Saturday, June 6, 2020

Civil Unrest, Trade Wars, Crashing GDP, Bankruptcy, COVID-19: Bull Market?

As the threat of COVID-19 reared its ugly head, as the economy shut down, things went south and they went south quickly. 

The markets were decimated, marking one of the most historic economic crashes that we have ever seen in mankind's financial history, with markets dropping by record breaking numbers within a 24 hour period.

However, that was a period of increased risk, of great uncertainty, nothing the likes of which we see now today, which of course is a period of "great prosperity" and yes, "extreme certainty".


(Chart source, google charts)

Due to these "prosperous times" we now find ourselves in, we are bearing witness to an almost complete reversal in the S&P 500 and DOW Jones Industrial Average, which are currently going through an incredible rally higher, edging closer and closer with each passing day to the pre-crash highs.

If rallying markets are not enough alone to convince you of just how great our economy is, or just how stable of a world we live in, then lets take a look at just some of the truly "positive" news that is unfolding all around us;



Of yes, I can see exactly why the markets are heading back to all time highs with all this "great" news unfolding all around us.

All of this "great" news must be why markets are roaring higher, right?

The Secret Sauce

Or... Maybe... Nah... But... Perhaps?

Just maybe there might be another reason why stock markets are ignoring all rational, ignoring the fact that tourism is likely dead for years, ignoring the fact that entire industries, entire businesses have been decimated, ignoring the fact that GDP is tanking.

(Chart source, Federal Reserve)


(Image source, economist)

Bingo! I've discovered the secret to success, the secret to making the markets move higher!

Just. Print. More. Money.

It truly is as easy as that, there is no need for financial experts, there is no need for someone to manage your money, there is no need to do anything, other than to ride the inflation wave train higher, as asset prices continue to move higher and higher, forever.

Since the COVID-19 crisis began, we have seen government after government, announce stimulus program after stimulus program, throwing caution to the wind and rapidly increasing debt levels to help keep the economy afloat, and the economic engine chugging along.

(Image source, Statista)

Statista reports;

"While the U.S. has committed to the largest rescue package of any country in pure dollar terms over three congressional stimulus phases ($8.3 billion, $192 billion and $2.5 trillion), Elgin's research shows that global responses are quite different compared to economic size. 

The U.S. measures work out at an estimated 13 percent of GDP and as large as that is, it actually trails Japan's measures which equate to just over 21 percent of GDP. 

In Europe where Spain and Italy have endured devastating coronavius outbreaks, the size of stimulus packages are estimated to be 7.3 percent and 5.7 percent of GDP respectively."

(Chart source, goldprice.org)

Regardless of this unprecedented money printing, there is one thing that you should never, ever do. 

Buy gold and silver bullion, as precious metals have historically proven to be horrible at protecting its purchasers from the ravages of inflation, against reckless money printing run a muck, by governments who simply believe that wealth can be created out of thin air.

/endsarcasm

My final suggestion? 

Ignore everything I just wrote, ignore the irrational markets, ignore the noise, see the world around you, the risks that it presents and yes, keep stacking. The farce will eventually end.

- Source, Nathan McDonald via the Sprott Money Blog