the breath of the gods.The myth of the Golden Apples of Hesperides is that they conferred immortality on whoever ate them. From Hercules’ quest for these golden apples to Arthur’s for the Holy Grail to Frodo’s to destroy the precious ring of power, gold is a symbol of incorruptible quest, ambition, or purpose. Even today the young student gets a gold star, the athlete a gold medal. It is a symbol of achievement.For numerous reasons, I am a believer that everybody’s investment portfolio should have an allocation to gold. My recommended dealer is The Pure Gold Company. The Flying Frisby is a reader-supported publication. To receive new posts and s

Inflation in the UK has just hit 10.1%, says the Office for National Statistics. That is five times the Bank of England’s stated target of 2%. FIVE TIMES! Sorry to shout. The joy of the public sector is that you can be this bad at your job and still keep it. Inflation hasn’t been this high in over 40 years.Are you prepared?None of this should be a surpriseWhen you delve below the surface, it gets a lot worse. Retail Price Inflation (the old measure) is 12.3%.Energy prices are rising. We all know that. Food prices too. But the Bank of England base rate is still 1.75%. Carnage or not, it is going to have to go up. That means borrowing costs are going to go up. And house prices are likely to come down.The pain of all this is going to eat into your wealth. On the one hand the value of your most prized asset – your house – is flat or falling. On the other, your costs – from food to energy to monthly mortgage repayments – are all rising. And it’s doubtful your income is keeping up with the increase in costs.A lot of people are going to lose their jobs and their livelihoods in the squeeze (though no one at the Bank of England).And so much of this is self-inflicted.I get so cross when I hear officials say, “no one could have predicted this” and it is “beyond anyone’s control”. We have been warning about it for years on these pages.If the market set the price of money, you can bet your bottom dollar that rates would have risen a lot higher a lot quicker.What are the causes? There’s deglobalisation – China especially has been exporting its cheap labour and deflation for so long, low prices had become normalised. Now nobody trusts anyone any more and globalisation has slowed. You can’t blame those in charge for that.There are the Covid-supply chain issues and the punitive, punishing-the-British-for-Brexit legislation on the continent that is hampering trade and thus raising end costs. Dimwitted, short-sighted, beholden-to-the-Green-lobby energy policy leading to a failure to invest in fossil fuels and nuclear has put up energy costs.Failure to measure inflation properly for decades (especially not including house prices in CPI) has meant interest rates have been too low for too long and asset prices have got totally out of kilter. And finally – yet perhaps, along with artificial rates for years, most significantly – hundreds of billions of money created at no cost through Quantitative Easing, first post 2008 and then through Covid. In short: printing money, debasing money, misguided energy policy and bureaucracy. Too much government has caused this.Now the chickens are coming home to roost. The irony is there is a scramble for cash, even though cash is now officially losing 10% per annum.This must be one of the most difficult investment landscapes I have ever known. How to protect your wealthThe most obvious asset to own in all of this is gold. Yes, in US dollars at least, gold has been a dog since the spring. Not as big a dog as other metals, or indeed tech (until a month ago), but it hasn’t exactly been doing what it did last time all this was happening in the 1970s, although dont forget it has a 50% correction mid decade. The US dollar being so strong has masked things.But let’s look at gold in sterling, and the story is different. Here we see gold in pounds over the last ten years.It was £700/oz in 2015. Today it’s £1,480. A double. It’s in a clear uptrend, and has been a good, low risk hedge against incompetent leadership and the incompetent management of the pound.You can see how gold has been making a series of higher lows – since 2015 in fact. Each sell-off comes to an end at a higher price than the last.Even since 2021 this has been the case. The current sell-off since the spring Russia’s-invasion-of-Ukraine-high has been painful. But the low in July was higher than the lows in January. That is long-term bull market action.My concern looking at that chart is a potential double top just above $1,550. Maybe it all ends there. Maybe it has already ended there.But while this sequence of higher lows continues – and looking at the mess around me – I am going to give the bull market the benefit of the doubt.Self-inflicted or not, the Bank of England is caught between a rock and a hard place. It’s damned if it puts up rates and it’s damned if it doesn’t. It’s going to have to. Looking forward to the winter, it’s easy to see a host of problems – energy shortages, more Covid, further escalation in Ukraine, squeezed citizens, no end of political discontent.I don’t know where all this ends. Often I can see where stuff is going, but this I can’t without getting shudders. We’ll find a solution. We always do. We are human beings, we work, we create, we innovate, we solve problems and life gets incrementally better. But it feels like we are early- to mid-series rather than going into the final episode.So my advice is to own some gold. I’m glad I do. It helps me sleep at night. It’s about the one part of my portfolio that I’m

John Stepek is leaving MoneyWeek. I’ve known for a while, but as his final day was yesterday and we have just had his leaving drinks, so the implications are just sinking in. I first started writing for MoneyWeek in 2006, which means John has been my editor for 16 years. Week in week out, he’s had to plough through my twaddle. I reckon I have written at least 800 Money Mornings in that time (one Money Morning per week for 16 years), though the figure is probably closer to a thousand, as I’ve often written two per week. Plus the stuff I’ve written for the main mag. Each Money Morning averages 1,000 words, often more, so I make that close to a million words of mine that John has read, suffered and edited. What a saint. A happy accidentI’ve been racking my brains as to a memorable and suitable present to buy him, to say thank you. Then it came to me. What more appropriate way of expressing my gratitude than through a Money Morning itself. For all our plans, for all “the best laid schemes o’ mice an’ men”, life has a habit of taking the accidental route and so it was with my relationship with John. Although it never went, “gang aft a-gley.” Now if John was editing this, he would demand that I explain that Scottish poet Robbie Burns reference. I would say, “everyone knows that quote, we don’t need to explain it.” John would insist we do. And, in order not to patronise those that do know it, I would then find a way of explaining that “gang aft a-gley” means “go wrong” without overtly looking like I am explaining it. The result would be something along the lines of what you’ve just read. You now know, if you were in any doubt, that “The best laid schemes o’ mice an’ men. Gang aft a-gley” is a quote by Scottish poet Robbie Burns meaning, “even good plans go wrong”, but you don’t feel patronised because I’ve explained it, while apparently talking about something else. I learned how to do that through working with John.In MoneyWeek, of course, usually what needs explaining isn’t a great Scottish poet, but some incomprehensible financial or mining jargon. Back to the point. My relationship with both John and MoneyWeek all happened by accident. Back in 2006, as a jobbing comedian and voiceover artist, I had made a bit of money and I was trying to figure out what to do with it. In fact, specifically, I was trying to figure how to turn the pot I had into three or five million quid in order that I could make the musical Kisses on a Postcard happen. I didn’t entirely trust the fund managers I had met to achieve the unrealistic and astronomical multiples I was hoping for. So I started a podcast and began interviewing all these clever people I saw talking on the internet, such as Jim Rogers, Jim Dines and James Turk, to see if I could figure out a plan. Commodities and gold in particular seemed the route, and the show was called Commodity Watch Radio. One of the people I interviewed was Merryn, who said did I want to write a newsletter about commodities? I said I wasn’t sure I was equipped to do that. She said come into the office and have a chat. In I went to meet Merryn and the then MD Toby Bray. There was also some quiet bloke in the corner, John Stepek. We agreed that thrusting me into a newsletter might be a little premature, but John had started this daily email, Money Morning, and perhaps I could start writing, say, one per week and then we’d see how it goes and take it from there? Fine, I agreed.Here we are 16 years on and it’s still going. A temporary plan became permanent. A bit like Income Tax. MoneyWeek’s quiet, consistent rock Clarity has always been one of John’s priorities, but also neutrality. “You’re great on the financial stuff and the macro stuff, Dominic, but when you get onto politics, you get ranty. You confirm the biases of those who agree with you, you annoy those who don’t and you alienate the undecided,” he once said to me. That expression has always stayed with me: “alienate the undecided”. In today’s polarised worlds, if you want notoriety, it pays to be an Owen Jones or a Tucker Carlson, but that was never measured John’s priority, nor is it the MoneyWeek way, which aims to stay broadly neutral on politics. John has always edited my stuff quickly and well, but he’s never been precious about his edits. I, on the other hand, am a control freak, and John has let that be. He doesn’t seem to mind me re-editing his edits - no control freak he. The resulting compromise has almost invariably been a better piece. I have learned so much about writing in our time together. I always wanted to be a writer. I went to drama school because all the best writers started out as actors. But, bizarrely, it wasn’t the entertainment industry that ever gave me the break. It was finance, MoneyWeek, Merryn Somerset Webb and John Stepek. I’ve since written three books, several films and endless content, as you probably know. And here’s the bizarre thing: in all that time, I’d say I have met John in person fewer than ten ti

