Consequences, Crashes And Coronavirus

April 22, 2020
Market Analyst, Author, and Founder of The Deviant Investor

Breaking News:

  1. Exponential growth in COVID-19 cases is frightening, just like exponential growth in debt, government expenditures, and “borrow and spend” policies.

  2. The COVID-19, aka World War C, is a game changer, a reset.

  3. U.S. official cases on March 5 were 159.

  4. U.S. official cases on March 21 exceeded 24,000. Hmmmmm!

  5. U.S. official cases on April 21 exceeded 823,000, if you trust their numbers…

  6. COVID-19 will be blamed instead of greed, corruption, bad policies, fake money, excessive spending and unpayable debt.

  7. But, to move forward, the US will increase government spending, bailouts, loans and national debt. Never waste a crisis!

  8. S&P500 companies bought back over $4 trillion in stock to reward management and shareholders. Now those companies demand federal bailouts. Privatize profits, socialize losses.

  9. The Fed has bailed out financial firms, traders, banks and hedge funds since September – $ 2 trillion in new QE. More bailouts are coming. Read about Hedge Funds.

  10. Stock and commodity markets are crashing and rallying with unusual volatility. See below. Read: “Global Repricing of Assets Can’t be Stopped.”

  11. The DOW closed at 29,551 on February 12. It closed at 23,018 on April 21, down 22% from its high. Boeing stock is down 68% from its March 2019 high. A 2008 “bloodbath” comes to mind, except this reckoning remains in the second inning.

  12. Crude oil spiked down to negative on April 20. YIKES!

  13. Gold and silver prices on the COMEX derivative exchanges have fallen. Prices for real silver coins and bullion have declined far less because premiums rose. The same happened in 2008 before the huge run-up in gold and silver prices.

Global Consequences Affect Everyone:

Cities and states have shut down, hospitals are overwhelmed, infections and deaths are rising exponentially, sporting events, restaurants, bars, and shopping centers are closed, and more. Unemployment is spiking higher. Bankruptcies and late payments will double or worse.

Boeing Stock: High close in March 2019 was $430. Close on April 21, 2020 was $136, down 68% from its high. Borrowing to buy back stock to boost share prices and management compensation worked for Boeing stock prices until it didn’t. Now Boeing has an impaired balance sheet, too much debt, not enough revenue and wants a $60 billion bailout. The piper must be paid, one way or another, by someone.

The daily S&P 500 Index looks similar.

The 25-year chart of monthly S&P 500 Index shows that prices have broken important uptrend support lines, as they did in 2000 and 2008. President Trump needs a strong market this summer to boost his reelection chances. Expect more debt, bailouts, panic and posturing. We’ll see if the Fed can generate a pre-election rally.

Gold is the ultimate currency. Silver is an industrial metal and a less important currency. In a panic (March – April 2020) traders sell everything to meet margin calls. Some gravitate, if they can, toward the ultimate currency—gold.

From Alasdair Macleod: “Payments Panic and the Ending of Fiat Currencies

But with the Fed and the US government promising to underwrite all businesses facing difficulties as a consequence of the virus, the inflationary consequences for the dollar will be staggering.”

“… it is almost certain the dollar’s value in terms of purchasing power will be fatally compromised.”

Because of Repo Madness, QE, Fed policies, and bailouts, the following are almost certain:

  1. Gold will rally well beyond its all-time high of $1,923.

  2. Silver will rise past highs of $50.00 from 1980 and $48 in 2011.

  3. National debt will grow many $trillions larger.

  4. Government expenses will expand, while tax revenues decline.

  5. The Fed will “print” – monetize government debt – and increase QE to fund excessive government expenditures.

  6. COVID-19 may become unimportant in several years, but massive unpayable debt will remain.

Gold to Silver Ratio

We could expect gold to fall less than silver, but whoa… look at this graph of the weekly COMEX gold to silver ratio. The ratio exceeded 120, an all-time historical high.

The ratio shows panic, huge sales of silver contracts on the COMEX, and desire for gold, the currency of last resort. Central banks have bought gold for over a decade. Russia and China sold dollars and T-bonds and bought thousands of tons of gold. In contrast, Western governments increased debt, pushed interest rates to near zero, and levitated stock markets while shipping gold to Asia.

The DOW to gold ratio shows the preference for paper and stock investments versus hard assets—real money. The ratio peaked in 2000 before the stock market crashed, fell into 2011 (gold market peaked), rose into 2018, and fell since then.

The ratio trends for many years. It peaks and breaks a trend line, falls and breaks a trend line, and repeats. Expect the ratio to fall for several years as the DOW declines or makes little progress and gold rockets higher.

Crude Oil:

Crude oil crashed below zero on April 20, 2020. This hurts American shale oil companies, traditional oil companies, and the banks that loaned them $billions.

Silver to S&P ratio

Silver prices are too low, and the S&P is high. Expect silver prices to rise substantially.

CONCLUSIONS

  • Markets are volatile and crazy. The consequences of fake money and bad policies crash markets and economies.

  • Inflate or DIE!

  • You can ignore fake money, but you can’t ignore the consequences of fake money. Year 2020 is the year we experience the nasty consequences of excessive debt.

  • Government and Federal Reserve responses show panic. The “printing” has begun.

  • Unemployment is spiking higher.

  • COVID-19 will be blamed for the economic reset.

  • Revenues will fall, expenses, and debt will rise. Since corporations and individuals can’t counterfeit dollars (as the banking cartel does), expect bankruptcies to soar.

  • Enormous forces are pushing stock markets, crude oil, gold, and silver markets lower. Someday stock markets will bounce higher and fall further. Gold and silver prices on the COMEX will soar to new highs.

  • Premiums on gold and silver bullion and coins are large. The U.S. Mint is out of silver eagles.

  • The DOW to gold ratio is falling, has broken trend line support, and will fall further this decade. Expect the ratio to fall from 22 (in 2018) to 5 or below. A DOW of 20,000 and gold at $10,000 are possible in several years.

  • $ trillions of fake money have evaporated and gone to money heaven. The carnage is not finished.

  • Our economic crisis reminds me of a professional golfer playing the back nine on Sunday afternoon. A bad bounce knocked his drive out of bounds and forced a double bogey. He followed with back to back triple bogies. Game over.

  • Ratios show that silver is underpriced compared to gold and stock Indexes.

Buy silver and gold to protect your savings and retirements.

Miles Franklin will convert digital and paper dollars into real money—gold and silver. For some products, you may experience delays receiving your metals, but prices are locked in and safe. Call 1-800-822-8080.

Gary Christenson

The Deviant Investor

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Gary ChristensonGary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy and central banking.

The total world's holdings of gold could be transported by a single solitary oil tanker.

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