Bitcoin, Gold and Inflation

While Goldman Sachs is correct to warn its clients to avoid Bitcoin, its assessment of the U.S. economy, the U.S. Dollar and inflation is wrong. But once they finally figure out what should already be obvious, they will advise their clients to buy gold, just at much higher prices.

U.S. Dollar: The Reason Why Goldman Sachs Is Bullish

Maybe the real reason Goldman Sachs is so bullish on the dollar is that as a primary dealer of U.S. Treasuries, they have a lot of dollars to sell. If Goldman's clients realized the dollar's fate, they wouldn't buy any Treasuries. Whether default or inflation, loss is inevitable.

Inflation Is Bullish For Gold

Investors are selling gold and gold mining stocks because a rising Dow Jones means risk is on, so safe havens are reflexively sold. But the Dow Jones Industrials Average is only up because the Federal Reserve is creating inflation to prop it up. This is ultimately far more bullish for gold than it is for the Dow.

The Rise Of Gold

The relentless rise in the price of gold will call into question the viability of the U.S. dollar and its ability to continue to as the world's reserve currency. Given the lack of yield, if the dollar keeps losing value relative to gold, it will lose its reserve status to gold.

Does Powell Watch The Price Of Gold?

Someone should also ask Powell if he watches the price of gold, and if there is a price that would be high enough to concern him that Fed monetary policy is too loose, and that a dollar crisis might result from a failure to raise rates sharply and sell down the balance sheet?

The Risk Of Inflation

The main reason the Federal Reserve doesn't want to acknowledge the risk of inflation is that it's not prepared to do anything to put out the fire once it really gets started. So, it plays down the risk as long as it can, knowing that ultimately the inflation fire will burn the economy down.

Many People Have Over-Reacted To The Actual Health Threat

The crazy thing is that while so many people have over-reacted to the actual health threat posed by Covid-19, they have under-reacted to the grave financial and economic threats posed by the increase in government spending, borrowing, and money printing in reaction to Covid-19!

The U.S. Needs More Savings

Powell was asked what the Federal Reserve can do to make the economy more resilient to these type of shocks. The question is ironic as its the Fed's fault the economy is so vulnerable to these shocks in the first place. What's needed is more savings, which requires higher interest rates!

Two Wrongs Do Not Make A Right

Unfortunately, there is now a growing consensus that since we have abandoned capitalism during bad times, we must also abandon it during good times. If we socialize the losses, we must also socialize the profits. While this is logically consistent, two wrongs don't make a right.

How Long Before A Currency Crisis?

The national debt now exceeds 24.6 trillion dollars. It was just two weeks ago that it hit 24 trillion dollars. 

We are adding $1 trillion per month to the national debt. That was the size of the entire national debt as late as Oct. 1981. 

How much longer can this pace continue without a crisis?

Gold Stocks Are The Perfect Hedge

Gold stocks are the perfect hedge few portfolio managers own, as they will rise regardless of which direction stocks move. If stocks rise due to Federal Reserve money printing, gold stocks will rise more. If stocks fall due to a weak economy and falling earnings, gold stocks will also rise.

Clearly, everything that is happening right now in the economy, with central banks, is extremely bullish for gold. There is no question about it.

Read the complete article here: Peter Schiff: Gold Is the No-Brainer Investment

Market Update: Stock Market, Federal Reserve and Socialism

Why The Stock Market Is Rallying

Trump repeated that pre-Coronavirus the U.S. had the strongest economy in world history, and the stock market rally proves it's still strong and that he's doing a great job. The economy was weak before the virus and the market is rising because the Federal Reserve is doing a horrible job.

The Misery Of A Socialist Decade

When Nixon took the U.S. off the gold standard in 1971, he reluctantly proclaimed "I am now a Keynesian in economics," ushering in a decade of rising inflation, unemployment, and interest rates. We have now moved beyond Keynes. The misery of a socialist decade will be far worse.

Federal Reserve: 3.5 months of QE3 in 1 week

It took the Federal Reserve a bit longer to finish the calculations, but its balance sheet rose by $284.7 billion last week. That's another 3.5 months of QE3 in 1 week. The Fed's balance sheet now stands at $6.368 trillion. But it won't stand there for long as it marches toward $10 trillion!

