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It’s hard to avoid Trump. Views abound. From high-brow economic thought leaders through to taxi drivers and even the odd taxidermist. Everyone has a view. That the man wiped the floor and now stands atop a clean sweep is very Liverpool-Istanbul-2005. Like him or loathe him, he’s got some form. As world leaders awkwardly embrace the President elect, and work with the PR team to reframe previous descriptions of “a woman-hating, neo-Nazi-sympathising sociopath“, all eyes fall on who’s going to be in on the fun bus of the new administration. In the fog of wider policy, the issue of tariffs appears to be one where there is no doubt. They’re going up. And going up a lot for China. That ‘Little Marco’ is set to be his new top diplomat is only going to fan the flames, given a description in the press as a wet-lipped ‘China hawk’. Hmm. The direction of travel is clear. The gloves are off. Less reported in the mainstream press is the burgeoning competitive threat of China in areas such as smart-phones, AI chips and electric vehicles. The much maligned Huawei has just pulled in more than three million pre-orders for a triple-folding smartphone, the first of its kind. This in addition to reports that the company has an AI chip that is on a par with Nvidia’s H100, giving it a big high-five to increasingly brittle US sanctions. The technological threat of China, specifically in government supported markets, is now real. It’s not unreasonable to think that once the domestic market has been conquered, many of these companies will have bigger ambitions. See BYD bringing a new customised double decker electric bus to the UK. Even long-established dealers, like the Alan Day Motor Group are pulling hard on the B&Hs and going all in, launching the first stand-alone BYD dealership in New Southgate. Perhaps reckoning the price-keen local clientele don’t share Little Marco’s views on the land of the dragon. The competitive threat has, not only real world implications, but will also liven discussion on the assumed unassailable position and future prospects for the likes of Apple, Tesla and other US tech firms that have long enjoyed prime time in the jacuzzi. The bear hug on profits, margins and valuations will have implications. More so in the light of a post-election rally that has printed unseen-before ETF volumes, and sent share prices up over the pavilion. Happy days for some. Perhaps six and out for others.

There’s always a risk writing missives on days when the political dance floor is as sweaty as it is and the arc of history is being ruffled by Fox News, but then modern life, agog as it is with TikTok videos and processed food, perhaps needs the occasional thrill. Let the voting begin. That a result is unlikely for days if not weeks, once the lawyers get involved, need not matter for now, but either way, the world awaits: slack jawed, scrolling bot-riddled social media, Doritos close to hand. Red or blue. More debt or more debt. And that’s the thing. Perhaps it doesn’t really matter who wins, either way, the fact that interest payments on all the debt is on course to overtake discretionary spending is a fact worth holding on to. Discretionary spending is basically everything bar social security and Medicaid, and runs to over 800 line items in the federal accounts. Things like Veterans Health Administration, operations and maintenance of several military branches, salaries at the FBI, the disaster relief fund of FEMA, and the like. The list goes on. On and on. Stumble across the website of the Congressional Budget Office and there’s a even a nice chart to bring it all to life. And the interest expense not going to stop going up, whoever wins the election. According to the University of Pennsylvania’s Wharton Budget Model, total debt will go up an eye-popping $4.4 trillion under Harris, and spine tingling $9.3 trillion under a Trump led-regime. And that’s off the current baseline which is itself, running off some pretty optimistic assumptions. So what’s the end game, the children ask, apart from all the crowding out of spending on lots of things that really matter? More borrowing, more money printing. More debt. More can kicking. “Just smile at the camera. CHEESE!” When the economy can no longer grow as fast as the debt and interest expense do, the DJ pulls the plug and goes home. History is somewhat explicit. There are no taxis. And it’s a long walk back to the ranch.

