THE GOLD CHRONICLES
with James Rickards and Alex Stanczyk
Fed hiked interest rate by .25% as expected
Fed is expecting 3 more rate increases for 2017 which would bring it to 1.25%
Yellen has indicated she would lean into Trump’s stimulus if it looked like inflation was getting out of hand
Trump’s plan calls for $1 trillion in spending, tax cuts, and less regulation. This is a recipe for much higher inflation
Monetary policy has reached the end of its capability
Why markets are entering a period of irrational exuberance
Factors that could impede Trump from having a free hand to implement his economic policy
The actual numbers of Trump’s fiscal stimulus is going to be far lower than the market is expecting
Gold is priced in various currency crosses versus gold, price variations are actually currency value fluctuations versus gold
USD/Gold moves for the last several months have been inverse to USD strength. All major currencies have been declining versus the USD, including gold
Assessment of Trump’s picks for his administration staff
India War on Cash / War on Gold has accelerated
War on Cash has extended to Argentina, Australia
Description of the “Bail-In” playbook
Why owning gold makes sense even when there is a risk of government confiscation, and why multi-jurisdictional diversification is one tool to do so
Gold conversion during periods of crisis
How to get the most value out of your gold holdings if there is a crisis
Crisis are temporary events, they have a lifespan, the most important is how value is preserved during a crisis and who has the most valuable assets on the other side of the crisis
Jon: Hello. I’m Jon Ward on behalf of Physical Gold Fund. We’re delighted to welcome you to the latest webinar with Jim Rickards and Alex Stanczyk in the series we’re calling The Gold Chronicles.
Jim Rickards is a New York Times bestselling author, the Chief Global Strategist for West Shore Funds, and the former general counsel of Long-Term Capital Management. He is currently a consultant to the US Intelligence Community and to the Department of Defense. Jim is also an advisory board member of Physical Gold Fund.
Hello, Jim. You’re in Berlin today, I believe.
Jim: I am, Jon. Thank you. It’s nice here in Berlin, and it’s nice to be with you and the audience.
Jon: We also have with us Alex Stanczyk, Managing Director of Physical Gold Fund. Alex is an expert in the physical gold industry dealing with the logistics chain from refinery to secure transport and vaulting. He has lectured globally to investor, institutional, and government audiences on the role of gold both in the international monetary system and in investment portfolios.
Alex: Hi, Jon. It’s great to be here, as well.
Jon: Later in this podcast, Alex will be looking out for questions that come from you, our listeners. Your questions today are more than welcome, and as time allows, we’ll do our best to respond to them.
Well, here we are just one day after the last meeting of the Federal Open Market Committee in 2016, and as predicted, rates are up. Jim, are there any surprises in yesterday’s pronouncements from the Fed, and could you perhaps tell us a little bit about the implications for gold?
Jim: There were a lot of surprises. Of course, the rate hike itself was no surprise as it was fully anticipated. We said this to listeners on this podcast months in advance, and others did, as well.
I saw one survey on Tuesday, just a day before the rate hike, of 120 economists, and 120 out of 120 expected a rate hike. So, this was probably the most heavily anticipated rate hike in history, and also right at 25 basis points. That’s what happened, so absolutely no surprise there.
But it’s never a question of simply taking the words at face value. If you watched Janet Yellen’s press conference with the FOMC statement and combine that with a little nuance, believe it or not, you get a lot more out of watching the video live than even reading a transcript just because body language can tell you something.
First, the obvious one that has been widely reported is that the Fed estimates, the FOMC members in their forecast, said they expected three rate increases in 2017. That’s in addition to the one yesterday, so we had the one yesterday and three more in 2017. That would get the Fed funds rate up to one and a quarter. Their prior forecast going back to last September was for two, so that by itself was a big deal.
Beyond that, reading behind the lines a little bit, Yellen was fairly explicit about Donald Trump’s fiscal policies, the Fed’s reaction to fiscal policy, her views on inflation, what she thought the economy was going to do, and even on her own status as chairman, all of which was fascinating.
I thought she was very blunt. I had formulated this thesis before, but yesterday really cemented my view that we are looking at a head-on collision between Donald Trump and Janet Yellen. I’m actually writing an article on this and still working on the subtitle, but maybe “The Clash of Titans” or “King Kong versus Godzilla.” Take your pick on who’s who, but Yellen and Trump are on a collision course. I think that was in the air.
Trump probably started the fight during the campaign with his remarks about wanting to fire her, and fired back in kind yesterday. Of course, he can’t legally fire her, but that doesn’t stop Trump from making the rhetorical gesture.
Just to be specific and put a little color behind those remarks, it was interesting, because I thought the questions were planted. That is not unusual for policymakers. I’ve certainly written questions that were intended to be asked in public by well-known officials.
Sometimes you get a call with the invitation, “Do you have any questions for…?” whether it’s a senator or a policymaker, and then fill in the blank. They don’t always get asked, but occasionally you are invited to submit those questions.
When Steve Liesman of CNBC stood up, I felt he was spoonfeeding her softballs about Trump’s fiscal policy and inviting her to respond, and I thought the response was fairly tough. Markets run these trends anyway; there were no trend reversals. Stocks are up, interest rates are up, bonds are down, gold is down. People call it the Trump trade. Some of it started before the election and accelerated as a result of the election, even more dramatically today.
Yellen was sort of hitting that head-on, but in particular, she was asked about the impact of fiscal policy, i.e., “Did fiscal policy affect the Fed’s thinking?” It clearly did. Not much has changed in the economic data between last September and now, but with the earthquake electorally in terms of the election of Donald Trump, his cabinet selections, and what he wants to do with fiscal policy, the Fed is looking at that.
Now, what has Trump actually said? We remarked earlier that because Trump is such a controversial figure, a lot of people had difficulty getting past his personality and demeanor during the campaign to look at his policies. Once it was clear that he was elected president, people got past that and looked at the policies. What he has called for is extremely stimulative. He wants $1 trillion of additional spending, tax cuts on top of the $1 trillion of infrastructure spending, and he wants less regulation.
Taking it at face value, if you throw that kind of additional spending on an economy that’s already close to capacity… You can debate labor force participation, but unemployment is 4.6%, this expansion is eight years old, and it’s not clear how much additional slack there is in the economy. There’s certainly some, but not that much. If you put $1 trillion of spending and tax cuts on an economy that’s already operating at or near capacity, you’re going to get inflation. Keynesianism 101 says that if people don’t spend, the government will.
