The 1921 Peace Dollar
Posted onSoon after World War I ended, the US decided to commemorate the peace that followed with a dollar coin. When it came time to design the artwork officials had the idea to host a competition. Artists could submit designs and a winner would be selected and receive the honor of seeing 
their work on an approved piece of US currency consisting almost entirely of silver. Additionally, the winner would be awarded $1,500 in prize money. The coin was referred to as the Peace dollar.
Italian American sculptor Anthony de Francisci submitted a design which was unanimously selected by the official judges. The win was especially impressive given that de Francisci was the youngest of the artists to enter the competition. He was only 34. His wife Teresa served as the model for Liberty. It was, however, another characteristic of his work that sparked outrage.
To visually represent the theme of peace, de Francisci included imagery of an eagle perched on a broken sword. When the first written descriptions of the artwork were shared with the public many people admonished de Francisci and other officials by citing the work as emblematic of defeat. One editorial, printed in the New York Herald, remarked that “a broken sword carries with it only unpleasant associations.” The author continued, “it is regrettable that the artist should have made such an error in symbolism.”
It is likely that this sentiment was shared by others because not long after the printing of the editorial officials relented and decided to move the broken sword. They did so by hiring another artist to adjust other elements in the design in such a way as to cover the broken sword. To achieve this effect the artist made alterations to the eagle’s talons and the olive branches that were part of the original image. Accentuating these features obscured the parts of the original people believed to be defeatist.
Eventually, the design earned approval and in 1921 the US Mint struck over one million pieces. The coin was eventually released to the public in early January of 1922 with a composition of .900 silver and .100 copper. In time, the mint in Denver and in San Francisco issued additional pieces along with the Philadelphia mint. In 1922 alone, the total combined issuance of these three mints was 84 million pieces. By 1928 the mints ended their issuance of the Peace dollars.
However, in 1934 the US resumed minting the Peace dollar. This resurgence was the result of a newly passed Congressional act which mandated that the mint would purchase bulk quantities of silver which, at the time, could be bought at record low prices. As a result, between 1934 and 1935 the US mint struck approximately seven million additional Peace dollars.
Today this single coin represents so many aspects of American culture. It represents the ambitions of a young Italian American, a celebration of peace, and the ingenuity of the mints that were able to issue such vast quantities.
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Monday Morning Wrap Up: April 20, 2020
Posted on — 4 CommentsA message from David Beahm
President and CEO
Over the past several years of rising stock prices and economic growth, “market risk” was an abstract concept.
The coronavirus, that seemingly emerged out of nowhere in the past few months, changed all that. Risk is no longer an abstract concept for any American today. With face masks now the new normal, so many things about daily life are different. While this may be hard to hear, there won’t be an easy path to a fast economic recovery.
If you’ve been checking your retirement balances in recent weeks, it has been a horror show. The first quarter of 2020 revealed the importance of diversification and proper asset allocation in order to protect your money.
So where are you now? Are you confident about your portfolio allocation and diversification percentages? Or, do you have questions about how long the recession will last and what could lie ahead for financial markets? And, most importantly are you wondering what this could mean for your finances and investments in the months and years ahead.
Wherever you are at today, Blanchard is here for you. We believe it is beneficial to talk with a portfolio manager at least on a quarterly basis. Even if you aren’t considering making any moves, we can offer insights, perspective and assurances. Call us today, even if it just to check in. Our portfolio managers watch new economic data and market moves closely and have their finger on the pulse of the market. Rely on our expertise during these challenging times. Call us today at 1-800-880-4653 even if it is just to let us know if you enjoy our Monday morning reports.
IMF Offers Stark Forecast
The global outlook continues to darken with every passing week of the health crisis. The International Monetary Fund warned last week the world is facing the worst financial crisis since the 1930’s Great Depression. The IMF projected a 3% decline in the global economy in 2020, well below the 0.1% contraction recorded in the 2008 global financial crisis.
“The current recession has likely reduced economic activity by 11.8% peak to trough, which is roughly three times the decline seen during the Great Recession in one-third of the time,” S&P Global said last week.
Gold soars to 7 1/2 Year High
In the midst of this unprecedented crisis, gold soared above the $1,700 an ounce level last week hitting a fresh high. The bull market in gold is still in its infancy. As governments and central banks around the world embark on historic and expansive stimulus measures, forecasts are growing for gold to hit new all-time highs within the next year, well above the $2,000 per ounce level.
Safe haven demand and a pick-up in inflation expectations are also driving fresh demand for gold and will continue to fuel additional price gains.
While gold already hit Bank of America’s 2020 price target last week, analysts at the bank issued a new report saying all-time highs are now within view. Looking back in recent decades there is precedence for double-digit rallies in gold, they said.
“Gold prices have rallied 20% or more 15 times since 1981 and 30% or more seven times. The biggest rallies were in 2006-2011 during the late cycle equity rally into and after the Global Financial Crisis,” the Bank of America analysts said. “If $1,947 were to be reached, then gold would be up 27% YTD [year to date]. A 31% YTD rally reaches $2,000. A 41% rally like 2006 reaches $2,150.”
North Korean hacking threatens U.S. and global financial system.
It’s not just coronavirus risks that threaten fiat money stability, other forces are at play as well. Last week, U.S. government officials issued a warning about the threat of North Korean hackers.
It is widely known that North Korea has been aggressively pursing a massive global money grab campaign for several years. The North Korean illegal activities include digital theft stealing tens of millions of dollars in cash from ATMs, implementing enormous thefts at major banks, hijacking and extorting computer users worldwide and infiltrating digital currency exchanges.
A 2019 U.N. report concluded that North Korea had stolen about $2 billion for its weapons of mass destruction programs using “widespread and increasingly sophisticated” hacking efforts.