The Edinburgh Fringe Festival starts this week. It’s the world’s biggest arts festival, an event that sells more tickets than any other event in the world, with the exception of the Olympic Games.I shall be making my way up to Scotland’s capital to make my own little contribution, a new show that I haven’t finished writing yet (!), “a lecture with funny bits”, about the eternal subject that is weights and measures. Why do I say eternal?Because people have been arguing about them, and trying to impose them since forever.How French revolutionaries tried to decimalise timeThe very first legal documents we have from Ancient Mesopotamia depict rulers with the rod and ring – a yardstick and a measuring string – usually being handed to them by God, as they try and standardise measures in law. Ancient Egyptian documents, illustrations and hieroglyphs abound with similar references. Scales are prominent too.The opening words of the Bible establish our basic measures of time – the day and the week. This is something the French Revolutionaries tried to do away with in 1792 when they decimalised time. One week would be ten days. One day would be ten hours. One hour would contain 100 decimal minutes, and each decimal minute, 100 decimal seconds. Thus one day would be 100,000 decimal seconds per day. When the proles discovered that meant one day off in ten, rather than in seven, the system began to meet with considerable resistance and duly kicked out. The revolutionaries may have got their metric weights and distances over the line, but time was a step too far. What is a “step” by the way, but a measure? A vague but useful measure that fitbits and iPhones and health apps have become obsessed with. I did 14,126 steps yesterday. (It was a long day). What about you?“There is to be one measure of wine throughout our kingdom, and one measure of ale, and one measure of corn,” proclaims Magna Carta. “One breadth of cloths … and let weights be dealt with as with measures.”Even today, when Boris Johnson made announcements about being able to use imperial measures again, the culture wars kicked off. In his 2019 election manifesto Johnson pledged “an era of generosity and tolerance towards traditional measurements”. To the Guardian, however, this was xenophobia and pseudoscience.Which is best – “free market” imperial or “central planning” metric?I often go to the Edinburgh Fringe to do “lectures with funny bits”. In 2016 I did one about tax, which would eventually become my book Daylight Robbery. In 2019, I did one about the philosophies of Adam Smith and how they related to the economics of the Fringe, which would eventually become a film, Father of the Fringe. This time around I thought it would be interesting to do one about weights and measures. I’ve since discovered the subject is enormous and endless, which is why I haven’t finished writing it yet. (It’s going to be held in Adam Smith’s old front room at Panmure House, so a wonderful historic setting.)The inevitable question that gets asked is: which system is better – imperial or metric? I would answer, with the bland neutrality of the on-the-fence politician, that they both have their place.I grew up with the metric system. That was what I was taught at school. But as I’ve grown older, I’ve found myself thinking more and more in imperial. Feet make more sense to me than 30, 60, or 90 centimetres, or 1.2, 1.5 or 1.8 metres. Inches – a thumb pressed down – make more sense than centimetres. A hair’s breadth means more than a micrometre. I find it easier to orient myself around pints than I do litres, around pounds – the amount you can easily hold in your hand – than I do kilos, and around yards – a pace – than I do metres.But the problem with imperial is that it was never a designed system in the way that metric is. Most measures emerged over time through use. Impractical measures got abandoned, and practical ones stuck. The buku was the distance from which the cry of a buffalo could be heard in Russia. No doubt an extremely useful measure in a country with such vast expanses of land, but of little use today. The pound we use today, however, roughly corresponds with the Babylonian “mesa”. Shoe sizes are defined by barleycorns. A fathom is one’s arms outstretched – 6 foot. A really useful distance, especially for depth. 6 foot is the depth to which in water we can just about stand up in - or bounce - without having to swim.But there are a gazillion measures that found common use in history that have fallen by the wayside. It’s very much a market driven system.Yet as soon as you start to analyse it with the logic of the planner, imperial measures look nuts. Just take a look at some of the flow charts to explain imperial measures on Wikipedia and elsewhere if you want to understand how nuts it looks. Why can’t we just have both?Americans have a “dry gallon” and a “liquid gallon”. What’s more, their gallon is not the same as our imperial gallon (one of the reasons petrol there se

Are the people at the top – the directors – buying or selling shares in their own company?If they are buying, that’s usually a good sign. But if they’re selling, not so good.They might be selling because they need the money for something: to buy a property for example, to pay school fees, to settle some debts.Then again, they might be selling because they don’t like the look of what’s going on.Directors’ dealings can offer telling signals as to whether insiders think the company is about to thrive or dive. That’s why so many follow them.With that in mind, I had a meeting with Joshua Saul yesterday, CEO of bullion dealer and storage company, the Pure Gold Company. He told me something that I found fascinating - similar to the value of director dealings as a potential indicator. I’d like to share that knowledge with you today.Who’s been buying bullion and why?Why are doctors queuing up to buy gold?The Pure Gold Company must now be one of Europe’s top bullion dealers, with a large and varied customer base, from institutions to individuals. As such, it knows who is buying, who is selling and to what extent.But, to help them make the right investments, it also makes an effort to get to know its clients: are you old or young? What do you do for a living? Why are you interested in buying gold? And so on. As a result, it gains an insight into people’s professions and motivations and that data, “both quantitative and qualitative”, to use Saul’s words, “reveals trends about the market”.There has, over the past couple of months, been a marked increase in buying from two professions: doctors and investment bankers. Weird, huh? The latter I sort of get, but the former.Most doctors I know work pretty hard. Their diaries are full and their time is precious. Unlike many other professions, I would venture that their ability to monitor markets, research investment ideas and so on is limited. (Any doctors out there, please correct me if I’m wrong).You have to be bright to make it through medical school, to qualify and practice, so doctors, for the most part, are not stupid. But at the same time, I would venture, as a rule, that their fingers are not particularly on the investment pulse, unless their investments are somehow related to the medical field – which gold isn’t.So what gives with doctors buying bullion?Doctors for the most part have money. It’s a well-paid profession. In some cases very well paid. And they are making money all the time. “My belief,” says Saul “is, first, they’ve been too busy up until now to take much of an active role in their investments, but having seen their pensions fall, have started to to be more proactive – driven primarily by safety and security”.Makes sense. They’ve been making good money, but on the other hand, they have been watching the value of their Isas and pensions fall quite dramatically. As a result, they are turning to the alternatives, which are gold and silver.Investment bankers are getting keen on gold again“Why then has there not been an uptick in, say, lawyers or pilots or computer programmers?” I ask. There has been, it turns out, but the most notable increase has been doctors – by 44% in the last four weeks – and, as we are about to consider, investment bankers. Investment bankers’ buying of coins and bars has increased by a – quite astounding, in my view – 59% over the past four weeks. I have to say, the implications of a 59% jump in investment bankers buying gold for their personal portfolios has some alarm bells ringing. What’s going on at the banks? Are there problems looming? What do they know that we don’t? Something similar was going in the lead up to the Lehman crisis.Possibly so. When asked about their motivation and timing, says Saul, many cited counterparty risk, exacerbated by the severe inflationary environment. Political uncertainty has been a factor too. Many fear inflation. The high cost of sitting in cash while waiting for opportunities in other asset classes, has become too high. The other factor cited was the consequences of escalating interest rates at a time of high and increasing debt, both individually and nationally. Overall, says CEO Saul, there has been a 39% increase in people purchasing gold bars and coins in July compared to the monthly average over the last 12 months, and a 42% increase in people purchasing silver bars and coins.Perhaps more tellingly, there has been a 67% increase in people selling equities within their pension to purchase physical gold bars within the same vehicle. This type of knowledge may mean absolutely nothing. I don’t think it’s reason alone to go out, sell everything, buy gold and run for the hills. But it’s one of those telling insights, I’d say, to have at the back of your mind as you make your broader macro investment decisions – how you determine your asset allocation. People are buying bullion. Especially investment bankers. It also explains the uptick in people asking me how to buy bullion. If you’re concerned ab

I was at a dinner the other night with a buddy who is a much cleverer investor than I am. The conversation went something like this.Clever Mate: “Inflation is 10%. Rates are going to have to go to 10% to get it under control. I’m 60% in cash.”Me: “The system can’t take rates at 10%.”Clever Mate shrugs. There is an awkward silence.Clever Mate: “It will have to.”Another more awkward silence follows as I digest the implications. Do central bankers have what it takes to tackle inflation?Have today’s central bankers – the liof Jerome Powell, Christine Lagarde and Andrew Bailey – got the bottle to “do a Volcker” and put rates up to these kinds of levels? (In 1981, then-Federal Reserve chairman Paul Volcker raised the Fed Funds rate to 20%.).It’s not just the chair or the governor, of course – though they will be the ones making the announcement – but the boards behind them. To make such a decision, with such ramifications, would not just require extraordinary bottle, but extraordinary conviction as well. It’s hard to have one without the other. I’m not sure Bailey or Lagarde have the right belief systems. In the case of Lagarde, I’m as sure as dammit the career and reputational risk would be intolerable to her.So my view, on this side of the Atlantic at least, is that a softly, softly approach will prevail and that rates will go up slightly, while those in charge prevaricate and hope that this unfortunate inflationary episode does prove to be temporary and passes.We will have a clearer idea of Powell’s intentions later this week when he makes his announcement.But here’s the point. Volcker is widely credited with curtailing the inflation of the 1970s. However, when he was appointed in 1979, inflation was long entrenched. From the Vietnam War to the abandonment of the gold standard in 1971 to the oil crisis of 1973 and through all the economic turmoil of the 1970s, inflation was not something new or just a few months old, as this episode is today. Volcker’s hiking of rates came off the back of a decade of this and, what’s more, President Carter appointed him specifically to do what he did. Even against all of that, his actions still provoked enormous ire.Today’s central bankers do not have the same backdrop. The inflation narrative is too new, and there is still the hope that this is all temporary. So my forecast is for them to do the least possible for now, with Powell probably remaining the boldest of the three. Rates may have to go to 10%, as my buddy argues, but the stage is not yet set – and this current pullback in commodities may give them some respite.Inflation redefined I had a thought in the shower this morning, as you do, and it was this.The classic definition of inflation, as regular readers will long since know, is “the expansion of the supply of money and credit with the consequence of higher prices.” You inflate – blow up – the money supply and, as a result of there being more money about the place, prices go up.However, because of semantic shifts (which is a high-falutin way of saying “a shift in the meaning of language over time”) this is no longer the definition of inflation. Inflation now just means “higher prices”. Somewhere along the line, whether due to a conspiracy by central planners and bankers is not known, the bit about expanding the supply of money and credit got dropped. The semantic shift has gone a stage further still. Inflation no longer means just rising prices, but rising prices of goods and services included in the core price index (CPI) measure of inflation. So house prices rising, for example, doesn’t mean inflation. It’s nuts because, as we know, the main reason house prices go up is because of an increase in the supply of money and credit – more and cheaper mortgages.However, such semantic shifts are beyond the power of this lowly writer to control. So there is little more I can do than rage, rage against the dying of the light, then go about my day.Anyway, I’ve got through the preamble, so here’s the thought. Inflation, by its modern definition, actually leads to a shrinking of the money supply, or at least it should do, if central banks follow their remits to curb it. If inflation is 10% then rates go up to curb it (though perhaps not as high as 10%). As rates rise, many deleverage and pay down debt. (Leverage is another means by which money and credit are created). If rates rise a lot, this can become a scramble.In other words, with inflation (by today’s definition) the supply of money and credit contracts. That means asset prices – house, bond and equity prices – fall, as they are what we use leverage to buy. Even car prices. (Finance costs more).These are mostly not included in CPI, but in such a deflationary event as interest rates rising to levels concomitant with current CPI inflation, you can expect CPI to fall too. To summarise, inflation originally meant the expansion of the money and credit supply with the consequence of higher prices. Today inflation, and the cent

