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1.21.20 - Fed: QE by Any Other Name is Still QE

Gold last traded at $1,558 an ounce. Silver at $17.83 an ounce.

NEWS SUMMARY: Precious metal prices paused Tuesday awaiting fresh economic and geopolitical news. U.S. stocks fell as concerns around U.S.-China trade relations and a virus outbreak in China halted the market’s rally.

The Debate Over Whether to Call It QE Is Over, and the Fed Lost -Bloomberg
"In the court of investor opinion, the verdict is in. The Federal Reserve is guilty of quantitative easing. Never mind that Chairman Jerome Powell tells everyone his efforts to shore up funding markets are 'in no sense' QE. Try as policy makers may, they’ve lost the ability to convince people that Treasury purchases aren’t at least partially why the Dow Jones Industrial Average is up almost 4,000 points since late August. Sure, it's all labels. If you want to call it QE, you can. Or not. If you want to ascribe the rally to Powell, that's up to you. Certainly the Fed thinks it's on solid ground. The problem for policy makers is that perceptions matter in shaping sentiment. If everyone believes central bank largess is pushing up prices, what happens in the market when it's turned off? 'Whether the Fed's liquidity injection impacted directly the economy or the pricing of assets or not, it's certainly true that a lot of people think it did,' said Jim Paulsen, Leuthold Group Inc.'s chief investment strategist....The wind-down of monthly purchases is the biggest risk facing investors face in 2020, strategists at John Hancock Investment Management said in December. 'Powell went out of his way to explain that it wasn't QE, but it doesn't really matter,' said Krishna Memani, former vice chairman of investments at Invesco. 'The Fed is in a bind. Effectively with policy initiatives they have, they have to increase reserves, and investors are aware of that. They will be in that mode for the foreseeable future.'"

gold chart Money managers retain bullish gold positioning -Kitco
"Large speculators mostly held onto their net-bullish positioning in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC)....Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections...The fresh buying (increase of 1,319 total longs) exceeded the fresh selling (increase of 617 gross shorts). TD Securities commented that the U.S. Federal Reserve policymakers may be about to provide a structurally 'more dovish lean' to policy, which propelled gold prices higher just ahead of the long holiday weekend in the U.S. 'The yellow metal rose, even as the greenback and equities rallied, which suggests that positioning may again tilt toward length in the days to come,' TDS said. In silver, money managers' net-long position also rose slightly, coming at 57,179 futures contracts, compared to 57,014 in the prior week. As was the case with gold, the fresh buying (rise of 2,763 total longs) outpaced the fresh selling (increase of 2,598 gross shorts)."

40% of the world's countries will witness civil unrest in 2020 -CNBC
"There are 195 countries in the world, if the Vatican and Palestine are included, and a newly released index of civil unrest has claimed that 47 of those states witnessed a rise in civil unrest in 2019. The data model, published Thursday by socio-economic and political analysis firm Verisk Maplecroft, has also predicted that in 2020, the number will balloon to 75 countries. Maplecroft's predictions for 2020 are bleak with both the number of countries witnessing protest and the intensity of unrest tipped to rise. The index predicts that 75 out of the 125 countries examined will see a deterioration in stability. That figure means almost 40% of all the world’s 195 nations will witness disruption and protest to some degree....Countries identified in this troubling bracket include the highly influential nations of Russia, China, Saudi Arabia, Turkey, Thailand and Brazil."

Impeachment Moves Forward to Nowhere -Noonan/Wall Street Journal
"Impeachment is moving forward and going nowhere. There is new information but it doesn't really tell those who've paid attention anything they didn't know....The president will be acquitted for a host of reasons, from partisanship to a prudential judgment that his actions don't warrant removal with a presidential election 10 months away....Impeachment has now been normalized. It won't be a once-in-a-generation act but an every-administration act. To the Democratic debate Tuesday night in Des Moines....I found myself watching Elizabeth Warren. She has proved she can take a punch and throw one...Her challenge is not that she's a woman, it is her policies, and maybe something else...Ms. Warren was doing her magical thinking about how universal Medicare won't cost people a thing, it's all savings with a few small tax increases on people we don't like. I asked aloud, 'Does she believe what she says or does she know it's make-believe?'”....Bernie Sanders has the same magical thinking about the cost of things, who'll pay, and what effect that will have on the nation's life. But he gets away with it because he's a declared socialist....There was also in the debate a kind of detachment from real life. A voter asked: 'How will you prioritize accessing quality affordable child care?'...No one spoke with compassion for parents, for mothers who forgo the earnings and status ('I have a job') and relationships ('I'm not lonely all day') of having a job to stay home with kids under 4....Meanwhile in full-employment America, Donald Trump is taking out terrorists with drones and announcing trade deals with China and seemingly weathering every storm. In the China ceremony Tuesday, in the East Room, after a booming .'Hail to the Chief,' with a palpable sense of triumph filling the room, with the golden frames of the great portraits shining, Mr. Trump rolled off the names of the CEOs in the audience...It was reminiscent of the scene in 'The Godfather: Part II' where Fulgencio Batista hands around the solid gold telephone. 'I'd like to thank this distinguished group of American industrialists for continuing to work with Cuba for the greatest period of prosperity in her entire history. We all think our breathless recitations of the latest revelations matter but I don't know, it keeps feeling like 2016. Only this time with full employment."

