Thursday, November 26, 2020
Sunday, November 22, 2020
Friday, November 20, 2020
Covid Recovery: V, L or W
The US economy fell by 31.4% (annualized) in the second quarter.
But the expectation was that we'd have a V-shaped recovery with a sharp bounce-back in the third quarter, a reopening of closed businesses, rehiring of the unemployed and a rising stock market.
But so far, the economy is not following the script laid out for it by the politicians and experts.
The stock market did rally, but that was mainly because the stock index components are heavily weighted to companies least affected by the pandemic including Amazon, Apple, Netflix, Alphabet (Google), Facebook and Microsoft.
Of course, it didn't hurt that the Federal Reserve printed $4 trillion of new money and backstopped money markets, corporate bonds, municipal bonds, foreign central banks and other facets of capital markets with direct purchases, guarantees or currency swaps.
Even at that, stocks have been struggling since hitting new highs on September 2.
And yes, there was growth in the third-quarter (the best estimate is that the economy will grow at about a 35% annualized rate, but we won't have official figures until October 29).
The 35% third-quarter recovery was to be expected as Americans got back to work after the lockdown. That 35% rate might sound like the third quarter will basically make up for the second quarter, but it won't.
The 35% gain is applied to the lower level of output resulting from the 31.4% loss. If you take 100 as a starting place, reduce it by 31.4% you get to a new level of 68.6. If you increase that level by 35% you get back to 92.6.
That still leaves you 7.4 percentage points in the hole, not counting the 5% drop in the first quarter. When you apply 7.4% to a $22 trillion economy, that means you still have $1.6 trillion of lost output on an annualized basis even after the 35% third-quarter recovery.
The V-shaped recovery looks more like an "L" with flattish growth beyond the third-quarter. Things will not necessarily get much better from there, and progress is very much in doubt.
The lockdown continues in many places. The virus has not gone away, and the caseload and fatalities continue to grow.
A second wave of layoffs has now begun as companies that were able to hang on thanks to Payroll Protection Plan loans find that the money has run out, and their businesses are still closed. They are now being forced to let go of workers who might have survived the first layoffs in March and April.
So the letter to describe the recovery isn't a "V" or even an "L" but possibly a "W," with another recession right around the corner.
Beyond the second wave of layoffs, there is a persistent problem of the long-term unemployed whose businesses are shut down or dead in the water with no prospect of any return of demand.
This is a combination of factors the economy has not seen since the 1930s. It's worse than a technical recession, it's a depression, and its effects will be felt for years, or even decades, to come.
The US will not regain 2019 output levels until at least 2022, and growth going forward will be even worse than the weakest-ever growth of the 2009–2020 recovery.
The post-2009 recovery produced only 2.2% growth. It was an L-shaped recovery. It was a real recovery, yet the output gap between the former trend and the new trend was never closed.
The US economy suffered over $4 trillion of lost wealth based on the difference between the former strong trend and the new weaker trend.
That lost wealth was a serious problem for the US before the New Great Depression. Now the prospect is for even lower growth than the weak post-2009 recovery.
The US economy would have to grow 10% a year in 2021 and 2022 to return to 2019 levels of output.
First, is 10% growth even a reality? Past history says no.
Since 1943, US annual real growth in GDP has never exceeded 10%. In fact, post-1980 recoveries averaged 3.2% growth. And since 1984, growth has never exceeded 5%.
So 10% is a very optimistic forecast to begin with. Here's the problem:
Using 100 as a yardstick for 2019 output and assuming unrealistic back-to-back years of 10% real growth in 2021 and 2022, one still does not get back to 2019 output levels.
It would take the highest annual real growth in over 40 years, sustained for two consecutive years, to get close to 2019 output levels.
It's far more realistic to assume real growth will be less than 10% per year. That puts the economy well into 2023 before reaching output levels last achieved in 2019.
Another "L"-shaped Recovery
The new recovery, far from the 10% growth discussed in the example above, may only produce 1.8% growth, even worse than the 2.2% growth before the pandemic.