Some Perspective On Initial Claims

A total of 22.034 million initial jobless claims have been filed over the past 4 weeks. That's 59.36% of the Great Recession's entire 18-month total of 37.118 million.

U.S. Economy: Breaking Records

Everyone expects bad new, just not this bad. Industrial production dropped 5.4 percent in March, exceeding expectations for a 4.2 percent decline. It was the biggest fall since January of 1946, after World War II ended and we stopped making weapons, and the 5.9 percent year-on-year (YOY) drop is the biggest since November 2009.

Stock Market: The Real Nominal Bottom

Does anyone really expect this bear market to end with Netflix (NFLX) and Amazon (AMZN) making new record highs? It seems to me that a real nominal bottom won't be made until these leaders are also shot!

Gold Is One Of The Best Bargains One Can Buy

If you think the price of gold is expensive now that its above $1,700 wait another week and see how expensive it is. In relation to the amount of money the Federal Reserve has already printed, and the amount it's about to print, gold at today's price is one of the best bargains one can buy.

Related trading instruments: SPDR Gold Trust ETF (GLD), Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Miners ETF (GDXJ)

All The Government Is Doing Is Printing Money

Nobody should be getting a check from the government because the government doesn't have any money. All the government is doing is printing money and they're destroying the value of everybody's savings.

Related trading instruments: SPDR Gold Trust ETF (GLD)

Earnings, JP Morgan Chase & Credit Cards

While Jamie Dimon, CEO of JPMorgan Chase, expressed concern that many bank customers will have trouble paying their credit card bills, he expressed optimism about those customers now earning more in unemployment benefits that they earned working, paying on time and spending more.

Housing Prices: Look Out Below!

JP Morgan Chase, the nation's largest lender, announced that effective Tuesday homebuyers will need FICO scores of 700 and 20 percent down payments to qualify for a mortgage. Housing prices will have to crash so most buyers, especially first time buyers, can afford to put down 20 percent. Look out below!

A Few Thoughts On The Current Crisis

The national debt just passed $24 trillion, up $4 trillion since Donald Trump took office. He will add more debt in 4 years than Bush did in 8. If reelected he will add more debt in 8 years than Bush & Obama did in 16. Instead of draining the swamp, he is draining the nation.

What will the Federal Reserve do if inflation picks up?

Someone needs to ask Powell what the Fed’s response will be if inflation really heats up? Will the Fed do nothing and let inflation get much worse? Or will it jack interest rates way up and sell bonds to shirk the money supply? Is the Fed prepared to do this during a recession?

The problem with student loan forgiveness

The biggest problem with student loan forgiveness is the moral hazard for both students and colleges. Since loans don't have to be repaid, students won't care how much they borrow. Colleges will exploit this by raising tuition even fasting, sending the cost to taxpayers soaring.

This Rally Is All About The Fed!

U.S. stock market futures are rallying off the much larger than expected jump in weekly unemployment claims. This clearly shows that investors know where their bread is buttered. This rally is all about the Federal Reserve, and the worse the economy gets, the more money the Fed will print.

China Will Buy Oil, Not U.S. Treasuries

It looks like the Chinese are getting smarter, and will be buying oil instead of U.S. Treasuries. This is just the beginning, as soon the entire world will be buying real stuff instead of Treasuries. That means the Federal Reserve will buy more Treasuries as Americans buy a lot less stuff.

U.S. Economy: There Is No Way To Go Back To Where We Were

It wasn't fine before the crisis. We didn't have a solid economy. We had a bubble. That's the problem. And the bubble has been pricked. There is no way to go back to where we were. It's like trying to unscramble an egg. It can't be done.

Record Initial Claims

Another 6.648 million Americans filed for unemployment last week, shattering the record set the prior week. With generous new benefits for losing one's jobs, and powerful incentive (likely to be extended) to remain unemployed, don't expect people to return to work any time soon.

Gold Isn't A Fear Trade

The media coverage, what little there is, of why people are buying gold, is wrong. Gold isn't a fear trade, or a hedge against the stock market. It's the best way for savers to protect their purchasing power when central banks are intent on destroying it by printing paper money. 

Thoughts On Trump's Infrastructure Spending Plans

President Trump thinks it's the perfect time for the government to borrow trillions more to improve our infrastructure. That's like a guy who just lost his job deciding it's the perfect time to take out a second mortgage to put in the swimming pool he's always wanted.