U.S. officials stated last week that North Korea’s hacking attempts “threaten the United States and countries around the world and, in particular, pose a significant threat to the integrity and stability of the international financial system.”
Food Supply Chain Tested By Covid-19
In other crisis news, Bloomberg reported last week that “on land and sea, vital supplies hit snags as pandemic deepens; Ship crews are stuck on board and truckers held up at borders…Covid-19 is about to put the global trading system through its most dramatic stress-test since World War II, with supply lines for essential food and medical goods entering a critical phase as the pandemic peaks in the U.S. and Europe.”
COVID-19 hit the meat sector last week. Smithfield Foods Inc., the world’s largest pork processor, shuttered U.S. bacon and ham plants last week after a coronavirus outbreak at one if its plants.
Social Unrest in U.S. Picks Up
With May just around the corner, the great debate is on in Washington D.C. and in state capitols around the country: When to reopen the economy?
Protests have popped up around the country, with some citizens banding together calling for the economy to reopen. Will stay-at-home orders be extended on May 1 and will states begin to reopen restaurants, businesses and stores?
The next several weeks will be pivotal for the health crisis and the economy. We will continue to update you here every Monday morning.
One thing hasn’t changed. In the midst of unprecedented uncertainty, gold remains the pillar of safety and security. An asset you can trust and count on to protect and grow your wealth.
Thank you for reading this.
Be safe,
David
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Why “Saints” Are Special
Posted onIt is often called one of the most beautiful U.S. coins.
For serious collectors, the impressive 1907 High Relief Double Eagle designed by Augustus Saint-Gaudens is often their first major purchase. For others, this prized $20 gold coin represents an aspirational trophy, which is highly coveted in the numismatics world.
What makes this unique coin so special?
For starters, the story behind the development of these coins is legendary.
Affectionately known as “Saints,” these awe-inspiring coins exist due to the partnership between two monumental historical figures of their day.
Not a big fan of American coins in circulation President Theodore Roosevelt called their design “atrocious hideousness.” He set out to rectify that.
President Roosevelt began his vision to reshape the nation’s coinage unleashing the majestic talent of Augustus Saint-Gaudens, a brilliant sculptor of that time. As the story goes, at a Washington dinner party one evening, Roosevelt tasked Saint-Gaudens with the grand undertaking to redesign America’s gold coins.
Both men admired Greece’s ancient coins and agreed that U.S. gold coins developed in that fashion would be a monumental achievement. They were right. Today, 113 years after this coin was minted, it still takes your breath away.
High Relief Made Coin Difficult to Stack
There is a relatively high survival rate of the mintage of just over 12,000 of the 1907 High Relief Double Eagles. Rumor has it, collectors immediately started acquiring these coins right after their minting.
These Saints were intensely desired due to their unique High Relief pattern. While the high relief is one of the features that collectors most admire today, it was also the reason the coin pattern was not continued. The high relief pattern, while beautiful, created problems for bankers who wanted to stack coins in back offices and also challenges in everyday commerce.
Other Unique Characteristics of 1907 Saints
The obverse of the coin shows the date in Roman numerals!
Also, the omnipresent IN GOD WE TRUST motto is noticeably absent from this coin. President Roosevelt believed the coin could be used for ungodly activities like gambling (or worse!) and did not want the name of God used on the coin.
The Coin’s Appearance
If you haven’t held a $20 Gold Double Eagle in your hand, imagine this.
The obverse showcases a dramatic full-length portrait of Liberty in a flowing gown, heralding a torch in her right hand and an olive branch in her left. She is featured in full stride with rays of sunlight behind her. Above her the word LIBERTY sits atop the coin.
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Monday Morning Wrap Up: April 13, 2020
Posted on — 1 CommentA message from David Beahm
President and CEO
Crisis Reshapes the Future
Black Swan. Nassim Taleb, a professor of risk engineering at New York University, popularized the term: Black Swan. It is defined as a highly improbable event with major consequences.
Think back just a few months ago.
At the beginning of 2020, the stock market was hitting new all-time highs, the unemployment rate was at a 50-year low, the economy continued to grow in the longest post-WWII expansion phase on record.
The COVID-19 health and economic crisis most certainly fits the definition of a Black Swan.
Fast forward to mid-April. There are reports the rate of coronavirus infection could be close to peaking in some states. Yet, America still faces weeks and months ahead of uncertainty and the potential for a resurgence in the virus.
Individuals, small businesses and corporations must work through the economic devastation that hit our country like a deadly F-5 tornado that struck Kansas unexpectedly one spring afternoon. This will take time. Things will look different in the months and years ahead.
Main Street and Wall Street are bracing for a second quarter that will likely record the deepest economic decline our generation has ever seen. Economists predict a double-digit unemployment rate that could easily last well into summer.
The COVID-19 stock market crash triggered a massive run on physical gold as individuals search for safety in the economic storm. This bull run in gold is projected to last throughout this current decade with record price highs.
Why? The COVID-19 crisis is reshaping our future with economic recession, bankruptcies, a massive increase in new government debt, and an unlimited expansion of the Federal Reserve’s money printing polices. QE infinity.
Even before this crisis hit, the U.S. economy was skating along in a bubble blown up by a decade of ultra-low and accommodative Federal Reserve monetary policy. Never before has our country seen interest rates so low for so long. The bubble has now burst and what lies ahead will be something we have never seen before. The crisis is setting gold up for one of the biggest bull phases in history.
Here are a few key news events from last week that will continue to support gains in gold in the months and years ahead.
National Debt Tops $24 Trillion
The national debt hit a new all-time record high above $24 trillion last week. In 1996, the national debt stood at $5 trillion. In 24 years, the debt has nearly quintupled.
The crisis is reshaping our future in very significant ways. What are the future ramifications of unsustainable debt?
- Higher interest rates.
- Lower economic growth.
- Less money to spend on government programs.
- Higher income tax rates.
