You won’t hear Federal Reserve Chairman Jerome Powell jawboning for gold or silver in your lifetime, but right now America’s central bank is inadvertently ensuring much higher prices for “alternative” assets, including precious metals – and even Bitcoin.
That’s not what the Fed’s trying to do. Their prime directive is to promote government money (i.e., the U.S. dollar), Treasury bonds, and the stock market. But don’t misunderstand: they want high government bond prices, which means low yields for bondholders, and they want the dollar to be popular internationally, which means a cheap dollar (hence the Fed is preparing to let inflation “run hot” and “play catch-up”).
They also have to keep the markets calm even when the Fed itself is the one causing panic, like on the evening of September 15 when the overnight repo lending rate spiked to almost 10%. That event is known as the “repo-calypse,” but they’d prefer that we not talk about it because it’s embarrassing to admit that the government has lost control of the monetary structure.
September 2019 was the first time in a decade that the banking system was so cash-poor that the Federal Reserve felt the need to intervene and provide a series of emergency overnight cash infusions. In fact, the last time they did that was in 2008, right as the economy and markets were about to implode.
We’ve seen this movie before, and it never has a happy ending for the economy or the markets. In 2000 and 2007, the Federal Reserve constricted the money supply. After, they started to turn on the liquidity spigot again (shown in the chart below with the lines bottoming and then curling back up):
Not long after the lines hit bottom and started to curl back upwards, all hell broke loose and large-cap stocks capitulated. We’re seeing this exact same scenario play out now as the Fed floods the American banking system with cheap and endless money – a policy they’ll continue month after month regardless of the consequences.
Ultimately, this won’t sit well for large-cap stock market indices.
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
Wealth Education and Investment Principles Are Hidden From Public Database On Purpose!
Build The Knowledge Base To Set Yourself Up For A Wealthy Retirement and Leverage The Relationships We Are Forming With Proven Small-Cap Management Teams To Hit Grand-Slams!
For many years, I’ve looked to the commodity markets for an inkling of what’s to come. Compared to other markets, I’ve found that commodities like gold and silver “tell the truth” as to how the economy’s actually doing because they’re not prone to corporate share buybacks and other artificial short-term price inflation tactics.
As you can see, the bear market in precious metals is old news (and it could be argued as being fake news) and a supercycle of bullish price action is underway. Technicians might advise taking profits on palladium at this time and shifting into gold, silver, and the underappreciated platinum, all of which are coiling for a massive move upwards.
These are all assets that have historically moved inversely to bond yields and the U.S. dollar – and the Fed has made it crystal clear that those government debt instruments will offer little to those who hold them in the coming years.
Bitcoin traders, incidentally, are also responding to the declining dollar. Like precious metals, Bitcoin is typically priced against the U.S. dollar if you’re trading it in America – and since the dollar saw its short-term peak in September/October of last year, Bitcoin has staged an exhilarating recovery as it prepares to break through the $9,000 resistance point.
Keep in mind that the halvening is only 117 days away, which will be the greatest monetary tightening event the world has ever seen. 86.6% of all Bitcoin has been mined already.
These non-government asset classes are as compelling as they’ve been in quite a while. We can thank the Federal Reserve for making gold, silver, platinum, and Bitcoin great opportunities as we dive deeper into 2020.
They didn’t mean to start the supercycle, but now they won’t be able to stop it.
Chief Editor, CrushTheStreet.com
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
Protect Yourself Now, By Building A Fully-Hedged Financial Fortress!
This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.
Never base any decision off of our emails. CrushTheStreet.com stock profiles are intended to be stock ideas, NOT recommendations. The ideas we present are high risk and you can lose your entire investment, we are not stock pickers, market timers, investment advisers, and you should not base any investment decision off our website, emails, videos, or anything we publish. Please do your own research before investing. It is crucial that you at least look at current SEC filings and read the latest press releases. Information contained in this profile was extracted from current documents filed with the SEC, the company web site and other publicly available sources deemed reliable. Never base any investment decision from information contained in our website or emails or any or our publications.Our report is not intended to be, nor should it be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell securities, or as a recommendation to purchase anything. This publication may provide the addresses or contain hyperlinks to websites; we disclaim any responsibility for the content of any such other websites. Please use our site as a place to get ideas. Enjoy our videos and news analysis, but never make an investment decision off of anything we say. Please review our entire disclaimer at CrushTheStreet.com.