Kyle Bass Sounds Off On "Worthless" Puerto Rican Debt, The Crypto "Gold Rush", And Guns

With the dollar’s recent post-Fed bout of appreciation providing some much-needed relief for Haymarket Capital’s P&L, its founder Kyle Bass sat for an interview on Friday with Bloomberg’s Erik Schatzker. During the 20 minute discussion, Bass expounded on the importance of holding gold, his cautiously optimistic view on digital currencies, the misguided notion that holders of Puerto Rican debt will someday be made whole – oh, and Bass’s next big call: Long Greece - particularly the stocks and debt of Greek banks.

A few weeks ago, Bloomberg view published a Bass-penned editorial in which the hedge fund founder and CIO called on the IMF to stop bullying Greece -  publicizing the fact that he is now effectively long Greece. Greek government bonds have performed reasonably well so far this year: They’re up about 16%.

And if Bass is right, they could have another 20% to 30% over the next 18 months if the IMF abandons its insistence on austerity and acknowledges that debt relief will need to be part of the long-term alleviation of debt. Bass added that, in the near future, voters will elect a more business-friendly government that will help reestablish the country’s creditworthiness, much like the government of Mauricio Macri did for Argentina. 

I think you also have an interesting political situation in Greece where I think there"s going to be a handoff from the current Syriza government to kind of a more slightly-center-right but very economically independent new leadership in the next, call it, 18 months.

And so, I think you asked why now? And I think you"re starting to see green shoots. You"re starting to see the banks do the right things finally in Greece and you are about to have new leadership.

So, I think that you"re going to see - and if you remember Argentina as Kirschner was going to hand-off – hand the reins over to someone that was much more let"s say focused on business and economics than being a kleptocrat, I think you"re going to see something again slightly similar in Greece where you have leadership today that might not be the right leadership and the government-in-waiting, I believe, and I think you know Mr. (Mitsutakous) - I think you"re going to see something great happen to Greece in the and next, kind of, two years.

Asked if he still considers himself a China bear after the yuan’s surprising run of strength against the dollar, Bass answered in the affirmative. But the language he uses to talk about China has softened notably, with the investor now expecting a correction instead of an all-out collapse.

Chinese President Xi Jinping has been laser-focused on consolidating power during this year’s quinquennial Communist Party National Congress, set for Oct. 18. Once it passes, Bass believes that the PBOC’s grip on the yuan exchange rate will loosen and market forces will reassert themselves. Meanwhile, the country will also relax its focus on appeasing President Trump.

What I"m telling you is my guess is their laser-like focus on exchange rates and dealing with the Trump Administration is going to be relaxed a bit once Xi consolidates his power.

You know, their electoral cycle is a little different than ours if you want to call it that. Their NPCs happen every five years. Xi - this is the end of his first term. He"s going to solidify a second term. He"s going to reconstitute the Standing Committee of the Politburo and we think that he has consolidated power.

He"s quickly becoming the most powerful Chinese ruler since Mao and the question is will he have a third term. And so, once this consolidation of power is over and the NPC is finished I think you"re going to see more natural economic forces acting on their banking system.

He acknowledged that the appreciation of the yuan "has been terrible this year" for his hedge fund, which has predicted that the yuan would fall more than 30%. But he’s standing by the position for now with the expectation that over the next nine months “you’ll see the rubber hit the road.”

It"s been terrible this year. And again, you think about the time continuums of these big global macro events.

Unfortunately, it doesn"t fit into a nice envelope that works every month, every quarter, every year. And so, you have to stick with it as long as you can and in this environment, I think in the next call it nine months from October you"ll see the rubber hit the road.

Bass scoffed at the notion of investing in Puerto Rican debt, saying that investors would be lucky to walk away with between 10 and 20 cents on the dollar. The idea that the island, with a workforce of just 1.4 million people, will ever be able to pay back $70 billion in debt is ridiculous, he said.

These are two different questions - one is, should we help with hurricane? Absolutely. We should do everything possible.

Puerto Rico is just a simple math 101 question.

But on the debt question I just think you have to be a little crazy to think that $100 billion worth of debt or even $70 billion of on-balance sheet debt is worth anything with 1.4 million workers in an economy like Puerto Rico"s.

…

When you look at sovereigns and you look at history of sovereign defaults, recoveries and wipeouts are $0.10-$0.20 on the dollar - that"s what I think people are going to end up with.

