Notes From Underground: And So It Goes

Everything we’ve discussed at NOTES FROM UNDERGROUND has come to fruition in a very real time. This is not predicting year-end levels or quarter-end levels but very critical calls in real time. My inbox has been inundated with pieces from analysts well after the fact. Last Thursday. I warned about the need to weaken the DOLLAR. Any reader long dollars is desirous of losing money.

In another forward-looking view we have advised that ECB President Christine Lagarde had a dual mandate in her own mind: To foster  EU fiscal harmonization and create a EUROBOND. As the EU attempts to resolve some of the issues of the CORONAVIRUS Lagarde is doing a run-around of the Germans and pushing for a massive fiscal stimulus coupled with a TRILLION in EURO CORONABONDS (read: EUROBONDS).

The Hanseatic League of Northern Europe has balked at Lagarde’s efforts claiming the ECB is violating the legal limits of the Lisbon Treaty. Germany and its dwarves have been outmaneuvered as Lagarde is full speed ahead to craft the EUROBOND knowing that with the world on the verge of deflationary spiral and with it a real depression. Germany not dare to stand in the way of “whatever it takes.”

If Germany pulled the plug on the Italian bailout they would be attacked by the world for their callousness. Germany has been trapped by Mario Draghi as he massively increased the ECB balance sheet based on the high quality of the German credit card. Chancellor Merkel gave political cover to Mario Draghi as he loaded up the ECB’s balance sheet with Italian, Spanish, Portuguese and other debt while also insuring the continuation of the buildup of TARGET2 funds also backed by the BUNDESBANK.

Today the EU bond markets crushed the differentials between German/French/Italian/Spanish spreads as it seems there will be some sort of EUROBOND. On Wednesday, the Financial Times reported that nine eurozone countries issued a call for CORONABONDS: France, Spain, Italy, Portugal, Ireland, Greece, Slovenia, Luxembourg and Belgium. The momentum is building for DEBT CONSOLIDATION, which requires the German credit card.

The politics in Germany will become more divisive, which is pushing Lagarde to “damn the torpedoes, full speed ahead.” She is not letting this crisis go to waste. If the EU fails to develop a EUROBOND it will be difficult for the EURO to be preserved which Lagarde this week promised to do, thus a EUROBOND.

There is so much in motion on the global scene the ascendance of discretionary global macro is certain. Mathematic quants will be liquidity starved for awhile as the short vol strategies has caused major losses. Be prepared will be more then the boy scouts marching song. It will be mandatory to have NOTES FROM UNDERGROUND ON YOUR LIST OF MUST-READS.

***My advice to Congress: In the fiscal bill that is pending I would institute  a one-year 3% cap on all credit cards and would FIX all mortgages of accredited borrowers at 3%. This would go a long way towards helping MAIN STREET at the expense of Wall Street. Tim Geithner and Company aided Wall Street in 2008 while leaving Main Street behind.
***Now I ask my readers to contribute to a fund affiliated with the 50-year work of my friend Mike Sturch, which feeds the hungry and clothes the naked and every penny goes where intended. My wife and I have written a check, sent today to the following address:
Marillac Saint Vincent Family Services
c/o Peter Beale-DelVecchio
6340 N. Magnolia Ave  #1 S
Chicago, IL 60660
Peter told me that the demands on their resources are growing exponentially as they are seeing a rise of people that never came for help. I hope that those who have benefited from NOTES FROM UNDERGROUND will be generous as the needs of the community increase everyday.
Paul Tudor Jones expressed the same sentiments today so I ask great support from this wonderful community.Please put my name as a way to track our community’s efforts to deal with the pain and suffering from Covid-19. Many thanks.

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62 Responses to “Notes From Underground: And So It Goes”

  1. Ray McKenzie Says:

    Thank you Yra. Making a donation now.

  2. Judd Hirschberg Says:

    You’ve been unbelievable with your work. The hottest you’ve ever been. That’s 40 years of sometimes fuzzy recollection! It would be great if Mike could post a Paypal account we could directly transfer money to.

  3. billdtx Says:

    I’m a new and already a loyal reader. I am happy to donate to this worthy cause in my hometown.

  4. thomas david Kinsman Says:

    Does the charity have a tax number? Thanks, T. K.

    On Thu, Mar 26, 2020 at 3:09 PM Notes From Underground wrote:

    > Yra posted: “Everything we’ve discussed at NOTES FROM UNDERGROUND has come > to fruition in a very real time. This is not predicting year-end levels or > quarter-end levels but very critical calls in real time. My inbox has been > inundated with pieces from analysts well af” >

  5. Pierre Chapuis Says:


  6. Pierre Chapuis Says:

    Done. Paying it forward.

