Rocktober 29, 2020
* an ugly day for all asset classes but Bonds…
* Has the Fed run out of Firepower?
Good Day… And a Tub Thumpin’ Thursday to you! When is the sun ever going to make an appearance here again? This is getting so N.W. that it’s making me feel depressed… I had to go to the wound center yesterday, and it was so cold out, I had to break out my winter coat! In Rocktober! And now we’re supposed to be getting pelted with rain from Zeta that made landfall yesterday… So… we’ve got that going for us! I know there are people around the Gulf that have has a horrendous Hurricane season, but I’m not on the coast, at this time of year. And I’m sick of not seeing the sun! The Chi-Lites greet me this morning with their song: Oh Girl… (I wouldn’t blame you if you left me now)
What a nasty day yesterday for Gold & Silver… Gold closed the day down $31.50 to $1,877.10… And Silver closed the day down $1.01 to $23.44… A very ugly day… That began in the overnight markets when the ECB announced that they were keeping rates unchanged… Of course, what the heck that has to do with Gold is beyond me… But the price manipulators saw this as a great opportunity to sell Gold Short… Dirty Deeds Done Dirt Cheap! To illustrate this… only $7.25 of Gold’s $31.50 loss was due to dollar strength… That leaves $23.85 for sellers… Do you know of anyone selling their Gold?
And to start today, Gold is down $4… so the selling hasn’t stopped, I would think that the price manipulators have gotten Gold’s price down to where they can make a profit, and then turn around and wait for the next big move up… I guess we’ll have to see as the day goes on…
But… the thing this pull back has done is open up a buying opportunity for those out there that have procrastinated and not bought yet, or for those of you who realize that you don’t have enough Gold or Silver… James Rickards says that investors should allocate 10% of their investment portfolios to Gold… I’m of the opinion that when an asset class is in a bull market, that the allocation should be moved higher to 15-20%…
Speaking of the Bull Market for Gold… Mr. Rickards gives us some history that I found in the 5 Minute Forecast yesterday, that I gave you the link for last week… here’s Rickards with his history of Bull Markets… ““The first great bull market (1971–1980) produced gains of 2,100% in nine years. The second great bull market (1999–2011) produced gains of 670% in 12 years.
“The third great bull market began in 2015 and is still underway,” says Jim. “Gains so far in the new bull market have been about 100% in five years.”
Assuming “a simple average of the first two bull markets would produce expected gains of 1,400% in 10 and a half years.
“Starting from a base of $1,050 per ounce,” Jim says, “if the new bull market tracks the average of the prior two, we should expect to see gold prices at $14,700 per ounce in early 2025.
“In fact, the rally is not constrained by the average and could easily exceed the record bull market of the 1970s.”
Chuck again… Well that concludes our discussion of Gold today, folks… but from $1,888 to the prices Rickards just talked about, is quite a move, ? … now on to other asset classes!
In the overnight markets, the dollar bugs have gone the whole nine yards in buying dollars, and the euro is in danger of losing the 1.17 handle, the Aussie dollar (A$) has lost more ground, and the only currency that has held its ground is the Japanese yen… Go figure… the currency from a basket case country is the only currency holding its ground… Hmmm…
When I left you yesterday morning, the dollar bugs were dancing in the streets once again, but during the day, their dancing abated, and the euro was able to claw back of its lost ground… But, the Petrol Currencies of Norway, Russia, Canada, Brazil, (and others) can’t find a bid these days, with the price of Oil slipping in price with every 24 hours passing by.
And the Aussie dollar (A$), just kept giving back recent gains as the day went along yesterday, as it was a double whammy for the A$… First it got caught up in the dollar buying early in the morning, and then traders woke up to the fact that Aussie exports to China were being boycotted by the Chinese… I said yesterday, that I thought this news would be bad for the A$, and it has turned out to be just that!
