Monday Morning Wrap Up – October 19, 2020
Posted on — Leave a commentGoldman Sachs says sell U.S. dollar, buy silver. 
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.
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Americans Are Socking Away More Than Ever…But Are Their Savings Safe?
Posted on — 2 CommentsAmericans historically have been terrible at saving.
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.
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“What Happens If…” Biden Wins on Election Night…But Trump Prevails After Mail-in Ballot Count
Posted on — Leave a commentRejected Ballots Deliver Win to Trump.
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
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Understanding the Early Ideals of the Nation with the Fugio Cent
Posted on — 1 CommentThe 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.
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.
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Monday Morning Wrap Up – October 12, 2020
Posted on — Leave a commentWill we get an October surprise?
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
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“What Happens If…Trump Wins on Election Night but Biden Prevails After Mail-in Ballot Count”
Posted on — Leave a commentThe Red Mirage…and Blue Shift
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.
Monday Morning Wrap Up – October 5, 2020
Posted on — Leave a commentPresident Trump hospitalized with COVID-19 infection.
Last week President Trump and First Lady Melania Trump became infected with COVID-19.
On Friday, the president was moved to Walter Reed Medical Center and received an experimental antibody drug treatment through a “compassionate care use” request made by the biotech company Regeneron.
A Sunday press conference with White House doctors said the president “feels well” and that he could be discharged as early as Monday.
The U.S. stock market weakened on Friday, with the S&P 500 down about 1%. But the reaction was muted – suggesting that investors, for now, are not expecting President Trump to turn over powers to Vice President Pence. Heading into this week, the president’s health will remain a key market driver and it could impact the markets if his condition worsens.
Other world leaders have gotten sick with Covid-19, notably UK Prime Minister Boris Johnson. In late March, Johnson announced he contracted COVID-19 and was hospitalized in early April as his condition worsened. The UK stock market tumbled nearly 7% in the week following his announcement. However, the U.K. stock market rebounded as the Prime Minister recovered from this illness.
Our country has a well-established chain of succession if the president is unable to fulfill his duties. Nonetheless, concern is rising as a number of Trump’s inner circle tested positive for COVID-19 last week including:
Who has tested positive: (source: USAToday)
- President Donald Trump
- First Lady Melania Trump
- Hope Hicks, senior adviser to the President
- Bill Stepien, Trump’s campaign manager
- Republican National Committee Chairwoman Ronna McDaniel
- Mike Lee, R-Utah
- Thom Tillis, R-North Carolina
- Ron Johnson, R-Wisconsin
- Chris Christie, former New Jersey governor who helped Trump with debate prep
- Three White House reporters
- One White House staffer
- Kellyanne Conway, former White House senior adviser
- The Rev. John Jenkins, president of Notre Dame University (Jenkins was at the White House Saturday, when Trump introduced Judge Amy Coney Barrett as his Supreme Court nominee.
This, of course, remains a developing story and we will be closely watching this week and, in the weeks, leading up to the election.
We wish President Trump and First Lady Melania Trump a full and speedy recovery.
Is the bottom in for gold?
Gold climbed steadily last week and closed above the $1,900 an ounce level. Last week’s action is encouraging and suggests a bottom is in for the recent gold market pullback. The gold market remains well above its 200-day moving average, considered an indicator for the long-term trend – and that level was not even tested on the recent correction.
Now is the time to buy gold
Last week, major firms including Wells Fargo and Ray Dalio’s Bridgewater Associates said this is a good time to buy gold.
“We’re buyers of gold,” Wells Fargo head of real asset strategy John LaForge wrote last week.
“After a great seven-month run, gold cooled off in August and September. Gold spot prices today sits about $200 lower than its all-time high of $2,075, per ounce set in August.”
Here’s what Ray Dalio’s hedge fund Bridgewater Associates said in its September report:
“In a world of ongoing pressure for policymakers across the globe to print and spend, zero interest rates, tectonic shifts in where global power lies, and conflict, gold has a unique role in protecting portfolios…It’s wise to hold some of what central banks can’t create more of.”
Presidential election looms
Last week’s Presidential debate between President Trump and Democratic candidate Joe Biden was one of the more contentious debates in modern history. However, the debate news was quickly overshadowed by the President’s announcement that he contracted COVID-19 later in the week.
Investors and analysts are considering many different scenarios, speculating on how the President’s COVID infection could impact the November election. But the truth is – no one really knows. Voting is already underway in many states through in-person early voting and mail-in voting.
As of October 1st, two million Americans have already voted in the 2020 presidential election.
