REUTER’S/Brijesh Patel

Gold steadies near 1-month peak as recession risks rise

April 13, 2020

“Gold prices held steady near a one-month high on Monday, supported by growing concerns over the extent of the economic hit from the coronavirus pandemic. Spot gold was up 0.1% at $1,690.08 per ounce by 0916 GMT, having risen to its highest since March 9 on Friday … ‘Gold has been on the positive side from the last two to three weeks; mostly it’s safe-haven buying and that the global economy is likely to face a recession because of the COVID-19 issue,’ Hareesh V, at Geojit Financial Services, said.

The coronavirus pandemic, which has battered global economic growth, has forced nations to extend lockdowns to curtail its spread, and central banks have announced a wave of fiscal and monetary support measures to mitigate the financial toll. The Fed announced a broad, $2.3 trillion stimulus package to weather the outbreak, which has forced 16.8 million Americans to file for unemployment benefits since the week ended March 21. ‘COVID-19’s deflationary effect has been a headwind for gold. But this trend should reverse in 2H20 as policy responses by governments and central banks gather traction,’ UBS analysts said in a note.”

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BLOOMBERG/Rita Nazareth and Sarah Ponczek

U.S. Stocks Decline Before Earnings; Oil Advances: Markets Wrap

April 13, 2020

money barrels over map“U.S. stocks fell before the start of an earnings season marked by the extraordinary uncertainties caused by the pandemic. The S&P 500 Index dropped after rallying almost 25% from its March low, equities declined in Asia’s main financial centers while markets across Europe were closed for the Easter holiday. Crude rallied as top producers pulled off a historic deal to cut output by nearly a 10th, and extended gains after President Trump said ‘the number that OPEC+ is looking to cut is 20 Million Barrels a day.

With the coronavirus pandemic sowing chaos across the world, the investment community has been lost in a fog when it comes to corporate profits. As the earnings season kicks off this week, traders might get a sense of how bad the hit to global earnings could be as the outbreak upends the global economy. ‘Companies, analysts, traders, investors and strategists to some extent are flying into earnings season without instruments’,’ said John Stoltzfus, the chief strategist at Oppenheimer & Co. The unprecedented nature of the economic shutdown, social distancing and sheltering in place ordered by officials provides an overhang of uncertainty.’”

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MARKET WATCH/Shawn Langlois

America should be ready for 18 months of shutdowns in ‘long, hard road’ ahead, warns the Fed’s Neel Kashkari

April 12, 2020

Neel Kashkari“‘This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It’s hard for me to see a V-shaped recovery under that scenario.’ Neel Kashkari, the head of the Federal Reserve Bank of Minneapolis, painting a rather gloomy picture in an interview on Sunday morning of what lies ahead for the U.S. economy as the country continues to battle the coronavirus pandemic. Kashkari, while acknowledging the downside of what a prolonged shutdown could mean for the economy, said the U.S., ‘barring some health-care miracle,’ is looking at an 18-month strategy of rolling shutdowns based on what has happened in other countries.

‘We could have these waves of flare-ups, controls, flare-ups and controls, until we actually get a therapy or a vaccine,’ he said. ‘We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future.’ Looking ahead, Kashkari doesn’t envision a quick rebound for the U.S. economy, which has already suffered more than 16 million job losses in the past three weeks.”

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THE WALL STREET JOURNAL/Miriam Gottfried

Private-Equity Firms Scramble to Shore Up Coronavirus-Hit Holdings

April 13, 2020

global buyout volume monthly“Private-equity executives have spent the past five years bemoaning the difficulty of investing profitably with stocks at elevated levels. Now, they’re getting a taste of what they wished for. As the coronavirus spreads and stay-at-home orders cut deeply into the economy, buyout firms are scrambling to triage investments in industries that are particularly vulnerable. Entertainment powerhouse Endeavor Group Holdings Inc., backed by Silver Lake, and Legoland owner Merlin Entertainments Ltd., a recent Blackstone Group Inc. bet, are among those that have been walloped. Revenue at both companies has declined dramatically as Hollywood productions, concerts and sporting events have been canceled and amusement parks are forced to close.

Meanwhile, upheaval in the credit markets and economic uncertainty have brought buyout volume, already sluggish before the virus, to a virtual standstill. With the IPO and merger markets all but shut down and valuations depressed, any hope of selling investments profitably is also out the window for now. During back-to-back calls from their Hamptons beach houses, Lake Tahoe ski cabins and Florida vacation rentals, private-equity managers have worked frantically to group their investments, with some using color-coded buckets. Green companies have escaped largely unscathed. Yellow means ‘Keep an eye on this one.’ Red equals serious trouble … Firms have told their most-affected portfolio companies to draw down their revolving lines of credit and instructed them to find ways to free up cash, like waiting longer to pay suppliers, negotiating with landlords, furloughing or laying off employees and putting capital investments on hold.”

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BARRON’S/Matthew C. Klein

The Coronavirus Has Already Made Us Poorer for Years to Come

April 13, 2020

the great disaster“Whatever happens next, the events of the past six weeks will scar the U.S. economy well into the 2030s, if not beyond.  The Fed, Congress, and the U.S. Treasury may believe they have acted quickly and decisively to support the economy, but they were nevertheless too slow to prevent trillions of dollars of lasting damage. Tens of millions of Americans are already paying the price, and they will continue to do so for a long time. Between March 15 and April 4, a staggering 16.8 million Americans filed initial claims for unemployment insurance benefits. Based on the historical relationship between the number of Americans receiving unemployment benefits and the level of the joblessness, the unemployment rate was probably around 13% by the end of March and perhaps close to 20% by the end of last week. That would be comparable to the Great Depression. As stark as these numbers are, they nevertheless understate the magnitude of the job losses that have already occurred.

Restaurants, bars, and hotels have been hit especially hard, but so has nearly every other sector. The Texas Workforce Commission highlighted layoffs in a variety of sectors including manufacturing, construction, health care, retail, scientific research, agriculture, and warehousing. Preventing those job losses should have been the government’s first priority, but it was too slow … Looking further out, economists have found laid-off workers lose about 2½ years of income over the rest of their professional lives through lower wages and lower employment. If the number of unemployed Americans rises by 30 million people from February levels – which would be consistent with a peak unemployment rate of about 22% — that would end up costing the economy the equivalent of 75 million work-years over the next two decades.”

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USA TODAY/Russ Wiles – Arizona Republic

Retirement planning during coronavirus pandemic: Here’s what to watch for

April 12, 2020

retirement planning“Retirement in the age of coronavirus isn’t going to be easy. True, seniors and pre-retirees can take advantage of some flexible and lenient new rules on retirement accounts. Some might see new opportunities for part-time employment, especially those who can work from home. In other ways, things could get tougher, especially for people already behind on retirement preparations. As happened during prior recessions, older workers will lose their jobs, possibly their businesses and perhaps a chunk of their retirement accounts because of stock market declines.

As a result, some will claim Social Security retirement benefits earlier than planned … The longer disruptions last, the more intense this reliance could be. Some will tap into retirement accounts. One option, for both Individual Retirement Accounts and 401(k)-style programs, is to withdraw money permanently. Another choice, in 401(k)-style plans, is to take out a loan. But even before coronavirus hit, many Americans were baffled by many of the rules affecting 401(k) plans and especially IRAs. Now that the CARES Act has become law, look for more uncertainty and confusion.”

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