One Mad Market & Six Cold Reality-Checks

Gold last traded at $1,777 an ounce. Silver at $26.02 an ounce.

NEWS SUMMARY: Precious metal prices rallied Friday as a key inflation indicator posts biggest year-over-year gain in nearly three decades. U.S. stocks rose as investors bet that higher inflation will be temporary as the economy continues to recover from the pandemic.

Gold Switzerland--"Fact checking politicos, headlines and central bankers is one thing. Putting their 'facts' into context is another.

Toward that end, it's critical to place so-called 'economic growth,' Treasury market growth, stock market growth, GDP growth and, of course, gold price growth into clearer perspective despite an insane global backdrop that is anything but clearly reported....

In other words, bragging about growth on the back of extreme deficit spending is like a spoiled kid bragging about a new Porsche secretly purchased with his father's credit card: It only looks good until the bill arrives and the car vanishes.

In a financial world gone mad, it's critical to look under the hood of what passes for growth in particular or basic principles of price discovery, debt levels or supply and demand in general.

In short: 'Growth' driven by extreme debt is not growth at all-it's just the headline surface shine on a sports car one can't afford. And yet the madness continues...

Context 2: The Treasury "Market"? - How can anyone call the U.S. Treasury market a 'market' when 56% of the $4.5T of bonds issued since last February have been bought by the Fed itself? Sounds more like an insider price-fix than a 'market,' no?....

Context 3: Deflation is back? - Hardly. Last week's jaw-boning from Powell, Fisher and Bullard had the markets wondering if the Fed will be raising rates in the distant future....

Context 4: Rising Stock Markets - Despite reaching nosebleed levels which defy every traditional valuation ceiling, from CAPE ratios and Tobin ratios to book values and FCF data, the headlines remind us that stocks can go even higher-and they can indeed. But context, as well as history, reminds us that the bigger the bubble the bigger the mean-reverting fall....

Context 5: The Dark Side of "Surging" GDP Growth - The World Bank recently made its own headlines projecting 5.6% global GDP growth, the fastest seen in 80 years. Good stuff, right? Well, not when placed into context... The last time we saw 5.6% global GDP growth was during a global world war....

Context 6: That Barbaric Relic? - What the foregoing inflation and rate contexts means is that in the years ahead, inflation will run higher and rates will run (be forced/controlled) lower until both rates and inflation spike together. This further means that real rates (i.e., those adjusted for inflation) could run as deep as -5% to -10% in the years ahead.

Such negative real rate levels could easily surpass those seen in the 70's and 80's, which means gold (and silver), both of whom love negative real rates, has nowhere to go but up, up and away in this totally debt-distorted backdrop."