In the future, this means Americans will face higher interest rates as the government will have to offer better rates to fund its debt repayment, lower levels of fiscal spending on things like the military, health research, education, social programs like Social Security and Medicare as more and more of the budget will have to go toward debt repayment, and it will mean higher income tax rates.
Economy in Free Fall
The lockdown measures currently in place across America will result in a double-digit economic contraction and recession in Q2 GDP. The consumer spending sector is most impacted by this crisis and conservative estimates peg second quarter gross domestic product at a stunning 20% decline. Former Fed Chair Yellen recently warned the economy could fall 30% this quarter.
Nearly 17 million Americans have now filed for unemployment benefits since mid-March. At this pace, a 20% unemployment rate is easy to expect. That is nearly double the unemployment rate we saw in the 2007-09 recession, but not quite as severe as the 25% unemployment rate seen during the 1930’s Great Depression. Every economic recession takes time to heal. It could be years before the unemployment rate comes back down.
Consumers Throw in the Towel
No surprise, consumer confidence plunged to an 8-year low in April. Last week, we saw the University of Michigan sentiment survey tumble 18.1 points to 71.0. The plummeting confidence numbers were driven primarily by the current conditions index. That’s no surprise since almost 17 million Americans lost their jobs in less than one month.
Bear Market Rallies – Beware of False Starts
While the stock market saw mild improvement last week, bear market rallies are a common phenomenon. After the market crash in 2008, the S&P 500 staged six different bear market bounces. Beware of false starts.
Capital Economics wrote in a research note to clients that a “sustained recovery in equity prices is unlikely until clear evidence emerges that coronavirus is being brought under control around the world. That still seems some way off…. What’s more, big increases in equity prices are quite common after major corrections and don’t necessarily mean that bear markets are over. For example, the rise in the Euro Stoxx 50 since mid-March is reminiscent of what happened to that index a similar amount of time after the collapse of Lehman Brothers during the Global Financial Crisis (GFC). It subsequently fell back to a fresh low.”
Fed Money Printing
In recent weeks, the Federal Reserve bought almost $1.2 trillion of government securities as new money printing and QE infinity kicks into gear. What lies ahead? As the U.S. Treasury auctions new bonds to pay for the $2 trillion fiscal stimulus package Congress just approved, the Fed will have to keep buying to prevent a massive spike in interest rates.
It is a like a house of cards. The Treasury sells bonds to fund public programs like the emergency stimulus package. Then, the Fed prints money to buy those bonds.
All houses of cards eventually fall to the ground.
Gold is an asset that will be left standing when that happens.
Black Swan Events
While you can’t predict what a black swan event could be, or when it will hit, we do know that they emerge at a fairly reliable pace throughout history.
We as a country will survive this crisis, but our future will be reshaped by it. And, we know there will be another black swan in the future.
Throughout it all, gold will continue to provide individuals a safe-haven investment to grow, protect and preserve wealth in these uncertain times.
Best wishes,
David
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Special Report: The Long Bear Market in Silver – Part Two
Posted onThis is part two of our special report on the long silver bear market. You can read part one of this comprehensive article here.
Why Should You Act Now?
CPM has an impressive track record with recommendations. They don’t come often and when they do they are extremely profitable.
- CPM’s previous intermediate-term investor recommendation on silver was on 2 May 2011, when silver touched $48.19 and CPM advised selling.
- The theoretical return from following CPM’s buy and sell recommendations would have been 57,434.3%, or an 18.9% compounded return.
Major Buy Signal in Gold/Silver Ratio
Here’s another reason you should act now.
The gold/silver ratio is showing a historical buy signal, which is a reliable buy and sell indicator for silver in recent decades. Here’s some background.
Since 1971 – when the gold standard was ended, the price of gold and silver have floated freely within a large range. The gold/silver ratio hit a low at 14 in 1980 – when both gold and silver hit historical highs in the wake of massive double digit inflation in the United States. The ratio approached 100 in 1991 as silver prices tumbled to a 20-year low. Those are extreme anomalies however.
Where is the gold/silver ratio now? Another historical anomaly at 111!
What is this indicator? The gold/silver ratio is simply the amount of silver it takes to purchase one ounce of gold. The history of the gold/silver ratio can be traced as far back as Roman times. Then, the ratio was fixed at 12 or 12.5. In the 18th and 19th centuries governments around the world fixed the ratio as a way to ensure monetary stability – as gold and silver coins were widely used in trade, commerce and everyday purchases. For example, the Coinage Act of 1792 in the U.S. deemed the gold/silver ratio at 15:1.
In more recent decades, gold/silver ratio readings above 65 signaled that silver is severely undervalued and was a strong buy signal for the metal. The latest 111 reading is historically high, which means silver prices right now offers investors incredible long-term value. On the lower extreme, a very low gold/silver ratio under 50 signals that gold is cheap by historical measures.
Gold silver/ratio 65 > or greater means silver is a relative bargain
Gold silver/ratio 50 < or lower means gold is a relative bargain
The current 111 reading signals one of the best buying opportunities in silver since 2003 when silver was trading around $5.00 an ounce.
How High Could Silver Climb in 2020?
“CPM projects that silver prices might rise around 11.7% in 2020 on an annual average basis, to around $18.12 for the full year. Further price increases are expected later. Mine production is projected to be flat to slightly lower, while secondary recovery from scrap may rise somewhat due to increased recycling of spent electronics and other silver-bearing products due to heightened environmental awareness, more stringent recycling laws, and somewhat higher silver prices. Fabrication demand is projected to increase perhaps 1.6% in 2020 from 2019’s level of demand.”
“Further price increases are expected, but beyond 2020, and only when long-term investors resume buying larger volumes of physical silver. When that happens, silver prices could rise dramatically. It may be several years before that happens. Meanwhile silver prices are expected to rise modestly,” CPM Group said.