Asked for his view on bitcoin, Bass said he’s accepted that he was wrong to dismiss it early on, saying he failed to grasp the technology. He acknowledges now that digital currencies are a “real asset class”. While he hasn’t yet figured out how to value digital assets, bitcoin’s deflationary features would presumably make it a strong performer as inflation rebounds over the coming years, Bass said. Bass said he doesn’t own digital currencies.  

Early on I summarily dismissed bitcoin and I shouldn"t have. And didn"t understand - truthfully, I don"t understand the depth of the algorithms, the technology and the fundamental foundation of bitcoin I didn"t understand. I spent a lot of time trying to understand it in the last call it six months and I believe that the digital-asset class of cryptocurrency is a real asset-class but in terms of kind of how the world views digital currencies we talked - when you look at global cash positions today given global Q/E, they"re now north of 110 percent of global GDP. So, we"re talking about almost $100 trillion of cash in the world.

That has never happened before in world history and so when I think about inflation - you"re starting to see wages move. You"re starting to see the price of all goods and services move. The thing that"s been really deflationary in the globe has been technology. It"s been a very positive deflationary force and I think that"s played out.

The technological deflation has played out so, now I think you"re going to start to see inflation and wages move. And this gets into crypto-currency.

The collective value of crypto currency is a little over $100 billion today. Global M2, global cash is like $80 trillion, $100 trillion; so, what"s $100 billion? The question is, what"s it worth? And as a store of value, a media of exchange and other currency I don"t think there"s any true institutional investor has any money in bitcoin – I know some have a little bit. They have nominal amounts invested but I think it will be an asset class that will work over time. I"m not sure how to value it yet - I really have no idea.

To be sure, Bass expressed skepticism about the red-hot market for ICOs, referring to it as a “digital gold rush” that will end with “a lot of people losing a lot of money.”

I think there"s a digital gold rush that"s gone on.

I think a whole bunch of people are going to lose a lot of money. These ICOs - you"re going to see a bunch of them go completely broke - a bunch of them are frauds. And that"s going to be problematic for all the people that just rushed in and so I feel like it"s a bit of a mania at the moment but

With the end of the interview approaching, the conversation veered toward gun control. Bass said that he and his son own dozens of guns and are close to many members of the armed service. However, he still believes that the state and federal government should maintain comprehensive gun registries, even though such precautions probably wouldn’t have stopped Las Vegas shooter Stephen Paddock from carrying out his horrifyingly deadly crime.

My son and I have this - we have this place here that we enjoy and when I think about this debate - should guns be registered? Absolutely. Should people be able to sell a gun from one to another without recording the buyer and the seller? Should every gun have a serial number and be registered with the federal government and local authorities?

I think this is a no-brainer. That"s just a pragmatist. The NRA fights that tooth-and-nail.

After all, people need to register their cars with the state, Bass said. Why not guns, too?

So, to sum up: Buy Greek bonds, buy Greek debt; hold gold, hold bitcoin; sell Puerto Rican debt, sell ICOs, sell yuan warning that "within nine months, the rubber will hit the road" on China"s currency collapse, and register all your guns...
 

EXCLUSIVE: Watch Cops Swarm, Arrest Innocent Man For Refusing To Say How Old He Was

In an exclusive interview with The Free Thought Project, a self-proclaimed constitutional rights activist is speaking out about his ordeal with Nevada police after he refused to tell an officer his date of birth. He said that in addition to being arrested, he has been harassed ever since.

Joshua Martinez said he became interested in Cliven Bundy’s ongoing conflict with the Bureau of Land Management back in April 2014. He said Bundy’s problems led him to become a student of the Constitution.

In December 2015, in a show of support for the Bundy family and their involvement with a stand-off with the FBI in Oregon that led to the death of LaVoy Finicum, Martinez raised LaVoy Finicum’s cattle brand, AKA the “LaVoy Finicum” flag on the Nevada federal courthouse steps.

Then in January, Martinez said he began passing out pocket copies of the U.S. Constitution and jury notification pamphlets. It was his way of being a good citizen, “but in the eyes of the government we rattle their cage and they don’t appreciate that,” he told TFTP.

Martinez did not get arrested for passing out the Constitution, but somehow he became a person of interest to courthouse officials and the Las Vegas Metropolitan Police Department.

