Newsflash to Subscribers:
Goodbye to The Penny
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The Federal Reserve recently killed production of the U.S. one-cent Penny, and many think it’s no big deal. Hey, it’s just a penny, right?
That’s shortsighted – and how people get blindsided by “the market.”
Instead, the elimination of the penny is another step towards the historic financial reset coming our way. We are inching closer to what some of us have been waiting for more than a decade. Here’s some food for thought…
First, it’s mandatory to never forget to appreciate that it’s a crazy world out there and sooner or later it will present itself in the stock market. The exact timing of which doesn’t matter unless you’re gambling on it.
Like legendary trader Michael “Big Short” Burry, who – far from his jackpot winning days during the 2008 financial crisis – recently liquidated his hedge fund in unceremonious fashion, reasoning, “My estimation of value in securities is not now, and has not been for some time, in sync with the markets.”
Live by the sword; and die by it.
Traders speculate/gamble on the direction of securities in short-term time increments. That’s what makes trading riskier than investing, because timing is more important than outcome, which makes success harder to achieve.
Hence the old saying, “The market can stay irrational longer than you can stay solvent.”
True, of course – and the Federal Reserve makes certain of it – which is the best reason to never gamble on the time of their pocket-watch.
Asset allocation is key!
Second, never forget that the Wall Street establishment is as much of a casino as it is bank. They invent gambling products (i.e. options and derivatives) and then create odds through origination pricing, which adjusts on subsequent action (securities trading) that they broker.
Trading securities is no different than betting on football or any other sport because it’s based on chance.
Make too many bad bets and bankruptcy isn’t far away – whether your venue is stocks, football, cards or roulette. Just ask Michael Burry.
Time and timing are always hard bets, which is the reason trading has a much higher failure rate than investing.
Third, and unlike traders, investors assemble assets to outperform market conditions over a long term. Investing requires a wider view, with a longer time horizon, and multiple asset class construction to seamlessly capitalize on changing market trends.
For instance, and just like Burry, I share the same grim view ahead for stocks – but instead of gambling on when it will arrive, my strategy is to capitalize through strategic asset allocation driven by market dynamics and common sense – because it’s safer, and easier to win.
Fourth, it’s impossible to know everything and no one knows when. But in my humble opinion, I just can’t see them letting Trump out of office without him facing another major catastrophe – one they can use to manipulate him into doing something more stupid than locking down a free people to “flatten the curve.”
They want to destroy Trump, his legacy – and the American ideal – and what better way to do it than another financial disaster.
Then it will be Trump and G.W. Bush, the last three Republican presidencies, who leave office with the evil capital markets in complete and utter ruin – with the iconic symbol of capitalism in tatters, with hands out looking for another big government bailout.
It’s storybook for them, again.
I see no way they let Trump ride off into the sunset like some John Wayne hero on a white horse just having saved America from big government and the communist insurrection.
They’d kill him first.
And when I say “they” I mean the establishment – the Federal Reserve, the Wall Street cartel, the global elites and their political Party affiliates, and their allies in media and academia – in other words, those who control banking and market activity, communications and world governance. They’ll decide when the next major fiasco happens, how it evolves, who the villain is and how to remedy it.
It’s their world, folks, and we’re just living in it.
And while I truly believe the next major correction will arrive some time before Trump leaves office, I’m not crazy enough to gamble on it.
Instead, I assemble assets in a manner to outperform market conditions.
For example, today stocks are overvalued (just look at the PE to growth rate spread). Inflation is suffocating the economy, and the labor market is atrocious. Recession is already here. And the stock market is being carried by AI and the high hopes thereof.
AI is red hot, no doubt, and everything else is high in their own right (see * below).
Ripe for correction.
Prompting the Federal Reserve to move another piece on the chessboard – eliminating the penny – a maneuver made for no other reason than to begin the elimination of all physical money.
How do we know this?
Because their reasoning to eliminate it – that one penny costs them four cents to make – is completely absurd. Something G.W. Bush would say.
Obviously, the Fed hasn’t gotten a quote to produce pennies in China, who can no doubt duplicate the penny for a fraction of a cent, FOB US Port.
Anyone want to bet on that?
Like paper money, the penny is only a unit of measure. It’s representative of the lowest denomination of money. That’s it. It’s not about what pennies are made of or what it costs to produce them (there hasn’t been copper in them for years.) They represent one percent of a dollar. Cheap to make, because it’s not worth counterfeiting.
Besides, why would the Federal Reserve even care about the economics of making a penny when they print trillions of new dollars and cents every year just to cover central government deficits?
What’s the harm in a few more pennies – right?
Or better yet, the Federal Reserve owns some $6 trillion of U.S. national debt (Treasury securities) from which they earn interest – are we to believe they can’t cover the cost to produce pennies within that hefty stream of revenue (even if at just 2% interest)?
Please. The Fed printed the money used to purchase all those bonds in the first place (QE).
Instead, the Fed is executing the establishment’s plan to eliminate all physical currency in the wake of the next financial crisis – that’s why gold and silver (both digital and physical) are must-have asset classes (* and why I under-weight in stocks).
The establishment wants everything to be 100% digital so they can control you. Control us. Control markets.
Protect your physical assets with guns and ammunition if you must (remember, it’s a crazy world getting crazier) and because their values also increase dramatically during times of crisis – when stock prices are plummeting. And they’re easy to trade legally.
All of those assets will always be worth something, making it impossible to lose everything during the next stock market crisis.
This is what I call strategic asset allocation, and smart hedging.
Consider one more thing…the U.S. government made it illegal for individuals to own gold and silver when America went off the gold standard. They strictly enforced a massive and mandatory reclamation effort (in 1933, FDR). And it wasn’t until Gerald Ford changed that law on December 31, 1974. Reason: it was his attempt at obtaining universal goodwill after pardoning Nixon for Watergate just three months earlier, on September 8, 1974.
Because Americans universally wanted an alternative to printed government currency.
God forbid an all-digital one.
That said, basic logic dictates at least three asset classes to be in your portfolio – a long-term growth asset (usually stocks), something that trades in a contrary manner to it (usually gold), and money because you can’t buy anything without it – and diversify them all, physical and digital, public and private, federally minted and alternative.
Eliminating the penny will cause inflation as pennies are now worth a nickel (because it won’t be long before retailers round up (inflationary)), thereby penalizing cash transactions and paving the way to a cashless system.
Think of the chaos that will cause.
So it’s goodbye to the penny – and hello to what?
Investing is fluid, just like life.
Stay connected.
Here if you want to chat.
Stay tuned…
