YOUGHAL, IRELAND – World stock markets are already down more than $2 trillion – supposedly on “trade war worries.”

And now, Friday has come. Tariffs have gone up. $200 billion worth of Chinese imports now face levies of 25%, up from 10%.

And the trade negotiations with China continue. Foreign markets are selling off a bit more, but not catastrophically.

These negotiations are a big waste of time, from an economic point of view. But they seem to have helped Donald Trump’s approval ratings. There’s nothing like a war – even a loopy trade war – to rally the masses.

What won’t help his ratings is a big, premature market selloff. Trump wants to blame the coming recession/bear market on the Fed. He can’t afford to trigger it now…

Our guess is that investors still expect a deal with China. And a further guess is that The Donald will make sure they get one.

But we’ll wait and see…

Politically Correct Capitalism

Meanwhile, back to Warren Buffett and Charlie Munger.

Wisdom comes at a price, we noted earlier this week. We get older. But some people pay dearly… and get little for their money.

Mr. Buffett was right about time and love. Those are the things that really matter. But Buffett and his longtime partner Munger are both wrong about what they claim to understand best: capitalism.

Capitalism is taking a lot of flak recently. Naturally, AOC, Elizabeth Warren, and Bernie Sanders are against it. They bid for votes by promising free stuff. And capitalism doesn’t give anything away.

But even rich people seem to have turned against it. They don’t condemn capitalism. They just want to fix it… improve it… make it kinder, gentler, and more politically correct.

We were unaware of how pervasive this claptrap was until we appeared on stage a few years ago at a conference. The organizers wanted a debate between the fixers – people who espoused “conscious capitalism” – and capitalists of the unconscious, naked, greedy sort.

They figured your editor would make a good proponent for capitalism of the beastly variety, so they put him up against archangel John Mackey, founder and CEO of Whole Foods, who is practically a capitalist saint.

We quickly realized that this was a losing battle. Who could be against a cleaner environment, living wages, and responsible corporate governance? And why shouldn’t corporations be “conscious” of these worthy goals and do what they can to achieve them?

What kind of monster would take the other side of that argument?

Well… your editor.

Fix Capitalism

We ranted and raved, guffawed and harrumphed; we tried sarcasm… indignation… and mockery. Nothing worked.

We could not easily explain why capitalism should be indifferent to the cares and fashions of contemporary life.

And saying so put us at odds, not just with Mackey, but with almost everyone.

In the last few weeks alone, in addition to Buffett, several of capitalism’s stars – including Ray Dalio, Jamie Dimon, Bill Gates, Steve Schwarzman, and Howard Schultz – have all come forward with calls to wake up and fix it.

In an op-ed in The Wall Street Journal, for example, Buffett favored a bigger earned-income tax credit to alleviate the problem of inequality. In other words, Buffett is “conscious” of who should get what. Of those not currently getting enough, he told Yahoo! Finance:

You want them to feel part of the system… as more and more of these golden eggs are laid, you want them to get a little more of their share.

But what accounts for the majority of today’s billionaires’ fortunes was not the “golden eggs” of honest capitalism, but the rotten eggs of crony capitalism.

And that is fixable… not via the largesse of the legislature… giving away other people’s money to the favored groups… but by letting honest capitalism work again.

In this regard, Buffett’s sidekick, Charlie Munger is closer to the mark. As to inequality, it “would go away by itself,” he said. He’s right about that.

Let the Fed announce, believably, that it is no longer responsible for keeping asset prices inflated. Within hours, the rich would lose half… maybe even three quarters… of their wealth. Problem solved!

Accidental Capitalism?

But even Munger is no fan of real capitalism. Says he of the crisis of 2008:

We were in desperate trouble. We were on the eve of a great recession that could have been a Great Depression, and then followed by the rise of people like Adolf Hitler, and so on, and so on. So we faced a real catastrophe.

We never printed money so much and spent it so fast and bought back so much debt, public and private. So this is total terra incognita in economics, and nobody knew for sure how it was going to work.

Nobody was trying to make the rich richer. It just was an accidental byproduct of a correct governmental decision made on a bipartisan basis.

An emergency? Where was the fire? The market was merely correcting the mistakes of the previous 30 years – including the Fed’s major errors #1, #2, and #3. The Fed keeps rates too low for too long… It then raises rates to try to deflate the bubble it has caused… And then, it panics and reflates the bubble with more rate cuts.