The FBI and the U.S. Marshalls took notice as well. Martinez said it all started in February when he attempted to be a spectator at some of the court proceedings involving defendants who were being tried for their role in the now-infamous occupation of the Malheur National Wildlife Refuge in Oregon.

But Martinez was more interested in being able to attend the proceedings without having to identify himself. His current contention is with forced identification. He went to the courthouse on Feb. 6, but was not allowed entry on the basis that he did not have a valid form of identification.

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First, the courthouse security, on behalf of the U.S. Marshalls, informed Martinez that he was not allowed to enter and observe the court proceedings without a valid identification. Asking to speak with a Marshall directly, he was met with several unidentified U.S. Marshalls who promptly informed Martinez he couldn’t come in without an ID.

Martinez wanted to sue the U.S. Marshalls for discriminating against him on the basis that he did not have identification and disallowing him from observing the court’s proceedings. But he said he had a problem. He had no idea who the Marshalls were who would not let him come inside.

READ MORE:  This is What"s Wrong Police: Cop Says He has "No Choice but to F**king Pull Over Black People"

Martinez said he decided to go back on Feb. 7 in an attempt to identify the very people who told him he couldn’t come inside without an ID.

Instead of obtaining the named of the Marshalls, Martinez was arrested. He said he passed through the metal detector and was in possession of a valid state-issued ID just in case, but after presenting his ID, they ran his ID and then informed him the “U.S. Marshalls don’t want you in the courtroom.” He and his friends left the building and sat on one of the courthouse benches outside.

“It’s all about conditioning us to live as slaves,” Martinez said. “when an officer gives us a command we have to do it. That’s all it’s about!”

Martinez, along with a few of his friends, were sitting outside the courthouse on public property when police arrived and swarmed him. Apparently, someone inside the courthouse called police about his attempts to get information on the U.S. Marshalls.

Metro PD was called and when they arrived, they began to question Martinez, who had already identified himself. They pressed him for more information, demanding his date of birth, a detail he was not willing to offer them.

Martinez said his rationale was that since he had committed no crime, he was not suspected of having committed a crime, and since he was not being detained, he was therefore under no obligation to cooperate with police.

Patriots such as Martinez seem to understand that if the so-called authority police possess is not challenged, more individuals will have their civil rights violated, such as attempting to go about their lives without having to carry an ID.

“Hiibel vs. Nevada states first and last name is required and nothing more. It doesn’t say anything about giving a date of birth or anything else,” Martinez said, as justification for why he refused to tell the officers his date-of-birth.

As can be heard in the video, one of the officers told another that Martinez was not under investigation, and was not trespassing. However, even though no crime was committed, Metro PD continued to ‘investigate’ further, eventually deciding to arrest Martinez.

READ MORE:  This Guy Has Been Stopped 14 Times By Cops, For Nothing. He Finally Had Enough.

Martinez was charged with “obstruction of justice,” even though no crime had been committed. He simply did not want to cooperate with police by providing any further identification and was arrested for it.

“Body cam footage of my arrest in front of the federal courthouse in Las Vegas Nevada on February 7, 2017. In the video, you can hear one officer inform the officer who made contact with me that I was not trespassed and that I was on public property. Reasonable suspicion was met when they learned I was not breaking any laws.”

Police often charge individuals with “obstruction” when all other attempts to criminalize an otherwise innocent individual are made. The charges lead to innocent people being arrested, fined, jailed (sometimes for months), and when they go to court, those charges are then often dropped.

If citizens truly have civil liberty, they should be allowed to come and go as they please without arousing the suspicions of police or government workers. But when everyone is seen as a suspect, it is easy for police to infringe on citizens’ rights to film in public, walk where they please, or even enjoy a sitting on a bench on public property.

A new documentary titled “What Happened In Vegas” was born out of such infringements. Director Ramsey Denison was assaulted and arrested after he called 911 to report an out-of-control police officer. Instead of being hailed as a concerned citizen looking out for the civil rights of others, he was quickly marked as a suspect and taken to jail.

It was only after that experience that Denison realized there was a systemic problem with Metro PD infringing on citizens’ rights and decided to detail what he sess as an out of control police department.

Since Martinez’s arrest he says he has been further harassed, not only by the FBI, but also by the counter-terrorism unit inside Metro PD. When asked why the government thinks he is a threat, Martinez said he feels it is because he has refused to get a driver’s license, and has produced many YouTube videos encouraging others to follow his example.

