by Rick Mills, Ahead Of The Herd:
Rick Mills, Editor/ Publisher, Ahead of the Herd:
What are your sentiment indicators saying to you?
Bob Moriarty, Founder, 321gold: Well I’ll tell you something interesting, you’ve known me long enough. I’m a contrarian and in my books I literally argue that you don’t have to know anything about investing if you can measure sentiment accurately.
Right now is interesting because of what’s happened this week and I will give you a clue. Gold went up three days running, $100/oz, how much do you think that effected the DSI [Daily Sentiment Indicator]?
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RM: I’ve got a feeling it’s fairly major.
BM: Actually it’s not very much at all. A week ago the DSI for gold was 86 and then with the three days where gold went up $100, it went 86, 79, 82, 87 which is the highest it’s been, and with the small decline yesterday it’s down to 80. Now I can tell you categorically it has not topped out at 87 when it gets up to 95 or 96 that will be a major top but we are nowhere near a major top.
There’s a lot of voodoo to his sentiment, it’s not an arbitrary number that he comes up with, he’s doing the mathematical calculation on commodities but it’s exceptionally accurate and for the DSI to go down to 80 when you’ve got $3,300 gold that’s just absolutely remarkable to me.
RM: It doesn’t make sense does it?
BM: Well here’s the key, it’s not supposed to make sense. It is exactly what it is, it is a measure of sentiment and nothing more and all these clowns in the industry say oh, if the Dow Jones goes up the price of gold goes down, if the price of gold goes up the S&P goes down, and they’re trying to connect things that are not necessarily connectable all the time.
Sentiment is sentiment. When we have an all-time high it will show it and I think if you go back to April 25th of 2011 I think the sentiment on silver was higher than it was in January of 1980.
RM: You’re trading on emotions and they are fear and greed, that’s what sentiment is and if you can somehow measure that accurately and put it into a number that’s Bernstein’s system.
BM: Well he’s onto something, I’ve known for many years how important sentiment is, but trying to buy the best sentiment gauge was really difficult.
RM: The US has $9.2 trillion of debt that they have to either pay off, roll over or newly finance and a big part of it is $2 trillion deficit that is due this year. We know that the Treasury sales have been going quite well, so no talk of debt monetization yet, as a matter of fact there was a massive Treasury auction in February and I mean everybody was buying, it was the euro area, UK, Taiwan I mean even the BRICS were buying, China and India and even Brazil.
There was the biggest increase in buying from foreigners since ‘21 and they all bought most of it in long-term debt, the short term just wasn’t attractive at all, and they were buying long-term debt at an average of 4.28%.
We know that the Trump administration really wants to get lower interest rates because what’s happening now of course is they’re trying to get their agenda together, trying to keep the tax cuts going and everything, and I think that when people start to realize one important fact, and this is really going resonate with a lot of people, is that the military budget for the US is $1 trillion.
In reality it’s a lot higher than that because they don’t include nuclear weapons, that’s under Energy, they don’t include Special Forces and they don’t include Veterans’ admin the VA, so your biggest line item on your federal government accounting ledger right now is the military.
Well that’s gone now, with this big roll over and the buying of the debt with such a high yield, and the reason they’re buying the US debt the long term it’s 10, 20, 30-year stuff, is because there’s only one other place that’s higher and that’s the UK. Everybody else their bonds are like half, their 10-year bonds around 1.6% maybe 2.1%m they’re getting really good yield on longer-term US debt, but what they’re doing is driving up the interest payment cost to over a trillion dollars.
Now your biggest line item in a government accounting ledger per year is going to be interest payments on the debt. That to me just shows something totally out of control, what’s your feelings on that?
BM: Strangely enough you used most accurate term you could possibly use. When Elon Musk said Social Security is a Ponzi scheme he was rich enough incredible enough that he can say something that everybody knows, ok? Social Security is a Ponzi scheme and we know how Ponzi schemes end, and I’ve been saying this for years, this is a a conflict between the BRICS system which is resource-based on the debt-based system of the West.
We’ve gone being a manufacturing county to being a country where 32% of the economy is shuffling pieces of paper. It’s a crisis but it’s a crisis that can only be solved by crashing and starting all over again. Now my fear is Donald Trump’s walked into a China shop and he’s swinging a baseball bat as hard as he can. He wants to make enemies of our biggest trading partner, I just don’t see any way that that’s going succeed.
I think it’s not Donald Trump and the tariffs all by themselves, the blown-up basis trade is far more important than the tariffs believe it or not. There is a crisis going on right now a liquidity crisis is going on behind the scenes and the world’s financial system it’s about to blow sky high, there is no solution other than a default and it scares me because I see Trump choosing the path of going to war, believing that’s a way out of a Depression I think there’s an excellent chance we’re going go to war and do it very soon.
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