How ESG Initiatives Will Drive the Future of Gold Investing

Posted on Leave a comment

The importance of environmental, social, and governance (ESG) issues to investors is playing an out-sized role in decision-making today. More individuals and businesses are trying to understand how their actions will impact others. An example of this phenomenon can be found in one of the least expected places: a colony of 25 rare chinchillas.Image of the interior of a gold mine

The short-haired chinchilla is an endangered species after being hunted to the brink of extinction. However, what makes this particular colony of rodents especially valuable is not just their endangered status, it’s what sits below the ground they inhabit. The colony is atop 3.5 million ounces of gold in the Salares Norte open pit mine in Chile.

Today, the mine is still in the permitting phase. The project, headed by the South African Gold Fields company, represents an $860 million investment. To move forward the project is obligated by Chilean law to relocate each of the 25 chinchillas. The latest reported figures show that Gold Fields has spent approximately $400,000 in an attempt to safely trap the animals. The expense illustrates that capturing the chinchillas and relocating them is harder than it sounds.

Chilean environmental manager Luis Ortega explains that two, non-lethal, attempts must be made to capture each rodent and each can last for a maximum of 10 days. If unsuccessful, the mining company must pause their efforts for 20 days before trying again.

Abiding by these regulations before mining begins is more than a legal requirement, it is also characteristic of business today. Consider research from FTSE Russel which found that a little over half of investors globally are implementing or evaluating ESG characteristics in their investment decisions. These investors are driven by more than a sense of responsibility to society and the planet. They are also driven by the search for annual returns.

Studies show that ESG investing strategies offer a long-term growth advantage. “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments,” concludes research from The Morgan Stanley Institute for Sustainable Investing. This finding makes intuitive sense because businesses that focus on sustainability prioritize renewable resources and a reduction in waste. Both of these practices reduce expenses in the long run which, in turn, improve profitability.

Another study from Harvard concluded that investing $1 in an equally weighted portfolio consisting only of high sustainability firms at the start of 1993 to the end of 2010 would out earn the same investment in a non-ESG portfolio by 46 percent.

The Gold Fields chinchilla project illustrates that gold mining operations can also abide by ESG standards. What makes ESG investing so powerful is the confluence of environmentalism, efficiency, and ethos. Businesses become more responsible to the planet while benefiting from improved use of resources while fulfilling investors’ growing need for ethics in their portfolio.

The World Gold Council has codified this movement with their “Responsible Gold Mining Principles,” which is a list of ten characteristics that, as a whole, represent responsible gold mining. These principles include things like safety and health, human rights and conflict, and working with communities. ESG-driven plans are a rare instance in which all parties benefit.

 

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

“What Happens If…” New Supreme Court Justice Amy Coney Barrett Rules on Election Challenges

Posted on 1 Comment

Will Supreme Court Rescue Trump Presidency? Thorns with American Flag in background

A global pandemic, wrenching unemployment and political polarization have created one of the most uncertain presidential election environments in modern history. 

In late October, polls show the presidential race tightening between President Trump and Democratic nominee Biden. The president has been casting doubt over mail-in ballots for weeks and the Republicans have been busily filing hundreds of lawsuits across the country designed to limit how mail-in ballots can be counted.

Issues like postmarks, when the ballot arrives, does the signature match, did the voter fill out the ballot correctly or did the voter move recently are all items being contested in court now – ahead of the election.

In our final election series installment we outline a potential legal battle over the results.

It’s November 4th: Day after Election

Wednesday morning November 4th, U.S. citizens wake up to the news that neither candidate yet has the required 270 Electoral College votes to determine a winner.

Thousands and thousands of mail-in ballots are still being processed and counted. In several key states across the country, mail-in ballots cannot be processed (verified) and then counted until after the polls close.

Local election systems are overwhelmed with the huge number of mail-in ballots used in 2020 due to the COVID health crisis and are working slowly through the ballots.

Supreme Court in Focus

Assuming that Amy Coney Barrett will be seated on the Supreme Court before the November 3rd presidential election – she will become the key and deciding vote in a case on mail-in ballots and who, ultimately, will become the United States President for the next four years.

A 4-4 Split Means Lower Court’s Ruling is Upheld

Without a ninth justice on the Supreme Court (which Barret will be) – any 4-4 Supreme Court ties — revert to the decision of the lower court. Let’s unpack what that means.

For example, in mid-October, the Supreme Court already ruled on a case regarding Pennsylvania state mail-in ballots.

A Pennsylvania state court ruled that mail-in ballots could be counted even if they arrive up to 3 days after election day – if they are postmarked by election day. The Supreme Court ruled in a 4-4 tie on the matter.

That means the decision of the lower Pennsylvania court stands – and those mail-in ballots can be counted.

If Amy Coney Barret had been on the court at that time, her judicial philosophy suggests she would have joined with the 4 conservative votes to not allow those votes to be counted. And, the lower court’s ruling would have been struck down.

2020 Trump v. Biden

So, you can see when it comes to election cases – having a fifth reliable conservative vote on the court could make the difference between a Joe Biden presidency and a Donald Trump second term.

Barrett dodged recusal questions

It’s no secret why President Trump wanted to advance his judge so quickly.

Amy Coney Barrett has been thrust onto the court amid President Trump’s frank calls for her swift confirmation so that she can be seated in time to decide the election cases.

Yet, in her Congressional testimony, Barrett artfully declined to answer whether or not she would recuse herself if a contested election case comes before her that could determine the outcome of this monumental presidential election.

Indeed, legal scholars point to a case from over a decade ago – Caperton v. A.T. Massey Coal Co., and say it applies directly to Barrett’s recusal decision and would require her to decline to vote on election cases.

The case states: A judge cannot hear a case that centers on the financial interests of someone who supported him substantially in his campaign for election.

Here’s the rationale: “Under the Due Process Clause and Tumey v. Ohio (1927), a judge must recuse himself if he has a direct, personal, substantial, pecuniary interest in the outcome of a case.”