Martinez also said he gets targeted because he uses court case law in his videos, and encourages citizens to know their rights and to get educated. Even with being an advocate for the Constitution, he has been labeled a “sovereign citizen,” but says nothing could be further from the truth. Martinez told TFTP he was born on an Air Force base to a very patriotic family, and his dad was a member of the Air Force.

READ MORE:  Thanks to the Feds, 2017 Cannabis Cup Has No Cannabis — Despite Being 100% Legal

“My main objection is government overreach and officials operating outside the confines of the Constitution…I believe we should keep our government in check,” Martinez said, adding the harassment he’s received has even followed him to his workplace.

Martinez described the second time he has been arrested in the last few months:

“They arrested me for possession of a concealed firearm. I was at the door. I’m a door host at a nightclub. I was checking ID’s at the door and was approached by three plains clothes men who came to me and asked me for a Sheriff’s Card (another permit he objects to…something Martinez calls an “adult work permit”). At first, I didn’t know who they were…”

Martinez said one of the officers pretended to be interested in his plainly visible gun—he carries openly per Nevada law—but then asked if he had a concealed carry permit. Martinez said he was carrying openly and he didn’t need one. At that point, he was arrested for “possession of a concealed firearm,” which is a felony in Nevada.

This is the type of treatment Martinez said he now has to live with, for speaking out and attempting to enter a courthouse without a valid ID. He said because he has been labeled as a “sovereign citizen,” he is now now one of the government’s targets, and he is facing felony charges as a result.

Martinez said that in his mind, the state of Nevada has a serious problem with permitting. “To be a cashier at a 7-Eleven you need four different forms of identification—a Sheriff’s Card, a TAM card (alcohol education certification), a health card (food handler’s card), and a regular form of identification,” He said.

“Permits, licensing, that’s my beef with the system,” Martinez said. Now he has to go to court to prove he is no danger to society and that because he was legally open-carrying his firearm, he should not be convicted of as a felon who would not longer have the right to keep and bear arms.

S&P Downgrades Qatar To AA-, Credit Risk Spikes To 2017 Highs

Citing expectations of notable slowing in economic growth andconcerns about fiscal and current account deficits widening, S&P has downgraded Qatar from AA to AA- as credit risk premia hit 2017 highs.

Qatar credit risk is at 2017 highs (but remains well below Jan 2016 recent highs...

Full Statement from S&P...

• On June 5, 2017, a group of governments including Saudi Arabia, United Arab Emirates, Bahrain, Egypt, Libya, and Yemen moved to cut diplomatic ties, as well as trade and transport links with Qatar.


• We believe this will exacerbate Qatar"s external vulnerabilities and could put pressure on economic growth and fiscal metrics.


• We are therefore lowering our long-term rating on Qatar to "AA-" from "AA" and placing it on CreditWatch with negative implications.


• The negative CreditWatch encompasses numerous downside risks to the rating as a consequence of recent events, reflecting that we could lower the ratings if domestic political risks were to substantially increase or if government indebtedness increases materially quicker than we currently expect. We could also lower the ratings if our assessment of contingent liabilities from the banking system or the government"s related entities were to increase, or if Qatar"s external financing lines were withdrawn.

RATING ACTION

On June 7, 2017, S&P Global Ratings lowered its long-term rating on the State of Qatar to "AA-" from "AA" and placed the rating on CreditWatch with negative implications. The "A-1+" short-term rating was affirmed. The Transfer & Convertibility assessment is "AA".

As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 "EU CRA Regulation"), the ratings on the State of Qatar are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar (see "Calendar Of 2017 EMEA Sovereign, Regional, And Local Government Rating Publication Dates published Dec. 16, 2016, on RatingsDirect). Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the reason for the deviation is a significant geopolitical development impacting creditworthiness. The next scheduled rating publication on the sovereign rating on the State of Qatar will be on Aug. 25, 2017.

RATIONALE

On June 5, 2017, a group of states including Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Egypt, Libya, and Yemen moved to cut diplomatic ties, as well as trade and transport links, with Qatar. The measures imposed include  a blockade of land, sea, and air access and the expulsion of Qatari officials, residents, and visitors from the group of states. We believe this will exacerbate Qatar"s external vulnerabilities and could put pressure on its economic growth and fiscal metrics. The negative CreditWatch encompasses numerous downside risks to the ratings as a consequence of recent events. At this stage, we note that there are numerous uncertainties regarding Qatar"s response, the extent to which these measures will be imposed, and their longevity. We expect to review this and the potential impact on our projections as further details emerge and by our next scheduled review, on Aug. 25, 2017.