  7. Bob Zimmerman Says:

    Sending it today!

  8. asherz Says:

    When Draghi loaded up the ECB with Portuguese Italian and Spanish (PIS) debt, transferring the real risk to German savers and tax payers. Similarly Bernanke bailed out the too big to fail banks over a decade ago transferring the risk to US taxpayers . Moral hazard was thus preserved.
    I’m sure this blog’s readers know who the governors of the Federal Reserve represent. A hint to those who don’t, they do not represent the regional banks.
    Now with $6 trillion flooding the economy, savers/retirees will again get the short end of the stick, as the currency will be debased to the advantage of debtors/spenders. The Prodigal Sons are the winners.
    Be on guard for The Lagarde Eurobond with all the sick puppies that will make up the portfolio of paper in its portfolio. Likewise as US national debt increasingly becomes bigger than GDP, that paper will be downgraded again
    Physical precious metals will be the safest harbor for those who have been taken advantage of by those who make monetary and fiscal policy. This will become apparent to all in the not distant future.

  9. Michael Temple Says:

    In war, anything and everything will be done to beat the enemy.

    The US created the Reconstruction Finance Corp (RFC) in late 1928/29 to deal with the stoppage of credit as banks became insolvent.

    We may dust off that playbook and create such a supra agency again.

    Fun fact….The first President of the RFC was an Evanstonian…Charles Gates Dawes. Yours truly attended Charles Dawes Elementary School way back when the dinosaurs roamed the earth.

    As we are now at war, LaGarde will “damn your torpedoes” and issue Corona Bonds, which will be Eurobonds by another name.

    The Germans might as well embrace it and try to gain some PR stature for helping their poorer and sicker European brethern.

    G20 just announced $5 Trillion in stimulus….Hey, every little bit helps.

    Perhaps, as you say, the IMF will throw together more than just their current $1 Trillion. Gold-backed bonds anybody?

    Asherz has it right…..Bonds are for losers given what is now happening, and will continue to happen for months to come.

    I will repeat myself, again.

    The major gold mining stocks are just about the best value out there that I can see.

    Think of them as gold with a yield, as NEM and Barrick both sport 1+% dividend yields. In a world now of NEG T-bills and UST 10 yr yielding 80ish bp with a very unpleasant future ahead, major mining stocks may be an even better proposition than buying Amazon or WalMart right now.

  10. Bosko Kacarevic Says:


    It has been a great education reading your blog and our countless discussions have been a guiding light in my journey to understand the markets. It will be my pleasure to donate, consider it done.


  11. Mike Sturch Says:

    Yra , Thanks so much for your donation, and for bringing attention to the “Santa Mike & Friends ” fund We are doing our best to serve the most needy.

    Thanks so much to you and all your followers…
    the tax ID # is …36-2109717

    Any questions? Call me, 312-402-0355

    Mike Sturch

  12. nserebrenik Says:

    Hello Yra, any way to help via paypal?

  13. yraharris Says:

    Peter–if there is a way for PAYPAL please post the instructions for everybody

  14. Bellino Says:

    John Connolly of ‘The Rotten Heart of Europe’ has stated that for the euro currency to work , Germany has to transfer 10% of its GDP in perpetuity to the unfortunates of Europe … like Spain, Greece, Italy ecetera. Is the coronabond a device to that purpose ? If so, will employment flow from Germany to the unfortunates , or just a flow euros from wealthy pockets to less wealthy pockets ?

  15. kevinwaspi Says:

    As a fan of John Connolly, let me take a stab at that question. With the creation of zeros beyond the imagination of anyone in the time of that book’s writing, 10% is not even close. Germany will be the credit card of Europe to the extent of its PERPETUAL GDP, not a mere 10% perpetually. Call it “reparations” for enjoying a weak currency for so many years…… perhaps like reparations of 100 years ago.

  16. yraharris Says:

    Gents–it is his eminence–Bernard Connolly

  17. msvceo Says:

    Thanks for putting the word out Yra! 25% of the 250 households we served last week at our food pantry were first timers. We served 129 families yesterday up from 77 Monday. The need is real with many people saying tomorrow brings their last paycheck until their employers can reopen.

    In our early childhood center we are serving the working poor. All the parents of our 500+ 6 week old-5 years olds are employed, but at less than 200% of the poverty level [$50K for a family of 4] with most making mid $30Ks. Many are hourly relying on their paycheck to feed their family and pay the bills. Thanks for any help you can offer.

    Working on PayPal option.