People, in fact, have not been spending. Gains in income have been scarce, but if people get them, they tend to pay down debt or save the money. They don’t go out and spend it. We’re in a little bit of a liquidity trap, but if you hand over the checkbook to the government and tell the government to spend the money, they’ll do a very good job of it. That’s what governments are good at.
Yellen is looking at this and saying, “Okay, with $1 trillion of spending, tax cuts, the economy near capacity, and unemployment at 4.6%, you’re definitely going to get inflation.” What she said was they’re going to lean into it; they’re not going to let that inflation take off.
Per Steve Liesman’s question, she also made the comment that not all fiscal policy is equally stimulative. She said certain kinds of spending add to productivity – like spending on education, re-training, and certain limited kinds of infrastructure – but other kinds of spending don’t add to productivity. They might add to spending, but they don’t make people more productive.
Clearly, in my view, she was talking about the kinds of tax cuts that Trump is proposing. Trump wants to cut the personal income tax rate from about 40% to around 33%. Half the people in the United States – 50% of the people in United States – pay no income tax. You could cut income taxes to zero and it would have no impact on that half, because they don’t pay any income taxes to begin with. In other words, those kind of tax cuts only apply to upper income individuals.
I don’t want to debate the policy; listeners can decide that on their own. But what she was saying as an economist is that if the wealthiest people get the tax cut, they have a very low propensity to consume. When you give rich people a tax cut, they don’t go out and buy another TV. They already have ten TVs, three houses, eight cars, and everything else. They’re not really going to spend it. They might invest it or they might just save it, but it doesn’t necessarily do a lot in terms of adding to the productivity of the economy.
It’s a bit of a giveaway, at least in Yellen’s view, versus some other kinds of fiscal stimulus that might add to productivity. Again, I’m not saying I agree with all that, but I’m just trying to interpret the way Janet Yellen thinks about it
She’s saying if you inject that kind of money into the economy in the form of tax cuts but don’t do anything to add to productivity, you’re just going to get inflation or even worse, maybe stagflation. The Fed is not going to let that happen.
This is the answer to the helicopter money question. What is helicopter money? The image is that the Fed prints out money, puts it in helicopters, throws it out of the helicopters, it lands on the ground, and people scoop it up and go out and spend it. It’s a colorful metaphor, but of course, that’s not actually what helicopter money is.
Helicopter money is a combination of fiscal and monetary policy. The elites have been calling for this for a long time independent of Trump’s election. People like Larry Summers and other economists including Janet Yellen herself have been saying that monetary policy has reached the end of what it can do. Monetary policy is running out of impact, running out of juice so to speak, and they need to combine it with fiscal policy.
At some level, that would mean larger deficits, the deficits would be covered by borrowings or by bond issues, the Fed would then buy the bonds (in effect, monetize the bonds), put them away, and not sell them. You’d have money printing, but it would be going directly into government spending, not just into the banks, and the banks would give it back to the Fed as excess reserves. That’s what helicopter money is.
Now, the question is, when do you use helicopter money? The classic formulation that was first articulated by Milton Friedman and later repeated by Ben Bernanke – and I’m sure Janet Yellen agrees – is that helicopter money is something you use when you have deflation. If you get into a deflationary trap, which is very destructive of government finance, increases the real value of debt, and makes debt defaults more likely, you might use helicopter money to get out of deflation.
But Yellen is sitting there saying we don’t have deflation; we have inflation. Inflation is low, but she sees it going a lot higher because of the constraints in the labor market. Remember, Janet Yellen is a big believer in the Phillips curve. The Phillips curve says there’s a tradeoff between employment and inflation. Up to a certain point, you can in effect print money to stimulate the economy and not get inflation, because more people are getting jobs, you’re bringing people back into the workforce. But when you get to the point of nobody left to come back into the workforce regardless of the reason – labor conditions are tight structurally, demographically, or otherwise – and you keep printing money, you’re going to get inflation.
That’s where Yellen thinks we are. I don’t personally agree that that’s where we are, but my view doesn’t matter; what matters for understanding policy is what she thinks. She’s saying we don’t need helicopter money. We have rising oil prices, inflation is accelerating, unemployment is low, and there’s not much slack in the labor market, so this is not a circumstance when you would use helicopter money.
For those who expected it, she really slammed the door yesterday when she talked about Trump’s stimulus. Again, she said this is not the kind of stimulus that adds to productivity; it is the kind of stimulus that will perhaps cause inflation. We, the Fed, are not going to allow that to happen. We want inflation to be a little higher, but not a lot higher. We don’t think deflation is a problem, we don’t think these are the circumstances when you can use helicopter money, and we’re going to lean into it.
That was a very big deal, because she is, in effect, challenging Trump saying, “If you use fiscal policies to stimulate the economy, we will use monetary policy to make sure that that stimulus doesn’t go too far, at least as far as nominal price increases are concerned.” That was one challenge or one confrontation with Trump.
The other one was even more interesting, a little bit of “inside baseball.” Janet Yellen’s term as Chairman of the Board of the Federal Reserve Board expires next January — let’s call it February 1st, 2018 – not that far away, a little over 13 months. Trump ran around on the campaign trail saying he’s going to fire Yellen, which he can’t, but it’s clear that he won’t reappoint her. When her term is up, someone else is going to be chairman.
A lot of people think that’s the end of Janet Yellen, but she’s also a governor of the Fed in addition to being the chair, and governors have 14-year terms. Her 14-year term as governor goes until 2028, and she hinted at least at the fact that even if Trump does not reappoint her as chairman, she may stay on the board as a governor and be a thorn in his side basically depriving him of his ability to fill that seat.
Traditionally, when a chairman’s term is up and they don’t get reappointed, they leave the board even though their governor term goes on a lot longer. Ben Bernanke was an example. When President Obama did not reappoint Ben Bernanke and picked Janet Yellen at the end of 2013, Bernanke resigned and left the board. He didn’t hang around as a governor, although he could have.
This hasn’t happened since 1949. Marriner Eccles was the chairman at the time and was not reappointed by President Truman as chairman, but he stayed on the board for three years until 1951. By saying that, Yellen was saying, “I might just sit in my seat and be a pain in your neck and not give you the opportunity to reshape the board as much as you think.”