This week the vice-presidential contest will take center stage as Vice President Pence and Democratic candidate Kamala Harris will meet in a debate on Wednesday at 9 pm ET.
Jobs data shows hiring slows heading into election
The U.S. unemployment rate dropped to 7.9% last month, the Labor department reported last week. However, the country added only 661,000 jobs in September, down from the 1.5 million new jobs in August and 1.8 million new jobs created in July.
Recovery has been seen in the labor market in recent months, yet economists say it could take into 2023 for the job market to fully recover.
New layoffs are underway. “Several major corporations announced huge layoffs in recent days: 28,000 at Disney. 3,600 at Ralph Lauren. 3,800 at Allstate insurance. 2,000 at Marathon Petroleum. 31,000 at American Airlines and United Airlines, combined,” Time magazine reported on Oct. 2.
The economic recovery remains fragile indeed.
Please stay safe. Until next week…
Regards,
David
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The Wreck of the Brother Jonathan Still Keeps Its Secrets
Posted on — Leave a commentOn a Sunday morning in 1865, a paddle steamer called the Brother Jonathan departed Crescent City Harbor, California. The ship was the idea of Edward Mills from New York. His original aim was to create a route from New York to Chagres, Panama. This was to be the first of a two-leg trip. After reaching Panama travelers could continue, via another ship from Panama to California, which was attracting people from all over the country as the Gold Rush instilled a sense of promise for so many seeking riches.
Railroad and shipping magnate Cornelius Vanderbuilt purchased the ship just a year after its completion. He repurposed it, making it larger to in order to fit more passengers and used it as a replacement for one of his previous ships which was destroyed in a wreck. He used the ship as a vessel in his agreement with the Nicaraguan government ,allowing him to transport passengers through the isthmus of the country. However, a few years later, after Vanderbuilt’s exclusive contract with the Nicaraguan government was cancelled the ship changed hands once more and operated along West Coast routes. In the following years the ship had several other owners and enjoyed a reputation for its speed.
The ship’s final voyage began when Captain Samuel DeWolf departed San Francisco Bay for Victoria, British Columbia. A fierce storm ensued and the captain docked in Crescent City Harbor. This was only a short reprieve; soon after leaving the harbor the ship encountered another dangerous storm. Facing such punishing waves the Captain was forced to turn back. He almost made it.
The ship struck a rock leaving a gash in the hull. The vessel was doomed. All passengers and crew were ordered to abandon the ship. Though there were enough lifeboats for everyone onboard, there was only enough time to properly deploy three. As a result, only 19 of the 244 passengers survived. The loss of life was devastating.
The financial loss was also considerable. The ship was carrying a current day value of $50 million in gold consisting of bars and coins. Salvage efforts began almost immediately after the sinking but the attempts ended in failure. It was not until 1993 that a successful expedition carried out by Deep Sea Research (DSR) located the ship. Much of the difficulty of finding the treasure was due to the fact that the ship in fact sank two miles from where it struck the rock. This might also explain why another three years were needed to locate the coins sitting in crates on the ocean floor. After the initial discovery, divers recovered 875 $20 Double Eagle gold coins. Further efforts yield a total of 1,207 coins.
Legal battles followed. The state of California claimed ownership of the gold. After years of fighting, the U.S. Supreme Court ruled on the case in 1998, deciding that the find belonged to those who salvaged the coins from the wreck. The state, however, would not relent. They made clear their intention to bring the case to the Supreme Court a second time. Though a win for the state was unlikely, the salvagers were unwilling to continue spending on legal fees. Therefore, both sides reached a settlement in which the state received 20% of the value of the find. Soon after, DSR initiated a sale of 1,006 of the coins earning a total of $6.3 million.
Despite the incredible find, many estimate that 80% of the total value of the treasure still remains undiscovered.
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“What Happens If….Biden Wins in a Landslide
Posted on — Leave a commentBetween 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
The Blue Sweep
Election Day 2020. It’s Tuesday evening November 3rd.
7:00 pm ET. The polls are just beginning to close in a couple of states. Network news announcers quickly report that Trump won Kentucky and South Carolina. However, Biden has a commanding lead in Florida. Yet, the race in that key swing state is still too close to call, the announcers say.
Sixty minutes later, just after 8:00 pm ET, the polls are now closed in 21 states.
Just like a lottery machine registering a winner – the United States map quickly becomes a sea of blue.
It becomes quickly apparent that Biden turned out voters across the nation – with voter turnout at its highest level in 80 years. Now, the announcers are saying – the margin of error has receded – and Florida is called for Democratic candidate Joe Biden!
By 9:00 pm ET, polls in another 14 states have closed, including key battleground states of Arizona, Michigan and Wisconsin.