    In the meantime, you can donate on-line here:

    With gratitude ~ Pete, MSV CEO

  18. Rony Schlapfer Says:


    • yraharris Says:

      Rony–thanks so very much for your thoughtfulness and for all of you that have openly and privately stepped up to make a difference in the lives of that been affected by the demand shock created by the rapid development of the pandemic.This is a humbling experience of gargantuan measures—-the jobless claims is a statistical reality but doesn’t reflect the pain and suffering that is the real story behind the numbers—-thank you so very much.

  19. Recoba Bacci Says:

    Am I wrong in supposing that most on this blog consider recent fiscal stimulus enough to stem the deflationary tide?
    I, for one am not convinced that the current stimulus will be enough to weather the coming deflationary storm.
    While I agree that ultimately inflation will be the outcome, I am not so sure it happens right now.
    I am also not so sure of the political will for a weaker dollar at this time. I think everyone is high fiving each other that they have saved the market, and perhaps this is the Big One.
    Wishing all health and a restful weekend

    • yraharris Says:

      Recoba—a very good question.The FED hopes and prays it comes quickly as what bteer way to relieve the load of debt then tho have much higher inflation which will lead to the ILLUSION of higher earnings in which to pay off the debt—hopefully prior to the FED having to raise rates to crush the inflation they so willingly created—this is the question raised on this blog for ten plus years about central bank credibility—-do you really feel comfortable trusting these people with the fiduciary responsibility of guarding the world’s store of value and medium of exchange?

      • masterblaster1978 Says:


        I sent Senator Gardner a letter asking him to put streamlined mortgage refinance for accounts in good standing in the bill. I recommended 2.5-2.75%. I have several friends who just got streamlined VA mortgages at 2.75% and it cost them ZERO. In fact, they actually got credits. Streamlined mortgage refi not only gives cash in American pockets NOW, it gives them more certainty for the length of the mortgage and puts incentive to stay in a home instead of selling… keeping the housing market fairly strong in these uncertain times. You are the first person I have heard mention the mortgage rate adjustment in the time when everyone wants to just throw cash at inefficient entities… unbelievable!!!

    • yraharris Says:

      Master Blaster—back in 2008 I was on CNBC and got into an argument with Merdith Whitney over this issue.I suggested this back then and she took me to task because she claimed the bondholders who were receiving higher payments would be harmed and that would be an abrogation of contractual agreements .I argued that all debt restructuring was a abrogation of contractual rights but better to receive a partial amount then to call through bankruptcy and risk NOTHING—she was wrong and all should revisit the work of Lee Bucheit which BLOG has noted over the last ten years.Thanks for your input but as this BLOG maintains–2+2=5 which implies thinking beyond the norm.

  20. masterblaster1978 Says:

    So, you cannot buy ANY precious metals bullion anywhere. Why is the spot price so ridiculously low, considering? I think Yra is definitely on to something with Platinum. It is really low. But you cannot buy the coins or bars! I have seen similar to this before not too long ago, and then the price of PMs CRASHED. I will never understand it.

    • TraderB Says:

      I was able to buy some gold bars on Friday, but they are hard to come by. I am not a conspiracy theorist, however I know that no wealthy person is selling gold right now. So who is holding the price down? The governments are the ones with the most gold.

      When the bids of all the wealthy men exceed the offers of the central banks, that process will be the market rejecting the monetary system and demanding a gold-based currency.

      I don’t think it really matters if you buy gold for $1200/oz or $1700/oz.

      When that day of reckoning arrives (soon), then those with physical gold will be fine. Those with GC, GLD and GDX will own a financial asset.

      Ted Fisher was a legend and spoke a few years ago on this. He nailed it. Enjoy.

      Got Gold? #GODL

      • TraderB Says:

        If you watch this video from 3:00 Min in until that 4:40 mark, that 1min 40sec is all you need to see.

        As Ted correctly predicted, the systemic shock to the system would have to be something that none of us could see coming. Something that creates a global loss of confidence at a point of economic and financial fragility.

        I suggest a beer before you watch this clip. Perhaps a Corona. Pun intended.

      • yraharris Says:

        Trader B–oh,Teddy Lee from University of Michigan—-we spent many hours discussing these ideas for years–always interesting to discourse with though we often had differing outcomes but Teddy is a very bright and dynamic student of economic history.Thanks for throwing this interview up on the blog

      • David Richards Says:

        Ted lives in Phuket now? Ted says between 5:30 – 6:00 that it’l be an “unforeseen shock to the system that causes a loss of confidence in the int’l foreign currency regime, first to one currency and that it spreads to the other currencies”.

        Not sure whether we’re there yet. Martin Armstrong has said the sign of that will be a big dollar spike that destroys the current monetary system & economy before crashing itself too.

