The Most Insolvent Bank In The History Of The World Is. …..

The Most Insolvent Bank In The History Of The World Is. …..

Notes From the Field By James Hickman (Simon Black)  December 12, 2024

As the 1800s came to a close and the world propelled itself full of innovation and optimism into the 20th century, there was perhaps nowhere else on the planet more admired and envied (except for the United States) than Argentina.

In fact, just like America in the late 1800s and early 1900s, Argentina was overflowing with immigrants from all over the world looking for a better way of life in that land of opportunity.

Argentina had already become a rich country at that point. And it was becoming richer so quickly that its economic growth was outpacing even that of the United States.

By 1900 Argentina’s economy was larger than the rest of Latin America combined, and roughly as large as all of Western Europe combined. It seemed like there was nowhere to go but up.

Plus the country was teeming with natural resources— everything from fresh water to some of the world’s most fertile soil, to vast oil and gas reserves. Argentina should have been unstoppable.

(This is still true today; Argentina still boasts one of the largest shale reserves in the world, having quadrupled its output over the last five years.)

You’d have to work really, really hard to screw up such wealth potential. And they did!

For much of the 20th century, Argentina slid into severe economic decay, and it remained that way for decades, mostly due to corrupt, excessive, outrageously irresponsible government spending and idiotic central planning.

Hyperinflation took hold, the banking system collapsed, and the economy has been in an extended depression.

Yet when the new chainsaw-wielding President Javier Milei took over last year, he pledged to change everything. And so far the results are pretty hard to argue with.

Earlier this week, Milei announced that Argentina has just posted a budget surplus— its FIRST surplus since those golden years in the early 1900s.

It’s not an accident. Milei has eliminated entire government departments, fired ministers, and dramatically reduced the size and scope of government.

In his announcement, Milei didn’t hold back, calling his predecessor a “fiscal degenerate” for ballooning the national debt and running massive deficits. These deficits, of course, were essentially funded by Argentina’s central bank, which printed all the money and created inflation.

Milei said that, just last year, his predecessor printed so much money that it was equal to roughly 13% of Argentina’s GDP.

Well, if printing 13% of GDP qualifies as fiscal degeneracy, then the Federal Reserve in the United States is guilty of the same thing— TWICE.

The first instance was in 2009, during the global financial crisis. Under then Chairman Ben Bernanke, the Federal Reserve created trillions of dollars of new money, roughly equivalent to 15% of GDP, to bail out the big Wall Street banks.

The second instance was during the pandemic in 2020 and 2021, when the Fed printed roughly 14% of GDP.

This reckless money printing not only engineered historic inflation in the US, but it also has created enormous problems for the Federal Reserve itself.

The Fed is now wildly and hopelessly insolvent. And that’s not some wild conspiracy theory; it is a fact straight from its own financial statements.

Here’s how it happened:

Going back to 2008, and most significantly during the 2020-2021 pandemic, the Fed created trillions of dollars, then used that money to buy government bonds. They concurrently slashed interest rates to zero.

The net result was that the Fed is now holding trillions of dollars worth of bonds at the lowest yields in recorded history.

But then they suddenly reversed course in 2022, hiking rates rapidly from 0% to more than 5%.

Well, if there’s one thing to understand about bonds, it’s that higher rates cause bond prices to fall. So when the Fed raised rates, they simultaneously caused the value of their bond portfolio to plummet.

And “plummet” is being rather polite.

As it stands today, the Fed faces $818.4 billion in net unrealized losses from all the bonds that it purchased during the pandemic— far exceeding the mere $44 billion it has in equity capital.

Literally according to its own financial statements, the Federal Reserve is totally insolvent. In fact, at nearly $1 trillion, the Fed is the most insolvent bank in the history of the world.

Talk about fiscal degenerates.

Now, the Fed has only a few options:

One, ignore the problem. Continue to pretend that the insolvency of the largest and most systemically important central bank on the planet is no big deal.

Two, request a bailout: Go to the Treasury with hat in hand.

The problem is, the Treasury doesn’t have any money; in fact, the US government already overspends by $2 trillion per year and has to borrow most of that money from the Fed.

So a bailout would first require the Fed to print money, loan that money to the Treasury, and the Treasury then gives it back to the Fed. Talk about bizarre.

The third option is to cut interest rates. Lower rates mean that its bond portfolio will increase in value, thus reducing the Fed’s near trillion-dollar insolvency.

But cutting rates would only invite more inflation.

Inflation is already creeping back. Just yesterday, the latest report showed an increase in the inflation rate with signs it will rise further. Yet the Fed has all but promised to cut rates again next week.

What’s clear is that the Fed is abandoning its responsibility to rein in inflation and maintain a sound currency. Instead, it’s inflating its way out of insolvency.

The result? Every single person who uses US dollars will end up bailing out the Federal Reserve through higher inflation.

And this is why we continue to maintain that real assets— which are an excellent inflation hedge— make so much sense, especially given that so many high quality real asset producers are selling at laughably low valuations.

To your freedom,

James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/the-most-insolvent-bank-in-the-history-of-the-world-is-151888/

PS: Just a reminder, this week we have opened up Total Access, our highest tier membership. We intentionally keep the membership closed for most of the year, to limit the group to a small, tight-knit community.

If you want to learn more about what Total Access offers, including the unparalleled camaraderie of fellow members, click here.

Great News If You Own A Company

Great News If You Own A Company

Notes From the Field By James Hickman (Simon Black) December 7, 2024

Right at the beginning of the year in early January, I wrote to you about one of the dumbest laws to hit the books in the Land of the Free in a VERY long time. It’s called the Corporate Transparency Act.

The article was called, “Get ready to spend two years in prison,” because, two years in prison is literally the penalty for noncompliance.

You see, the do-gooders in Washington decided that there is too much criminal money laundering taking place in the US banking system. Nevermind that these brainiacs have already passed countless other laws to combat money laundering... all of which seem to be dismal failures.

So they decided to pass yet another anti-money laundering law, which requires every company in America to file a special report to the federal government disclosing the names of its owners.