Even more, Justice Antonin Scalia, while he did dissent in the case he wrote in that case:  “In the best of all possible worlds, [judges should] sometimes recuse [themselves] even where the clear commands” of the Constitution don’t require it.

Yes, there is a strong case for Amy Coney Barrett to recuse herself from 2020 election cases.

Will she recuse herself?

Unlikely.

Get Ready for a Replay of 2020: Bush v. Gore

The nation has been primed for and is hurtling toward a reply of 2020’s Bush v. Gore, in which the Supreme Court decided the fate of the election and the country for the next four years.

President Trump stated shortly after the death of Supreme Court Justice Ruth Bader Ginsberg: “I think this [election decision] will end up in the Supreme Court,”  “And I think it’s very important that we have nine justices,” instead of the eight seats currently filled.

President Trump publicly stated several times that he wants Barrett to be appointed swiftly so she will be on the court in time to “decide” the presidential election results.

How Will Financial Markets Respond?

In the event that our country moves through November and December with no presidential outcome – as court cases work their way toward the Supreme Court – the stock market will sink.

In 2000, the last time we saw a contested presidential election, the S&P 500 and technology stocks sank. Expect that to happen again – extended stock market weakness and volatility. In this scenario, investors will rush to safe haven assets like gold and silver and the U.S. dollar will tumble by 15-20%. Gold climb moderately amid the uncertainty hitting a new all-time high at $2,100 an ounce.

Bottom line

If the 2020 Presidential election battle is turned over to the courts as it was in 2000 – having Amy Coney Barrett seated on the court all but ensures a victory for incumbent President Trump.

Worth noting – power to pick presidents and strike down laws

No matter your political party affiliation, it is worth noting the extreme power the Supreme Court now has on our society.

In an increasingly polarized environment where Congress has become ineffectual due to gridlock, the Supreme Court has moved to the forefront to be the most important governing body in our land.

Of course, our founding fathers intended for all three branches of government (Executive, Judicial and Congress) to be equal with checks and balances on each other.

Today’s reality is different.

The Supreme Court has shown its ability to decide presidential elections (Bush in 2000) and can strike down any law that Congress passes that it sees unconstitutional.

With a strong conservative majority on the Supreme Court with Amy Coney Barrett – and their   lifetime appointments – the Supreme Court has become the most powerful influence and governing body for America for the next 30 years.

Longer-Term Market View

In this scenario, once the Supreme Court decides the election – and hands the White House back to President Trump for a second term, U.S. dollar devaluation will continue as the Administration brow beats the Federal Reserve into printing ever more money to attempt to prop up the economy.

The stock market will rally briefly on expectations for another tax cut – but as the second term continues the economic realities of isolationist and combative trade policies tank the U.S. equity market.

Investors will turn to hard assets like gold and silver as the dollar continues to weaken and as capital begins to leave the United States.

Wealthy investors will begin to move their money offshore as it becomes clear the decline of the United States of America is on a track that can’t be turned around. Gold will easily eclipse the $3,000 an ounce mark. For precious metals investors, there is small comfort in their gold and silver holdings, as inflation is becoming rampant and the country’s economic future becomes grimmer.

This concludes our “What Happens If…” election series. With less than one week until election day, we hope that we’ve provided you with valuable information to help you prepare your portfolio for most any eventuality.

Regardless of the election outcome, the economy is still reeling from the pandemic and a quick recovery is unlikely. Inflation is coming. Call us today at 866-629-2281 for a personalized review of your long-term financial goals. We want to help you protect what you’ve worked hard to build.

If you’d like to read the entire six-week series, please follow the links below and let us know your thoughts.

Read Part 1 here: “What happens if….” Trump Wins in a Landslide

Read Part 2 here: “What Happens If….Biden Wins in a Landslide

Read Part 3 here: “What Happens If…Trump Wins on Election Night but Biden Prevails After Mail-in Ballot Count

Read Part 4 here: “What Happens If…” Biden Wins on Election Night…But Trump Prevails After Mail-in Ballot Count

Read Part 5 here: What Happens If…” States Aren’t Ready to Declare a Winner

Monday Morning Wrap Up – October 26, 2020

Posted on Leave a comment

Trick or treat?David Beahm Blanchard CEO

Halloween is fast approaching. What spooky surprise might be just around the corner? The nation is on edge. Early voting numbers are through the roof. A record number of 52 million Americans have already cast their ballot in this year’s U.S. Presidential Election – and we still have another week to go before Election Day.

As Americans stream to the polls, there is another looming threat overhanging credit markets.

Two of the three major U.S. credit agencies – Fitch Ratings and Moody’s Investor’s Service – which currently give the U.S. a top rating have warned that if a peaceful transfer of power does not occur that high rating could be in jeopardy.

When you are wondering who the next President of the United States will be, a credit rating may not seem to be of great importance. Think again.

Could the U.S. lose our AAA credit rating?

The U.S.’s nearly top-notch credit rating is what allows our country to finance our $27 trillion plus in federal debt at rock bottom interest rates.

Ratings agencies will be monitoring the post-election environment closely for “any departure” from America’s history of orderly transfers of power.

Indeed, our country boasts a perfect AAA credit rating from Fitch in part because of our history for strong governance, including “well-understood rules and processes for the transfer of power,” a report from Fitch last week said.

Beware. A downgrade for U.S. debt would trigger a huge loss of confidence in U.S. financial markets – and could potentially trigger stock and bond market volatility.

Tech world abuzz with Google anti-trust lawsuit

The Trump administration hit tech giant Google with an anti-trust lawsuit last week.  This awakens memories of the Microsoft anti-trust lawsuit that ran from the late 1990’s-early 2000’s.

In the end, after years of court wrangling, Microsoft suffered little more than a slap on the wrist. Key takeaway for the Google case? Expect this to last for years.

Presidential debate – a draw?

The nation witnessed the last presidential debate on Thursday evening. President Trump exhibited a more restrained approach – and most analysts called the debate a draw – as neither candidate likely moved the voting needle in a significant fashion.