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1.17.20 - College Degrees No Longer Create Wealth

Gold last traded at $1,559 an ounce. Silver at $18.07 an ounce.

NEWS SUMMARY: Precious metal prices rose Friday on bargain-hunting despite a firmer dollar. U.S. stocks rose as strong global economic data and a solid start to the earnings season led to another week of gains.

Your pension is being robbed, gold is only salvation -Kiyosaki/Kitco
"A ballooning retiree population over the coming years is likely to force the government to print more money in order to support pensioners, and this will create a good environment for gold, said Robert Kiyosaki, author of Who Stole My Pension? How You Can Stop the Looting. 'In the next ten years, two billion old guys like me will retire. Two billion, all over the world. This is a global crisis,' Kiyosaki told Kitco News. 'I'm buying gold and silver, I love silver, because it's cheap.' He added that the government will have to print more money to cover a massive shortfall of money for retirees."

QE hell The Federal Reserve is stuck in quantitative-easing hell -Marketwatch
"Imagine doing the same thing over and over again, with little progress and no relief. Sounds like most people's vision of hell - or the Federal Reserve's current predicament. Since September, the central bank, through the Federal Reserve Bank of New York, has been purchasing securities hand over fist to alleviate short-term pressures in the overnight money markets. It has used repurchase ('repo') and reverse repurchase ('reverse repo') agreements to provide liquidity and keep overnight borrowing rates from spiking...Powell and the Fed have repeatedly denied this is a new phase of 'quantitative easing (QE),' three rounds of which added $3.6 trillion to the Fed's balance sheet in the years after the financial crisis....Danielle DiMartino Booth, CEO of Dallas-based research firm Quill Intelligence, says the Fed is on the cusp of enacting QE4, or may already be there....'The Fed will tell you it's all technical in nature,' she said. 'In their last minutes, they said that if they had to move into [longer] coupons, they would. So the table has been set.' This all comes, Booth believes, amid a weakening economy....Booth points out that by several measures, 'outside of the year 2000 the stock market has never been as overvalued,' which means stock markets more than ever hinge on the Fed's every move. 'We have certainly started to see some signs of slowing, and I think Jay Powell is trapped,' said Booth. 'The Fed is trying to keep a bucket full that's filled with holes.' Welcome to QE - or not QE - hell."

Political Turmoil to Be 'New Normal' for 2020 -Yahoo News
"'We all need to buckle up for 2020,' said Miha Hribernik, the Singapore-based head of Asia risk insight for Verisk Maplecroft. 'The rage that caught many governments off-guard last year isn't going anywhere and we'd all better adapt.' Many governments were caught by surprise by the scale and ferocity of the protests and ended up attempting to crackdown on the movements, deploying what human rights group have said were arbitrary arrests and indiscriminate violence. That response has ended up further radicalizing protesters and provoking more violent demonstrations, Verisk Maplecroft said in its Political Risk Outlook 2020....Hong Kong similarly rose from 117th to 26th after seven months of pro-democracy street protests, the firm said. Although prompted by a since-withdrawn bill that would have allowed extraditions to mainland China, Verisk Maplecroft added that the 'root cause of discontent has been the rollback of civil and political rights since 1997.' India and Iraq, which have both seen determined protests recently, ranked much lower on the list of worsening hot spots because they began last year with heightened levels of unrest."

College Degrees Used to Make Families Wealthier. That's No Longer True -Worth
"The conventional wisdom is that a college education all but guarantees access to the middle class and a higher standard of living for each successive generation. Yet new research from the Federal Reserve Bank of Saint Louis calls this equation into question. The numbers are stark. The college income premium still exists. But the wealth premium - the difference in net worth between college and non-college graduates - has plunged since 1940. Put simply: College graduates today are experiencing a profound struggle to generate wealth. The biggest culprit is likely the surging cost of higher education and an accompanying increase in student loan debt...This is a 'striking divergence between the income and wealth outcomes.'....'While the overall level of consumer prices has increased by a factor of four since 1978,' the report says, 'the cost of college tuition and fees has increased by a factor of almost 14 - more than triple the overall increase in consumer prices.' These two trends, the slump in household net worth and the drastic rise in student loan debt, are becoming increasingly acute...Total student loan debt has reached $1.46 trillion, compared to $870 billion for credit card debt and $1.27 trillion for automotive debt."