Ding, ding, ding – Michigan and Wisconsin go to Biden!
The Trump campaign is quiet as they know without Florida and the upper Midwest, there is no path for the president to win enough Electoral College votes. It’s still too early to call Arizona, but Biden has the lead there too.
By 10:30 pm ET, it becomes clear that Biden has delivered a sweeping victory.
He easily swept essential swing states such as Pennsylvania, Florida, Michigan, Arizona, North Carolina and Wisconsin. He even reached deep into Republican states and won electoral votes from states including Georgia, Texas, Iowa and Ohio.
By the end of the night it is clear that Trump primarily kept his base — including Appalachia, the interior West and the rural South. But the narrow base was not enough to get to even 200 Electoral College votes.
It’s a Biden blowout.
By 10:45 pm ET, Biden is declared the winner on every major news network you watch. Even conservative cable TV news networks declare Biden the winner of the 2020 election.
However, the Trump campaign remains quiet. There is no concession call by the president. Nonetheless, Biden declares victory and delivers a heartfelt speech to the nation – promising a return to normalcy.
Biden’s resounding landslide win marked the fifth time during the 20th century that a first term president failed to win reelection. Trump joins Taft, Hoover, Carter and Bush for that footnote in the history books.
A Biden Presidency
What will it mean for the economy, key government policies, the stock market and precious metals? We explore some of those questions here with hypothetical scenarios and invite your thoughts too! Please leave a comment below.
The Stock Market
On election night, the stock market sinks – with the major averages selling off swiftly in after-hours trading as it becomes clear that the Democratic voters turned out in droves. The knee-jerk reaction lower reveals Wall Street’s worries over Biden’s proposal to increase the corporate tax rate and the likelihood that the regulatory environment will tighten once again.
Gold on Election Night
Gold surges above the $2,000 an ounce level as risk-averse investors turn to precious metals once again for safety and wealth preservation.
Digging into Biden’s policies
The Trump administration slashed the corporate tax rate from 35% to 21%, which boosted earnings growth and the stock market in the Trump era.
President Biden increases the corporate tax rate up to 28%, but it still remains lower than the 35% level it was prior to Trump’s tax cuts.
President Biden follows through on his pledge to fix the Social Security program. He adds new Social Security taxes for those earning above $400,000 at an even 12.4% split between workers and employers. This helps strengthen the Social Security Trust Fund.
Regulations Tightens Back Up
After the past four years, where regulations were eased across key industries like energy and the financial sector, President Biden tightens up the regulatory environment for oil and gas companies and increases consumer protections in the financial industry.
A Hands off Approach to the Federal Reserve
The Biden presidency returns to the traditional hands off approach to the Federal Reserve. While President Trump, in a highly unorthodox manner, criticized the Federal Reserve and jawboned repeatedly for lower – and even negative interest rates – President Biden respects the independence of the Federal Reserve.
Financial markets and Wall Street breathe a big sigh of relief that political influence on the Fed is once again off-limits – this preserves the Fed’s ability to protect the financial system and lowers the risk of future financial system destabilization due to a politicized Fed.
Interest rates stay low through the Biden presidency.
The Economy
As promised, President Biden rolls out greater reliance on public transportation using ‘green energy.’ He institutes manufacturing tax credits and subsidies for capital investment process upgrades to utilize low-carbon technologies and creates a carbon tax on fossil fuels.
Biden implements his 4-year $700 billion “Made in America” plan for federal procurement of U.S. manufactured goods, which helps new job creation in the wake of the COVID recession. He increases spending on infrastructure, which also creates new jobs and the unemployment rate falls quickly in 2021.
Biden allows Medicare to negotiate drug prices, which controls drug price inflation.
America’s Role in the World
Like Trump, Biden has taken a tough stance on China. However, Biden rejects the use of tariffs, which ultimately created an additional tax for U.S. consumers on imported goods from China. Inflation on consumer goods eases modestly as Biden calls a truce in the tariff trade war. His administration quickly resumes multilateral trade negotiations, pulling in key European allies, which is a dramatic turnaround from the isolated role the U.S. played in its trade war with China under the Trump era. The United States rejoins Paris Climate agreement.
Federal Deficit
Annual budget deficits likely over $1 trillion are currently forecast for a Biden presidency, which is the same as was expected under a second Trump presidency.
The United States remains on a collision course in the future regarding the supremacy of the U.S. dollar as the world’s reserve currency. Neither President Trump nor Biden have made tackling and reducing the federal debt a priority issue. This allows gold to continue to rally and climb throughout Biden’s presidency as investors around the globe turn to precious metals in response to fiat currencies becoming increasingly indebted by their sovereign governments.