You Are Paying For The Bailouts!

If you don't know who is paying for the massive stimulus bill and bailouts, it's you. There's no free lunch. Everyone who saves or earns dollars will have their purchasing power stolen to fund an unprecedented increase in government spending. If you don't want to pay, buy gold.

The US Dollar Is Entering a Tailspin

Last week as the US dollar spiked many currency speculators were suckered into the trade. They are now underwater hoping for a rally. Soon they will stop hoping, and bailout of the biggest currency head fake ever. The US dollar is entering a tailspin from which recovery is impossible.

Topics: currency trading, forex, US Dollar;

Gold Is The Safe Haven

Treasury bonds are not a safe haven. The Federal Reserve will own all the Treasury bonds, as well as most other U.S. dollar denominated debt. The problem is that the tens of trillions of dollars the Fed will print to buy all those bonds will be practically worthless. Gold is the safe haven.

Real bond yields will plunge as inflation soars. Normally rising inflation would push up nominal yields to compensate buyers for the erosion of their purchasing power. But since the Federal Reserve is buying to keep nominal yields from rising, the entire bond market is about to be monetized!

Gold: How It Reacts During Crisis

During the 2008 financial crisis, gold fell about 25 percent and took seven months to make a new high. This time gold only fell about 15 percent, and may make a new high in under a month. This shows how much greater this financial crisis is, and how much more reckless current Fed policy is.

Related trading instruments: SPDR Gold Trust ETF (GLD), Market Vectors Gold Miners ETF (GDX)

Bailing Out The Airline Industry

Watching CNBC anchors spreading more industry propaganda that without a government bailout, the U.S. will not have an airline industry. Without a bailout the U.S. will have a much stronger airline industry. To work at CNBC one must fail a test on free market economics.

Related trading instruments: Delta Air Lines (DAL), American Airlines (AAL), JetBlue Airways (JBLU)

QE Infinity Will Crash The U.S. Dollar

Americans wanting intervention to weaken the U.S. dollar should be careful what they wish for. The overvalued U.S. dollar is making things worse abroad, but it's actually lessening the pain here. Quantitative Easing (QE) infinity will crash the U.S. dollar on its own once the global dollar liquidity squeeze ends.

Gold Will Skyrocket

Gold is falling because investors are clueless as to what is coming. Their mindset is similar to that of central bankers. They have no idea how bad the consequences of the current monetary and fiscal policy mistakes will be. When they figure it out en masse, gold will skyrocket.

Related trading instruments: SPDR Gold Trust ETF (GLD), iShares Silver ETF (SLV), Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Miners ETF (GDXJ)

Inflation Is Coming

All the discussion of the current economic decline and whether the stock market has bottomed is missing the point. The damage being done now by Federal Government spending and Federal Reserve money printing to cushion the immediate impact has adverse consequences worse than the Coronavirus. 

The money the Federal Reserve is printing isn't going to have value. It isn't going to buy anything. Prices are going to skyrocket. And in fact, this coronavirus is accelerating that process because it's reducing the supply of goods available to buy.

This Crisis Is Economic, Not Merely Financial

The financial crisis of 2008 was a cake walk compared to this. All that happened in 2008 was real estate prices fell, borrowers defaulted, and lenders lost money. Today global commerce is grading to a halt. Production is shutting down. This crisis is economic, not merely financial.

Game Over!

In 2008 we bailed out the banks and GSE's, as they owned the mortgages. Today it's not just mortgage debtors who can't pay, it's all debtors. It's not just banks that need to be bailed out, but every leveraged business in every industry. Who is left to do the bailing? Game over!

The Russell 2000 Index Is Down 33% From Its High

The Russell 2000 Index, the purest stock play on the U.S. economy, is down 33 percent from its record high set in August of 2018, wiping out all the gains from June of 2016, 3 months before real Donald Trump was elected President. A Presidency that lives by the stock market dies by it as well!

Related trading instruments: iShares Russell 2000 Index ETF (IWM), SPDR S&P 500 Index ETF (SPY), Nasdaq 100 Index ETF (QQQ), SPDR Dow Jones Industrial Average ETF (DIA)

This Is Similar To 2008

CNBC anchors keep repeating that what is happening now bears no resemblance to what happened in 2008. Not only is this extremely similar to 2008, as in both cases a credit bubble popped, but it's also similar in that none of the anchors on CNBC saw that crisis coming either!