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1.16.20 - Bridgewater Sees Gold Price Spiking 30%

Gold last traded at $1,551 an ounce. Silver at $17.97 an ounce.

NEWS SUMMARY: Precious metal prices eased Thursday as upbeat economic data boosted the dollar. U.S. stocks rose after Morgan Stanley’s quarterly figures topped analyst expectations as investors cheered solid economic data.

Bridgewater sees gold spiking 30% to a record high -Markets Insider
"Gold could spike 30% to a record high of over $2,000 an ounce as central banks allow inflation and political fears mount, Bridgewater Associates boss Greg Jensen told the Financial Times. The Federal Reserve and other central banks won't clamp down on inflation or raise interest rates in the near term, supporting a higher gold price, said Ray Dalio's co-chief at the world's largest hedge fund. 'That's a big deal.' Gold could also benefit from the widening gap between rich and poor Americans, and rising tensions between the US and China, Iran, and others, Jensen told the Financial Times. 'There is so much boiling conflict, that gold being part of a portfolio makes sense to us.' In fact, rising inflation and soaring budget and trade deficits could lead to gold eventually replacing the US dollar as the world's reserve currency, Jensen told the newspaper. 'When you look at the geopolitical strife, how many foreign entities really want to hold dollars?' he said. 'What are they going to hold? Gold stands out because it's nobody else's liabilities as a possibility.'....US stocks are also 'frothy' after a decade of outperformance, Jensen told the newspaper, providing another reason to favor gold."

trade deal $95 Billion Centerpiece of the Trade Deal Is Already In Doubt -Bloomberg/Yahoo Finance
"China has pledged to buy almost $95 billion worth of additional U.S. commodities as part of a phase one trade deal. The market is not so sure. Prices fell for most raw materials that are part of the agreement...Traders said evidence of increases in shipments is needed for market gains. The pessimism was in contrast to comments at the White House by President Donald Trump, who said U.S. energy producers and farmers would benefit....'Signing the deal is the easy part,' said Ken Morrison, a St. Louis-based independent commodity trader. 'I have yet to hear a sound argument on how China will execute this deal.' China pledged to buy a total of $32 billion in additional agricultural products over the next two years, while it said it will also 'strive' for another $10 billion of purchases. That includes oil seeds, meat, cereals, ethanol and cotton. It also promised $52.4 billion in further purchases of American energy such as LNG, crude oil and coal over 2020 and 2021. However, the so-called phase-one deal that was signed in Washington Wednesday didn't specify whether the Asian nation will lift retaliatory duties it imposed on American goods such as oil, soybeans and LNG....'Without more concrete details, we are deeply concerned that all of this pain may not have been worth it,' the National Farmers Union, which represents almost 200,000 American farmers, said in a statement. 'Given the numerous deals that have been reached and then breached in the past two years, we are also skeptical.'"

The Fed Admits Being Forced To Fuel Asset Bubble -Zero Hedge
"The worst kept secret in the financial world is now not only accepted orthodoxy, but finally being discussed openly by, at least some, authorities. Central bank policies are directly driving asset prices and the bubbles therein. It's what they do. It has been so stunningly obvious that, at this point, it makes a mockery of things to deny it as an ongoing, and essential, part of how their strategy is implemented....In some ways it was refreshing that Dallas Fed President Robert Kaplan openly talked about it in an interview Wednesday. Although he did couch it in terms that implied it was a matter of some concern to him. But, of course, he went on to say, 'we've done what we need to do up until now.' 'My own view is it's having some effect on risk assets,' Kaplan said. 'It's a derivative of QE when we buy bills and we inject more liquidity; it affects risk assets. This is why I say growth in the balance sheet is not free. There is a cost to it.'...Their ability to drive investor behavior is so well established that what is going on in the markets can't remotely be seen as an unintended, or even unwanted, consequence....Stocks act as if they are bullet-proof. Stock buy-backs look like they are front-running the inevitable rather than being the cause of it. Reports of new all-time highs, need to include the word 'again.'....Most worryingly, I keep hearing from people who are sure that it's obvious where we go from here."