An accident? Yes and no.

It might have been an honest mistake when the feds created fake money in 1971 by removing the final connective tissue between gold and the greenback. But by 2008, the insiders knew what they were doing.

During that crucial week in late September, Goldman Sachs’ CEO Lloyd Blankfein talked to U.S. Treasury chief Hank Paulson at least two dozen times. The fix was in.

Ask yourself this question: If Fed policies had cut stocks, bonds, and real estate prices in half… would the program have continued for another year, let alone 10 years?

Bipartisan? It’s amazing how many people will go along, readily, with a program that shifts $30 trillion in their direction.

And this is how “conscious” capitalism really works; they rig the game. People slip aces up their sleeves and pretend it is to protect us from Adolf Hitler.

They stack the deck, claiming it makes for happier employees or a greener planet. They give the cards the ol’ false shuffle… and deal from the bottom of the deck.

Real Capitalism

Capitalists are conscious. They always try to get the outcomes they want… and they don’t mind cheating – when they can get away with it.

Real capitalism, on the other hand, is not brain dead; it never had a brain to start with. It doesn’t care what you think. It doesn’t care what you want. It doesn’t give a damn about the planet… the employee… the company… or its owners. Capitalism has no destination in mind – and wouldn’t know it if it got there.

And inequality? Capitalism doesn’t care about the outcome; it only cares about the process.

Recently, the organizers of the great capitalist debate – which they now frame as an argument between “conscious capitalism and pure greed” – got back in touch. They asked if we would take the “pure greed” side again.

We demurred, sending this note:

Everyone is greedy, capitalists as well as everyone else. But capitalism itself is not. Because it’s unconscious. It’s organic… like a virus… unthinking and undirected. It intends neither good nor harm.

A Great Leap Forward plan is conscious. Premeditated murder is conscious. Trade wars are conscious. But capitalism is comatose. And as soon as you wake it up, it’s not capitalism any more – its cronyism, or socialism, or corporatism, or do-goodism. That is, the capitalist is no longer giving customers what they want; he’s giving them what he wants them to have.

That’s why Adam Smith’s famous hand is “invisible.” The capitalist doesn’t know what the customer wants… or what he should give him. He lets “the invisible hand” guide him.

Within limits of decency, a capitalist should only care about making money. And the only honest way to make money is to do unto others what you would have them do unto you. You don’t intend to improve their lives or make a better world. You wouldn’t know how.

You just try to provide a better service or product… and satisfy the customer. Let them tell you what to do. Any “conscious” intrusion into capitalism is vanity.

Regards,

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Bill

COMMODITIES INSIGHT: SOMETHING BIG IS AFOOT IN RESOURCE STOCKS

By Dave Forest, Editor, International Speculator

Yesterday, I showed you how an uptick in mergers and acquisitions (M&A) among mining companies has historically preceded bull markets in commodities.

That’s because when the mining firms see a spike in commodities coming, they position themselves for maximum profit. That typically means buying smaller companies.

In 2018, total flows into the mining sector rose notably, to $183 billion.

I believe something big is afoot. In 2019, money flows into mining will likely dwarf the $183 billion from last year. And that could mean the start of a monster bull market in resource stocks…

In terms of mining M&As, the current year got off to a big start when major gold miner Newmont Mining announced a friendly $10 billion takeover of fellow major Goldcorp.

But that megadeal was eclipsed in February – when the world’s largest public gold miner, Barrick Gold, jumped into the takeover fray.

On February 25, Barrick unveiled a hostile bid for Newmont worth around $23.2 billion. That’s a huge bid – as you can see in the chart below, it would be the second-largest M&A deal in gold during the last decade.

Chart

Between Barrick, Newmont, and Goldcorp, the world’s top gold executives tabled nearly $28 billion in deals within the span of a few weeks.

And while the Barrick-Newmont deal didn’t go through, shareholders voted in favor of the Newmont-Goldcorp transaction. And the new entity created a joint venture with Barrick in Nevada – largely as expected.

The bottom line is, just a few months into 2019, we’re on pace for a significant rise in this critical metric. And historically, that’s meant massive profits coming during a cyclical upsurge.

The massive amount of money involved here shows that mining executives see something happening in the gold market.

