by Sean Kelly

Cities burning.  A plague on the land.  Soldiers fighting mobs.

We know it sounds like an old Cecil B. DeMille movie.

But this isn’t Hollywood.  It’s real life today.

All of these things—a public health crisis, the pandemic lockdown, civil unrest, property destruction—are an enormous drag on prosperity. They are a tax on opportunity and growth at the very least and are always met by massive government spending.

In our case that means more money printing.

The shredding of the social fabric and civil disorder are good reasons to own gold.  So is a historic economic downturn.  But there is another story that is being crowded off the front pages. Something in addition to the riots and looting.  Something more than the coronavirus, businesses that are closed never to reopen, millions unemployed.

It is not more important that our domestic chaos.  But it must not escape your notice.

We are also living in an extremely dangerous geopolitical moment.  International tensions are running higher than at any time since the Cold War—this time between the US and China.

The war of words is escalating.  China has “ripped off the United States” like no one before, says Trump.  For its part The Global Times, a Chinese government newspaper, accuses Trump of “typical international hooliganism.”

Cracking down on Hong Kong’s autonomy, China has imposed a new national security order that would allow its secret police, the Ministry of State Security, to operate in Hong Kong the way that secret police operate.

In response, the US is ending Hong Kong’s preferential trade status.  (That seems like a peculiar policy since it will hurt China, but it will hurt Hong Kong more.)

The shipping lanes of the South China Sea are growing crowed with both territorial claims and warships, making likely a confrontation even over an accident.  The Taiwan Times is reporting that China’s People’s Liberation Army is conducting drills in preparation for an assault on the Pratas Islands, held by Taiwan.  On the American side, reports the newspaper, “in recent weeks a succession of U.S. aircraft and naval vessels have patrolled the area south and west of Taiwan in response to frequent forays into Taiwanese airspace by PLA aircraft.”

Not every front of the Sino-American divide is territorial.  There are commercial fronts as well.  US Secretary of State Mike Pompeo is employing maximum bluster in the direction of Israel and other countries against deepening economic ties with China.  One of Pompeo’s aims is to impede the adoption of China-based Huawei’s 5G networks.

Nevertheless, European officials are now speaking quite openly about the “the end of an American-led system and the arrival of an Asian century.”

Other charges are bouncing back and forth across the Pacific.  Legal cases are being drawn for COVID-19 claims against China.  China is signaling that it will retaliate against the US Huawei ban, with Boeing, Tesla and Apple all mentioned.  Increasingly discussed are major restrictions against Chinese students studying in the US.

Meanwhile, Republican strategists and early ads have made clear that they intend China to be central  to their presidential campaign.  Democrats won’t let themselves be outdone on the issue.

Bear in mind that as all this goes on, and as US spending soars and the national debt compounds, China remains a major US creditor.  It holds $1.08 trillion in US Treasury securities at a time the US needs all the creditors it can find.  China does not loan all that money to the US as a favor.  It needs dollar reserves for its own purposes, such as settling international trade deals.  But as Russia discovered in replacing most of its US Treasury holdings with gold, China can get by with a lot fewer dollar-based reserves.

Rising tensions carry the very real prospect—and at some point the inevitability—of massive Chinese disinvestment in the dollar and an accelerated reliance on gold –not just as an alternative, but as an upgrade to their dollar holdings.

It is a reasonable thing for China to do.  Afterall, prominent figures on Capitol Hill are making the suicidal suggestion—suicidal for the us—that the government renege on China’s US debt portfolio.

That would end the reign of the dollar, crash the stock market, and destroy the bond markets.

China has been getting ready for this moment for a long time.  Since 2006 its gold reserves have grown from 600 tons to 1,948 tons.  Bear in mind, that these numbers from the People’s Bank of China reflect official state holdings.  But many observers believe they substantially understate China’s gold position.  Most agree that there has been a tremendous flow of gold into private hands in China as well, mostly from Europe and the West.  At the same time, China remains far and away the world’s largest producer of gold.

Stated in the terms of personal financial management, China has diversified its portfolio with an emphasis on gold.  It is investing for a crisis.  It knows exactly what the Federal Reserve is doing and anticipates the dethroning of the dollar as the world’s reserve currency.

China has been getting ready for this moment.

We think you would be wise to diversify into gold as well, now, in this time of chaos and crisis.

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by Sean Kelly

More central banks are planning to buy gold this year.

The increase in the number of central banks buying gold in 2020 is especially significant since central bank gold buying already reached record levels in 2019.

That’s according to the World Gold Council’s 2020 Central Bank Gold Reserves survey released this month.  Twenty percent of central banks intend to acquire gold over the next twelve months according to the report.  That compares to eight percent in the 2019 survey.

Key factors in the central banks’ gold acquisition plans are no different than those of informed individual investors.

Interest rates head the list of bankers’ concerns.

  • “88 percent of respondents say that negative interest rates are a relevant factor for their reserve management decisions.
  • “79 percent of respondents view gold’s performance during times of crisis as an important reason to hold gold, up from 59 percent in 2019.”
  • “74 percent of respondents consider gold’s lack of default risk to be an important reason for holding the metal, up from 59 percent in 2019.”

The report concludes that these shifts signal an ongoing re-evaluation of gold’s role in the international monetary system and reflect “long-term concerns about fiscal sustainability as government stimulus is deployed to cushion the global economy.”

We are disappointed that the mainstream media does not feature reports on this news more prominently, since it is part of a global shift away from the dollar and will affect American living standards over time.  In any case, this “de-dollarization” is a leading financial megatrend of our times and is a very bullish development for gold, of which our friends and clients deserve to be aware.

This megatrend affects individual precious metals investors in three specific ways.  First, the central banks buy in huge quantities, last year adding 650 metric tons to their holdings.

It is a harbinger of a changing world order, a move to weaken the US geopolitical hegemony that had grown for the last century.  As central banks move to gold, they do so mostly with the dollars they once held.  Ten years ago, Russia held $180 billion in US Treasury securities.  Now Russia’s gold holdings have grown, its dollar holdings have fallen so low they are reported down in the asterisks in US Treasury listings, below the holdings of countries like Iraq and Vietnam.  This shift from dollars to gold over time removes some of the underpinnings of the dollar in global markets.

We also view gold in central bank reserves to be gold held in strong hands.  That means it is not likely to be sold in the case of market events, such as margin call selling in a stock market crash.

The World Gold Council reported earlier this year that global investment demand for gold (bullion, coins, ETFs) in the first quarter of 2020 was 80 percent higher than during the same quarter in 2019.

More central banks are planning to buy gold this year.  We recommend you do so, too.  Before they do!

 

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We would like to thank Federal Reserve Chairman Jerome Powell for doing our work for us Sunday night on the CBS program 60 Minutes (5/17/20).

A good deal of our day has to do with discussing the US dollar and our monetary system.  It is no surprise that so few American understand how it works.  The schools don’t really deal much with it.  And frankly, parts of the monetary system were designed to shroud the sketchiest parts of the operation.

We don’t blame people for not knowing more about it: how dollars are created and what gives them value.  People have families to provide for and work responsibilities that demand their attention.  A good mechanic knows more about our cars than we will ever learn.  A pharmacist has a dizzying array of medicines to counsel customers about.

Individual areas of expertise like that don’t leave people a lot of extra time to pay attention to arcane monetary issues like debt monetization or liquidity operations.

But Chairman Powell pulled the curtain back on what the Fed really does in his interview with Scott Pelley.

And that’s a big help!  Because in talking to our friends and clients about the importance of gold in their retirement accounts and financial portfolios, the subject almost always comes up.  And once they understand the way the Fed makes money out of nothing, money that gets stovepiped to bailout reckless banks or to crony companies and even foreign governments, the gold story starts to become more clear.

And when they learn that dollars created out of nothing take on value to the degree they dilute the value of the dollars they have been saving, the reasons to own gold come into sharp focus.

So what did Chairman Powell say that helps make much of this clear?  Just the truth.

Discussing the Fed’s response to the COVID-19 shutdown, the interviewer asked if the Fed has just flooded the country with money.

Here’s a partial transcript:

Reporter: “Fair to say you simply flooded the system with money?”

Fed Chairman: “Yes. We did. That’s another way to think about it. We did.”

Reporter: “Where does it come from? Do you just print it?”

Fed Chairman: “We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.”

Reporter: “In terms of size, Mr. Chairman, how does what the Fed is doing right now compare to the unprecedented action it took in 2008?”

Fed Chairman: “So the things we’re doing now are substantially larger. The asset purchases that we’re doing are a multiple of the programs that were done during the last crisis. . .”

Bear in mind that when the Chairman says the Fed buys assets in the afternoon, it is doing so with money that didn’t exist in the morning.  It didn’t exist until somebody hit “enter” on a computer keyboard.  And made it up.

You might think that creating “money” that isn’t backed by anything is like writing a check on an account with no deposits, or even like counterfeiting.  You would be right.

It is like counterfeiting.  But it is legal counterfeiting.

So, our hat is off to Powell.  Other Fed chairman have been obfuscatory about what they do, and for good reason.  Most people work too hard to believe that real wealth is created out of thin air.  And once they learn that there is no discipline on government spending and no limit on the dollars the Fed can create, they begin to see gold in a new light.

Actually, we shouldn’t say new light, because gold has been the shining and enduring money of the ages for thousands of years and in the far-flung corners of the earth.  People turn to gold for both protection and for profit when the authorities start doing things like making “money” out of nothing at all.

So, thank you Chairman Powell for helping us out.

For today, our work here is done.

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by Sean Kelly

Few Americans realize the US dollar is more than simply another currency, that thanks to its global dominance the dollar has also been weaponized.  It is not just a unit in commercial transactions; whether for good or for ill, it is a bludgeoning tool of US foreign policy.

President Nixon’s Treasury secretary John Connally rubbed the world’s face in this reality in 1971 when he told a group of foreign finance ministers that “the dollar is our currency, but it’s your problem.”  Connally was right.  Only weeks earlier the US suddenly repudiated its promise to foreigners to redeem the dollar they held with the gold they had been promised.

This vulnerability to US dominance is a remnant of the post-war Bretton Woods agreement.  With that arrangement, most of the world’s countries agreed to hold dollars instead of gold as their own currency reserves.  Having abandoned gold, they became hostages to US policy.

The dollar’s status as the world’s reserve currency has cemented this dominance into geopolitical affairs.  Tools of this reach include the SWIFT system, a global interbank financial communications system used to settle international accounts.  By denying countries at odds with US policy access to SWIFT, the US cuts foreign nations out of international markets and thereby exerts unprecedented control over global economic activity in furtherance of its geopolitical and military objectives.

Sanctions… penalties… asset seizures:  foreign banks have been fined billions of dollars while entire countries have had their foreign assets frozen and claim to have been economically crippled by the US for violation of what they believe are promiscuous, arbitrary, and cruel US sanctions.

Although they have been biting their tongues for years, foreign governments are now openly bristling at this state of affairs and making common cause to change it.  They are racing to establish bi-lateral and multi-lateral institutions to bypass the old order, the “exorbitant privilege” enjoyed by the dollar.

The accompanying movement of central banks around the world, most notably Russia and China, to de-dollarize by repositioning the reserves out of dollars and into gold may prove to be the most significant megatrend of this decade.  It is a shift in global monetary management that can damage the dollar badly and propel gold much higher.  Since 2006 China’s gold reserves have grown from 600 tons to 1,948 tons, while Russia’s have swollen from 400 tons to 2,299 tons today.

Foreign nations aren’t ganging up against the dollar because it is in a position of strength.  The COVID-19 pandemic, with its exponential growth of US debt and warp speed Federal Reserve money printing, provides a fresh opportunity to unite against dollar hegemony.

The president of the Shanghai Gold Exchange, the world’s largest spot physical gold trading center, Wang Zhenying, used this pandemic moment to voice the common dissatisfaction with the dollar.  “When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he said.  “Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country.”

Talk of a “super-sovereign currency” may ring a bell.  Long ago French President Charles de Gaulle called for a new monetary system “on an indisputable monetary base that does not carry the mark of any particular country. . . . Yes, gold, which does not change in nature, which is made indifferently into bars, ingots and coins, which does not have any nationality, which is considered, in all places and at all times, the immutable and fiduciary value par excellence.”

De Gaulle was on to something.  A few years before dollar holders were left holding the “old maid” when the US suspended the dollar’s convertibility to gold, de Gaulle had sent the French navy across the Atlantic to pick up France’s gold reserves held in the US.

Good move.

The moral of this story is that with the old-world monetary order under growing strain and de-dollarization spreading, moving assets into the global “super sovereign currency” is especially alluring.

For nation states and individuals alike.

Gold is the super sovereign currency today, just as it has been for thousands of years.

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by Sean Kelly

As if COVID-19 weren’t enough, along with “expert” opinions that conflict with one another, and a lockdown that has given us depression-era levels of unemployment, the US government has now entered a red zone of debt that will plague us even after the coronavirus is just a bad memory.

The latest news this week is that in the current quarter (April-May-June) the US Treasury will have to borrow an unprecedented $3 trillion just to keep operating.

Altogether for fiscal year 2020, the US is on track to add $4.5 trillion in red ink.  That’s more than it borrowed in the previous five years combined!

We’re in this mess because tax revenues have collapsed thanks to shut-down businesses and record unemployment, at the same time government spending is on a booster rocket with more bailouts, stimulus checks, payments to farmers, payroll support, infrastructure spending, and other initiatives on the drawing boards that we won’t even bother to catalog.

It’s not just debt that’s in the red zone.  The Federal Reserve has stepped into the mix, too.

Let me frame it differently.  What does a government that already has $25 trillion in debt that it can’t pay do when it wants to spend trillions more?

It “prints” the money.

Here’s a chart that shows what we mean.  It’s a chart of what the Federal Reserve owns, Fed assets.  As you can see, it shows that the Fed carries more than $6.6 trillion of financial assets on its books — government bonds, mortgage and other securities, junk bonds, and other toxic assets.

FRED total assets

The Fed pays money for all these assets, more than $2.7 trillion in the past 12 months alone.  You can see that since late February, with the coronavirus shutdown, the trajectory of its purchases went straight up.

We think that justifies saying Fed money printing has gone stratospheric.

But where did it get the money?

It made it up.

The Fed just printed the money.  (Actually, since this is the digital age, it did it with a few simple computer keystrokes.  That’s even easier than printing money!)

All that new money, those new US dollars created with a keystroke, dilute the purchasing power of every other dollar.  Including the dollars you own.