I felt she confronted Trump in two ways: Number one, I heard her say she’s not going to do helicopter money and that if we get the kind of stimulus Trump is talking about on the fiscal side, the Fed will tighten even more. Number two, she might hang around even if she’s not reappointed as chair just to be a vote for more rate increases and deprive Donald Trump of the ability to fill that seat.
Both of those things are hawkish. The FOMC was already hawkish by increasing the projected rate increases from two to three, so this was a super hawkish message coming out of the Fed, and that’s how markets interpreted it.
Bonds down, gold down, that’s all easy to understand. Positive real rates is when the nominal interest rate is significantly higher than the rate of inflation. A simple example is that if you get up to 3% on a ten-year note and inflation is about 2% or less, your positive real rate is 1% or more.
That’s a headwind for gold, no question about it, because gold doesn’t have a yield. That’s another issue. Gold in my view is not supposed to have a yield because it’s money, but people allocating assets don’t think of it that way.
They think, “I can buy stocks, I can buy bonds, I can buy foreign currencies, I can buy gold, and if I can get positive real returns of 1% or 1.5% and nominal returns of 3% or more versus zero on gold, why would I have gold? I’d buy bonds.” That’s why gold is down so significantly, particularly today when it had a very large drawdown. A very hawkish Fed equals headwinds for gold.
I’ll finish there, because I know we have a lot more to discuss, but maybe later in the podcast, we can come back to how this is going to actually play out. The scenario I described of the Trump trade, stocks up, bonds down, gold down, and interest rates up is subject for a major reversal.
Not right away, but maybe by the end of February or early March, I think things are going to play out very differently than I just described. For now, they are the way I described, this is what markets expect, and the Fed did nothing to steer anyone away from that view yesterday. In fact, they were pretty clear that they think rates are on a very steep upward path.
Jon: Thanks, Jim. Let’s build on that, because one of the stunning consequences of the election has been a dramatic buoyancy in the financial markets. The DOW has shot up some 1200 points following Mr. Trump’s victory.
I wanted to ask you if this is a case of irrational exuberance, or does the new administration give reason for economic optimism and therefore, of course, pessimism for the future dollar price of gold. What are your thoughts on this?
Jim: I do think it’s a case of irrational exuberance, and I’ll explain why. The phrase “irrational exuberance” in reference to the stock market came from Alan Greenspan. It stems from stock prices going up and looking at them saying, “There’s really no good reason for this, there’s no fundamental reason for this; it’s just a case of your four-year trend following momentum.”
Alan Greenspan coined the phrase in December of 1996. The stock market peaked on January 1st, 2000. It was three full years before reality caught up with the stock market. Even though Greenspan was worried about irrational exuberance in 1996, the market went up for three more years. For me to sit here today and say, “Yes, I think it’s irrational exuberance,” doesn’t rule out the fact that just because things are irrational doesn’t mean they can’t get more irrational. We all know that about markets.
Let me put a finer point on that by taking the markets one at a time. Why are stocks going up? It’s fairly straightforward. What are Trump’s policies? He’s talking about lower taxes, less regulation, and lots of spending.
As a stock market investor, you say, “Lower taxes? That means consumers are going to have more money in their pockets, so I’m going to buy consumer non-durables. You’re going to spend money on defense? Let’s buy Boeing, Lockheed, Raytheon. You want to spend more money on infrastructure? Let’s buy John Deere and Caterpillar. You want to get rid of Obamacare? Let’s buy pharmaceuticals. You want to get rid of Dodd-Frank? Let’s buy banks.” It’s buy, buy, buy.
When you look at the Trump program, it’s hard to find a sector in the stock market that you wouldn’t want to buy, because all his policies individually are good for one or more of these sectors. You can say, “Good for pharmaceuticals, good for banks, good for construction, good for defense contractors, good for consumers, what’s not to like?” The problem is, will any of it really happen?
This is what the markets expect, this is what Trump has called for, but let’s take a minute and think about the cold, hard reality of what I just described. First, the policy of lower taxes, less regulation, and more government spending was Ronald Reagan’s policy. That was exactly what Ronald Reagan championed, and what he ultimately delivered, but there are a lot of caveats or footnotes around that.
When Ronald Reagan said that, interest rates were 20%. They had nowhere to go but down. They were as high as they had been since the Civil War. Paul Volcker took them there to destroy inflation. Inflation wasn’t quite killed off – it took another couple of years to do it, and interest rates remained at high levels – but that was as high as they ever got. They basically had nowhere to go but down, and they did go down a lot, which obviously was great for the bond market.
Inflation was between 14% and 15% when Reagan was sworn in. It had nowhere to go but down, and it did go down for 20 years after that. By 1983, it was into the single digits, by the 1990s, it was extremely low, and by 2000, it was zero or negative. Where’s inflation today? It’s about 1.5% with nowhere to go but up.
And finally, the stock market was at decade-long lows. Remember the first two years of the Reagan administration, 1981 and 1982, we had the worst recession since the Great Depression. In fact, all the way up until the financial panic of 2008, that ’81–’82 recession was the worst recession since the end of World War II. The economy went through a very rough time.
The Reagan boom years that everyone remembers were real during 1983, 1984, 1985, and 1986. The economy grew enormously, but it grew from a position of coming out of the worst recession since the end of World War II, interest rates that had nowhere to go but down, etc.
The other thing Reagan had going for him was the 35% debt-to-GDP ratio of the United States. He had massive headroom and could be a big spender and run large deficits, which he did.
The idea that Reagan was fiscally conservative is just not true. Reagan was a big spender and took the debt-to-GDP ratio from 35% to 55% by the time he left office. Take the 20-point increase divided by 35, which is where he started, and that’s approximately a 60% increase in the debt-to-GDP ratio.
Let’s compare everything I just said to where Trump is today. Interest rates are close to zero with nowhere to go but up, inflation is close to zero with nowhere to go but up, and the economy is not in a recession; it’s in the eighth year of an expansion. That means a lot less bang for the buck.
People are familiar with the Keynesian multiplier: For every $1 of government spending, we get $1.50 or $1.40 of additional GDP. They spend a dollar on a defense contract, the defense contractor hires a worker, that worker gets a job, he hires a babysitter, and the babysitter takes a taxi cab home. That’s velocity. The $1 gets turned into more than $1 of goods and services, and the economy grows. That’s the Keynesian multiplier.
