Blogging as Coffee Break Chatter

I've given up on social media, and I can't say I miss it. Outside a handful of forums that sometimes share something of interest, there's too much emotion and little originality. There's also an obsession with truth that I find tiring. Truth to me is secondary to originality. It's more important that an idea is original than that it is accurate, because it's originality that sparks ideas of value. The premise may be false, but if the reasoning is original, there may be something of value in it anyway. Such thinking triggers the imagination, and therein lies its value.

The problem with social media is that it's too public. It has too much in common with newspapers where the exact truth and meaning of every little thing is discussed with a passion. This is much less the case for a blog, certainly a low key blog like this one. Here I can express my thoughts without any concern about my readers' sensitivities. If anyone finds my thoughts wrong headed or boring, move on. This blog is my coffee break chatter.

Blogging has been a great way to organize my thoughts, and I can highly recommend it for others. The fact that others can read my blog gives discipline, and discipline gives structure. Over time, a lot of things fall into place. The world becomes a less confusing place.

Coffee break

Pigs Get Slaughtered

Market actions over the last couple of days has illustrated once again how pigs get slaughtered. Without a proper strategy, these useful idiots get all excited at the worst possible time. They get into battles for which they are unprepared. Many are led astray by individuals with ulterior motives. These individuals make the pigs all excited about a cause. Then they present a plan for the pigs to follow. Fully trusting in the plan, the pigs become canon fodder for the big guns.

This is why we need a solid long term strategy. We must know what assets to monitor and which ones to stay away from. If there's a battle brewing in an unrelated asset, we stay put. It's not our battle to fight. If our chosen assets move beyond pre-determined targets, we buy or sell accordingly. We have clear entry points and exit points. We also know how to stay solvent while we wait for the right time to move. We have an income, and we have ways to profit from our assets while we're holding on to them. A long term strategy must have a minimum of risk. There must be no short term horizons after which we become insolvent.

To go into a market without such a plan is tantamount to being a pig.

Pig

By Johan Spaedtke - Own work, CC0, Link

Tesla, Bitcoin and Silver

Elon Musk is a popular man. That's evident from the way markets react to his tweets. The other day, he tweeted something derogatory about Game Stop shorts and the stock went up. Then he said something nice about Bitcoin which made it pop higher. Having been attacked by short sellers himself, it's easy to understand Musk's glee at the sight of crushed short sellers in Game Stop, but why did he tweet about Bitcoin? It seems unrelated to his businesses.

Musk's followers will undoubtedly argue that Bitcoin is technology just like Tesla, Space X and solar panels, and that's his motivation. He was simply promoting technology as the way of the future. However, there's also the possibility that his tweet was motivated by something entirely different.

Musk's Bitcoin tweet came at a time when a rumble could be heard in the silver markets. There was talk of a coordinated push, the aim of which was to send silver prises soaring. That would be bad for Musk who uses silver in the production of cars, rockets and solar panels. Higher prices for silver would translate directly into higher input costs for his products. Sensing trouble ahead for silver, Musk decided to do his part in deflecting attention to that other asset popular among his followers, namely Bitcoin.

A change in the price of Bitcoin does nothing to the price of Musk's products. Bitcoin is therefore the perfect distraction. What Musk's Bitcoin tweet reveals is the importance of Bitcoin as a tool used in the manipulation of the commodity markets. With speculation mainly taking place in virtual currencies, completely detached from the real world, Musk and his buddies can manipulate prices of commodities, unhindered by speculators. Industrialists like Musk depend in this way on Bitcoin as a means to serve themselves, and that's the true motivation for his tweet.

Elon Musk

By Duncan.Hull - Own work, CC BY-SA 4.0, Link

How to Avoid Premiums on Physical Gold and Silver

The price of silver went up by a lot today, and the premiums for physical silver went up even more. Anyone buying physical silver at the moment are paying a whopping 30% above the spot price, which means that they will have a guaranteed 25% loss if they turn around immediately to sell their physical silver back to the dealer. Premiums for gold are closer to 5% at the moment, which is the norm for both gold and silver coins, so the current premiums in silver are excessive. However, even under normal circumstances, buyers face the prospect of significant loss on their purchase if they have to return their stash to the dealer. No wonder then that people hesitate to buy physical metals. It cannot be traded. It must be held for months or years before a reasonable profit can be made.