And that explains why “the smart money” is buying gold.  People everywhere in the financial world are beginning to notice.  Fred Hickey writes an investment newsletter called The High Tech Strategist.  Even though his beat is technology, the other day he tweeted this:  “All the smart money: Dalio, Druckenmiller, Tudor Jones, Zell, Gundlach, Singer, Klarman, Einhorn, Mobius (and some who I know are loading up but are doing it quietly) are long gold…. Question is: What are YOU waiting for?”

Jim Rogers is certainly part of the smart money, too.  He co-founded the legendary Quantuum Fund and Soros Fund Management.  Rogers is buying precious metals for the first time in years because of the money-printing practices we described.

One of the nation’s largest banks summed it all up a few days ago, as it raised its own target price for gold by 50 percent.

It titled the report, “The Fed Can’t Print Gold!”

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by Sean Kelly

For weeks we’ve been asked to quarantine ourselves, stay indoors, social distance, work from home, wear masks, and avoid outside contact. We’ve become a restless and agitated nation.

Americans were simply not cut out for isolation. After all, we tamed the wild frontiers of the West, pioneered aviation, invented muscle cars and perfected the road trip. We even “slipped the surly bonds of earth” to send a man to the moon.

Can we go back to normal now?

In 2020, cabin fever does not adequately describe the ferment of over 320 million people who love to shop, eat out, travel and socialize. We crave normalcy. But the notion of “normal” is a consequence of conformity. It is the embrace of things considered “ordinary.” In the wake of COVID-19, however, the very word seems inapplicable. Most experts agree that there will never be a precise return to how we once were. Will folks really rush into jam-packed stadiums again? Will Americans embrace busy restaurants and shopping malls as they once did? Who, if anyone, will opt for the middle seat on an airplane? We’re in a precarious place – trapped between wellness and disease, recovery and relapse, and economic rescue and financial ruin.

Are we reopening the economy too early?

While we have segregated ourselves into ‘flattening the curve’ of infection – some states are now relaxing restrictions and others have announced phased re-openings like: Texas, Colorado, Alaska, Oklahoma, Georgia, Tennessee, Idaho, Iowa, Minnesota, Nebraska, Montana, North Carolina, South Carolina, North Dakota, South Dakota, Mississippi, and West Virginia. Despite the mad dash to normal, however, concerns linger about an infection bounce-back. Have we tested enough? How many asymptomatic people are lurking about? Could the virus return in a stronger, second wave? As social interaction increases, a possible rise in new infections could send us back to solitary confinement and side-track any hopes of an economic recovery.

Is Washington fueling an epic stock bubble?

As states and businesses slowly open up, the stock market is rallying. The Dow surged over 350 points yesterday and despite a multi-week economic shut down, it is just 18% off its recent high of almost 30,000 on February 12th. Wall Street has been oddly resilient in the face of what has become the worst economic calamity since the Great Recession. Are traders perhaps overly confident about Americans getting back to work? Is market negativity already priced in? Has massive risk appetite returned? Or are investors betting on endless rounds of stimulus from Washington to make everything okay? More federal money means more risk-taking and bigtime risk, builds bigtime bubbles which almost always wreak economic havoc.

Are we entering dangerous debt territory?

The coronavirus fallout has prompted lawmakers to pass the biggest stimulus package in U.S. history. The $2 trillion Cares Act and over $480 billion dollar coronavirus relief monies have pushed federal deficits to unprecedented levels. And more cash is on the way. Our national debt could eclipse our annual economic output as soon as this year. We’re on track to grow the balance sheet by up to $10 trillion next year and our debt liability could reach 117% of GDP by 2025, far exceeding World War II levels. The Treasury can continue to borrow its way forward as long as interest rates remain low but if inflation returns and rates are forced higher, the weight of that debt could crush our economic future.

Will America’s Cities Go Bust?

With restaurants, bars and businesses suffering under stay-at-home orders, America’s cities stand to lose billions in sales and income tax revenue along with tourism and travel dollars. Shoppers in the nation’s largest municipalities are few and far between, hotels are empty, malls have become ghost towns, trade shows and conferences have all been postponed. And, the loss of these revenues along with skyrocketing pension costs could jeopardize essential city services like school funding, road repairs, sanitation, fire and police protection, medical supplies and infrastructure care. Under these pressures, cities are less likely to pay down their debt. As a result, the coronavirus will severely test finances in places like New York, San Francisco, and Seattle and threaten pensions in Philadelphia, Dallas and Chicago. Insolvent pension plans could push some major metropolitan areas into fast bankruptcy.

Confirmed worldwide cases of the coronavirus have now surpassed 3 million. Over 210,000 people have died, 56,000 in the United States. America is now the epicenter of the virus outbreak. Most of us, just want our life back – but that’s the hard part. The emotional fear and economic fallout will likely linger for a while and uncertainty about the days ahead will be one of our greatest challenges. We should prepare ourselves for anything from a new wave of infections and a broad market bubble – to soaring national debt and the collapse of our most celebrated cities. Tomorrow, however, belongs to those that understand that “normal” may very well be something we no longer recognize – so we should plan accordingly.

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by Sean Kelly

Last week, the White House unveiled Opening Up America Again, its plan to get the country back to work which is presented in three phases, each spaced several weeks apart. It features a state-by-state “Gating Criteria” that should be satisfied before restrictions are lifted in each phase of the plan.

The entire reopening process hinges on the downward trajectory of coronavirus infections, a fall in documented cases, the ability for hospitals to treat all patients needing care, and a robust testing program.

  • Phase One, for states and regions that satisfy the gating criteria, loosens the restrictions on access to public places like parks and shopping areas. It allows large venues to resume operation (e.g., restaurants, movie theaters, sporting venues, places of worship) but only if strict physical distancing protocols remain in place.

 

  • Phase Two, for states and regions with no evidence of an infection upsurge, allows the reopening of schools, daycares and camps with appropriate distancing measures. In addition, large venues can operate with only moderate distancing protocols. Elective surgeries and non-essential travel can also resume.

 

  • Phase Three, permits the return of public interactions. Employers can resume unrestricted staffing. While vulnerable individuals should still practice physical distancing, visits to hospitals and senior care facilities can also resume. Large venues can operate with limit distancing restrictions. Gyms can also re-open and bars can operate with standing room occupancy where applicable.

The plan has been criticized by some state governors as too vague and panned by House Speaker Nancy Pelosi for not mandating mass testing and tracing.  A non-partisan group of 50 House members that call themselves, “The Problem Solvers” also put forth guidelines to re-start the economy called the “Reopening and Recovery ‘Back-to-Work’ Checklist” which emphasizes comprehensive testing and a science-based approach to safely bring the economy back online. It has been offered as a framework for future rounds of economic relief.

These attempts to restart American industry come amid soaring unemployment numbers and mounting “back to work” protests that are gaining momentum across the country. Rallies and demonstrations have erupted in Michigan, Texas, Utah, Maryland, Florida, Colorado, Indiana, Illinois, Nevada, Pennsylvania, Tennessee, Washington, Montana and even in New Jersey and California. Signs reading, “Stop the Shutdown,” “The Cure Has Become the Disease,” “Stop Killing the Economy,” “Let us Work,” and “Give me Liberty or Give me Covid-19!” capture the frustration and anger of Americans worried about their freedom and their livelihood.

Over the past, three weeks U.S. economic activity has come to a complete standstill and what protestors fear most is that the longer businesses remain closed and entire American cities shelter at home, the deeper and darker the economic chasm. The massive layoffs, cratering GDP, and crumbling housing numbers are reminiscent of the financial crisis of a decade ago – except far more severe. The speed and scope of the current financial collapse has been unlike anything experienced in modern times.

While some have accused the protestors of defying science and endangering the public good, their economic reality is fairly straightforward– they can’t pay their bills if they don’t leave the house. Civil liberties, religious freedom and government overreach are undoubtedly part of the dialogue along with something much more fundamental, the “pursuit of happiness” guaranteed by the Declaration of Independence and nearly impossible to enact without a job and a paycheck.

Experts predict that an economic recovery could take many months and depending on the development of effective therapies, treatments and/or vaccines to control the spread of the virus, it may be longer than that. Even as the pandemic fades no one knows how quickly consumers will return to restaurants, theaters and ballgames – and if they’ll ever come back in the same numbers.

As the layoffs, business closures and market losses mount, the hit to retirement and savings accounts could reach catastrophic levels. For those taking to the streets, the recovery will start when they finally return to work. For those in the shadow of retirement, it will start when they finally decide to diversify their portfolio and protect their wealth.

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Back in mid-March President Trump declared war on coronavirus and labeled himself a wartime President. During a series of press briefings at the White House, the president called the virus an “invisible enemy” and deemed the fight against it a “medical war.”

When we think of war time presidents – Abraham Lincoln, Woodrow Wilson, FDR, and Lyndon Johnson all come to mind. Each placed their trust in a team of key advisors, worked to protect the country, had a plan for victory and often warned that things would get worse before they got better.

Such has been the case in the war against COVID-19. A formidable foe also known as SARS-CoV-2, silently and imperceptibly makes its way into the human body through droplets from an infected sneeze or cough – typically lodging in the nose and throat. It can also slip into the lungs triggering an inflammatory response that causes oxygen levels to plummet, patients to gasp for air, and in severe cases respiratory ‘death by drowning.’

It is an invisible enemy indeed, as a matter of fact, it’s not even alive. The Washington Post reports that, “viruses have spent billions of years perfecting the art of surviving without living — a frighteningly effective strategy that makes them a potent threat in today’s world.” The novel coronavirus is technically a spike protein with a spherical structure that helps it gain entry into the body by binding to cell membranes. Once it hits the lungs, it divides and conquers, creating infinite versions of itself.

In terms of warfare, COVID-19 is always mobilizing. It never regroups or falls back, requires no munitions and has unlimited reinforcements. It has effectively shut down the globe in terms of business, industry, commerce, social contact and human interaction.

For our part, we’ve taken mass casualties. Worldwide coronavirus infections are approaching 2 million, with over 118,000 deaths. More than 580,000 Americans have been infected and over 23,000 have died. Our only offensive has been to retreat, hunker down, take shelter and hope the enemy withdraws. Is there a winning wartime precedent for such a tactic? Not really.

Carl von Clausewitz, a Prussian general and military theorist famously said, “four elements make up the climate of war: danger, exertion, uncertainty and chance.” There’s no doubt that we’re in a dangerous place mercilessly trapped between a killer virus and a collapsing economy. We’ve extended ourselves emotionally and monetarily. Things are wildly unclear and events are unfolding so rapidly we have little time to prepare ourselves for what happens next.

“We went from full throttle to 90% revenue loss in three weeks,’’ said the CEO of a New Jersey

car service company last month. “We’ve been through 9/11. We’ve seen recessions. We’ve never seen anything like this.’’  In just two weeks, more Americans were put out of work than in the most brutal months of the Great Recession. Slumping economic indicators and crumbling consumer sentiment have historically fallen over consecutive quarters of dismal economic news. Now, life is turning on the daily media counts of the pandemic’s relentless advance.

“The economy has never gone from healthy to disaster so quickly,” said Jason Furman, who served as an economic advisor to President Obama. “The housing bubble burst in 2006, the first financial tremors were in 2007, and the major financial events were spread out from February through September of 2008. What would take years in a financial crisis has happened in days in this health crisis.’’

As we continue to shelter in place and quarantine in our makeshift trenches, no one knows how or precisely when this will end. “We had the best economy we’ve ever had,” said President Trump. “And then, one day, you have to close it down in order to defeat this enemy.” And in our efforts to win the fight – generations of wealth, a collective lifetime of savings and the financial future of millions of Americans are being systematically destroyed.

This is our “big war” as the president calls it. We face an existential threat from the unrelenting advance of a deadly disease and the scorched economic earth left in its wake. We can endure, however, in the same way that the survivors of previous big wars have, by doubling down on the safety, liquidity and certainty of holding solid gold.

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by Sean Kelly

As we struggle to social distance, engage in frequent handwashing, don mouth coverings, and toss our delivery boxes outside until the germs dissipate – we anxiously wait for the coronavirus to weaken and fritter away. Some of us follow the daily virus tolls, others bury ourselves in remote work, still others watch re-runs of old NBA and MLB games as a distraction from the daily gloom.

America is clearly in the midst of a collective anxiety attack. We will get through this but when we finally gather, engage and exhale again – we’ll have to contend with a world that looks a bit different than the one we knew just a few months ago.

When the virus arrived in the U.S. in late January, the Dow Jones was nearing 29,000. Today it has slipped more than 21%. Unemployment was sitting at an historically low 3.6%. The latest jobs report shows up to 10 million new jobless claims and an unemployment outlook that could go as high as 32%, worse than the darkest days of the Great Depression. Back in January the International Monetary Fund projected global GDP to hit 3.3% for the year, but the latest estimates suggest that the world economy will shrink.

Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. and the only current bank CEO to weather the subprime mortgage meltdown and crisis, believes were heading into a recession similar to 2008. So do economists at Goldman Sachs, Deutsche Bank, Bank of America, Pacific Investment Management Co., and UBS. While we find ourselves in a place we’ve never been before, we’re also revisiting some financial era lingo like quantitative easing, stimulus spending, and bailout packages.

On March 6th, the federal government appropriated $8.3 billion in emergency funding for state and local health departments to use for hiring and purchasing medical equipment. On March 12th, the Fed announced it would inject $1.5 trillion worth of liquidity into the banking system. On March 18th, the $183 billion Families First Coronavirus Response Act was signed into law requiring paid leave for small-business employees affected by the virus along with tax relief for employers. On March 27th, the president approved CARE (Coronavirus Aid, Relief, and Economic Security), a massive $2 trillion aid package designed to help American workers, small businesses and industries grappling with the disruption and hardship of the economic shutdown.

CNN is now reporting that this level of spending could push federal debt as a share of the economy, “to levels not seen since World War II.” And it still may not be enough. The White House and Congressional Democrats are already considering another round of stimulus as well as a massive infrastructure bill.

In terms of severity and communicability, COVID-19 has been a formidable foe that has stressed world markets, corporations, and financial institutions as well as small businesses, hourly workers, and U.S. households. The hospitality, retail, transportation, and entertainment industries – along with professional sports leagues have all come to a halt resulting in millions of furloughs, scores of layoffs, and a mountain of lost paychecks. Economic disruption is now spreading as fast as the rate of new infections.