It's another L-shaped recovery, the second in a row. Now the bottom of the L is even closer to a flat line, and the output gap compared with the long-term trend is even greater.
All of this economic devastation was not caused directly by the virus. It was caused by the policy response to the virus, specifically the extreme lockdowns ordered by many state governors.
Was it all worth it? The likely answer is "no."
Many top scientists agree that lockdowns don't work. The virus will spread with or without a lockdown. Some measures make sense such as washing hands, keeping social distance and wearing masks in crowded spaces.
But there's no evidence masks do any good at all when the wearer is alone, outdoors or at a reasonable distance from others.
We could have followed these basic rules and gotten 90% of the benefit of a lockdown at only 10% of the cost.
Those supporting lockdowns have ignored the costs of increased suicides, drug abuse, alcohol abuse, domestic violence and the depression and anxiety that result from lack of social interaction. There was never a good reason to close every bar, restaurant, salon, boutique and public space.
Even the World Health Organization is coming out against lockdowns. Dr David Nabarro, the WHO's special envoy on Covid-19, says:
"We really do appeal to all world leaders: stop using lockdown as your primary control method...We in the World Health Organization do not advocate lockdowns as the primary means of control of this virus. The only time we believe a lockdown is justified is to buy you time to reorganize, regroup, rebalance your resources, protect your health workers who are exhausted, but by and large, we'd rather not do it."
We destroyed the world's greatest economy for no good reason.
But the expectation was that we'd have a V-shaped recovery with a sharp bounce-back in the third quarter, a reopening of closed businesses, rehiring of the unemployed and a rising stock market.
But so far, the economy is not following the script laid out for it by the politicians and experts.
The stock market did rally, but that was mainly because the stock index components are heavily weighted to companies least affected by the pandemic including Amazon, Apple, Netflix, Alphabet (Google), Facebook and Microsoft.
Of course, it didn't hurt that the Federal Reserve printed $4 trillion of new money and backstopped money markets, corporate bonds, municipal bonds, foreign central banks and other facets of capital markets with direct purchases, guarantees or currency swaps.
Even at that, stocks have been struggling since hitting new highs on September 2.
And yes, there was growth in the third-quarter (the best estimate is that the economy will grow at about a 35% annualized rate, but we won't have official figures until October 29).
The 35% third-quarter recovery was to be expected as Americans got back to work after the lockdown. That 35% rate might sound like the third quarter will basically make up for the second quarter, but it won't.
The 35% gain is applied to the lower level of output resulting from the 31.4% loss. If you take 100 as a starting place, reduce it by 31.4% you get to a new level of 68.6. If you increase that level by 35% you get back to 92.6.
That still leaves you 7.4 percentage points in the hole, not counting the 5% drop in the first quarter. When you apply 7.4% to a $22 trillion economy, that means you still have $1.6 trillion of lost output on an annualized basis even after the 35% third-quarter recovery.
The V-shaped recovery looks more like an "L" with flattish growth beyond the third-quarter. Things will not necessarily get much better from there, and progress is very much in doubt.
The lockdown continues in many places. The virus has not gone away, and the caseload and fatalities continue to grow.
A second wave of layoffs has now begun as companies that were able to hang on thanks to Payroll Protection Plan loans find that the money has run out, and their businesses are still closed. They are now being forced to let go of workers who might have survived the first layoffs in March and April.
So the letter to describe the recovery isn't a "V" or even an "L" but possibly a "W," with another recession right around the corner.
Beyond the second wave of layoffs, there is a persistent problem of the long-term unemployed whose businesses are shut down or dead in the water with no prospect of any return of demand.
This is a combination of factors the economy has not seen since the 1930s. It's worse than a technical recession, it's a depression, and its effects will be felt for years, or even decades, to come.
The US will not regain 2019 output levels until at least 2022, and growth going forward will be even worse than the weakest-ever growth of the 2009–2020 recovery.
The post-2009 recovery produced only 2.2% growth. It was an L-shaped recovery. It was a real recovery, yet the output gap between the former trend and the new trend was never closed.