So if you own a Delaware LLC, for example, to own your family investments, then they wanted you to file this report... even though you ALREADY report the exact same information to the IRS each year.

Well that doesn’t matter. The government wants you to send the same info— but in a different format— to another agency within the Treasury Department. And if you don’t file the report, they threatened everyone with up to two years in prison.

Obviously “ignorance of the law is not an excuse”. They just expect you to keep up with the flood of new laws, plus agency rules, plus court decisions which might modify or nullify all the rules and laws.

Case in point: earlier this week, a VERY sensible federal judge thankfully issued a nationwide injunction on the Corporate Transparency Act, suspending compliance requirements until a final ruling.

This is great news; it means that, at least for now, you do not have to comply with the CTA. But it also illustrates how quickly the laws change. Like literally every single day.

It’s practically a full-time job to keep up with all the changes... and it’s virtually impossible to have a functioning society when the rules are so fluid.

This is the topic of this weekend’s podcast— we hope you enjoy and look forward to speaking with you again next week.

To your freedom, James Hickman  Co-Founder, Schiff Sovereign LLC

ABOUT THE AUTHOR  James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

https://www.schiffsovereign.com/trends/podcast-great-news-if-you-own-a-company-151858/

What Does It Mean To Have A Plan B?

What Does It Mean To Have A Plan B?

Notes From the Field By James Hickman (Simon Black) December 10, 2024

What does it really mean to have a Plan B— especially these days?

We’ve used the term Plan B for almost the entire 15 years since I started this business in 2009.

Back then the national debt was really starting to become a major problem. The Federal Reserve was printing trillions of dollars to bail out irresponsible bankers. The economy was on the ropes after the Global Financial Crisis.

Plus a guy who told business owners, “You didn’t build that,” had just become President of the United States— and then bizarrely awarded the Nobel Peace Prize.

So the need for a “Plan B” seemed pretty obvious.

Today there is a lot more reason to be optimistic. There’s people coming to power that want to take a wrecking ball to the rot, corruption, and inefficiency that has been plaguing the country for far too long.

Frankly, I’m rooting for them. I’m even willing to pitch in and help. To be frank, I’m not comfortable with a world where China is the dominant superpower.

And there certainly seems to be a real opportunity right now to get the country back on track.

Let’s not be naive though. There are still serious challenges ahead. And the people coming to power have a very narrow window to get things back on track.

But we haven’t had this much reason to be optimistic in quite a while.

This isn’t just about an election or single individual, but rather a clear sign from the entire country, sick and tired of being lectured by out of touch “experts.”

Voters practically demanded a return to sanity and prosperity, even if it means dismantling large chunks of a broken system.

In today’s podcast, we talk about what it really means to have a Plan B in this kind of environment, where there’s reason to be optimistic, yet major challenges remain.

This, after all, is the entire point of a Plan B; to put yourself in a position of strength, and take advantage of great opportunities, while hedging clear and obvious risks.

We talk about that a lot in today’s episode.

We actually start with our CEO Viktorija, fresh off of a Total Access trip to El Salvador, telling us about the VIP treatment our group received from senior levels in both the public and private sector.

Then we transition into things that America needs to get right in short order. And the consequences if this doesn’t happen.

We then discuss the concept of a Plan B, versus having a dangerous “bunker mentality”, and how to think about hedging those risks, both in terms of investments, as well as non-financial solutions.

One of the key ideas is taking steps that make sense, regardless of what might or might not happen int he future. And one example of this is building strong relationships with people who share your values. That’s the whole idea of what “community” is supposed to be.

And this is exactly the type of community that we have developed with our Total Access group.

There are incredible VIP trips, exclusive investment conferences, compelling private investment opportunities, in-depth research, world class discounts, and a whole lot more.

But ultimately, the thing we are most proud of is the community and camaraderie among members.

That is consistently what our Total Access members rate as the biggest benefit to our organization. Many say they have found their tribe.

We usually keep membership closed, and only open up enrollment a few times each year.

To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC

We are doing that right now, and you can check out more about Total Access here.

https://www.schiffsovereign.com/trends/plan_b-151869/

They Have To Get This Right For America To Have A Real Chance

They Have To Get This Right For America To Have A Real Chance

Notes From the Field By James Hickman (Simon Black)  December 5, 2024  

On November 20, 1945, an international tribunal first convened in the Bavarian city of Nuremberg to prosecute key leaders of Nazi Germany for crimes against humanity. The Nuremberg Trials were a key aspect of holding individuals accountable for the brutal acts and genocide committed under Nazi rule.

High-ranking officials, including Hermann Göring and Rudolf Hess, faced charges, and they tended to grab most of the headlines. But plenty of lower ranking officers, and even doctors, faced trial as well. Naturally they tried to defend themselves by claiming they were “only following orders”.

But the Nuremberg Trials established a clear precedent that moral responsibility falls on the individual who committed the crime. “Only following orders” is simply not a valid justification for blatant wrongdoing.

It’s always dangerous territory to bring up the Nazis in any intellectual argument because it’s just so sensational. But in this case the analogy is an important one because we’re ultimately talking about accountability.

Bureaucrats and politicians in the US government commit outrageous, egregious acts of wasteful mismanagement on a daily basis. A lot of it is even deliberate.

And yet no one is ever held accountable. The conservative writer Thomas Sowell once argued that “it is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”

People in the private sector pay for their mistakes all the time. Businesses who don’t deliver value soon find themselves without customers. Employees who don’t do good work find themselves out of a job.

But government officials have squandered trillions of dollars. They locked down businesses, forced experimental vaccines on children, censored free speech, and violated just about every right imaginable.

How many have been truly held accountable?

TO READ MORE: https://www.schiffsovereign.com/trends/they-have-to-get-this-right-for-america-to-have-a-real-chance-151850/

Is The US Banking System In Trouble?

Is The US Banking System In Trouble?