The outlook is exasperating and while we’re doing all that we can to safeguard our lives, we must also remember to protect our retirement. The coronavirus has triggered an irrefutable and irreversible demand for gold and silver and as one analyst states, “There’s no putting the genie back in the bottle, an unprecedented shift to precious metals has begun.”

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by Sean Kelly

We’re several weeks into the federal social distancing mandate and things have gotten very quiet. Faced with new U.S. projection models for coronavirus infections in the millions and possible deaths in the hundreds of thousands, most Americans are staying home. Stores are closed, restaurants are shut, businesses are dark – and our cities and towns have slowed to a crawl.

The start of a new month presents a slew of payment due dates, however. For consumers there are mortgages, rents, credit card statements, car payments, phone and utility bills, etc. For businesses there’s operating expenses like equipment leases, fixtures, inventory, storage, licenses, tax deposits and payroll. So, what happens when the hourly worker that was recently laid off and the shuttered business that employs hundreds of workers can’t pay the bills?

Some 3.3 million Americans are now unemployed and millions more have lost pay or had their salaries cut, particularly in vulnerable industries. But months before COVID-19’s infiltration into the U.S. via ‘patient zero’ back in mid-January – Americans were struggling with debt and affordability. According to CNBC, last year U.S. households saw the largest annual increase in debt since the financial crisis, rising over $600 billion and topping $14 trillion for the first time ever. Mortgage debt also made the largest gains since 2007 while car loans and credit card debt increased by $57 billion. To make matters worse, according to a 2019 GoBankingRates’ savings survey, 70% of Americans have just $1000 or less tucked away for a crisis. The key findings of the survey concluded that: 45% of respondents had no monies in savings whatsoever and another 24% had $1000 or less. The top reason cited for not being able to put money away was ‘living paycheck to paycheck’ – while 20% named the ‘high cost of living.’

A lot of businesses are in no better shape. According to the Wall Street Journal, the restaurant industry has lost an estimated $25 billion since March 1st and nearly 50,000 stores of major American retail chains have closed. For the travel, leisure and hospitality industries, the coronavirus threatens their very existence. Airlines are flying near empty planes. TSA screening records showed just 180,000 screenings on March 29, 2020 compared to over 2.5 million on the same date last year. The International Air Transport Association is estimating that over a million flights worldwide will be canceled by June 30th with a loss of over $250 billion in revenue. The loss for the U.S. and Canadian airlines will top $50 billion. Demand for hotel rooms has also plummeted. InterContinental Hotels Group (IHG) whose properties include Holiday Inn, Staybridge, Kimpton, Crowne Plaza and Candlewood Suites announced $150 million in cost cutting measures and said it expected revenues to plunge by about 60% in March. And in light of the various on-board infections, in-dock quarantines, and a complete halt in global operations – some analysts are predicting that the $45 billion cruise industry may never recover.

The domino effect of all this will be swift and severe for all consumer groups and across all categories of business. The job losses triggered by the restaurant and retail industry is a snapshot of what the economic halt can do the rest of the economy. Already mortgage companies are expecting scores of missed payments. Car dealers are fielding calls from consumers that cannot make their next lease or loan installment and commercial landlords are being inundated by companies of all sizes that cannot make their April rent. Suspending foreclosures, banning evictions and a $1200 check from the government won’t curb the damage. Morgan Stanley is projecting that job losses could hit 17 million by May and the unemployment rate could soar over 12% by June. Their analysts also expect GDP to slump by an astonishing 30.1% in the 3rd quarter of this year. But, the worst part of the forecast is the uncertainty. Dire predictions are being made about conditions that could easily worsen if the pandemic is not stopped or if governments around the world enact the wrong measures to try to prop up their economies. And we simply do not know how many jobs will be lost or how fast – or how many payments will be skipped or for how long.

What we do know is that regaining a sense of normalcy could take months, even years. The coronavirus has delivered an acute economic disruption at a rate of speed never seen in modern history. Consumers are feeling panicked and disconnected. Businesses are feeling stressed and overleveraged. And both are worried that bailouts won’t arrive in time, and the money won’t be sufficient to keep them afloat.

We are in the midst of a culture-changing journey to a place we’ve never been – and for those of us trying to ride out the unknown, we need both a short-term and a long-term financial strategy. Perhaps this is why gold, often popular with survivalists and those looking for a hedge against economic volatility is being acquired at record levels. We are, after all, in a ‘survival of the fittest’ scenario in arguably the most volatile economic moment in history.

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by Sean Kelly

Yesterday President Trump tweeted, “We cannot let the cure be worse than the problem itself.” He was commenting on the trillions of dollars of economic output that has been lost as U.S. cities and states have shut down in an effort the flatten the curve of the coronavirus outbreak. While the hope is that ‘social distancing’ will dramatically dull the spread of the virus, the adverse impact on the economy is irrefutable.

In a matter of weeks, the various stay-at-home orders implemented across America which now include 12 states: California, Connecticut, Delaware, Illinois, Indiana, Louisiana, Massachusetts, Michigan, New Jersey, New York, Ohio and West Virginia – have distressed businesses large and small. The impact on airlines, hotels, restaurants, retail, travel, and tourism has been particularly devastating. U.S. unemployment, which sat at a pre-pandemic low of 3.6%, will likely explode in the coming months with some estimates projecting a jobless rate as high as 20% to 30%. Federal Reserve Bank of St. Louis President James Bullard is also warning that we could see GDP cut in half and a subsequent $2.5 trillion loss in income.

This begs the question. Are we in a Zero-Sum game? While mandatory self-isolation is the only strategy we have at the moment, the economic disruption of closing down society is decimating businesses, jeopardizing jobs, and pushing the American economy to a dramatic breaking point.

According to the Foundation for Economic Freedom, state intervention and extreme mandates can sometimes make panics worse. We’re reminded of the infamous gasoline crisis of the 1970’s when the federal government tried to reduce soaring prices at the pump by implementing price controls that triggered a national fuel shortage. Americans were faced with mile-long gas lines, gas rationing, reduced speed limits, extended daylights savings time, and even violence. The stock market also crashed during this period followed by a deep recession.

The current panic-fueled selloff on Wall Street has undone years of market gains. Since mid-February when the Dow was hitting daily, all-time highs, the index has plummeted by over 37%, the S&P 500 has dropped by over 34%, and the Nasdaq has tumbled by over 30%. When we consider those actively saving for or nearing retirement, COVID-19 has been life-altering as 401(k) and IRA holders are now reporting losses of up to 30%.

The outlook for the world economy is equally bleak. The Organisation for Economic Co-operation believes the economic destruction posed by the coronavirus has already surpassed that of the 2008 financial crisis, and it will take years for the global economy to heal. The 36-member body has called on world governments to do whatever it takes to test and treat the virus, and they see no quick recovery or post-pandemic bounce-back on the horizon.

Angel Gurría, OECD secretary general, compares the current climate of uncertainty to the dark days following the September 11th attacks, “We don’t know how much it’s going to take to fix unemployment,” he says, “because we don’t know how many people are going to end up unemployed. We also don’t know how much it’s going to take to fix the hundreds of thousands of small and medium enterprises who are already suffering.”

The world’s leading experts on epidemics including those, as The New York Times reports, “who have fought AIDS, malaria, tuberculosis, flu and Ebola,” are very clear as they list the steps that must be taken to defeat the COVID-19. They’re dramatic, some may even consider them excessive and include extreme social distancing, reduced travel, minimal human interaction, and the complete isolation of infected persons outside of the home to break the momentum of the pandemic. But the question is will it also break the back of the U.S. economy and send us into a social distanced depression?

And then there’s an even larger question. Can Americans actually do what it takes to stop the spread? According to the Times, it’s “not at all clear that a nation so fundamentally committed to individual liberty and distrustful of government could learn to adapt to many of these measures, especially those that smack of state compulsion.”

Lest we forget that ‘Zero Sum’ means a gain on one side is a loss on the other (and vice-versa) which makes the heart of this struggle an existential one. Any epidemiological gains made against COVID-19 will likely come at the expense of the freedom, independence, and economic security that we so cherish. So, as we navigate the ‘game’ in the weeks and months ahead, we must do our part to stop the spread but also take critical and timely steps to preserve our wealth and secure our financial future.

60 Years Experience

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by Sean Kelly

When we think of a “perfect storm,” we can’t help but recall the three massive weather systems that collided back in 1991 off the coast of New England, Nova Scotia, and Newfoundland. According to the National Weather Service, the event created a Nor’easter-type cyclone fueled by the Gulf Stream that emitted heavy rain, hurricane force winds, flooding, catastrophic storm surges and wave heights of over 60 feet.

A movie released back in 2000, detailed such an event. The story of the ill-fated Andrea Gail, a commercial fishing boat out of Gloucester, Massachusetts got caught up in the ferocity and was forever lost.

The term is now used to describe any rare or unusual combination of events that prove to be calamitous, even apocalyptic – like the current economy.

We’re living in an extraordinary economic moment. An unprecedented gathering of volatile currents, unstable air, and dense pressure systems are building up all around us. They’re upending our political system, disrupting national unity, and threatening our very way of life.

In the midst of an election year, we face the uncertainty of new leadership, dramatic policy changes, and a disruption to the world order.

More than anything, we have an unclear road map for the future which can suppress sentiment and dull economic expectations. Lest we forget that consumer confidence and associated spending represents 78% of GDP. Perhaps that’s why both the Dow and the S&P 500 tend to trend lower in presidential election years.

We’re also in a punishing political season where economic optimism and pessimism are starkly split along party lines. The animosity, disunity and discord directly impact legislative collaboration, policy making, and the forward thinking required to do the nation’s business. Partisanship has become a blood sport of allegation, denigration, and scandal where tearing down an opponent often comes at the price of undermining the economic potential of the country – even in the face of a cataclysmic crisis.

And we certainly have one. Call it a Black Swan, an inflection point, a watershed moment or a history-altering event. Pandemics are such things. The World Health Organization defines it as: “a new influenza virus that emerges and spreads around the world, and most people do not have immunity.” We also do not have a vaccine.

COVID-19 is not only a killer, it’s highly contagious and has caused dramatic changes to life as we know it – from travel, to worship, to education, to sports.

Quarantines, isolation and social distancing are now forcing the cancellation of parties, gatherings, graduations, vacations, and even trips the gym. We’ve been utterly transformed and so has the economy. The threat to the travel industry, cruise lines, restaurants, entertainment, sports establishments, small businesses, and of course the financial markets has reached dangerous levels.

The disruption, fallout, and long-term consequences of the virus could upend supply and demand, paralyze the manufacturing sector, spike unemployment, overwhelm health resources, exacerbate consumer and corporate debt, and dramatically increase uncertainty.

And to make matters worse, the Fed can do little to help after slashing rates to near zero on Sunday. They are, as many experts maintain, “Out of Ammo!”

Tele-health, tele-medicine and tele-debates are the new normal –and the coronavirus is likely to continue to infect the American psyche and weaken investor resolve long after it’s gone.

Don’t wait until the data is tallied, the damage is assessed, and quarterly GDP numbers roll in to safeguard your retirement. Adding gold to your portfolio now provides balance, risk protection, and an historic refuge from the crippling economic fallout to follow.

“The worst was yet to come, for germs would kill more people than bullets. By the time that last fever broke and the last quarantine sign came down, the world had lost 3-5% of its population.”  Charles River Editors, The 1918 Spanish Flu Pandemic: The History and Legacy of the World’s Deadliest Influenza Outbreak

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The spread of the coronavirus has sparked some extreme consumer behavior. Americans are flocking to stores and inundating online sites to purchase disinfectants, hand soap, bottled water, canned goods, powdered milk, and toilet paper. The panicked buying has produced empty supermarket shelves and “Sold Out” notifications across ecommerce sites that sell foodstuffs, cleaning supplies, daily provisions or anything that has now been deemed “survival essential” and hence, subject to stockpiling and hoarding.

CNN Business is reporting that sales of hand sanitizers increased 73% in February, thermometers jumped 47%, and surgical masks soared 319% compared to last year.

And then there’s good old fashion bleach. There’s nothing fancy about the white jug solution of sodium hypochlorite that dates back to the 17th century.  Its claim to fame has always been found in America’s laundry rooms removing stains and whitening “whites.” But bleach also functions as a strong disinfectant that can kill bacteria, fungus, and yes viruses. Needless to say, shares of Clorox have been rising right alongside Purell and Lysol.

The stockpiling phenomenon has spread across the globe as emergency hoarding is also occurring in China, Japan, South Korea, Italy, the U.K. France, and Canada. And as the citizens of the world rush to fill their “pandemic pantries,” they’re exhibiting behavior that is rooted in fear which almost always leads to panic. The same panic that has now consumed the financial markets.

On Monday, the Dow plunged more than 2,000 points on coronavirus fears and the breakdown of talks between OPEC and Russia which crushed crude prices by almost a third. The sell-off began at the opening bell and the five-minute frenzy that ensued tripped Wall Street’s circuit breakers bringing everything to a screeching halt. The reprieve was short-lived, however. After traders caught their breath, the early jitters quickly morphed into full-blown market hysteria. Stocks cratered throughout the day and logged the worst one-day drop on record.

The “fear” of missing out that fueled Wall Street for over a decade has now succumbed to the “panic” of staying in. And all of this comes at a particularly bad time for overvalued equity markets, overextended consumers, an overleveraged corporate sector, and a Fed that is far less prepared than it should be.

Panic has precedent, and it rarely ends well. In September of 2007, CNN Money published a piece called, “Panic on Wall Street: A Brief History of Fear,” where it discussed how market anxiety was fanning uncertainty.  An article in The New York Times published on May 25, 2008 entitled, “Wall Street Exodus: Fear, Panic and Anger,” summed up the anxious psychology of the unfolding market rout. And in 2010, a Forbes piece called, “Fat Fingers Cause Panics,” outlined how nerves and skepticism were prompting investors to sell.

Wall Street’s fingers were downright portly yesterday – and we’re miles beyond any notion of uncertainty, anxious psychology, or early signs of trouble. We’ve stopped traveling, excursioning, and vacationing. Events have been canceled and conferences postponed. Factories have been shut and workers sent home. Stadiums are empty and restaurants are quiet. Virtually every industry that relies on a gathering of customers or a collection of people is now feeling the impact of the quarantines, travel restrictions, business disruptions, battered nerves and economic fallout of COVID-19.

