01 Jun How You Can Benefit From The US Stock Market Pyramid Scheme
On the 20th June 2019, I published an article on why the US Stock markets were so high and why they had to come down. This has now happened. I did not however anticipate that a virus would bring the world to its knees. I also did not consider that we will not return to business as usual for a very long time. What has happened though is that physical gold and silver bars have increased in value. A 1 kg silver bar was R11,760.00 on 29/1/20. It is now R14,080 on 29/5/20. By having 15 – 20% of your assets in physical gold and silver you will prosper from the coming global recession that is on the way. This is absolutely the most effective way in which ordinary citizens can benefit from the inevitable financial carnage that is happening right now. Our world has changed dramatically in the last 4 months and the actual damage is not yet fully known. The stock market pyramid scheme is using the Fed money to pay investor dividends to prevent them from selling their stocks. The S&P 500 index in the US, which represent the 500 biggest companies, dropped from 3329.3 on 16/02/2020 to 2182.8 on 22/03/2020. That was a 34.43% drop! The average definition of a crash is a 10% drop. The place where you really feel this is in the pit of your stomach when you watch your pension and savings drop thru the floor day after day. And you wonder, should I sell, or shall I hang in there?
All this history does not really help us right now. What matters right now is that we look at what is happening and most importantly, how we react going forward. Currently the S&P500 is back up to 3070.8. This is a 40.67% rise from the low in March. This is fantastic news for investors which have recovered a big chunk of what they lost. My question here at this point is, what is driving this run up in the markets, and is it sustainable?
It is my opinion that Donald Trump is behind this whole situation. This man has demonstrated time and time again to what lengths he is willing to go to achieve his goals. Right now his only goal is to get re elected in the November elections in the US. His ticket to achieve this is a high stock market that will allow him to say ” hey, look how good my presidency is for the stock market, who else but me can do this” The only people benefiting from this high stock market is his rich golfing buddies. To prove my point you can look at the US Debt Clock where the US DEBT to GDP is now 123% as opposed to 104% before Covid-19.
The list below details the US Federal Reserve Bank interventions that are causing the current buoyant stock markets.
- March 3 – Emergency 0.5 percent rate cut
- March 15 – Another 1 percent cut bringing the rates to near zero
- March 15 – Fed lowers the bank’s borrowing rate by 1.5 percent and cut reserve requirement to near zero
- March 17 – Fed starts buying commercial paper to fund business’s operational cash flow
- March 18 – A new Credit facility to keep money markets functioning properly
- March 19 – New operations focused on currency swaps aimed at other institutions who wants dollar-denominated assets
- March 20 – Boston Fed buys municipal debt
- March 23 – Fed’s original asset purchase to max out at $700 billion extended with no limits. Fed’s balance sheet already expanded by more than $2 trillion.
- March 23 – Fed announces a $300 billion credit programme for businesses and consumers.
- April 6 – Fed provides support to the Payment Protection Program to minimize employee lay offs
- April 8 – A modification on asset restriction so Wells Fargo can operate more freely
- April 9 – A $2.3 trillion lending programme to banks who issue PPP loans.
There is not one single reason that I can think of that justifies the current levels of the stock markets other than the Trump instructed Federal Reserve interventions. It simply does not make sense and I therefore strongly believe the US S&P500 index is heading for another big drop to around the 2200 level. Just look around you folks! it does not take a genius to see the planes on the ground, empty hotels and guest houses, car hire companies go bankrupt ( Hertz ) 36 Million and growing Americans are out of work and all the claims have not even been processed. In one of my previous articles I mentioned the fact that low unemployment like we had prior to the stock market crash is an indicator for a recession. I always use United States statistics because their record keeping is the best in the world.
In closing we must consider how opening many businesses up for trade might influence the future. It might well be that this reopening might trigger a second wave of Covid-19 infections, destroying the economy even further. It is also emerging now that the insurance industry might not cover all the claims that are streaming in taking every available little opportunity not to pay. Businesses are facing very uncertain times that will last for at least the next 6 months.
Now is the time to make sure you have 15-20% of your assets in physical gold and silver bars.
You van order gold and silver bars here