Notes From Underground: A New Form of Asian Contagion

On July 2, 1997 the Thai baht entered crisis mode, kicking off what become known as 18 months of Asian Contagion. The so-called Asian Tigers experienced massive capital disruptions as the Chinese economic miracle undermined the capital expenditure projects that were creating the manufacturing capacity to lift the TIGERS out of poverty and into significance in the global supply chain. The emerging markets learned that as fast as capital flows in to support foreign direct investment it can hurriedly depart as it seeks alternative venues with a better competitive advantage .

So the Asian Tigers learned from the contagion and as China grew beyond its initial thrusts of grabbing growth from its neighbors via devaluation and cheap labor it became a source of economic stimulus for South Korea, Malaysia, Indonesia, Thailand and other countries. This is the world that exists as SUPPLY CHAINS have spread the wealth throughout the Asian region, if not the world. But this development is what makes genuine viral contagion a more dynamic phenomenon. The global spread of capital comes with increased risks as globalization leads to the people traveling far and wide for work and pleasure. The need to slow it down in an effort to understand CONTAGIOUS INFECTION leads to a POTENTIAL demand shock.

There are those portending a supply shock as production shuts down but the feedback loop from no work to hunkering down at home will be a problem for the global situation of excess capacity built by ravenous capital in search of returns. The U.S./CHINA trade frictions were a warning shot to manufacturers seeking pools of cheap labor without regard for political ramifications. The COVID-19 situation has provided another reason for concern over being stretched too far. The bond markets are signaling the fear of a demand shock with the fallout being a deflationary outcome. As discussed before, the GOLD reflects the fears about central bank uncertainty.

Federal Reserve Governor Lael Brainard ignited some of those fears as she raised the issue of the FED utilizing “flexible inflation averaging.” This would allow the central bank to have inflation run over the coveted 2% target so as to hit an average over an extended period, or what has been referred to as “hotter for longer.” According to Brainard, “This approach will help move inflation expectations back to our 2 per cent objective, which is critical to preserve conventional policy space.” We should all question the idea of 2 percent inflation being conventional policy space .

This is critical to understanding the role of central banks in a FIAT CURRENCY WORLD. Bonds and GOLD cannot both be correct beyond the immediacy of fear stalking global financial markets. It was always suggested that former Fed Chairman Paul Volcker deemed GOLD his enemy when he was helmed the central bank. If GOLD is the enemy of central bankers then where do markets decide the victor in this battle? As Chairman Jerome Powell said about the ultimate creditor of the ECB, “They have a printing press.”

If the printing press is the answer then the price action in GOLD is correct. The battle lines are being drawn as the world awakens to concerns over the newest form of contagion. Interestingly, the DOLLAR was down on Friday after experiencing a continued rally as the impact of the Covid-19 spread outside of China. But Friday was different. We will watch to see if the DOLLAR continues to slide between the political news out of Nevada and Brainard’s discussion about FED policy on meeting inflation.

Powell has raised the issue of SYMMETRIC INFLATION OF 2% many times without actually defining it. Does Brainard’s comments now define a hard position for the FED? If so, bonds are not where one should seek safe harbor. Buying U.S. debt in an AGE OF NEGATIVE REAL YIELDS is not a long-term investment strategy, especially since they have a printing press to pay for the budget deficits of around 5%. Stay short duration, which flies in the face of what many pundits are suggesting. Buying bonds for capital appreciation and stocks for return seems like insanity. I sure hope it’s not contagious.

***Quick note: On February 14 Bloomberg News reported the Swiss National Bank and Swiss Government agreed that “negative interest rates are essential and a premature tightening would hurt the economy.” Many sectors in Switzerland have been complaining about the impact from negative rates but it seems that for the greater good negative rates will remain.

