V-shaped recovery is in ‘tatters,’ and Wall Street doesn’t seem to care: Economist Stephen Roach
Economist Stephen Roach sees trouble on Wall Street.
His observation: The market is placing too much emphasis on the Federal Reserve holding interest rates at zero to prevent the economy from falling into another recession.
“That gives markets conviction to look though literally anything from political insurrection to the likelihood of a double dip to a V-shaped recovery that’s in tatters,” the Yale University senior fellow told CNBC’s “Trading Nation” on Monday. “The markets do not seem to care.”
Roach, who served as chairman of Morgan Stanley Asia during the deadly 2003 SARS epidemic, believes the economy is relapsing into a downturn under the force of Covid-19 surges and continued lockdowns. He estimates first quarter GDP could see a decline in the mid-single percentage range.
“We saw an unexpectedly sharp decline in consumer retail sales in November, weakness in consumer confidence and then significant downside surprise with unemployment numbers released for December,” said Roach. “The economy is slipping right before our very eyes.”
According to Roach, additional federal coronavirus aid is critical right now. However, he warns there will be consequences.
“The budget deficit, which is at a record right now, is going to get even larger,” he said. “That will put further downward pressure on domestic saving, the current account and eventually the dollar which has been falling pretty sharply in the last nine months.”
Fox Business/Angelica Stabile
Bitcoin is ‘fool’s gold and anybody buying it is ultimately a fool’: Peter Schiff
Euro Pacific Capital chief economist and strategist Peter Schiff suggested cryptocurrency investors are “fools” Monday after bitcoin took a major dip in the market after reaching record-breaking highs against the dollar.
“All bitcoin is is the latest iteration of fool’s gold and anybody buying it is ultimately a fool,” Schiff told FOX Business’ “Making Money with Charles Payne.”
Schiff explained that bitcoin investors who were able to sell after the stock’s recent joyride are merely selling to other buyers who don’t recognize it’s all a “scheme.” However, he added, most people who don’t sell are “under the delusion” that bitcoin will someday turn to cash.
“It’s never going to be money,” he said. “It doesn’t fit the very definition of money. Money needs to be a commodity. It needs to have actual value unto itself, not just the uses and means of exchange.”
The economist likened bitcoin to fiat digital currency that’s “backed by nothing” and, moreover, is not legally recognized.
“People who are buying it are going to wake up one day and they’re just going to be a bagholder,” he concluded.
The cryptocurrency reached a record value of $40,797 per coin on Thursday, helping fuel the market capitalization for all digital coins to above $1 trillion for the first time. Bitcoin was trading down 5.14% at $33,519 per coin on Monday afternoon after reaching a session low of $30,568.
Gold gains as stocks dip on Washington worries, rising virus cases
Gold ticked higher on Tuesday as Asian stocks slipped on political ferment in Washington and a global surge in coronavirus cases, although a firmer dollar and higher U.S. Treasury yields limited gains.
Spot gold rose 0.2% at $1,847.96 per ounce by 0235 GMT, after touching its lowest since Dec. 2 in the previous session. U.S. gold futures eased 0.2% to $1,847.30.
Asian stocks mostly traded lower as Democrats in the U.S. House of Representatives barrelled towards impeaching U.S. President Donald Trump in the wake of Capitol siege last week.
“The macro picture is still positive for gold, so the market appears to be in dip-buying mode, but cautious about the scale of the dips,” said Nicholas Frappell, global general manager at ABC Bullion.
“Short-term gold is still vulnerable to U.S. dollar sentiment and yields, but gold is finding some support around the $1,830 level and it may use that as a base to consolidate and push higher from.”
Benchmark 10-year Treasury yields held firm at 10-month highs as investors adjusted for higher government spending, helping the dollar firm and making gold expensive.
CNN Business/Anna Bahney
Only 39% of Americans can afford a $1,000 emergency expense
Just 39% of Americans would be able to cover an unexpected $1,000 expense, according to a new report from Bankrate.com.
That’s down from 2020, when 41% of people said they could cover a $1,000 cost with their savings.
Another 38% would need to borrow money, either by using a credit card or borrowing from family to pay for a surprise cost such as a medical bill or emergency repair.
“The precarious state of Americans’ emergency savings has been further set back by the pandemic, with nearly as many needing to borrow to cover a $1,000 unplanned expense as those that can pay for it from savings,” says Greg McBride, Bankrate.com’s chief financial analyst.
Many households have been able to stockpile savings because they can work from home or have eliminated travel or entertainment spending. But for millions of others, job losses and pay cuts have sent them on a precarious downward slide.