Metals are not going to stop crashing until the US dollar turns.I’ve been banging on about that for some time. I don’t know when that will be. Nor does anyone. But this US dollar action feels like the parabolic blow-off that you get towards the end of bull markets, rather than the creeping disbelief you get at the beginning.I’m hearing talk of forex interventions coming. That may or may not be so. So I’m not ready to pull the trigger just yet. But… I’m closely following the price action of two metals that look remarkably cheap. They are silver and platinum. I mentioned them last week.Platinum looks cheap, regardless of what happens nextThe case for platinum, the main use of which is in catalytic converters for diesel engines, is pretty simple. You would normally expect it to trade at a 25% premium to gold. That is the historical average. But demand has been shattered since the Volkswagen emissions scandal of 2015 and the subsequent move away from diesel engines.Gold is currently at $1,720/oz. If history is any guide, platinum “should” be north of $2,000/oz. It isn’t though. It’s $830.I don’t really know what’s going to change on the demand side. Platinum may have a major role to play in fuel cells and the hydrogen economy (as a catalyst), but so far this has not been perceived as significant enough to push the price higher.In any case, here is a 20-year chart of platinum. I’ve drawn a dashed blue line around $780 and you can see the platinum has been below this level just once in almost 20 years – during the Corona panic of March 2020.It went to $600/oz intraday back then. Otherwise the $770 area has been the floor.So if you can pick platinum up below $800, let’s just say your downside is likely limited.And now to the disappointment that is silverSilver is not quite as clear cut. Oh, silver! How I used to love it back in the noughties. Experience changed my view. Was there ever a metal with so much potential? Silver is to electronics and modern tech as sugar or salt is to food. It is in just about everything. Then there is its monetary allure as well. Didn’t silver go to $50 during the inflation of the 1970s? Aren’t you supposed to take refuge in precious metals during inflationary episodes? Here we are in 2022 and silver has fallen off a cliff. It’s sitting at $18. For five years between 2015 and 2020 that $19-20 area was resistance. Technical analysis 101 says $19-20 should now be support. But silver – being silver – has cut straight through it.It went to $12 in the corona panic and $8 in 2008, but the $14 zone has for many years been a pivotal price zone.Here’s a long-term chart with a dashed line drawn at the $14 mark.Can it get to $14 on this move? It would be extraordinary, given the amounts of money that have been printed, for it to go that low. There should be some support at $18 and at $16, but it’s silver, so never underestimate its capacity to disappoint.If the US dollar index goes to 120, a number I’ve been harping on about for months, then silver will get that low. And in a panic it will probably surpass it (if surpass is the right word).As I say, I’m not quite ready to pull the trigger. My appetite for risk has been somewhat tempered by the market action of recent months. But, as with platinum below $800, your downside is limited buying silver at $14 or below.When I say buying silver or platinum, I don’t necessarily mean going down to the bullion shop and buying bars, nice though they are. I mean physical metal stored in vaults, ETFs (exchange-traded funds), mining companies, even options or spread betting the price (though these last two are only for the experienced and highly risk-aware, so if you don’t already know how to do it, I suggest you don’t).If we get to those kinds of levels I’ll put out another piece explaining in more detail some ways to play it. I must say if silver goes to $14 I’m likely to get out the leverage.But I’m not quite ready to pull the trigger yet. Bottom fishing is a dangerous, and often expensive game. However, silver and platinum are very much coming into the “buy” zone. And at a certain point they will be irresistibly cheap. I’d say we are nearly there, but not quite yet. Patience…For those after physical metal, my current recommended bullion dealer in the UK is The Pure Gold Company, whether you are taking delivery or storing online. Premiums are low, quality of service is high. You can deal with a human being. In Ireland it’s Goldcore. Both deliver to the UK, US, Canada and Europe, or you can store your gold with them. I have affiliation deals with both. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

We suggested a couple of weeks back that oil might due a hit as seemed the only sector that hadn’t been walloped and so it has turned out. Both Brent and West Texas Intermediate slid back below $100 a barrel joining metals on the downward slope. Metals have been battered even harder, of course, with silver – as often seems to be the way – leading the fall downwards. How can silver be trading below $20 an ounce? How can platinum be below $850?I’m not saying they aren’t going lower. They probably are. But there’ll come a time in the future when we’ll be wondering how on earth it was possible to buy these metals at these prices. Silver below $20. Platinum below $850. Platinum is half the price of gold!Remember when nickel went to $100k per tonne? It’s $21k now.Wheat’s at $800. It was $1,300 in March. Corn, oats, soybeans, lumber – you name it, there’s pain. Never underestimate the bust-to-boom-to-bust potential of raw material markets, I guess is the lesson. They always seem to return whence they came. With this rout in commodities prices, this inflationary episode could yet prove to be transitory. (I stress I’m using the word inflation with its modern meaning: rising prices of goods in the CPI basket. The other kind of inflation – debasing money by creating too much of it – isn’t going anywhere). The villain in the piece has been the US dollar. The dollar index is now at 107. Can it go higher? Maybe. It’s come a long way already.June of last year we thought it had made a double bottom at 89-90. 103 was the huge line in the sand. It got through that at the second attempt. 120 is the next big one. It really would be an outlier if it got there – but this is a time of outliers. The euro is now $1.01. Parity beckons. In 2000, with the dotcom chaos, it got to 82c (this was also before it had fully launched across member states). Is it going there again? Again, it would be an outlier, but it’s possible.The pound’s at $1.18. I wouldn’t rule out parity there either.Could capitulation by the Bank of Japan mark the end of the dollar bull run?But I will say this. “Long dollar” is a crowded trade. Everybody’s talking about it. When it turns – and it will sooner or later – there’s going to be a lot of money made on the other side of this trade. FX traders are going to be all over it. Long anything anti-dollar – gold, the euro, perhaps even the yen.The yen’s at lows not seen since the Asian crisis of 1998. But could Japan have its own “Swiss bank” moment?I’m referring to 2015, when Switzerland announced that it was going to abandon the franc’s peg to the euro (it was pegged at 1.20 euros to the franc) and the franc instantly shot up 20% as a result. That is an astonishing amount for a major currency. The move destroyed many a forex trader’s fortune, not to mention the many people who had Swiss-denominated mortgages and other forms of debt. Many of them were from poorer nations with weaker currencies.The yen is not pegged to any currency, but the Bank of Japan has committed to holding its benchmark 10-year government bond yield to 0.25%. With this so-called yield curve control, it pins down borrowing costs and “stimulates growth” (ergo cause asset price inflation - except that it hasn’t worked for years).For decades now, shorting Japanese bonds (ie betting on higher yields) has been the mother of all widow-maker trades. I’m not ready to fall into that trap, even if Japan’s buying of its own bonds has gone nuts. The government now owns over 50% of its own bonds, and the rate of purchase has accelerated as it tries to hold the 10-year yield at 0.25%, even as the rest of the developed world starts “quantitative tightening” (ie doing the opposite). Don’t fight the printers. You’ll lose.But even with private sector savings exceeding the fiscal deficit and so much government buying, there is a possibility Japan has to stop defending the 0.25% mark. It may be because yields get too low relative to other nations’. It may just be that inflation pushes it over the brink (and a weaker currency means higher inflation).But, cripes, there is some reversal in the yen (and thus in the dollar) that is waiting to happen.Here’s the yen since 1990 (when the red line falls, the yen is getting weaker – the Y-axis shows how many dollars you can buy for 10,000 yen).I don’t know when the dollar turns – but there’s going to be a mad scramble when it does. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

A week or so ago, the selling action in the stock market had grown so bad that a number of folks thought a crash was back on the cards. It started to feel like that again this week.But crashes are rare events. They don’t come along very often.The 21st century has seen two so far. That’s rather a lot by the standards of the previous century, when there were perhaps five or six in the US over the course of 100 years – 1907, 1929, 1937, 1962, 1987 and 1990. It depends how you define crash of course. You could argue there were just three. The probability is, then, that if you forecast or expect a crash, you are going to be wrong. Even the great short sellers who made fortunes during crashes – Jesse Livermore in 1929, Stanley Druckenmiller in 2008 – will tell you that 90% of their fortunes were made on the long side, especially in growth stocks. (That’s what Druckenmiller says, at least).Yet, a bit like ghosts and UFO landings, crashes make for good copy. Predicting crashes gets you lots of clicks and lots of followers. I think we all have an innate obsession with them. The thought of a crash and losing everything lingers at the back of every investor’s mind, the worst-case scenario.But, as I say, selling pressure got so extreme a week or so ago that it really started to feel like a full-on crash could be on the cards. Stock markets rallied a bit, then sold off again, then rallied. The pressure might have eased, but I can tell you, I was feeling the heat, and I bet you were too.What triggered me was a recollection of 2008, when markets had been in abject decline for some months, but the oil price kept rising. It made its way all the way to $150 a barrel, or thereabouts, in July of that year, before capitulating along with everything else by the autumn.It occurred to me that something similar wass happening this year. Markets generally were declining, while the oil price kept on rising.Oil price surges are driven by genuine demand, but there is always a lot of hot speculative money in there as well, which means the rises and the sell-offs can be a bit more racy than perhaps they otherwise would be.What previous crashes can tell us about what might happen nextIn any case, history often rhymes, as the saying goes, and humans will always be humans with the same psychology, and so there is some value to fractal patterns – that is, looking for similar price patterns from different periods – if you are looking to ascertain how likely certain outcomes are.I spent some time at the weekend comparing the price action of various asset prices in the lead up to the crashes of 2000 and 2008 – the S&P 500, gold, copper, Brent crude and the long bond – compared to the price action of late.I’m not going to post a chart as there are too many squiggly lines, and it’s confusing. But the sequence has been as follows: bonds made a high at the beginning of December 2021, then relentlessly declined. Stock markets (S&P 500) peaked at the beginning of January 2022, then relentlessly declined. Brent, gold and copper all peaked in March, with gold and copper all going into relentless decline. Oil then had another rally and peaked in early June. Now we are having a bit of a relief rally in stocks.So to summarise – bonds, then stocks, then precious and base metals, then oil. Then relief rally in stocks.Turning to 2008, bonds rallied, as everything else crashed, so there is no correlation. But otherwise the sequence is similar. Stocks peaked in October 2007, then gold and copper peaked in March 2008. Gold then fell, but copper had another rally, eventually peaking with oil in July. Then they began their fall. Stocks had a relief rally for a couple of months. Then in September we went into global free fall.Bonds aside then, the sequence is similar enough to be concerning.As for 2000, bonds peaked over a year ahead of stocks, declined, but then rallied as stocks fell.Gold peaked six months ahead of stocks – which peaked in March 2000. (Gold was at the end of its worst bear market ever, so I am not even sure comparisons are valid here). But then copper and oil peaked shortly after stocks re-tested their highs in October 2000.So leaving aside bonds, there is a definite sequence of stocks peaking, followed by base metals and oil a few months after, then the big declines.We are following a similar sequence now. Sentiment is so low, and markets so oversold, there is a part of me that thinks we have already seen the low. But I’m also conscious that a relief rally in stocks now, with weakness in metals and energy, is worryingly close to the 2008 crash template, and to an extent the 2000 template.So stay defensive. Maybe not time to bet the house just yet. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe

I haven’t covered the perennial disappointment that is gold for a while, and I felt the metal is overdue some attention, so that will be the subject of today’s missive. I say perennial disappointment, because gold “should” be so much higher. In any case, it’s summer. Usually, the best time of year to buy each year is in the June to August timeframe, so perhaps it’s time to allocate some funds that way. I stress “usually”, not always. A summer low in gold is frequent enough to be noticeable, but not consistent enough to be reliable. A bit like your errant teenager’s mood swings.In terms of price, the high for the year was $2,080 per ounce – printed in March shortly after you know who invaded you know where.The low for the year was $1,780 – that came in January. We also came close to that figure in May ($1,785 was the low).And today we are meandering around the $1,820 mark, which is also where the 52-week moving average lies. That’s actually quite a telling little fact. For all the declines we’ve seen elsewhere in stocks, bonds and crypto, and the ensuing erosion of wealth, gold sits at its one-year average. In other words, it’s done what it’s supposed to: preserved its value, and preserved your capital.And that’s with the US dollar so strong. Gold has been doing better than you thinkGold has actually done rather better against other currencies. The chart below shows gold in dollars (red), but also gold measured in pounds (blue), Japanese yen (green) and euros (yellow).You can see that against all those three currencies, gold is not far off its all-time highs. If you’re Japanese, European or British - all good then.Here’s another way of looking at the same thing. This is gold against 18 national currencies in 2021. It might be down a little against some of them – the US and Canadian dollars, the Chinese yuan, the Brazilian real, the Mexican peso and the Russian ruble (how has the ruble been so strong?!).But it’s up, significantly in some cases, against others – the Argentinian peso, the Swiss franc, the euro, the pound, the Korean won, the Japanese yen and, of course, the Turkish lira.Gold’s price is being determined then by the much bigger market that is the US dollar, as much as anything. Where’s the US dollar going next? Your guess is as good as mine. Monetary policy is tighter there than elsewhere, it’s the first port of call for capital in a panic, and so the dollar keeps rising. Currently at 104 on the index, it could go all the way to 120. Unlikely, but it’s been there before. If it does, gold almost certainly won’t be going anywhere significant.But of course, if the dollar heads lower – and it will if other countries start to tighten as much as the Americans – then gold will make a move. I gather analysts at Goldman Sachs have just put a $2,500 year-end target on gold. That would be nice.Is gold heading for a repeat of the 1970s?So many comparisons are being made between today and the 1970s. Politically and economically there are parallels galore. The big differences are technological. Nevertheless, gold had one of its best ever decades in the 1970s, going from $35/oz in 1971 to $850 (albeit briefly) early in 1980. It was bonanza time for gold mining.But even within that bonanza decade, gold went through a near two-year bear market in 1975-76 that saw it fall by nearly half – going from around $200/oz to $100. Imagine if gold went to $1,000 now. That would be hard to swallow. Here is gold during its glory years. Longer term, the fundamentals of out-of-control inflation, geopolitical instability, escalating de-globalisation and weak, unpopular leadership all tend to be drivers of flight to gold. But it remains an analogue asset in a world, where all the value is digital.It was me that first made this comparison many years ago, though I still haven’t decided what the answer is. The horse was transport for thousands of years. It was “natural transport”. With the invention of the car it became irrelevant.Gold too was money for thousands of years, “natural money”. But with digital technology and modern communications, is it now as irrelevant to finance and the horse is to transport?Or, like King Arthur to the English, will gold return to finance to save the people in their hour of need?I guess, until it actually does shows up, we’ll never know the answer From a technical perspective, that enormous cup-and-handle formation, built up over a decade, remains in play and looks ready to propel gold higher. I’ve illustrated it here.Cups and handles are another of those commonly observed chart patterns – like “double tops” or “head and shoulders” – which are fairly self-explanatory. This one was first observed in the 1980s. Investopedia calls it a “technical chart pattern that resembles a cup and handle”. It is considered a very bullish signal.If it plays out, it will give Goldman Sachs their target. And some.I own gold and I’m glad I do. I may be rude about it, but I love it. And it’s the one part of my portfolio

I keep thinking about that interview with Stanley Druckenmiller.Druckenmiller, a legend in US investing, worked with George Soros for many years, 12 of them as lead portfolio manager of Soros’s Quantum Fund, when he, among other things, spearheaded the infamous “Black Wednesday” raid on the pound in 1992 that forced the UK out of the European exchange rate mechanism (ERM). His own fund’s performance over many decades, year-in, year-out, is almost without equal.The part that really struck home with me is what he says was the key thing he learnt from Soros: “sizing”. Others might call that: how much to speculate or invest. Others: how much to risk. Others: how much of your portfolio to allocate. “Sizing is 70% to 80% of the equation. Part of the equation is seeing the investment, part of the equation is seeing myself in a good trading rhythm. It’s not whether you’re right or wrong, it’s how much you make when you’re right and how much you lose when you’re wrong”.“I believe in streaks,” he says, “Like in baseball. Sometimes you’re seeing the ball, sometimes you’re not. And my number one job is to know when I’m hot and when I’m not. When I’m hot, I need to turn the dial straight up. When you’re cold the last thing you should do is make big bets to get even. You need to turn yourself down.”The reason this has struck home with me – and perhaps might with you as well – is that I am not hot at the moment. I’ve had streaks when I’ve been great. Every stock I cover, every call I make, every buy or sell is red hot and bang on the knuckle. I could go through old articles and pick winners that eclipse other commentators.Perhaps you followed me into these trades and made out like bandits as a result.But I’ve also had streaks when I’ve been awful. And I could go through old articles and find you plenty of those too – articles that, when looked back on now, make me look a laughing stock.Perhaps you followed me into those and made out like a bandit who’s just been put in jail.Looking back, I first thought my hot streak came to an end in the spring, in early March. I was bullish on metals – I bought into the decade-of-under-investment narrative (and I still do) – but failed to fully heed to the Ukraine invasion “pop and drop” factor, followed by the impact of China lockdowns, never mind the broader market weakness.But now I realise my mistakes go back further – into 2021 – with a failure to see the tech bear market for what it was sufficiently early to have gone on the defensive. One part of my portfolio was doing well, so perhaps it concealed the other.Then, of course, since the spring decline of everything, I’ve taken some big hits. I imagine you have too. And I have been too slow to react.That’s another thing Druckenmiller talks about by the way: act first, research later. Markets move quickly, ideas spread fast, especially good ones, so it pays to get positioned. You can always exit if your research changes the story.As well as a failure to recognize what was what, or only half recognising it, and being slow to move, my risk management was poor. So to Druckenmiller’s “how much you lose when you’re wrong” – my answer? “Too much”. I should know better, and I’m more than a bit cross with myself. Nevertheless, I have been on a bit of a tidying-up exercise, re-evaluating positions and so on. I’ve also been working on my fitness as I believe that helps you make good decisions. What I’m betting on nowRightly or wrongly, I sold down some of my oil positions last week, as I felt oil could be the next shoe to drop in these ongoing liquidations. I sold down another couple of positions elsewhere that I felt had got tired so as to have some cash in case this bear market has another leg down (none of the companies discussed with paid subscribers, don’t worry).I spent some time comparing the movements of various asset classes from 2005-09 to the movement today. My memory was that stocks peaked, then a few months later metals peaked, then oil peaked – then a few months after that everything crashed.The sequence has been similar this year, so I am now concerned that another crash is on the cards. I tend not to bet on crashes, or indeed predict them, as they are rare occurrences. With two big ones this century and maybe three or four whoppers in the last, they tend to be outlier events. Predicting crashes may get you extra hits and clicks, but more often than not, you’re wrong.But my revaluation has now persuaded me that whether we crash or not in the autumn, I think we are bouncing now. It might be a change in trend (we have seen the low) or a counter-trend rally (further lows to come). So I’ve actually ended up, after selling a bit, now buying a bit (a simple long on the S&P 500). This might all sound contradictory, but trading and investing often are. You change your mind. I’m glad to have reached where I’ve reached, because it has been the result of thought, analysis and conscious decision-making, rather than laziness, following other

