Cubed!

By Chris at www.CapitalistExploits.at

When I set out over a year ago to just once a week highlight one element of absurdity (because it is absurdity which often leads to asymmetry and thus profits) on this ball of dirt we call home, it was inevitable that I wouldn"t have much trouble in finding things to jeer and laugh at.

With the torrent of rules and regulations, manipulations, and interventions that fill statute books each day... and with governments and central bankers doing what they do best (stupid things), it was a statistical certainty that I would reach a day when I looked around and finding far too much to show you my head would simply explode. And this week that day arrived...

And so... with an exploded head I"m useless to you.

So instead, I figured I"d go back and review all the voting on the World Out of Whack posts I"ve done. And by George, there are a sh*tload. June of 2016 was when the fun began. I don"t know if I"ll get through them all but you never know unless you start so here"s the first three.

1. Bat isht crazy real estate

Vancouver real estate. Investors thought it was such a great idea... except you. Cos you"re smart. Well done!

Now a year on, Vancouverites would rather weld their children together with molten metal than dive in and buy.

There"s more, though. I threw some crumbs. Now, don"t say I don"t love you:

Side note: While the focus today is on overvalued RE markets, as an investor I can’t help myself from pointing out that with a P/E ratio of just 9x, Hong Kong’s equity markets are today the cheapest in the world, with the Hang Seng Index trading at the biggest discount to global shares in 15 years.

As a reference point consider that most major stock markets typically trade at a P/E of between 15-20x, so we’re looking at an equity market some 40-50% of its highs and an overvalued real estate market at the same time.

Here"s that undervalued market I was talking about:

I then mentioned those fiendish orientals... and why you should buy Bitcoin. This is a game not just for round eyes in Silicon Valley to play:

2. Next up was just after Brexit

...and we asked you:

Crikey... you lot are sharp. Certainly French elections registered as a crisis in confidence with the first time that an incumbent never even made it to the runoffs. Ha! Take that Hollande... and put it in your pipe and smoke it.

3. And then in the third issue of WOW, we covered global bond markets

We asked the question:

So that was published on 29th June.

Though gold is about where it was in June of last year, this question will only be answered in the next crisis... and I"m willing to put some shiny ones on you being right once again because I promise you this: In the next crisis, gold is likely to fair much better than trying to conjugate the modern day version of Julius Caesar"s paper.

And really... if there is one thing I"d like to get across, it is encapsulated in this wonderful chart below. Because once you realise this, you"ll begin to start thinking the right way:

Happy Wednesday!  

- Chris

"Never attribute to malice, that which can be reasonably explained by stupidity." — Spider Robinson

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Liked this article? Then you"ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

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Grant Williams: "History Is About To Repeat Itself Again... And It Might Get Ugly"

Real Vision"s Grant Williams believes that the 76 million retiring Baby Boomers will trigger a major pension crisis. 

“With that potentially bad situation we could face,” the seasoned asset manager and co-founder of Real Vision TV said in a recent extended Metal Masters interview (full interview below), “holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take.”

His outlook has changed drastically since he started his first job trading Japanese markets in 1986: “What I walked into at that time was one of the greatest bull market bubbles the world had ever seen, in the Japanese equity market and real estate market.” During this heyday, precious metals weren’t on his radar at all—until a year later, when he witnessed his first stock market crash and started asking some inconvenient questions.

“I’ve always been a fan of history,” says Williams, who also writes the wildly popular macroeconomic newsletter, Things That Make You Go Hmmm… “So I read financial history and I just kept reading. And it was clear to me that at this point in time, I needed to buy some gold.”

Until then, the gold price didn’t mean much to him, except as an indicator of other things, so he considers the crashes he witnessed in his career wake-up calls and blessings in disguise.

The 1987 crash, he says, was more like “a bad day at the office; it came and went so fast… The bounce-back was quick, but it was a real shock to the system that that could happen.” When the dotcom bubble burst, he was well prepared. “I recognized the madness for what it was much sooner… and so that taught me that markets can reverse and just go down.”

He remembers reading a story about a boy from Chicago who studied in Weimar Germany, and his parents sent him tuition and rent money every month. At some point, “the Reichsmark was going through the roof—four billion to one, compared to one to one a few months earlier—and this kid, with his one hundred dollars that his parents sent him… ended up buying the entire street he lived on, all the houses, and became a landlord.”

Over the years, his study of monetary history and current economic events has convinced him that it would be prudent to hold some gold as crisis insurance. “I remember I wanted just to buy an ounce of gold… and I very consciously took cash to pay for this thing. I handed over $333 in paper, and [the dealer] gave me this coin.” The experience of holding physical gold in your hand, he says, answers a lot of questions. “People get stuck in this trap of ‘Why does it have value?’ These are the wrong questions to ask, because you’re driving yourself mad. It does. Pure and simple.”

Williams says gold is still undervalued: “At heart, I’m a value investor, and I think gold offers incredible value now.”

He says he’s followed the gold market ever since that pivotal day and recommends that everyone should have at least some allocation to precious metals: “I think if you don’t own some gold in your portfolio now, you either don’t understand history, or you don’t want to understand history.”

Much more from the author of "Things That Make You Go Hmmm" in the full video below.

Junk Bonds Wave a Red Flag at Risk

The market should bounce this morning, but after that we’re heading down.

The technical damage from last week was severe with the bull market trendline that has supported stocks since early November being violated on the S&P 500.

Moreover, stocks finished down during August options expiration week in six of the last seven years. So there is also a negative historical pattern for this week.

However, something much worse than all of this is brewing in the financial system. The junk bond market has broken out of a rising wedge pattern that formed since the 2016 lows.

This is a VERY bad sign for risk in general as junk bonds lead stocks. Indeed, based on all of the above, we"ve got the makings of a SHARP move lower for the markets this week.

You"ve been warned.

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