And I don’t like to talk about stocks… But OMG has the trap door been sprung under the stock jockeys? Yesterday’s losses were the broadest since June, when back then when we were hypnotized by Dr. Fauci, and the doomsayers… Well, according to the pundits that follow stocks, they all say that the recent run up of positive cases has investors shaking with fear…
And the stock market futures are in the red again this morning, so the selling there hasn’t stopped either… You know, as I look at the markets, the only asset class I see that has held steady Eddie through all this selling is Bonds… The ten year Treasury’s yield is steady at .77%… I saw a blub online the other day with a stock jockey telling people that they should sell bonds and buy stocks… Really? I’m not enthusiastic about buying Treasuries with that low of a yield, but the bonds I do own, I’m not selling, that’s for sure!
I saw a great sign yesterday… It said: “ There is a spike in COVID cases, because there’s a spike in Testing! If we had more IQ tests, there would be a SPIKE in Morons!”
Now that’s not only funny, it’s true… I tell my kids all the time that there are more people in the world, and therefore there are more idiots…
Even with the dollar surge the yesterday morning, according to the folks at Reuters.com, “The U.S. currency is near its lowest level in 27 months and is down about 11% from its 2020 peak against a basket of its peers, with Goldman Sachs, UBS and Societe Generale among the banks forecasting more losses.”
Makes sense to me… But the gains for the currencies have come in bits and spurts, and nothing that feels like a trend, just yet…
Well… remember Bill Dudley? He was the President of the Fed NY from 2009 – 2018… And now he’s an economist, who had this to say to Bloomberg, “Central bank officials aren’t bluffing when they say that only government spending can rescue the U.S. economy.”
Of course I would argue that even that statement is somewhat incorrect… As the Gov’t can’t help us… Oh, there are those in the U.S. that believe that helicopter money will save us… And I’m telling you now, so maybe you’ll listen to me later, that printing fake dollars, as one of my fave economists, Bill Bonner, calls helicopter money, will not save us… It’s simple economics folks… too much of something lowers its value… So now take that to dollars… too much fake money, will lower its value… And when it lowers its value, it lowers the buying power that citizens that hold dollars have… And to me, that’s like a additional tax… So… while you might have some extra cash in your pocket, what’s it going to buy? And that’s where the idea of helicopter money gets grounded…
In addition, you add more to the national debt, and with every Billion of debt that gets added to the national debt, the closer we get to the whole shootin’ match collapsing! But don’t let that get in the way of getting “free cash” from the government!
OK, I’ve to to talk about something else or my blood pressure is going to go through the roof! At doctor’s offices they always take my blood pressure, and then look at me and say, “You’re doing a great job keeping your blood pressure in check”… And I always respond.. “Better living through chemistry!” HA!
But fear not about losing buying power due to our national debt being so monstrously high… Ted Cruz is here to save us… check this out: “Republican Sen. Ted Cruz says the mounting national debt will reemerge as a major concern for the GOP.” Now? Now it’s going to reemerge as a concern? I do believe that we’re way past the point of being concerned about it, Mr. Cruz… But if you want to see what you and your henchmen, I mean fellow congressmen & women, can do about getting inflation to rise you would be helping out the Cartel, I mean the Fed… for they haven’t got a clue why inflation is rising right now… I’m just saying…
Bill Dudley, the same guy above, also told Bloomberg that “The Fed Is Really Running Out of Fire Power”… No, duh! Interest rates are near zero, they can only go to zero, before being negative, so that pretty much tells us that they are near the end of the road… The Fed has bought Treasuries, bought Munis, bought ETF’s, and Corp Bonds, and the economy still isn’t back to normal, which before the pandemic hit we, as a country, had settled for a new norm in GDP which had averaged about 2.1% for the last 10 years… But, what was I talking about? Oh, that’s right, the Fed running out of Fire Power… That would be a good thing in my books… The Fed not being able to screw up price discovery any more would be a great thing!
OK… time for class… what does price discovery mean? According to Investopedia, it means: “Price discovery is the overall process, whether explicit or inferred, of setting the spot price or the proper price of an asset, security, commodity, or currency.”
And I believe that the Fed has destroyed price discovery in almost all markets… Stocks, bonds, and so on… They did this by buying stocks, bonds, etc. in the markets place at whatever price, and creating a short squeeze in the asset… This is so wrong… The Fed was supposed to be the lender of last resort for the member banks, not the buyer of last resort… I really feel that this has got to stop…
The U.S. Data Cupboard has the 3rd QTR GDP first print this morning… Yesterday, I went through the math and explained how the 30% forecasted gain for GDP wasn’t the same as the 30% drop back in the 2nd QTR… But I doubt the traders will do the math, and start singing, “We’re in the money, that sky is sunny, Old Man Depression you are through, you done us wrong.” But they’ll be so wrong that no one will notice!