“Amazingly, the market is finally waking up to the prospects of not just viral contagion,” said Scott Minerd of Guggenheim Partners, “but also to financial contagion.” With many analysts now declaring that a global recession is virtually inevitable, it’s time to think beyond all those consumables stacked in our “pantries” to the hard assets stashed in our retirement accounts. Gold rises when everything else falls and with “business as usual” now a distant memory – it’s a critical time to hoard something that holds its value in times of extreme fear and financial uncertainty.

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Back on January 10th, the New York Times reported the first death from a new virus that surfaced in the Chinese city of Wuhan, the capital of China’s Hubei province and a major commercial center. Chinese officials linked the “bug” to workers that sold live fish, birds and animals at an outdoor market and stated there was no evidence that the virus could spread between humans.

Within 20 days, the World Health Organization declared the new coronavirus a public health emergency. A month later, the pneumonialike illness has been reported on every continent in the world except Antarctica and the global death toll has surpassed 3,000. COVID-19, according to the CDC, is a “respiratory illness that can spread from person to person,” and there is no vaccine or antiviral treatment available to combat it. The World Health Organization says the outbreak puts the world in “uncharted territory” as doctors have “never before seen a respiratory pathogen capable of community transmission.”

The rapid spread of COVID-19 has triggered mass quarantines, shuttered schools and universities, and closed major tourist attractions. It has disrupted global manufacturing and travel – and sapped consumer spending and business sentiment. It has pushed 10-year Treasury yields to record lows and the Cboe Volatility Index (VIX) to the highest level since the Great Recession. The resulting panic has triggered the Dow’s largest one-day point drop in history, pushed all three major U.S. indexes into correction, slammed global markets, and singlehandedly crimped economic growth forecasts around the world.

If that doesn’t get your attention – what will? How about this. Confirmed cases of the virus are now growing faster outside of China as Italy, Iran and South Korea have all reported more infections than the Chinese in the past week. New cases have also been confirmed in the United States where twenty-three infections were logged over the weekend. New cases of COVID-19 have been reported in New York, Florida, Rhode Island, New Hampshire, Illinois, and Oregon bringing the American tally to 88. Washington State has confirmed three more fatalities, putting the U.S. death toll at six. With the expansion of local and state testing, U.S. cases of the virus are expected to soar.

We are indeed in uncharted territory — medically and economically. And as major industrial nations now grapple with the full extent of the virus outbreak, critical questions are being asked. How will we contain the spread? How bad will it get? What will the social consequences be? How will business and industry cope?

Needless to say, all of this has increased recession talk and invoked endless comparatives with the financial crisis of 2008 and the dot.com crash of the late 1990’s. With good reason. Money is cheap again, loans are easy, consumers are overleveraged, markets are inflated, and we’re in yet another bubble. And just like that – the prospect of the coronavirus damaging the U.S. economy has become very real.

What about all those IRA’s, 401(k)’s, pensions and retirement plans? History has proven there is scant refuge from speculation, risk, and all out panic.

As local and state governments scramble for virus test kits – the federal government is scrambling for monetary tools to fight what is likely to be a contagion-fueled downturn. Like the testing protocols, the government’s response is delayed, the components are faulty, and the damage may already be done.

We’re facing a global supply shock that could send the price of basic goods sky-high, radically suppress demand, and dramatically reduce output – propelling the nation and the world into a deep recession. And we’re doing it with limited monetary tools and few resources to combat the massive financial disruptions to follow.

Much like the virus itself, we’ve never been here before and there is uncertainty around every corner. The world’s largest and wealthiest companies, the safe and profitable stalwarts of industry, are issuing warnings and exuding somber tones which underscore the truth about all pandemics – that nothing is safe and no one is immune.

Goldman Sachs, however, has identified one asset class that it deems virus resistant. Gold has earned its reputation as a safe haven precisely because of its history of holding its value during the most volatile episodes in human existence which include world war, global disasters, international catastrophes, and out of control pandemics. “While so much about the current environment remains unclear,” said Goldman’s head of global commodities, “there’s one thing that isn’t: gold, which—unlike people and our economies—is immune to the virus.”

Gold continues to dramatically outperform other safe havens in 2020 and has now officially become, “the currency of last resort.”

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The phrase “Okay, Boomer,” gained prominence last year when a Millennial member of the New Zealand parliament used it to silence a heckling older statesman. Chloe Swarbrick was in the midst of delivering a passionate speech about how climate change is threatening her generation, when a “Boomer” became agitated. The term was a flippant retort, but also a dismissal of all those born between 1946 and 1964, deeming them out-of-touch and close-minded. Indeed, it is “sticks and stones” payback for many Gen Y’ers who believe that the term “Millennial” has been similarly used to dub all young people as entitled and mollycoddled.

While not a wholly homogeneous group, Baby boomers are generally regarded as self-assured and goal-centric. They are the children of the “greatest generation,” and they’re great in their own right. Boomers are credited with developing personal computing, the World Wide Web, Rock and Roll, DNA fingerprinting, counter-culture, and the notion that “Greed is Good.” They were also on the front lines of gender equality, diversity, and booming entrepreneurship. Most notably, they were among the 400,000 young people that shut down the New York State Thruway for the Woodstock Music & Art Fair back in 1969.

Steve Wozniak, Bill Gates, and Steve Jobs are all Baby boomers. So are Oprah Winfrey, Stephen Spielberg, and Meryl Street. George Bush, Bill Clinton, Barack Obama and Donald Trump are also on the list along with Elton John, Stevie Wonder, Melissa Ethridge and Jimmy Buffett.

AARP describes their Baby boomer demographic in this way:

“We’re the largest, richest, best-educated generation of Americans, the favored children of a strong, confident and prosperous country. Or, as other generations call us, spoiled brats. Born between 1946 and 1964, the 76 million boomers reaped all the benefits of the postwar period’s extraordinary economic growth.”

Financially, Baby boomers are a powerful economic force. They’re the richest generation in history and currently control more than half of all U.S. household wealth. They have, on average, quadrupled their aggregate net worth since the late 1980’s. According to Epsilon Data Management, Boomers also spend more than any other generational group, consuming over $548 billion annually in goods and services. And they can afford to. Money and the Markets maintains that Baby Boomers have captured about two-thirds of all wealth gains (about $10 trillion) recorded during the Trump administration.

Baby boomers are also hurling toward retirement at a rate of about 10,000 a day and despite their collective wealth – the Insured Retirement Institute reports that some 45% have no savings, four in ten believe that Medicare will cover their long-term health care costs, and six in ten have taken no action with respect to their workplace defined contribution plans.

For a generation that has always brimmed with overriding confidence, the prospect of retiring comfortably has suddenly given Boomers pause. They’re worried about nest eggs falling short, social security becoming insolvent, the cost of living rising too fast, and health care bills wiping out everything they’ve saved, accrued and amassed.

A recent MarketWatch feature identified the ‘seven deadly sins’ of Boomer retirement planning as including insufficient savings, the premature draining of retirement accounts, and a fundamental lack of retirement planning. Extreme portfolio risk completes the list, as Boomers are also wildly overleveraged in stocks. According to Fidelity’s third-quarter retirement report, almost 1 in 3 Boomers are heading into their golden years extremely “equity-heavy”:

“Fidelity’s Q3 analysis found that many 401(k) account holders had stock allocations higher than those recommended for their age group. Fidelity compared average asset allocations to an age-based target date fund and found nearly a quarter (23.1%) of 401(k) savers still have a higher percentage of equities than recommended, including 7% who are 100% equity. Among Baby Boomers, the over-allocation of stock was even higher – 37.6% have too much equity, including 7.9% who are in 100% equities.”

While Baby boomers have ridden the markets to unprecedented levels of wealth, they now risk the downside hazards of staying in for too long. Asset allocation is critical to wealth protection and when it comes to safeguarding retirement and savings accounts in 2020, gold is an ideal diversifier. Its lack of volatility, low correlation with other asserts, and exceedingly long history of holding value – make it part of a smart 21st century portfolio strategy.

And, there is perhaps no better asset for a self-driven, self-reliant generation like Baby Boomers than independent money that exists outside the banking system and well beyond the reach of government.

60 Years Experience

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As the world grapples with crisis and chaos, America shrugs.

We’re living in a time of good economic vibrations.

We’re currently enjoying the longest expansion in history which started back in June of 2009 and has rumbled 128 months, smashing the previous record of 120 months (March 1991 to March 2001). We’re also sitting in the longest bull market ever which is now just a month shy of its 11th birthday.

Imagine that — we have not felt truly bearish about the stock market since 2009.

Wall Street’s run has been exasperating, particularly lately. The Dow hit 22 record closes last year, 15 in 2018, 5 in 2017, and 25 in 2016. This month alone, the S&P 500 has hit both an all-time closing and an intra-day high. And according to Fidelity, their millionaire’s club has swelled by some 441,000 as sky-high stocks have turned a record number of Fidelity retirement accounts into well-heeled ‘rainy-day’ funds.

Americans are anything but fearful. According to Gallup, U.S. economic confidence is the highest since 2000. In a recent University of Michigan survey, consumers mentioned feeling wealthier now than at any other time since 1960. And Americans rate the current economy, the best overall since the 1990’s.

As China’s economy has been besieged by the coronavirus, the eurozone has suffered its slowest growth in 7 years, Japan has been pushed to the brink of recession, and world debt has reached an all-time high — it should come as no surprise that America shrugged.

U.S. investors are not making the connection between a synchronized global downturn and the health of the U.S. economy.

The world economy is critical to the countless American corporations that operate abroad as well as foreign companies with offices in the U.S. that contribute to U.S. job growth, economic output, and market capitalization. Overseas supply chains are vital to U.S. business and foreign investment, whether in the American markets or American corporations, is very much influenced by global factors. As a result, many retirement and savings accounts are exposed to risks associated with financial uncertainties and slowing growth in countries halfway around the world.

During the 1992 presidential election, Bill Clinton’s campaign director, James Carville, famously posted a sign at Clinton headquarters that read, “It’s the economy, stupid,” as a stark reminder that America was facing a recession and that the markets, the Fed, and global conditions were contributing to the overriding economic malaise. In 2020, the same elements are in play except the financial fallout has yet to wash ashore — but when it does, only those with an aggressive risk management strategy will be prepared.

In his new book, Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, author James Rickards warns that,

“The dizzying heights of the stock market can’t continue indefinitely–especially since asset prices have been artificially inflated by investor optimism around the Trump administration, ruinously low interest rates, and the infiltration of behavioral economics into our financial lives. The elites are prepared, but what’s the average investor to do?”

With the Europe stagnating, China stumbling, and the U.S. election sowing the seeds of deep political uncertainty — investors are taking strong positions in gold.

A world brimming with economic, political and monetary uncertainty requires a global safe haven which is why central banks around the world hold gold in their reserves. Gold is an international monetary standard and an ideal hedge against weakening economies, floating exchange rates, and global market volatility. And let’s not forget the lower-for-longer rate environment that has turned borrowing upside down and savings inside out, making gold an indispensable store of value and a critical counterweight to ever-expanding market bubbles.

Gold becomes more valuable during times of heightened market risk and rising geopolitical turmoil. Yes, “it’s the economy stupid” – the global economy, and we’re reminded time and time again why gold is the world’s most famous and most preferred crisis-resistant asset.

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the tesla rallyWhen we think about Wall Street and the sudden rise and fall of the financial markets — words like parabolic, feverish, and frantic often describe periods of rapid speculation. These are commonly known as bubbles. Stock bubbles are anything but normal events. They reflect extreme market psychology including greed, herd instinct, and the infamous ‘fear of missing out.’ A market bubble is a surge in share prices that is not backed by fundamentals or critical corporate markers like cash flow, ROI, profit, and future growth prospects. And, it tends to feed itself.

Tesla’s current rally may well be the perfect 2020 illustration of ‘irrational exuberance,’ a term coined by former Fed Chair Alan Greenspan during the tech stock boom of the late 1990’s.  Greenspan used the phrase to suggest that the market was overvalued and that animal spirits had replaced critical financial metrics such as income statements, accounting ratios, and balance sheets. He also used it to warn that a massive bubble was forming.

Last week, Tesla’s stock shares jumped almost $130 on Monday, another $107 on Tuesday, and then dropped over $150 on Wednesday. Overall, the electric car maker’s share price has more than tripled since late September despite experts deeming the company’s valuation as ‘stretched’ and most analysts listing the stock as a solid ‘sell.’ And as share prices continue to climb — there’s no doubt that euphoria is in play.

This begs the question — is Tesla’s market mania a typical ‘high-risk/high-reward’ gambit or could it be a cautionary tale about the underlying fragility of world markets?

Tesla’s wild ride is reminiscent of several other famous bubbles that started small and rapidly spread across various funds and equity classes triggering a broad-based sell-off. In this sense, bubbles function as market disrupters. After all, they have triggered some of the most notorious recessions in history. The Great Depression was sparked by an unsustainable asset bubble. The recession of the early 2000’s was powered by the dot.com bubble, and more recently, the Great Recession was fueled by a real estate bubble.

When bubbles burst, prices plummet, paper wealth evaporates and panic ensues. What follows is typically a contraction, correction, or a full-blown crash.

Hyman P. Minsky, an American Economist and scholar at the Levy Economics Institute — was among the first to outline the key elements of a market bubble. The first is Displacement which is the disruption caused by a new technology or extraordinary financial condition like historically low interest rates. The second is a Boom where prices gain momentum and attract a rising throng of investors. Next comes Euphoria where market shares are driven to new highs that are well beyond sound data or reason. This is followed by Profit Taking, where traders sell securities to lock in their gains. The last phase is Panic where prices quickly reverse course and correct — causing a rush for the exits where investors invariably get crushed and trampled in the mad dash to avert additional losses.

Bubbles are punishing pain points and Tesla, which is being driven by the lure of renewable energy, sexy cars and the appeal of Elon Musk himself — could be the high-tech canary in the clean energy coal mine. The electric car maker’s ‘Peak Musk’ valuation has doubled in a month and risen almost 380% since May. Its market capitalization, according to NASDAQ, makes it more valuable than GM, Ford, Fiat, Chrysler and Honda combined. It is now the second largest automaker behind Toyota, and within striking distance of iconic corporate giants like Nike and McDonald’s.

It’s an extraordinary feat for a company that has had major struggles with delivery, profitability, and consumer demand. So, is the Tesla rally sustainable — or is the auto-maker the latest poster child for over-priced, over-hyped and over-pumped markets around the world?