The US economy suffered over $4 trillion of lost wealth based on the difference between the former strong trend and the new weaker trend.
That lost wealth was a serious problem for the US before the New Great Depression. Now the prospect is for even lower growth than the weak post-2009 recovery.
The US economy would have to grow 10% a year in 2021 and 2022 to return to 2019 levels of output.
First, is 10% growth even a reality? Past history says no.
Since 1943, US annual real growth in GDP has never exceeded 10%. In fact, post-1980 recoveries averaged 3.2% growth. And since 1984, growth has never exceeded 5%.
So 10% is a very optimistic forecast to begin with. Here's the problem:
Using 100 as a yardstick for 2019 output and assuming unrealistic back-to-back years of 10% real growth in 2021 and 2022, one still does not get back to 2019 output levels.
It would take the highest annual real growth in over 40 years, sustained for two consecutive years, to get close to 2019 output levels.
It's far more realistic to assume real growth will be less than 10% per year. That puts the economy well into 2023 before reaching output levels last achieved in 2019.
Another "L"-shaped Recovery
The new recovery, far from the 10% growth discussed in the example above, may only produce 1.8% growth, even worse than the 2.2% growth before the pandemic.
It's another L-shaped recovery, the second in a row. Now the bottom of the L is even closer to a flat line, and the output gap compared with the long-term trend is even greater.
All of this economic devastation was not caused directly by the virus. It was caused by the policy response to the virus, specifically the extreme lockdowns ordered by many state governors.
Was it all worth it? The likely answer is "no."
Many top scientists agree that lockdowns don't work. The virus will spread with or without a lockdown. Some measures make sense such as washing hands, keeping social distance and wearing masks in crowded spaces.
But there's no evidence masks do any good at all when the wearer is alone, outdoors or at a reasonable distance from others.
We could have followed these basic rules and gotten 90% of the benefit of a lockdown at only 10% of the cost.
Those supporting lockdowns have ignored the costs of increased suicides, drug abuse, alcohol abuse, domestic violence and the depression and anxiety that result from lack of social interaction. There was never a good reason to close every bar, restaurant, salon, boutique and public space.
Even the World Health Organization is coming out against lockdowns. Dr David Nabarro, the WHO's special envoy on Covid-19, says:
"We really do appeal to all world leaders: stop using lockdown as your primary control method...We in the World Health Organization do not advocate lockdowns as the primary means of control of this virus. The only time we believe a lockdown is justified is to buy you time to reorganize, regroup, rebalance your resources, protect your health workers who are exhausted, but by and large, we'd rather not do it."
We destroyed the world's greatest economy for no good reason.
- Source, James Rickards
Sunday, November 15, 2020
Jim Rickards: Gold and Silver Have Never Looked Better
Jim Rickards lent his insight on what he thinks is the Fed’s need to keep lending rates low for quite a while, stating one thing as “certain”:
"That will destroy traditional fixed-income investments. The institutional investors who rely on those assets the most — pension funds, insurance companies, university endowments — will inevitably turn to gold as an alternative."
If institutional investors will eventually turn to gold, then now is a good time for you to consider whether or not following their lead would be a good idea.
Holding assets such as physical gold and silver can help provide a hedge against uncertain economic conditions.
"That will destroy traditional fixed-income investments. The institutional investors who rely on those assets the most — pension funds, insurance companies, university endowments — will inevitably turn to gold as an alternative."
If institutional investors will eventually turn to gold, then now is a good time for you to consider whether or not following their lead would be a good idea.
Holding assets such as physical gold and silver can help provide a hedge against uncertain economic conditions.
- Source, WBAP
Tuesday, November 10, 2020
What Record Coronavirus Cases, Swooning Stocks Mean for After Election Day
The latest COVID-19 spectacle features a new rise in cases that has generated yet another wave of economic uncertainty in the markets.
According to a CNBC piece, stocks have dropped this week due to concerns over a rise in coronavirus cases and how it may affect the economy.
The recent trend of falling stocks actually started a couple weeks ago on October 12.