December 2, 2024  Notes From the Field By James Hickman (Simon Black)

In the year 1157, the Republic of Venice was engaged in a bitter trade war with its arch rival the Byzantine Empire.

While the rest of Europe was barely surviving thanks to the stupidity of their centrally planned feudal economies, Venice was a place where anyone, even the most illiterate peasant, could work hard, take some risks, and become fabulously wealthy.

In short, it was the medieval America. And unsurprisingly its economy was booming.

Trade was the bread and butter of the Venetian economy. Venice had the fastest ships, the boldest captains, the shrewdest merchants, and by far the best legal and economic system.

In the other corner was the Byzantine Empire, a superpower in decline. Even the emperor at that point was more of a figurehead as nearly everything in the economy was controlled by incompetent career bureaucrats.

Even despite its decline, however, the Byzantine Empire still controlled regional trade in the Black Sea and Eastern Mediterranean. And Venice dominated trade in the Western Mediterranean.

It was only natural that the two-- a rising power versus a declining power-- would lock horns in a trade war.

Bear in mind that medieval trade wars were not what we think of today. In our modern era, a trade “war” is mostly harsh words, barbed tweets, and now potentially tariffs.

A thousand years ago, a trade war was almost an actual war-- naval battles, piracy, wanton slaughter… pretty much standard medieval warfare short of a full-blown ground invasion.

And like any war, a trade war was expensive.

So, in the year 1157, rather than raise taxes, the Venetian government launched a special loan program from its citizens. Participation was pretty much mandatory. But the basic idea was that, unlike taxes, the government would pay back the money, with interest.

Investors were issued paper certificates as a guarantee of repayment. And since nearly everyone in Venice had paper certificates (since the loan was mandatory), merchants and bankers began trading certificates to settle transactions.

The government loan certificates had essentially become a financial security-- and even a form of money. And the world’s first real bond market was born.

These days bonds are considered a boring, ‘safe’ investment. And most individual investors seldom bother to even learn about the bond market, let alone actually buy any bonds.

After all, bonds aren’t nearly as sexy as the stock market.

But bonds are still a critical piece of the global financial system. And just like in medieval Venice, bonds are almost a form of money, i.e. large corporations, banks, and governments consider bonds a “cash equivalent”.

Banks in particular are massive hoarders of bonds. When you make a deposit at your bank, most of the time they use that money to buy bonds.

That’s because, again, bonds are considered safe and boring. Especially US government bonds. And banks are supposed to be safe and boring.

But a serious problem started to creep into this ‘safe and boring’ asset class around ten years ago.

You might recall back during the 2008 financial crisis, central banks around the world printed tons of money and slashed interest rates to zero.

Governments also started spending like crazy in an effort to bail out their economies, and most of them went very deeply into debt.

The US national debt was $9.5 trillion just prior to the 2008 financial crisis. Barely three years later it had risen to $15 trillion.

But because interest rates were so low, most of that $5 trillion in new debt had a yield of roughly 1%.

And it was America’s commercial banks (along with insurance companies) which bought up a huge portion of those 1% yielding bonds.

Well, eventually the economy emerged from its crisis… so the Fed began to hike interest rates. But in doing so they created a huge problem for banks.

If there’s one thing to understand about bonds, it’s this: bond values fall when interest rates rise.

Think about it-- the banks bought trillions of dollars’ worth of bonds during the financial crisis. And their bonds were locked in a ~1% yield.

When rates suddenly rose to 2%, the value of the banks’ 1% bonds obviously fell. After all, why would a bond with a 1% fixed yield be worth the same as a new bond that pays 2%?

So, the new, higher rates caused the banks’ bond portfolios to suffer huge losses. Some banks were even heading towards insolvency. But they used a bunch of clever accounting tricks to hide their losses and pretend that everything was fine.

I first wrote about this nearly ten years ago and predicted that some banks will fail as a result.

Fortunately for the banks, the interest rate hikes were short-lived. By 2019 the Fed reversed course and started cutting rates. Then came the pandemic, and rates once again went to zero.

You’d think the banks would have collectively breathed a sigh of relief, learned from their mistake, and vowed to never load up on low-yield bonds ever again.

Yet the opposite happened. Banks bought trillions of dollars’ worth of US government bonds throughout 2020-2021 with yields as low as 0.01%. Crazy.

Today bond yields have risen to more than 4%... and, SHOCKER, the same effect has taken place: banks’ bond portfolios have suffered enormous losses.

The FDIC recently reported the total ‘unrealized’ bond loss to be over half a trillion dollars. That’s a lot.

The US banking system as a whole has enough equity to cover that loss. But individually, many banks do not.

In fact, this is precisely the reason that Silicon Valley Bank (among others) failed in 2023. So if rates don’t fall dramatically (or worse-- rates go up), then we could see more banks fail.

Bank of America is one of the naughty banks with nearly $90 billion in losses from higher interest rates. That’s over a third of the bank’s total equity.

This means that Bank of America is not insolvent; but at some point, the regulators could force them to reinforce their balance sheet by suspending their dividend and raising more capital. This is likely a big reason why Warren Buffett dumped so much Bank of America stock.

(Bizarrely, since reporting massive bond losses in their most recent quarterly report, Bank of America’s stock price has shot up nearly 20%. The same thing happened with Silicon Valley Bank’s stock in 2023.)

But, again, while there’s currently still enough capital in the US banking system as a whole to fend off a major crisis, there’s a MUCH bigger problem lurking-- and I’ll write to you about this soon.

In the meantime, if you’d rather avoid the mess entirely, definitely consider short-term T-bills in Treasury Direct (it’s like having a four-week CD), or dollar-pegged tokens like USDC.

There’s also the option of a foreign bank account in a financially secure jurisdiction, which includes the added benefit of asset protection and diversification.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

PS-  Banks are marketed as pillars of security, but in reality represent significant risk to your hard earned money.  In the upcoming Monthly Letter for Schiff Sovereign Premium subscribers, we uncover the cracks in the banking system and explain how these challenges are affecting both individual banks and the system at large.