I wanted to discuss the natural resources industry today – energy and mining – because I see an industry caught between a rock and a hard place. If I get a bit ranty, I apologise. But this impossible situation makes me get a little frothy at the mouth, because it is in large part so unnecessary – and not the making of the industry itself, but of idiotic policy.We, as investors, however, need to understand the binds in which businesses find themselves, so here goes.We’ll start with supply chains.Disrupted first by Covid-19, then the Ukraine War, then more lockdowns in China, supply chains are still not working as they should. You don’t need me to tell you that delays cost money. Imagine a workforce ready to go, and being paid – but without the right equipment to get started. Money is draining out of one side and nothing is coming in on the other. This is particularly punishing where capital is tight. And boy, is capital tight in mining.Then there is, as we all know, dramatic inflation in input costs, especially energy. Budgets to production are going up, up and up. Money is also tight because of lack of investment. This lack of investment takes many forms. First there is under-investment from outside. ESG (environmental, social and governance) guidelines determine where many fund managers allocate capital. Oil, gas and mining, for obvious reasons, tend not to score so well on ESG, so capital is not allocated there and the industry is starved of funds.What’s so hypocritical is that ESG demands, and the decarbonised future it wants, require enormous amounts of the very products that its investment guidelines steer it away from: metals. Copper, tin, silver, lithium, cobalt, palladium, platinum, nickel, manganese, rare earths – the list goes on. They are all essential to a low-carbon future. But how are they to be produced without investment?Vast amounts of carbon must be burnt to achieve decarbonisation, yet oil and gas have also suffered from lack of investment. It’s one of the reasons prices are now so high – lack of new supply. Yet instead the companies involved are accused of ramping up the price and profiteering. The industry is wary of expansion tooThen there is a lack of investment from within. The industry still has memories of 2013-14, when mining in particular had, as metals analyst, Nicholas Snowden of Goldman Sachs puts it, a “near death experience”. The collapse in the oil price decimated energy too.This near-death experience followed the bonanza of the 2000s, when it seemed that metals and energy prices could only go higher, driven first by China’s seemingly insatiable appetite for natural resources, and then the money printing post-2008, during which the US exported incredible amounts of inflation. But those soaring prices suddenly came to a halt. Supply met demand, prices collapsed and with them the oil, gas and mining industries. Many companies went under. People lost their jobs and their livelihoods. Worse still, those who work in the mining industry tend to have a habit of investing in mines too – so their investments went down the Swannie as well.As a result there is “internalised trauma” – Snowden’s words again – and it is now uber-cautious. Nobody wants to be the stupid guy who blows fortunes on projects that prove uneconomic. So despite all the shortages in energy and metals we keep reading about, the industry is still cautious – probably a sensible mental space to be in.Rising commodities prices, especially those of oil and gas, may largely down to ten years of underinvestment, yet still the industry is reluctant to go all in. But can you blame it? Look at what’s happening in markets across the board. We’ve got a spiralling US dollar, crashing bonds and equities, and money is tightening. Even the UK housing market looks dodgy. The next asset class that looks like it is puking is, despite everything, oil (and policy makers would actually welcome that). I was listening to a debate on Bloomberg last week between someone from the US government and someone from the US oil and gas industry. The former was demanding that oil companies re-invest their profits in the ground – in exploration – so that production can be increased and the load on the US consumer lightened. The latter was arguing that profits should be returned to investors in the form of dividends, as that’s why they invested in the first place. The former then, basically, said that if you don’t re-invest your profits in the ground of your own accord, we are going to force you to do it by government mandate. That’s hardly going to entice further investment!What if companies are forced to put their profits back into the ground, and the price of the underlying commodity collapses? That’s what the industry is so terrified of, so it tries to find a balance between re-investment and rewards to existing investors.Why should they re-invest capital, when governments have said they want an end to fossil fuels? What’s the point?You (literally

I don’t listen to as many interviews and podcasts as I used to, or indeed as I should (more fool me), but this interview this week with legendary investor, Stanley Druckenmiller, happened across my desk and I highly recommend it, if you can find the time. It’s long, but well worth it.Druckenmiller founded Duquesne Capital in 1981 and closed it 2010 with some $12bn in assets. He is said to have made $260 million in 2008 alone. He was also, from 1988 to 2000, lead portfolio manager of George Soros’ Quantum Fund. (Many of the best parts of the interview regard what he learnt from Soros).There are great stories, insight and wisdom, and a great deal to learn from him.Here are some of my take-aways:In his 45 years as a chief investment officer, today’s set-up is like nothing Druckenmiller has ever seen, because the bond market is so distorted with all the central bank buying of the last 12 years. He is not sure how it pans out. Normally, if he sees a bear market, he would hide in bonds. But that is not such an obvious option, when is inflation 8% and they are only yielding 3%. (Currently he seems to be mostly on the sidelines - more on this in a moment).“Once inflation gets above 5% it has never come down unless the Fed funds rate gets above CPI. And that is currently 8%.” He doesn’t think the Fed funds can get to 8%.He is generally bearish regarding today’s markets, but also makes the point that he has an overly bearish mindset, and part of his process is managing that. 90% of his fortune, and of any good short-seller, he says came on the long side, in growth stocks (in his case). The maths is with you.Think a year aheadStock markets are predictive - particularly companies within the stock market. The homebuilders, the truckers, retail - they can all tell you where the economy is going 6 months or a year from now. (He thinks a recession is likely). Retail investors tend to focus on what’s happening right now, and that is why they do not outperform. Current fundamentals are already reflected in the price. His advice is to focus intensely on what moves the stock price - what’s going to change 18 to 24 months from now? Will the company be in better shape? How are people going to react to that change?“My number one advice: Do not invest in the present. The present does not move stock prices. Change moves them.”He is not a fan of the diversification advocated in business schools. A big problem for investors is stale longs and stale shorts, he says. One should have a good knowledge of all asset classes and be able to switch between them. The act of doing that keeps you on your toes. It keeps you thinking and questioning.If you have an idea, it often pays to act quickly on it, then do the research later. Today markets move quickly and there is often not time to wait on a good idea. If an idea appeals intuitively and fits with his macro thinking, he tends to invest quickly and then do further research. If he is wrong, he can get out quickly. Good ideas tend to spread fast in the market - people talk. When an idea catches on, a security moves fast, erasing much of the trade potential, so it is important to be in as early as possible. Soros has spoken of this strategy in his books as well.Never mind the market, what about you?A key thing he learned from Soros is that “sizing is 70% to 80% of the equation ... Part of the equation is seeing the investment, part of the investment is seeing myself in a good trading rhythm. It’s not whether you’re right or wrong it’s how much you make when you’re right and how much you lose when you’re wrong.”“I believe in streaks,” he says, “Like in baseball. Sometimes you’re seeing the ball, sometimes you’re not, and one my number one jobs is to know when I’m hot and when I’m not. When I’m hot, I need to turn the dial straight up. When you’re cold the last thing you should do is make big bets to get even. You need to turn yourself down.”He applies this same logic to those who work for him. Placing big bets with those within his firm, who are on a winning streak, and often even betting against those who are on losing streaks. We could perhaps apply the same logic to those we follow - to commentators such as myself: know when they are hot and when they are not. (I am not hot at the moment FWIW).Many great traders talk of the need for humility and part of Druckenmiller’s success lies, I guess, in knowing when to be humble - knowing when he’s off. On one occasion in 2000, he went to Africa for six months, switched out of the market altogether - no screens, no papers nothing - came back and made 40% in a month.Macro chaos comingDruckenmiller sees “macro chaos” in the years ahead and feels investors will need to be able to switch between assets. He is worried about global trade and does not rule out a return to the 1930s.He thinks blockchain is going to be very big three to five years from now, a major feature of finance - but has no major positions. He is too old to compete. He may go back to sho

Like Brexit, Trump, what a woman is, the BBC or vaccines, bitcoin has proved itself one of the battlegrounds in the ongoing culture war. Some people like it a lot. “Bitcoin fixes this” is the slogan, and bitcoin is thought to be the answer to any number of societal problems – from unaffordable housing, to government overreach, to the financial inclusion of the unbanked, the world’s poorest.There are many, however, who take the other view. It’s only used by drug dealers and money-launderers. It’s a Ponzi scheme, it can’t scale and it’s destroying the environment.The latter have been rather noisy of late. The reason? Bitcoin’s crashed. Again…Bitcoin has had a painful crash – but this isn’t that unusualLet’s start with the price. What was $67,500 back in November is now $21,000. It touched $20,000 on Monday. I make that a 70% haircut. Not good.But not so abnormal either. Bitcoin has had at least six corrections of 80% in its 13-year life – I make that one almost every two years. And yet, on broader time horizons, the network continues to grow, the number of users increases and the price appreciates. That kind of volatility is hard to stomach (particularly if you have a large portion of your net worth tied up in it, or, worse, on leverage) and it makes the case for it to become some kind of default money system harder to press. But it is what it is: a new technology whose purpose is to be money. It’s about as speculative a boom-bust vehicle as you could ever hope to design.As I see it, there have been two factors driving the price action.First, we are in the midst of one of the most vicious bear markets in my memory. Just about every asset there is is being battered. (Will oil be the next to go? I am starting to wonder.)We are talking about deleveraging across the board and, in such a macro environment, there is little time for speculative growth plays like bitcoin, the future of money or not. Panic is acute. There is a rush for cash. Never mind that, after you account for inflation, cash is losing 10% per annum. For now cash is king – specifically the US dollar, which is breaking out of its range to 19-year highs.I’m worried this goes to 120, by the way. If it does (as we have been warning for some time), never mind bitcoin, all assets are in even deeper trouble, be they stocks, commodities or other national currencies. We might even need another Plaza Accord.But of all the sectors to have been walloped by this bear market, tech, the darling of the preceding bull market, has been hit hardest. Bitcoin may not be a Nasdaq stock, but it trades as though it is, and the Nasdaq has been hit hard.The wider cryptocurrency sector is in panic mode The second catalyst to drive crypto prices lower comes from within the sector itself. We wrote a few weeks ago about the collapse of stablecoin Luna and suggested bitcoin would go to $20,000 then with the sudden rush for liquidity. But it didn’t. It held up. The latest scandal to dog crypto – which has a knock on from Terra and Luna – is around Celsius. And that has driven it to $20,000.Celsius is one of those lending platforms which paid what seemed like extraordinary rates of interest if you stake your crypto coins with them. They would then lend those coins out. Sort of like banking, really, but with cooler buzzwords. 7% was what it paid for bitcoin, I gather, up to 18% for others. If it sounds too good to be true, it probably isn’t true.With falling crypto prices this year, many have been withdrawing their crypto, creating for Celsius a liquidity crisis of its own. The collapse in value of its Terra holdings has only made things worse, while it borrowed ether from customers and staked it in such a way that it is now tied up and can’t sell.It’s a clusterflip. But it then emerged that it had sent over $300m in coins to exchange FTX. It looked like a rug pull. Cue a market panic, as everyone tried to get their coins back, and in many cases, sell what they have. Before long, Binance, the world’s biggest exchange, also halted withdrawals (only for a period though).Reading this I imagine most neutrals would not want to get involved in this space at all. Well, fair enough. I remain of the mind that bitcoin is an extraordinary technological breakthrough and I want to keep my shares in what is the most powerful computer network ever built. Others won’t feel the same way – and perspectives get messed with in bull and bear markets. We are at one of those points where everything looks awful.How much further will bitcoin fall from here?I’ve suggested before several times that bitcoin might come back to $20,000. That was its level in 2017 at the end of that particular episode (before it then went back to $3,000). It’s an obvious pivotal price point. The next question to ask ourselves is: will $20,000 hold?Well, if this bear market in everything carries on for much longer, the short answer is, “no”. Everything will be going lower. Here’s a chart with a dashed line at the $20,000 mark. Le