However, there are some ways around this that few seem to realize. We don't have to return our gold or silver to the dealer if we can sell it to friends and relatives, or we can borrow cash with our stash as security. This requires a general awareness among our friends about the true value of gold and silver, and it requires them to be in a healthy financial position. Our network needs to have a reasonable net worth. But apart from this, no special goodwill or trust is required. If our friends agree to buy our stash for a price above spot, it's a straight forward deal with no debt involved, and if we borrow from our friends with 100% security, there's no risk of default. If we don't repay our debt, our friends retain the security.

If done correctly within a circle of relatives and friends, gold and silver can be kept in circulation inside our network for decades without any need of a dealer. Premiums are only paid to dealers when there's a need or desire to add to our stash beyond what's available inside our network, or there's a need or desire to lower our total exposure to the metals.

I've done this with success over the last ten years, so I know that it works as it should, and I expect it to work well for me and my loved ones into the future. I have lent money to friends with security in their gold, and I've bought gold from my son when he needed money for an apartment. Going forward, I see things continuing along the following lines:

Instead of putting money into saving accounts with banks, family and friends buy physical gold, either from dealers or from individuals inside their network. They add to their stash until they are ready to make a major investment. Since they cannot borrow money in a bank with precious metals as security, they turn to their network for help. Someone with access to credit in a bank steps up and proposes a deal: "Let me hold your stash, and I'll lend you X amount of cash at Y% interest." This individual is able to get credit from the bank for a little under Y%, and will therefore make a small profit. The borrower has had the advantage of better return on the metal than would have been possible in a savings account, so the deal is tolerable, especially because the stash remains inside our network so no premium is lost. The stash is returned to the borrower in predetermined portions with every repayment.

No-one runs any risk with such a scheme, and everybody gains because banks cannot exploit us with their sub-par savings accounts, and metal brokers cannot make money on what's circulating inside our network. The scheme encourages prudent investment and savings habits, and renders everyone better off over time.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link

First Rule of Brainwashing is Constant Repetition

The first rule of brainwashing is a constant mind-numbing repetition of a narrative. As such, there's no difference between brain-washing and indoctrination. In both cases, the aim is to make the target repeat the message without question, first to themselves and secondly to everybody else. The victims become in this way part of the operation. The message is spread through repetition. However, since no real thinking went into accepting the message, there's no way for the victim to argue coherently for the narrative. The victim will therefore respond with anger if the narrative is challenged. Since this is inevitable, the brainwashers must encourage this type of reaction. The second rule of brainwashing is therefore to elevate anger against dissenters to a virtue.

Seen in this light, it's interesting to see the constant repetition of the mask-wearing narrative on TV, often combined with simmering hatred towards anyone not wearing their mask correctly. Top politicians denounce the dissenters, subtly encouraging their minions to approach such people with anger.

Guantanamo Bay detention camp

By Shane T. McCoy, U.S. Navy - (copied from http://en.wikipedia.org/wiki/Image:Camp_x-ray_detainees.jpg so that the image can be used on Wikinews.), Public Domain, Link

The whole mask wearing thing is as taken straight out of the Guantanamo Bay play book. First they break the weak. Then they empower the weak to go after the strong. The feeble minded become the lords of the strong willed. Society as a whole becomes an upside down world where the corrupt rule over the strong by the help of an army of feeble minded minions.

Public schools used to encourage independent thinking, but is now little more than indoctrination camps for the young. True science has been replaced by pseudo-science. Instead of facts, children are presented with heroes that must be worshipped without question.

Greta Thunberg

Eco-anxiety - By Anders Hellberg - Own work, CC BY-SA 4.0, Link

The propaganda is now so deafening that it hurts. Mainstream news has become unbearably painful to watch. The situation is claustrophobic. However, there's cause for optimism. Confidence in politicians an journalists have fallen off a cliff. There's an awareness of what's going on. Even the most brainwashed among us are catching on to the fact that none of our moral superiors know anything of substance. They have no real answers. They go about harassing us, blaming every little thing, real or imagined, on us.  They are our tormentors.

To protect ourselves, we withdraw from social media, we start teaching our children at home, we make it clear to friends and family where we stand and why we don't trust anyone anymore. The message is spreading. Things are about to change. Fear and compliance is about to be replaced by fearless anger directed at the people who so cynically thought they could manipulate the whole world into an image of their own liking.