Cloudy economic outlook ahead

With COVID-19 infections on the rise especially in the Midwest and Rocky Mountain region, we’ve seen little movement from Congress on a second round of emergency stimulus and future economic projections are beginning to look dire.

The massive stimulus package Congress passed earlier this year was, in essence, life support for the economy. It injected billions of dollars of money that flowed through the economy through extra unemployment insurance and support to businesses.

That stimulus is gone now. And, the economy must limp along on its own. Expect economic headwinds to take hold in November and December – especially if a contested election occurs. Neither individuals nor businesses like uncertainty. Indeed, uncertainty – whether that is political, economic or market related tends to hold people back from making decisions or spending money.

High earners spending less too

Even spending from high-income households remains below pre-pandemic levels, simply because those individuals face a discretionary sector challenged by health crisis restrictions. For the week ending September 27th, high income household spending was 7.3% below January levels.

Industries most impacted by the health crisis are showing double digital declines in activity. U.S. restaurants are operating at 35% below than year-ago levels as of October 18th, hotel occupancy was 29% lower year ago levels as of October 10th and air traffic has been slashed by 60%, according to S&P Global research.

Silver demand soars at nearly triple the year-over-year levels

In the midst of the uncertainty, investor demand for silver soared in the first three quarters of 2020.

“Investors sought security in silver-backed Exchange-Traded Products (ETPs) in the first nine months of 2020, nearly tripling the amount amassed compared to the comparable period in 2019. Investors have also had a strong appetite for investment in silver bullion coins and bars during the first three quarters of this year. Overall, this reflects both silver’s role as a safe haven asset and as a leveraged play on gold, as some investors expect silver to outperform the yellow metal,” the Silver Institute said last week.

Gold traded sideways last week – as investors remain in a wait and see mode ahead of what could be a tumultuous election market reaction.

Are you prepared?

Right now, perhaps more than ever before in history, it’s critical to think about what could lie ahead and to prepare your financial situation for whatever may come next.

Investments in tangible assets like gold and silver offer you the safety and security that no paper asset can offer in these unprecedented times.  Take advantage of this time now – just ahead of the election – to increase your financial security with an additional allocation to physical gold.

Take care of yourself and your loved ones. Until next week…

Regards,

David

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

“What Happens If…” States are not ready to declare a winner

Posted on Leave a comment

It’s December: The Nation Is Still Waiting for a WinnerAmerican flag in monochrome

Dozens of lawsuits are underway to decide whether or not uncounted mail-in ballots in key battleground states should be counted. It was a rigged election, the Republicans say!

So…here we are in early December – and the nation still doesn’t know who won the Presidential election in November.

Joe Biden won the popular vote easily on Election Day – as the polls predicted he would. Yet, the popular vote doesn’t decide the winner of the White House in the United States – that honor goes to the Electoral College of course.

That big Biden win in the popular vote occurred despite polling day violence which erupted in several voting sites.

Violence at the Polls on Election Day

Prior to Election Day, President Trump and his campaign encouraged his followers to “enlist in an army” of poll watchers to “fight” for his victory.  That army of supporters remains active into early December.

Earlier in October, the FBI charged six men with a plot to kidnap Michigan Governor Gretchen Whitmer from her vacation home with a plan to take her to Wisconsin and put her on trial for treason. Seven more men face state charges as part of the same plot, which included plans to attack law enforcement, overthrow the government and start a civil war. That state remains a hotbed of unrest and militia activity.

Militia group members show up at several polling places on Election Day in Michigan to “watch the polls.” Tense situations escalate and, sadly, three innocent bystanders are injured as gun violence erupted outside one of the polling stations.

Civil Unrest: 7 pm Curfew Set in Portland and Chicago

Throughout November and into December, civil unrest has taken over big cities across the nation. Peaceful protests calling for a “full and complete vote count” in large, urban Democratic cities turn violent. Militia group members swarm to major cities – and violent clashes erupt nearly every day.

Chicago and Portland now have 7 pm curfews. Citizens are not allowed to leave their homes after dark. The National Guard has been called into several major cities and they patrol at night.

The United States is gripped in a crisis of severe proportions and on several fronts. The rate of COVID-19 infections is escalating quickly, some hospitals in Midwestern states are becoming overwhelmed. Unemployment remains high.

The nation’s transportation and delivery system has been disrupted. Shortages are common in many cities. The grocery stores are short on items and consumers are unable to buy many basic goods they need for everyday life.

Today on December 8th, the outcome of the election rides on key battleground states like Michigan, Pennsylvania and Wisconsin. The Republicans are suing for recounts in states where the popular vote was close and have lawsuits about alleged voter irregularities in key battleground states.

Post Office Seized Mail-in Ballots

Millions of mail-in ballots that were in transit on November 4th were seized by the U.S. Post Office, under orders from the Trump Administration. As of December 8th, those ballots remain locked up in the custody of the U.S. Postal Service.

The Postal Service is an agency under the Executive Branch, which allows the President broad authority over mail in ballots in transit. Trump has the full support of Attorney General William Barr – who embraces the President’s electoral fraud claims.

Will those votes ever be counted? That decision lies in the hand of federal judges and the case will likely go to the Supreme Court.

Stock Market Crashes – Dollar’s Position as Reserve Currency in Jeopardy

To the international community, it has become clear that America is a nation gripped in crisis and chaos. Foreigners are cashing out of U.S. denominated assets – fast.

The stock market crashed throughout November – sinking into a bear market amid the uncertainty of the contested election litigation and amid the wave of violence that is erupting across the country.

The U.S. dollar declined sharply and foreigners are selling U.S. Treasury bonds.

The idea that the U.S. dollar will continue to act as a stable reserve currency of the world is being widely doubted in financial centers around the globe.

In the midst of the 2020 US Election Crisis, gold has climbed to new all-time highs – now trading at $2,500 an ounce as panicked investors turn to the safety of precious metals.