When you’re at capacity, in the eighth year of an expansion, you get diminishing marginal returns. Unlike the speed of light, the multiplier is not constant. It can change and does change. In current conditions, the multiplier could actually be negative. For $1 of government spending, you might get maybe 90 cents or 95 cents of additional GDP. In fact, that’s very likely.
This is all theoretical. There’s a lot of evidence to back it up, but you never know where you are at a point in time. You should let the economy play out, go back and look at the data, and then you can compute it after the fact. It’s not like a speedometer where you can just look at it and tell how fast you’re going. You have to estimate it theoretically.
Again, given capacity constraints of the eighth year of a recovery, it’s very likely that we’re in negative territory. This means $1 of government spending doesn’t even get you $1 of GDP. It gets you maybe 98 cents, because people are using the money to pay off debt or they’re saving it or they’re not spending it one way or the other.
We’re in that territory, so we’re not going to get a pop from declining interest rates or declining inflation, from disinflation. We’re not going to get a pop from the Keynesian multiplier, so even if Trump did what he said, it’s not going to have the same effect as Reagan, because our initial conditions are completely different.
Beyond that, it’s looking less and less likely that Trump is going to be able to do what he said. This is not a question of reneging on promises; it’s a question of political reality. Paul Ryan and Mitch McConnell – the Republican leadership in the House and the Senate –know these numbers as well as I do. Paul Ryan probably dreams about them in his sleep.
Just think about what the Republicans did for the last eight years. They fought Obama and the White House tooth and nail on budget deficits, debt ceilings, the fiscal cliff, and shutting down the government.
Remember all those debates? Remember Ted Cruz standing up in the Senate in 2011 threatening to shut down the government? They did actually have short shutdowns. Remember the fiscal cliff, the refusal to raise the debt ceiling so that the Treasury could issue more debt?
Remember Joe Weisenthal and his $1 trillion platinum coin and all that stuff? That’s all you heard in 2010, 2011, and 2012. You haven’t heard about it the last two years, because the Democrats and the Republicans did a deal to take it off the table for the election cycle. Now it’s back.
Having fought Obama tooth and nail over the debt ceiling, now that the Republicans are in charge of everything, how are they going to raise the debt ceiling? They’re going to look like complete hypocrites.
Don’t get me wrong, they probably will, because hypocrisy never stopped a politician from doing anything. My point is, they’re not going to be very credible or let spending go wherever it wants or raise the debt ceiling $1 trillion so that Steve Bannon, Trump’s senior advisor, can build roads, bridges, tunnels, airports, and all the other stuff they want to do.
Mitch McConnell has said that tax cuts have to be revenue-neutral. By the way, Mitch McConnell is the Senate Majority Leader and can singlehandedly stop the Senate in its tracks. Nothing will happen in the Senate unless Mitch McConnell wants it to happen. If he says – and he did say – that tax cuts must be revenue-neutral, that means if you want to cut taxes on the wealthy from 40% to 33%, you have to compute how much it’s going to cost you and you have to make it up someplace else.
Now, they could do a lot of things. They got rid of the three-martini lunch a long time ago, but they could get rid of deductions, they could get rid of home mortgage interest deductions, and they could get rid of charitable deductions.
There are other things they could do. The biggest target is probably converting taxes on carried interest for private equity managers from capital gains to ordinary income. It’ll only get things so far, but here’s the real point: it kind of doesn’t matter what they do.
To say revenue neutral, there’s no stimulative impact. If I’m going to cut taxes over here and raise them just as much over there so that the impact on the deficit is zero, where’s the stimulus if I’m raising them as much as I’m cutting them? There isn’t any stimulus. All you’re doing is saying, “This guy gets a bigger piece of the pie, and somebody else gets a smaller piece of the pie,” but you’re not making the pie bigger. That right there takes away the stimulus effect of the tax cuts as far as spending is concerned.
We have $20 trillion in debt and the U.S. debt-to-GDP ratio is 104%. Do you think they’re going to throw another $1 trillion on top of that and take the debt-to-GDP ratio past 110%? We’re going to look like Italy before long.
I think what Trump is going to find is that he’ll have to prioritize and pick and choose. He’ll get some things through Congress that will be popular, and he’ll at least have the appearance of keeping some of his campaign promises, but the actual numbers, the actual stimulative effect of what’s going to happen, will be far less than the stock market is anticipating.
They’re going to find out that maybe you can have roads and bridges and maybe you can have defense spending, but you can’t have both. Maybe you can have tax cuts for the rich, but you’re going to have to increase them over here.
The hard reality is such that you’re not going to get anywhere near the fiscal stimulus from Trump that the stock market is expecting, and the whole inflation trade is not going to materialize. Go back to what I said at the beginning of this call. The Fed has already said they’re going to lean in. The Fed threatened to not engage in helicopter money because we don’t have deflation and they’re worried about inflation.
The rhetoric is that happy days are here again, we’re going to have the Trump reflation trade, buy stock, sell gold, sell bonds, etc. That’s the rhetoric and the market thinking, but the reality may be quite the opposite.
The reality may be that you get far less fiscal stimulus than you expect, and furthermore, you get a far tighter monetary policy than you expect. If you do that, it’s a combination for a recession – far from going into a ninth year of expansion.
The Fed is always behind the curve. If the Fed is sitting there waiting for evidence to show up, by the time it shows up, it could come as a very unpleasant surprise when you look at, say, first quarter GDP at the end of April or the March employment report, which will also come out in the beginning of April.
By the way, I have a very high probability that the Fed will actually raise interest rates in March. We’ll get that out there for the listeners.
Take the March rate hike on top of the one we just had yesterday, on top of projected rate hikes, all of which is very much tightening monetary conditions, then maybe by the end of February, the stock market will get a wakeup call, “Oh, gee, we’re not going to get the deficit spending we were expecting.” The market must correct for that, so it goes down, and that’s tightening financial conditions.
You might have extremely tight financial conditions by March or April, in which case everything is going to go in reverse. Stocks are going to go down, the Fed is going to have to go dovish, that’s going to be bullish for gold, bonds are going to go up again, and rates are going to come down.
But not yet. I think it’s very important that we understand the timing and the sequence. I’m not saying you should go out and short stocks; that would be like standing in front of a train that’s coming down the tracks at 100 mph. That would be crazy to do today.