The politicians and central bankers believe that the economic costs from a stronger Swiss franc are too much for the overall economy to bear. If bankers have to suffer under the weight of negative rates it is a relatively small price. But what again is certain: The currency is a tool of monetary policy regardless of what central bankers intimate. Currency manipulation/controls can be used to effectuate monetary policy outcomes. Jerome, can you hear me now?

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27 Responses to “Notes From Underground: A New Form of Asian Contagion”

  1. ShockedToFindGambling Says:

    Yra…..good post.

    The problem is, that even with massive money/credit creation, inflation cannot lift it’s head.

    This is pointing to deflation, when the recession hits.

    Crude, natgas, industrial metals………already in bear markets.

    The longer the central Banks hold up financial assets, the bigger the fall will be.

    Hoping Gold stays up, but everyone might want cash, at least initially.

    • ShockedToFindGambling Says:

      Credit spreads look like they have turned negative and 2/10s trying to turn today, toward steepening.

      For at least the last 60 years, 2/10s has Steepened going into a recession.

      Corona is the excuse, but Gundlach talking about Bernie, as the cause.

      I’m for Klobuchar, Biden, or Bloomberg, but have no doubt Bernie can beat Trump, if the stock market/economy turn down.

  2. Pierre Chapuis Says:

    What a great post!

    Fiat currency is defined as money without any intrinsic value. But it is backed by something I believe.
    It is backed by the millions of people who wake up every morning and go chase it. It is backed by their labor, their time, their energy, the debt theyre trying to repay just about every action and decision we all make.

    I guess the tipping point will be when the millions will start looking for an alternative to this fiat currency.

    Interesting fact I once heard,
    Not until 51% of the herd lifts their head in lieu of a possible lion attack, will the whole herd run. The tipping point of the herd stands right at that ONE antelope that lifts their head up.

    • TraderB Says:

      Hey Jay Powell-
      Now you’s can’t leave.

      We have long said on this blog that gold is inversely correlated with FED credibility.

    • Bosko Says:

      I would add … once a US citizen, always a US citizen– who must file an income tax with the IRS for LIFE, no matter where you live and work. This fact alone represents a guaranteed loyal customer for life. A law most other countries lack. Also a fiat government currency is only as good as the rule of law backing the currency, who would trust a gold backed Yuan, Ruble or EU, with no bond market? Yes I know Nixon shocked the world in 1971, (which questions the trust of the US also) but the gold backing was replaced by a petro-dollar, the military industrial complex and semiconductors, so to speak. As we see both the USD and the Gold going up together is evidence enough that the world trusts the US banking, securities laws and gold over most other assets or fiat currencies. The question is how long before we declare a final winner between the USD and the Gold, as Yra has explained so well, the battle lines have been drawn.

  3. Michael Temple Says:

    Yra
    This was not the way I wanted to see PMs explode.

    Covid is about to inflict as much financial devastation as actual deaths as it appears to be going global.

    We will get through this. But, many many companies may not survive a 6 month virtual shutdown of business as so many countries
    may soon close up shop if Covid doesn’t get stopped in its tracks immediately.

    Action in USTs/RED EDs screams for the Fed to drop rates….Probably not this week. But, just two more days like today where S&P is now down 100 points, and I think we get our 50 bp
    cut.

    Where will gold be then?

    And if Jerome only cuts 25 bp, he will do more harm than good as markets will plotz at the realization that he doesn’t see this raging forest fire.

    Mike

  4. yraharris Says:

    To all– and especially Mike T—-these are great posts and add to the discussion in a very constructive way.The Powell Pivot came fast and hard when it was the equity and bond markets on the verge of a possible debacle—this is a genuine economic event in motion and NOT WHEN GENIUS FAILED—-this is the predicament the central banks have placed themselves in—-when will the trump engine begin tweeting and blasting at the FED.Not saying it is a good thing,it is not

  5. Richard H Papp Says:

    On a cold reading of the numbers a close below the Jan. 31 closing lows of the Dow Industrials and Transportation Av. would mean that Bruin is back in charge. They are: 28,256.03 and 10,566.74
    It is noted that the Dow Trans. Av. topped out in the Fall of 2018 and has NEVER made a new closing high.