December 8th: Safe Harbor Deadline

It’s December 8th. Most citizens had never heard of the December 8 safe harbor deadline until the 2020 presidential election. This is the deadline for states to choose which electors will be sent to the Electoral College. Now, the details of these arcane rules and procedures, which normally have unfolded in the background, quietly, without a hitch, have become common public knowledge.  

In America, it’s actually the 538 members of the Electoral College that vote for President.

When voters go to the polls they are actually voting for a slate of presidential electors who will vote for president. Further complicating matters, only 33 states require electors to vote for the winner of the popular vote in a state.

The safe harbor deadline requires states to choose electors to be accepted by Congress.

But, who should Michigan, Pennsylvania and Wisconsin choose? They don’t know the official final ballot tally – mail in ballots have not been fully counted yet.

The Republicans have been lobbying hard to all the key battleground/undecided states to submit the slate of Trump electors, despite the popular vote. Trump has a major advantage as the incumbent. He is able to use the power of the presidency to his advantage while he is still in office, even if the courts may rule his actions as eventually unlawful. These powers include the ability of the president to freeze assets of individuals and groups the president determines to be a threat, and his ability to restrict internet communications in the name of national security, according to the Transition Integrity Project (TIP).

The electors are supposed to vote on December 14th and the count is tabulated on January 6th before Congress.

In the midst of the chaos, the country hurtles through December with no clear alignment on a winner and the calendar flips to January.

Can Nancy Pelosi Become President?

It’s January 6, 2021. There is a joint session of Congress to ratify the Electoral College votes and declare official election results.

Yet, there is no clear winner from the Electoral College vote on January 6th.

There may be a tie, or many Electoral College votes are disputed due to states not following the popular vote or because mail in ballots weren’t fully counted.

Here’s what happens next.

According to the Constitution, the House chooses the president with each state, not each member, casting a single vote. The Senate chooses the vice president.

Indeed, this has happened before. One president in American history did take office that way under the current Electoral College system. It was John Quincy Adams in 1825.

Again, we turn to the Constitution to understand if Nancy Pelosi could actually become president.

The presidential term ends on January 20th – no matter what.

If Congress and the Electoral College have been unable to choose the winners by then, the Presidential Succession Act kicks in.

Then, the first in line to serve as acting president is the House speaker, now Nancy Pelosi. She is followed by the president pro tempore of the Senate, currently Charles Grassley of Iowa, followed by members of the Cabinet.

However, Pelosi would be required to resign from Congress to serve in the temporary Acting President position and she could only serve until Congress finally decided who the new president will be.

The Bottom Line

So, technically, Pelosi could temporarily become acting president on Jan. 20th. But, it is a highly unlikely outcome and would only be short-lived.

Never before has an election been so complicated, with so many hypothetical scenarios and what-ifs. Never before have citizens had to dig into election rules and laws to understand if their vote will count and what the contingencies are in place if a contested election goes off the rails. But, this is indeed what we could be facing this year.

Now it’s Your Turn

How do you see this or another hypothetical election scenario unfolding?

Between now and Election Day, we present to you an in-depth Blanchard exclusive Presidential Election series. Please join us each week as we cover six hypothetical scenarios and detail potential outcomes for the economy, geopolitics, the stock market and precious metals if these scenarios unfold. We invite your comments, questions and insights below.

 

Read Part 1 here: “What happens if….” Trump Wins in a Landslide

Read Part 2 here: “What Happens If….Biden Wins in a Landslide

Read Part 3 here: “What Happens If…Trump Wins on Election Night but Biden Prevails After Mail-in Ballot Count

Read Part 4 here: “What Happens If…” Biden Wins on Election Night…But Trump Prevails After Mail-in Ballot Count

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

 

Monday Morning Wrap Up – October 19, 2020

Posted on Leave a comment

Goldman Sachs says sell U.S. dollar, buy silver. David Beahm Blanchard CEO

Heading into the U.S. election, Goldman Sachs issued new reports over the past week advising its clients to sell the U.S. dollar and to buy silver.

“The risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive outcome — a win by Mr. Trump combined with a meaningful vaccine delay,” Goldman analysts said.

A weaker U.S. dollar is a positive signal for precious metals, and would boost both gold and silver higher. Goldman also warned that the U.S. dollar was vulnerable to a plunge to its 2018 lows.

How high could silver run? Looking ahead, if the U.S. and China move forward with new solar installations plans, Goldman estimates a 9.3% advance to its $30 an ounce silver target. Silver is a major component in solar panels manufacturing.

Billionaire Jeffrey Gundlach warns of stock market crash.

The economy is weaker than you think.

“I don’t think people fully understand how many business closures there’s going to be in the next few months,” he told MarketWatch. Gundlach added that he’s shocked at how many empty storefronts are popping up. “There’s going to be a lot more of that. I think it’s going to really accelerate. I think there’s going to be real problems in the wintertime here.”

How should investors prepare? Gundlach says: Owning 25% of your portfolio in gold isn’t crazy right now.

The final stretch.

We are just two weeks away from Election Day. Over 27 million Americans have already cast their vote in the most contentious presidential election cycle in modern era. You can watch President Trump and Democratic candidate Biden on Thursday night at 9 pm ET in the final debate in Nashville, Tennessee.

Market action.

The stock market gained modestly last week as Wall Street investors continue to watch for news on a potential emergency stimulus package to support the economy ahead of the election.

Gold traded sideways in quiet trade, closing above the $1,900 an ounce level. While the gold market may seem quiet recently, don’t forget – gold at $1,900 an ounce is up about 25% year to date. Gold made a major move earlier this year. Indeed, experts say the historic Bull Run in gold is just getting started.

New record highs for gold ahead! Yes, another big bank calls for new gold highs.

Last week, Canadian Bank TD securities said gold will continue higher no matter who wins the White House next month.

“The resulting record debt and deficits, monetization and the Fed’s ultra-low interest rate policy across the yield curve all imply that gold should see a sustained rally, once the new government starts operating in the early months of 2021,” the TD Securities report said. “It is likely that large fiscal spending programs, topping five trillion dollars over the next two years, will very likely be passed by whoever is in power … Lower real interest rates and weaker USD will be important factors assisting gold in its move to new records.”