Following trends like this set by big industry insiders has historically been a recipe for profits.

I expect 2019 to be a pivotal year for commodities. Today is the perfect time to get positioned.

– Dave Forest

Editor’s Note: If you want to stay up on the latest investment opportunities Dave sees in the resource market, the best way is to subscribe to the Casey Daily Dispatch. In this free newsletter, Dave shares what he’s seeing play out in the commodities market, and identifies the best setups before they hit the mainstream. Sign up with one click right here.

FEATURED READS

Is Book Value Really Dead?
As Dan Denning put it in the recent issue of The Bonner-Denning Letter, super investor Warren Buffett has turned his back on book value. That long-favored “value” metric is no longer relevant, says the Oracle of Omaha. But not everybody agrees…

Microsoft’s Spellcheck Gets Politically Correct
Dear readers are undoubtedly familiar with Microsoft Word’s spellcheck function. That handy tool has saved many a writer from embarrassing gaffes. But spellcheck is now taking an… interesting… step. The algorithm will now scan your document for political correctness, and make recommendations to ensure you’re typing the “right” phrases.

A Sneak Peek of Bill’s New Book
Regular readers will recall that Bill has been hard at work on his newest book, Win-Win or Lose. He’s spent years researching and writing it. And after much anticipation, Bill’s manuscript is finally ready. But before we ship it off to the printer, we wanted to give Diary readers a sneak peek…

MAILBAG

In the mailbag, some ruffled feathers. Should Bill stop “bashing and blaming” President Trump?

You might do better if you quit bashing and blaming Trump. He was handed the cards he is playing, and tariffs may be what is needed to keep China at bay. Either way, you’re losing a lot of viewership doing this.

Oh, by the way, the economy is doing the best in many years. And Trump is doing his best to do this for all of us. I agree that the system is fragile, over-burdened with debt, and oversold, but America is ours and we need to make it great again.

– Larry C.

Your not liking Trump is one thing, but calling him an ignoramus is quite another. And his tax “returns” were not released, just some tax information. When I studied journalism, not remaining objective and not getting information correct resulted in a grade of F.

– E.T.

Meanwhile, Bill’s story of the house on the hill draws praise… and a potential visit from a dear reader…

Ah… the Irish. The REAL Irish (in Ireland). Nobody, and I mean nobody, can tell a better, more entertaining and embellished story than that lot. I sure hope you bought that old man a round or two; that took some imagination. And I hope you played the gullible American. If so, you made his night. Fun read, though.

– Chad E.

Bill… That was quite a story you received at the bar. I think you might consider giving the house a blessing. Doesn’t matter what religion, Druid ceremony, whatever. Some spirits need to be appeased, that’s for sure! Good luck!

– David F.

I am writing to you as a regular reader/subscriber for over the past 10 years from Wales in the UK. I have read hundreds of your letters, and have always been intrigued by the interesting situations you get into. But today, Bill, I could scarcely believe what I was reading!!

When I read that you were in Youghal, falling off decrepit stone walls, in my mind’s eye, I momentarily imagined jumping on a plane and coming out to meet you (very presumptuously!) I’ve shared many of your principles and values over the years, and you have so much to share with the lucky few.

So, as I read your letter today, it was easy to picture a chat in the local pub – which I went to just once, in the late 1960s. I was on a fishing trip to the river Blackwater, staying in a pub in Youghal, and the landlady directed me where to go to fish. It was on the same big estate that you wrote about – just a day after the young master was shot.

When I got to the estate, I stumbled across the little church and was side-tracked into visiting it. I had fallen into this ongoing drama, with its undertones and unspoken implications, and was left with my own very uncomfortable suspicions after talking with the estate workers and grave diggers. I did no fishing that day.

Listening to the whispered thoughts of local people in the pub that evening did nothing to remove my conviction that I had been in a place I should never have gone to. I’ll never forget it. It’s a beautiful place to have a pad. I look forward to reading that you’ve got the roof on!

– Geoff D.

Have You Claimed Your Free Report?

As Bill says, in this market, you’ll want to own some gold…

But how to buy it? Store it? And how do you know you’re getting the best deal?

All the answers in this free report from our friends at Casey Research. Click the banner to automatically sign up for their free newsletter, the Casey Daily Dispatch, and receive your free research.

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