More importantly, we provide actionable strategies to safeguard your wealth—and even grow it—despite these uncertainties.  

https://www.schiffsovereign.com/trends/is-the-us-banking-system-in-trouble-151833/

What’s up with Buffett and his $325 Billion Pile of Cash?

What’s up with Buffett and his $325 Billion Pile of Cash?

November 20, 2024 Notes From the Field By James Hickman (Simon Black)

Much has been written about Warren Buffett having sold a substantial amount of stocks. And his company, Berkshire Hathaway, is sitting on a record $325 billion cash pile as a result.

Buffett has often said that his preferred holding period for an investment is "forever". So the fact that he has sold so much stock has many observers proclaiming that "Buffett is predicting an imminent stock market crash."

Except that he's not. Buffett is a pretty transparent guy who has never been afraid to speak his mind. If he were predicting a crash, he'd probably say it.

Besides, Buffett has sold plenty of stocks in the past; this is not an anomaly. In 2022 and 2023, for example, he dumped shares of Chevron, Activision Blizzard, Taiwan Semiconductor, and HP.

This time around he sold off some shares in Apple and Bank of America. But he actually explained WHY-- especially with Apple. And I think his reasoning is worth mentioning.

Buffett explained to a reporter that "We don’t mind paying taxes at Berkshire. And we are paying a 21% federal rate,” which amounted to $5 billion last year.

But he continued, saying that the US federal corporate tax rate "was 35% not long ago, and it’s been 52% in the past. . . With the present fiscal policies, I think that something has to give, and I think that higher taxes are quite likely," i.e. that the government will take "a greater share of your income, or mine, or Berkshire's."

"So if I’m [selling Apple stock] at 21% [tax rates] this year, and we’re doing it at a lot higher percentage later on, I don’t think [shareholders] will actually mind that we sold a little Apple this year.”

This is a critical takeaway.

Nations with enormous debts and deficits can’t live beyond their means forever; Buffett isn't predicting a market crash-- he's predicting higher taxes... that, sooner or later, the federal government is going to have a take a much bigger bite out of people's paychecks.

As I've written before, there's a chance that Buffett's prediction might be wrong. It IS still possible for the US to get back on the right track-- a combination of government efficiency, spending cuts, de-regulation, and a technology (AI) fueled productivity boom could generate such an economic boom that the country COULD grow its way out of debt without having to resort to higher taxes (or inflation).

But the new administration will have to get moving immediately. Otherwise, Buffett will be proven right: higher taxes will be inevitable.

His decision to sell Bank of America stock is even more obvious and also bears mentioning. Quite simply, Bank of America is in deep trouble.

You probably recall how the Federal Reserve slashed interest rates all the way down to zero during the pandemic. It was ridiculous-- the US government was able to sell Ten Year notes with a yield of less than 0.4%.

Talk about a ******* deal. The largest debtor in the history of the world was selling bonds with such a pitiful yield that they didn't even keep up with inflation. Who would be such an idiot to buy such a terrible asset?

Bank of America, that's who. In fact, Bank of America invested hundreds of billions of dollars of their depositors' savings in these terrible assets.

Well, now that interest rates are literally more than 10x higher (from 0.4% to more than 4%), those same bonds that Bank of America bought back in 2020 and 2021 have lost a TON of money. BofA is sitting on more than $100 BILLION in unrealized losses from their bond portfolio.

Remember, this is the same reason that Silicon Valley Bank (among others) went bust last year-- the bonds they bought during the pandemic lost a ton of value, and the bank was wiped out. Bank of America is in a similar position now.

The key difference is that Bank of America has enough capital on its balance sheet to sustain those losses. So they might not be wiped out or fail. But the implications for shareholders are pretty bad.

Whenever a bank gets into trouble, the first thing that happens is the regulators step in and start making a bunch of demands. In this case, the FDIC and Fed will probably force Bank of America to raise more capital.

This will have the effect of severely diluting existing Bank of America shareholders... which most investors, especially Buffett, absolutely HATE.

The second thing that regulators always do with troubled banks is force them to suspend their dividend. And dividends are among the top reasons why Buffett likes to hold companies "forever". So given the likely prospect of zero dividends and heavily diluted shares, it looks like Buffett is getting out before regulators drop the hammer on Bank of America.

This is a big difference from "Buffett predicting a crash" as so many headlines across the Internet have been suggesting.

That said, the US stock market in general is definitely looking very expensive and near historically high valuations once again.

But there's at least one sector that's still cheap: real assets.

I've been writing for most of the past two years that real assets make a lot of sense to own, especially during inflationary times. Real assets were THE asset class to own during the 1970s stagflation.

The US is currently on the same path-- with its national debt constantly surging to new record highs (now $36 trillion), suggesting that another bout of nasty inflation could be in order down the road.

But, again, there's now a reasonable chance that the new administration is able to get the nation's finances on the right track... potentially forestalling an inflation spike and debt crisis.

So do real assets still make sense?

For now, yes. Natural gas is a great example-- as I've explained before, US natural gas is still incredibly cheap. And any American energy renaissance will depend heavily on natural gas. Prices could surge as a result, and natural gas producers could boom. Yet many companies' shares are still available for peanuts.

Bottom line, it still makes sense to consider fantastic real asset producers-- especially when they are profitable, low-debt, dividend-paying businesses that trade at absurdly low valuations.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/whats-up-with-buffett-and-his-325-billion-pile-of-cash-151751/

If You Think Bitcoin Is On Fire, Just Wait For The Natural Gas Boom

If You Think Bitcoin Is On Fire, Just Wait For The Natural Gas Boom

November 12, 2024 Notes from the Field By James Hickman / Simon Black

“Wow, these guys are going to be in for a rude wakening about how much power is going to be available. . .” thought Joe Dominguez, CEO of Constellation Energy.

Dominguez was one of the attendees last May at a private, invitation-only gathering of energy and tech company CEOs held at Microsoft’s headquarters. The whole point was to talk about power.

