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The US government is taking Corona very seriously, but only as it relates to the stock market.
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Instead of trying to save burning stock market investors from an ongoing sleigh ride into the financial abyss, the government needs to start mobilizing the nation’s armed forces… for the biggest mass disinfectant program in the history of America.
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Trump is gambling (with millions of lives at stake) that warm weather will make the hideous virus go away. He’s hoping that if it becomes dormant, everyone will put their red debt worship hats back on and buy more stocks with their credit cards.
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The situation is grim, and it’s being made even more grim by the ridiculous antics of the government.
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A payroll tax cut should have happened a long time ago. It’s good that’s it’s finally happening, but soldiers in hazmat suits spraying oceans of disinfectant across America are what is required to win this war.
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Please click here now. Double-click to enlarge. Oil is headed into a gulag and US oil companies will soon start going bankrupt. The majors will have to consider dividend cuts. Enormous cuts in revenues and profits are imminent.
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Please click here now. Simply put, China now has the virus under control, but the rest of the wold does not.
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Only in America though, is the government acting like it has no interest in getting it under control. The government seems to measure success by how many points the Dow rises in a day rather than by the number of people coming out of quarantine.
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Please click here now. Double-click to enlarge. If the Dow loses this morning’s gains and closes in the red today, already-shaky institutional investor confidence will get obliterated.
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It’s probably only a matter of time before that happens. What’s coming is more debt, more money printing, and more storytelling from the government. Fixing a debt problem with more debt works… until it doesn’t. For America, the “it doesn’t work any more” moment is near.
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Please click here now. Double-click to enlarge this beautiful gold chart. There’s a fabulous inverse H&S bull continuation pattern in play. The price target of the pattern is the $1800-$1850 area.
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The bottom line: When more debt is no longer a viable fix for the economy, stagflation begins. It happened in Zimbabwe and it’s beginning to happen in America now.
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I urged investors to watch for a watershed moment when a rate cut from the Fed would be followed by a crashing stock market. That has now occurred.
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What this means is that money managers now believe the Fed sees the situation as severe. It’s not that the Fed has “lost control”, but that time is required for the downturn to play out.
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The Fed has never claimed it can stop a recession with rate cuts. It simply tries to reduce the severity of a recession with cutting policy. Here’s the problem:
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As debt levels have skyrocketed and de-dollarization has intensified, the government’s obsession with debt-oriented growth has brought the nation dangerously close to the point where Fed stimulus becomes inflationary, and that’s reflected in the current gold price action.
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Please click here now. Double-click to enlarge. Interestingly, the Dow/gold ratio tends to mirror the price/earnings ratio of the US stock market.
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For example, in 1999 the Dow/gold ratio went above 40 and so did the P/E ratio. The Dow/gold ratio recently flashed a sell signal in the 20 area with the P/E ratios of a lot of US stocks also sitting at about 20.
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Gold is stomping on the Dow because America is sick with two viruses; debt and Corona. US demographics are a nightmare; citizens have no savings, debt levels are outrageous, the population is elderly… and Corona is especially deadly for older citizens.
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While Trump goes golfing and tells citizens to have fun pushing their buy buttons for the stock market, the CDC tells anyone over 60 to consider “battening down the hatches”.
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Citizens need to self-quarantine, stock up on food, and prepare for a nightmare scenario that no payroll tax cut or stock market buy button can fix.
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I expect the US government will face enormous class action lawsuits for failing to protect the nation’s citizens as Corona becomes the biggest catastrophe in the history of the nation.
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The horrifying reality of the Corona virus has yet to be understood by the Trump administration. When that finally happens, gold bugs can expect to see the government launch one of the biggest waves of money printing in the history of the world.
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Please click here now. Double-click to enlarge this big picture GDX chart. As the money printing takes hold, GDX will stage the two-week close over $32 that should define the start of America’s stagflationary era. This “victory” will be hollow though, as I expect many US cities to become ghost towns, as Corona cases rise into the thousands, and perhaps into the millions. Gold bugs need to stay strong, because the situation is grim and what lies ahead is truly ominous.