We understand these moves to be motivated by Qatar"s apparently more conciliatory stance toward Iran amid allegations that Qatar is financing terrorist activity. We note that Qatari authorities vigorously  deny these allegations, and that Qatar"s exact policy response is uncertain at the moment.

Supporting the ratings, Qatar holds the third-largest proven natural gas reserves in the world, and is the largest exporter of liquid natural gas (LNG). We expect Qatar"s reserves to provide many decades of  production at the current levels. GDP per capita is among the highest of rated sovereigns, estimated at US$62,500 in 2017. The hydrocarbon sector contributes about 50% of Qatar"s GDP, 90% of government revenues (oil and gas taxes and royalties, plus dividends from Qatar Petroleum), and 85% of exports.

Nonresident deposits in Qatar"s banking system increased over 2016 by 17% of GDP, which has weakened Qatar"s external liquidity position as related external short-term obligations have increased (see our ratio of gross external financing needs); the average maturity of these deposits is under one year. Over the same period, bank credit directly to the government increased by a similar amount, and the funds were generally used to finance Qatar"s ongoing significant infrastructure program. This dynamic has therefore increased pressure on our external stock metric (narrow net external debt), as the increase in external liabilities was not matched by external liquid assets. While we no longer expect the continued accumulation of these external liabilities, in our opinion recent events have the potential to destabilize these nonresident deposits and provoke an outflow.

Although we do not expect this potential outflow to pose immediate and significant issues for Qatar"s banks (see "A Sharp Rise In External Debt Leaves Qatari Banks More Vulnerable," published May 8, 2017), it could mean that government support would be needed in some form to offset any potential major outflow, including the potential use of QIA (Qatar Investment Authority, the sovereign wealth fund) assets, in addition to the central bank"s contingency reserves. Moreover, we now consider risks to external financing lines to the whole economy, including foreign direct investment, portfolio flows and to the financial sector to be elevated, and this could lead to pressure on Qatar"s pegged monetary arrangement. We subtract Qatar"s monetary base from usable reserves, which we view as consistent with maintaining confidence in a pegged currency. We estimate government liquid external assets to be worth 170% of GDP, which remains a key rating support.

Qatar"s fiscal and current account deficits could widen as related revenues from regional trade diminish. In 2016, 10% of Qatar"s exports was to the group of states that have blocked trade. We believe this figure includes gas exports through the Dolphin pipeline, the position of which under the embargo is currently unclear. The same group of states provides 15% of Qatar"s imports, potentially causing substantial shortages of key materials, including those used for construction projects, and food. Furthermore, the imposition of air travel restrictions could have significant implications for Qatar Airways" profitability. We note that debt of government-related entities (GREs) accounts for approximately 85% of GDP. There is currently no indication that Qatar"s main trade partners (Japan, South Korea, China, and India), who purchase the bulk of Qatar"s LNG production, will reconsider their existing trade arrangements. These four countries account for 55% of Qatar"s total exports.

Although still very strong, the government"s net asset position (net general government assets are 120% of GDP) could weaken as a result of deploying these assets to support revenue shortfalls and  because the potential for debt financing at similar prices to recent issues appears unlikely. Additionally, government support to the banking system (as was the case during the financial crisis) and to its GREs, which also require external financing, could place an additional burden on government assets. These developments could weigh on our external analysis to the extent that they act as a drain on liquid external assets and reduce coverage of external debt. At the moment, we expect that Qatar will continue with its substantial infrastructure development, the bulk of which is not related to the 2022 World Cup, but rather developing road and sewerage networks, schools, and public transportation networks.

As a result of these factors, we expect that economic growth will slow, not just through reduced regional trade, but as corporate profitability is damaged because regional demand is cut off, investment is hampered, and investment confidence wanes.

