I’m confused. There is a huge run on gold but at the start of this week gold was trading near 1700 and now its.about 1500 how does huge demand equal a price drop?
It’s discovering that all your spending power is tied up in shiny blocks of metal that local stores don’t accept.
You think this is just some marketing ploy? I’ve checked multiple online dealers and they all have seriously depleted inventory. And this crisis is only in it’s infancy. Once the CPI inflation hits double digits, it will be almost impossible to buy any precious metals.
It needs to be understood that the price of the precious metals have almost nothing to do with the supply and demand of the real physical metals. The prices are determined by electronic paper swaps taking place in New York, Chicago, London, and elsewhere. For example, there are 176 electronic paper “ounces” of silver trading for every real ounce. But the paper derivatives markets is what sets the price. It’s an enormous ponzi scheme really. But it all works so long as the paper holders don’t demand to take possession of the physical.
Right, but if you were going to buy a gold coin from your broker tomorrow would it be cheaper or more expensive than it was last monday?
Suggest you consider if the global factory in China is able to produce the goods that the world needs? The global supply chain has moved to China, and this crisis is uncovering things like the sweetner in Diet Coke or certain pharmaceuticals only come from China. Drill down and what about small Chinese companies that produce parts for the supply chain. Lack of a 20 cent spring can stop automobile production. Or you need 100% of the parts to make an iPhone (99% or one missing screw means it can’t be manufactured). There is a huge labor shortage in China right now, and companies like Apple are paying huge incentives to get line workers. This means the smaller sub sub suppliers are having trouble reopening and being staffed, and are in precarious financial straits anyway from the Trump trade war. If these small guys go bankrupt, and they will, then there is an interruption of supply until someone else can ramp. Net net, global goods production is dropping.
That may be a good thing, since global demand has cratered.
Both are not good for a consumer driven economy. This is a global recession.
Why is it the banks fault that people are in debt?
There will certainly be a sharp slowdown in Q2. Whether it turns into a serious global recession will depend on the policy choices of the world’s leaders and the nature of the virus itself.
- The experience of China and South Korea suggest that the virus can be contained given the right measures. Other countries can learn and benefit from their experience especially that of South Korea which is a democracy. The general trend has been of countries around the world including the US taking much more serious steps to contain the virus.
- The world economy in general has low inflation and low interest rates which means a lot of room for fiscal and monetary stimulus. In the US at least it appears as if policymakers will be quite aggressive in their response.
3)There is some correlational evidence that the virus spreads more slowly with higher temperatures which, if true, it should provide a valuable respite as temperatures rise in the Northern Hemisphere.
Pushing down interest rates encouraged weak companies to borrow to stay afloat. A zombie company is one whose income doesn’t cover their interest payments - in other words, it still walks though it should be dead. According to the Times this morning 16% of companies are zombies. When the crunch comes (winter is coming!) they are going to die, with great disruption, rather than dying bit by bit.
Another case, really, of where we should have flattened the curve.
During the housing bubble investors looking for higher returns than the unnaturally low interest rates could give them put their money into crap mortgages. This time they put their money into crap corporate bonds - just above junk. We should expect a similar result.
Low interest rates give less room for stimulus. In only 2 cuts the Fed is now down near 0. The Fed and similar banks don’t borrow, they print.
How’s your silver doing this week?
Corporate Darwinism: only the strong survive while the weak are purged from the relentless corporate genepool. Whatever doesn’t kill you makes you [del]stronger[/del] sicker (but ignore that). But if you only pretend to live, who notices till it’s too late?
And a similar bailout of the too-big-to-fail monsters, with no prosecutions. Sad.
Many businesses are getting shut down. Where I work shut down. My upcoming doctor’s appointment is going to be done by phone. Libraries closed. Many banks are cutting hours or closing branches. It’s getting easier to list what types of businesses are open. (That’s probably an exaggeration. Since I’m not working, I don’t need to go outside, so I can’t see for myself what is closing.) I’m getting emails from many businesses I deal with (such as banks, investments, a clothing company where I bought something once) all telling me what impact the virus has on their operations and trying to keep us calm.
Schools are shutting down. It’s March Break up north, and the kids probably aren’t having much fun. No camps, and at the very least they’re discouraged from going to water parks, movie theatres, etc. Next two weeks will cause problems as parents of younger children will have to stay home. They can’t rely on daycares because t hose have also shut down. My boss is married to a teacher, so at least someone will be home to take care of the child. (But then she, like me, got sent home.)
Where I work, I’m going to be get paid. I also have a ton of sick days. This does not apply to many businesses. Only two Canadian provinces here have paid sick days… one day per year, I believe, and not in the biggest province (which actually had a single paid sick day for about a year before the current government got rid of that). Even if the businesses pay their employees, they’re going into debt to do so, as they’re not bringing in income.
Many people won’t be able to pay their rent, so expect a spike in homelessness. Many people can’t pay their mortgage (in Canada, the insurers are going to pay the next 3-6 months of mortgages for insured mortgages).
I expect many businesses will close permanently, putting many people out of work “permanently”. Some of the larger businesses are “too big to fail” but will still be badly hurt. Airlines and cruise lines all have huge problems. So do bars, restaurants, anything to do with entertainment or travel, any business dependent on the school system, and so forth.
I haven’t seen any stories of tranches of junkish bonds mixed with good bonds to make them look good. Yet. Still early days.
And *those *shelves got cleaned out amazingly fast, too.
Low interest rates make it easy for the government to borrow and spend which is the primary tool for stimulating the economy right now. While low interest rates do constrain the Fed from using conventional tools like the fed funds rate, there are other tools like quantitative easing which can still be used especially when inflation is low.
If we could only invest in Covid-19… Hell, look how the numbers rise!
I think as far as investing for right now, that Acorn app that saves spare change is tempting.