Of all the headlines to catch the eye post the recent hurricane fest on the East cost of the US, the batch relating to Spruce Pine garnered undue interest. Spruce Pine is a town of about two and a half thousand hardy folk, in Mitchell County, North Carolina. The town was founded in 1907, like many, on the railroad heading up to North Toe River from Erwin, down in Tennessee. There must be an inn, you mutter, and indeed you’d be right, the town is built around The Old English Inn, that still stands to this day, presumably sporting more neon than sawdust. Why then did Spruce Pine hit the wires? Well, look no further than the biggest employer in town. The subsidiary of one mysterious Belgian company you have probably never heard of: Sibelco. Sibelco is a mining company. A digger-upper. The company produces exotic sounding materials like feldspathics and olivine. It has a line in clays and glass recycling. It also digs up quartz rock and by luck of geology their mine in Spruce Pine is one of the very few sites in the world to be able to produce super pure quartz that is used to ensure the purity of molten silicon, that is then used to make top-end semiconductor chips. It is possible to use less pure quartz to make the same stuff, but it’s slower and more expensive, hence when Hurricane Helene ripped across the county and dumped two feet of rain on the town and closed the mining operations, there was some clenching of buttocks from those higher up the supply chain. It is a reminder of how fragile supply chains are, how interconnected the world has become under the bonnet, how intricate, tight, and dependent; and how steamy geopolitics and wild weather can so easily blow a gasket in obscure, but critically important locations. It’s also a reminder to re-read I, Pencil, Leonard Read’s timeless explanation of how a pencil is made. And a reminder, perhaps, to be positioned in assets that are scarce. Hmm. For those whose buttocks remain tight, there are reports the mine has reopened. Christmas need not be cancelled. Amen to that.

The chart of the gold price is a thing of beauty. Pick your currency, but up it goes. Up almost 30% this year alone in USD, a move not many commentators were calling for over the Christmas turkey. Any yet, according to the strategists at BAML, private client allocations to gold via physical bullion or a shiny ETF, are just 0.2% of AUM. Basically nothing. And this scrap of exposure is set against an allocation to equities that is right at the top of a 20-year range. The relentless bid to the gold price has come from somewhere else. Western Investors are largely absent. The bid has come from the East, where Central Banks have been voracious, sucking the bullion out of Western vaults at an alarming rate. Friday’s ‘blockbuster’ payrolls print should have doused the gold pit, given the likely path of more measured rate cuts, and yet the price on the screen barely flickered. Perhaps buyers were not impressed by the headline print, and choose instead to point to the fact that the ‘blockbuster’ beat was courtesy of the government hiring like a cashed up tech-bro. The 785k of government workers added was the biggest monthly surge on record. That an election is turning down the home straight is not lost to those cat-calling the current administration. And all these jobs were funded by the remorseless piling up of ever more debt. By the end of the year, it is estimated that nigh on $1.2 trillion will be going to service the debt alone. Alone. Nothing else. No new schools, no new hospitals, no new roads. No wonder there is a bid to gold. So too, silver. Having broken a key $26 resistance line, the summer was spent ‘consolidating’ or, in the words of some technical analysts, ‘building energy’. Come Friday, and the ‘final’ resistance line in the $32 zone was feeling some heat, and may be finally broken this week should reports that it is now being eyed up as a strategic asset by the likes of Russia prove to be on the money. Platinum and palladium are also stirring. There are many reasons that precious metals are on a tear, some true, some less true. All told, with faith in many fiat currencies compromised by unstainable fiscal policies, the bid is likely to persist.

Following a terse email from the management of The Gazette, warning about recent shrill, ill-informed market comment, the Editorial team have attempted a more measured tone, turning the gaze to one of the most influential money-men of the post-war era.

In the shadow of a jumbo cut to interest rates, the chatter around the camp fire continues to focus on the near-term wanderings of financial assets, and how they perform in subsequent months. Despite low unemployment, steady, if unspectacular economic growth, ripe corporate profit margins and falling inflation, the Federal Reserve decided to go big. The market reaction was scatty, reflecting an insecurity perhaps, over current valuations, wet-lipped retail enthusiasm and a brittle structure imposed on it by a price and, valuation agnostic, passive industry that so dominates day-to-day trading. Might then, whisper the cheap seats, in the face of monster interest payments on an unsustainable but growing pile of debt, the rate cuts be politically motivated?