Everyone already knew that AI was consuming a lot of electricity, and they assumed this demand would grow. A lot. But they didn’t realize by quite how much until OpenAI co-founder Sam Altman told the group that just a single AI model will require as much power as a large city.

Again, that’s just ONE model. And there are plenty of them out there-- Google Gemini, OpenAI, Meta AI, etc. Every major tech company-- not to mention plenty of startups-- have developed or are developing power-hungry AI models.

In terms of energy demand and power consumption, AI will be the equivalent of adding several states to the US over the next few years. And America’s power grid simply doesn’t have the capacity.

Joe Dominguez understood that immediately… which is why his company teamed up with Microsoft to restart the Three Mile Island nuclear power station in Pennsylvania.

But one additional nuclear power plant is barely going to move the needle on America’s energy needs… and it takes way too much time to build new ones.

In fact, the most recent nuclear power facility to come online in the US took more than a decade to build. So even if the industry gets started today (which they won’t), and the permitting process were quick and easy (which it won’t be), nuclear power is still a long way out.

But there’s an easier option for the here and now: natural gas.

I’ve written about this before-- US natural gas is absurdly cheap, especially compared to global prices. That’s because there’s just so damn much of it in the US… combined with the fact that natural gas is complicated to transport.

Oil is simple. Tanker ships crisscross the planet transporting crude from country to country, so the global price for oil is similar everywhere.

But it’s not that way with gas. Natural gas has to first be decontaminated of various impurities at the wellhead in order to be transported in ‘dry’ form through pipelines, then stored underground.

At the moment there is no trans-Atlantic pipeline allowing US natural gas to flow to Europe. And building one would take years if not decades.

That’s why there’s such a tremendous price difference in natural gas between the United States and Europe. The US produces oceans of it but hardly uses it, hence a cheap price. Europe barely produces any but consumes it voraciously, so the price is more than 4x higher.

If only there were a readily available way to transport natural gas across the Atlantic… then US producers would be able to export to Europe. Natural gas would be more like oil-- a global commodity whose price is more or less the same around the world. And the US price would surge.

Well, there actually is a way to do that. Natural gas can be liquefied into a condensed form (about 1/600th of the gaseous volume) and transported at -163C.

Obviously, there’s a cost to liquefying and transporting gas. But a US producer can still make so much more money selling gas to Europe-- even after the additional costs are included.

And this started to happen around 2017; US producers began liquefying their natural gas and exporting to Europe in major quantities. Within a few years, LNG exports were booming.

But then, earlier this year, Joe Biden bowed to the climate fanatics and ordered his Department of Energy to cease issuing permits for new LNG export terminals… essentially shutting down export growth.

It’s safe to expect a totally different policy starting in January, i.e. more US natural gas will flow to Europe. That means less supply in the US. Natural gas prices will rise as a result… and probably by a LOT.

But don’t forget about AI.

Let’s first think about different ways to generate electricity and the types of fuels that are available.

There’s solar and wind, for example. The prices of solar panels in particular… and wind turbines to a degree, are both falling. In large part this is because the Chinese Communist Party heavily subsidizes its domestic solar panel industry.

So, wind and solar are somewhat price competitive. But they carry a security risk: do you really want China manufacturing your entire power grid? Is it possible they built a kill switch in their software?

More importantly, they’re not terribly reliable. There are times (like night!) when the sun doesn’t shine. Germany (which generates nearly 60% of its power from renewable energy) recently experienced yet another dunkelflaute, i.e. a foggy, doldrum period in which there is neither sunshine nor wind.

This doesn’t work for AI. Tech companies need reliability.

Then there’s coal… which is super reliable, not to mention cheap and efficient. But it’s one of the dirtiest fuels known to man. Google won’t get its hands dirty with that one.

Tech companies love nuclear. They understand it is, by far, the most efficient form of energy known to man. But again, new reactors are 10+ years away. AI needs power now.

And that pretty much leaves natural gas. The US has oceans of it and barely uses a fraction of its supply. It’s absurdly cheap. In fact, according to the US National Renewable Energy Laboratory, natural gas is THE cheapest fuel source per MW of electrical capacity.

It’s the cleanest of all the conventional sources. Plus, you can construct a new facility in about two years… so new power can come online quickly. And the Big Tech companies have demonstrated that they are more than willing to shell out the cash needed to finance natural gas power plants.

Between these two trends: AI power demand, and the upcoming export boom, natural gas prices are probably going to soar.

We’ve just watched the Dow Jones Industrial Average rise by 7% to an all-time high in the last week. Bitcoin has surged by more than 30% to its all-time high.

That’s nothing compared to what we could see in the natural gas price.

It’s obviously not going to happen in a week, these trends will take longer to unfold. But it’s definitely a good time to look at some of the extremely undervalued natural gas producers whose profits will boom.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/if-you-think-bitcoin-is-on-fire-just-wait-for-the-natural-gas-boom-151726/

What About Gold?

What About Gold?

November 18, 2024  Notes From the Field – James Hickman/ Simon Black/ Sovereign Man

It was early January 2020, and weird things were happening in the world.

Socialism was on the march in the Land of the Free. Conflict, it seemed, was exploding everywhere, both abroad (North Korea, Iran, Yemen) and at home.

And most notably, over in China, the Communist government was literally welding people into their homes to ‘keep them safe’ from a bizarre virus that was spreading rapidly

It was only January, but 2020 was already looking pretty uncertain.

I wrote an article about preparing for uncertainty. And, with respect to finance, I wrote that gold was a very sensible asset to own in such times: “Frankly I don’t think anyone can credibly say that they have any idea what’s going to happen in the world in 2020. And that’s why I own gold.”

We soon found out. One of the most ridiculous hysterias in human history gripped the world. Countries were locked down. Governments and central banks conjured trillions of dollars out of thin air to pay people to stay home and not work.

Three months later, in mid-April, I wrote again that the Fed’s virtually unlimited money printing was going to be “very inflationary” and encouraged readers to consider gold once again (along with other real assets).