TD Securities targets gold’s next move to a new record at $2,100 an ounce.

COVID cases on the rise again.

A massive second wave of COVID infections hit Europe last week. Hospitals are nearing capacity in some countries, with many around the same levels seen during the spring crisis. France issued a new state of emergency and introduced a dramatic curfew in an attempt to stem the growth of the pandemic.

In the U.S. COVID cases are also on the rise again and climbed to their highest levels since mid-August last week. The Midwest has become a new hot spot, with Wisconsin, Indiana and Iowa showing some of the worst infection rates in the nation.

In Kansas City last week, many hospitals hit capacity. Several hospitals were forced to turn ambulances away due to a lack of beds, ABC News and others reported.           

Major unknowns ahead.

The next several weeks are tenuous for the country, the financial markets and maybe even our democracy. With the potential for a contested election and civil unrest, the stock market could be set for a major crash. No matter what lies ahead, owning gold in these uncertain times gives you confidence that your wealth is secure.

Stay safe…

Regards,

David

 Related Reading

A U.S. dollar crash could have serious consequences for many American investors who haven’t properly hedged their portfolios. Learn more here.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

Americans Are Socking Away More Than Ever…But Are Their Savings Safe?

Posted on 1 Comment

Americans historically have been terrible at saving.Savings account passbook with pencil

The COVID-19 crisis changed that.

Indeed, the COVID-19 crisis has changed our lives in so many ways, including how much we save.

Back in 2013, the American personal savings rate stood at a paltry 3%. That compares to Germany (10%), Australia (11%) and France (15%), according to Organization for Economic Cooperation and Development (OECD) data.

Americans who are still employed in 2020 are saving more during the COVID-19 crisis – than ever before in history.

Most experts would argue – a higher savings rate is a good thing. In fact, we agree. Yet, your future financial security depends on where you put that savings (more on that later).

In April at the height of the COVID shelter-in-place lockdowns, American’s savings rate surged to over 30%, according to the St. Louis Federal Reserve. It’s come down since then – but still stood at a respectable 14% as of August.

In fact, total household net worth rose 6.8%, to $119 trillion in the second quarter of 2020, the Federal Reserve said. That gain was the largest in quarterly records back to 1952.

What to Do With Your Savings?

Investors looking for a safe place to store their savings today see meager choices in vehicles that our parents and grandparents used – like certificate of deposits, bank savings accounts or even Treasury securities.

  • Current CD rates stand at 0.27% for a year.
  • The average bank savings account interest rate stands at 0.05%.
  • And, 3-month Treasury bill yields only 0.09%.

When you factor in inflation – you lose money every month you store your money in one of those assets.

  Current Rate Inflation Real Rate of Return
CD 0.27% 4% -3.73%
Bank Savings 0.05% 4% -3.95%
3 Month Treasury Bill 0.09% 4% -3.91%

What Happens If the Dollar Crashes?

To make matters even worse for investors today, the COVID-related explosion in the U.S. government debt leaves Americans so vulnerable to a dollar-crisis.

If the dollar crashes, you lose. It’s really that simple.

This is not something many people think about.

The value of the U.S. dollar – measured as the U.S. dollar index on the global financial markets matters a lot – to your future purchasing power.

Sadly, the Federal Reserve and our government continue to obliterate the future value of our dollars, with every new dollar they print and every new dollar they rack up in government debt.

  • In 2016, the total U.S. government debt stood at $5 trillion, according to Treasury Direct.

What is the national debt today?

  • We just surpassed $27 trillion in October 2020, four years later.

If the dollar index falls you lose.  Then what?

Of course, we all know the U.S. government no longer backs its dollars with gold. Yet, the government has printed more dollars by the trillions – just this year alone!

What does that do to the value of the piece of paper in your pocket? As we learned in Econ 101, more of anything dilutes the value.

Can you trust the value of the U.S. dollar to stay the same?

Absolutely not!

Today the U.S. dollar is increasingly vulnerable to a major crash due to central bank money printing and massive government debt.

Stephen Roach, Yale University Senior Fellow and former Morgan Stanley Asia chairman, told CNBC this summer that a dollar crash is looming.

“The dollar is going to fall very, very sharply. These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead,” said Roach.

His forecast calls for a 35% drop against other major currencies within the next few years!

What will that do to the real rate of return on CDs, savings and treasury bills? You can bet it will be worse than the -3% to -4% you’re getting now.

Want a safe, liquid asset that keeps your purchasing power intact?

Gold Preserves Your Purchasing Power

It’s no wonder that investors in the U.S. are turning to gold in 2020. Major investment firms have even called gold a “bond alternative” this year.

When you are investing for the long term you want to increase your wealth and preserve your purchasing power. Gold does that for you.

Legendary investor Warren Buffett highlighted this critical point in his 2014 letter to Berkshire Hathaway shareholders. Buffett explained how over the past 50 years, the purchasing power of the U.S. dollar fell 87%. That means it now takes $1 to buy something that could be purchased for 13 cents in 1965, as measured by the Consumer Price Index. That’s simply from inflation!

A dollar simply doesn’t buy what it did 20 years ago and will buy even less 20 years in the future – especially as the government enacts policies that weaken our currency.

You need your investments to hedge against currency volatility and to keep up with the pace (or exceed) the rate of inflation in order to preserve your purchasing power.

Gold and the dollar have what is known as an ‘inverse correlation.’

Gold is a traditional hedge against inflation and tends to increase often significantly during inflationary periods. And also – this is important – when the dollar goes down, gold goes up.

Turn to the safety of gold

In today’s uncertain world, where you put your savings is more important than ever.

Don’t let your hard earned savings crash in value – as government policies leave the U.S. dollar at risk.  

When you invest your savings into tangible assets like gold and silver you can be assured your future purchasing power will be preserved. Just as it has been for thousands of years, gold is a store of wealth, an asset without credit risk related to any government. Gold is an alternative currency and some may say the only real currency. You can take that to the vault.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

“What Happens If…” Biden Wins on Election Night…But Trump Prevails After Mail-in Ballot Count

Posted on Leave a comment

Rejected Ballots Deliver Win to Trump.American flag in cabin

It’s Election Night 2020.