A rising consortium of experts say it’s time to diversify and not with asset classes that rise and fall together. Holding gold is one of the oldest forms of wealth protection in existence and one of the most powerful hedges against rising bubble talk, improbable bull-runs, and single stock rallies that foreshadow massive sell-offs.

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GOLD IRA GUIDE

by Sean Kelly

As the Iowa caucuses stumbled late into the night on Monday, the presidential primary process officially got under way. It was a sloppy display of dumbfounded news anchors and awkward speeches by candidates who vowed to secure their party’s nomination despite extensive reporting delays in the primary season’s first major contest.

Delegates chosen at the state level either by caucus or primary vote will decide who runs for president on the national ticket in November.

For the next four months candidates and the media will rush from state to state — invading local coffee houses, diners and fairgrounds as final pushes and closing stump speeches are made to secure as many votes as possible. And as each subsequent primary unfolds — Iowa, New Hampshire, Nevada, South Carolina, and those infamous ‘Super Tuesday’ states including delegate-rich California, Texas and Massachusetts – the field will necessarily narrow.

But as we learned on Monday, it is not a simple or straightforward undertaking. It’s messy and combative and many would say breathlessly unfair. The rules for delegates vary. Some states are winner-take-all, others are winner-take-some, and the rest go to congressional districts. Several state caucuses select candidates in an informal meeting of party leaders and there are endless backdoor maneuvers involving unpledged delegates and mysterious super delegates — those free agents of the electorate that can often make or break the nominating process.

The Council on Foreign Relations has called the U.S. political system, “one of the most complex, lengthy, and expensive in the world.” Indeed, nearly every presidential election has cost more than the one preceding it and with a gaggle of billionaires suddenly in the mix, the cost of the 2020 Presidential Election is likely to shatter the $2.4 billion spent in 2016. Several prominent ad agencies are already estimating that 2020 political ads alone could reach as much as $10 billion.

When we consider the still-cramped Democratic field, things seem even messier. After sifting through some 29 candidates, almost a dozen remain in the running with four clustered at the top of the polls: former vice president Joe Biden, Senator Bernie Sanders of Vermont, Senator Elizabeth Warren of Massachusetts, and the former mayor of South Bend, Indiana, Pete Buttigieg. These candidates have prompted fierce debate over prickly issues like the Green New Deal, Raising Taxes, Free Tuition, Medicare-for-All, Universal Basic Income and LGBTQ rights.

It should come as no surprise that many voters seem as uncertain as the process itself. Recent polls suggest that they are more than willing to change their mind even up to entering the polling a lever or casting a chad. That’s a wake-up call for leading candidates with vote-switching vulnerabilities. Biden, for instance, has been dogged by questions of stamina. Elizabeth Warren has been hounded by her plan to end private health insurance. Mayor Pete has had to combat the recurring issues of his youth and inexperience. And, Bernie Sanders faces long-standing doubts about how his socialist agenda will fare in a general election against Donald Trump.

Primaries are tricky things and not knowing who will be the next president is downright beguiling. Simply stated, all of this confusion is bad for business. Political uncertainty can impact production, investment, spending, and hiring. Elections, after all, are the tools of change and America will ultimately decide whether it wants a completely new direction this November.

In the meantime, the Iowa ‘Train Wreck,’ reminds us that mayhem is alive and this raises the specter of risk, volatility, and political instability. So, while all those mom and pop stores in places like Bedford, New Hampshire; Boulder City, Nevada; and Fort Mill, South Carolina become the next proving ground for those seeking their party’s nomination, gold remains a safe haven for everyone, in every city, and every party affiliation across the country. It is the ideal political, economic and financial hedge and no matter what candidates, issues or agendas finally rule the day — holding gold is a winning platform.

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by Sean Kelly

As world health authorities scramble to contain the spread of a new coronavirus that originated in China, global economists are weighing the potential economic fallout if a full-blown pandemic develops. The fast-moving, respiratory illness which has been dubbed “2019-nCoV” or the “Wuhan Virus” has killed over 100 people, infected over 4,000, and now reached 13 countries including the U.S. and Australia as well as nations across Asia and Europe.

A deadly contagion could not come at a worse time for China as their economy has slowed, their debt has soared, and they’re still reeling from a punishing trade war with the United States. The pneumonia-like virus has prompted the lock down of entire Chinese provinces, the closing of manufacturing plants, the dismissal of migrant laborers, and the extension of the week-long Lunar New Year holiday in an effort to limit travel. Chinese transportation, tourism, catering, and retail businesses are enduring a cumulative ‘hit’ that could significantly slow first quarter economic growth. If the virus multiplies unabated, there’s increasing fear that it could infect the broader global economy.

Many estimates of the economic and social costs of modern-day pandemics are based on the effects of the Great Influenza of 1918 which also had its origins in China and killed as many as 100 million people worldwide which eclipses the casualty count of World War One. According to New York Times best-selling author John Barry, it killed “more people in twenty-four months than AIDS killed in twenty-four years [and] more in a year than the Black Death killed in a century.”

Back in 2007, the St. Louis Fed reported that, “the possibility of a worldwide influenza pandemic (e.g., the avian flu) in the near future is of growing concern for many countries around the globe. The World Bank estimates that a global influenza pandemic would cost the world economy $800 billion and kill tens-of-millions of people.” In a more recent 2018 study, the bank examined other deadly global pandemics like SARS, swine flu, MERS, Ebola, Zika, yellow fever, Lassa fever, and cholera. They concluded that the annual global cost of moderately severe to severe pandemics is about $570 billion, or roughly 0.7% of global income.

Things are bigger, faster and more consequential in 2020, however. Global trade is more robust, world travel is more commonplace, and the spread of infectious disease is more rapid than at any other time in history. According to a recent analysis by Imperial College London, “the scale of the [current] outbreak will depend on how quickly and easily the virus is passed between people. Using data collected up to 18 January, it appears that, on average, each person infected with the virus passes it to between 1.5 and 3.5 other people.”

None of this has been sitting well with world markets. On Monday, the Dow posted its worst day since October losing over 450 points as it tumbled into the red for the new year. Investors across the globe — from Europe, to Asia, to the Middle East dumped stocks on fears that the mysterious new virus will sicken the world and trigger a steep contraction. Stephen Innes, chief market strategist at AxiTrader, aptly summarized the unease stating that, “With coronavirus worries on the rise, the market continues to struggle with the unenviable task of factoring in absolute terms its implied economic devastation.”

All of this has sparked a dramatic selloff in equities and a rush to safe haven assets. Gold is now trading near $1600 an ounce and is up more than 20% over the past year. While it had already been buoyed by a host of global uncertainties, the added threat posed by the coronavirus could be a safe haven game changer.

Gold’s pandemic record is worth noting. It rose in 2002 (SARS), 2009 (Swine Flu), and 2012 (MERS). And in 2019, there are no anti-virals or broad-spectrum defenses to combat the deadly new pathogen that has now pushed beyond China’s Hubei province, infiltrated the mainland, and infected the broader global community. In a world where standard safeguards fail to protect us, gold has provided safety, security, and economic healing for as long as epidemics, pandemics and plagues have threatened the wellbeing of humankind.

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Index funds are a form of passive investing that track a broader index, like the S&P 500 which houses the stocks of 500 large-cap U.S. companies including Apple, Microsoft, ExxonMobil, Johnson & Johnson, General Electric, Amazon and Facebook. They’re low-cost and relatively uncomplicated investments that can take the form of a mutual fund or an exchange-traded fund (ETF). They’re based upon a pre-set bucket of stocks that are aligned to an index — and for the first time in history their cumulative value has surpassed managed stock holdings.

The rise of indexing has been propelled by their one-stop shopping convenience which saves time, research hours, and the need for a portfolio manager and their associated fees. And, since most indexes include an array of diversified companies, they’re generally considered low risk. Their ease and simplicity are so appealing that, they’ve invaded Wall Street, particularly since the financial crisis and according to Reuters now control half of the mutual fund market. The Vanguard S&P 500 ETF, one of the largest funds on record, was sitting on $520 billion in assets as of December.

“The index fund is one of a handful of unambiguously beneficial financial innovations. Before it caught on, investors routinely paid sky-high fees to active stock-pickers who often delivered subpar returns. The near-universal popularity of index funds puts them up there with Social Security, Stevie Wonder, and streaming TV.” Bloomberg

Over the past decade some $1.36 trillion has been dumped into indexed mutual funds and ETF’s — while some $1.32 trillion was subsequently pulled out of traditionally managed accounts. The Wall Street Journal calls it, “the passing of the asset crown” and “one of the most dramatic transformations in the history of the financial markets.”  But while the seismic shift has increased fund access and lowered the cost of investing, it has also dramatically consolidated power within the industry as indexing goliaths Black Rock, Vanguard and State Street are now the largest shareholders in almost 90% of S&P 500 firms. Similarly, Barron’s reports that the three firms hold 80% of ETF assets in some 600 products, “that leaves another 1,600 ETFs and more than 100 firms competing like gunslingers in the Wild West.”

The Securities and Exchange Commission approved the first ETF in 1993 and according to the Washington Post there were only 124 index funds back in 1996 valued at just $100 billion. According to recent estimates, the number of ETF’s and Index Funds has now climbed to over 2,000 with a combined value nearing $7 trillion. Their growth shows no sign of slowing down as Black Rock recently estimated the total value of indexing could reach $12 trillion by 2025.

The SEC is now asking some pointed questions, however about transparency, market stability, and the consolidation of financial power. There is little regulatory oversight of the firms that create these indexes, and they’re more than ripe for conflicts of interest. And, while there is a collective upside to indexing during a rising market, the funds offer scant protection for a sudden sell-off or consolidated stampede. Further, retirement funds and life savings are subject to the amalgamated whims of the three, giant asset managers: BlackRock, Vanguard and State Street, the index cartel — subjecting millions of Americans to an uncharacteristic loss of control with respect to their money and retirement savings.

And there are other concerns. The sheer size and number of these funds could distort market prices and make the exchanges unstable. The frenzy surrounding passive investing is reminiscent of bubble behavior and that could cause a market collapse when the inflows exhale. And lastly, these funds offer no allowance for personal risk tolerance or an asset mix that reflects specific retirement needs.

Even the late, great Jack Bogle, the founder of Vanguard and the ‘Father of Indexing’ mused as recently as last year that there are too many shares in too few hands – and that could undermine investing behavior and disrupt market metrics. The truth is Index Trading is too vast to stop, too large to curtail, and far, far too big to fail. But what if it does?

Indexing can mask a multitude of hidden dangers and this is precisely where an alternative investment outside the mania of fast-shifting barometers becomes critical. Gold is private, confidential, highly liquid, and carries no counter-party risk. It is the ideal ‘check and balance’ asset to protect our money from those things beyond our control, specifically — the new world dominance of index funds and the new power brokers of Wall Street.

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by Sean Kelly

The holidays are over. As we stash away all the ribbons and bows, they look a bit less colorful than they did just a few weeks ago. We now find ourselves in the dull, gray routine of winter grappling with resolutions, rush hour, and an overabundance of Amazon boxes. Like every other year, January comes as a moment of reckoning for over-eating, over-spending, and over-promising.

The New Year Blues are actually a fairly common thing. While some celebrate the accomplishments of the old year and approach the new one with enthusiasm — others are engulfed by a sense of dread. And when the cycle of anticipation invariably fails to live up to the hype, it can be debilitating. This is perhaps even more prominent in the world of money, investing, and the markets.

As 2020 begins, we close out a decade of low inflation, low interest rates, and historic economic expansion. In the 2010’s, we not only continued to pull away from one of the worst financial crises since the Great Depression — we made economic history. We reached historically low levels of unemployment for African Americans, Hispanic Americans, Asian Americans, and women along with the highest levels of median household income to ever grace the record books. We also achieved the longest consecutive streak of job growth and the lengthiest bull market in history. And we witnessed something most economists said was not possible — the return of American manufacturing jobs.

But as we dip our toe into a new decade, we’re faced with new pressures and the historical precedent of unexpected political and economic events. In 1980, the U.S. started the decade by entering a deep recession triggered by the Iranian Revolution of 1979 and a dramatic surge in oil prices. In 1990, Iraq invaded Kuwait, which triggered the first Gulf War that subsequently crippled consumer confidence, suppressed business spending, and sparked a U.S. recession. In the year 2000, the dot.com bubble burst which precipitated the collapse of internet stocks causing trillions of dollars in market losses. In 2010, the European Debt Crisis got under way which threatened banks around the world and had adverse effects on both global trade and world economic growth.

In the first week of this new year — stocks have been volatile and there has been endless talk of powder kegs and market bubbles. Corporate debt has reached unsustainable levels and the student loan crisis has spiraled out of control. We’re also grappling with a presidential impeachment, a precarious trade truce with China, renewed rocket warnings from North Korea, hypersonic missile threats from Russia, and a highly contentious presidential election. Add the recent threat of retaliation from an incensed Iran for the killing of Qassem Soleimani, and we get a truly unnerving glimpse into global risk.

Are you tired of hearing Happy New Year yet? So, despite our private resolve to drop a pant size and pay down our debt, the tenor of the 2020’s will very much hinge on the state of the world. From the Korean Peninsula, to the South China Sea, to the Middle East, the 2010’s left behind a tinderbox of global flashpoints. And while Christmas is clearly over on Wall Street, the economic hope of the new decade will likely rest in a familiar place —- the safety, security and staying power of holding physical gold.

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by Sean Kelly

As we think about resolutions and goals for the new year – many of us gravitate to the traditional aspirations of losing weight, eating better, exercising regularly, and the perennial favorite — being better about money. With respect to the latter, that can take the form of spending less, saving more, or investing smarter.

2019 was a banner year for the financial markets. Despite a debilitating trade war, global growth concerns, and extreme political polarization — Wall Street basked in recurring record highs. For the Dow, the Nasdaq, and the S&P 500, the good times rolled unhindered and unchecked making it the best year for stocks in decades. ‘Fear of Missing Out’ paled in comparison to the ‘Fear of Not Having Enough’ as investors piled into equities head first, breakneck and full bore. So much for ending the year with a bang — the markets closed 2019 with a sonic boom.

But here’s the $85 trillion question. What will 2020 bring? Can Wall Street live up to the ‘go all-in,’ let it ride, devil-may-care attitude that dominated 2019? In order to do that, the three indexes will have to combine for some 37 new records. Possible? Anything is possible but there are a few things that could dampen the new year spirit.