Let’s define the Trump trade. The Trump trade is stocks up, interest rates up, bond prices down, gold down, and stronger dollar. I would expect all those things to continue for a while at least through the end of the year, maybe into early next year. Probably not later than the end of February when I would look for all those things to go into reverse for the reasons I mentioned. I don’t want to just make claims, I want to explain the analysis based on the reality of higher interest rates and tighter monetary policy.
Think about what the strong dollar does. It’s deflationary. If you have a stronger dollar, that means an American who wants to buy French wine, go on a Swiss vacation, or even buy clothing from China in Costco, all those things will cost less if the dollar is worth more. That’s deflationary.
How does the Fed get to inflation with a strong dollar that’s causing deflation? They can’t. These are the conundrums, these are the paradoxes we’re confronting, but none of this will be apparent today except for our listeners.
I would expect it will become apparent by the end of February, March going into April. Every one of these trades is going to go into reverse, and that’s where gold will go up, the dollar will go down, and interest rates will start to come down.
Just to have a little pop quiz for the listeners, does anybody knows what interest rates were on the ten-year Treasury note with maturity at the end of 2013? They were over 3%. Today, it’s about 2.6% or maybe a little higher than that.
Interest rates were higher three years ago than they are today. If you went out and bought ten-year Treasury notes at the end of 2013, you got a nice 3% yield in the meantime, and you still have capital gains because rates are about 2.6%. They’re lower than they were when you bought them. That means the price of the bond goes up.
All you hear today is, “The bond bubble has burst, interest rates are going up, bond prices are going down, blah, blah, blah.” Sorry, their actual yields are lower than they were three years ago, and gold prices are higher.
Yes, the short-term trends have been negative for bonds and gold. Rates higher, bond prices down, gold down, stock up, I get all that. It’s not a lot of fun if you’re sitting on gold, but I would suggest that people keep it in perspective and understand that gold prices are up on the 21st century, they’re up on the year. They’re not up as much as they were, but they are up. They were up over this time period. Certainly, bond prices are up in the last three years. You have to put these things in perspective.
I don’t think March or April is that far away. By the time we get to the spring, we might see a complete reversal in all these trends. But for now, the trends are intact and the Trump trade is alive and well.
Jon: Thanks, Jim. That’s a very full answer, very rich in information.
Alex, you watch all this and the markets, the equity and bond markets, through the lens of physical gold. Looking back on recent events, how do you see what’s been happening?
Alex: I have a couple of views on this. I’d like to remind everybody that there are times when gold moves quite a bit, and sometimes people get a little concerned about the price. I would remind you that the prices we see are based upon currency crosses versus gold. What I mean is that gold doesn’t do anything.
I saw a news article the other day that said, “Trump loves gold, but gold doesn’t love Trump.” I thought to myself, “That is really one of the dumbest headlines I think I’ve ever seen,” because gold doesn’t love anybody. It’s an inert material. It doesn’t have a fancy for certain things.
Gold is just gold. A troy ounce of gold is a troy ounce of gold now, and it will be a thousand years from now. It will be in the United States or in Germany or in any other country; it doesn’t matter. It doesn’t move, it doesn’t go anywhere, and it doesn’t do anything. It just is, so when you’re seeing prices expressed in U.S. dollars for gold or British pounds or euros, what you’re really seeing is fluctuations in those currency values against gold.
Listening to what Jim was saying, I think he’s totally right. The words I would use to describe the situation is temporarily over-optimistic. In my view, equities and the U.S. dollar have been getting much stronger for all the reasons Jim mentioned and possibly a couple more.
There’s this narrative going on about how the U.S. economy is going into the future, but we should also look around the world. The turbulence we’re seeing in the EU right now and around the world is all contributing to the U.S. dollar strength, so these moves are all based on U.S. dollar strength.
There are a lot of things that push on the price of gold. On occasion, the U.S. dollar has the strongest push, and that’s exactly what’s been happening. Even in the last two days, the U.S. dollar is up strongly while every major currency in the world including gold is down versus the dollar.
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Back it up even further to the beginning of October when gold in U.S. dollar terms was doing great. If you lined up a two-month chart of the U.S. dollar next to gold, you would see an extremely obvious pattern. The U.S. dollar has been getting stronger and gold has been getting weaker, but the interesting thing is that U.S. treasuries have been moving almost lockstep with gold. So has the euro, JPY, the British pound, and Swiss franc. These are all moving inverse to the U.S. dollar. This tells us that currencies around the world are just repositioning versus the dollar, and the U.S. gold price is a direct reflection of this.
I concur with what Jim says. The dollar has to weaken from this current strengthening cycle. If it keeps getting stronger like this, we’re going to be looking at serious emerging market crises, and it must reverse. What I think is going to happen is that as much of this starts to reverse, a lot of these things are also going to go in the other direction.
Jon: Thanks, Alex.
Jim, I’d like to ask you for a brief thought about one other aspect of this election drama we’ve just lived through. Donald Trump campaigned as the champion of an unheard working class against the corruptions of the political and financial elite.
When you look at his cabinet choices that assembles the wealthiest cabinet in U.S. history, you look at his plans to reduce banking regulations, and you look at the continued reign of Goldman Sachs at the Treasury, can you see any daylight between Trump and the elites? What do these hiring decisions mean for the markets looking forward?
Jim: I can see some daylight. I’m not as tough on this regarding Trump as some of his critics or even some of his supporters.
Your question is probably more aimed at Trump’s supporters: are they disappointed or upset at some of these appointments, and do they feel it’s the same old, same old? It’s like that song by The Who, Won’t Get Fooled Again. “Meet the new boss, same as the old boss.”
I view it a little bit differently. First, I am impressed with the caliber of the talent. Independent of the pedigree or where people worked once upon a time in their career, I think Trump is picking extremely talented, smart, competent people for the cabinet.
Garry Cohn is moving from Chief Operating Officer of Goldman Sachs to head of the National Economic Council, which is a very powerful job. They’re actually in the White House as part of the senior staff with the ear of the president. For example, when the president goes to G20, it’s the National Economic Council and the head of it who prepare his briefings and positions on things like currency wars or bailout versus bail-in, etc., and just directing economic policy in general.
As I mentioned, Cohn was Chief Operating Officer of Goldman Sachs. Probably the president’s closest advisor outside of his children and son-in-law is Steve Bannon who at one time worked at Goldman Sachs. The Secretary of the Treasury is Steve Mnuchin who also worked at Goldman Sachs.