Democratic contender Joe Biden is ahead in the popular vote as of 9 pm ET.

Traditional “Blue” states like Washington, Oregon, California, New York and Illinois have been called for Biden.

Key battleground states like Minnesota, Wisconsin, Michigan and Pennsylvania with their rich number of Electoral votes are still undecided.

Will those states go to Trump or Biden? Americans across the country are glued to their favorite television channel watching the returns and waiting…

Electoral College Will Decide Election

As of 10 pm ET, it becomes clear that the battleground states of Minnesota, Wisconsin, Michigan and Pennsylvania will decide the Electoral College victory and with that – the White House, no matter who wins the popular vote.

Popular Vote Goes Big for Biden

Voters remember that Hillary Clinton won the popular vote in 2016 by nearly 3 million votes. And, today Joe Biden is a lot more popular than Hillary Clinton ever was.

By 10:30 pm the popular vote shows Biden trouncing President Trump. Biden is ahead by 7 million votes! But, of course, the popular vote doesn’t matter in our country. 

All that matters is which candidate earns 270 Electoral College Votes.

Waiting on the Mail-In Ballots…

TV news anchors tell viewers – there are still millions of mail-in votes that have not been counted!

Indeed, many states don’t allow the processing or counting of absentee ballots until Election Day. Processing simply means getting the ballot ready to be counted (signature verification and opening the envelopes).

In fact, Wisconsin and Pennsylvania do not allow votes to be counted or processed before Election Day. In Minnesota, ballots can be processed when they are received – however ballots cannot be counted until after the polls close in that state.

By 11 pm ET, news anchors are reporting that thousands and thousands of mail in ballots are being rejected!

The media reminds the country that these are most likely Democratic votes that are being tossed. Pre-election surveys showed Democrats twice as likely to vote by mail as Republicans.  

It turns out that in the 2016 presidential election, 315,651 absentee (mail-in) ballots were rejected. Yet, even weeks ahead of the 2020 presidential election, experts were warning well over a million Americans could lose their vote on Nov. 3.

Why?

In the contested 2000 Florida presidential election that went all the way to the Supreme Court – the culprit was hanging chads on paper ballots.

In 2020 – it turns out that mismatched signatures, voters who have moved since requesting their ballot and post-marks after Election Day are the major reasons over a million votes are thrown out.

As Americans wearily go to bed on Election night, Biden is well ahead in the popular vote. Yet, the states that will decide the 2020 election through the Electoral College (Minnesota, Wisconsin, Michigan and Pennsylvania) have not been called – and the nation must wait for mail in votes to be counted.

Market Reaction

On Election Night, the stock market sells-off hard amid both the uncertainty and the expectations that Biden could win. Gold climbs quickly to a new all-time record high at $2,100 as investors rush to safe haven assets and on concerns that Biden’s policies would be inflationary.

What We Knew Ahead of the Election

Ahead of the election, hundreds of lawsuits clogged the courts over how signatures are evaluated on mail in ballots and whether voters can fix ballots that get tossed and other mail in voting issues. President Trump and the Republicans fought hard for strict signature matches. While, the Democrats argued for easier rules that gave people a chance to prove their identity, even if their John Hancock may have changed a little bit.

“At least 1.03 million absentee ballots could be tossed if half of the nation votes by mail. Discarded votes jump to 1.55 million if 75% of the country votes absentee. In the latter scenario, more than 185,000 votes could be lost in Florida, North Carolina, Pennsylvania, and Wisconsin – states considered key to capturing the White House,” according to an Oct. 8 USA Today article.

Fast forward to the results in our hypothetical scenario…

The Red Sweep!

By November 10 – the key battleground states have finished counting their mail in ballots and it is announced – Trump wins!

Despite Biden’s crushing lead in the popular vote, almost 2 million mail in ballots were tossed due to technicalities, which delivered Trump the Electoral College and the White House for another four years.

Sound farfetched? Not really. Consider this.

President Trump won Wisconsin in 2016 by almost 23,000 votes.

Yet, more than 23,000 absentee ballots were rejected in the state’s presidential primary in April 2020.

Also, over 37,000 primary ballots were rejected in June in Pennsylvania, a state Trump won by just over 44,000 votes, according to NPR analysis.

In a close election, every ballot that is counted – or is not counted truly matters.

Why did this happen? Thousands of first-time mail in voters made simple mistakes that led to their ballots being tossed.

Pre-election studies revealed that voters of color and young voters were more likely than others to have their ballots not count because required signatures are missing or don’t match the one on record, or because the ballot arrives too late.

  • Rejected ballots are even more widespread in Black and Hispanic communities. A University of Florida study found Black and Hispanic voters in the state were twice as likely to have their ballots rejected as White voters.
  • Younger voters were also more likely to have their ballots rejected than older voters, according to University of Florida professor Daniel Smith, who compiled the data from the Florida Division of Elections.

Voters saw evidence of this weeks ahead of Election Day 2020.

In North Carolina, as of September 17, 2020 Black voter’s ballots were rejected at a 4.7% rate versus White voters ballots rejected at a 1.1% rate.

Yet these ballots were tossed in 2020 – as the hundreds of lawsuits leading up to the election were ruled on favorably by the heavily conservative U.S. court system.

Another four years is confirmed for President Trump.

Markets and Economy under President Trump’s Second Term

We detail forecast and outlook for the economy and markets under a second Trump Presidency here. Key policy plans include falling tax rates, rising government debt, continued easing of environmental regulations and increased isolation of American within the world global power structure.

Now it’s Your Turn

How do you see this or another hypothetical election scenario unfolding? We invite your comments below!

Between now and Election Day, we present to you an in-depth Blanchard exclusive Presidential Election series. Please join us each week as we cover six hypothetical scenarios and detail potential outcomes for the economy, geopolitics, the stock market and precious metals if these scenarios unfold. We invite your comments, questions and insights below in this interactive event.

