Money is one of the primary measures of value in any society, perhaps the primary one, the principal repository of value. As such, money is a central source of stability, continuity, and coherence in any community. Hence to tamper with the basic money supply is to tamper with a community’s sense of value. By making money worthless, inflation threatens to undermine and dissolve all sense of value in a society.

– Paul A. Cantor

DUBLIN – We flew back to Dublin on Friday night. Here, in midsummer, the temperature is only half what it was in Dubai.

While it was 110 degrees on the banks of the Persian Gulf… so hot we couldn’t go outside for more than a minute or two… when we stepped off the plane on the banks of the River Liffey in Dublin, the thermometer recorded only 55 degrees.

Though the beginning of summer, it could have passed for the end of November in Maryland.

But Dublin is hopping. On Saturday, the sun shone and brought out the crowds. The streets, shops, and bars filled to overflowing, with tourists and locals eager to feel the sun on their faces at least once before winter returns.

Then, on Sunday, summer never having gotten much of a foothold, came the autumn rains. We went to church services at Saint Ann’s Church, where the choir was superb:

Click below to listen to the choir.


Everything Goes Nuts

Meanwhile…

Last week, the Fed said it still had investors’ backs. There would be no rate hike, said the Fed’s Jay Powell. Conspicuous by its absence was the word “patient” from Powell’s remarks. The implication being that rate cuts could be up next.

And then, according to Bloomberg:

Fed Loses Its Patience and Almost Everything You Can Trade Goes Nuts

Stocks rose to records, bonds surged, oil jumped almost 10% and even gold got into the act, as traders celebrated a dovish conversion at the Federal Reserve. One back-of-the-envelope measure shows the rally in everything was the strongest since 2011.

And:

Bitcoin traded above $11,000 for the first time in 15 months, recouping more than half of the parabolic increase that captured the attention of mainstream investors before the cryptocurrency bubble burst last year.

What to make of it?

Harmful Content

And here, we pause and dip into the Sunday papers. It helps to remind us that 95% of everything you read about public policy is wretched gobbledygook. Could it be that these price trends are, too? 

In Ireland, the Sunday Independent went right to the claptrap.

“First social media controls revealed,” is the headline story on the front page. The Irish feds are setting up a “watchdog” to “target harmful content.”

What’s harmful content? It depends on who’s in charge.

In China, anything critical of the Communist party, the government, or its economic policies is not only harmful, it gets you a prison sentence.

In Dubai, blasphemy, indecency, insurrection – even cross-dressing, swearing, or dancing in public – can get you arrested.

In the U.S., in the 19th century, United States postal inspector and anti-vice activist Anthony Comstock banned anatomy textbooks from being sent via U.S. mail on the grounds that they were lewd. During his career as censor, he reportedly destroyed 15 tons of books and 4 million pictures.

And here in Ireland, on page 6 of the Sunday Independent, we find the censors drooling over “food porn.” Dr. Donal O’Shea says social media postings of attractive eats “normalize” binge eating.

“Wait,” warned a friend. “You can’t talk about ‘bingeing’ anymore. It’s insensitive to people with a tendency to binge.”

“Oh…”

But this joke is too good to let political correctness stand in the way. A study by Oxford University showed that looking at food on the internet “makes it harder to resist eating.” Fat people binge, in other words.

“There are massive health implications,” says a government toad, calling for surgery, censorship, and other meddling.

Yes, there are hefty implications for us all, we reply. But if you allow the feds to censor your opinions, thoughts, and news, you are a moron. How would the censor know better than you what you should see or think?

The Sunday Independent doesn’t bother to raise the question.

Fakier Rates

But neither does any major newspaper bother to question how a central banker knows what interest rate is good for you.

Last week, Fed chair Jay Powell and European Central Bank president Mario Draghi both affirmed their resolve to provide more stimulus in the months ahead.

In other words, the guardians of the world’s most important measures of value said they would lend more fake money at even fakier interest rates.

This, of course, caused hearts to flutter in the markets. Investors are pretty sure that an already nutty situation is going to be even nuttier in the future.

And they’re probably right. But there’s no guarantee they’re going to like it.

As you know, Dear Reader, here at the Diary, we only try to connect the dots. And taking shape before us is a staggering picture. It is almost impossible to believe it is true. We rub our eyes in wonder at the nuttiness of it. How could it be?

Bond investors own $13 trillion worth of loans… and pay for the privilege by making negative interest payments. The U.S. stock market hits an all-time closing high while the economy actually slows down. And people are so desperate for an honest currency that they turn to bitcoin… which they can’t see, can’t touch, and can’t understand.

How could it be?

We squint and look closer. And out of the fog emerges a hypothesis… an explanation almost as strange as the picture itself: Americans have allowed the feds to censor their markets.