Buy Low, Sell High
Silver prices are higher now compared to where they have been in most of history, yet dramatically lower than the all-time high.
For perspective, the current silver price at around $15 an ounce level is well above the $4.00-$6.00 range where silver traded from late 1998 into late 2003. Yet, it is dramatically below the nearly $50 an ounce high in 2011.
Again, current silver prices are very low compared to the 2011 high.
If you buy silver now, there is potential for you to double or triple your money in a few years’ time as the bulls drive the market back toward the 2011 high.
Buy low, sell high – that’s something you probably learned in Econ 101.
Historical market opportunities usually don’t last long. Use the current softness in silver as an opportunity to build up your silver exposure. When prices are higher a year from now you’ll be glad you did.
Another Bullish View
Here’s what the Silver Institute said last month.
“The Silver Institute believes that macroeconomic and geopolitical conditions will remain broadly supportive for precious metals, encouraging investors to stay net buyers of silver overall, a development that should lift silver prices higher this year. Additionally, we see continued growth in physical silver investment, and forecast silver’s use as an industrial metal will rise in 2020.”
“The outlook for silver remains positive, with the annual average price projected to rise by 13% to a six-year high of $18.40 in 2020. This rally is premised mainly on a positive spill-over from gains in gold, as the yellow metal will continue to benefit from macroeconomic and geopolitical uncertainties across critical economies. Concerns about the state of the global economy will have possible negative consequences for the industrial metals, and by extension, silver. However, the weight of institutional money flowing into a relatively small market should prove sufficient for silver to outperform gold, and could cause the gold: silver ratio to drop to the mid to high-70s later this year,” the Silver Institute said.
Getting Started is Easy
From an investment standpoint, silver offers investors perhaps a once in a generation buying opportunity. Not only is silver a less expensive precious metal than gold, but it also sees additional demand from industry, technology and even medical uses, which supports the new bull market in silver ahead.
There are many ways to begin building a physical silver exposure including bullion coins, bars or for larger investments – there is bulk bullion. If you have questions, just ask. Blanchard can help.
Blanchard is a family-owned company with broad reach and deep roots in the precious metals market. We live by our name, which is known nationwide for honesty and integrity. Over the past 40 years, we have helped clients invest in American numismatic rarities and gold, silver, platinum, and palladium bullion. If you have additional questions about investing in silver, please leave them below and we can address them in a future post, or call us today to speak with a portfolio manager.
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Special Report: The Long Bear Market in Silver – Part One
Posted on — 1 CommentInvestors big and small, domestic and foreign, piled heartily into gold since the start of the COVID-19 bear market in stocks. Gold is one of the best performing assets classes in the first quarter 2020, yet silver remains depressed.
Many investors wonder why.
The short answer is that 1) silver reacts more to commodity cycles than gold due to its large industrial demand and 2) investment demand for silver weakened since the 2011 price high.
If you are considering a new investment in silver now or have been disappointed in the recent performance of your silver holdings, we’ll discuss the larger outlook here.
Quick take: current silver prices offer individuals one of the best buying opportunities in the precious metal since late 2003.
Why Invest in Silver?
Just like gold, there are many reasons to invest in tangible assets like silver. These are broader reasons to buy silver, and don’t include the current market dynamics, which we will cover later on in this in-depth report.
Here are three of the many reasons that investors diversify into silver.
1. Silver is a precious metal like gold. Yet, it is also so much more.
It is a physical commodity widely used in a vast array of industrial purposes. Industrial demand for silver could slow in 2020 amid a slowdown in global economic growth in the wake of the coronavirus pandemic. Yet, silver industrial demand is expected to continue to expand broadly in the years ahead fueled by growing applications in electronics, solar panels, electronics and more. New industrial uses are being found for silver almost monthly it seems.
2. It is a monetary metal (quasi money).
Yes, it’s money. Silver has been used as money for over 4,000 years. Even recently, in China prior to the Communist takeover in 1949, the primary currency used there was U.S., Mexican and Cuban silver coins. After the Communists seized control, the new government ordered all the silver to be turned in. This is a useful explanation of how fairly recently silver still was used in daily transactions as money. Its size and lower cost value versus gold make it an excellent transactional form of money. Some individuals who purchase physical silver today view it as in investment in an asset that could again be used for daily commerce, while others accumulate silver as a portfolio diversifier and store of wealth.
3. Silver is also a financial asset, a store of value and a proven portfolio diversifier just like gold.
Research by the well-respected CPM Group reveals that the optimal level for silver portfolio diversification is around 5-10%, with benefits up to 25% of one’s portfolio based on historical results from 1968 through 2018. Portfolios with silver allocation yielded better returns, with lower risk.
Let’s look at some recent history, before analyzing current silver market dynamics and forecasts.
The Long Bear Market
Since trading at $49.80 on the New York spot market in 2011, silver fell into a commodity bear market cycle. Silver is more influenced than gold by traditional commodity market cycles due to the large amount of industrial demand for the metal.
In commodity markets, high and low cycles reliably form.
Why? High prices encourage production by miners – as they see an opportunity to cash in on the high prices. Since then, silver fell to a New York spot low at $11.75 last month. We believe the low is now in.
There is an old saying in the commodity world: “the cure for low prices, is low prices.”
When you think about it, it makes perfect sense. High prices encourage mining production, which is what occurred in 2011. That creates a glut of supply and the surplus we have seen in silver in recent years.
Meanwhile, low prices decrease production as mining is less profitable, which is turn creates a supply squeeze.
Because of the large industrial demand for silver, the supply/demand conditions that dictate commodity market cycles have a larger impact on the price of silver versus gold.
Experts are optimistic that the silver bear is bottoming out right now. Silver is already showing signs of turning higher following last month’s liquidity wash-out, where investors sold hard assets like silver to cover margin calls in the stock market crash.