Given the cross-party fiscal incontinence, might it be a move driven not by economic factors, but one in which the breathless WhatsApp message yelled in capital letters, that something needed to change. Interest payments, and other non-productive fiscal spend, has started to crowd out spending on stuff that keeps the GDP machine rolling. With little political will to pare spending, or hike taxes, there are few other options left. Cut rates. Paper over the cracks. Give the narrative a bit of spit and polish before voters hit the ballot box. It’s happened before. Suggestions of a Fed Chair being overly influenced by political masters, with accusations of running lines that actively supported wider government policy. Not many investors will remember the spice of the 1970s, but history is perhaps where they should now turn.

Arthur F. Burns was the Chairman of the Federal Reserve for much of the decade, a decade defined by the Bee Gee’s mega-hit “Staying Alive”. Given the story book of economic and political woe, the oil shocks and labour strikes, many people tried to do just that. Now Burns was offered the job by the salty Richard Nixon, after he snuck the 1968 election from the Democrat Hubert Humphrey and the well up-for-it Independent, one George Wallace, a politician whose views today might well blow up Twitter, or whatever it is called. Following his election as Governor of Alabama in 1963, he thumped the lectern and with spittle flying, told all those still listening that he stood for “segregation now, segregation tomorrow, segregation forever”, a phrase that would become a rallying cry for those opposed to integration and the wider civil rights movement. That he carried five states suggest America was in a different place back then; albeit the vitriol today is no less incendiary.

As you might imagine, given how it all ended, Richard Nixon had a bit of form. The background is the 1960 election where Nixon narrowly lost to JFK, a defeat that Nixon blamed, not on his own personal and political shortcomings, but on the Federal Reserve who, under the Truman-appointed William McChesney Martin Jnr, was tightening the straps and raising rates, moves that ultimately tipped the economy into recession. The economy matters to voters, and so they kicked out the Republicans and elected JFK, the youngest President in US history. Roosevelt, before you mutter, was indeed younger, but he was inaugurated after William McKinley ran into an anarchist on a rally, so was not technically elected. But there you go, we digress.

Come the 1968 election, one that Nixon nipped, he shortly afterward named Burns Chair of the Federal Reserve, with explicit instructions to keep things loose in the run up to the 1972 vote. Burns, as you might imagine, resisted, claiming that monetary policy should be separate, as intended, but soon woke up to find the morning papers full of negative headlines about him and his Board. After quiet warnings that legislation was being drafted to dilute the Fed’s influence, the mood changed. Burns and the Governors fell into line. After the oil shocks of 1973, the failure of price controls, inflation would run wild.

Arthur Burns was born in Stanislau, which was then part of the Austro-Hungarian Empire, in 1904, a town that is now a City in the Western part of Ukraine. Given the CV he would later lay down it’s no surprise that, as a child, he had a spark. Pre-Beano days, he had little choice but to translate the Talmud – the Central text of Rabbinic Judaism and the primary source of Jewish religious law – into Polish and Russian by the age of six. Six! By nine, he was earnestly debating the ins and outs of socialism with wide eyed visitors. After moving to America with his parents, by seventeen, Burns had slipped into Columbia University on a scholarship where he graduated Phi Beta Kappa, a kite mark for high-brow academic excellence.

Given such raw potential, Burns was drawn to academia, and taught at Rutgers University, one of the nine colonial colleges that were chartered before the American Revolution, and named after Colonel Henry Rutgers, who came in with a cheque to keep the show going during a particularly sticky patch for admissions. He also gave the college a bell, that is still in use today; a fact that is largely irrelevant to everyone bar current students. Perhaps them, too. Anyway, whilst at Rutgers, Burns continued to burn the oil, pursuing graduate studies at Columbia and assuming the role of ‘protégé’ for the founder of the National Bureau of Economic Research, one Wesley Clair Mithcell. Indeed, it was Mithcell who inspired Burns to begin a life-long study of business cycles, study that had no small part in establishing the credentials of the NBER which is, today, still considered one of the more authoritative bodies sweating out economic comment. It’s no surprise to learn, a few short years later, Burns would become a professor at Columbia. Later still, he would be pulled into Nixon’s orbit, and end up with one of the most high-profile jobs in America, and a place in economic history.