Further to last week’s piece on, “acquiring the right investment psychology” (if you missed it here is the link) I enjoyed listening to Bloomberg’s Odd Lots podcast this week with Goldman Sachs metals strategist, Nicholas Snowdon.The recent price action in metals has cast doubts in my mind as to the secular bull market. I needed gee-ing up with some bull food. I came away from the conversation wanting to buy as many metals producers as I possibly can…The outlook for copper is very bullish“By the middle of this decade, we're forecasting the largest ever deficit in the copper market,” says Nicholas Snowden of Goldman Sachs. “So just two years away from now. And by the end of the decade, the largest ever long-term deficit. It's just an impossibly tight future.”When I hear stuff like that from randos on the internet I tend to call “BS” – it’s usually sensationalising or click bait, so my instinct is to filter out. But when it’s coming from respectable employees of respectable institutions, the implications are rather different. Let’s start with the recent correction in copper prices. That was caused, says Snowden, by weak Chinese demand (due to their Covid lockdowns). There were also higher than expected exports from Russia (!). But both of these are transitory.The longer-term bull market is underpinned by two factors. First there is increased demand due to decarbonisation, net zero, etc. That will require a lot of copper and there is no obvious substitute. Second, there has been a chronic lack of investment in the sector. This is a drum we have been beating on these pages, but it is nice to hear that view endorsed by a Goldman Sachs analyst.Demand for copper this year will come in at around 24 million tonnes. Of that, about 22.5m tonnes is “normal” – copper in construction, wiring and so on. Only 1.5m tonnes of demand is “green”, decarbonisation-related demand. That is to say for electric vehicles (EVs), EV infrastructure and so on. By 2025 this “green” demand will double. By 2030, that number is projected to be 6-7m tonnes. In other words, green copper demand will rise from being about 5% to 20% of annual global demand.Where is that extra supply going to come from? Production is set to increase slightly this year, but then it flatlines after that when it needs to rise to meet the new demand.In the bull market of the 2000s, Snowden observes, projects were quickly approved, investment flowed, and supply reasonably quickly caught up with the increased demand (from China mostly). It’s different now. “Over the last two years,” he says, “even though copper demand has doubled, there hasn't been a single new copper mine approved.” I can’t believe that not a single copper mine has been approved – but perhaps not a significantly-sized one.“The number one constraint on the copper mining industry is the experience of the last cycle. Because the mining industry faced a near-death experience in 2013 and 2014, as a result of the overbuild in response to high prices in the mid-to-late 2000s. Now you have a much more conservative mentality amongst management teams in the mining sector, reflecting that experience.”I’ll say. The memory of 2013-14 still lingers, and not just in my mind. We won’t forget it in a hurry. “Internalised trauma,” Snowden calls it, and it slows down investment.Meanwhile, the permitting process, largely for environmental reasons, has got a lot slower. What would take 6-to-12 months now takes two to three years. Chile is the world’s largest producer, but it is also one of the hardest places to get a copper project going.That slows investment, as does the ESG influence on investor allocation. Less capital goes to mining because it does not tend to score well through the ESG filter.Another observation we have made on these pages, particularly as regards oil and gas, is the talent factor. Mining is hard. Who wants to work in mining when you can earn more, while risking less in tech? The gains are quicker and the aggro is lower. “You've got a real bottleneck now on skilled labour in the industry,” says Snowden. “There aren't enough engineers to a project.” That puts upwards pressure on wages and from there on capex and ultimately on prices.In short, painful memories of previous over-expansion are holding back investment; opening mines is harder because of increased regulation; and there’s a shortage of people. There are no obvious substitutes for the metalSubstitution – using something other than copper – might look like a solution. After all, other metals conduct electricity too. But there are practical issues with all of these too. Aluminium for example - but you need a lot more of it so it’s no good for anything that requires small space. There’re also supply issues. The decade of underinvestment has led to a shortage of supply of base metals across the board. The incentive to substitute is low. As Snowden notes, the cost of the copper content of an EV is a small part of the overall cost of the EV. So the

As regular readers of my stuff will know, I’m of the view that a society should be designed around direct democracy and very low levels of land value tax (LVT), what Milton Friedman called “the least bad tax”. I may dream of Ancapistan, a land of no government, but the reality is that taxation of some kind, even if it be voluntary, is inevitable. There has never been a civilisation without taxation.Ideally, land value tax would replace ALL other taxes. However, if you offered me LVT in the UK and all other taxes, income tax especially, slashed to 10, 15 or even 20%, I’d bite your hand off. My friends in the countryside hate the idea, and I get angry messages about it, but the reality is that it is the owners of prime city centre real estate, the likes of the Crown, the Grosvenor Estate, major institutions and so on, who would bear the brunt, not ordinary homeowners or someone with 10 acres of field with no planning permission. (In my book Daylight Robbery, I argue for location value tax - it’s the same as land value tax, but I use the word “location” because the location of the land - ie city centres - is more important than the actual amount of land).In any case, LVT is not going to happen here in the UK. Introducing a major new tax is too big an undertaking. It’s easier for politicians to raise and lower the taxes they already impose, and tinker round the edges of the existing system. LVT would be a whopping vote-loser in a nation whose primary concept of wealth is the value of their house. Just explaining it, never mind getting it across the line, is hard enough. (If you want an explainer, by the way, there is one here and another here). Anyway this is all pre-amble, and I’m not here today to discuss the merits - or lack thereof - of LVT. For the purposes of this blog, just take my word that LVT keeps the relationship between ruler and citizen, between governor and governed, in healthy, transparent check. With LVT you would pay fewer taxes and lower levels of tax - ie less tax overall.So I’ve been trying to come up with a politically possible means by which* LVT can be implemented and shown in practice to work* Beautiful housing can be made affordable to ordinary people without collapsing the housing market or having to reform the fiat money system* Corporations, particularly crony capitalist building companies, planners, regulators and government are kept out of it, and people can be left to their own ingenious devicesAnd, by George, I think I’ve got it.Here’s my idea. I stress: it is just an idea I am working through so there are bound to be flaws. I’d be grateful for any comments, pointers, thoughts, statistics, data, and so on.Water Location Value TaxSummary:Today’s unaffordable housing is a consequence of both our system of planning and our system of money. They have conspired. But wholesale reform to either as good as politically impossible. With Britain’s over-leverage to housing, the financial repercussions of markedly lower house prices are politically intolerable. Instead we propose to bypass the housing market altogether with an initiative to re-populate the underused rivers, keys, docks and canals of Britain with houseboats, barges and floating homes. Local authorities and the land registry will determine who “owns” the water and the land beside it (most water is nationally owned). That which is not needed for transportation (eg the middle of rivers) will be parcelled off into small plots to be sold to individual owners – not corporate entities – on which they can then build or buy, then moor floating homes and other edifices. An annual Water Tax will then be levied along the lines of Henry George’s Single Tax (land value tax), based on the rental value of the plot, payable to the local authority and to the body in charge of the waterway, usually the Canal River Trust.20 housing ministers since 1999The unaffordability of housing has been for twenty years or more one of the biggest issues in the country. As if to illustrate the priority this problem is being given in Whitehall, we have this:In fact, we have had two more, since Esther McVey and this chart: Christopher Pincher Stuart Andrew and Steward Andrew. I make that 20 different housing ministers since Hilary Armstrong in 1999. It’s not what you would describe as evidence of a long-term strategy.It seems absurd that we should have any crisis at all. A house does not cost a lot of money to build. In China it has long been the case that a 3D printer can build a home in a day for about £3,000. Here in the UK you can buy a flatpack 3-bed house, which takes 6-7 hours to erect, yours for £24,000. The interior of one of architect, Renato Vidal’s 3-bed, flat-packed homes, £24,000. Meanwhile, there is no shortage of land. Little more than 4% of the land in England and Wales is built on, even less in Scotland. This was the finding of the National Ecosystem Assessment in 2011: just 1.1% of rural and urban land in England and Wales has domestic proper

I remember having lunch once upon a time with a fun manager of the old-school, refined Englishman variety. He rather took me aback towards the end of the meal when he started talking about this company his fund had put money into…You need faith – but you need to back that faith with something real Previously so understated, my fund manager acquaintance became wildly enthusiastic about this company, speaking with surprising zeal - and passionate volume - about cash flow and profit margins. I almost wondered if it was the same chap.“He’s fallen too much in love,” I thought. “He’s never going to be able to sell.”Then I took stock. “This is one of the most successful fund managers in the business,” I thought. “If I compare my investment success to his, well, he is clearly a lot better at it than I am. But … he’s in love with this company to the point of being delusional.”It was then that I had a bit of a lightbulb moment about the psychology of being long. Never mind our refined fund manager. I could just have easily been describing Tesla investors, silver bugs or bitcoin maximalists when I use the word “zeal”.You need that zeal – or belief – as an investor. If you’re too cynical, you’ll be one of those people who has been declaring since forever that bitcoin or Tesla or whatever “is a bubble”, and you’ll miss out on some of the greatest investment opportunities of our lifetimes.Then again you need to be cynical too. Otherwise how do you sell?Bearish articles seem to command a lot more wide nods of agreement – never mind hits – than bullish ones. Bears are hallowed as geniuses when bear markets come around. Yet bears have also predicted 37 of the last three declines. They’re wrong much more often than they’re not – at least, the permabears are.There’s a time to be bearish and a time to be bullish. But human beings progress and thus economies tend to grow over time. So the bullish stance tends – over time – to be the correct one.The key is to be cynical and disbelieving in the face of rubbish investments, and deeply credulous when confronted with not-so-rubbish ones. Easy to say, hard to do.You’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run, as Kenny Rogers once sang.How to know? There’s no substitute for knowledge and experience. That’s how to know when to channel your youthful bravado, and when your wizened cynic.I think we are instinctively bearish. I say that because instinct enables us to evaluate risk and take precautions. There could be a vicious predator in those trees. There probably isn’t, but there might be, so let’s act as though there is – that way we’ll survive. Let’s assume the seas will be rough tomorrow, and have a lifeboat in place.So how do we overcome our instinctively bearish psychologies in a bull market? If you’re not a 100% technical-driven investor – which is most of us, even if we do stare at charts – how do you stay bullish through a bull market, so that you stay invested and keep riding the thing up? Belief is the answer. You need some of our fund manager’s belief. But that belief needs to be founded on something. Knowledge. The more you read, listen to podcasts, and generally do your research, the more you will know. If you can back up your beliefs or theories with hard facts, truth, data and information, then you reinforce them. Your belief is not then superstition or delusional. It is fact-based - “evidence-based” to use the naff expression that is now so commonplace.How I’m approaching markets right nowHow am I applying this in today’s markets?I was of the mind that there was a major shortage in most commodities, due largely to a decade of underinvestment, and that as a result, prices of energy and metals were going higher. The action in commodities over the last couple of months has shaken that belief.I could also see that the Russian invasion of Ukraine had panicked prices a lot higher than perhaps they should have gone, given current levels of supply and demand – so we did seem to need a correction. And we got one.But it’s the sell-off as a result of falling demand from China for metal, as a result of its lockdown, that has surprised me. And the grinding action that has followed. So I’m back to reading, researching and thinking. Have the facts around this bull market changed? Perhaps a little – but not nearly as much as the price. Is this ESG, “net zero” transformation still ongoing? There is a growing realisation dawning about how much it is going to cost, but I still think decarbonisation and the electrification of everything remains a huge theme for this decade. That requires a huge amount of metal and energy.I’m looking at my portfolio of investments. I like what most of the companies are doing. I like how they are going about things. I like the sectors they are in. I can see increasing demand for their products. So I’ve got very little I want to sell – not at current prices, at least. Should I buy more, then? Ach, I’m expos