Gold over the Long Term
Gold hits $3,000 an ounce in Biden’s second year in office and continues its slow and steady uptrend – with major Wall Street firms now projecting gains to $5,000 an ounce by 2024 amid the continued and unsustainable increase in the United States government debt levels.
Stocks over the Long Term
The stock market quickly rebounded from the Election night sell-off. The traditional Santa Claus rally delivered its annual gifts to Wall Street investors in late December – as it becomes clear that Biden intends to follow through on his moderate policies, and the progressive wing of the party will remain on the outskirts of his administration.
Indeed, history reveals that the stock market typically outperforms under Democratic presidents.
From 1945-2019, the S&P 500 returned an average of 12.96% under a Democratic president and unified Congress versus a 5.70% return with a Republican president, according to Bloomberg and Wells Fargo Investment Institute.
The bull market in stocks continues over the next two years, with new all-time highs seen in the major stock indices. The U.S. dollar trends lower and gold and silver continue in steady and strong uptrends as well.
Now It’s Your Turn
How do you see a Biden presidency unfolding? We invite your comments below!
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Monday Morning Wrap Up – September 28, 2020
Posted on — 2 CommentsPolitical risks are rising.
The stock market sank last week as the September sell-off continues, with technology stocks leading the way down. The Nasdaq 100 has plunged 12% since September 2nd. The FAANG stocks, which include Facebook, Apple, Amazon, Netflix and Alphabet (Google) have tumbled 15%. The S&P 500 has dropped 9% so far in September.
The stock market is lurching lower amid the growing uncertainty over the state of the economy, worries over the new COVID-19 outbreaks in Europe, the lack of another fiscal stimulus package and last but not least, the rising political risks that lie ahead with the contentious presidential election.
The death of Supreme Court Justice Ruth Bader Ginsburg has shifted the Senate’s focus to swift confirmation hearings of President Trump’s chosen replacement, Amy Coney Barrett.
The upcoming battle over the Supreme Court appointment ahead of the November 3rd presidential election is decreasing the odds that Congress will pass another fiscal stimulus package to support the ailing U.S. economy.
Beyond the Supreme Court battle, this week ushers in the first scheduled debate between President Trump and Democratic candidate Joe Biden. You can watch that debate at 9:00 pm ET on Tuesday evening.
Tensions Are Heating Up
Last week, President Trump declined to commit to a peaceful transfer of power if he loses the November 3rd presidential election, the Associated Press and other news outlets reported.
While the temperatures outside are dropping in much of the country as fall begins to take hold, the internal temperature of the country is rising.
America cities are already on edge after protests this summer.
Facebook CEO, Mark Zuckerberg, has warned there may be civil unrest and violence after the presidential election. Other experts and law enforcement officials are also warning about this possibility, as covered in a recent Time article.
Gold Breaks Down
Gold sold off last week, breaking down below the $1,900 an ounce level. The sharp jump in the U.S. dollar index was the primary factor pressing gold lower. Gold is priced in U.S. dollars and a rising dollar typically pressures gold lower. In general, this is viewed by analysts as a short-lived decline in gold.
“Further gold price weakness is possible, but U.S. election uncertainties will likely intensify and the Fed will ultimately need to expand policy. Hence, we maintain our positive view on gold,” the UBS analysts wrote in a research note to clients last week.
Also, economist Stephen Roach told CNBC last week that the US dollar is vulnerable to a crash next year and he sees double dip recession odds above 50%. He is the former chairman of Morgan Stanley Asia. Roach points to the “net national savings rate” which has turned negative in the United States as an indication the U.S. dollar must adjust sharply lower.
Jobless Claims Remain High
Over a million Americans filed for initial jobless claims in the week ending September 19th, with initial claims climbing 870,000 plus an additional 630,000 self-employed workers filing for benefits through a separate Pandemic Unemployment Assistance program. These are stunning losses in the labor market nine months after the COVID-19 virus first shut down our economy.
The stock market is registering its concern that the recovery is in trouble – and the economy isn’t out of the woods yet.
A Big Week Ahead…
In addition to this week’s presidential debate, investors will be watching for key economic data on Friday – the September non-farm employment report is slated for release. This marks the last major labor market update before the November 3rd elections.
We are heading into what could be the most turbulent election in modern history. The case for owning precious metals has never been stronger. We are seeing many clients increase their holdings of silver and gold heading into this election cycle.
Last week’s drop in gold offers you the opportunity to own more gold at a lower price – if you act now. Check out the current gold price here.
Stay safe. Until next week…
Regards,
David
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