{"id":1198495,"date":"2020-07-28T16:16:36","date_gmt":"2020-07-28T21:16:36","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109535"},"modified":"2020-07-28T16:16:36","modified_gmt":"2020-07-28T21:16:36","slug":"the-government-put-is-a-tailwind-for-gold","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1198495","title":{"rendered":"The \u201cGovernment Put,\u201d Is a Tailwind for Gold"},"content":{"rendered":"

This post The \u201cGovernment Put,\u201d Is a Tailwind for Gold<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Gold recently crested $1900, where it is today as of this writing. For some, the $1900 price level is an important indicator of momentum building. I\u2019ll share with you some advice on the gold price offered by my zoom interview this week, George Gammon, Rebel Capitalist, below.<\/p>\n

In an effort to help you sort things out, I\u2019ve invited George to help us put the macro picture into perspective given the pandemic, shutdown of the economy, a bizarrely resilient stock market and prospects for your investments now and in the future.<\/p>\n

Gammon\u2019s own story \u2014 from serial entrepreneur to global real estate developer to macroeconomic guru \u2014 uniquely positions him to help put the current state of affairs into perspective. On top of that he\u2019s a heckuva good guy, entertaining, approachable; he has a talent for making complex ideas easy to understand.<\/p>\n

He\u2019s well versed in my late obsession with collectivism, which I\u2019ve been exploring deeply since the protests started. He also explains how the Fed will monetize the $26.5 trillion in debt racked up during the crisis; the secret vehicle the Treasury will use if Fed efforts fail; how and why the dollar remains strong; what shenanigans the data wonks to white wash important economic data.<\/p>\n

We further discussed prospects for reopening of the economy; why the economy and the stock market have diverged so dramatically; what signs to look for in the capitalist endgame; where the heck all that stimulus money is going; and more.<\/p>\n

Frankly, my conversation with George was one of the more interesting, informative and entertaining I\u2019ve done since starting the Surviving and Thriving <\/i>series for Agora Financial Platinum Reserve members.<\/p>\n

You\u2019ll definitely want to see the \u201clightning round\u201d at the end where we cover his thoughts on real estate, stocks, tech, commodities, bitcoin, gold, silver and precious metals; including a look under the hood at some of his own investments. Go here<\/b><\/a> for a full transcript of our interview.<\/p>\n

Now, let\u2019s play with a hypothetical\u2026<\/p>\n

Let\u2019s say we have another wave of lockdowns in various geographic locales in the economy. Here in Baltimore the mayor is about to close restaurants again, for example. The restaurants close. Bars close. Gyms close. Schools don\u2019t reopen\u2026 yada, yada.<\/p>\n

Institutional traders get spooked, again — still speaking hypothetically — and start selling stocks. The hoi polloi see the numbers tanking in their 401(k)s. And so on. We know what happened during the initial lockdown. February and March of 2020 account for 8 out of 10 of the largest single day point losses in the Dow Jones\u2019 ever.<\/p>\n

\"IMG<\/p>\n

Source: Standard and Poors<\/a><\/p>\n

By March 11 the Dow had lost 6,004 points — down 20.3% from the Feb. 12 high. What if bad news causes this, still jittery, market to drop 20% again?<\/p>\n

\u201cThe whole U.S. economy is so tied to asset prices,\u201d George Gammon suggests, \u201cI just cannot see the Fed and or Treasury not stepping in and trying to prop up the market. Fact is, they have to step in and try to do something.\u201d<\/p>\n

I can\u2019t argue with that.<\/p>\n

\u201cWhen you trap people in a system of debt,\u201d said lefty linguist Noam Chomsky, \u201cthey can\u2019t afford the time to think.\u201d<\/p>\n

I\u2019m not sure I\u2019d agree with Chomsky on too many things, but I think he nails that one.<\/p>\n

For the first time since WWII the interest on the debt \u2014 which grows daily \u2014 is higher than the nation\u2019s GDP. If that isn\u2019t a trap, I can\u2019t think of what would be\u2026 and so much of the hole the country is digging itself into is entirely out of your hands.<\/p>\n

What\u2019s an individual investor to do?<\/p>\n

Back in the Crisis of \u201808 I often referred to the \u201cFed Put\u201d \u2014 a friendly colloquial term describing the Fed practice of buying mortgage backed securities to put a floor in the market. So many banks were leveraged into those moribund financial instruments, without the Fed Put, the entire global system would have been kaput.<\/p>\n

Fast forward 12 years and a fully re-inflated bubble, The \u2018Fed Put\u2019 may have expired. \u201cIf you want to think that one through,\u201d George explains:<\/p>\n

\n

Remember when the Fed had that emergency meeting in March, where they were going to meet on Wednesday to decide the interest rate policy, but they had that emergency meeting on Sunday where they dropped interest rates by 100 basis points, took it down to zero and they announced QE Infinity and they\u2019re committing a trillion a day to the repo market.<\/i><\/p>\n

Monday, the market opens, it does go higher for maybe three or four hours, but then it just tanks, drops out of bed. Even though the Fed throws everything at it but the kitchen sink. And then the government comes in and announces all these stimulus programs. Then at that point, the market started to go back up a few days later.<\/i><\/p>\n

So it seems like maybe, just maybe the Fed Put has expired and has been replaced by a government put. So now the only entity to prop up the market is going to be straight government spending.<\/i><\/p>\n<\/blockquote>\n

What that means is not just bank reserves, but that means a direct M2 money supply \u2014 cash to folks like you and me \u2014 and an increase in velocity, the speed at which \u201cgetting and spending\u201d happens.<\/p>\n

Whether it will continue to work, or not, is anybody\u2019s guess.<\/p>\n

The \u201cGovernment Put\u201d could be the butterfly that unleashes a hurricane on the other side of the planet.<\/p>\n

So… what should you buy? How about gold? And when should you buy it?<\/p>\n

\u201cI don’t even worry about the price of gold,\u201d Mr. Gammon answers. \u201cI don’t even look<\/i> at the price. When I get an extra hundred grand, bam, 10,000 goes into gold.\u201d<\/p>\n

\u201cAs far as silver, I look at that more like a speculation, more like Bitcoin. But the ultimate speculation right now are the gold miners. And I was fortunate enough to buy a lot of those back in March as well. And they’ve had a good run, but again, I’m not planning on selling them at all. And if they go back down even further, I’ll buy more.\u201d<\/p>\n

\u201cI think if you look at everything we’ve talked about in this interview<\/b><\/a>, and the M2 money supply, the velocity, the deficits, not only that, but you’ve got oil that’s very low, which definitely helps the P&L for the gold miners because a lot of their expenses are energy.\u201d<\/p>\n

\u201cCheap oil benefits them tremendously. And with the Government Put there is already a huge tailwind for gold in general. They could go down. But if they do go down, I’ll happily buy more and just wait until I think they’re expensive, which probably is going to be a long bull run from now.\u201d<\/p>\n

Buy gold (and gold miners)… and enjoy the ride.<\/p>\n

Regards,<\/p>\n

Addison Wiggin
\nfor The Daily Reckoning<\/i><\/p>\n

The post The \u201cGovernment Put,\u201d Is a Tailwind for Gold<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post The “Government Put,” Is a Tailwind for Gold<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

“I don’t even look at the price. When I get an extra hundred grand, bam, 10,000 goes into gold”…<\/p>\n

The post The “Government Put,” Is a Tailwind for Gold<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":119,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[3724,366,463],"tags":[48],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198495"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/119"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1198495"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198495\/revisions"}],"predecessor-version":[{"id":1198496,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198495\/revisions\/1198496"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1198495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1198495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1198495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}