The policy response of Qatari authorities to falling oil prices since 2015 has been very visible and is illustrated by reigning in current expenditures, merging line ministries, and implementing numerous cost-saving initiatives within its core GREs. In comparison with regional peers, fiscal deficits have been modest as a result and their financing strategy clear. In our opinion, the government has been clear with its stated ambitions on economic diversification and its supporting infrastructure development plan. We do not expect that the aims of the authorities will deviate as a result of the embargo, but that achieving them while maintaining the current level of creditworthiness will now require additional fiscal effort, which therefore raises some uncertainty on the exact policy response. We expect details to emerge in the next few weeks. We do not consider the recent lifting of the moratorium on Qatar"s North Field in our assessment because the potential related revenues fall outside of our rating horizon. Less certain still, in our opinion, is Qatar"s policy response to the apparent demands of the group of states and Qatar"s position in the Gulf Cooperation Council. We view these factors as damaging to overall policy predictability.

We believe the fixed exchange rate of the Qatari riyal to the U.S. dollar leads to limited monetary flexibility, and we expect the currency peg to be maintained. Qatar"s real effective exchange rate has appreciated by 14% since early 2014. In our view, this represents a deterioration in international competitiveness of the country"s modest tradeables sector and a dampening of nonhydrocarbon GDP growth, absent any offsetting factors such as improved efficiency or technological capacity.

*  *  *

Interestingly S&P expects the currency peg to be maintained - something the market strongly disagrees with...

Don't Let This Happen To You

Authored by John Rubino via DollarCollapse.com,

Some lives were changed recently:

(Mercury News) — British officials say they’ve been unable to trace the rightful heirs to a trove of gold coins found stashed inside a piano and worth a “life-changing” amount of money.

The Shropshire school that owns the piano and the tuner who found the gold are now in line for a windfall after a coroner investigating the find declared it treasure. The couple who owned the piano for three decades before donating it to the school will likely miss out.

Coroner John Ellery said Thursday that, despite a thorough investigation and a public appeal for information, “we simply do not know” who concealed the coins.

The 913 gold coins which were found in a piano, are displayed at Ludlow Museum in Ludlow, England Thursday April 20, 2017, where they are being kept under lock and key.

The hoard was discovered last year when the piano was sent for tuning. Under the keyboard — neatly stacked in hand-stitched packages and pouches — were 913 gold sovereigns and half-sovereigns minted in the 19th and early 20th centuries.

Piano tuner Martin Backhouse said when he found the pouches and slit open the stitching, he thought: “Ooh, it looks like there’s rather a lot of gold in this.”

The hoard, which weighs 13 pounds, has not been formally valued. But Peter Reavill of the British Museum has said it is worth a “potentially life-changing” amount.

Revenue from items declared “treasure” is generally split between the owner — in this case, Bishops Castle Community College — and the finder.

The piano was owned for 33 years by Graham and Meg Hemmings, who donated it last year to the school close to their home, near the Welsh border about 45 miles west of Birmingham. Meg Hemmings said she’s not bitter at missing out on treasure that was right under her nose.

“The sadness is, it’s not a complete story,” she said. “They’ve looked and searched for the people and they unfortunately haven’t come forward.

——————

(Popular Mechanics) – A tank collector in the United Kingdom was in for a surprise when he and his mechanic opened one of his tank’s diesel fuel tanks. Inside were gold bars totaling approximately $1.2 million dollars.

The tank came into possession of Nick Mead, a tank collector and owner of Tanks Alot, a company that offers tanks and other armored vehicles for driving classes, private events, and television and film appearances. Mead found the tank, an ex-Iraqi Army Type 69, on sale on eBay and traded it for an Abbot self-propelled howitzer and a British Army truck.

Mead and his mechanic, Todd Chamberlain, were filming the opening of the fuel tank because they had already found machine gun ammunition in the armored vehicle and wanted video proof in case more ammunition was found. They pulled out five gold bars weighing about twelve pounds worth an estimated $2.4 million. The gold was handed over to authorities, and Mead has placed a receipt for the bars of bullion in a safe deposit box.

There are two ways to react to such stories. The first is from the point of view of the finder, which is obviously “AWESOME!!!”

The second is to consider the person who hid the gold in the first place and realize what a horrendous failure it represents. Someone saves for a lifetime (or audaciously steals or otherwise acquires real wealth), and rather than trusting the banking/currency system, hides that wealth in physical form, either for their own future enjoyment or their descendants’ security. This kind of wealth really can change the course of many future generations.

But they made a big mistake. They didn’t tell anyone, or they told the wrong person, or they failed to plan for some other event that broke the link between gold hoard and owner/beneficiary. And so the gold is lost until found by strangers.