        I don’t think the dollar spike this month comes close to qualifying, but as we know, policymakers intervened heavily in the dollar’s rise to save the system. However, that shouldn’t matter if this is THE big one, as Armstrong and Elliott say policymakers are helpless against such an avalanche when one arrives for real. At that point, it’ll also be too late and impractical if not impossible to trade, so fortune favors the prepared.

    • David Richards Says:

      Actually, there’s a large supply of physical gold and silver bars & coins in eastern Asia now. Including surprisingly some new Gold & Silver Eagles & Maples, maybe because they’re not too popular, I guess due to their higher premiums. I don’t buy high premium, especially commemorative coins, as premium evaporates for resale.

      As most of the world’s physical gold exists in Asia now, Iook there for best physical price discovery. They fell >5% since Tuesday. For paper gold, look to the West. I don’t pay much attention to the latter anymore except for speculative purpose, expecting that paper gold may retest recent lows again sometime later.

      And the dollar, currently making an expected retracement lower of its last big runup, can be watched carefully to see whether it bounces from within the 61.8-78.6% range of that retracement, if the dollar is to retain its bullish posture. As many say, the dollar is probably the most important market. Yup.

      • TraderB Says:

        Platinum definitely offers far less downside risk here than Gold. The spread was trading $500-$600 for the past 1-2 years. Then within the past month, it blew out to $900 as gold rallied and platinum sold off. This all happened in tandem with the risk parity deleveraging and subsequent blowout in realized and implied vol.

        A trade that has worked for me a couple of times (not so much this last time)… Buying an at the money Put on Gold, and then over hedging it’s delta with platinum.
        That is definitely a short vol trade.

        Ideally, I would want my short in paper gold and my long in physical platinum.

      • David Richards Says:

        Yeah, that’s a good trade. And also yes, historically speaking, platinum is a bargain relative to gold. Remember the marketing schemes: Silver Plan, Gold Plan, Platinum Plan. Haha. Instead of platinum, it should now be Palladium Plan, as those two metals have swapped places. LOL

  21. Michael Temple Says:


    The “End of Days” when gold hits “Reset” levels is probably at least 2-3 years away. The “System” will not go quietly.

    However, gold is definitely headed higher, and that right soon.

    As of Friday night, April Comex OI is 37,000 contracts. We are now in delivery phase. I suspect a lot of the “longs” intend to take delivery, as it would cost them nearly $20 to roll up into June.

    If they all take delivery, that is nearly 1700 metric tonnes.

    And, if you think that is a lot, take a look at the June Comex OI.

    Nearly 10X higher at 367K contracts, with nearly 8 weeks to go.

    For those doing the math at home, that is approximately 17,000 metric tonnes if they all wish to take delivery. LBMA has reassured folks that there is 8200ish tonnes of gold in various approved LBMA vaults.

    I doubt all 367K take delivery, but it does appear 37K of the April longs decided to hold and take delivery.

    Let’s say that with gold fever beginning to rise, twice as many June holders decide to take delivery as there are April holders

    Combined, that is 5100 tonnes out of the supposedly abundant 8200 tonnes.

    1 metric ton of gold is 33,200 Oz. For simplicity, let’s price it at $2000/0z. That is $$66.5MM. Let’s round it up to $67MM

    1000 tonnes is $67 BM

    Total LBMA availability of 8200 is roughly $550 BN.

    Global monetary and fiscal stimulus is conservatively north of $12 Trillion and growing. Might even be closer to $15T+ after you throw in the $6T pledged by IMF and G20.

    I dare say there may not be enough gold at even $2000 to satiate the coming demand. $550 BN is a drop in the bucket of the global investable markets—stocks, bonds and real estate.

    Every sovereign printing t press is whirring 24/7 and every Govt is pledging extraordinary fiscal pump priming.

    I think a large part of those 367,000 “longs” of June Comex might just want to take delivery.

    My 2 cts? I think Comex gold (and maybe silver) May be converted to cash settlement by year end if a large portion of the June holders decide to take delivery and clean out a huge swathe of the LBMA stash.

    All the anecdotal stories, including this morning’s WSJ cover story, point to a global rush after the historic CB actions of the past two weeks.

    Keep an eye on June Comex OI for “real time” indication of increasing (or not) gold buying.

    For an institutional investor who wishes to buy 8 or even 9 figures worth of gold, Comex pit may be the only place to go to get “size”
    without having to pay up too much.

    Just my 2 cts

    • TraderB Says:

      So you are confident in that if you own the COMEX GC contract, that is the same thing as gold. I agree that it is only a matter of time before those contract specs are changed.