Quite predictably, the price of gold shot up, from $1560 in early January, to $1720 in April, to nearly $2000 in August.

At that point there was a lot of fickle, speculative capital flowing into the gold market. Gold ETFs were receiving huge inflows, pushing the price to (what was then) an all-time high.

So I wrote to our audience again on August 3rd stating that, “a short-term correction may be in order” for gold. The price peaked three days later, and then fell be several hundred dollars per ounce.

I started writing about gold again in earnest back in early 2023, a few months after the price had bottomed out. The fiscal trajectory of the United States under Joe Biden was painfully obvious at that point. The national debt was growing at an unprecedented peace-time pace, and other nations were lining up against the dollar as the global reserve currency.

Gold was a smart move. And by the end of the year I concluded that “we could easily see central banks around the world ditching their US dollars and loading up on gold as part of a new, de-dollarized global financial system.”

And that’s what started happening: fed up with dollar inflation, US government dysfunction, and America’s gargantuan national debt, foreign central banks began trading their dollars for gold.

THE GOLD PRICE SOARED AS A RESULT

Even in March of this year, when gold was at its all time high of the time at $2,150, I wrote that gold was actually a contrarian investment with a lot more room to rise.

It went all the way up to almost $2,800.

Now, I’m not citing my own work to be boastful. Trust me, I’ve gotten plenty of things wrong.

My point is to illustrate that I AM NOT A GOLD BUG. I don’t hold a fanatical view about gold that it’s the only thing worth owning and is only going to go up.

Furthermore, I don’t think about gold strictly in terms of price; that’s way too one-dimensional.

Gold is a great insurance policy. It’s a hedge against systemic risks. It’s great for estate planning and asset protection. It holds its value over inflation over long periods of time. And, sometimes, it can also be a fantastic speculation.

The above examples demonstrate that I’m not shy about saying whether I think gold has been overbought, is too expensive, or too cheap. My assessment obviously changes when the information changes.

Right now one thing is clear: foreign central banks were the ones responsible for driving the price of gold to all-time highs throughout 2024, just as I suggested would be the case in 2023.

And that was happening at a time when most individual investors (plus ‘smart money’ hedge funds) were actually selling gold. So they were missing out on the boom.

But that started to change over the past few months.

Data from Gold ETFs around the world show that individual investors have been buying tons of gold. Problem is— that money tends to be very short-term... and fickle.

We can already see it; a lot of those same small investors have already yanked their money out of gold after the US election, which is why the price is down about 10% from its record high.

But, again, the real long-term driver of gold demand is central banks. And I think a lot of foreign central banks are sitting on the sidelines right now.

With gold already near its all-time high, they have paused their buying spree, and they’re now looking at this incoming administration to see what happens next.

Can Elon trim the federal budget? Will there be a US energy renaissance or AI-fueled productivity bonanza? Will the government become functional once again? Will America’s unparalleled military superiority be restored? Will sensible monetary policy reign in inflation?

Because if those things actually happen, then the dollar has a pretty good shot of continuing its reign as the dominant global reserve currency.

And I think a lot of central banks that have been buying so much gold are happy to wait for the next several months to see what happens. Hence gold could easily trade sideways for a while, or even fall.

All that said, gold is still worth owning... because there’s still long-term risk to the US and to the dollar.

Vladimir Putin recently made some comments that a lot of folks misinterpreted as “Russia and the BRICS nations will keep using the dollar. . .”

But that’s not what Putin said.

Putin said it was the US government’s weaponization of the dollar that pushed Russia and the BRICs nations away. And as long as that threat remains, the BRICS+ bloc is plowing ahead with developing an alternate financial system.

Many large economies have already started trading with one another in a currency other than the US dollar. And that trend is likely to continue, i.e. the dollar is going to have competition.

Not to mention, there’s still a ton of uncertainty in the world. The national debt is still way too high. The Leftists still want to storm to power and Make America California. Conflict might still break out.

hese are all sensible reasons to own some gold.

But given that the key driver of the gold price, i.e. central banks, are probably going to sit on the sidelines over the next few months, I wouldn’t be buying right now on the expectation of a short-term price surge.

To your freedom,   James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/what-about-gold-151745/

The Dirty, Four-Letter Word That Keeps the Lights On

The Dirty, Four-Letter Word That Keeps the Lights On

Notes From the Field By James Hickman (Simon Black) October 24, 2024

There’s a really dirty four-letter word that starts with a “C”. No, not that one. This is a word you simply cannot say around Greta Thunberg, otherwise her ears will melt off of her face. 

I’m talking about coal. And it’s about to have its moment.

One reason is that global population grows each year, and every one of them needs energy in some way or another—to keep the lights on, to fuel the machines that harvest their food, to power virtually everything that keeps life going.

Second, the world population generally becomes wealthier each year. Billions of people in China, India, and Southeast Asia are better off now than they were ten years ago. As economies develop, they consume more food, more goods, more electricity— and all of that requires more energy.

More efficient technology offsets some energy use, like switching from old-school incandescent light bulbs to LEDs.

But the general rule is that as energy becomes cheaper, people tend to use more of it, i.e. the world always finds a way to use that energy savings somewhere else.

Plus there are some technologies (AI, crypto mining) which, in aggregate, consume a ton of energy.

So overall global energy demand keeps rising.

Energy supply, on the other hand, is REALLY hard to come by. Exploring for oil, drilling, constructing power plants, building hydroelectric dams, wind turbines, etc. is capital-intensive, labor-intensive, resource-intensive, and very time-consuming.

Meanwhile, many sources of energy supply are dwindling.

Some major shale fields in the US, which were once the biggest source of growth in energy supply, have peaked.

But perhaps an even more significant obstacle to supply is how the government and hyperventilating, pearl-clutching leftists do everything they can to reduce supply.

These people who stop traffic, throw glitter bombs on priceless works of art, and deface public property, in their efforts to “Just Stop Oil” want to turn the clock back to 1750 on human civilization.

Plus there are fanatics with real political power— like California Governor Gavin Newsom— who insist on replacing conventional electrical plants with extremely inefficient wind and solar.

