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There is so much to comment on today it’s hard to know where to start.  As the title suggests, “war” seems to be the theme.  Before getting into the meat, I read an article by Simon Black “The last time this happened was …never”.  This was quite a good piece and extremely correct but misses the point I tried to make yesterday and one I will try again with today.   He is right on target, we have a superpower waning, technology advancing faster than ever and all wrapped around a financial bubble of unprecedented size.  Yes it presents risk and offers opportunity …but this is not about “money”, rather it is about “the” money.

The technology of the markets has taken over.  Algos written by people in “vacuums” are what run the markets and value everything today in a world where everyone knows the price of everything but the value of nothing.  This will work until there is only ONE algo or computer who has won and has no one else to “eat”.  A perfect example is the recent announcement by Deutsche Bank.  They just happen to be tied (With JP Morgan) as the largest holder of derivatives in the world.  Please understand, “business and finance” are war, there are winners and losers.  The problem today is when winners win “so big” they either have nothing else to eat or …the losers lose so badly they cannot pay.  The markets are now terminally BROKEN and the values of everything (including morals!) needs to be RESET!

Shifting gears, I want to focus your attention on the wane of U.S. supremacy.  Russia is now building bases in Syria while sending troops and supplies OVER IRAQI/IRANIAN AIRSPACE!    Do you suppose this would have ever happened in the past?  Or would our coastlines be buzzed by Russian aircraft or submarines?  Yes I know, the smarty pants out there will say it already did, I will say correct but NOT BLATANTLY OR OPENLY FOR THE WORLD TO SEE!

And what about China?  “When” in any past would China sell U.S. Treasury securities and announce it publicly?  Or even better, how about announcing they will begin an oil contract to trade in yuan as “opposed” to dollars starting next month.   They have set up currency hubs, trade deals, swaps, bought gold publicly and now they will add “fiscal stimulus” from their treasury to the tune of a couple hundred billion dollars over the next three years.  Do you suppose these funds will come from U.S. Treasury holdings?  If not, will this not weaken the yuan, something the U.S. has barked at for years?

My point is this, how much further can this game go before someone mistakenly fires a shot?   Or have they already with the multiple tit for tat highly coincidental Eastern/Western explosions?  The U.S. used to rule with an iron hand.  We said how we wanted things and we enforced it.  Years ago we said what exactly we would, or would not do and that was the way it was.  Now, no one knows where we stand, who we back or whether we will or will not do what we say.  The roles are reversing between East and West …and so are the holdings of gold!

Do not belittle this last point.  Gold is money, it is wealth, it is ultimately power in a world where deals are not deals and settlement never occurs.  Not only will “values” be re set, the fundamental way business is done and paid for will be re set.  We live in a world where one half wants (hopes for) the status quo and the other half wants to move forward (or backward) to a time and place where trade is beneficial to both sides and is settled fairly.  The problem is this, man has now perfected weaponry to settle their disputes which leaves no winners.  Upon thinking about it, isn’t this exactly the same as our “derivatized” financial world?  The only way to win …is not to play the game!

Standing watch,

Bill Holter

Holter-Sinclair collaboration

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