Trump Impeachment Trial Begins -Wall Street Journal
"The impeachment trial of President Trump on charges of abuse of power and obstruction of Congress will begin in the U.S. Senate on Thursday with a ceremonial reading of the House-passed articles and a solemn swearing-in of all 100 senators, who will pledge to do 'impartial justice.' The moment will mark the official start of the trial - only the third such proceeding against a U.S. president in history. At least two-thirds of the senators would have to vote to convict Mr. Trump to remove him from office. Mr. Trump has denied wrongdoing. At 2 p.m., Chief Justice John Roberts, who will preside, will arrive at the Capitol to be sworn in by Sen. Chuck Grassley (R., Iowa), the Senate's president pro tempore....'We will pledge to rise above petty factionalism and do justice for our institutions, for our states, and for the nation,' Senate Majority Leader Mitch McConnell (R., Ky.) said on the floor on Wednesday evening. After the swearing-in, the Senate will formally notify the White House of the pending trial and summon Mr. Trump, but he will be given time to reply....During the trial, all senators will be warned by the Sergeant at Arms to remain silent 'on pain of imprisonment' and will be expected to be present and seated at their assigned desks. 'It's a place apart from the normal Senate business,' said Sen. Dianne Feinstein (D., Calif.), who also was a senator during the Clinton trial. 'The minute you walk in, it's electric with significance,' she said."

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1.15.20 - 2020 Outlook: America At The Crossroads

Gold last traded at $1,544 an ounce. Silver at $17.80 an ounce

NEWS SUMMARY: Precious metal prices rose Wednesday on bargain-hunting and a weaker dollar. U.S. stocks rose ahead of the U.S. and China signing a so-called phase one trade deal amid upbeat corporate earnings.

Central Banks Continue "Remarkable" Gold-Buying Spree -Zero Hedge
"Central banks continued their remarkable gold-buying spree...and remain on pace to eclipse 2018's near-record purchases....In 2018, central banks purchased just over 650 tons. According to the WGC, that was the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record....For the second month in a row, the People's Bank of China did not report any gold purchases. It's not uncommon for China to go silent and then suddenly announce a large increase in reserves. The World Gold Council called the scale of central bank gold purchases in 2019 'remarkable.' The central bank gold-buying spree is expected to continue into 2020 as countries continue to create a hedge against geopolitical risk and diversify their reserves away from the US dollar."

RMP2020 America At The Crossroads -Real Money Perspectives/Swiss America
"America was founded upon sacred principles, which built the world's strongest economy; but today our position as the world's leader is at risk. Our nation's social and economic divide is approaching a boiling point. Unless cooler heads prevail, we may soon face an even more disunited United States. Solutions demand unity and clarity of vision. In 2020 it will be important for investors to remove their rose-colored glasses and take a hard look at what is going on in the economic and political world. The problem with looking at the world through rose-colored glasses is all of life's red flags look just like ordinary flags. The truth is, no one can predict the economic or political outcome of 2020, which is precisely why wise investors cover all the bases; regardless of which way the political winds blow. Our goal in this 38th Anniversary Issue of Real Money Perspectives is to elevate your perspective so you may better navigate the future. CLICK HERE to request a free copy.

Weakening Dollar Could Lift Commodities in 2020 -Wall Street Journal
"A softening U.S. dollar could give commodity prices a boost this year. After a year in which a strong dollar weighed on commodity prices, some banks now predict the U.S. dollar is set to weaken in 2020, dragged lower by expectations that the Federal Reserve will keep interest rates steady after recent cuts. Lower interest rates make a currency less attractive to investors, as they offer lower rates of return. That could herald good news in 2020 for investors already betting that easing trade tensions between the U.S. and China and a pickup in global growth will lift demand for commodities like metals and crude oil....'When there's weakness in the dollar, the usual response is to pick up things that are priced in dollars,' said Tai Wong, head of base and precious metals derivatives trading at Bank of Montreal."

Bernie's Senior Economic Advisor Sees No Problem in Printing Unlimited Money -Youngberg/
"Much like I can create as many strong recommendations [for my economics students] as I want, Modern Monetary Theory notes that a country has a god-like power to create its own currency. Therefore, they argue, countries that control their own currency shouldn't bother budgeting. Budgeting is for us mere mortals. The theory turns out to be little more than a recipe for hyperinflation, but that didn't stop Stephanie Kelton, Bernie Sanders's senior economic advisor, from sending out this tweet: 'The carpenter can't run out of inches, The stadium can't run out of points, The airline can't run out of FF miles, And the USA can't run out of dollars.' Kelton conveniently does not mention that carpenters can run out of wood, the stadium can run out of seats, and the airline can run out of fuel. The ability of a country's economy to grow restrains the government's ability to print money without causing inflation. Money is spent to buy resources; if money far exceeds resources, inflation follows....And if a country created more money than its economy could possibly justify, its money would mean nothing (something too many countries have learned the hard way)....So it's true that the US can't run out of dollars. It is also true that you can't run out of zeros, which will be important if the nation has to measure inflation under MMT."

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