You might say, “Wait a second, isn’t this a Goldman Sachs government?” Yes, they may have worked there, but Cohn is different; he’s Goldman Sachs to his DNA. The other two, Bannon and Mnuchin, worked there for part of their careers but moved on.
A lot of people come and go, so not everyone is there for life. They certainly get some great training, build a great network, and get some skills, but Bannon went on and had a big career in Hollywood.
He started doing media deals and started his own investment bank. He did media deals as an investment banker and made a ton of money. He bought the rights to Seinfeld, the comedy show, after the first season. It wasn’t a big hit in the first season, he stepped in and bought the show, and then, of course, it was the most popular TV show of the 1990s. He made a lot of money there.
Mnuchin also went out on his own as a private equity dealmaker, bought some banks, and made a lot of money that way. They’re super talented guys who have made a ton of money, they’re Wall Streeters – however you want to define it – but I don’t really think of them as part of a deep, dark Goldman Sachs conspiracy where one firm controls the government.
Goldman Sachs is full of Republicans and Democrats who do have a finger in every pie. I will say everywhere you turn, you’ll find Goldman Sachs alumni. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, worked there. Bob Rubin, Secretary of the Treasury during the Democratic Clinton administration, and Hank Paulson, Secretary of the Treasury during the Republican Bush administration, were both former heads of Goldman Sachs. They tend to be everywhere, but they tend to be quite talented. They’re Republicans and Democrats, conservatives and liberals.
I don’t see Goldman Sachs as this homogeneous malevolent force, particularly if you haven’t been there your whole career. Cohn has, so he’s maybe in a little bit of a different category. The others were there for a while, but they did a lot else in their career. I view it more as a question of talent.
The title of my new book is The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis. When I talk about the global elites I’m not talking about CEOs and bankers; I’m talking about policymakers. People like Christine Lagarde and David Lipton at the IMF, or Michael Froman, now the U.S. Trade Representative, formerly on the National Economic Council, or central bankers like Mario Draghi or Janet Yellen, or academics like Larry Summers or Ken Rogoff, or public intellectuals like Adair Turner and Anatole Kaletsky.
Those are the people I refer to when I use the phrase global elites, because they’re running the international monetary system, institutions like the World Bank, the International Monetary Fund, the Bank for International Settlements, the Financial Stability Board, the sherpas in the G20 process, central bankers, and finance ministers. That’s the group I’m talking about specifically. They’re the ones who are advocating the SDR and are getting ready for the next financial crisis.
Investment bankers are important, they play an important role, but I really think of them as more about talent. I think Trump is getting some very good talent and some very good advice. I don’t quite buy into the Goldman Sachs conspiracy theory. It’s a powerful institution with a lot of problems. As far as Goldman Sachs itself as a company, what they do, that bears watching, but I think you have to take the individuals one at a time.
As far as his other appointments, as President-Elect Trump would say, “I have my generals.” General Flynn at the National Security Council, General Mattis at the Pentagon, and others who are getting various appointments in the Intelligence Community and other roles. They’ve talked about General Petraeus as perhaps having a role, Admiral Rogers maybe for Director of National Intelligence. Not all of these appointments have been announced and not all these seats have been filled yet, but he’s really relying on military people.
Just a word there: I have been privileged to have a lot of exposure to the military, particularly senior officers, working with majors and colonels and generals. I’ve met a few four-star generals, but I work closely with two-star and three-star generals, brigadiers, major generals, and lieutenant generals. You would have a hard time finding a smarter group of individuals. I’ve worked with Wall Streeters, Nobel Prize winners, PhDs and academics, and I’ve worked with the military. Our senior military officers – I’m talking about the top tier – these men and women, they have PhDs, they speak five languages, they have two master’s degrees. They have all that education, plus they’ve been on active duty on five continents.
When you’re an area commander, a central commander, African commander, European commander, you’re like a super-ambassador. You deal with your peers, you deal with heads of state, you deal with ministers of defense and other senior cabinet officials, CEOs in the places you go. They’re super competent, but they also have a culture.
The military culture is “Can do. Never complain, get it done, mobilize whatever resources you need.” They don’t make excuses between each other. They have a very direct, very blunt style. That’s the kind of military culture. There’s a lot to admire there.
Another example is Wilbur Ross. I’ve met him a few times. He’s a very nice guy, super successful, and a shrewd dealmaker. So, I look around this cabinet and what I see is not a group of elites. I guess if you’re a billionaire and you belong to certain clubs, you’re part of the elite, but I define it a little more narrowly. My definition of elites runs to likeminded people using really bad economic models to run the financial system off a cliff.
As far as the others are concerned in the Trump cabinet, I see a lot of talent, a lot of smart people, and I don’t see the conspiracy that some others see. It’s nice fodder for the websites. What do they call Goldman Sachs? The Vampire Squid. It was Matt Taibi at Rolling Stone who came up with that phrase.
Goldman is a powerful institution; I have no illusions about it. They do have a finger in every pie, but I don’t quite buy the vampire squid theory, and I don’t think it’s a conspiracy. I think Trump has some very talented people.
Jon: Thanks, Jim. In particular, it’s a very helpful distinction you made about how precisely you’re defining the financial elites.
And now, Alex, I’m sure you have many questions from our listeners. We have a little time left, so let’s use it to hear those questions.
Alex: We did have a lot more material planned for this discussion, including the situation that’s going on in India, and I’m just going to very briefly touch on that.
For those of you who don’t know, there was a demonetization declared on November 8th by India’s Prime Minister. It has created a tremendous amount of turmoil. Almost 98% of the country’s transactions are done in cash, so this has been a huge issue. We referred to this in previous discussions as the war on cash, and it sort of morphed now into the war on gold over there.
We don’t have time to dive too deeply into that at all, but just be aware that it is happening, and we’ll try to cover it more in-depth maybe if it’s still an issue in the next podcast. We have a bunch of great questions right now.
Jim: Alex, I’m sorry, if I could just interrupt for 30 seconds. I hope we do cover it in the next podcast. You’re absolutely right about India, but this thing is spreading faster than I can keep track of.
After that, we had a demonetization in Venezuela. They declared the 100 bolivar note no longer legal tender. Demonetization is a fancy word for “Your money is not money anymore.” A president or a head of state or a prime minister wakes up and says, “Your money is not money anymore.”
It happened in India, it happened in Venezuela, and it’s now being proposed in Australia. It came up yesterday that Australia may abolish the $100 AUD note. This is bouncing around from country to country. It’s gone way beyond India, although India is the most egregious case.