Execution of Robespierre

By Unknown author - This image comes from Gallica Digital Library and is available under the digital ID btv1b6950750j, Public Domain, Link

Useful Idiots

All times are confusing times, but some times are more confusing than others, and it appears we've entered a particularly rough patch. It's unusually  hard to figure out what's going on. In the space of a few weeks, we've had a storming of the capitol, a viral Sanders meme and an insurrection in the markets. All sorts of interpretations can be made with no one standing out as much more believable than another. In the heat of the moment, a sole event is seen as little more than a dumpster fire by some and a systemic threat by others.

Only in retrospect will it be possible to determine the true significance of current events, and even then, there will be different angles and interpretations. The reason for this is that there's always more than one motivating factor behind an event. There's no single view being expressed. Even the most coherent and honest actors will have more than one motivating factors influencing them. There's always a desire for personal gains, no matter how noble the cause may be, and there's no way to know the exact nature of the cause. No two people have the exact same view of things, and the cause as a whole is therefore a somewhat muddled idea, no matter how simple and concise the rallying calls and slogans may be.

Adding to the confusion, we have honest people with conflicting viewpoints, infiltrators that deliberately confuse issues, and individuals with less than noble intention. Sympathy with the overall cause should not blind us to this fact. Rushing into any of this without proper understanding is more likely to harm us than give us lasting gains. Our first reaction to any grand movement should therefore be caution.

Our best strategy in dealing with the uncertainties of life is to first build a coherent moral framework for ourselves so that we can quickly judge the ethical quality of things going on. Secondly, we need to understand our position in the greater scheme of things. Rather than chasing the hot trends of the moment, we should seek to find the next big thing, and position ourselves for this event. Finally, we have to be careful in picking our battles. We don't personally have to fight in every one. Leave it to others to fight the battles for which we haven't prepared.

Being carried out on a stretcher, with everything lost, doesn't make us a successful revolutionary. It simply means that someone else won. That someone may be the revolutionary leader, or it may be the opponent. Either way, it's not us. We're somebody else's useful idiot, left impotent and broke at the side line of history. That's hardly something to be proud of, no matter how noble the cause may have been. If we're not personally better off at the end of a revolution, chances are that someone else gained at our expense, and that our fight was for nothing.

Revolution

By Jean-Pierre Houël - Bibliothèque nationale de France, Public Domain, Link

Rise and Fall of Index Funds

Index funds have no price discovery. They track whatever basket of companies they're supposed to track. When money comes in, they buy according to a pre-set distribution. When money is withdrawn, the same distribution is sold. It's therefore incorrect to suggest that index funds are forced to load up with Game Stop shares due to its recent price rise. Only fresh money going into index funds containing Game Stop will have to buy this company at present prices. If no money is coming in or going out, the index fund remains passive.

However, some passive investors may have caught onto the fact that Game Stop is sending the price of certain index funds higher, and conclude from this that it may be a good idea to leave these funds for now, awaiting buying opportunities in the future or buying into something unrelated. If so, there will be an outflow of money from funds containing the Game Stop company. Game Stop will have to be sold together with whatever other companies the index holds. The meteoritic rise of Game Stop will in this way have the perverse effect of sending other companies down for no other reason than their loose affiliation with Game Stop through index funds. This will in turn affect other indexes that contain some of the same stocks, but not Game Stop. The sell off will spread beyond indexes containing this company, resulting in an overall unwind in all stocks.

This is technically different from the inclusion of Tesla into the S&P 500 index. In that case, index funds were forced to buy Tesla. They could not remain passive. They had to sell certain stocks in order to load up with Tesla. However, some may find Tesla too speculative for their taste and decide to sell the S&P 500 in favour of something less speculative. If so, the effect of Tesla's inclusion into the S&P 500 may be similar to that of Game Stop. The inclusion of Tesla and the over-representation of Game Stop are both signalling a move towards trash. It's indicative of a market top.

The prudent investor will take some chips off the table at this point. A natural safe harbour will be cash and gold as outlined in my investment thesis. If a large enough portion of small investors do this, we'll see prices drop for all stocks, especially the ones considered safe, because it's the prudent investor that will cash out first. They will sell their index funds that contain mostly conservative brands.

When speculative brands start dominating the investment scene, conservative brands suffer. This pulls the broader marked down. More people start pulling down their positions, and the process continues. As things stand at the moment, the entire market is priced at historically high levels relative to earnings. There's a scary looking trumpet formation in the charts, indicative of general instability, and some index funds are already experiencing relatively high outflows. Everything points towards an imminent market collapse. The upside potential is tiny while the down side may be a stunning 80% relative to cash or 95% relative to gold.

GameStop

By Mike Mozart from Funny YouTube, USA - GameStop, CC BY 2.0, Link