Given the rampant inflation that his tenure is associated with, his legacy is somewhat mottled. Some conservative economists suggest that he either didn’t fully understand the mistakes he was making; or he did understand, but was under such pressure from Nixon and his cronies that he had no choice. It’s not clear which one is correct, but neither explanation is particularly flattering.

Indeed, it’s widely accepted that the Nixon era, as a whole, is not the blueprint of good politics.

On many levels.

Arthur Burns would later become Ambassador to West Germany under Ronald Regan’s front-footed administration. He died two years after returning from Bonn, in June 1987.

With global money supply now rising at the fastest pace in two years, up more than $7 trillion over the past twelve months alone, and Central Banks cutting rates, it’s not inconceivable to think inflation is not yet beaten.

Not by any means.

“History doesn’t repeat itself, but it often rhymes“

It’s quite a thing that the best performing stock YTD in the blue-chip S&P 500 is an ‘integrated retail electricity and power generation’ company. NVIDIA may court all the souped-up AI headlines, but the shares trail, by some distance, Vistra Corporation’s near 200% romp. Indeed NVDA is the seasoned meat in a power sandwich, with the third best runner being Constellation Energy, a company whose mojo has recently been dusted in glitter after signing a deal with Microsoft  to provide clean energy to satisfy the booming needs of its data centres. This sort of makes sense when the likes of Goldman Sachs forecast a 160% increase in power demand by 2030. Why? Well, by all account every ChatGPT ‘ask’ chomps up nearly ten times as much electricity as a simple ‘Where does Sir Keir buy his suits’ Google search. Hence all the mutterings about a ‘sea change’ in demand. Hence Microsoft’s deal to make sure that it’s not caught short, firing back up a nuclear reactor at Pennsylvania’s Three Mile Island power station. That the cost of giving everything a new lick of paint is thought to be around $2bn is not lost on shareholders. It’s expensive. It captures, more broadly, a trend of massive capex outlays from once asset light businesses as the search for reliable, baseload power takes on white-lipped importance. Valuations, after years of excess, may yet start to squirm. And if Big Tech is getting in on game, Wall Street will not be far behind. Cue this week a group of fourteen global financial institutions lined up, held hands, and announced that they will be going all in on nuclear, supporting projects and financing the transition to a low-carbon economy. The narrative is changing. The world might need more data-centres, but what it really needs is more energy. More power. The more reliable, the better.

Away from the brouhaha of the US Presidential circus, and the relentless will-they-won’t-they, and if they do, how-much-will-they-do, chatter on Central Bank policy, it’s been another iffy month for electric vehicles. Volvo Cars is the latest manufacturer to size up the reality of going all in, and has scrapped its previous goal of going 100% electric by 2030. The reason the board got all clammy is that demand is soft. Weak. Affordability, beyond the leafy lanes of the moneyed elites, is another concern. So, too, the lack of action on the wider roll-out of charging points. Whilst the board remain committed: “We are resolute in our belief that our future is electric,” so said CEO Jim Rowan, there needed to be – cue intake of breath – a re-sizing of the ambition, “…the transition to electrification will not be linear, and customers and markets are moving at different speeds.” Indeed. The winner it seems is the hybrid, the pragmatic individual’s nod to the climate emergency, and a strategy that has been a big bet for the likes of Toyota. The left-field winner of the near ubiquitous strategic swerve across the auto C-suite then, could well be the Platinum Group Metals, where roughly 65% of what’s dug up, is used in the catalytic converters for internal combustion engines. And what’s more, analysts write that PGM loading is set to increase per vehicle in coming years. No way? And now, per Volvo Cars, there may not only be more needed per vehicle, there may also be a whole load more vehicles. The same analysts write that just eight companies control 90% of global output suggesting, with shares in the dog bowl and trading at multi year lows, there might be something to go for. Money can often to make more money by buying dislocation, distress, and neglect. The PGM complex ticks all three.

