Yield Steepening

There’s very little that I can think of that is more bullish to silver than what’s currently underway.

If we look at silver’s two major breakouts, they came at a time when major economic and fiscal changes were taking place.

In the 1970s, the United States altered the monetary system under which we once lived from its very foundation. That move led to silver going from $1.92 to $50/ounce, at the height of the Hunt Brothers debacle.

The 2000s, which brought with them the rise of China and hyper-globalization, saw interest rates cut dramatically and this new regime of next-to-zero funding costs, sent silver from $4 to $21. Then 2008 happened.

In the reflation of 2009 through to 2011, something led to silver’s ascent from $9 to $49.

What was it?

The answer is the real sense of inflation, the consensus on Wall Street and not on Main Street that the government and the central bank are IN FAVOR of inflation.

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Courtesy: Zerohedge.com, Bloomberg

Think about it from the government’s perspective: They’ve just approved a massive aid package worth $100bn, and they’re not stopping there…

The deficit is rising meaningfully and the debt ceiling debate is over and done with and no government shutdown happened.

In other words, it’s a bi-partisan agreement that the stakes are high right now and that in the Middle East, the Far East (China/Taiwan) and Russia, the consequences of appearing weak and not supporting the interest of the United States, could lead to untold disasters in the coming years.

You can totally see how Wall Street changed its view in the past week, leading to the surge in gold’s price:

Courtesy: Zerohedge.com, Bloomberg

Think about what just happened: Institutional money (Wall Street) pulled more funds out of money-market accounts in one week than ever before.

Institutions put money in liquid accounts, bearing yield, when they feel that there is no opportunity out there to be had, and they pull funds out when they think that there is a big one coming.

Think to yourselves: If they thought a deflation is next, would they give up the juicy yield, offered by liquid money-market accounts?

They would never.

They think the opposite… inflation remains the real issue that the FED can’t solve, because rates have already broken out on the 10-yr bond, but the 2-yr bond hasn’t followed… in other words, we are seeing the yield curve steepening.

Courtesy: Zerohedge.com, Bloomberg

I see many signs that tell me we are entering an inflationary period, and I don’t think that it will NOT be prolonged, even if we enter a recession.

In other words, because of the re-industrialization of the United States, the likelihood of recession is tied more to Europe and the domestic economy than to what’s happening with China.

In the U.S., families can’t wait to start buying homes once lending standards relax, and I see a big recovery in housing.

I have never seen a recession when housing is rebounding and most people have jobs, so there’s that…

Lastly, I do think that interest rates will remain high, not low. In other words, the boom we saw that helped fuel the garbage bubbles of the 2020s IS DONE.

If a business idea cannot make one a big chunk, then one has other options in fixed income. All these crappy assets that popped up, like NFTs and others, be gone.

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Best Regards,

Lior Gantz
President, WealthResearchGroup.com