More to come…

Regards,

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Bill

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Baby boomers changed America. But probably not in the way you think. They brought more rules, more paperwork… and more debt. But they won’t be the ones to shoulder this burden. That falls on the next generation…

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MAILBAG

Today, dear readers weigh in on the conflict with Iran… after your editor said war is just another scheme “to move wealth from the middle class to the privileged few”…

Bill, as an avid history buff, you surprised me with the naive notion that to solve the Middle East conflict, all we need to do is withdraw our troops. (Heck, isn’t that what Obama did?) I just returned from a journey to Germany via Austria, Slovakia, Hungary, Serbia, and Romania, a region that has been invaded by outside rulers throughout history. What did they do wrong, oh master peacemaker?

– Erich K.

“That is a lot of hits for something that is probably not true. The Iranians saw what happened to Saddam and Gaddafi. The last thing the Persians would want is to give the U.S. a pretext to ‘Bomb, bomb, bomb… bomb, bomb Iran.’” Those are words taken from you. But it’s Israel that wants us at war there. We merely obey.

– Richard S.

Dear Bill, there’s nothing new in wars benefiting the warmongers, but in regards to Iran, it’s hard to see how this is in anyone’s best interest right now.

– Michael S.

Meanwhile, another dear reader suggests that the Fed’s meddling with interest rates might not be such a short-sighted strategy…

Bill, I love what you write as much as the word choice you use to convey your perspectives. However, I am confused when you bemoan the Fed futzing around with interest rates. If capitalism is the process by which wealth is created, then it strikes me that by making the cost of capital less expensive (e.g., low interest rates), then the prospect is proportionally greater that more wealth along with more jobs and more tax revenue for greedy governments will occur.

Of course, low interest rates trigger more borrowing and greater debt. But if debt is wisely used to ensure revenues exceed the cost to service debts, then what’s wrong with this scenario? Most of us don’t have savings (i.e., capital) to buy a new car, much less start a new business from scratch.

– Jim R.

Also, a dear reader asks us to stop our “constant nitpicking” of President Trump…

As a longtime subscriber of the “Baltimore” cabal, I have to respond to the constant criticism of President Trump. I subscribe for financial advice, not political opinions. Mr. Bonner carries himself as a citizen of the world with roots in Argentina, France, and Ireland (and probably more). He could be more respectful of our president, and thus his subscribers. Would he rather sit back and allow those building their weaponry in Iran, North Korea, China, and Russia to continue, and prefer America to ignore it?

We were not a great power internationally prior to the second World War, and we did not cause the Axis countries to declare war on Europe and Asia. But we sure helped defeat those enemies and protect the likes of Great Britain, Ireland, France, Italy, China, the Philippines, etc., and then spent big dollars to rebuild those countries, and Germany and Japan, too. Our war effort, patriotism, and sacrifice at home from 1941-1945 was tremendous. I grew up during that period.

Please refrain from the constant nitpicking of President Trump, who would have accomplished even more in the past two and a half years had the hatefulness of the Democratic Party and its mouthpieces allowed him to drain the Swamp. I am not a politician, but I am a loyal American.

– A. Mlakar

Finally, more questions for Tom Dyson about his unique Dow-to-Gold trade and his globe-trotting trip with his family

Hello, Tom. It was great to get an update on your “goings on.” It’s strange, since I’ve never met you in person, but I somehow feel a kinship with several of the financial writers that have helped me over the years. You are one of them. It’s probably inappropriate for me to ask, but I’ve gotten to an age where, at times, the “rules” no longer apply. You had previously mentioned that you were going through a divorce. Yet the enclosed photo shows you with your beautiful partner and children. Did you reconcile? Start over? If possible, please update. My best to you!

– Robert R.

Tom’s Reply: Ha! Inappropriate questions are the best ones!

We got divorced in 2014. We spent the last five years leading separate lives with different partners. I got very depressed in this period. When Kate said she wanted to take the kids on a road trip around America last summer, I jumped at the opportunity and invited myself along. Kate said yes.

We spent a month driving from Miami to Seattle, visiting the national parks and sleeping in campgrounds. It was a magical trip. We decided to keep going. We went back home, cleaned out our apartments, sold all our things, and flew to Europe. We traveled around there for a few more months.

We were having so much fun. The scope of the trip just kept mushrooming. Now, here we are in India with round-the-world plane tickets!

In addition to being a lot of fun, this trip is also a big comeback story for our family. But what happens next? Better stay tuned…

How do we go about investing in this opportunity of a lifetime along with you? Can we take this ride, too? Suggested investments? Suggested timing? Beta testers?

– Margaret G.

Tom’s Reply: Yes! Bill and Dan (Denning) have carved out a regular section for me in their monthly newsletter, The Bonner-Denning Letter. I’ll lay out all the details there. The July issue comes out Wednesday. If you’re not already a subscriber, you can sign up right here.

So glad you will be writing articles for Bonner & Partners. If someone can talk you into writing a similar monthly newsletter, I’d subscribe to that in a heartbeat.

– Joe E.

Tom’s Reply: Noted! Thanks for your encouragement. It means a lot.

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