Now there’s a thing. Such has been the relentless one-way trade of the buy-big-tech era, even thick skinned value investors have started to expand their remit. According to a Bloomberg article last week, only about one in ten funds remain true to their woollen socks, sporting a portfolio that is proper blue-chip value. As for the rest: “The only way to get rid of temptation is to yield to it”. Hmm. What a surprise then, to read that the mob of stocks that makes up the S&P 500 ‘value’ index has been quietly outperforming the shiny S&P 500 growth bucket; and outperforming for nigh on three years. Who knew? Stan ‘Fat Pitch’ Druckenmiller often whispers at drinks parties that the best economist he knows is the guts of the stock market. Before popping an olive in his mouth and wandering off to find the bar. Perhaps, then, something’s up. With all the focus on whether the ties at the Federal Reserve will cut by a little or a lot, or what the next NFP print will be, and how much previous prints will be revised lower, perhaps something is up and change is afoot. Perhaps a bigger shift is in play, and whether there’s a recession or soft landing it doesn’t make much difference. The sands of geopolitics are shifting. Regional wars keep newsreaders in shrill tones. Capital gushes into mega-projects like data centres and electricity grids, just as many key commodities lurch into long-term supply deficits. More widely supply chains are being rejigged, the West is ageing and there’s too much debt. Whistle through the teeth stuff. Uncertainty abounds. And yet, perhaps, the winners of the coming decade are just starting to emerge. And they might just be wearing woollen socks.

Electricity prices are going up. Pick your reason, from EV demand through to the data centres powering the AI revolution. It doesn’t matter. They’re going up. Indeed, one Patty Cook, a senior VP at the consultancy ICF laid it out at a recent coffee morning. “The whole notion of clean, affordable, and reliable [power] got incredibly, monumentally complicated in a very quick period of time,” she said to those who had popped in. As the hob-nobs got passed around, she cracked on, warning of a “sea change” in electricity demand. And all this power has to come from somewhere. Preferably not coal. Or any fossil fuel come to mind. Which explains why South Korea is the latest country to do done one of those high-profile U-turns and come out all pro-nuclear, approving two new reactors that had previously been canned, with three more in the pipe. Sweden, too, is also going all in. For those who took a keen interest in their recent budget bill they would have read that “the government’s work to enable the expansion of new nuclear power is now entering a more intensive phase.” South Korea and Sweden are not alone. The problem, though, might be in finding the pounds of uranium to make all this electricity, given much of it comes from countries that have a bit of form. Tables show that almost 25% of the uranium bought up by European utilities comes from either Russia and Kazakhstan. And doesn’t Putin know it, lighting up the tape this week with some rhetoric that will have utility company fuel buyers sucking hard on a Dunhill out by the bins: RUSSIA’S PUTIN: MAYBE WE SHOULD THINK ABOUT EXPORTS RESTRICTIONS OF SOME GOODS, SUCH AS URANIUM. Nuclear ambitions are one thing, but the approval of such high profile plans might just be the easy bit.

Silver popped above $26 this week. This might not mean much to many, but to some it was huge. $26 was a level. A mythical line of resistance, a line that gave way. The gates are now open. The precious metals complex remains out of fashion. See the bombed-out share price of a Newmont for details. Gold has courted some attention with its YTD romp, but not a lot. Now silver has broken out. And for those who watch precious metals, if silver starts making the running, watch out. It’s show time. Given the number of articles on the topic, much of the media appears to have been surprised by the move up in gold this year. Surprised in the context of the droves of Western selling out of shiny ETFs. And yet the gold price has risen. Up it goes. That Central Banks, largely in the East, have been hoovering up the old rock for years only gets passing comment. So too, strangely, the unsustainable fiscal largesse of an administration under the heat from a resurgent Trump campaign that appears to be very much in-it-to-win-it come the November kerfuffle at the polls. That precious metals are up should be something to make any investor shift uncomfortably from one buttock to another. The heat in the space whispers of a catcall on the Fed being able to bring inflation down to the much fangled 2%. It suggests too there is zero confidence the fiscal boom-boom is going to stop anytime soon. When metals like gold and copper rally together something is up. Brent crude is through $90. Soft commodities too, are all up. It’s all getting a little sweaty. Inflation wasn’t caused by supply chain issues, it was caused by unprecedented money printing, money that is now sloshing around and diffusing into prices. With tech bellwether APPL testing 52-week lows, the rotation into hard assets has only just started. Silver is on its way to $30 and, given all the debt monetisation to come, it is unlikely to stop there.