CNBC/Stephanie Landsman
A dollar crash is virtually inevitable, Asia expert Stephen Roach warns

Dollar Index“Stephen Roach, one of the world’s leading authorities on Asia, is worried a changing global landscape paired with a massive U.S. budget deficit will spark a dollar crash.

‘The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit,’ the former Morgan Stanley Asia chairman told CNBC’s ‘Trading Nation’ on Monday. ‘The dollar is going to fall very, very sharply.’

His forecast calls for a 35% drop against other major currencies.

‘These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead,’ said Roach, a Yale University senior fellow.”

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CNBC/Elizabeth Schulze
Economist Mohamed El-Erian warns about the risk of ‘zombie markets’

“’Zombie markets are markets that are completely mispriced, they’re completely distorted,’ El-Erian said. ‘Why? Because there is a policy view that you need to subsidize everything in markets for now.’

The Fed has taken extraordinary steps, including pledging to buy corporate debt and unlimited amounts of Treasurys, to keep the financial system running smoothly during the coronavirus recession. On Monday, the central bank said it would expand its purchases in the credit market to include individual corporate bonds.

The Fed’s aggressive actions have helped stocks recover from big losses earlier this year when the coronavirus pandemic started to spread across the U.S. The S&P 500 has surged nearly 40% since March 23, when the Fed first announced it would buy corporate bonds, even as parts of the economy came to a standstill and unemployment surged.

El-Erian said the Fed’s actions have created a “win-win” mentality in the stock market, as many traders expect the central bank will continue to buy assets including equities in order to prevent a financial crisis.”

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The rise of mom-and-pop investors in the stock market will ‘end in tears,’ warns billionaire Cooperman

lee cooperman“A number of recent reports attribute the market’s rally since its March 23 low, and its subsequent choppy trading, to an era of zero-commission discount brokerage trades, ushered in by Charles Schwab SCHW, 2.48%, and platforms like Robinhood that cater to younger investors.

Critics like Cooperman say that a dearth of diversions due to COVID-19 lockdowns and unemployment have created a perfect environment for newly minted day traders to wreak havoc on Wall Street.

On Monday, Cooperman pointed to purchases of bankrupt car-rental company Hertz Global Holdings Inc. HTZ, 1.86%, which has drawn feverish buying interest from bargain-hunting investors, even though the company’s bankruptcy means that there is little if any equity value in the enterprise.

‘The gambling casinos are closed and the [Federal Reserve] is promising you free money for the next two years, so let them speculate,’ Cooperman said, referring to the central bank’s balance sheet which has ballooned to $7.2 trillion from about $4 trillion at the beginning of March, as it rolls out stimulus measures to limit the damage from the pandemic.”

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KITCO/John Wyckoff
Gold, silver prices fade a bit on strong U.S. retail sales

24 hour spot gold“Gold and silver prices are trading near steady in early U.S. trading Tuesday, but have backed down from overnight highs in the wake of a much-better-than-expected U.S. retail sales report for May. A rally in the U.S. stock market due in part to reports that a drug has been realized that can cut death risks of patients on ventilators by one-third has also crimped the safe-haven metals. August gold futures were last up $6.30 an ounce at $1,733.50. July Comex silver prices were last up $0.216 at $17.61 an ounce.

The just-released U.S. retail sales report for May showed a rise of 17.7% versus expectations for a rise of 7.7%. This is yet another U.S. data point that shows a surprising rebound in the U.S. economy from the Covid-19-inducted damage of the past three months.

Global stock markets were mostly up in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. The U.S. stock indexes on Monday made a strong recovery from sharp early-day losses, due in part to the Federal Reserve announcing it has started buying corporate bonds, in an extension of an existing program that had only purchased corporate bond exchange traded funds. Reports also said the Trump administration is planning to spend $1 trillion on U.S. infrastructure improvements.”

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