Why Own Bitcoin?

Bitcoin was created after the 2008 financial crisis and hodlers always assumed that it would be the safe-haven of choice during the next. Looks like they assumed wrong. If Bitcoin is not a currency, not a store of value, and not a safe haven, then what is it and why own it?

The Fed Will Cut Rates To Zero

The collapse in oil prices will provide cover for the Federal Reserve to cut interest rates to zero and ramp up QE, as it can claim it's necessary to fight declining inflation expectations. But when the U.S. dollar cracks, and oil and consumer prices surge, the Federal Reserve will be unable to reverse the policy.

The Dow Jones Transports Is In Bear Market Territory

The Dow Jones Transports are leading the decline, now down 20 percent into official bear market territory. The next stop is the December 2018 low, which is 5 percent below current levels. If we take that out the January 2016 low is a realistic target. That would be a 44 percent decline from the high! 

Related stocks: Delta Air Lines (DAL), United Parcel Service (UPS), Union Pacific Corporation (UNP), American Airlines

How A Recession Really Happens

What happens when declining revenue results in over-leveraged businesses being unable to make the interest payments on their debts?

What happens when over-extended workers living paycheck-to-paycheck get laid off and can’t make their mortgage, car loan, or credit card payments?

The Fed Can’t Stimulate The Economy During Downturns

The Federal Reserve should not even have the mission of stimulating the economy during downturns, as it can’t actually do it. All the Federal Reserve can do is exacerbate the problems that recessions attempt to solve. The Fed only succeeds in delaying the day of reckoning by making the problems bigger.

Trump Cannot Beat Biden In A Recession

While it was possible that Donald Trump could beat Bernie Sanders during a recession, there is no way he can beat Joe Biden. Biden won't be good for the economy or the stock market. He will increase government spending, taxes, and regulation substantially. Look out below!

The Last Thing The Fed Should Do

The last thing the Federal Reserve should do now is rescue the stock market or the economy by cutting interest rates. It's rate cuts of the past that have left both the stock market and the economy so vulnerable in the present. It's much better to swallow some very bitter tasting medicine.

Related trading instruments: SPDR S&P 500 Index ETF (SPY), Nasdaq 100 Index ETF (QQQ), SPDR Dow Jones Industrial Average ETF (DIA)

Stocks: Sell-Off or Crash?

CNBC anchor Andrew Ross Sorkin of CNBC just said there is no other word to describe the recent market plunge other than "sell-off." Let me introduce a new word into Andrew's vocabulary, "crash."

Related trading instruments: SPDR S&P 500 Index ETF (SPY), Nasdaq 100 Index ETF (QQQ), SPDR Dow Jones Industrial Average ETF (DIA)

The U.S. Economic "Recovery" Was Based On A Stock Market Bubble

The U.S. economic "recovery" was based on a stock market bubble. Once that bubble pops there is no way to avoid a severe recession. It does not matter why the bubble pops. All that matters is that it does. A stock market crash pulls the rug out from under an asset-based economy.

Sanders Generates Enthusiasm By Promising Free Stuff

Senator Bernie Sanders generates enthusiasm not by promising more freedom, but more free stuff. His sales pitch is not to allow voters to keep more of what they earn, but to take more of what others earn. It’s a campaign based on envy and theft, rather than personal achievement.

Sanders says “anyone who feels entitled to a decent standard of living” should join his campaign. No one is entitled to anything they did not earn. No one has a right to use government to steal what others have earned. Plus, what defines decent and who defines it?

Delinquent Auto Loans Are On The Rise!

It makes perfect sense that during what Trump claims is the greatest economic boom in world history that a record number of Americans can't even make their car payments!

U.S. Economy: Renting Costs Are Too High

"One in four renters is paying more than half their income on housing." - Peter Schiff

 Read the complete article here: The Rent’s Too High!

The Bullish Case For Gold

You know, the reason the US stock market went up this year is because the Federal Reserve surprised everybody by doing exactly what I had been predicting they would do. They aborted their feigned attempt to normalize their interest rates and shrink their balance sheet. They went back to interest rate cuts and quantitative easing. This is extremely bullish for gold.