      Gold is the ultimate long vol trade. The whole purpose for owning gold is to mitigate default risk. Owning a paper contract of gold is an oxymoron. Especially in a moment of extreme uncertainty.

      If this virus began as a short term disruption to the Global Supply Chain. Then it spread and began to dampen demand across the globe. Then it created a complete freeze in economic activity and a credit catastrophe for virtually every business in the world. Now we have a stimulus package that everyone is trying to figure out how to utilize, YET WE HAVE NO IDEA HOW LONG we will need assistance.

      Given this uncertainty, no one is going to cut a purchase order or extend terms to a counter party. The cloud of uncertainty is as dark as night. 51 doctors have died in Italy.

      What began as a short term disruption is now a Global Catastrophe. I am pretty sure Monday is going to be the worst day in the history of the Stock Market. The fear tends to build over the weekends as people process what is unfolding before our eyes.

      What if this IS the shock that ends our Financial system. I am not sure what you are waiting for in 2-3 years that could possibly more catastrophic, morally hazardous, and confidence-shattering than the debacle we are living through in this moment. When this much baseless money is being created out thin air, the joke is on the lender.

  22. Michael Temple Says:


    For now, yes, I think holding the April and the June Comex futures is as good as holding gold, if you choose to take delivery. Beyond June, I think it may not be so.

    To date, gold has NOT been the ultimate long VOL trade. But, its day is truly coming.

    Not sure the cloud of uncertainty is quite as dark as you paint. I am rather optimistic that Covid will pass. Could be 2 months, could be 4 months. But, the economy will ultimately recover, though not likely a full rebound, to be sure. But, there will be trillions circulating in the economy from the actions of the past two weeks. And, the Fed will be uber dovish for the rest of the year, if not into 2021.

    As for Monday, it may be a down day. But, I don’t think it will be the worst day ever. I was there for October 1987, and that was one for the record books. Strangely, it was Tuesday that was far more nerve wracking, as all manner of rumors were flying Monday night, and there was “NO BID” for S&P on Tuesday morning. Stocks may yet go down again next week, but nothing worse than what came about in the past 4 weeks.

    This is NOT the shock that ends our financial system—not yet, anyway.

    The Fed and Treasury (along with global CBs) are throwing not only the kitchen sink at this, but they are throwing their neighbor’s kitchen sink, and their neighbor’s neighbor’s kitchen sink at this unprecedented economic contraction.

    What I am waiting for in 2-3 years time is the EXTRAORDINARY STAGFLATION that undoes just about everything.

    USD will be in awful shape and foreigners may truly not want to touch our paper.

    Again, very few people realize/understand that in late 1970s, the US Treasury issued DM-denominated bonds.

    Yra has commented on this previously.

    It is when the Treasury will be unable to find natural buyers for its trillions of issuance in the years to come that the REAL CRISIS of the USD will begin. At that time, I believe gold will trade at many multiples of its current $1600ish price.

    Be well and enjoy the weekend.


    • TraderB Says:

      Great point. 2-3 months of zero consumption is the base case. I think that is the key. No set backs.

      When the weather changes in October, right as things are ramping back up, what happens if there is another wave of this virus? Do we all go on lockdown again? And do another $5T or QE?

      Looking two steps ahead, maybe that’s the question.

    • GreenAB Says:

      “USD will be in awful shape and foreigners may truly not want to touch our paper.”

      What if all the “foreigners” are in the same awful shape as the US? Which they arguabely are? Europe, Japan, EMs…

      • Michael Temple Says:


        Then even more buyers of gold as all Fiat viewed as existentially bankrupt.

        But that is a story for much much later


  23. Michael Temple Says:

    I am very curious. When you say there is now quite a supply of gold available in Singapore/Asis, how much would you estimate and at what premiums?

    I ask because yesterday’s WSJ front page story quoted several “reputable” dealers, including Credit Suisse who has been in the game since 1864, as saying they have no inventory for immediate delivery. In one instance, a man placed an order for 10,000 1 oz coins and could find nobody able to fill his order.

    I come back to the actual mechanism of a futures contract. Unless otherwise stated as a cash only settlement, the logic and entire basis of the futures contract is to settle the contract in PHYSICAL should either the buyer or seller stand for delivery.

    In the example above of the gentleman who wanted to buy 10,000 1 oz coins, he should “simply” buy 1000 April contracts and take delivery (likely in London) of his 10,000 oz in bar form, not coin form.

    Now, maybe there really is ample supply of PHYSICAL in Asia. And, perhaps it really is trading/selling for a substantial premium to Comex futures pricing, which appears still to be a suppressed paper price.