Don’t forget, part of the reason silver climbed to nearly $50 an ounce in 2011 was amid America’s debt ceiling crisis with widespread concerns the U.S. could default on its debt. The S&P ratings agency issued a negative outlook on US AAA debt, for the first time in history. In August, S&P downgraded US debt in a major slap in the face and warning signal to US policymakers from AAA to AA+.
Into the 2011 high, there was massive investment demand for silver as a monetary metal and store of value.
Once U.S. policymakers addressed the debt ceiling, investors began to take profits on silver which had climbed from a low around $8.75 in 2008 into the $49.80 New York spot high in 2011, and that combined with increased silver production (supply), the bear market began. We are likely at a new inflection point and expect rising investment demand for silver to continue throughout 2020.
3 Major Drivers for New Uptrend in Silver
Here are three key factors that will drive silver higher in the years ahead.
1. Falling supply
- Total annual silver supply is declining. After peaking in 2016, silver supply fell in 2017, 2018 and 2019.
- The global economy is already forecast to skid to its deepest recession in 40 years in the wake of the COVID-19 pandemic. Slower growth will decrease mining production, which will decrease silver supply, setting the market up for a shortage as we emerge from the recession.
2. Increasing industrial demand
- Solar panel use hits new records in 2019. Jewelry and silverware demand remains strong. Electronics demand continues to climb for the past five years. New innovative uses for silver are increasing industrial demand, which will hit an important inflection point as we come out of the recession with a physical shortage. The supply/demand imbalance will be a major factor propelling silver higher in the next bull phase.
3. Rise in investment demand
- Just as we saw in the 2008-2009 crisis, investment demand soared amid concerns about fiat money devaluation and a loss of confidence in government and rising government debt levels. We saw a massive surge in physical buying in silver over the last month. This will continue to expand as the recession deepens and the central bank continues its experimental money printing policies and the Federal government continues on an unsustainable path of reckless government borrowing. Investment demand will soon become another major driver in the new bull market in silver.
Intermediate-Term Buy Recommendation
In December 2019, CPM Group issued a silver buy recommendation for investors with an intermediate-term investment horizon, which CPM puts as a two- to three-year time horizon.
“The silver market is at a critical vertex at present,” CPM Group’s Vice President in charge of Research Rohit Savant said in announcing the buy recommendation. “Silver market fundamentals are precariously similar to the critically poor conditions that existed in 1989. Our expectations are that the market may avoid the long period of net investor silver selling and low prices that followed from that year, however. Prices seem more likely to rise in the years ahead rather that to decline. There are many external as well as internal factors behind our analysis. That said, super bulls will continue to be disappointed by silver.”
Join us tomorrow for Part 2 of this special report on silver. If you have any questions, please comment below.
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Monday Morning Wrap Up – April 6, 2020
Posted onA message from David Beahm
President and CEO
Gold Shines: Shelter in the Storm
Nearly 90% of Americans are now under some sort of lockdown as the coronavirus pandemic halted daily life as we know it. Businesses are closing left and right as the number of COVID-19 cases are exploding in New York City and other parts of the country as well.
Job layoffs are skyrocketing at a faster pace than any time in U.S. history. Over 6.6 million Americans filed for unemployment in the last week of March, which followed a record number 3.3 million people in the previous week. Service sector jobs suffered most amid social distancing. These massive job losses are unprecedented and warn that the U.S. economy may be skipping recession and moving directly into a depression zone.
Economists now project over 20 million jobs lost by mid-May. While hard to comprehend, the economic consequences of this crisis are just beginning to ripple through the economy.
In the midst of this stunning event, gold is providing investors a safe-haven in the storm. Gold is shining in the midst of carnage across other asset classes. Even U.S. Treasuries are only returning a paltry 0.5%. Here’s a quick look at financial market performance:
Year-to-Date Returns
Gainers
| Palladium | +11% |
| Gold | +8% |
| U.S. Dollar Index | +5% |
| U.S. 10-Yr Treasury Yield | +0.5% |
Losers
| NASDAQ | -18% |
| Silver | -19% |
| S&P 500 | -23% |
| Platinum | -26% |
| Russell 2000 | -37% |
| Crude Oil | -47% |
Last week, we saw more early damage to the economy from the pandemic, with a surge in the March employment rate to 4.4%. Expect it to go higher. Much higher.
The stock market traded mostly sideways last week as investors hunkered down in a wait and see mode. With the pace of the pandemic still growing here in the U.S., the stock market is unlikely to stage any sort of recovery until there are actual signs the pandemic is slowing with fewer reported confirmed cases. Health officials believe that could be months away.
What about Silver?
Silver has under-performed gold and fell in price the last two months. Why? Silver is both an industrial and monetary metal. Because it is an industrial metal it trades and is vulnerable to commodity cycles. In addition to its monetary value, there are a wide range of manufacturing and technology uses for silver. Silver is utilized in solar panels, electronics, batteries, nanotechnology applications and even water purification systems, to name just a few applications. Industrial demand for silver is expected to weaken in the short-term if we face a global recession.
Yet, it is important for investors to remember that while the current commodity cycle has pressured silver, it is much more than just a commodity. It is a precious and monetary metal.
The gold/silver ratio historically has demonstrated reliable buy signals for silver in recent decades. That well respected technical indicator is flashing a huge “BUY” right now for silver.
Readings above 80 signal that silver is undervalued and is a strong buy signal for the metal.
And, we just hit 114!
A supply/demand shortage appears on the horizon for silver as the slowdown in the global economy will impact mining operations. Truly historical investment opportunities don’t come around every day. Your dollars buy dramatically more silver in the current market environment. If you’ve been considering adding to your precious metals portfolio, silver offers excellent value at current levels. How high could silver go in the years ahead? In 2011, silver climbed above the $49.00 an ounce level.
