David Jensen Explains Powell's Sudden Pivot

There have been several theories about why Fed Chairman Powell suddenly turned soft on monetary policy.

Dec. 1: “It would be premature to …speculate on when poicy might ease.”

Dec. 13: “Rate cuts are something that ‘begins to come into view’ and ‘clearly is a topic of discussion.’”

The markets took this to mean it’s time to party again with money from nothing making us all rich beyond imagination. Of course, money from nothing ends up being exactly that—nothing! But to most investors who are ignorant about money they only think in terms of dollars and their dollar stock, bond and commodities accounts all got bigger after Powell’s Dec. 13 speech.

John Williams of the Fed subsequently tried to walk back Powell’s dovish remarks but if David Jensen is right, the market may indeed be right in betting on the hyperinflationary scenario.

I would recommend reading David’s article on Substack titled “The Fed’s Panicked U-Turn” for supporting evidence for his view as to why Fed rhetoric turned so dovish so quickly. Essentially David is pointing the the rapidly declining reverse repo market and growing evidence that bank balance sheets are underwater due to losses on bond holdings in the rising interest rate environment over the past couple of years.

If David is right, we may indeed be heading toward the next super bull market in gold and silver. As I recently noted, very credible analysts like Michael Oliver and Jim Rickards have projected gold prices during this emerging secular bull market of US $8,000 and $15,000 respectively. That is hard for those who believe in the almighty dollar to comprehend. But when you realize the dollar has zero intrinsic value while gold has retained its purchasing power for thousands of years, those projections are not so far fetched when comparing them to the moves in the price of gold from $35 in the 1970s to $850 in 1980 or from $250 in 2002 to $2,000 in 2011. Its not that gold is increasing in price. Rather its that investors out of a necessity to survive are discovering that the fiat dollar is intrinsicially worthless. And with a growing number of countires opting out of dollars into gold, that reality will become ever more obvious.

Gold and silver are assets you need to own for a solid portfolio foundation. Gold and silver miners will put icing on the cake during this emerging bull market for those willing to take the risk inherent in owning producers of real money.

Best wishes,

Jay Taylor