Let’s make a note that is a good one for the next podcast.
Alex: Yes, absolutely. We talked about it the last time and said that these are not isolated cases; this is all part of a larger sort of plan. This is not a big conspiracy theory or anything like that. Jim has talked extensively about it. It’s all documented. We know from the last G20 meetings, the initiative there. The end-result that they’re trying to get everybody into is basically digital accounts and no cash so it’s easier to control.
Moving on to our questions, as I’ve mentioned, we have a lot of good ones.
The first question comes from a gentleman by the name of Chris M. If I’m not mistaken, I believe he’s from the U.K. His question starts out with a bit of preface: “In the U.S., the FDIC compensation scheme is in place to compensate small savers with money in banks. In the U.K., the Financial Services Compensation Scheme is the equivalent, and it’s likely to be raised to £85,000 soon.”
His questions are, “Isn’t it possible that in the event of a systemic banking crisis – worse than 2008, for example – that the U.K. government, saddled with public debt of 90% to GDP, might not be in a position to honor these promises to compensate savers?” There’s a second part to it: “May the only courses of action be a partial payout and bail-ins in order to salvage the situation?”
Jim: Anything is possible, so you can take any scenario you want and I’m not going to say it can’t happen. Too many weird things have been happening. We don’t have to guess about what a bail-in is because the G20 told us.
In November 2014, from Brisbane, Australia, the G20 meeting working papers had a blueprint for what a bail-in is. It doesn’t mean they can honor it in every case, but we know what it is. They do intend to honor the insured deposit. Any amount in excess of the insurance is absolutely at risk.
I don’t know every limit in every country, but I know for the European Monetary Union, it’s 100,000 euros. In the United States, it’s $250,000. I take it from Chris’s question that in the U.K., it’s somewhere south of £85,000, which I guess would be roughly equivalent to $100,000.
The amounts vary, but it is the intention of the G20 to protect you to that extent. A lot of people have more than that, but it doesn’t mean they’re super rich. People say, “If you have $500,000 or 500,000 euros in the bank, doesn’t that make you rich?” Maybe, but you could also be a businessperson, and that could be your working capital.
You could be a car dealer or a restaurant operator with that much in working capital to meet payroll. The money is in the bank, but it doesn’t mean it’s all your personal net worth. It could be there to satisfy accounts payable, payroll, working capital, or any other thing you might have in the business.
That money is at risk in the event that a particular bank becomes a subject of a bail-in. The intention would be to take amounts more than the insured amount, convert it into equity in the new bank, bearing in mind that the equity in the old bank got wiped out.
The bail-in playbook is simple: equity goes to zero, deposits in excess of the insured amount can be converted into anything they want including equity in a new bank, so you involuntarily go from being a depositor into being a stockholder. Bondholders take a haircut.
A haircut just means you don’t get 100 cents on a dollar. You might get 40 or 60 cents. Whatever it takes to fill the hole in the balance sheet is how much the bonds will get haircut. All of that happens before any government money is used.
As for the insured amount, could the government be in a position where they can’t honor the obligation? That shouldn’t happen, because they can always print the money. The question really is, what’s the money worth?
In other words, I might pay you your £85,000, but if I have to print the money to do it, the purchasing power might be worth half. I’ll give you all the nominal money, but you might discover that it’s not worth as much as you think.
Alex: We’re very tight on time, but there are still a couple of really good questions. If we could ask you to stay maybe five minutes over time, Jim, and quickly address some of these to make a three-minute or a five-minute clip for each one.
Before I jump into them, just a quick hello to Susan K. She’s asking when will the gold price bottom? We talked a little bit about that before. If you’re looking at gold, December-January-February timeframe might be a good window.
There are two questions here. One is from Robert O. who asks, “If the world’s currency cash-holders have lost the war on cash, how do you expect those much fewer gold owners to be able to win the war on gold? Would it be wise in your opinion to join in on this losing proposition?”
Jim: I hear this a lot in different forms. People say, “Yes, I hear you, Jim and Alex. I understand gold preserves wealth and will protect me against inflation and the war on cash, but what good will it do me if the government is just going to come and take my gold?” When I hear that, I think of it as an excuse by somebody who doesn’t really want to own gold to begin with and is looking for reasons to justify that.
What happened in 1933 in the United States? President Roosevelt, by executive order, made gold illegal in the hands of U.S. citizens. He made it contraband, like drugs or smuggled goods, and said everyone had to hand in their gold. If you didn’t, you could go to jail, and there were fines equivalent to $100,000 in today’s dollars.
That’s what’s referred to as the Great Gold Confiscation. Wouldn’t they just do it again? Well, there’s a little bit of nuance there. That is what happened, but when they handed in their gold, they got $20 an ounce which was the price of gold at the time.
The Fifth Amendment of the U.S. Constitution says the government can take your property, but if they do, they must give you just compensation. For example, if the government is putting through a highway and says, “Sorry, we have to put the highway through your farm because that’s where the road goes. We’re taking your land by eminent domain, but we’ll give you a check for the value of the land,” the government can do that.
The government can take your gold at any time they want, but they must pay you for it. They can’t just come break down your door and seize it. That would be a violation of the Constitution. I don’t know what the law in India is; maybe they can break your door down and seize it for tax evasion, but not in the United States.
Roosevelt did give them $20 an ounce, but he was sneaky. He knew he intended to raise the price of gold in effect devaluing the dollar, which he did. He took it from $20 an ounce to $35 an ounce, which was a 75% increase in the price of gold if you want to think of it that way, or inversely, a 40% devaluation of the dollar.
I’ve always called it a confiscation because he didn’t know exactly $35 at the time. He ended up there, but he was thinking, “I’m just going to raise the price of gold until I get some inflation,” which he eventually did.
If you force people to sell it to you at $20 an ounce, but you know secretly that you’re going to raise the price, that’s a form of theft. It’s just dishonest. He wasn’t honest with the American people. That’s why I call it a confiscation.
For the record, they did get $20 an ounce. The problem is they didn’t get $35 an ounce, which is where he ultimately took it. That was the deception, that’s what was wrong. The $20 an ounce did fulfill the requirements of the Constitution, of the Fifth Amendment, because they got just compensation. We were on a gold standard, and that’s what the price of gold was.
