via Schifgold.com
This week, Peter looks at the highlights of the last few weeks of volatile trading, with a particular focus on Wall Street’s favorite AI stock, Nvidia, and gold mining powerhouse Newmont Corporation.
The stock prices of both companies showed dramatic price movements.and NVDA gains market capitalization of $260 billion And it received an excellent earnings report, which lifted the market. Meanwhile, Newmont’s stock price fell 7% after a disappointing last quarter.
Peter explains how monetary policy affects mining profitability:
“Part of the big problem for Newmont and all the other mining stocks is that It’s now much more expensive to mine gold …Now, why is that? inflation. Inflation is hitting these companies’ profits hard because the price of gold hasn’t risen as much as the cost of mining it. And that’s why I keep saying gold mining stocks are the ironic victims of inflation. ”
The recent rapid growth of Nvidia and the technology industry is reminiscent of the market in the late 1990s, just before the dot-com bubble burst.
”What’s really important about today’s situation is that 1999-2000 has started all over again in the stock market. But it’s more like 2008 in terms of the disaster waiting around the corner. There was no financial crisis in 2001, but it happened in 2008. ”
[ZH: Or 1930s…]
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This does not mean that AI technology is doomed to failure. Instead, innovative companies like NVIDIA are now being swallowed up by an overheating economy and will eventually succumb to inflationary pressures.
”There is no doubt that artificial intelligence can help. The market is once again far ahead of the reality of how all of this is going to play out. At the same time, they overlook the tremendous economic and fiscal problems hiding in plain sight. ”
[ZH: It’s different this time…]
Peter also cited FOMC minutes released this week that show Fed officials remain hesitant to cut rates. Gold reacted favorably to this news, as it did last week. After higher-than-expected CPI numbers were announced:
“The gold market shrugged it off. This really shows the strength of the market. Stocks sold off briefly, but I think investors quickly realized the view: ‘We’re going to get this reduction. “What the market is focused on is that the rate hike is over. We have the wind blowing. The question is how strong is that wind?”
Recent movements in oil prices, mortgage rates, and Treasury yields suggest these investors are overly optimistic.
”These market indicators indicate that inflation is returning, has bottomed out, and is trending higher. And the market does not expect this to be possible… If the market is wrong, the stock market will collapse. ”
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The market expects interest rates to fall this spring, but rates will have to rise.
”The situation could get even worse if the Fed does not raise rates. Maybe not for markets, but for the dollar, for bonds, and maybe even more bullish for gold. If the Fed doesn’t raise rates, inflation will simply spiral out of control. And in fact, even if the Fed doesn’t cut rates, if you leave interest rates where they are, inflation will rise and real interest rates will fall! ”
Proponents of interest rate hikes are wrong to argue that recent rate hikes amount to “restrictive monetary policy.”
”This is not restrictive monetary policy. Again, something that is too loose is not very tight. What is restricted? Is the government regulated? Will government spending be cut? Is the government borrowing less because the Fed has raised borrowing costs? no! The government is borrowing more! In fact, they are borrowing more to pay the higher interest rates. ”
Peter concludes by discussing A hefty fine was imposed on Donald Trump. in a fraud case in New York. In this case and others, a politicized legal system portends a riskier and increasingly unattractive business environment, both in New York and the rest of the country.
“One of the reasons why so much international money has invested in America over the years is because of our belief in our legal system, our rule of law, our belief in private property, which means you can own property, assets, and businesses here, and you can too. It is. “We are protected by the rule of law. It cannot be taken away arbitrarily, but what we are now showing the world is that it is not!”
Wall Street is celebrating a record week, but Peter’s insights aren’t so rosy. It’s unlikely that a few years of tech stocks can permanently sustain an economy plagued by years of inflation and oppressive debt. America is dependent on cheap credit, and this addiction, if left unchecked, will cripple the economy.
Posted by: Zerohedge.com
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