The first is the over-leveraged U.S. consumer. While spending has sustained the American economy, consumer debt is rising and delinquencies are poised to hit decade highs, particularly on credit cards and auto loans. Then, there’s the question of interest rates. The Fed has been unduly restrained and rates remain at historic lows. Over 60% of current homeowners are paying mortgage rates between 3.00% and 4.90%. In 2000 the average rate was 8.05%, in 1990 it was 10.13%, in 1980 it was 13.74%. At some point, rates will have to rise and when they do, the ripple effect could crush the markets. And we cannot overlook the ever-precarious trade truce. If the ‘Phase One’ trade deal between the U.S. and China fails to hold or progress, look for global uncertainty to mount and the markets to elicit a nervous gasp.

While these risks are menacing, they’re being written off as things we merely need to worry about ‘at some point’ but not necessarily now. This type of hope-mongering, can leave investors flat-footed. YES — At some point, the markets will correct, the economic expansion will end, the economy will slow, and a recession will arrive. Until then, it’s a perilous game of market “Musical Chairs” and the critical question we must ask ourselves is where we’ll be sitting and what we’ll be holding when the music stops and “at some point” slides into a chair before we do.

So, as you hum along to another tipsy rendition of “Auld Lang Syne” and guzzle a little Moët & Chandon at midnight — keep a few things in mind. Global growth is decelerating, wealth inequality is soaring, corporate profits are sinking, business uncertainty is rising, and we have no clue who will govern the most powerful economy in the world in 2020.

All of this helped lift gold more than 18% in 2019 making it one of the few assets that not only advanced on all the many things that went right last year — but became a power hedge for all that could go wrong as we move into the next.

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by Sean Kelly

It was the economic buzz word of the 1980’s and the big bad wolf of spending, purchasing power, and economic growth. ‘Inflation’ was top of mind whether you were buying a loaf of bread or pumping a gallon of gas. Those were the days that 48-month car loans were over 15% and 30-year fixed mortgage rates hovered at 18%. For those of us that lived through it, inflation sapped our spirit and tapped our paychecks. It was an altered reality where the cost of everything was rising all at once, and the value of money just couldn’t keep up.

Ronald Reagan famously called inflation “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” Indeed, it triggers a fall in real income, raises the cost of borrowing, suppresses business sentiment, and undermines our overall standard of living. The most perilous aspect of inflation, however, is that it is self-perpetuating and self-feeding. It unleashes an animal spirit that creates even more inflation.

In the decades following the second World War, the U.S. inflation rate averaged under 4%. The oil embargo of 1973-1974, however, pushed it into double digits — crippling consumer purchasing power and stretching American households. The surge was blamed on everything from supply side issues, to increased defense spending, rising wages, currency manipulation, and flat-out greed.

Hindsight has taught us, however, that monetary policy mistakes also played a role. ‘The Great Inflation’ report by the Federal Reserve Bank of Atlanta claimed that a combination of bad data and miscalculations caused policymakers to underestimate the inflationary impact of their policies:

“Motivated by a mandate to create full employment with little or no anchor for the management of reserves, the Federal Reserve accommodated large and rising fiscal imbalances and leaned against the headwinds produced by energy costs. These policies accelerated the expansion of the money supply and raised overall prices without reducing unemployment.”

Despite running as a fiscal Conservative, President Richard Nixon continued to fund the Vietnam War, increase social welfare spending, and rack up massive budget deficits throughout the early 1970’s. He also pushed the Fed to maintain low interest rates which temporarily stimulated the economy before eventually fueling higher inflation. Wharton Professor Jeremy Siegel called it, “the greatest failure of American macroeconomic policy in the postwar period.”

As we approach a new decade, much of this sounds familiar and yet we find ourselves in a wholly different predicament. Since the Fed established its 2% target seven years ago, the inflation rate has spent the majority of time hovering below it. Why is this a concern? Because too-low inflation can signal a coming recession and limit the Fed’s ability to turn things around. This has prompted calls to revamp inflation benchmarks across the globe. The rationale is that higher inflation will result in higher interest rates and this will give central banks more tools to fight the next crisis.

According to Alan Greenspan however, a re-calibration of inflation targets may not be necessary. The economist and former Fed Chair recently issued a warning that the rise of loose money and historic deficits could bring inflation back in a big way. Current interest rates remain historically low and the U.S. deficit for 2019 is just shy of an unfathomable $1 trillion. Historically, when cheap money abounds and federal expenditures dramatically exceed revenue, inflation follows.

And in some places, it’s already here.  Venezuela’s inflation rate is an astonishing 282,972.80%. Zimbabwe’s is over 175% and Argentina, North Korea and South Sudan are all over 50%. Food inflation is making headlines in India and China, credit inflation is soaring around the world, and the cost of education, healthcare, and housing in the U.S. has skyrocketed. In an economy where consumer spending accounts for 70% of economic growth, even a modest rise in these areas is worrisome.

Indeed, Credit Suisse’s chief economist stated that U.S. inflation could be “surprisingly high” if global growth holds in light of the Fed’s decision to stop raising rates. Similarly, some market strategists are warning of an “inflation scare” in 2020. While fund managers around the world are re-examining asset allocations due to inflationary risks.

In the current low rate, high debt environment — inflation is not going down. So, if you want to protect your purchasing power, now the time to diversify. Rising inflation will likely put gold back in the headlines as a safe haven and one of the most durable assets to hold in the face of an eroding dollar.

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If you’re like most Americans, you have a healthy sense of skepticism. When things sound too good to be true, you get a little nervous — even cynical. Whether we’re presented with zero percent financing, one-penny Whoppers, or a free shopping spree — deep down we’re suspicious. We can’t help thinking, ‘what’s the catch’ because it is within the parameters of the ‘catch’ that good deals turn detrimental, money is lost, and what we thought was the best thing since sliced bread turns out to be the worst thing since bread-making.

As consumers, our economic sixth sense has served us well. We tend to shy away from Nigerian prince emails, shady sweepstakes, and fishy tax collection notices. We’re wary of fake discounts, bait and switch deals, and extreme markdowns.

Our instincts often get scuttled, however, when it comes to a booming stock market. The Head of Wealth Planning at Vanguard recently suggested that the recommended 60/40 stocks-to-bonds portfolio split has skewed to 75/25 for investors captivated by the upside of the sustained bull market. This dramatically elevates risk, particularly for those with a short-term retirement horizon.

Why do we do this? There are two main reasons. The first has to do with all the economic warnings that consumed the financial media for the better part of the year regarding the U.S.-China trade war. Indeed, the manufacturing woes, business uncertainty, and hits to American farmers, Chinese factories, and German auto makers were all very real. Then there was the prospect of a no-deal Brexit which threatened to shrink the U.K.’s GDP by up to 8%. And we were told the global economy was buckling under the weight of a severe and sustained manufacturing contraction. But now that we’ve arrived at a ‘Phase One’ trade deal, an orderly Brexit process, and a global economy that has seems to have regained its footing — Wall Street is melting-up and a stampede of optimism is pushing the market to recurrent highs.

This brings us to the second reason that we tend to suppress all that healthy skepticism that has steered us clear of financial danger — the so-called “fear of missing out.” It is that urgent feeling that someone is benefiting from something that we’re not participating in. It is the gnawing belief that everyone else is making more money, enjoying a greater upside, and riding higher than we are. The FOMO with respect to the current bull market, overpowers any concerns of a correction, an economic pull back, or a financial realignment. And, it is that “caution to the wind” approach to money and retirement that prompts us to make bad decisions.

Engaging in risky behavior because everyone else does, does not make for a sound financial plan. It wasn’t all that long ago that countless consumers followed the crowd into the ‘no money down,’ subprime traps that pushed their homes underwater. Or, signed up for credit cards with fleeting introductory rates, or used their houses as piggy banks with hefty cash-out re-fi’s that dramatically inflated their mortgage debt.

Just as we do when we buy anything — when we invest, particularly in equities, we have to tap into our innate sense of cynicism and ask the hard questions. What if monetary policy can’t be normalized? What if there is a corporate debt-driven recession? What if more countries exit the EU? What if the global economy continues to wobble?

So, whether it’s a BOGO, FOMO or Door Buster Deal that lures you to the Wall Street risk party, make yourself aware of the exits. This is not about having the right coupon at the right time. It’s about having the right money in the right place — right now. Amid the dark pools and the unicorns, the fat tails and the fallen angels — we must again summon our inner skeptic. Is Wall Street riding new highs because of market fundamentals or because the world just dodged another trade war bullet?

Those that come upon the real answer, will likely leave the party as quickly and as quietly as possible.

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It’s a fairly simple rule of thumb — if we borrow more money than we can pay back, we’re overleveraged.

Consumers become overleveraged when they have more bills and expenses than income to pay them with. Businesses become overleveraged when they have a high ratio of debt to capital. Countries become overleveraged when their liabilities exceed their overall economic output.

These are not unfamiliar scenarios. Cheap credit, excessive borrowing, and vast gaps between income and debt were among the root causes of the Great Recession. And when the financial crisis hit back in 2007-2008, central banks from Western and Eastern Europe, Asia, Scandinavia, the Middle East, and North America stepped in to save their economies from collapse by lowering borrowing costs, underwriting bank debt, guaranteeing deposits, and bailing out lenders. So, in order to restore confidence, stimulate growth, and ignite a recovery — they dramatically stretched their balance sheets.

As we approach 2020, household debt has reached unprecedented levels, corporations are carrying unwieldy liabilities, and governments worldwide are swimming in a deeper and murkier sea of red than at any other time in history. According to a November report by the International Institute of Finance (IIF), world debt is on track to exceed $250 trillion this year, three times global economic output. This comes on the heels of another reckless era of cheap money, easy credit, and rampant borrowing. It is the highest cumulative debt load the world has ever known, and it shows no signs of abating.

This has brought us to a breaking point. The world’s reserve banks have managed to deliver the economy from crisis-to-recovery for hundreds of years, but now find themselves overloaded and under stress. Faced with balance sheets that are too high and interest rates that are too low, they are short on stimulus and shy on firepower.

So, as we sit atop this towering mountain of debt and default and once again look to monetary authorities to save the global economy — we realize that they may not even be able to save themselves. Fiscal cycle after fiscal cycle, deficits have increased and budgets have exploded to unsustainable levels. And, for the first time ever we’re forced to contemplate the desperate notion of what comes next —The Implausible? The Unworkable? The Impossible?

With a $23 trillion liability, the threat of de-dollarization, and the prospect of massive new spending initiatives like ‘Medicare for All’ and the Green New Deal — the Fed, in particular, has little room to increase spending or encourage borrowing. And if Powell and company lose control of the economy, America could be headed for a crisis far worse than 2008 with no foreseeable escape.

So, where does a cash-strapped, belly-up world turn? To one place and one place only. In 2019 central bank, net gold purchases will shatter 50-year highs. This is no coincidence. In a world that has seen empires rise and fall, civilizations come and go, watersheds, turning points, depressions, recessions, defining moments and monumental indebtedness — there has never been anything as safe, steadfast and as enduring as solid gold.

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It’s December, and we suddenly find ourselves in the last month of 2019 with the holiday season well underway. Ready or not, the year will come to an end in a matter of weeks. For some it has been a good year, for others it has been a year of hard work and hard lessons.  In terms of money and finance, 2019 offers critical clues as to what to expect next.

During the past year, the U.S.-China trade war exposed cracks in the global economy. Suddenly, everyone seemed vulnerable from U.S. farmers, to Chinese manufacturers, to German automakers. The yield curve inverted, business investment began to sag, and wage growth all but stalled. Wall Street turned downright fitful as intraday market volatility reached levels not seen in eight years. And a decade of easy money and cheap credit came home to roost as the world’s debt pile grew to almost three times the size of global output.

We have now come face-to-face with the limitations of monetary policy as interest rates around the world remain fixed at historic lows leaving central banks painfully short on ammo.

Let’s not forget the forces of wealth inequality, waning corporate profits, economic contractions (in the EU, Asia, and Latin America), the looming Brexit fallout, and the repercussions of America’s deep, political divide. The potential impeachment of a U.S. president casts tax policy, corporate regulations, and capex spending into a sea of doubt.

Despite a record-setting stock run and a chart-busting U.S. expansion, uncertainty is undercutting confidence in every nook and cranny of the financial world.

The U.S. manufacturing sector remains in a contraction, national debt has ballooned to unsustainable levels, CEO confidence is slipping, and private sector job growth has slowed. Financial leaders and policymakers around the world are recession-proofing their companies, shoring up their reserves, and safe-guarding their capital in the event the downturn gains steam.

The story of 2019 is one of a ‘world disrupted’ — and the resulting commotion and chaos will carry into 2020.

Like all ‘Auld Lang Synes,’ the prospect of a new year brings familiar regrets, improbable resolutions, and a year of fresh risk. So, we remain on recession watch and brace for more volatility, increasing uncertainty, and steeper market losses.

Billionaires, hedge fund gurus and speculators from across the financial spectrum have expressed growing concerns about everything from negative interest rates and negative bond yields, falling inflation and evaporating liquidity, geopolitical risk and the collapse of the free market system. Others believe that we could talk ourselves into a recession. They’re unanimous, however, in their collective anxiety about how we’ll cope with the next downturn.

So, before you tune into Dick Clark’s New Year’s Rockin’ Eve, watch the Times Square ball wobble and drop, sip some extra dry champagne, and mouth the words to that song that no one really knows — it’s a good time to make a plan to protect your savings.

Along with the new year comes the reality of the unforeseen, the unexpected and any number of pressing issues that could crush consumer confidence and send us headlong into a full-blown financial crisis.

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Charles Dickens once said, “Reflect upon your present blessings — of which every man has many — not on your past misfortunes, of which all men have some.”

Ten years ago this week, we were trapped in the lingering fallout of the Great Recession. Unemployment had reached 10% for the fist time in a quarter of a century. GM, the ‘heartbeat of America,’ filed for bankruptcy. Housing foreclosures were at record levels. ‘Cash for Clunkers’ was in full force and to add to the gloom, the H1N1 flu strain had reached epidemic levels.

In the U.S., housing declines had started to ease ever so slightly and Wall Street was stabilizing but the ‘damage was done’ so to speak — as home foreclosures reached almost 3 million in 2009 alone, and the economy was still hemorrhaging jobs. The federal government was forced to nationalize the auto industry with an $81 billion cash infusion and Fed stress tests showed that major U.S. banks were gravely under-capitalized including Wells Fargo, Bank of America, Citigroup, and a host of regional banks.