Stocks Heading Into Worst Six Months Period
Expect the stock market to test the recent lows again as new economic data released each week reveals how badly hit the economy is in the wake of this disaster. The seasonally documented “worst six months of the stock market” are just around the corner. Historically, the May through October period is the worst performing period of the year. Investors should brace for things to get worse in stocks before they get better.
Risky assets like stocks are unlikely to recover their losses for a long time. There is still time to diversify your portfolio and protect your assets with tangible assets. If you would like expert recommendations on asset allocation during these challenging times please contact us. We can help.
In the midst of this pandemic, it is worth remembering that this too will pass. For now, please take care of yourself and your loved ones. Check in on your parents and grandparents. Stay safe and healthy.
Best wishes,
David
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Monday Morning Wrap Up
Posted onA message from David Beahm
President and CEO
Coronavirus Tidal Wave Still Gaining Strength
Like a massive tidal wave, the coronavirus continues to splash and hit every aspect of our lives.
The tsunami that is COVID-19 is still gaining strength out in the ocean. This wave has not yet fully hit the shores of America yet. Yes, we are seeing early impact waves which have now touched all 50 U.S. states.
Yet, we still have not yet experienced the full force of this devastating pandemic.
Millions of Americans are trapped at home under shelter in place orders in hopes of slowing the acceleration of the coronavirus pandemic. The historic health crisis quickly morphed into an economic crisis on both the deeply personal level of people who lost their jobs and paychecks to the national and global economy, which is now forecast to see the deepest global recession in 40 years.
We don’t know when we will turn the corner and stop the spread of the virus in America or how long-lasting the economic and financial damage will be. Last week we saw the first hard economic data on the damage from the early waves crashing into our economy. It was sobering.
Early Economic Damage – Jobless Claims Hit Record Level
The number of Americans filing for unemployment insurance skyrocketed to a never seen before 3.2 million. In just one week over 3 million Americans lost their jobs. To put that number in perspective that is five times as large as the peak during the 2008-2009 Great Recession. The previous one-week record was 700,000.
The unemployment rate is expected to soar above 10% by April or May. Economists warn that once the economy reopens, it is unlikely to reverse all these losses. Unemployment could remain high for years.
We are probably in a recession right now, Fed Chairman Powell said recently.
The longest economic expansion in U.S. history abruptly ended in the first quarter of 2020. And, economists have been piling on with forecasts for devastating declines from 15% or more in second quarter GDP. Yes, the Federal Reserve and U.S. government have gone all-out to stem the economic damage from this pandemic with a historic $2 trillion fiscal stimulus deal signed last week and the central bank’s pledge to print as much money as the economy needs to maintain liquidity. But, that leads us to the $64,000 question.
How Fast Can the Economy Recover?
I’m sorry to say that a $21 trillion economy like ours can’t be turned around that quickly.
Think of the U.S. economy like a fully loaded tanker ship.
It’s not as nimble as a small speedboat and can’t turn around on a dime. Metaphorically speaking, currently the tanker has hit an iceberg and is stranded. The Fed and the government are trying to prevent it from sinking.
Not everyone can telecommute from their job and over 3 million people stopped getting a paycheck last week. For a certain swath of American citizens, that means they can’t buy groceries or pay their rent.
Can Government Limit the Fallout?
They are trying. Last week, President Trump signed a massive $2 trillion stimulus package following Congressional passage. This marks the largest emergency aid package in U.S. history ever.
The package includes direct payments to middle and low-income Americans, expanded unemployment insurance benefits, loans to small businesses and corporations and funding for hospitals, who are desperately strained during this health crisis.
The government and the Fed’s recent actions are impressive.
Yet, they won’t prevent a massive blow to the economy in the second quarter, which could extend into the third quarter as well.
With Americans ordered to stay at home, many can’t work or spend. The package will ease the financial pain for those most at risk, enabling them to pay their rent and buy groceries. But, that’s just a short-term fix, not a long-term solution.
Last Week in the Markets
Gold shined last week soaring within a few dollars of the 2020 price high. The bull market in gold is going strong and just getting started.
Like most asset classes during this crisis, gold has been impacted by fast-moving dynamics, including an initial short-lived retreat as gold owners sold precious metals in order to pay back margin calls as the stock market crashed.
Gold continues to play an essential role in investor’s portfolios providing a source of liquidity in crises and an opportunity to preserve and protect and grow your wealth in a time of rampant fiat currency debasement, skyrocketing government debt and negative interest rates.
Gold is a hard currency, a tangible asset that you can hold in your hand. No central bank has the ability to print more gold and debase its value. This rally in gold is just getting started. Count on it.
Beware the Bear Market Bounce in Stocks
Many Americans saw stomach-turning news when checking their stock market accounts in recent weeks. The stock market is officially in a bear with over a 30% decline registered in the S&P 500 from the peak in Feb. 19. Oh, that all-time stock market high in mid-February seems like so long ago.
Last week saw a modest gain in the S&P 500 off the recent low. Traders like to call what we saw last week a ‘dead cat bounce.’ That refers to a brief bounce-back in the stock market after a major decline, right before stocks start tanking again.
The stock market gained in appreciation of the government’s $2 trillion stimulus package and the Fed’s all-out promise to print as much money as needed. While it’s a short-term salve, it doesn’t solve our current economic problems.
In fact, it only creates new problems for the future.
Rising U.S. debt levels already plagued our economy in recent months before this crisis hit.
The U.S. national debt stands at a record and rising $23 trillion. This latest fiscal stimulus package means our debt gets bigger fast. For perspective, the national debt stood at $19.9 trillion when President Trump was inaugurated, climbing 16% since the last presidential election. With the pandemic looming, the government has no choice but to step in. But, there will be a future cost.
Creating New U.S. Dollars at Light Speed
The Fed has announced its intention to do “whatever it takes” in its role as lender of last resort.
