REUTERS/ Karthika Suresh Namboothiri
Gold eases as China invites U.S. officials for talks
November 21, 2019
“Gold prices on Thursday eased from the last session’s two-week high after a report that China has invited top U.S. negotiators for a new round of face-to-face talks, and is seeking to reach an initial trade agreement with the United States. Spot gold dipped 0.1% to $1,470.45 per ounce as of 1227 GMT. Prices had notched a two-week high of $1,478.80 in the previous session, before turning negative, after the U.S. passed a bill supporting Hong Kong anti-government protesters.
U.S. gold futures dipped 0.3% to $1,470.40 per ounce. ‘Even though there is more tension between the U.S. and China, the gold market takes a wait-and-see stance. It looks like the market is in general a bit tired of news on the trade front,’ said ABN Amro analyst Georgette Boele. ‘There have been some buyers on dips and the holders of gold still hope prices will go higher. But if this does not materialise in the near-term, they will likely take profit on longs, pushing prices lower.’ China will strive to reach an initial trade agreement with the United States as both sides keep communication channels open, the Chinese commerce ministry said on Thursday.”
YAHOO FINANCE/Joao Peixe
4 Trends to Watch as Gold Prices Soar
November 20, 2019
“There’s a common saying ‘hope for the best, but prepare for the worst’ … And that’s never been more true than in today’s markets. Just spend 5 minutes watching the news … The UK is looking down the barrel of an economically crippling no-deal Brexit… One of the world’s top financial hubs, Hong Kong, is teetering on the edge… Germany’s manufacturing sector is collapsing… And the U.S.-China trade war is taking domestic victims left and right. It’s safe to say that the global economy has seen better days. And according to economists and veteran market analysts alike… It’s about to get a whole lot worse. Of course, we should hope for the best. No one is actually hoping for a global recession, after all… But it is time to start preparing for the worst.
And what’s the best way to hedge against a potential global recession? Gold. African Gold Group CEO Stan Bharti notes, ‘Gold has always been and will always be investors’ favorite safe haven…and that’s good news for miners.’ Investors are piling into gold in a big way. The market has never been hotter. Some are even saying that $2,000/oz gold may be on the horizon. And smart money knows that when gold goes up…so do the companies pulling it out of the ground. Back in 2016, gold prices jumped 26% in 6 months… and gold miners exploded.”
CNN BUSINESS/Jill Disis
Ray Dalio says the global economy is heading for a ‘great sag’
November 21, 2019
“Ray Dalio doesn’t want to use the word ‘recession’ when talking about the global economy. But he does believe it is headed for what he dubbed the ‘Great Sag.’ The billionaire hedge fund founder told CNN Business on Thursday that the world is dealing with financial challenges on a scale not seen since the 1930s, when economies were deep in the throes of the Great Depression. Pension and health care debts are piling up faster than they can be funded, he said. And with interest rates as low as they are around the world, Dalio said he doubts that further action from central banks will do much to help.
‘The impetuses for growth that began in 2008 and 2009 are largely behind us,’ Dalio said on the sidelines of the Bloomberg New Economy Forum in Beijing. That lack of policy effectiveness creates other problems, Dalio added. By buying up government debt and encouraging more lending, central banks are just putting more money in the hands of investors — exacerbating the divide between the rich and poor. ‘The world is awash in liquidity,’ Dalio said. ‘But it doesn’t resolve the wealth gap.’ That kind of inequality has fueled unrest in places like Hong Kong and Chile, Dalio said, adding that tension in those areas ‘is a reflection of that increased populism.’ Dalio is famous for predicting the 2008 financial crisis. And he worries now that capitalism is broken for most people. In a recent LinkedIn post, he wrote that the world is ‘approaching a big paradigm shift.’”
MARKET WATCH/Mark DeCambre
Wall Street fears repeat of May’s stock-market rout as talk of impasse on U.S.-China phase-one deal heats up
November 21, 2019
“Reports of a potential delay in a partial trade pact between China and the U.S. is bringing back shades of the ugly stock-market downturn in May for some investors. However, market participants interviewed on Wednesday were still holding out hope that President Trump will strike a partial trade deal that will help to resolve longstanding tensions between the world’s biggest economies. ‘Until today, the market has been nonplused by the comings and goings of the comments and reports but I think this [situation] resembles May more than in it resembles December,’ Art Hogan, chief strategist at National Securities told MarketWatch, referring to the worst trading day on the trading day before Christmas in history back in 2018 and a tweet-driven tanking that occurred six months later.
Markets took a firm leg lower after Reuters reported that a phase-one pact, hoped for within weeks, could drift into 2019, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with its own demands. Disagreement exists between the U.S. and China on specific tariffs that would be phased out as they attempt to move toward agreement. Even before the news, Sino-American trade relations have been aggravated, highlighted by The Wall Street Journal that talks had hit a wall. Meanwhile, the Senate approved a bill to support human rights in Hong Kong following months of unrest in the semiautonomous Chinese city. China responded by threatening to take ‘strong countermeasures’ if Congress proceeds with passage of the bill.”
The World May Have a Bigger Problem Than a Potential Recession
November 21, 2019
“The global economy is stuck in a rut that it won’t exit unless governments revolutionize policies and how they invest, rather than just hoping for a cyclical upswing, the OECD said. The latest outlook and policy prescriptions from the Paris-based group mark a step beyond its repeated warnings about threats to growth from U.S.-China tensions, weak investment and trade flows. Those remain, but it also flags more systemic challenges from climate change, technology and the fact that the trade war is just part of a bigger shift in the global order. For OECD Chief Economist Laurence Boone, the worry is that the world could continue to suffer in the decades to come if authorities offer short-term fiscal and monetary fixes as the only response.
‘The biggest concern… is that the deterioration of the outlook continues unabated, reflecting unaddressed structural changes more than any cyclical shock,’ Boone said. ‘It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary and fiscal policy: they are structural.’ The pessimism about the deep seated problems in the global economy contrasts with more upbeat signals coming from financial markets, where investors are increasingly betting on an upswing next year depending on the latest twists in trade talks.”
MARKET WATCH/Keith Jurow
This home mortgage disaster is ready to punish housing markets
November 20, 2019
“Last March, I discussed the serious threat that cash-out refinances (cash-out refis) pose for major U.S. housing markets. Eight months later, the problem continues. In a cash-out refinance mortgage the borrower pulls out some of the equity in the house by taking out a new mortgage larger than the previous one. The homeowner pockets the difference. During the 2004-07 housing bubble era, homeowners in major metros used their growing equity as a piggy bank to tap at will. According to Freddie Mac’s quarterly refinance report, borrowers pulled out just under $1 trillion from their homes between 2004 and 2007 … The peak of the cash-out refi madness came in 2005 and 2006, as the desire to turn equity into real cash spread to millions of U.S. homeowners.
Cash-out refis are gaining popularity again — and are still dangerous. According to Freddie Mac’s refinance report, the percentage of refinance originations in dollars that were cash-outs soared to 23% by the end of 2018 from 3% at the close of 2012. The report notes that 82% of all refinances in the final quarter of 2018 were cash-outs refis. This chart based on Freddie Mac data shows the surge in cash-out refis over the past five years.”