I have an odd professional life. I double as a financial writer and a comedian. It seems to work. I specialise in unacceptable songs. You’re bound to have stumbled across one of them at some point. Apparently, I’m Nigel Farage’s favourite comic. I’ve just made what many would consider a comical investment. I have put more money than I care to think about into a theatrical venture on which I am almost certainly going to lose my shirt. It’s got a cast of over 50, a 15-piece orchestra and more. But I don’t care, because this is more important than money. My father, Terence Frisby, had a full and successful life. His play There’s A Girl In Soup was, for a time, the longest-running comedy in the history of the West End and a worldwide hit with runs on Broadway and across Europe (in Paris with Gérard Depardieu, in Rome with Domenico Modugno). It was made into a film with Peter Sellers and Goldie Hawn, and my father won the Writer’s Guild Award for the screenplay. His sitcom Lucky Feller, starring David Jason as one of two working-class brothers living in a council flat in south-east London (sound familiar?) was one ITV’s most successful sitcoms of the 1970s, and, another of his sitcoms, That’s Love, would become one of ITV’s most successful sitcoms of the 1980s. He made fortunes, lost fortunes, won awards, had a string of high profile court cases and beautiful girlfriends, a glamorous wife (my mum) - for a bit - and plenty of fresh air.But there was one thing that nagged away at him constantly, like squirrels in the attic of his mind. It was that he never saw the best thing he ever wrote on the West End stage or on screen. That thing is Kisses on a Postcard.How Kisses on a Postcard got its name In 1940, when my father was seven and his brother, my uncle Jack, was eleven, they were evacuated from their family in south-east London to escape the Blitz. Millions of children across the country met with the same fate. Neither they nor the parents knew where they were going, who they would be staying with or for how long.“Whatever happens, you stay together,” insisted their mum, my grandmother. “You got that? You stay together!” Then, to turn it into an adventure for the two boys, she invented a secret code for them. “When you get there,” she said, handing them a stamped, addressed postcard, “you find out your new address, you write it on this card and you post it to me. Got it? Now, here’s the code. You know how to write a kiss - with a cross? Well, put one kiss if it's horrible and I'll come straight there and bring you back home. You put two kisses if it's all right. And three kisses if it's nice. Then I'll know.”The two boys were put on a train along with the rest of their school, each with a gas mask, some sandwiches and a label round their neck with their name on. They ended up in a tiny village in Cornwall, where they were herded into the school hall and picked at random by whichever local would take them.Jack and Terry were chosen by a Welsh ex-coal miner and his wife, Auntie Rose and Uncle Jack, who lived in a tiny cottage by the railway with their soldier son Gwyn. Inside, they found a room packed with things: a cat curled beside the stove: a canary in a cage; oil lamps - there was no electricity here; and two First-World-War shells in their cases, over six inches tall, standing on either side of the clock on the mantelpiece. Outside in the yard, there was a pig and chickens; beyond that a valley with endless woods, a rushing river, fish to catch, streams to dam, paths, tracks, a quarry to climb. And, best of all, at the bottom of the yard lay the main line from London to Penzance. Trains!That night, on a borrowed mattress on the floor, staring at the postcard, they considered their code. They covered the card with kisses and posted it the next morning.My father would spend the next four years in that Cornish village. While many had horrible experiences as vackies, my father didn’t. He called it his second childhood. Kisses on a Postcard tells the story of those two boys and the tiny Cornish village during the war, with its conflicts, kindness, pettiness, generosity and gossip, turned on its head, first by the arrival of so many children, then by the arrival of American soldiers, prior to D-Day – a whole regiment of black GIs. No one in the village had ever seen a black man.Having had the theatre thrust upon me since an early age, I’m not as crazy about it as some. My view is that theatre disappeared up its own backside in somewhere around 1974 never to return - certainly the subsidised stuff, anyway. Kisses was only ever staged many years ago as a tiny community theatre project in North Devon, with mostly amateur performers, but it was like nothing I ever saw. Suddenly, I understood why Dad loved the theatre so much and just what a brilliant medium it can be. It became one of my lifetime missions to get Kisses on, and anyone who knows me will know that I have constantly been hustling for over 20 years trying

Back in 2016 we learnt a new word. “Lustrum”. It means a five-year period. Given how long decades are, I can’t believe it doesn’t find more use. Even if we don’t use the word, we investors often think in terms of lustrums. Many of the investments we make are made with a three-to-five-year time horizon in mind.Which is precisely why I started using the word. We had identified a trade of the lustrum. It was oil. So how’s it doing?Oil still looks very cheap relative to most other assetsVery well, is the answer. But it hasn’t been an easy ride. At times we have really had to bury our heads in the sand. Crude was in the mid-$30s when we recommended it, but at one stage we found ourselves $60 underwater! How is that even possible, you might wonder? Well, of course, oil went negative back in 2020.But like all normal humans when presented with facts they don’t want to hear, we put our hands over our ears, shouted, “blah, blah, blah fishcakes” and went and played table tennis. It won’t last, we thought, and we were right. In fact, we should have bought more.Our reasoning back in March 2016 was that oil was extraordinarily cheap relative to other assets, be they stock markets, tech stocks, houses, gold, or even other commodities. It could go lower, we reasoned. Then again it might not. But, we observed, it was an anomaly that it should be trading at the same price it had been in the 1980s given how much money has been printed since.So here we are six years later, with oil three times the price or more, how’s the trade looking now? Do we sell?The trade is maturing nicely, I’d say. But, to use an analogy, although the wine in the cellar is getting finer all the time, it’s not yet at its most drinkable.Why oil could go to $300Let’s consider some long-term ratios, starting with oil vs stocks. This chart shows how many units of the S&P 500 you can buy with a barrel of West Texas Intermediate (WTIC – the US benchmark). Currently you get 0.03 of an S&P 500 unit (4,135) for a barrel of oil ($114).When the chart is falling, oil is getting cheaper relative to stocks. When it is rising, oil is getting more expensive. So you can see that it fell through the ‘80s and ‘90s, as the oil price declined, yet it rose through the ‘00s as the oil price made its way from $10 to $150/barrel.You would expect this ratio to fall over time as oil production techniques improve and stock market valuations increase as economies grow. Nevertheless, we are nowhere near the “sell” zone. If anything, we are still in the “buy” zone. The ratio is the same price it was in 2002. No reason here to sell our oil and move the money back into stocks. Call me again when the ratio is at 0.06 or 0.07. That’s another way of saying I see oil getting at least twice as expensive relative to stocks as it is now before this is over.If the S&P 500 is 4,000, a 0.07 ratio gives you an oil price of $280. Mark my words – $300 oil is not such an outlier.Here’s WTIC vs the Nasdaq. Again you would expect Nasdaq valuations to improve over time versus oil because of the scalability of digital and the growth in that sector. But on a relative basis, oil again looks very cheap and is still a buy.Whre’s it going back to? 0.04 maybe? Doesn’t look unreasonable.Using the ETF VNQ as a proxy for US housing, here is WTIC vs housing since 2004. It was three times higher before the end of the last bull market.And finally here is crude against gold – how many ounces can you get for a barrel? The answer is 0.06 of an ounce.This ratio tends to be much tighter over time – just as oil production techniques improve so do gold mining techniques, and there isn’t the growth-of-companies factor to push it lower.We are somewhere in the low-to-middle range. Call me when it gets above 0.1. If gold is $1,850 an ounce that would mean oil at $185/barrel.It’s not just relative – there are strong fundamental reasons for oil to go up too So we’ve looked at relative valuations. What about the fundamental reasons to expect a higher oil price?First, there’s 14 years of money printing and inflation. A lot of that money is going to go into the basic human requirement that is energy. Even if they print less, the money has still been created and oil is essential. Unless there is a sudden 2008-style debt destruction moment, that money will remain.Second, despite the fracking revolution, and the improved productivity it brought about, for almost ten years now there has been huge underinvestment in the sector. From lack of new discoveries through to aging pipelines, this means higher costs.Misguided anti-fossil fuel narratives perpetrated across the media and social media have made this sector toxic. Few want anything to do with it. Talent goes elsewhere, and with it investment. So productivity declines.Governments have exacerbated the lack of investment with their pursuit of green energy and net zero. They clearly don’t get it. The narrative now is windfall taxes. That’s only going to further disincentivize investmen