In the past three weeks alone, the Fed’s balance sheet exploded by more than $1 trillion, hitting $5.2 trillion last week. In just one week, the Fed bought almost $350 billion of Treasury securities, loaned $50 billion in banks through the discount window, gave out $28 billion through the primary dealer credit facility and another $31 billion to the money market mutual fund loan facility.
And, how did the Fed do all that? It printed new money.
What Could Lie Ahead?
The stimulus packages financed by the central bank is a house of cards. Eventually it will fall down. What could this mean for the future?
Inflation. Hyperinflation. Sky high interest rates in the future as America faces difficulty selling our bonds to pay interest on unsustainable debt.
The results of more government debt and unlimited Federal Reserve money printing continue our country on the unsustainable path of fiat currency degradation.
What exactly is the value of the printed piece of paper that says: “Federal Reserve Note. This note is legal tender for all debts public and private.” It’s becoming more and more worthless every day. Never mind the level of the U.S. dollar index. What matters is your future purchasing power with the dollars you own today.
Create more of anything and the value goes down. It’s simple supply and demand.
Gold Shines in This Environment
It’s no surprise that investors around the world have been adding physical gold to their portfolios at a furious pace in recent weeks.
It’s business as usual here at Blanchard and we are busier than ever. Unlike other dealers, we even have some products available to ship immediately.
Spot gold soared sharply higher toward the $1,670 an ounce level last week, within just a few dollars of the 2020 high seen at about $1,680 an ounce.
The bull trend in gold is strong and just getting started.
The government can print money to buy bonds to fund the $2 trillion fiscal package. While they can’t stand aside and do nothing, they are putting at risk the economic future of our country with these actions and the new problems they will create.
That’s why we are seeing so many investors turn to the safety of physical gold right now.
Over the past 45 years, we have helped clients invest in tangible assets like physical gold and numismatic rarities to protect and grow their wealth. It is our honor to help investors and collectors implement these essential diversification strategies to help them meet their financial goals. If you have any questions during these uncertain times, Blanchard has answers. We are here for you.
We have products available now and there is no minimum order.
I truly hope that you and your loved ones are healthy and well. Stay safe.
David
What Questions Do You Have?
Email questions for me to answer in next week’s Monday Morning Wrap at: [email protected] or email just to let us know if you like this commentary or how we can make it better. Prefer the phone? Call us at 1-866-629-2281. We want to hear from you.
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Every Action Has a Consequence
Posted onUnprecedented times lead to extraordinary measures.
The COVID-19 pandemic continues to wreak havoc upon the U.S. economy, the stock market and even the integrity of the financial system itself as lending freezes up.
The Fed is attacking this crisis in full force.
While the Fed’s actions may be necessary, they will have consequences. Let us explain.
The Federal Reserve stepped in on Monday with new quantitative easing (QE) measures, like those seen during the 2008-2009 global financial crisis.
Quantitative easing in plain English means the Fed buying securities – like mortgage backed securities. In the 2008 crisis, the Fed would state a specific amount – like $300 billion.
What’s different now?
This is open-ended quantitative easing. No dollar amount. As much as it takes.
“The central bank is shifting from being not just the lender of last resort, but now it is the buyer of last resort. Don’t ask how much they will buy, this is truly QE infinity,” Chris Rupkey, managing director and chief financial economist at MUFG, wrote in a research note to clients.
In an enlightening interview on 60 Minutes on CBS on Sunday evening, Neel Kashkari, the chief of the Minneapolis Fed, explained: the Fed is flooding the system with money and there is no end to their ability to do that.
Kashkari is the former U.S. Treasury official who ran the $700 billion government response to the 2008 financial crisis.
Here’s what else Kashkari said, paraphrased.
60 Minutes: Will the Federal Reserve ensure that banks have all the cash they need to satisfy whatever withdrawals may be coming?
Kashkari: Yes, we call it lender of last resort. This is why central banks exist. If everybody gets scared at the same time, and they demand their money back, that’s why the Federal Reserve is here to make sure there is liquidity and money to meet those demands. We will absolutely meet those demands.
60 Minutes: Is the Fed just going to print money?
Kashkari: That’s literally what Congress has told us to do. That is the authority they have given us. To print money and provide liquidity into the financial system, and that’s how we do it. We create it electronically and then we can also print it with Treasury department so you can get money out of your ATM.
The Action: These unprecedented actions could help prevent a Depression. Maybe.
The Consequence: The unlimited money printing will devalue the dollar. It’s Economics 101. More supply of anything decreases its value.
Never before has diversification in tangible assets been more important to protect and preserve your wealth. Gold is a limited resource and its value can’t be altered by government printing presses. Do you own enough gold and silver?
Watch the 60 Minutes Video Clip here.
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MONDAY MORNING WRAP UP
Posted on — 1 CommentA message from David Beahm
President and CEO
Depression Ahead?
The streets are eerily quiet. Traffic jams are non-existent.
A record 75 million Americans are under lockdown or shelter in place orders this Monday morning as the government goes all out in the fight against the COVID-19 health crisis. Experts agree this is the worst pandemic facing the world since the Spanish flu outbreak of 1918.
Yet, the morning paper is still delivered, the sun is shining and the birds are still chirping. We are living in unprecedented times in America. Medical science will ultimately prevail.
We don’t know how long it will take or how long this crisis will last. But, rest assured, this pandemic is temporary and we as a nation will recover. Eventually.
Facing reality, however, the extraordinary shutdown of economic activity will have ripple effects for the U.S. economy for potentially years to come.
This isn’t just a health threat. It’s a massive economic threat too.
Industries like restaurants, entertainment, tourism, airlines, and hotels are being crushed by the social distancing requirements in place.
Already the toll on workers is high as the world’s largest economy grinds to a halt.