Read Part 1 here: “What happens if….” Trump Wins in a Landslide

Read Part 2 here: “What Happens If….” Biden Wins in a Landslide

Read Part 3 here: “What Happens If…” Trump Wins on Election Night but Biden Prevails After Mail-in Ballot Count

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

Understanding the Early Ideals of the Nation with the Fugio Cent

Posted on Leave a comment

The Fugio cent offers insight into the psychology of the nation in its earliest days. The design was the work of Benjamin Franklin and represents two key ideas that seem to be ever-present is his work and life: dedication to one’s business affairs and an unwavering desire to remain productive.Fugio Cent Obverse Side

The coin was minted from copper and was developed when the Congress of the Confederation authorized the design. Production lasted for only one year in 1787.

The word “fugio” on the coin is Latin for “I flee.” This word, in combination with the image of a sundial, is a reference to the perception that time escapes us and is always rushing by. The decision to convey this idea may have emerged from the immense change Franklin experienced in his life over such a short period. Or, perhaps it was his attempt to communicate that there was still much work to be done amid the nation building he was pursuing. What remains clear is that Franklin’s writings, including his autobiography, communicate an intense need to achieve goals and better himself with every passing day. The design of the piece echoes this strongly.

Interestingly, Franklin also decided to include the words “mind your business” on the coin. This could easily be confused with the common contemporary phrase “mind your own business,” however Franklin did not intend to communicate this idea. Instead, he likely meant to communicate that others should literally keep their business affairs at the center of their thinking. Franklin himself was a fervent business man.

On the reverse side was the motto “We Are One” referring to the solidarity of the thirteen original colonies which were represented visually with thirteen linked rings around the perimeter. In time this motto would be replaced with “E pluribus unum.” 

Like so many other early coins there were errors made along the way. It has been reported that an additional fifth line was mistakenly added to the Roman numeral IIII on the ring surrounding the sundial. To correct this flaw the die was adjusted to include a small design flourish intended to cover the extra stroke. Additionally, the “G” in “FUGIO” had to be accomplished by adding a small crossbar to the letter “C” which was mistakenly part of the press. 

Just one year after minting began the Bank of New York allocated several thousand of the coins to storage. They remained in storage for more than six decades until they were transferred to another area in the basement. They sat for another seventy years before being rediscovered in 1946 when many of the coins were distributed to individuals as souvenirs. All of the coins were in mint state condition upon discovery. After distributing several thousand pieces the bank retained 819 coins which are believed to still be in their possession today.

Today the imperfections of the design and forthright style of the words engraved represent a charming roughness that is emblematic of the burgeoning years of the nation. Moreover, the Fugio cent is a testament to the boldness of Benjamin Franklin and his urging to all others that our time is short and we must make the most of it.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

Monday Morning Wrap Up – October 12, 2020

Posted on Leave a comment

Will we get an October surprise?David Beahm Blanchard CEO

News events are moving at breakneck speed.

In the span of one week:

  • President Trump was hospitalized for COVID-19, released and is now back at home in the White House giving re-election rally speeches.
  • The second presidential debate between President Trump and Democratic candidate Joe Biden was cancelled as Trump declined to participate in a virtual debate.
  • The FBI charged six men with a plot to kidnap Michigan Governor Gretchen Whitmer from her vacation home with a plan to take her to Wisconsin and put her on trial for treason. Seven more men face state charges as part of the same plot, which included plans to attack law enforcement, overthrow the government and start a civil war.
  • Trump tweeted that there would be no stimulus bill until after the election. Stocks promptly sank sharply in after-hours trading. Then, the President swiftly reversed course and said he would support a stimulus bill. Over the weekend, Administration and Congressional officials continue to negotiate on a potential stimulus offer that could be worth $1.8 billion.
  • New COVID-19 cases are surging in France, Spain and the U.K and is straining hospital systems there amid the onset of winter, the Wall Street Journal said.

That’s right. Just one week.

Meanwhile, Election Day is 23 days away.

Will we get an October surprise that could shake up the country ahead of the election? This is 2020. I wouldn’t bet against it.

The near-term fate of the stock market may well hinge on whether or not a stimulus deal is passed ahead of the election. Economic data is continuing to weaken and experts warn layoffs will become permanent without the support of another emergency stimulus package. The stock market swung lower and higher last week based on presidential tweets and shifting expectations on a potential stimulus deal.

Gold prices climbed nearly 2% on Friday as investors continue to turn to precious metals as a safe haven in these ever-increasingly turbulent times.

Indeed, amid the tense conditions ahead of the November election, the country remains fixated on the state of the economy. New polls by Gallop and the Pew Research Center both found that the biggest problem facing Americans is the economy.

Last week, we saw another round of initial jobless claims – with 840,000 new U.S. citizens filing for unemployment. That is little changed from the 849,000 number we saw in the week prior. Don’t be fooled. These numbers are running higher than the worst week of the 2008-2009 Great Recession. The pandemic has created a recession far more damaging to the U.S. labor market than the Great Recession.

Biden win could be best for gold

Last week, a new Saxo Bank report said that a Biden White House victory could create an environment for gold prices to move higher. A Biden win would be viewed as more inflationary by the markets, which would send gold prices higher, the report said.

Treasury Bonds Continue To Lose Their Allure

In today’s zero-interest rate environment, Treasury bonds continue to fall in stature.

A headline: “Treasurys Lose Status as Safety Net for Investors” last week in The Wall Street Journal underscored how the central bank stimulus measures in the COVID-19 crisis are permanently changing the role of bonds in a portfolio. In the past, investors reliably bought bonds as a portfolio diversifier with the expectation bonds would act as an effective hedge against stocks.

No more.

“It is rare for stocks and government bonds both to fall in value together. But, that happened in March,” The Wall Street Journal article stated. “A basic 60% stocks – 40% Treasurys portfolio suffered one of the worst single-month losses since the 1960’s according to Goldman Sachs.”