This is both profoundly sad and an object lesson for anyone who hears and takes to heart the idea that “gold in hand” is the only truly safe way to store real wealth. Because while true in theory, it involves serious challenges in practice. How, for instance, do you hide gold and silver so that it’s both undetectable by the wrong people and accessible to the right ones? Whom do you tell so that it will never be stolen but also never lost and forgotten?

These are questions with different answers for every situation. But they have to be asked and correctly answered for gold in hand to be truly a safe.

These Were The Best And Worst Performing Assets In October And YTD

October was a month most investors will wish to quickly forget. As DB"s Jim Reid writes, for the most part October will likely be remembered as the month where ‘Hard Brexit’ concerns well and truly jumped into the spotlight and Sterling related assets suffered as a result. Politics was a fairly consistent theme during the month however with the US Presidential Election campaign also attracting plenty of attention. Earnings season has provided another distraction for markets while we’ve also had the usual focus on central banks including a number of speculative ECB stories. Add to that the ongoing OPEC related news and it’s certainly made for a busy October.

As DB adds, it was sterling assets which really stand out. Unsurprisingly the negative news flow had a big impact on the currency with Sterling dropping -6% during the month from around $1.30 to the low $1.20’s. Negative sentiment also hurt Gilts which in local currency terms dropped -4% however in USD hedged terms plummeted -10% and the most amongst the assets in the asset sample. It was a similar story for UK equities which were up 1% in local terms but -5% in USD terms. Given the moves for Gilts, Sterling credit also had a poor total return month despite the BoE purchasing scheme impressing with the initial pace of purchases in October. Indeed GBP corps, non-fins and fins were -8% to -9% in USD total return terms (and -2-4% in local currency terms) although GBP HY (0% local and -6% USD terms) did outperform.

It wasn’t just Gilts which suffered in bond markets however. With markets also reassessing inflation expectations, in USD terms BTP’s (-5%), EU Sovereigns (-4%), Bunds (-4%) and Spanish Bonds (-4%) all suffered. BTPs being also hit as the polls leaned slightly towards a rejection of the senate reform referendum in early December. Treasuries (-1%) outperformed but were still weaker during the month. Those moves had another obvious knock on in credit markets too although performance was reasonably resilient despite the rates selloff. US credit outperformed with indices finishing flat to -1% during the month while European indices were broadly -1% to -3% with ECB purchases still evidently having a positive impact and helping out-perform rates. Interestingly EUR higher beta HY and sub-fins outperformed more.

Speaking of financials, banks had a decent month. European Banks were +9% in local terms and +6% in USD terms no doubt supported by better than expected earnings to some degree, and also the positive correlation to the move higher for bond yields. Other equity markets were more mixed however. The FTSE MIB, Nikkei and IBEX were all +2% in USD terms while the DAX (-1%), S&P 500 (-2%) and Stoxx 600 (-3%) were more disappointing. It was a similar story for EM equities too which were little changed during the month, although the Bovespa (+14%) did top the table for the month. The other asset class to highlight is commodities. Oil traded around OPEC headlines and had looked on to course to end the month flatish before yesterday’s sharp plunge saw WTI and Brent finish -3% and -4% for the month respectively. It was the softs which outperformed with Corn (+5%) and Wheat (+4%) continuing the strong performance from the end of September, while Gold (-3%) and Silver (-7%) were down as Fed rate hike expectations for December crept above 70%. All in all, in local currency terms 17 of the 39 assets finished with a positive return while just 12 assets did in USD terms.

A quick refresher where we are YTD now. It’s the usual culprits which head the top of the leaderboard in local currency terms with the Bovespa (+50%), Silver (+29%), WTI (+27%) and Gold (+20%) leading while Russian equities (+18%) round out the top five. Sterling (-17%) takes up the bottom place while Italian equities (-17%) and European Banks (-13%) are still languishing. It’s worth noting however that these assets have bounced back from heavier losses earlier in the year.

Elsewhere the S&P 500 (+6%) has had a reasonable YTD while the Stoxx 600 (-4%) has struggled. Bond markets outside of Gilts are in the 1-5% return range while credit markets have had a strong year. European indices are up anywhere from 4-8% while USD IG indices are up 5-9%. US HY is leading the way however, returning +14% YTD.

Source: DB