We’ll also see the Weekly Initial Jobless Claims which the previous week showed a big drop in the number, that surprised me… So, no surprises this week… There’s just so many people that have dropped off the unemployment roster, these days… you have to wonder if we’ve saturated the employment roster of people? about 150 Million people did work before the pandemic hit… I’m just asking…
To recap… it was an absolutely ugly day in the markets, stocks, currencies, Oil and metals all got sold down the river… The only asset class to hold its ground was Treasuries… Hmmm… Gold got sold by $31 yesterday, and is down another $4 in the early trading this morning… A buying opportunity? Chuck thinks so…
For What It’s Worth… Well… Since I spend a good part of the day talking about Gold today, I thought I might as well end it with another discussion of Gold.. .This one I pulled from Ed Steer’s letter this morning… you can always find Ed here: www.edsteergoldsilver.com… And the article is about China’s consumption of Gold and it can be found here: https://www.brecorder.com/news/40029403/china-gold-consumption-rebounds-in-q3-as-strong-wedding-market-lifts-sales
Or, here’s your snippet: “China’s gold consumption rose 28.7% in the July-September period from the previous quarter, the China Gold Association said on Tuesday, supported by a stabilising economy and a rapid recovery of the wedding market.
Consumption in China in the first nine months of 2020 stood at 548.09 tonnes, down 28.7% year on year, the association said on its website, which implies third-quarter consumption was 224.8 tonnes, down 8.2% from a year earlier.
Demand in the world’s top gold user had been hit early in the year as coronavirus-led lockdowns and high prices for the precious metal kept retail buyers at home.
“Spot gold prices gained around 24% in the first nine months of 2020, but have eased about 8% from an all-time high of $2072.50 notched on Aug. 7.
Consumption has gradually recovered since the second quarter, fuelled by Beijing’s stimulus measures.
“With the sustained and stable recovery of the domestic economy and the rapid recovery of the wedding market, gold consumption has picked up significantly,” the association said.
Sales of gold bars and coins in the third quarter increased by 66.73% from the previous quarter, the association said.”
Chuck again… physical demand is still strong in Gold & Silver., folks.. .the bull market for metals is in place, don’t let an engineered take down scare you from what’s ahead for Gold… I’m just saying..
Market Prices 10/29/20: American Style: A$ .7026, kiwi .6622, C$ .7482, euro 1.1705, sterling 1.2943, Swiss $1.0960, European Style: rand 16.4514, krone 9.5311, SEK 8.8988, forint 314.97, zloty 3.9655, koruna 23.4201, RUB 78.23, yen 104.24, sing 1.3663, HKD 7.7518, INR 74.43, China 6.7116, peso 21.43, BRL 5.7224, Dollar Index 93.69, Oil $35.87, 10-year .77%, Silver $23.08, Platinum $860.00, Palladium $2,216.00, and Gold.. $1,873.30
That’s it for today… and this month! Rocktober will turn to November, my most disliked month, when we next talk on Monday… When I used to have a job, my assistant was Christine, who’s husband was a basketball coach, and the basketball season would begin in Nov. So, she and I would commiserate together about how we disliked November! I have no one to commiserate with any longer, so I’ll just hunker down and try to forget about what month it is… Well… Saturday is Halloween! Will you be doing the Monster Mash? I hear that it will be a bit warmer on Saturday, which is good… I’ll sit outside and give out treats, to the kids, who venture out.. The doomsayers say Trick-or Treating will be dangerous… I don’t think you can take this away from the kids, period.! The Temptations take us to the finish line today with their song: Papa Was A Rolling Stone… And with that I’ll bid Rocktober goodbye, and hope you have a Tub Thumpin’ Thursday, and a haunting Halloween on Saturday… My beloved Tigers play Saturday night, so I might have to move the extra TV we have outside! Go Tigers! Please continue to Be Good To Yourself, and I’ll talk to you again on Monday… God willing and the Creek don’t rise…