    According to Dow Theory a move by one average unconfirmed by the other is most likely deceptive.

    For a detail study of Dow Theory I refer you to Richard Russell’s (R.I.P.) text “The Dow Theory Today”

  6. Michael Temple Says:

    Yra
    While all eyes were on the Dow, S&P and bonds, the PPT was at work today on Crimex (my name for Comex).

    As a rampant gold price is an indicator that CBs have lost the narrative and that fear is stalking the playground, somebody decided to aggressively sell (short sell?) nearly $3 BN in gold futures with prices in the 1670s.

    Gold (and silver) promptly got flushed down to the 1650s under such selling. Was S&P suddenly getting goosed higher? Or were USTs getting sold off?

    Nope…Both remained at their respective intra day highs/lows, yet gold suddenly got caught up in a RISK OFF trade.

    In fact, gold was as high as 1680 in early am when S&P was down just 80ish points, not the 100+ down when the gold assault began.

    Lazy MSM analysts chalked it up to margin call selling!

    Are you kidding me? Margin call? Not a peep was mentioned all day today about margin selling in the stock market.

    Margin Call…All the longs in gold were likely short stocks, not long em, as they are generally negatively correlated.

    Who, in their right mind, would liquidate a PHYSICAL position so large and so sloppily? NOBODY

    But, PPT could most definitely get the biggest bang for its buck by attacking gold with just $3 BN. No such amount would have propelled stocks higher or sent bonds reeling.

    NO. This was the work of PPT, in my mind…..Chinese have plenty of USTs that they can easily liquidate without putting the price down on themselves.

    NOPE. This was a Crimex takedown.

    For now, it has worked…But, if rate cuts are nigh, gold will do very well, thank you very much. And, heck, even stocks will probably have an intermediate bottom.

    But, for now, this brazen act is further proof that the PPT is warbling just off stage.

    As for stocks bouncing tonight, who knows…On the other hand, all it takes is just one more BAD Covid news in some other part of the globe to have fear return.

    Read one article today that said that inventory levels for most producers will begin to run out by mid-March….If China Inc is not back online, that is when we could see big supply chains BROKEN as the shelves will be bereft of critical parts.

    And for those who think today mars a dip to be bought, just take a look at UAL. They pulled ALL 2020 guidance today. Somewhat akin
    to Hilton CEO doing the same on his 150 shuttered China hotels last week.

    Xi may want the workers back on the job….But, how precisely can that happen while Covid rages on in China.

    Mike

  7. Michael Temple Says:

    Yra
    So, according to Trump, tonight’s further 1.4% dump in S&P futures is follow through disgust by the market to the raucous Democratic
    debate from Charleston on Wednesday night, and NOT the market’s newfound fear of economic slowdown as Covid is making its way towards America.

    Of course, we all know that Covid is now the pin to the stock market’s bubble that peaked at S&P 3380ish just 2 weeks ago.
    S&P just about to touch its 200 day MA, while Dow has already sliced through its own 200 day MA.

    A couple of observations about gold.

    1. The ratio of gold to S&P has now skyrocketed above the BIG downtrend line since the 2011 peak of gold at 1900, when the ratio was close to 1.40 in favor of gold over S&P.

    Since then, stocks have trounced gold with the ratio bottoming out
    at roughly 0.40 in the past few years.

    But, the ratio has now broken out decisively above the trendline where resistance has been 0.50…In fact, gold to S&P right now is
    at 0.538, which signals (to me) a huge change which will govern
    market dynamics in the coming years.

    Also of note, I believe that gold has already marked a new all-time high earlier this week when it touched $1685ish before the Crimex/Comex paper bombing that took it down as much as $55 to $1630 before its rebound tonight back to $1650.

    Now, you may argue with me that gold’s all-time high was its one-day peak of $1900ish back in Sept 2011.