I like clean air and water as much as anyone, but wind and solar aren’t anywhere near as environmentally friendly as people claim. They require tons of dirty minerals and chemicals, and barely produce enough energy yield to offset the inputs.

This is why big technology companies (who are looking to power their massive AI electricity needs) are going all-in on nuclear power.

Nuclear is absolutely the power of the future. It’s clean. It’s safe. It’s absurdly efficient.

By comparison, a single kilogram of Uranium can produce as much electricity as an entire square kilometer of solar panels. The difference in energy yield is not even close.

Tech companies understand this... hence why Google, Amazon, Microsoft, etc. are investing billions in nuclear energy as the ultimate solution to power their electricity-hungry AI data centers.

But it takes time to build nuclear power plants. And the most advanced “small scale” nuclear reactors are still in development.

In the meantime, tech companies still need power. The world still needs power. Lots of it. And more every year.

We’ve already talked about how natural gas (especially US natural gas) is THE cheapest energy source on earth right now. In fact, at its current price of roughly $2.40, US natural gas is priced at the energy-equivalent of oil selling for $15 per barrel. That’s cheap.

But there’s another cheap, abundant energy source that is going to be extremely relevant in powering the world’s energy needs for the foreseeable future: coal.

Yes, it’s a very, very dirty word. Climate fanatics don’t want to hear it. But until the world builds sufficient nuclear energy infrastructure, there’s still a critical need for conventional fossil fuels. And that includes coal.

Like it or not, coal is still vital to energy infrastructure, accounting for more than a third of global electricity production. In fact, global coal consumption has consistently INCREASED over the past few decades despite the environmental backlash against it.

Coal is still an extremely efficient source of energy, compared to wind and solar. On an energy return basis, it’s about 6x more efficient than wind and solar— i.e. less energy input required per unit of output.

And if you think coal is dirty, then you should check out how environmentally damaging cobalt mines are (a key ingredient in solar batteries). Not to mention, most cobalt mines in Africa are teeming with child labor.

Coal power plants have the added benefit of being very quick any easy to build. That’s why China— in addition to investing heavily in nuclear power— is also still buying a lot of coal.

It’s also worth pointing out that coal is an essential ingredient in iron and steel production. So even though the leftists hate it, coal will likely remain a key resource in human civilization for the next few decades.

However, from an investment perspective, hardly anyone wants to touch coal. Investment funds are afraid of government blow-back and the wrath of the left... so they don’t invest in coal.

And for individual investors, coal is uncool and unpopular. Thanks Greta.

As a result, there are some coal companies out there making money hand over fist. They have a bright future with plenty of demand down the road. Yet their valuations are a total joke.

TO READ MORE:  https://www.schiffsovereign.com/trends/the-dirty-four-letter-word-that-keeps-the-lights-on-151675/

A Real Asset With A 12% Dividend Yield

A Real Asset With A 12% Dividend Yield

Notes From the Field By James Hickman / Simon Black October 17, 2024

It’s very hard to overstate just how obliterated the global economy was following World War II. Europe was in ruins, with many major cities having been bombed back into the Stone Age. Japan had literally been nuked.

And just about every economy around the world that still had any manufacturing capacity was pumping out guns, bullets, and bombs; there was hardly any economic activity taking place that wasn’t somehow tied to the war.

It was sort of like Covid— the regular economy was shut down... and governments discovered very quickly that they couldn’t simply turn the global economic machine back on with the flip of a switch.

The transition from obliterated war economy to booming peacetime economy was an incredibly difficult one. So in 1948, the United States (which was among the only developed major economies still standing) launched the Marshal Plan.

The idea was simple, America would shovel $13 billion (which, as a percentage of global GDP is equivalent to around $5 trillion today) around the world to facilitate trade and economic development.

But alongside the financial aid came a promise: the US Navy would protect the seas, ensuring that the global flow of goods could continue unimpeded.

For decades, American naval dominance guaranteed a level of safety and stability that allowed international trade to thrive. Shipping routes were secured, costs remained low, and commerce could flow relatively uninterrupted across the world's oceans.

The post-WWII era ushered in an unprecedented period of cooperation and prosperity, making international trade easier, faster, and more profitable.

But those calm seas are growing choppy again.

The war between Russia and Ukraine, for example, has drastically altered oil trade routes. Russian crude oil, which once flowed easily into Europe, is now making much longer journeys to places like India, where it’s refined and then sent back to Europe as diesel.

This convoluted, inefficient process is adding enormous strain and cost to shipping routes, increasing the “ton miles”, i.e. each mile that a ton of product must travel.

But this is just one example. In the Middle East, the Houthis in Yemen have launched attacks on vessels transiting the Red Sea, creating a new chokepoint in global shipping lanes. Pirates have increased their attacks in the area as well.

Many oil tankers are now rerouting entirely around the southern tip of Africa to avoid the Suez Canal, extending travel times significantly.

The further oil must go, the more tankers are needed. The problem is, these changes took place quite rapidly, yet shipbuilding is not an industry that can quickly respond to that demand.

Shipbuilding is a slow, capital-intensive process. And after years of underinvestment, there are hardly any new tankers being built. Shipyards are busy constructing other types of vessels, but the number of new oil tankers remains near record lows.

At the same time, a large chunk of the existing global fleet is over 20 years old, nearing the end of its lifespan. This imbalance is going to worsen before it gets better, leading to a serious shortage in oil tankers at the exact moment when the world needs them most.

The combination of more ton miles and fewer ships is creating a perfect storm in the tanker market.

This imbalance is inflationary. Both shipping and energy are core components of nearly every supply chain. Higher costs to transport oil mean higher costs for just about everything else we buy—from groceries to manufactured goods.

Climate fanatics can pretend that the world is ready to run off wind and solar, which is why they suppress investment in everything from new drilling, to transport ships. But the reality is, oil is still the most important energy source on earth.

Energy is a prime example of a real asset— a critical resource that keeps the economy going, and cannot be created out of thin air by governments and central banks.

