Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, we look at the economic storm clouds on the horizon.
Precious Metals:
Gold Prices Struggle To Hold $1,300 As U.S. ISM Manufacturing Rises In March
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And for those in the chartist camp: Gold Cycles Down Into Late-Spring, Up Into Summer
Economy & Finance:
Erik Conley, at Seeking Alpha: Why An Inverted Yield Curve Is Important
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Martin W. Armstrong: The Financial Panic of 2019? Armstrong notes:
“There is a major liquidity crisis brewing that could pop in May 2019. European Banks have loaded their portfolios with real estate loans thanks to quantitative easing and negative interest rates, and emerging market debt. Spanish banks are especially invested in Turkish debt where they hoped to get the highest yields expecting that the IMF would never let Turkey default. On top of this, banks have been lending to each other to also avoid parking money at the European Central Bank where they would be charged with a negative interest rate.
Currencies from South Africa’s rand to Brazil’s real are witnessing a spike in their expected volatility, signaling concern they may weaken the most along with the Turkish lira going into May. The price swings have evoked sudden deep-rooted fears that there may be an emerging market crash before the end of the year.”
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James Glassman not seeing economic storm clouds
Stocks:
At Seeking Alpha: U.S. Stock Market: Recession Ahead?
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Stock Split Calendar – April 1, 2019
Commodities:
Oil Falls After EIA Reports Crude Build. A quote:
“This segment of the downstream industry could see more action in the months to come as refiners prepare to capture higher profit margins from increased sales of low-sulfur bunkering ahead of the IMO’s new emission rules that enter into effect next January.
Gasoline production, on the other hand, might swing into a glut as it grows faster than demand in the United States at least. This opens the door wider for exports as we approach driving season in the northern hemisphere.
As for crude oil fundamentals, optimism about a U.S.-China trade deal, the OPEC cuts, and the U.S. sanctions on Iran and Venezuela continue to dominate oil headlines, along with the persistent worry about the world’s economic growth prospects. The tailwinds among these factors have helped to push crude oil benchmarks up 25 percent since the start of the year.”
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World’s Largest EV Market Loves Gas Guzzling Trucks
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The latest from The Trend Trader. (I recommend bookmarking their site and a good “snapshot view” of stocks, commodities, and precious metals.)
Retail Marketplace:
Readers G.G. and D.S.C. both sent this indicator: NBC News: Retail apocalypse? JCPenney, Payless, LifeWay announce 3,000+ combined store closures
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Restricting Gun Sales Cost Dick’s $150 Million Last Year. JWR’s Comment: So if they are removing all of the guns and hunting-related gear from their stores, will they be re-naming their “Field and Stream” stores just “Stream”? Oh, but wait, that is, until the militant Vegans convince them to eliminating all of their fishing gear. Clearly, the management of Dick’s is already more than halfway down the slippery slope. The terminal moraine is of course, bankruptcy.
Forex:
The Big Picture on Debt and Devaluations
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Brexit in meltdown: Theresa May under pressure to forge softer divorce deal
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Can rupee again head to 75 to the dollar in 2019? Yes, & here is why
Provisos:
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News Tips:
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who particularly watch individual markets. And due to their diligence and focus, we benefit from fresh “on target” investing news. We often get the scoop on economic and investing news that is probably ignored (or reported late) by mainstream American news outlets. Thanks!
Today’s articles on the yield curve and a potential panic illustrate the truth that the next financial crisis, if there is one, will come from the debt markets, not the stock market. The latter would of course respond by dropping like a stone if such an event were to occur. All financial markets depend on confidence. Investors invest because the believe they will receive the interest, dividends, or potential growth the particular security may provide. Once confidence is lost, everyone rushes to sell everything, and prices drop accordingly. Interest rates are the prices of money and thus guide financial decision-making throughout the economy. The alleged experts at the world’s central banks have a terrible record of guiding economies and compensating for panics, and forget entirely about preventing them.
The Fed’s recent decision to stop raising interest rates almost ensures that in the next crisis, if there is one, they will have to push interest rates negative. That means bank depositors will be paying the banks to hold their money. It also means that access to bank accounts will be restricted, so that people won’t be able to take their money out. In the early stage of such a crisis banks may be closed, so credit cards may not work either. Everyone should get at least three months basic living expenses in cash (no bills above a $20) and keep in a safe place. If this is more than $1-2 thousand, don’t do it all at once — spread it over a couple of months. Ask for older bills, not new ones. Don’t tell your friends and neighbors about it!
We are told that buying gold and silver in various forms is a way to preserve wealth. All assets are useless, however, if they cannot be sold. Remember that in Patriots JWR pointed out that it could take a couple of years after a major crisis for things to develop to the point where junk silver and other metals are accepted as a medium of exchange.
Note too that while these assets spike way up during a crisis, they spike back down relatively quickly afterwards. Therefore, be very clear about what you’re prepping for and try to understand the nature of whatever current crisis we’re experiencing.
If the current crisis is NOT TEOTWAWKI, wait for blood in the streets, and sell your gold to paniced buyers. Use the money th buy other assets: land, rental properties, businesses, stocks. As the crisis ends, these will go back up in value, increasing your wealth. Knowing the difference between kinds of crises will thus make a huge difference to intelligent preppers.
Very interesting. To expand on Doc’s comment, when you sell any gold or silver, you are supposed to report the sale to the IRS and pay a 29% tax on the gain since it is classified as a “collectible.” While you should not engage in any activity that would classify as tax evasion (a felony), this means that you should be very careful who you sell to. Sales on eBay will be reported to the IRS. People you don’t know could be undercover government agents. Think I’m paranoid? They’d love to get enough “evidence” to support a confiscation of gold and silver and a subsequent outlawing of ownership.
Cute, Kote. You’re right about selling, though. It can be a good idea to buy only from 1 local dealer, letting them know they’re your only source. Let them know you’ll want to sell back to them at some point. You’ll have to pick the right time, though — when there are lines outside their shop waiting to buy. Make sure to ask them about the reporting requirements at that time so you understand them completely.
Never meet someone in an “empty” parking lot at night to sell them gold or silver! Don’t even go along with someone who’s doing that. A famous gun trainer once said “Don’t do stupid things at stupid times of the day with stupid people.”
Note too that it can be worth paying the premium on 1/10 oz gold eagles to have some smaller denomination coins in an emergency situation. Do not depend on a junk silver market developing soon enough to keep you from starving to death!
The silver and gold are for when the crunch goes into the second or third year. By then there won’t be any capital gains tax, the gold and silver will be used as actual money. Remember, money is just a convenience, all commerce is barter, trading one thing of value for another. Precious metals are a lot easier to carry than a wagon load of corn, wheat, coal or logs. The purpose of buying the precious metals now is to have them on hand when needed. If it proves not to be needed, the crunch never comes, then sell your silver and gold a little at a time, and only for cash or barter.
As an aside: I notice they charge a ridiculously high capital gains tax, but they don’t pay you the difference for capital losses. It would seem fair, don’t you think? 😉
We are not really discussing precious metals but rather the course and length of a potential crisis. If you believe the crunch will be the permanent end of life as we’ve known it, your analysis has merit. I do want to point out that gold is inherently no more valuable than paper. Barter, as you say, would dominate economic life. It could take years for gold and silver to be accepted as a medium of exchange. Until that moment, the metals’ value would be only potential.
I think we need to think more deeply about “intermediate” crises, of shorter than permanent duration. Strategies for surviving these may be very different than for TEOTWAWKI.
Further comment on the 10-2 yield curve. Go to https://ycharts.com/indicators/210_year_treasury_yield_spread to monitor it for yourself.