Around the world, governments were pumping trillions into their own economies in an effort to avoid a deeper downturn or a new setback that could trigger more financial pain. Few nations, regions, or states were spared the marked slowdown in economic activity as GDP growth turned negative in: Austria, Belgium, Canada, Brazil, Denmark, The Czech Republic, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Mexico, Netherlands, Norway, Russia, Saudi Arabia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. As a whole, the world economy contracted (-)1.7%.

As we sat down at the Thanksgiving table in 2009 — we had lost, on average, two decades of accumulated wealth, more than 30% of our home value, and a large portion of our retirement funds as stocks reached a painful bottom. And yet, we found reasons to give thanks. The Spider-Man float was making a comeback at the 83rd Macy’s Thanksgiving Day Parade and the Pillsbury Doughboy was making its debut. 2009 was also the year of the “Miracle on the Hudson,” when captain ‘Sully’ Sullenberger piloted a crippled U.S. Airways jet to safety on the frigid Hudson River — saving all on board. Avatar, Slum Dog Millionaire, and The Hangover were the top escapist flicks and sports dynasty teams reigned supreme as the New York Yankees won the World Series, the Pittsburgh Steelers won the Super Bowl, and the L.A. Lakers won the NBA championships.

Along with the turkey and gravy, we found comfort in a familial gathering without talk of foreclosures, short-sales, bailouts, or crashes. And as one the worst economic downturns in modern history continued to pack a punch, we found the bright side — in cranberry sauce and stuffing, pumpkin pie and football. Ten years later, we’re left with the memories as well as the lessons — that a house is not a nest egg, stocks are not a safe haven, panic is not a crisis hedge, risk is not a tangible asset, and the Fed’s power is only eclipsed by its limitations.

A look back at Thanksgiving during the dark days of the downturn, is a timely reminder to celebrate the good times, prepare for the bad times, and hold tight to those things what never waiver, weaken or fall away — like family, the blessing of good food, the joy of good company, and the strength of the American spirit.

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From Hong Kong to Catalonia, Paris to Santiago, Islamabad to Quito — the world is engulfed in protests. The themes range from social justice, political independence, economic equality, separatist movements and climate change. The demonstrations run the gamut from peaceful marches and civil disobedience —- to riots and extreme acts of violence.

In South America, Europe, the Middle East and Asia — the images are the same. Swarms of nonviolent demonstrators carry signs and banners in some cities while masked activists throw rocks and Molotov cocktails in others. There have been police in riot gear, troop deployments, tear gas, water cannons, rubber bullets and even live rounds of ammunition.

In Chile’s capital, protests erupted in response to a hike in subway fares but the rallies exposed deeper issues of falling wages, soaring costs, substandard public services, and a paltry pension system. In an attempt to quell the demonstrations, there have been claims of police abuse and excessive force that has resulted in over twenty deaths and thousands of injuries.

In the wealthy Catalan region of Northeastern Spain, the drive for independence has thrust the Spanish government into one of the most serious political crises since the death of dictator Francisco Franco back in 1975. In 2017, some 90% of Catalans voted for independence but the referendum was declared unconstitutional and Madrid imposed direct rule. After leaders of the resistance were arrested and imprisoned, Spain has been hit by some of the worst street violence in decades.

In Paris, the gilets jaunes (yellow vests) protests started last year over the rising costs of petrol but quickly morphed into an anti-government, anti-elite, and anti-taxation movement.

The image of the yellow vest, which citizens are required to carry in their vehicle, has come to signify the plight of the working class. Protests have coalesced into mass demonstrations that have included roadblocks, petrol-bombs and attacks on banks, shops and fuel depots.

In Lebanon uprisings were initially triggered by a tax on the popular messaging application ‘WhatsApp’ but like other demonstrations, it revealed deeper issues of government corruption, human rights abuses, and rampant unemployment. Tens of thousands have marched for social and economic reform as well as clean water and electricity. Lebanese protestors have blocked roads and highways in mass sit-in’s seeking a revamp of the entire existing political system.

In Hong Kong, what started as opposition to an extradition bill authorizing the detention and removal of criminal suspects to mainland China, has morphed into a broader demand for democratic reform. As many as a million people have marched in protest of the bill as well as China’s growing influence. One demonstrator has been shot and over 4,500 have been arrested since June. Tensions have taken a more violent turn in recent days as demonstrators have taken over Hong Kong’s Polytechnic University which has turned into veritable a combat zone of rocks and firebombs —- tear gas and rubber bullets.

Clearly, global unrest is mounting, death tolls are rising, and people everywhere are calling for change. All across South America, the Middle East, Asia and the Caribbean there is havoc in the streets and disruption to business, trade, commerce, and daily life. The Chilean peso has slid to record lows during the unrest. Spain has been combatting the second highest unemployment rate in the EU. France is facing meager fourth quarter GDP growth. Lebanon is on the brink of an economic crisis, Hong Kong has already slipped into recession, and the drag on the global economy has yet to be tallied.

Jacquelien van Stekelenburg, a professor of Social Change and Conflict at Vrije University in Amsterdam says, “the data shows that the amount of protests is increasing and is as high as the roaring 60s.” The 1960’s saw one of the longest economic expansions in history but what followed should give us pause. The 1970’s was an era of skyrocketing unemployment, slumping economic growth, and a convergence of recessionary forces. It was a punishing decade of collapsing markets, sagging business sentiment, and unrelenting stagflation.

So, is there a correlation between widespread demonstrations and the world economy? A research study entitled, ‘The Economic Impact of Political Instability and Mass Civil Protest,’ conducted by the Centre for Research in Economic Development and International Trade at the University of Nottingham concluded that in the wake of crises like these there is, “an immediate fall in output which is never recovered in the subsequent five years.”

Worldwide discontent does indeed carry an economic cost. Regardless of the validity of the cause — systemic protests, riots, and rebellions put downward pressure on the global economy. And, as we start a new decade on the heels of another unprecedented expansion and in the throes of similar mass unrest, we would be wise to insulate our money from the threat of another lost era.

Gold surged well over 1000% during the 1970’s, and if history does indeed repeat itself — we’ll want to be on the right side of it.[/vc_column_text][/vc_column][vc_column width=”1/3″ el_class=”sidebar-content”][porto_block label=”” name=”right-side-bar-form”][/vc_column][/vc_row][vc_row][vc_column][porto_block label=”” name=”review-new”][/vc_column][/vc_row]

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Wealth inequality is at historic levels throughout the world and some consider it the greatest threat to the global economy.

The disparity between the very rich and the very poor seems as old as society itself, but it’s a bit more complicated than Marie Antoinette’s reported, “Let them eat cake” pronouncement upon hearing that her starving peasants had no bread. Or, Oliver Twist’s bold request for more than the issued “three meals of thin gruel a day, with an onion twice a week,” at the parish workhouse.

Wealth or income inequality, according to Investopedia is “an extreme disparity of income distributions with a high concentration of income usually in the hands of a small percentage of a population.” The National Bureau of Economic Research reported earlier this year that the wealth gap has indeed widened since the 1980’s when the top 1% held some 25%-30% of the world’s wealth compared to today’s far heftier 40%. And the prevailing notion that the rich are now getting richer and the poor are getting poorer — could have extreme economic, social and political consequences.

The struggle of those on the bottom echelon of society has been apparent for thousands of years, but there is growing evidence that income inequality now hurts everyone. Researchers at the International Monetary Fund maintain that there’s a distinct correlation between the rising incomes of the top percentage of wage earners and falling GDP. Productivity, spending, and economic mobility all suffer when low-income workers fail to thrive. It’s also an environment ripe for high debt and staggering inflation.

Societies where income inequality is most pronounced also tend to struggle with elevated levels of poverty, public health issues, human rights violations, crime and lawlessness. They are more likely to under-invest in technology, education, and innovation and turn a blind eye to economic fear, anxiety and frustration. Rising unhappiness, lower life expectancy, and a frayed social fabric are the common outgrowths of unequal income distribution. And then there’s the nagging question of social cohesion. Wealth inequality has led to a dramatic rise in political tension and uncomfortable conversations about income transfers, re-distribution, and weighty new taxes on the rich.

The disparity of wealth in America in particular, has caused many to question the notion of capitalism itself and spawned discussions about whether the free enterprise system has failed the poor, no longer works, or does not support the ‘greater good.’ Indeed, billionaire investor, Ray Dalio, recently compared the current wealth gap to the decadent, pre-depression 1930’s. Similarly, J.P Morgan CEO Jamie Dimon, asserted that the widening chasm between the ‘haves and have-nots’ has left too many behind. These are common criticisms of the market economy, and they’ve given rise to 2020 political platforms that embrace socialism, collectivism and communalism by advancing incalculable notions like free college tuition, Medicare-for-all, and the Green New Deal.

We’ve certainly come a long way from the 1982 “poverty sucks” poster with the capped man in riding boots, hoisting a martini in front of his Rolls Royce. But there’s danger in believing that America does not endorse competitive markets, private ownership, and the creation of wealth. And there’s great economic peril in tossing out the free market baby with the free enterprise bath water. If our social and political fabric does indeed unravel in 2020, gold will be the safe haven asset of last resort.

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Who can forget the interminable parking lots, crowded escalators, holiday window displays, and jam-packed food courts? The shopping mall is where many of us grew up. From hiding under dress racks, to reluctantly trying on school clothes, and momentarily losing sight of our mothers — all of us have a mall memory. These shopping meccas were so popular in the 1970’s and 1980’s that wading through crowds and swarms of bag-toting shoppers became part of their mystique. We lined up for everything from a rocking horse ride and a stint in Santa’s lap — to video arcades and Black Friday markdowns.

While Austrian immigrant Victor Gruen is credited with inventing the shopping mall back in the 1950’s, it quickly became a uniquely American experience. The sprawling suburban shopping plaza morphed into a people center and a tabernacle of booming U.S. consumerism.

The Great Recession, however, turned malls into ghost towns and triggered the demise of countless anchor stores like: Circuit City, Fortunoff’s, Filene’s Basement, Linens & Things, and Gottschalks. In December of 2008, The New York Times reported that retail sales figures were the “Weakest in 35 Years.”

And now the rise of the shop-at-home/free delivery models of e-retailers like Amazon have triggered a rash of new retail defaults and mega mall closings. This year alone has seen the demise of Z Gallerie, Payless Shoesource, Things Remembered, Gymboree, Perkin’s, Marie Callenders, and Barney’s New York all of whom filed bankruptcy or began liquidation proceedings in 2019. They join last year’s casualties which include Sears, Brookstone, Nine West, Rockport, and the Walking Company.

All that remains of the once humming shopping hubs are cavernous superstructures and dead mall graveyards hoping to be snapped up by an online distribution center or leveled into fresh, commercial real estate. The retail collapse has racked up record-setting store closings and decimated an industry that was once the backbone of the American economy.

So, is the demise of brick-and-mortar retail just a sign of changing times or an indication of something more perilous?  There’s no doubt that technology and globalization are dramatically altering the shopping experience. But some believe that the retail industry, which employs almost 16 million people, is now in a recession. And with store closings in the first half of 2019 surpassing all of 2018, the pace of shuttering shows no signs of abating. This begs the question — if we continue to shed retail jobs in a good economy, what happens when the economy turns bad?

Mark Zandi, chief economist at Moody’s, addressed precisely this concern in a recent CNN Business report on the ‘Retail Apocalypse’ stating, “They’ve been laying off workers coming up on three years. And this is a time when consumers are out spending aggressively. If the broader economy is in recession, there is going to be blood in the streets.”

With two-thirds of CFO’s predicting a recession within the next 12 months, the streets may very well run red in 2020. Weakness in the retail sector — the layoffs, liquidations and store closures could become catastrophic and the mounting job losses could quickly spread to other sectors of the economy.

Dead men may tell no tales, as the saying goes — but it seems that dead malls do. And whether the demise of great American shopping centers is the result of changing tastes or shifting times — the disruption to the economy in the event of a downturn could be calamitous.

Grabbing a paperback at Waldenbooks, the latest CD at Sam Goody, or a lava lamp from Sharper Image may be a long-lost memory, but your retirement portfolio shouldn’t be. It needs an active crisis hedge, and gold has a solid history of increasing in value when paper assets like stocks and bonds fail.

With a host of major economies already on the brink — global gold demand could surge in 2020 creating a significant upside. So, while you may no longer be able to pick up a new tennis racket at Sports Authority, you can still acquire a stash of gold bullion from a reputable gold company to protect your portfolio in 2020.

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Back in August, a chief investment strategist called the U.S. consumer “Atlas” for its role in holding up the economy. Atlas, you’ll recall, was a titan from Greek mythology who was burdened with carrying the heavens upon his shoulders as punishment from Zeus for losing a battle with the Olympian Gods.

Indeed, the U.S. consumer has been a titan in its own right. ‘Shop until you drop’ Americans have almost single-handedly shouldered economic growth and have remained unflinching and unflappable in their spend trends despite recession talk, trade pressures, global weakness, central bank easing, and a host of political risks. Consumer spending makes up 70% of U.S. GDP and when Americans splurge on durable, non-durable and luxury goods — it not only feeds into supply and demand metrics, but it’s a sign of burgeoning consumer confidence.

Real Personal Consumption ExpendituresAccording to the Bureau of Economic Analysis, personal income in the United Sates increased $73.5 billion (0.4 percent) in August. Disposable personal income (DPI) increased $77.7 billion (0.5 percent), and personal consumption expenditures (PCE) increased $20.1 billion (0.1 percent). The latter data point has been on an upward trajectory throughout the year.

Bloomberg also recently called free-wheeling, free-spending Americans, “The Best Hope Against Recession.” They cited vigorous consumption levels, a consumer confidence rate at near historic highs, and a 2019 holiday sales season that is expected to be beat the running five-year average.

There are signs that the titan is tiring, however. U.S. Retail sales dropped in September for the first time in seven months. Americans are also starting to worry about the interminable trade war with China and wonder whether the billions in tit-for-tat tariffs will show up at the cash register or in their online shopping cart. There are also concerns about Fed policy, the coming election, and a new wave of wild days on Wall Street.

In addition, several Bank of America Merrill Lynch analysts identified three growing risks that could spook consumers and derail America’s record-setting expansion. The first is a massive spike in borrowing. Earlier in the year, outstanding consumer debt surpassed $4 trillion, an all-time high. And, more Americans are holding more credit card debt than at any other time in U.S. history and delinquencies are climbing.