    Yes, but……..

    Did you know that gold’s average price in 2011 was approximately $1570ish?

    And in 2012, as gold started its slide from its frenzied peak, the average price for that year was $1668ish!!

    By Dec 31, 2013 Gold finished the year at $1205.

    My point? At $1685 on Monday morning, gold’s price was higher than its best ever annual finish of $1668 back in 2012.

    Currently, gold is priced at all-time highs in virtually every other currency in the world, a fact Yra made in another blog post recently.

    I contend that BIS or some bullion banks, acting on behalf of BIS, paper bombed Comex with over $3 BN in frenetic futures selling at that $1685ish high as it was BAD OPTICS for CBs to have gold make a bee line for $1700 and make a mockery of CB actions/inactions during this latest equity meltdown.

    Better and easier to knock gold down with just $3 BN than to try to halt the slide in S&P or stop the freight train move in USTs.

    Moreover, I think the authorities know that they will soon be making coordinated emergency policy actions in the coming weeks, if not days.

    PBOC has thrown ungodly sums of money at its markets.

    HK just announced the first ever MMT operation, a direct intravenous
    injection of $1200 to each HK citizen, bypassing the banks in its stimulus move

    And, finally, the Germans have decided to suspend their Zero deficit pledge and have decided to do some fiscal stimulus to address the slowdown now well evidenced BEFORE Covid has stalked the landscape.

    As I type, UST 2 yr is yielding 1.11% and 10 yr is 1.30%
    WTI Oil now has a $47 handle
    And S&P is trading at 3067.

    S&P is now down about 8% for the week. Could be down 10% by the Friday close, which would put it right about 3000.

    Trump will be going BATSHEET crazy with Tweets at Jerome to CUT CUT CUT early Saturday am, if not sooner. Heck, he couldn’t stop himself from taking a very public potshot at him during his Covid conference last night.

    Do we really expect Trump’s appointment of Pence to solve the Covid crisis? Of course, not.

    Anecdotal evidence keeps piling up of the change in psychology finally hitting here in US. Just tonight, Workday (a successful Silicon Valley company) cancelled a sales conference it has in Orlando for 3000 employees due to an abundance of caution of bringing so many people together in one place due to Covid concerns.

    Orlando!! Not Europe or SE Asia….Orlando, where there is no infections, but they simply don’t want to bring together 3000 disparate folks for fear that just one infected person could wreak havoc on its workforce.

    Jerome will NOT have the luxury to wait until the March FOMC to gauge Covid impact on the economy. Again, it seems neither he nor Clarida nor Kashkari believe the flickering signs of distress that print daily on their Bloomberg terminals. According to Kashkari, tonight’s new lows in UST yields speaks to even stronger investor confidence.

    Yeah, right, and I have some bat soup to nourish your appetite.

    Expect the Fed to blink any day now….Anything less than a 50 bp cute will be laughed at by the market, as UST 2 year is nearly 40 BP through FF of 1.50-1.75 (Can we please eliminate that silly, stupid range….My God, the 30 yr is yielding 1.80%).

    By all rights, FF should be 50 bp through UST 2 yr, which would imply 61 bp NOW for FF….Jerome will not cut 90 bps. Some might argue that he should slash by 75 given the price signal of USTs.

    In such a world, I think gold starts to skyrocket further in the month ahead…..

    • TraderB Says:

      Mike/Yra-
      1- What time of the day does the FED typically announce an emergency rate cut? Would they likely announce this between 4:15PM CST – 5:00PM CST? (or over the weekend)
      2- Knowing their antics, won’t they first start talking really dovish (with “whatever it takes” type language and “more tools in their toolbox”) and see if their words can help stabilize market fears?
      3- Assuming they announce an emergency 50 BPS rate cut when the market is closed, how much higher will the S&Ps gap higher on the next open?
      4- Any pop on a rate cut would be short lived, agreed? With bonds already rallying, the market is doing QE for them. More QE would just push us into negative interest rate territory.
      5- It seems like the real solution to all this is going to be a Shock & Awe Fiscal solution.
      A bailout of all of the airlines and other vital infrastructure in our country. Maybe a stimulus check to all citizens. Huge investment in resources to aid the sick.
      6- My guess would be that our do-nothing congress won’t act until SPUs are below the lows made in Dec 2018. I would guess 1800-2000 in S&Ps will get their attention.
      7- If/when Congress announces their $2T stimulus package, watch out for the snapper! Stocks will RIP higher! So will gold.
      8- In the meantime, I wouldn’t be shocked to see gold prices dragged down with other assets. In Q4 of 2008, Gold sold off 25% from it’s highs during the market meltdown.

      Is this really the Black Swan that will pop the bubble once and for all? The irrational FANG, VC, and Private Equity behavior of the past decade all meet their day of reckoning. All of the sheep who were lured into risk assets in lieu of low interest treasuries are about to be led to the slaughterhouse. It seems like there is definitely a chance that could happen.

      • Michael Temple Says:

        Trader B
        So so many questions. Here are my quick thoughts.

        The nature of an “emergency” rate cut is that it needs to take place
        after an EMERGENCY. Somehow, I think we need to see one more huge leg lower in stocks to get there, which probably happens alongside news of a Covid cluster popping up somewhere in US.

        As Yra has noted, Jerome has lost the opportunity to have made an insurance cut….So, I think the Fed needs to play “trader” and time its
        cut at the point of maximum pessismism/oversold conditions and do it, preferably, in a globally coordinated way on a weekend.

        Why? If they time it right, they can trap the “shorts” and make them sweat bullets over a weekend as they prepare to get torched on Sunday night when Asian markets open.

        So, my bet is a weekend “Shanghai Accord” sometime within the next couple of weeks, although our dear friend, Yra, might tell you
        it could come this weekend.

        So, yes, stocks will RIP higher from whatever depressed level they reach before such announcement.

        As for gold getting dragged down with it, I am not so sure this time.

        Rational investors will realize that we are heading towards ZIRP and record QE to Infinity here in the US….As all CBs everywhere will be beggaring thy neighbors, global demand for gold will grow.

        Now, CRIMEX may see more silly attacks by the BIS/IMF. But, this time, they may just get met with more buying than they decide to sell.

        The backdrop for gold is as good as it gets, and will only become more self evident once the FED goes “ALL IN” with Real QE.

        Gold broke out of a massive 6 year sideways pattern last year when it finally busted through $1375. 6 years….We are not even finished with the first year of that breakout. Crimex shadowy figures may still play games, but NO REAL OWNER of physical gold wants to sell a couple of billion of gold now, not when the fiscal and monetary fireworks are about to begin.

        The Fed has FULL COVER to take EXTRAORDINARY actions as we are now at War with Covid and the ravages it will soon inflict on our domestic economy, not just the 2nd order problems of broken supply chains emanating out of China.

        The least of CB concerns should be a rising price of gold when stocks/REAL WEALTH get destroyed. Imagine the “shock and awe” when Joe/Jane Retail opens his/her 401K quarterly statement in the first week of April to see a negative return for the quarter, and perhaps a really big one if things get uglier here.

        The REVERSE WEALTH EFFECT will further tarnish economic confidence. With UST 10 yr below 1% by that time, where do you go
        for some SAFE returns? Well, if you finally decide to cash in some
        of your long long term stock gains, gold might just be the answer.

        Mike

    • David Richards Says:

      Good observations about the average yearly gold price as that smoothes the intra-year volatility. Likewise, the yearly closing price of gold was its highest-ever in 2012 (not 2011) at $1664, so your average gold price in 2012 was nearly identical to the 2012 closing price and, as you point out, similar to this week’s gold price. Of course, we’re talking paper gold which has occasionally bifurcated in price from physical gold. Like in Singapore, a huge offshore wealth storage and tax haven, banks ran out of gold since Feb 10, so you must buy gold from private dealers/storage at a higher rate than interbank. Physical gold more bullish if (when?) Fed goes more dovish?…agreed, likely soon.