Further the Dow Jones has been on a roller coaster ride since August. As usual, since this is an election year, mainstream media coverage is driving at least some of the uncertainty.
But some of the uncertainty also seems to come from local governments’ response to the latest rise in cases. According to the same CNBC piece:
The recent uptick in COVID cases has led some countries to reinstate certain social distancing measures. In the U.S., the state of Illinois has ordered Chicago to shut down indoor dining. In Europe, German officials agreed to a four-week partial lockdown, while the French government imposed new nationwide restrictions until Dec. 1.
“I think there’s going to be a call for lockdowns the likes of which we’ve seen in Chicago,” CNBC’s Jim Cramer said Wednesday.
That’s where we are today. But after election day, the coronavirus plus at least three other factors could come together to create even more uncertainty.
Fed, Deficit & Unemployment Add to Potential Post-Election Chaos
Another CNBC article shines a light on the possibility that the Fed might be running out of ammo to help the economy:
Federal Reserve officials have been pressing Congress to provide more fiscal help to the U.S. economy, and with good reason: The central bank is running out of ways it can help.
And Congress delaying CARES-related stimulus talks until after the election might also contribute to the uncertainty. But according to the same article: “Chairman Jerome Powell and other officials rarely miss an opportunity to egg on Congress for more aid.”
That sure seems like politicians could be playing political games rather than looking for solutions to improve the economic wellbeing of the country.
And after December, unless new stimulus is issued, 13.5 million people will lose certain unemployment benefits mandated by the CARES Act.
If consumers don’t even have the money to spend on necessary items, even big retailers like Amazon could take a hit.
But while response to rising coronavirus cases continues, all of this monetary stimulus is brewing another potential post-election catastrophe — a major deficit crisis.
According to Agora Financial, “The official budget deficit totaled $3.1 trillion — ‘more than triple last year’s shortfall of $984 billion and double the previous record of $1.4 trillion in 2009.'”
Jim Rickards thinks that the debt-to-GDP ratio “will soon reach 135%,” and ended his dire outlook with the following potential outcome:
The only ways out of this debt death spiral are default, inflation or confiscatory tax rates that hurt growth even more. In anticipation of these outcomes, citizens spend less and save more. That kills consumption and growth. In short, Congress will not be able to borrow and spend their way out of the new depression.
No matter how you look at it, government stimulus to the coronavirus seems to have created enough economic uncertainty to last well into 2021.
According to a CNBC piece, stocks have dropped this week due to concerns over a rise in coronavirus cases and how it may affect the economy.
The recent trend of falling stocks actually started a couple weeks ago on October 12.
Further the Dow Jones has been on a roller coaster ride since August. As usual, since this is an election year, mainstream media coverage is driving at least some of the uncertainty.
But some of the uncertainty also seems to come from local governments’ response to the latest rise in cases. According to the same CNBC piece:
The recent uptick in COVID cases has led some countries to reinstate certain social distancing measures. In the U.S., the state of Illinois has ordered Chicago to shut down indoor dining. In Europe, German officials agreed to a four-week partial lockdown, while the French government imposed new nationwide restrictions until Dec. 1.
“I think there’s going to be a call for lockdowns the likes of which we’ve seen in Chicago,” CNBC’s Jim Cramer said Wednesday.
That’s where we are today. But after election day, the coronavirus plus at least three other factors could come together to create even more uncertainty.
Fed, Deficit & Unemployment Add to Potential Post-Election Chaos
Another CNBC article shines a light on the possibility that the Fed might be running out of ammo to help the economy:
Federal Reserve officials have been pressing Congress to provide more fiscal help to the U.S. economy, and with good reason: The central bank is running out of ways it can help.
And Congress delaying CARES-related stimulus talks until after the election might also contribute to the uncertainty. But according to the same article: “Chairman Jerome Powell and other officials rarely miss an opportunity to egg on Congress for more aid.”
That sure seems like politicians could be playing political games rather than looking for solutions to improve the economic wellbeing of the country.
