Zero­Hedge News

• Peter Schiff: The Fed’s COVID Cure Is Mak­ing The Econ­omy Sicker
  Peter Schiff: The Fed’s COVID Cure Is Mak­ing The Econ­omy Sicker Tyler Dur­den Tue, 11/​24/​2020 — 10:10

  Via Schif​f​Gold​.com,

  A lot of peo­ple are turn­ing more bull­ish on the econ­omy with the pos­si­bil­ity of an effec­tive COVID-​19 vac­cine. But in his pod­cast, Peter Schiff argued that coro­n­avirus isn’t the prob­lem. COVID-​19 isn’t mak­ing the econ­omy sick. All of the Fed­eral Reserve stim­u­lus and money print­ing is mak­ing the econ­omy ill. And coro­n­avirus vac­cine isn’t going to make it well.

  Peter said he recently read an arti­cle say­ing that hedge funds have never been more net-​long in his­tory as they are right now.

  So the guys that run the hedge funds, sup­pos­edly the smartest peo­ple in the room, have never been more opti­mistic and more bull­ish, and they are just long. So, in other words, hedge funds have never been less hedged than they are today. So, they’re really not hedge funds at all, they are risk funds. And when every­body is loaded up on one side of the trade, there’s a pretty good indi­ca­tion that the mar­kets are get­ting ready to move in the other direc­tion.”

  What is pro­vid­ing the impe­tus for all this bullishness?

  The Fed – and the idea that QE infin­ity is here to stay.

  That is the only thing dri­ving stock prices.”

  JP Mor­gan recently pro­jected GDP in Q1 of 2021 would be neg­a­tive. But they are pre­dict­ing the econ­omy will come roar­ing back in Q2 and Q3 of next year. Why?

  Obvi­ously, it’s because of mas­sive gov­ern­ment stim­u­lus that they’re expect­ing, prob­a­bly even more from the Fed than from Con­gress, because I don’t know how long it’s going to take the Biden admin­is­tra­tion and Con­gress to actu­ally enact their ini­tial stim­u­lus.”

  If we do have a neg­a­tive GDP for the first quar­ter, that will put even more polit­i­cal pres­sure on Con­gress, in par­tic­u­lar the Repub­li­cans in the Sen­ate, assum­ing that they win the Geor­gia spe­cial elec­tions, to com­pro­mise and deliver more stimulus.

  So, it’s the antic­i­pa­tion of this stim­u­lus which is dri­ving the market.”

  A lot of peo­ple think a COVID vac­cine might ease the need for stimulus.

  But the real bur­den is not the COVID, but all the debt the econ­omy accu­mu­lated while the Fed was try­ing to fight COVID. It’s the COVID cure that is far more harm­ful to the econ­omy than the dis­ease. So, even after the dis­ease is gone, the cure is going to linger and is going to con­tinue to do dam­age because we accu­mu­lated all this extra debt, because the Fed’s bal­ance sheet is now so much big­ger, because the stock mar­ket bub­ble is so much big­ger, because the real estate bub­ble has gained new strength, because every­body has more lever­age than they did before. And of course, the US econ­omy is going to be less effi­cient in this post-​COVID world as US com­pa­nies are still going to have to be cov­er­ing the costs of being able to pre­pare for the next lock­down or the next virus that comes up. We already know what the play­book is.”

  Sim­ply put, we have a less effi­cient, more highly indebted, more highly lever­aged econ­omy that will need stim­u­lus more than ever.

  We don’t need the stim­u­lus to deal with the COVID dis­ease. We need more stim­u­lus to deal with the COVID cure. That’s what we’re addicted to. We’re addicted to the cure. It’s not about the dis­ease. It’s all about the cure.”

  Peter pointed out that the Fed will likely start focus­ing QE on the longer end of the yield curve and may well even­tu­ally own the entire long end. Pri­vate investors will be wary of hold­ing long-​term bonds because of the risk of ris­ing inter­est rates. Of course, even­tu­ally, the cen­tral bank could well own the entirety of the bond mar­ket. The Fed cur­rently holds a record per­cent­age of US debt.

  Last week, Fed data showed another $67.7 bil­lion added to the bal­ance sheet. It now stands at $7.243 tril­lion. Mean­while, the money sup­ply increased by $172.4 billion.

  This is why the US dol­lar is so weak. And it’s going to get a lot weaker.”

  Peter said at some point prices will col­lapse – but not in dol­lars. The Fed will print enough money to keep that from hap­pen­ing. But they will col­lapse priced in gold.

  The Fed will stop the nom­i­nal col­lapse in asset prices or goods prices. But they will cause an even big­ger col­lapse in real terms pric­ing those assets and goods in gold. So, if you hide out in US Trea­suries, you get wiped out. That’s not a safe haven. The real safe haven would be real money, which would be gold.”

  In this pod­cast, Peter also talked about bit­coin and Trump’s exec­u­tive order to lower the price of pre­scrip­tion drugs.

• US Con­sumer Con­fi­dence Slumps In Novem­ber As Hope Fades
  US Con­sumer Con­fi­dence Slumps In Novem­ber As Hope Fades Tyler Dur­den Tue, 11/​24/​2020 — 10:05

  After a mixed bag in Octo­ber (present sit­u­a­tion up, future hope down), ana­lysts expected The Con­fer­ence Board to report a wors­en­ing in over­all con­sumer con­fi­dence in Novem­ber (despite soar­ing stocks), and in fact things were worse than expected.

  Head­line con­sumer con­fi­dence slipped to 96.1 from 100.9 (well below the 98.0 expec­ta­tion) as expec­ta­tions tum­bled from 98.2 to 89.5 and the present sit­u­a­tion dropped mod­estly from an upwardly revised 106.2 to 105.9.

  Source: Bloomberg

  If stock mar­kets are forward-​looking then this should be worrisome…

  Inter­est­ingly, despite the drop in con­fi­dence, buy­ing expec­ta­tions rose for homes, cars, and major appli­ances, and expec­ta­tions for ris­ing incomes also rose modestly.

• Gold Tum­bles Below $1800, Tests Crit­i­cal Tech­ni­cal Sup­port
  Gold Tum­bles Below $1800, Tests Crit­i­cal Tech­ni­cal Sup­port Tyler Dur­den Tue, 11/​24/​2020 — 09:52

  As Crypto soars, non-​digital-​gold is plung­ing, with futures break­ing below $1800 for the first time since July. Since the elec­tion and vac­cine news, gold futures have crashed from $1960 to $1798…

  The big ques­tion is, will gold find sup­port at its 200DMA, or is this a sys­temic break­down that ignores the future deficit-​spending col­lapse of cred­i­bil­ity in the global reserve currency?

  As it appears — for now — that dig­i­tal gold is prefer­able to real gold…

  Is Benoit back?