      FF cuts would likely also collapse USD which has already been falling since Friday, perhaps in anticipation of Fed accommodation. DXY is 500 pips lower than 3 years ago and the last DXY peak on Friday merely closed its gap down from its waterfall collapse in April 2017, failing to even reclaim 100, never mind reclaim 104. Proverbial false move up, bearish now. The 50-year chart of USD is ugly (can anyone think of something bad that happened to USD almost 50 years ago?…haha). Kills me how the MSM buys the endless “strong dollar” nonsense, given the overall USD chart for 50 years and the dollar’s drop against almost everything since Trump took office… Saying the dollar has been “strong” with Trump is akin to saying US stocks have been “bearish”… nonsense.

      According to Martin Armstrong’s special report on Repo, another FF cut would trigger the next phase of the US repo crisis, bigger than phase 1 of the repo crisis last autumn. He wrote that this is why Jerome met with Trump last fall and convinced Trump to shut-up about cutting FF, which Trump did for months. The next Repo crisis is coming and it won’t be contained, like Covid-19 is coming and it won’t be contained.

  8. Michael Temple Says:

    David
    While I agree with your most of your comments, I am not sure I agree with your RePo conclusions. I have begun to believe the Repo crisis was inextricably tied to two conditions.

    1. The level of “excess” reserves fell too to far for comfort. And,
    2. A lot of evidence suggests that financing rates in FX Dollar swap markets were much higher/juicier as many folks were scrambling for Dollars and were “paying up” for it.

    Hence, major banks chose to lend at higher rates in the equally secure overnight FX swaps markets than in Repo. Again, had the Repoggedon really been about a foreign bank on the ropes, we would have seen that floating corpse by now. Heck, DB, the poster boy for ugly European banks, managed recently to sell an incredibly rich CoCo to help shore up their equity accounts.

    Nevertheless, your USD comments seem to be valid and if USD finally gives up the ghost after the likely coming QE episode, that will add further spice to gold, to be sure.

    Are you still in SE Asia?

    Best

    Mike

  9. Michael Temple Says:

    Trader B

    I don’t think S&P goes anywhere close to 1800-2000

    Maybe perhaps 2800 on this current power dive. Once the Fed
    does its deed, then yes, it i will rip higher. Not so sure that stocks
    turn south again for a while, however

    Trump will pull out all the stops to ensure fiscal action, whether Congress goes along with him or not. After all, Trump has a re-election to win and he has staked his reputation on the Dow Jones barometer. Don’t underestimate the effect that massive amounts of fiscal and monetary stimulus can have in the short run, even if it further mortgages our future in the decade ahead. Stocks are still a cult religion, despite the current “come to Jesus” moment.

    Best

    Mike

  10. Recoba Bacci Says:

    Temple: Beware of being long Gold here; as the COVID situation may have changed the fundamental outlook for gold over the next year or 2. If Covid situation continues to unravel, then the coming shock is extremely Deflationary and will take Gold lower, not higher. It will take MMT measures and helicopter money to help fight the global contraction, but ultimately monetary stimulus isnt going to do Jack Squat when everyone is afraid to go to work because of a Virus. So the Virus will need to run its course, leading to a protracted deflationary recession over the next 12-18 months.