The Fed has indeed locked the U.S. government bond market into a tight range with its promises that interest rates are not going up or down for a long time.

The sad truth is that if you buy high-quality bonds today, you’ll collect very little yield.

The 10-year Treasury note currently offers a 0.77% return. Once you factor in inflation – this is indeed a losing proposition. It is part of the reason so many investors are turning to gold…

Gold is shining bright

Gold set a new all-time record high this year and the precious metals outlook remains strong. With the tumultuous events of just one week, we continue brace for the next onslaught of panic, uncertainties and surprises.

What will this year’s October surprise? No matter what it is – we vote for gold as the asset to help you ride through the current storm to financial safety.

Stay well. Until next week…

Regards,

David

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.

“What Happens If…Trump Wins on Election Night but Biden Prevails After Mail-in Ballot Count”

Posted on Leave a comment

The Red Mirage…and Blue ShiftAmerican Flag Wave

 It’s Election Day 2020. Tensions are high. Alarm bells have been sounding for weeks with President Trump’s repeated statements that mail-in ballots are rigged.

Polls in recent weeks have shown that Democrats planned to vote by mail at a much higher rate than Republicans. Indeed, in key swing state Wisconsin, a Marquette University poll revealed that 47% of Democrats plan to vote by mail, while just 18% of Republicans do.

Voters across America who have become accustomed to learning the outcome of the contest on election night will be disappointed this year.

As the early returns begin to roll in on the evening of November 3rd – it’s a sea of red on the U.S. map. Where most states, including key swing states, do not have decisive winners, President Trump is ahead in the count. It appears that the President is winning across the country!

However…mail in votes aren’t counted yet…It’s a red mirage (it looks like Trump has won)…but once mail in ballots are counted…a blue shift will appear…

Complicating this year’s count, key swing states like Wisconsin, Michigan and Pennsylvania can’t, by law, start preparing mail ballots to be counted until Election Day.

With large numbers of Democrats casting their votes by mail – that means most Democratic ballots will not be counted on election night.

Even though many states have not been called for Trump, his campaign declares a victory at 11:15 pm ET!

Following through on his belief that the nation “must know Election results on the night of the Election,” per his Tweet – Trump launches into his acceptance speech.

Political broadcasters attempt to clarify to the nation that, in fact, the election has not concluded. Indeed, the view of the U.S. map on TV screens is mostly red, but only with a lead, not decisive wins.

Yet, conservative internet news sites declare Trump the victor. The ‘news’ spreads fast on social media that Trump won on election night.

Major broadcast networks attempt to tell the nation that the election is not over…yet millions don’t believe the ‘fake news.’

Claiming widespread “voter irregularities,” the Trump Administration begins its campaign to stop additional vote counts.

The nation wakes up on November 4th to the news that President Trump is attempting to stop the mail-in vote count that is still occurring in many states. Attorney General Bill Barr orders the seizure of mail-in ballots to ensure the vote counting will stop.

Conservative social media claims the Democrats are trying to steal the election and the President’s base takes to the streets to defend his ‘victory’ on election night. Violent outbreaks occur in major cities across the nation as disinformation spreads on social media about the danger posed by pro-Biden demonstrators and supposed Antifa violence.

[Editor’s note: While this may sound like an extreme turn of events, parts of this scenario were gamed out over the summer by the Transition Integrity Project (TIP), a bipartisan group of current and former government officials and campaign leaders.]

Market Reaction

The stock market plunges on November 4th – as the international news media reports that presidential election results are not official, yet Trump has claimed victory. The U.S. dollar tumbles and foreign investors sell Treasury bonds in a vote of no-confidence in the apparent political instability of America. Gold and silver soars as investors turn to a safe haven amid the chaos, panic and fear.

Throughout November, dozens of lawsuits are filed. President Trump still maintains that he is the winner of the election. Candidate Joe Biden has not yet conceded.

U.S. International Standing Falls

By now, the U.S. stock market has fallen into a bear market – and is down 35% amid the failure to achieve a peaceful transfer of power. Gold hits a new record high at $3,000.

Governments around the world point at the United States and claim the fall of American democracy has begun.

Russia and China continue their efforts to squeeze the U.S. dollar out of international commerce and sign a new deal which allows for trade using the yuan. Several Asian countries and European countries sign on as well – as they see the writing on the wall that the U.S. is a superpower in decline.

S&P cut the long-term U.S. credit rating by several notches, with a negative outlook. Suddenly interest rates in the U.S. spike – as foreigners are no longer interested in buying U.S. Treasury debt. Yet, the country must continue to sell new Treasury securities to pay the interest coming due on the nation’s gargantuan $27 trillion in debt.

As the lawsuits wind their way through the courts – lower courts rule the counting must continue. The states resume their counts of the mail in ballots. The Supreme Court affirms a case that yes, all mail-in votes must be counted.

White House Operations Moves to Palm Beach

By Thanksgiving it is clear that Joe Biden has won the election as all the mail-in ballots are finally counted.

The mainstream news media announces that Biden is the winner of the United States 2020 Presidential Election. President Trump still hasn’t conceded – yet he moves his family and key staffers to Palm Beach, Florida. Trump announces he is moving White House operations to his resort The Mar-a-Lago Club.

While Trump never concedes, the inauguration of Joe Biden occurs on schedule in January and the new Democratic Administration takes power. The stock market recovers slowly and interest rates come down as some semblance of normalcy returns in 2021. Yet, gold and silver prices remain high – as investors know how close the country came to the edge of democracy.

Now it’s Your Turn

How do you see this or other hypothetical election scenario unfolding? We invite your comments below!

Between now and Election Day, we present to you an in-depth Blanchard exclusive Presidential Election series. Please join us each week as we cover six hypothetical scenarios and detail potential outcomes for the economy, geopolitics, the stock market and precious metals if these scenarios unfold. We invite your comments, questions and insights below in this interactive event.

Read Part 1 here: “What happens if….” Trump Wins in a Landslide

Read Part 2 here: “What Happens If….Biden Wins in a Landslide

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.