    But, if that is true, why wouldn’t these Asian players calmly replace the gold they are selling at big fat premiums in Asia with “cheap”
    Comex gold, taking delivery in either NY or London?

    From the sound of all the stories here and everywhere, it does not seem like many, if any, physical bullion/coin dealers are willing to sell
    an ounce at anything approaching the $1620ish price indicated by the April Comex close on Friday. 2-3% mark up, that I can understand.

    But the stories seem to indicate pricing closer to 10% over “spot”

    What the hell does “spot” mean if you simply cannot buy it.

    Yet, you can buy at “spot” at the April Comex futures pit, if you desire.

    I know that Yra is unable to comment freely given that he is a CME director about what exactly is happening at Comex.

    On the other hand, as a market commentator, I am sure he would agree that a properly functioning futures market (i.e one that ensures
    deliverability) should track within fractions to the cash price, less the
    costs of storage/transportation/insurance etc etc etc

    I know if I were a CME governor that just witnessed the dislocation/”force majeure” this week in gold, I would want to know immediately that all that 8100 tonnes of that “good gold” in LBMA vaults, which are now “good deliverables” against my futures contract are indeed free and clear and unencumbered.

    Because ALL these stories, now being highlighted on the front page of the WSJ, indicate that the price for physical gold has disconnected from Comex gold…..Therefore, economic logic (if such a term exists after the market events of the past 2 weeks) dictates that real buyers
    will buy “low” at Comex and sell “high” to retail, beginning with that gentleman who might have paid $1800 per coin for his 10,000 oz order.

    • David Richards Says:

      Michael, as I’ve said before the banks in Sgp, incl Credit Suisse & compatriot bullion bank UBS, have been sold-out since Feb 10. But I’ve noticed that dealers are currently mostly In Stock of products rather than mostly Out Of Stock like a week or so ago. I don’t know the depth of their inventory. In contrast, the couple of North American dealers I’ve followed are more Out Of Stock.

      Price-wise, 1-oz gold Eagles or Maples are about 10% above spot, eg. $1803. But I’m sceptical that a dealer could fill 10-thousand of those ($18,030,000) all at once at any time, now or before. So I don’t find that story to be particularly supportive of a gold shortage. Unlike screenshots of dealers all “Out Of Stock” a week ago.

      But I’m not arguing against the fact that physical gold and (especially) silver prices have disconnected from comex prices. However, we’ve seen this before on occasion. In a few weeks, we’ll know more about the current situation.

      As you know, Comex delivers 100-oz bars, not 1-oz coins. But you cannot economically arbitrage those big bars into gold coins here as suggested unless you have a mint. One not shutdown as most are now, which is probably exacerbating the premium currently.

      • Michael Temple Says:

        I acknowledge that you cannot “arbitrage” a 100 oz bar into 1 oz coins…But, institutional investors should be just as happy, probably happier, to take 100 oz bars or 400 oz bars at SPOT prices right now.

        None of this really computes. I traded cash soybeans/soybean meal in a former life. I experienced actual deliveries in which my “tickets got stopped” by a buyer who wanted PHYSICAL.

        I can understand that part of the premium right now is due to actual mints/refiners being closed by Covid. But, the sea change in demand is probably PERMANENT given the extraordinarily brave new world of fiscal and monetary debasement.

        Maybe the “small guy” can’t or doesn’t want to take delivery of Comex sizes. But, just about any big time institutional investor has the means and now the appetite to add some gold to their portfolios.

        Besides, wouldn’t you rather have a 100 or 400 oz bar than the equivalent number of coins? Especially as you intend to store them, anyway.

        I am not suggesting that Comex gold is about to explode higher by $100 this week. But, I am suggesting that LBMA stocks (which are now “good deliverables”) should get drawn down rather significantly given the newly discovered demand for gold by the investment world.

        Probably NOT until paper gold begins a rise towards $1900/2000 will the investment world embrace platinum or silver. Why should they, when the price of paper gold can’t even trade within a few percent of PHYSICAL gold

      • David Richards Says:

        It’d be helpful if there was a good historical price chart of the spread between the two.

        We’ll see whether the current physical gold & silver shortage is more akin to the temporary 2013 “chinese housewives” panic buying or the permanent collapse & closure in 1967-68 of the london gold pool. I can believe that sometime the comex might face a similar fate, but timing it is exceedingly difficult. If they declare a settlement holiday and/or force majeure, then maybe they’re on that same path to collapse and before long, permanent closure. But you know better than I because it’s your line. Let’s watch.

        PS. Currently, most institutional managers lack the mandate to possess physical gold.