    • yraharris Says:

      Recoba—I would make the case that a deflationary outcome would cause the central banks to panic as you point out—MMT /Helicopter drops is why GOLD is presently rising not because of inflation.Central bank credibility is all there is in a fiat currency world—-whether money stimulus dies squat is of no difference because the fear of 1937 is what motivates the Bernanke world of central banking.The US is not Japan and the world’s reserve currency can not be a store of value in such a scenario.Japan had real deflation ,show me that in the US and even Europe—-negative real yields will push GOLD higher against all fiat currencies

      • Recoba Bacci Says:

        Yra- For MMT/Helicopter Money you need fiscal action and that is at least 6-12 months away and the results from such action are even further away. So even if CB’s see the deflation and panic there is very little they can do other than more monetary measures which IMO will have limited efficacy on inflation. We agree that the long term fundamental case for Gold is bullish because of CB credibility. In my mind, CB credibility = willingness to tolerate higher levels of inflation. Certainly the path we were on pre-Covid was one of tolerating higher levels of inflation (with corresponding negative real yields) and fiscal stimulus to promote such inflation. I think we both agree on the long term drivers, however I am merely pointing out that in in the short run (0-12 months) this demand shock (=deflationary) will reduce inflation levels showing up in the data 12 months from now and might provide the Narrative for a solid counter trend PB in Gold.

    • yraharris Says:

      Recoba—-the market proved you today.Nice posts to the blog and greatly appreciated

      • Recoba Bacci Says:

        Yra the pleasure is mine to participate in this forum where many share their knowledge and experience

      • Michael Temple Says:

        Recoba
        Seems so

        But, HK laid down an extraordinary MMT marker this week. So much depends on Covid, to be sure.

        Yet, as markets readjust to new economic reality and settle down to lower growth, I think we will paradoxically enter inflation as those very same supply chains break. Little noticed in Friday Carnage was a steel industry announcement to hike hot rolled by $40/ton. No Chinese competition!

        So, as demand slides, to be sure, supply may fall even faster just as CBs ease.

        Yes, gold/silver got taken to the woodshed last week.
        But consider this, gold miners are still seeing strong prices compared to past 5 years.

        And with oil down 30%+ since January, mining margins should explode higher as energy costs are roughly 30% of overall costs, trailing only labor.

        So, a30% drop in an I out that is 30% of your costs is a cool 900 bp drop in expenses.

        VERY VERY meaningful.

        Investors just up NFLX as a great “indoor stock”.
        Yet, just because we All watch more NFLX does not necessarily mean a spike in new subscribers.

        Gold mining industry has something a bit more tangiy, if you ask me.

        CBs will ultimately throw the kitchen sink at markets.

        I fully expect stocks to have at least another major flush after a rally sometime soon from horribly oversold conditions.

        Regardless of the violent gold sell off Friday, gold has outperformed stocks by a mile. Yes, USTs have been the ultimate winner.

        But, gold should soon weather this storm
        I think a lot of the *smartest guys in the room” will not necessarily chase back into stocks while gold fundamentals look so strong and the technicals look great after breking out of a 6-7 year slump

    • ShockedToFindGambling Says:

      Recoba,

      What’s a counter trend PB?

      My thinking on Gold has been that it is a deflation hedge……obviously wrong this week.

      When the economy tanks, do you want to own something with counterparty risk? The only monetary asset that does not is Gold (and Silver, Platinum, if you consider them monetary).

      2020 is a much bigger bubble than 2008…..the fall should also be bigger.

  11. Chicken Says:

    Nice low rate on the 10yr

    Tis the set of the sails
    And not the gales
    Which tells us the way to go.

    • TraderB Says:

      All the King’s horses and all of the King’s men couldn’t put Humpty Dumpty back together again. How will the King’s horses and King’s men put Humpty Dumpty back together?

      Perhaps a $5T stimulus package. Rebuild all roads and bridges, upgrade all of our schools, tax credits for all things eco-friendly, forgive student debt, etc.

      Who will lend the Treasury that money?
      Why the FED of course.

      Maybe that will put Humpty Dumpty back together for 10 more years. Maybe it won’t.

      I am not worried about the Corona Virus. I am worried that Humpty Dumpty might be falling apart. And all the King’s horses and all the King’s men wont be able to put Humpty Dumpty back together again.

  12. GreenAB Says:

    Those China PMIs – wow!

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