Imagine the same thing today. The government is so desperate they want to come and get your gold. Well, they have to pay you for it. They could do it, I’m not ruling it out, but they must pay you for it. But there’s a big difference – we’re not on a gold standard today. The price of gold can be whatever it can be. It can go down, it can go up. There is no fixed price of $20 an ounce or even $1000 an ounce.
Imagine a world where the government is going to do this. A world in which the government is so desperate that they want to confiscate all the gold is a world that’s already out of control. It’s a world where the price of gold is probably well on its way to $10,000 an ounce.
To confiscate gold today consistent with the Fifth Amendment, because there’s not a fixed price, they can’t do the bait and switch that Roosevelt did. They would have to pay you the market price, and it’s extremely likely that the market price in that state of the world would be well above $5000 an ounce.
If you buy gold at $1100 or $1200 an ounce and the government takes it at $5000, I would say mission accomplished. At least you got your $5000. That’s an extreme scenario I don’t see happening, but it certainly could.
The difference between then and now is the government would have to pay you the market price, and since we’re not on a gold standard, it would be something more like a true market price, probably much higher than it is today.
Alex: I can also add to that for our international listeners. Oftentimes as much as 50% of our audience is international. We have a wide range of people from different walks of life from professionals, doctors, attorneys, airline pilots, people who run money professionally, fund managers, etc. all over the world.
One of the things I can tell you from our background in gold and our experience in dealing with this over decades is that the way multigenerational wealth is preserved many times is not just by diversification but by what we call jurisdictional diversification. That means if the gold is in places not just in your own jurisdiction but spread out across several jurisdictions, extreme events happening at any one particular jurisdiction may not affect other jurisdictions.
The question must be asked. If you have wealth that’s preserved from generation to generation, we’re talking over a span of maybe a hundred or more years, inevitably, in any jurisdiction, there are wars, economic turmoil, and perhaps drastic changes in government, so how is wealth preserved? The answer is that they don’t put all their eggs in one basket jurisdictionally, so to speak. That’s another area to perhaps think about and take a look at.
Jim, if you have time, there’s one important question I think people need an answer to. This is coming from Bradley W., and I’m going to briefly summarize his question.
He says he attends all our podcasts, has read all your books, is a subscriber to your various newsletters, and he listens to most of your interviews. His one nagging question – and I suspect he’s not the only one who’s worrying about that – is if he holds 10% of his portfolio in gold and there is a systemic lockdown like what you’ve been speaking about, then how does he convert his gold to something of value?
What are the options at that point, and what are your views on that?
Jim: He doesn’t have to convert his gold to something of value, because it’s already in something of value. The gold itself is valuable. Of every scenario I can think of, that would be the one where I would most want gold.
In a scenario where you can buy and sell freely, or sell an asset and get dollars for it, turn the dollars into euros, move the money around, the system is working, the infrastructure is up, gold will do everything it’s supposed to do and the dollar price of gold could go a lot higher and will go a lot higher based on the declining dollar.
I think what Bradley was getting at is, “What’s the bottom for gold?” The bottom for gold is the top for the dollar. When the dollar peaks, that’s the lowest dollar price for gold. That’s all it is, it’s a seesaw. One is the inverse of the other. If you say, “What’s the low dollar price for gold?” I’m going to say, “When does the dollar peak?” The answer is it’s pretty soon.
The way to do the analysis is always to think through the alternatives. Say, “Why can’t the dollar go to 120 on the index?” Take the dollar to 120 on the index and you’re going to have massive deflation in the U.S. economy. That’s going to increase the debt-to-GDP ratio, and the U.S. is going to have a sovereign debt crisis. That’s why that can’t happen, which means the dollar has to back off at some point. I think we’re getting close to that point.
When you do scenario analysis, you don’t just focus in on one thing; you look at all the alternatives and think of the reaction functions and how things are actually going to play out.
The scenario where the banks are locked down, what I call “ice-nine” in my new book, is when you can’t get money out of the banks, the ATMs are shut, the exchanges are shut, maybe there’s social unrest, maybe there are problems in the power grid – a really dire scenario. That’s when I want my gold more than ever.
In that world, you’re not looking to exchange it for some other store of value. You probably have the best store of value out there along with fine art or land or a couple of other things. I would say you don’t want to exchange it.
You could spend it. Remember, people always find money. For the best example, go back to the Great Depression in 1933. There were parts of the United States where there was no money. They were just out of money. The banks were closed, people were unemployed, the economy was flat on its back, and they had no money. What did people do? They made up money.
I don’t know if you’ve heard the expression, “Don’t take any wooden nickels.” That comes from the Great Depression. People made circular wooden coins, stamped them with values, put the names of local merchants on them, and put them into circulation.
You could go down to a drug store and buy drugs with the wooden coins, and then the drug store owner would pay his employee with the wooden coins. They literally made money out of wood, and that’s where the expression wooden nickel comes from.
My point being, people will always come up with some kind of money. People might say, “Why would I want gold? I can’t eat it.” My answer is “Why would you want to eat it? Eat food, don’t eat gold.” They say, “I can’t spend it.” My answer is “Yes, you can.”
When you don’t need it, you’re not going to be able to spend it, but when you do need it, you will absolutely be able to spend it because people will invent money. If you have the real thing, you’re going to be the richest guy in town.
Alex: Just to add a little bit to that, we’ve always said that gold and silver is money of last resort. In a complete breakdown of ability to transfer money around, there is always that.
One last thing, keep in mind that these things are temporary events. They’re not forever events. It’s like a hurricane that comes in and causes a lot of chaos and damage, but it doesn’t last a week, a month, a year, or two years. There’s a period of time where that’ll happen.
At the same time, the most important thing is, how are you preserving your value? When it’s over, whoever has the most value is going to have the best options. I think that’s probably the most important thing to keep in mind.
Jim, I want to thank you for your time. It’s always an excellent discussion with you. I love to do these podcasts, and based upon the feedback we get from our listeners, I’m sure it’s very much appreciated.
With that, we’re going to turn it over to Jon.
Jon: Thank you, Alex, and thank you, Jim Rickards. It’s always a pleasure and an education having these conversations with the both of you. Most of all, thank you to our listeners for spending time with us today and hanging in there quite a bit over time.
Let me encourage you to follow Jim and Alex on Twitter. Jim’s handle is @JamesGRickards, and Alex’s handle is @alexstanczyk.
Goodbye for now, and we look forward to joining you again soon.