And the shipping companies which transport that oil are real asset businesses... which is why we have been following this industry closely.

One company in particular that we told subscribers about in our premium investment research stands out as being uniquely positioned to capitalize on these trends.

It has a fleet of 82 ships, with an average age of just over 10 years, meaning they have plenty of life left. They can also continue to benefit from the shortage of ships as long as it lasts— which we know from the global orderbook for new ships, will be several years at least.

But this also means the company won’t have to spend huge amounts of capital in the near future buying new ships. And already, it carries little debt... yet still pays around a 12% dividend.

Again, in addition to the dynamics of debt, deficits, and dysfunction in the US government which promise to increase inflation, global conflict is also inflationary.

This is another example of the real asset companies not only poised to do well in an inflationary world, but that are also trading near historic low valuations.

This shipping company, for example, is trading at a P/E (price to earnings) ratio of just 4.44.

While we can wish all we want that the world was not becoming less cooperative, that won’t change the reality. Better to position ourselves to benefit under these conditions, by investing in companies that actually gain from that disorder.

We’ve talked a lot about this same dynamic when it comes to gold, and why central banks around the world are turning to it, and away from the US dollar.

We also talked about it recently in relation to how the prices of certain critical metals have been artificially suppressed by climate fanatics who think the days of gas vehicles are past. They are wrong.

The best way to fight back, while inflation-proofing your future, is to invest in critical real asset companies at historic lows.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

PS-

Our premium investment research service, The 4th Pillar, has provided recent, in-depth reports on several undervalued real asset businesses, which we believe are set to boom under these conditions

https://www.schiffsovereign.com/trends/a-real-asset-with-a-12-dividend-yield-151662/

How to Buy Gold for $900 per Ounce

How to Buy Gold for $900 per Ounce

Notes From the Field By James Hickman / Simon Black  October 11, 2024

Today’s letter is about how to go back in time.

A lot of us remember 2009 as a pretty tough economy. The whole world was in bad shape. Major banks had failed, panic had set in, governments were spending money hand over fist, and debts were rising fast. It was pretty brutal.

But if there’s anything nostalgic about 2009, it would be that, almost exactly 15 years ago, gold traded below $1,000 an ounce for the last time.  Today, the price of gold is hovering at its all-time high, more than $2,600 per ounce.

We’ve talked a lot about why that is. Central banks have been buying up physical gold, literally by the metric ton, primarily because they are looking to diversify a portion of their reserves outside of the US dollar.

And central banks are sitting on a LOT of US dollar reserves— more than $8 trillion.

It makes sense that they want to diversify. There’s so much more conflict in the world, and US global dominance is waning.

Iran is now flat-out threatening the US government and promising to retaliate if America provides military support to Israel. This would have been unthinkable even five years ago.

But today, adversary nations have seized on the US government’s weakness. And foreign central banks— which, again, hold trillions of US dollar reserves— have noticed.

They’ve also noticed America’s outrageous national debt, and its annual budget deficits; in fact the most recent estimate by the Congressional Budget Office of the Fiscal Year 2024 is an incredible $1.8 trillion.

So obviously these central banks see a clear need to diversify. And gold is one of the best and easiest ways for them to do that.

The gold market is big. It can handle tens of billions of dollars of inflows at a time. Plus gold is universally valued around the world with a 5,000 year history of maintaining its value. No central banker is worried about whether or not they’ll be able to liquidate their gold holdings in the future.

But central banks only buy physical gold, i.e. piles and piles of physical gold bars. They do not buy gold mines... or gold miners.

This is why there is a historic anomaly in front of us: the price of gold has soared to an all-time high. But many gold companies are laughably cheap.

This is pretty strange when you think about it; a gold miner’s revenue is denominated in... gold! And many of these companies are starting to see soaring revenues and record profits. Yet their stock prices are still languishing.

For example, one gold producer we profiled in our premium research is trading at a Price to Earnings (P/E) of just 4x. It has almost no debt. And it produces a ton of Free Cash Flow.

The company has even blown away expectations and managed to produce 100,000 ounces of gold. Yet the stock price has barely budged.

What’s amazing is that the entire company is currently valued at less than the market price of that one year's worth of gold that it mined.

But the kicker is how little it cost this company to produce that gold.

Their “All In Sustaining Cost” (AISC)— everything spent to pull that gold out of the ground, from mining to processing— was less than $1,000 per ounce.

And in our view, buying shares in an efficient, profitable, deeply undervalued mining company with such a low cost structure is almost like going back in time to 2009 and buying up gold at less than $1,000 per ounce... especially given that the company still has millions of ounces of proven gold reserves in the ground which it has yet to extract.

I’ve written many times before— we still see significant upside for gold. Especially if Kamala is elected.

Based on the type of spending she envisions, plus her weak “vibes” and “joy” leadership, I don’t expect the dollar to last as the global reserve currency beyond her first term.

Instead, central banks will continue to turn to gold. And when central banks converted just $80 billion— about 1%— of their US reserves into gold, the price increased to over $2,600 an ounce.

What would happen to the gold price if they converted 5%... or 20% of their US dollar reserves into gold?

Even buying physical gold, right now, at all time highs, would probably work out really well.

But buying a company whose revenue is gold, yet costs a fraction of that price, could work out even better.

Gold is just one of the real assets we talk about in Schiff Sovereign Premium.

We’ve been clear that America’s debt problems can only be solved by lower interest rates and more money printing from the Federal Reserve.

That’s why we don’t believe inflation is behind us, and why we believe so whole-heartedly in the value of real assets— critical resources that cannot be conjured out of thin air by governments and central banks.

This gold producer is just one example of these massively undervalued real asset companies we’ve named in Schiff Sovereign Premium— a highly educational, month-by-month guide that is designed to help you navigate the world from a position of strength, both personally and financially.

You can click here if you want to learn more about both the Plan B strategies and compelling investment research we present.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/how-to-buy-gold-for-900-per-ounce-151648/