    • Pierre C Says:

      I’m not yet smart enough to understand what is going on, but this may be part of the missing puzzle. I will leave it at that because I still have much more studying to do.

    • David Richards Says:

      Michael, there are a variety of 100-oz and 400-oz gold bars available today (PAMP, Heraeus, RCM, Metalor) for premiums in the range of 1.6 to 2.3 per cent. Again I don’t know the inventory depth.

      So while the physical shortage is real, and particularly acute for retail products like coins due to a combination of greater demand and reduced supply as a side effect of the virus situation, I’d be cautious about extrapolating that to mean the comex will permanently fail. Dealers are hustlers who love to spin stories with which they can whip up a buying frenzy, jack up prices to them and make a killing. After which, things settle back to normal later.

      But you know better than I. What happened before when they couldn’t meet physical delivery for your commodity? It still exists.

  24. GreenAB Says:

    Michael, could you map a path towards your scenario (fiat bankrupt)?

    Not that I´m not worried about this outcome for 10+ years. BUT: the Japanes are throwing everything and their mother on the problem. Debt/GDP is far above everybody´s. They are buying bonds and stocks like crazy. And so far… nothing happenend.

    So what makes you think that the outcome will be different in the US?

    Thanks a lot!

    • yraharris Says:

      GreenAB—the Japanese comparison I believe is flawed.Most importantly the DOLLAR is the world’s reserve currency backed but nothing but the full faith and credit of the US GOVERNMENT.Secondly,when Japan embarked on its massive fiscal stimulus and BOJ intervention it had real deflation coupled with the fact that 97% of its bonds were domestically owned.Far different—keep us posted on the fast changing events in Germany for there is a story that the Economic Minister committed suicide

  25. Michael Temple Says:


    USD will remain reserve currency for at least 2 more years.

    Doesn’t mean it won’t necessarily go down.

    But the real fireworks/cliff fall comes after 2021.

    Maybe not 2022, but probably before 2025.

    Unlike Japan, the US has a huge Negative Investment Account in which foreigners hold much more claims of us than we do of them.

    Not so with Japan.

    • TraderB Says:

      Question about Miners (GDX):
      Do they hedge? If so, they are losing a lot of money on their hedges right now.
      If their production capacities are subdued due to COVID, then they essentially overhedged.

      I don’t understand the business models of these miners, therefore I just buy the physical.

  26. Michael Temple Says:

    You should invest in what makes you comfortable.

    But, I firmly believe gold miners, esp the BIG and conservative ones, will outperform gold by multiples in the coming year.

    Most no longer hedge and the big guys have focused on internal improvements and have eschewed costly takeovers.

    NEM and Barrick both produce over 5MM Oz/yr.

    Let’s be wildly bullish and say gold rises to $2600 from $1600 by year end. Roughly 40%. Whi wouldn’t love that?

    Meanwhile, NEM will earn an additional FCF of $5 BN.

    What multiple do you wish to apply to that additional FCF?

    10X means an additional $50 BN in market valuation.

    At last glance, I think NEM is presently valued at $22 BN AND it pays you a 1%+ dividend, to boot.

    That is nearly 200% gain.

    As always, do your own due diligence. And, by the gain on your gold is not subject to capital gains rates. Your NEM gain is eligible.

    Sure, there is always idiosyncratic risk with any one miner.

    So, perhaps you buy a basket of 4 or 5.

    And if we hit a real GOLd FEVER market, who is to say valuati9ns don’t rise much higher than 10X FCF.

  27. Michael Temple Says:

    My apologies

    NEM is valued at $37 BN.

    So, my math needs to be adjusted. A $50 BN increase in value is only just 133%, and not the 200% i erroneously wrote beforehand.

    Again, invest in what you understand and makes you comfortable.

    But, I don’t think NEM or GOLD are sons of Bre-X

    • David Richards Says:

      Bre-X… haha Michael your age is showing – clearly no millennial.

      For those who don’t know Bre-X, De Guzman created a fake gold mine nearby on Borneo for almost $5-billion actually worth zero, by spiking ore samples with shavings from his gold wedding ring, scumbag. He officially jumped to his death on Borneo from a helicopter 23 years ago, although some initially said he was instead thrown, though either way he couldn’t be identified because “wild animals” ate his face and hands (apparently leaving the rest). Simultaneously, a body was seen missing from the local morgue. Today, he’s rumored to be living a life of luxury elsewhere under a different name.

      The company’s valuation way back in 1997 (equivalent to $20-billion today) on the Toronto stock exchange was second only to Nortel. Both companies went bankrupt after the dot-com crash.