Back in the early 1990s comedienne Mandy Knight did a show at the Edinburgh Fringe called, “Some of my best friends are ginger”. I always thought it was an inspired title, exposing a double standard that still persists today, and it always stayed with me.Then, a few years back I presented a series for Italian TV about beauty, Senso Della Bellezza - Sense of Beauty - and we did a feature on red heads. I thought it would be a nice piece today to mine that feature and expand on it, explore the history of redheads, and thereby celebrate the unjustly mocked 1% of the global population that carry the MC1R gene.The Book of Genesis is perhaps the first book to have been written down and, in the book of Genesis we have the first celebrity redhead, and a victim of some treachery, Esau. Esau came home hungry one day after a long shift in the fields, and his brother Jacob offered him a bowl of soup, but only in exchange for something: his birthright, his first-born son status. Esau, who seems to have been a bit of short-term thinker, put his stomach first and he accepted. Thus did Jacob inherit, and so did Jacob - and not Esau - go on to become one of the Fathers of the Israelites. All things considered, it was probably better for the Israelites that he did.Esau was born red all over “like a hairy garment”, and one interpretation is that Esau had some recessive Neanderthal gene - the theory is that Neanderthals had red hair, although I do not suggest red heads are any more Neanderthal than the rest of us. The genetic mutation responsible is different to the one that which causes red hair in modern humans.Red hair occurs most commonly in people of Germanic or Celtic origin. Ireland has the most red heads per capita at around 10%, but the highest density of red heads and thus the red head capital of the world is actually Edinburgh. No wonder Mandy’s show did so well there.It’s thought that the reason red heads are more commonly found in colder climates is that it is actually an advantage to be pale, where sunlight is sparse. The lighter skin of red heads improves the absorption of sunlight, which is vital for the production of vitamin D by the body. Red hair is also relatively common among Ashkenazi Jews. Many Jews in literature have been portrayed with red hair. Shylock in Shakespeare’s Merchant of Venice and Fagin in Dickens’ Oliver Twist, being two of the most famous. Judas, the betrayer of Christ, is often portrayed as a redhead.During the Inquisition in Italy and Spain, where red hair is less common, those with red hair were identified as Jews, even if they weren’t actually Jewish. Today the commission for Racial Equality do not monitor cases of discrimination and hate crimes against redheadsRedheads were first mentioned in literature by the Greek poet Xenophanes around 500BC describing the Thracians, who it seems were red headed and blue eyed. The Ancient Greeks seemed to be particularly admiring of red heads. In men red hair was associated with honour and courage, while in women red hair was associated with beauty. Homer says the heroes Menelaus and Achilles were both redheads, while Helen of Troy, the most beautiful woman that ever lived, was also a red head.Aphrodite, Goddess of beauty and love was also red headed. (During the Renaissance, Botticelli and, especially, Titian were always painting beautiful women with red hair to the extent that titian now means auburn).The hair of female statues in Ancient Greece was often painted red - the Greeks loved the colour red.Many slaves in ancient Greece and Rome were the northern territories. Red headed slaves would often fetch a higher price, as they were thought to bring good luck. Red wigs were given to actors depicting slaves in Greek and Roman theatre. Indeed one fringe theory to explain modern mocking of redheads is that it stems from the Roman subjugation and persecution of Celts after the Romans arrived in the British Isles.Aristotle was not as keen as other Ancient Greeks is supposed to have said that "Those with tawny coloured hair are brave; witness the lions. But the reddish are of bad character; witness the foxes."Romans seemed just as admiring of red heads as the Greeks, particularly among the fierce Gaulish tribes, who Titus Levy said, “stand first in reputation for war … with their tall bodies, long red hair, huge shields, very long swords, and songs and yells as they go into battle, they terrify their foes.”From the Gauls to the Vikings to the Celts there has always been this connection between martial strength and flame-colored hair. The English warrior queen Boudicca was a red head. Perhaps the greatest warrior of the lot, Ghenghis Khan, was “long-bearded, red-haired, and green-eyed.”Egyptian pharaohs were found to have hair with reddish pigments, among them ‘Rameses the Great’, the most powerful of them all, and Cleopatra. Alexander the Great, Richard the Lionheart, the great Ottoman naval commander Hayreddin Barbarossa (Red Beard), Queen Elizabeth I

Not being a Fed-watcher, I have been rather slow to this particular narrative, I’m afraid, and it only really dawned on me last week as I was losing money trying to catch falling knives in the stock market.It was Zoltan Pozsar writing for Credit Suisse who switched on the lightbulb for me. He’s the new rockstar among institutional market strategists.A couple of other analysts have reached the same conclusion.It’s this: the Federal Reserve and America’s other policy-making powers that be, actually want the stock market lower…The Federal Reserve really does want to fight inflation I’ve heard so much hot air coming out of government officials’ mouths over the years that I think my mind is actually programmed now not to believe a word they say. It’s not that I’m treating what they say with a healthy dose of cynicism. I’ve reached unhealthy levels of cynicism. My default, so low is my trust, is now not only not to believe a word they say: it is to assume they are lying. Probably not a good place.It turns out that sometimes those in power do actually tell the truth. I got my first surprise dose of this earlier this year from Foreign Secretary Liz Truss, when she warned that the Russian troops on the other side of the Ukraine border were about to invade. Pull the other one, I thought. Russia wouldn’t do that. It turned out that Truss was talking straight, and her intelligence was correct.When US president Joe Biden said his top economic priority was getting inflation down, my inner cynic muttered: “yeah, course it is mate.” It turns out what he was saying might actually, believe it or not, be true. The Federal Reserve’s primary mandate is to keep inflation down. It might be that chief, Jerome Powell, is taking this mandate at face value. All that stuff about his hero being Paul Volcker might even be true too.Lower asset prices help the cause.Back in 2008, and for many years since, everyone in Policymakerland was worried about deflation, and every effort went into staving it off. So we got QE, ZIRP (zero interest rate policy) and all the rest of it. We got very used to it. It went on for so long, it became normalised. The idea that they would ever do anything else seemed far-fetched. But, no, in Policymakerland they are genuinely worried about inflation, and so asset prices are not going to be defended. Au contraire. They want them to fall.Bear markets mean financial conditions tighten. Tighter financial conditions mean lower money velocity and lower inflation, according to modern definitions at least.The Fed is talking tough, and it might be that talking tough does a lot of the job for them – and they might not have to actually act as tough as they talk.If they can get stock prices down a bit, house prices down a bit, and a lot more caution around the place, with just a bit of jawboning, then the need for higher rates will diminish, and the western world might not actually implode. Falling crypto markets help the cause too. There won’t be that particular thorn in the Federal side exposing the shortcomings of fiat money.Tighter conditions will put some upward pressure on unemployment, which means the upward pressure on wages will go away too, and that will help reduce inflation.If this has to happen sometime, that time is now, in the second year of an election cycle. Come 2023, the priority will shift to getting the economic conditions in place to win the next election. Part of this of course is lower inflation, but they will want the correction in the past and asset prices moving back up again.OK. So if you buy this theory - how far do stocks fall?How low can the S&P 500 go?Currently we are at 3,970 on the S&P 500, having been as high as 4,800, and over the last couple of days the bulls appear to have regained control of the tape. The low was 3,800 - off about 20% from the highs. Another 10% or 15% would take us to the low 3,000s.While we could bounce a little here, I’m inclined to think we haven’t yet seen the lows. Best-case scenario, I’m going to say 3,600 – that’s the post Corona-panic high. Worst case? Down around 3,000 at the 2019 highs. Most likely, I’m going to guess somewhere in the middle at 3,400 – the 2020 pre-lockdown highs. Remember these are just guesses.But the bottom line is this: the “print-money-and-protect-asset-prices-at-all-costs” narrative has gone. It’s history. The issue is no longer deflation, by their definition. Now it’s about inflation. They’ve been able to ignore it for years by crooked measures, ignoring asset prices and all the rest of it. They can’t any longer. That’s what they are now fighting.As they say, “don’t fight the Fed”.It won’t be the case forever. Elections have to be won. But it seems the case for now. Psychologically, we might need some despair and maximum pessimism before the bear market can be deemed over. There still seems to be too much optimism about. We need to be at that point of perception that the bear market is entrenched and we are never going to get out of

‘Due to our low tax policy . . . revenue has increased.’John James Cowperthwaite, Hong Kong Financial Secretary, 1961-71Fourteenth-century Tunisian, Ibn Khaldun, is probably the greatest philosopher of the Islamic Golden Age. In his magnum opus, The Muqaddimah, he wrote: ‘In the early stages of an empire, taxes are light in their incidence, but fetch in large revenue. As time passes and kings succeed each other, they lose their tribal habits in favour of more civilised ones. Their needs and exigencies grow . . . owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects . . . and sharply raise the rate of old taxes to increase their yield . . . But the effects on business of this rise in taxation make themselves felt. For businessmen are soon discouraged by the comparison of their profits with the burden of their taxes . . . Consequently, production falls off, and with it the yield of taxation.’ Never mind his own Islam, he might have been describing Rome or Greece before, or Britain or the US after. Low taxation and small government accompany the ascent of great civilisations, high taxation and big government their demise.It may be counter-intuitive, but it is an observation that goes back centuries. Low tax rates often bring in greater revenue, while higher tax rates bring in less.Khaldun was not the first to make this observation. It was the guiding philosophy of the fourth caliph, Ali. Take great care, he instructed his governors, ‘to ensure the prosperity of those who pay taxes. The proper upkeep of the land in cultivation is of greater importance than the collection of revenue for revenue cannot be derived unless the land is productive.’ If conditions are bad, then suspend taxes, he advised. “Do not mind the loss of revenue on that account, for that will return to you one day manifold in the hour of greater prosperity of the land and enable you to improve the condition of your towns and to raise the prestige of your state.”Hong Kong’s John James Cowperthwaite acted by the same philosophy and would always push for the low- or no-tax option. Eventually, ‘funds left in the hands of the public will come into the Exchequer’, he said, but ‘with interest’.In 1924, US Secretary of the Treasury Andrew Mellon wrote, ‘It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may often be obtained by lower rates.’But perhaps the most famous proponent of this argument was the American economist Arthur Laffer.In 1974, Laffer was having dinner in Washington DC with two of (recently impeached) President Richard Nixon’s former advisers, Dick Cheney and Donald Rumsfeld, as well as a writer for the Wall Street Journal by the name of Jude Wanniski. Laffer was arguing that the incumbent president Gerald Ford’s recent tax increases were flawed and would not lead to increased government revenue. To illustrate his argument, so the story goes, he drew a curve on a napkin showing the relationship between tax rates and revenue. At very low rates of tax, government revenue is low; but it is also low at high rates (because the economy is weaker, profits are down, earnings are down, evasion is higher and so on), so the curve is bell-shaped. The top of the bell is the point of maximum revenue – that is, the sweet spot at which to place tax rates if your goal is to maximise government revenue. Laffer’s argument caught the imagination of those present; Wanniski would later dub it ‘the Laffer Curve’, even though Laffer later stressed, ‘The Laffer Curve, by the way, was not invented by me,’ and mentioned many others, from Keynes to Khaldun, who had observed the same phenomenon (perhaps we should call it the Fourth Caliph Curve). As President J. F. Kennedy once said, ‘It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.’ It is a lesson that mankind continually seems to forget, and one that continually needs re-teaching. Hence today’s post.(That was an adapted extract from Daylight Robbery, How Tax Shaped our Past and Will Change our Future). This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.theflyingfrisby.com/subscribe