Secondly, consumer confidence has dipped. In September it fell by the highest level in 9 months amid trade worries and a series of grim manufacturing statistics. Consumer confidence is a leading indicator which helps predict consumer spending.  When confidence wanes, folks get nervous and are less likely to part with money. If spending slows, it would be the death knell of the current economic expansion.

Lastly, job growth came in weaker than expected last month and wage growth also decelerated. With unemployment at historic lows, logic suggests that employers would need to up the ante in order to attract and retain workers. But that’s not happening and no one really knows why. The manufacturing and retail sectors were particularly hard hit and both are considered the life blood of a growing economy.

Consumer anxiety and economic uncertainty almost always trigger a spending pullback. If this occurs in the waning weeks of 2019 or the early months of 2020, the fear, uncertainty, and panic would weigh on capital investment, dampen retail sales, squash manufacturing output, and rattle Wall Street — causing the economic engine to gasp, sputter and seize up.

Do you have a plan for that? Diversifying your portfolio with physical gold is one of the most effective ways to protect its value. Gold is an inflation, recession and crisis hedge — and precisely where savvy investors go when American consumers start saying no.[/vc_column_text][/vc_column][vc_column width=”1/3″ el_class=”sidebar-content”][porto_block label=”” name=”right-side-bar-form”][/vc_column][/vc_row][vc_row][vc_column][porto_block label=”” name=”review-new”][/vc_column][/vc_row]

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The trillions in quiet cash and securities that are transferred back and forth between banks each day and night, comprise the repo market which is short for re-purchase agreement. The loans and collateralized transactions that often occur in the wee hours rarely garner much attention, but they are, in many respects, the hidden flywheels of the financial system.

Repo’s involve the short-term selling of U.S. Treasuries, and they are also a critical source of cash for non-bank entities like money market funds and brokerage firms. And if their rates go off the rails economic trouble could follow.

In Bloomberg’s recent feature entitled, “The Repo Market’s a Mess,” they refer to the short term borrowing exchange as, “the world’s biggest pawn shop: It helps a wide range of other transactions go more smoothly including trading in the over $16 trillion U.S. Treasury market.” The rates charged for repos typically align with the Federal Funds rate, but back in September
something went wildly wrong as volume surged and short-term rates soared as high as 10%forcing the Fed to pump over $128 billion into the financial system to stave off a liquidity collapse. It was the first time the Fed has intervened in financial markets in ten years.

“The repo market is important,” according to Bloomberg, “because it serves as thegrease that keeps the global capital markets spinning.” So last month’s dramatic bailout, should not be overlooked.

Repo transactions ensure that banks have the cash and liquidity needed to fund their various lending activities, and the system works well when the repo rate hugs the Fed’s benchmark. When there’s not enough cash in the system or sufficient reserves to meet demand, however, that rate can surge creating chaos in short-term lending that impacts U.S. banks, corporations, money market funds, and an array of institutional investors.

Last month’s crushing demand for cash is being blamed on everything from treasury debt and corporate tax payments — to crisisera monetary policy and post-recession banking regulations. Regardless of the cause, when supply and demand metrics push repo market rates to historic levels, it poses a threat to the financial system — one that we have not seen in over a decade.

A just released study by the National Bureau of Economic Research concluded that, “the financial panic of 2007-8 stemmed from a run on the repurchase or repo market — the primary source of funds for the securitized banking system.” The research further suggests that the sudden loss of liquidity and resulting repo rupture, directly led to the broader financial crisis:

“Based on their analysis, the authors hypothesize that when the subprime real estate market weakened early in 2007, repo market buyers grew anxious about the quality of the securitized assets in the bonds and the increasing haircuts on deals. Although some
banks raised capital by issuing new securities in response, those efforts soon fell short because of slumping real estate, and mortgage, prices … By August 2007, market fears reached a critical mass that led to the first run on repo. Lenders were no longer willing to provide short-term financing at historical spreads, and repo haircuts jumped to new highs, tantamount to massive withdrawals from the banking system.”

The recent repo rate uproar puts the Federal Reserve smack in the midst of another liquiditycrisis forcing the government to treasury’s again, intervene in the nation’s markets again, and inject cash into the financial system again. Haven’t we been here before? And didn’t itprecede a credit crunch, a banking crisis, and a catastrophic financial downturn?

The Federal Reserve Bank of San Francisco concluded that:

“The 2007–08 financial crisis was the biggest shock to the banking system since the 1930s, raising fundamental questions about liquidity risk. The global financial system experienced urgent demands for cash from various sources, including counterparties,
short-term creditors, and, especially, existing borrowers. Credit fell, with banks hit hardest by liquidity pressures cutting back most sharply.”

Alas, dramatic rate cuts and massive liquidity infusions did little to stop the global financial crisis of 2008. It, of course, went on to become the worst economic disaster since the Great Depression. And while the Fed’s recent intervention in the short-term lending market helped stabilize current rate volatility, a host of questions and concerns have emerged — Has the Fed
finally lost control of rates? Can monetary policy still steer the economy? Are the financial markets more vulnerable than we realize? And, without a lasting repo fix, is another downturn imminent?

It wasn’t too long ago that the U.S. financial system teetered was on the brink of dissolution asreal estate values plummeted, foreclosures soared, and banks large and small folded on what seemed like a moment’s notice. And amid the federal bailouts, conservator ships, and credit freezes — investors, traders, savers, and businesses sought shelter from volatility and risk.
They found it in gold which almost doubled in value during the most punishing years of the financial crisis from 2007 to 2012.

So, if the current repo chaos is a symptom of a financial system under pressure and an omen of broader economic danger to come gold will once again be the go-to crisis hedge for wealth protection and long-term peace of mind.

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When we think of Presidential impeachment, we recall Bill Clinton waving his finger in denial on national television or Richard Nixon’s emphatic claim that he is “not a crook.” It brings to mind endless gavel committees, subpoenas, contentious Capitol Hill hearings, and a host of dark moments from the archives of American political history.

Removing a president is, after all, an extreme undertaking. Albert Broderick, a professor at The Catholic University of America Columbus School of Law wrote in the American Bar Association Journal back in 1974 that, “Impeachment is a political rather than legal process in the American Constitutional system.” In his essay called, “The Politics of Impeachment,” Broderick proclaims that we “must free ourselves from the tyranny of legal mystique when we consider impeachment, particularly impeachment of a president.” He describes a process where the House acts as accuser and prosecutor, the Senate plays judge and jury, and the sentence and final pronouncement is virtually indisputable.

It is for this very reason that the framers of the Constitution, fearing partisan sway, made the removal of a sitting president a difficult undertaking. It requires a super-majority vote or a two-thirds conviction in the Senate and the likely crossing of party lines. Out of the 45 individuals that have held the office of President only three have faced impeachment. In 1868, Andrew Johnson was impeached for dismissing a government official without the approval of the Senate but was ultimately acquitted and remained in office. Similarly, Bill Clinton was impeached for perjury and obstruction of justice; he too was acquitted by the Senate and finished his term. In 1974, Richard Nixon was brought up on charges of obstruction of justice, abuse of power, and contempt of Congress but resigned prior to what was a certain impeachment by both legislative chambers.

Nixon was forced from office during a turbulent time of high inflation, rising oil prices, and soaring unemployment. The heavy military spending, trade imbalances, and massive foreign aid racked up during the 1960’s triggered massive runs on the dollar in the 1970’s. Since U.S. currency was still backed by gold, it threatened to wipe out federal gold reserves and caused Nixon to end the gold standard. As a result, the dollar became dramatically unstable as did free-floating fiat currencies around the world ushering in a period of pronounced stagflation.

The New York Times recently noted, “From the date burglars broke into the Democratic National Committee headquarters in the Watergate complex in 1972 until the resignation of President Richard Nixon two years later, the S&P 500 fell 25 percent.” And, just 5 months after Nixon’s departure, the Minneapolis Fed described economic barometers as “giving out strong signals of unsettled conditions, with a possibility of rough seas.” The report specifically addressed inflation, recession, global stagflation, and nagging questions of financial stability.

President Trump is now the subject of a similar impeachment inquiry and various committees have issued subpoenas, interviewed witnesses, requested transcripts, records, documents and even text messages in an effort to gather enough evidence to remove him from office. If they succeed, it could have a dramatic impact on the economy for the remainder of 2019 and well into 2020.
There’s no doubt that a changing of the guard can stoke economic unease, and there’s perhaps nothing that the stock market hates more than uncertainty. The anxiety of impeachment proceedings must be added to the current agitation surrounding the trade war, bond yields, asset bubbles, slowing global growth, rising global debt, and sinking corporate profits.

Trump’s potential removal from office will undoubtedly get the financial community ‘wound up’ and not necessarily in a good way. Let’s face it, Wall Street likes the president’s policies. That’s not a political assessment, it’s an economic one. Corporations have benefited from the Trump tax cuts, regulatory rollback, and overall pro-growth agenda. In short, this President has been good for business but industry and commerce are clearly not top-of-mind to lawmakers at the moment.

In announcing the impeachment inquiry, Nancy Pelosi, Speaker of the U.S. House of Representatives and a leading opposition party voice stated that Trump’s recent call with the President of Ukraine revealed, “the president’s betrayal of his oath of office, betrayal of our national security, and betrayal of the integrity of our elections.” Pelosi later quipped that she wants to “see him in prison.”

The House Intelligence Committee chair, Adam Schiff, called out what he believes is the President’s “losses of leadership” claiming President Trump was “determined to weed out anyone who may dare disagree” and dubbed it “one of the most challenging moments for the Intelligence Community.”

The bottom line is, we don’t know if the President will be impeached, nor do we know if he will be removed from office. More importantly, we don’t know how much more “stuff’ investors will be able to shrug off. Much like the Nixon era, we’re living in volatile times where trade turmoil, political upheaval, massive debt, manufacturing weakness, feckless monetary policy, extreme partisanship, and investor skepticism have created a world of wild cards.

And while Trump’s pro-growth policies have juiced our portfolios we now need a solid impeachment hedge. Throughout the 1970’s, gold climbed over 1000% and as Congress approaches the point of no return with respect to “high crimes and misdemeanors,” gold is uniquely positioned to once again provide balance, protection and critical diversification for savings and retirement accounts worldwide.

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The Institute for Supply Management is one of the largest organizations of its kind in the world. With some 50,000 personnel in more than 100 countries, their membership includes the agents, managers,and mediators engaged in sourcing, procuring, and purchasing goods and services across the globe. While the organization provides vital training, networking, and certifications for supply management personnel, it also offers a critical snapshot of the global economy. Initially called the National Association of Purchasing Agents, these are the professionals that have their thumb on the pulse of manufacturing supply and demand.

The ISM’s Purchasing Managers Index (PMI) is generally considered to be a vital measure of industrial activity. It is based on a monthly survey of purchasing and supply executives across 19 industries that report on changes in things like new orders, inventory, production, supply levels, back log, prices, import/export sand employment activities.Any PMI reading above 50% indicates an expansion of the manufacturing sector while a reading under 50% suggests a contraction.

So, why does PMI matter? If the economy had an engine room, the PMI reading tells you whether it’s humming, sputtering or on fire. It is a front line assessment of economic activity in areas like Chemical products, Apparel, Electrical Equipment, Transportation Equipment, Computer and Electronic Products, Plastic and Rubber Products, Machinery,Petroleum and Coal Products, etc. These industries not only provide a glimpse into the health of the economy but are often a precursor to changes in GDP,jobs data, and overall business confidence.

In September, the U.S. Purchasing Manager’s Index dropped to 47.8% from 49.1% in August, marking the second,consecutive month of contraction. Out of the 18 manufacturing industries tracked, only three reported growth as a deceleration shifted to an outright decline and the overall slum preached a level not seen since June of 2009.

Remember 2009? It was the waning days of the manufacturing  recession. It was the year that Congress approved the $787  billion economic stimulus package and another $75 billion plan to help stop for eclosures —and yet the number of homes under water hit record levels, investors panicked, the markets plummeted,the unemployment rate hit 10%, and the June PMI reading came in at 45.8% —-just two percentage points lower than this past month.

So why is U.S manufacturing recession in a contraction? Some analysts are blaming the trade war with China for increasing costs and creating financial uncertainty. Peter Boock var, chief investment officer at Bleakley Advisory Group,echoed this sentiment stating in a CNBC report on October 1st,“We have now tariffed our way into a manufacturing recession in the U.S. and globally.” Others blame a host of other factors like falling oil prices, a slumping global economy, slowing Chinese growth, rising Brexit turmoil, and exploding lobal debt. Still others see this as part of a larger, cyclical slowdown that has been long in the making, long coming,and with far-reaching impact.We are, after all, still riding the longest expansion in U.S. history.

Regardless of the precise triggers, the dismal reading sends a clear message and a potential fateful warning. Chris Rupkey, chief economist at MUFG Union Bank put it more starkly, “Purchasing managers are telling stock market investors to get out.”

We all know that gold is negatively correlated to the markets, and that’s all we really need to know in order to grasp its safe haven power. And if we’re hitting 2009 economic benchmarks, we may already be at a tipping point and should perhaps “Run,” as Rupkey further cautions on equities, “Get out while you can. The outlook is darkening and the thunder is growing louder by the day.”

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TSP Owner’s 
Guide To Gold

 

How to Protect Your Savings Plan

INSIDE YOUR GUIDE LEARN HOW GOLD:

PROVIDES SIGNIFICANT TAX BENEFITS
Learn the exact IRS rule that allows you to use a Home Delivery IRA for gold and silver

PROTECTS YOU FROM THE FALLING DOLLAR
Gold and silver can protect you from inflation and the death of the dollar

OFFERS HUGE GROWTH POTENTIAL
Gold and silver are poised for massive gains in the next 2-5 years 

 

Red Rock Secured is a private distributor of Gold, Silver & Platinum coins from the U.S. Mint and is not affiliated with the U.S. Government or the Federal Retirement Thrift Investment Board. Information on this web site is intended for educational purpose only and is not to be used as investment advice or a recommendation to buy sell or trade any asset that requires a licensed broker. As with all investments there is risk and the past performance of a particular asset class does not guarantee any future performance. Red Rock Secured principals and representatives do not guarantee to clients that they will realize a profit or guarantee that losses may not be incurred as a result of following its coin collecting recommendations, or upon liquidation of coins bought from Red Rock Secured All content and images are owned by Red Rock Secured and may not be reproduced without written authorization. By submitting your information you give Red Rock Secured permission to contact you by phone, email, and sms texting.

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