      Further, youngsters need to understand that back then there was no Fed/Treasury (the same thing now?) quickly willing to bail out international companies, covering up their fraud and/or reckless mismanagement that enriches top execs like today. In 2020, Bre-X and Nortel might’ve continued on indefinitely.

      • yraharris Says:

        Dave–first example of helicopter money I suppose— thought so back then

  28. asherz Says:

    David Michael,
    Re availability of gold bars and silver. They are still purchasable at a relatively small premium to paper which at some point will prove to be the unclothed emperor (insufficient backing) .
    But we are living at a time where Gresham’s Law is occurring in front of our eyes. Although this law of “good money drives out bad” description was coined in the mid-19th century and named after a 16th century banker, the phenomenon has been around since the ancients. A shaved down Drachma anyone?
    Trillions of IOUs are being printed by all fiat currency handlers and will make others buy the precious metals which cannot be manufactured.
    That’s why we talk about alchemists.

  29. Jenny Sturch Says:

    Yra: Above please find the link to make a direct donation to the Santa Mike Fund. THANK YOU for your donation and for bringing attention at this very critical time. BIG LOVE.

    • yraharris Says:

      From Yra—thanks Jenny for posting this .For everyone this is the easiest way to donate to Santa Mike which I can atest results in 100% of the money going to the purpose of feeding ,clothing and generally ameliorating the short term financial pain of people trying to get by on a daily basis——again thanks Jenny for picking up for me—Love,Yra

  30. Financial Repression Authority Says:

    […] from Yra Harris: “I ask my readers to contribute to a fund affiliated with the 50-year work of my friend Mike Sturch, which feeds the hungry and clothes the naked and every penny goes where intended. My wife and I have written a check, sent today to the following address: Marillac Saint Vincent Family Services c/o Peter Beale-DelVecchio 6340 N. Magnolia Ave  #1 S Chicago, IL 60660 Peter told me that the demands on their resources are growing exponentially as they are seeing a rise of people that never came for help. I hope that those who have benefited from NOTES FROM UNDERGROUND will be generous as the needs of the community increase everyday. Paul Tudor Jones expressed the same sentiments today so I ask great support from this wonderful community.Please put my name as a way to track our community’s efforts to deal with the pain and suffering from Covid-19. Many thanks.” LINK to Yra’s Blog Post […]

  31. The Bigman Says:

    Hey Yra paid it forward as well One of my few rules is if a friend asks for others in need always give.
    Relevant piece on Zerohedge(guy must be a Notes reader):

    Interested to hear Green AB reaction to this

    • GreenAB Says:

      Sorry, but i call BS on this article. Starts with the alleged “impotation of hundreds of thousands skilled Syrians”, which is complete nonsense.

      As for the big picture I encourage everyone to look waaay back. It´s easy to forget that following the dotcom bubble Germany was “the sick man of Europe”. While the PIIG countries were booming due to the Euro integration (which greatly lowered their borrowing costs), Germany was starving. High unemployment, no wage growth, high deficits, no way out. In fact it was Germany that was one of the first countries to break the 3% deficit rule.

      So, the PIIGS enjoyed rapid growth which turned into a full blown boom and bust. And Germany has to pay the price for it? Really?

      As for the huge bailout package: I applaud the Merkel government for their disciplined fiscal approach. They were doing things the way they should be: save in good times in order to be able to stimulate during a crisis. The “schwarze null” (balanced budget) is what allows Germany to play big now.

      As for Eurobonds: as long as there´s no common pan European fiscal policy, there´s no point for Germany to take on other countries debt burden. To be honest: Germany is on the hook already. We´re guaranteeing the ECB (which buys everybodyy´s debt).

      • yraharris Says:

        Green AB–as always your thoughtful response is appreciated and we have gond back and forth on this issue for many years.Your last paragraph is the best summation as of course it is Germany that makes it all possible–in tonight’s forthcoming BLOG I note the same but declare it is time to end the charade and get on with a genuine EUROBOND—-I fault Merkel for sleep walking while Draghi kept digging Germany in deeper and deeper.The wahtever it takes policy would look far different if Chancelor Merkel had not caved in to Sarkozy and pushed for Axel Weber to be the ECB President in 2011/12—big mistake that Germany will have to correct for there is no leaving now as the result would be a massive global financial default

    • yraharris Says:

      Bigman–thank you much for putting it out there–let’s hope for a massive outpouring of support

    • yraharris Says:

      Bigman–thank you much for putting it out there–let’s hope for a massive outpouring of support

  32. Notes From Underground: Closing In On Critical Levels | Notes From Underground Says:

    […] last thing. In March, NOTES FROM UNDERGROUND put out a call to raise money for the Santa Mike project to feed and clothe the homeless. You, dear readers […]

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