It will get worse as citizens without jobs can’t pay their rent or mortgages, car payments or utility bills. Last week alone, over 281,000 Americans filed for unemployment insurance. That marks a 33% jump over the previous week and the highest level in two and a half years. It will get worse. Some economists peg the unemployment rate at 20% in the months ahead, the worst since the Great Depression in the 1930’s.
Shocking Second Quarter GDP Forecasts
Brace yourself. Second quarter GDP could shrink by a record 10% or even more.
JP Morgan forecasts a shocking 14% decline in the second quarter. Deutsche Bank predicts a 13% contraction in the second quarter, while Oxford Economics forecasts a 12% decline. Goldman Sachs now expects a stomach-wrenching 24% drop in the second quarter.
Numbers like that far exceed even the worst performance of the Great Recession in 2008, which registered an 8.4% decline in the fourth quarter 2008. And, you probably remember. That was bad. This will be worse.
Using Goldman Sachs economic estimates, this could translate into a loss of 14 million jobs this spring. Again, the 8.7 million jobs lost during the 2008-2009 Great Recession number pales in comparison.
The economic devastation that will lay in the rubble of this fight to save human lives could easily become the most serious economic crisis to face our nation since the Great Depression of the 1930’s.
Economists are divided on when the U.S. economy could begin a recovery, but there is none of the Pollyanna optimism exhibited by the Administration in its daily press briefings. Economists are much more sober.
A Growling Bear Grips Stocks
The S&P 500 sold off 32% from its all-time high peak on February 19 into Friday’s low.
Yes, the U.S. stock market has already lost over a third of its value.
The sickening declines over the past month wiped out all the gains achieved since Donald Trump was elected to office and more.
The percentage decline this far in March for the Dow Jones Industrial Average ranks currently as the second-worst in history after the 30.7% monthly collapse in September of 1931. But, wait. The month isn’t over yet.
Don’t expect a bottom in stocks just yet. The Dot.com bear market in 2001 saw the S&P 500 crash 49.1%. The global financial crisis in 2008-2009 sank the S&P 500 by 56.8%.
Using history as a guide, the 32% decline in stocks we’ve seen so far, likely has more to go.
Gold Swings Wildly As Investors Liquidate to Meet Stock Margin Calls and Need for Cash
Physical gold and silver demand skyrocketed in recent weeks as individual investors rushed to the safety of gold. As Americans woke up to fully face the threat of the coronavirus and its devastating impact on the economy and stock market, investors rushed to the safety of gold.
Massive gold and silver buy orders deluged Blanchard in recent weeks as investors seek to buy insurance through tangible asset ownership. During these unprecedented times, you can count on Blanchard as your trusted tangible asset partner. We can deliver your needs, although supply chain disruptions are creating a minor delivery delay in some instances.
Like the run on toilet paper and hand sanitizer, there has been a run on physical gold and silver in recent weeks. Some bullion dealers are out of stocks.
This may seem confusing to some investors to hear that bullion dealers are running out of supply while gold prices are falling on the world market.
The reason is that gold has been used to raise cash to cover margin calls amid the crash in the stock market. Gold is acting as the insurance policy that it is – a financial instrument that provides liquidity during times of crisis.
Yes, Gold Remains an Effective Portfolio Hedge
The recent volatility in gold is to be expected in the early days of a crisis as investors sell gold to raise cash. In the months ahead, new all-time highs above the $2,000 an ounce level gold are expected. Gold remains an effective portfolio hedge. Here’s what the World Gold Council said last week:
“We believe that, so far, gold has played an important role in portfolios as a source of liquidity and collateral. And we expect it will serve as a safe haven in the longer term.
Gold experienced pullbacks at the onset of the global financial crisis too, falling between 15% and 25% in US-dollar terms a couple of times during 2008. But by the end of that year, gold was one of the few assets – alongside US treasuries – to post positive returns.”
Gold Is Set To Soar
From a low at $680 an ounce in the fourth quarter 2008, gold more than doubled as it raced higher into the 2011 all-time high above $1,900 an ounce. We expect the same during this crisis. From current levels that could mean gold as approaching the $3,000 an ounce level in the next three years.
This Is Still Just Getting Started
The global spread of the coronavirus continues at a fast pace. Over the past week, confirmed cases infection doubled in a week to top 310,000 as of Sunday. The Imperial College of London, considered the world’s most renowned health modeling experts estimate the pandemic could unfold in waves over the next 18 months.
Government Response
In the months ahead, there will be waves of Federal Reserve quantitative easing and massive fiscal stimulus packages in the trillions.
The government will print and borrow money in efforts to stave off another Great Depression. Will it work? The jury has not even heard the case yet. These efforts, while necessary given the magnitude of the crisis, will degrade and devalue paper currency.
The fiscal rescue packages will mortgage the next generation of Americans with ever-greater debt levels. With the nation’s debt already topping $22 trillion, it seems foolish not to add a couple trillion on more now. Yet, this could unleash great inflation, double-digit interest rates and a destabilization of our financial system in the years ahead.
The Fed and the U.S. government are between a rock and a hard place. They have to act.
Many fiscal and monetary ideas will be tried. Some may work, others may not. No matter what, there will be a financial reckoning in the years ahead.
In this environment, gold remains one of the few assets that is recognized around the world as a store of wealth and value. Throughout history and in the future, gold has and will continue to provide investors a safe harbor in the storm.
Be safe,
David
What Questions Do You Have?
This is the first installment of a new weekly message from Blanchard. In the weeks ahead, I will provide a wrap up of the key events of the previous week, along with commentary to keep you informed. Count on us for insightful news, perspective and analysis along with recommendations to protect and preserve your wealth. Blanchard is here for you.
Email questions for me to answer in next week’s Monday Morning Wrap at: [email protected] or email just to let us know if you like this commentary or how we can make it better. Prefer the phone? Call us at 1-800-880-4653. We want to hear from you.
