It appears to me that what I have been warning about for quite some time is finally coming to pass.
They can blame it on whatever they want but the main driver of this pullback is DEBT. Nothing was fixed after 2008 and only the piling on of massive debt has given the illusion of a solution. It appears that a virus has given some clarity to the situation and the illusion is being exposed.
Just this morning the banks requested $179 billion. The Fed obliged with $120 billion according to the Fed website. That is a $59 billion shortfall in what the banks felt they needed. This has been going on in amounts from $40 billion to $198 billion per day since September. What would these “markets” have looked like without that? We wouldn’t recognize them! Think about that. $120 billion is NOT enough to prop these “markets” as we speak.
In addition, the Fed announced an emergency .5% rate cut. The DOW blasted up 700 points from where it was only to fall 800 points right after the press conference by Jerome Powell. Where is Mnuchin? Kudlow should be showing up on financial game shows shortly!
Another sign is that the DOW had its greatest ever one-day point gain yesterday. For the bulls doing their victory dance the next two highest point return days were October 28, 2008 (+936.42) and October 13, 2008 (+889.35) at the height of the financial crisis. Sign?
I believe the ONLY reason we are unaware of our precarious circumstance is that the “printing” has been able to mask a lack of demand and give an illusion of solvency where none exists. Any time a central bank is buying government debt directly (Fed buys $60 billion per month of T Bills right now and is buying other Treasury notes by stealth using banks as intermediaries) (Zerohedge), there is a major funding problem.
In the meantime gold has made back the losses incurred last week. I look for more of the same as many will start worrying about counterparty risk (as the banks already OBVIOUSLY are) and gold, along with silver are assets that are not another’s liability.
Personally, I am much more worried about return OF my money than return ON it right now. The time for getting aggressive will come but right now I believe caution is warranted.
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