And after December, unless new stimulus is issued, 13.5 million people will lose certain unemployment benefits mandated by the CARES Act.
If consumers don’t even have the money to spend on necessary items, even big retailers like Amazon could take a hit.
But while response to rising coronavirus cases continues, all of this monetary stimulus is brewing another potential post-election catastrophe — a major deficit crisis.
According to Agora Financial, “The official budget deficit totaled $3.1 trillion — ‘more than triple last year’s shortfall of $984 billion and double the previous record of $1.4 trillion in 2009.'”
Jim Rickards thinks that the debt-to-GDP ratio “will soon reach 135%,” and ended his dire outlook with the following potential outcome:
The only ways out of this debt death spiral are default, inflation or confiscatory tax rates that hurt growth even more. In anticipation of these outcomes, citizens spend less and save more. That kills consumption and growth. In short, Congress will not be able to borrow and spend their way out of the new depression.
No matter how you look at it, government stimulus to the coronavirus seems to have created enough economic uncertainty to last well into 2021.
- Source, WBAP
Sunday, November 8, 2020
Jim Rickards First Take: Life Under Biden, the Next Four Years
He’s now taken the lead in Pennsylvania, which Trump needs to win reelection. Biden’s also taken the lead in Georgia, while holding onto leads in Nevada and Arizona. It’s not over yet, but everything would have to break right for Trump if he’s to win.
He’s also issued a number of legal challenges, but they’re unlikely to overturn the results in any state.
Were there instances of voter fraud in states like Pennsylvania, Wisconsin and Michigan? It’s highly likely, but it would be very difficult to prove in court that they substantially impacted the outcome.
So it appears right now that Joe Biden will be the next president of the United States, unless Trump can somehow run the table or succeed in the courts.
An Historic Turning Point Election
This was a historic, turning-point election. Turning-point elections are the most historic because they put the country on a different path: Party Politics in 1800, Populism in 1828, Civil War in 1860, Liberalism in 1932, and Conservatism in 1980.
Every 100 years, America gets a president who shakes the establishment and cleans out the Washington sewers. In the 1800s it was Andrew Jackson. In the 1900s it was Teddy Roosevelt. In the 2000s, it’s Donald Trump.
There is no doubt that Trump and Biden would lead America in almost opposite directions with profound consequences for the future of the country and for future elections.
If Trump had won, we would have gotten more of the same, which is saying a lot. Trump would offer more tax cuts (or at least preserve the tax cuts we’ve received). He’d offer less regulation, a major accomplishment of his first term. Trump would continue the trade war with China and expand it in ways that would move jobs back to the United States (or at least get them out of China into friendlier countries such as Vietnam and India).
He would also curtail Chinese theft of U.S. intellectual property and cut off Chinese tech investment in the United States. Trump has also stopped foreign installation of sensitive 5G telecommunications systems from Huawei and ZTE, which are hidden arms of the Chinese military.
Trump built alliances to constrain Chinese expansion efforts. His main breakthrough was the Quad Alliance of the U.S., Japan, Australia and India that effectively surrounds and can interdict China’s sea lanes to the Pacific and Indian Oceans.
Trump also made great strides toward Middle East peace with the first two Israeli-Arab peace treaties in twenty-five years – one with the UAE and one with Bahrain. Other peace treaties with Israel may have followed. Finally, Trump was imposing crippling sanctions on Iran that would have forced it to negotiate in good faith on its nuclear program or crush its economy in ways that would also impede its efforts at terrorism and nuclear weapons.
With Trump, what you see is what you get: Lower taxes, less regulation, more jobs, no new wars, peace in the Middle East, and peace through strength in confronting Iran and China.
With four more years, Trump could have accomplished his goals and perhaps be ranked among the ten most significant presidents of all time.
The Scenario Under a Biden Administration
Biden is another matter entirely. First of all, Biden is running for president in name only. He has never been that bright. He has accomplished little in his almost fifty years in public service. He is physically frail and clearly suffering acute cognitive decline.
If Joe Biden does win, he’ll be 78 years old when sworn in and 82 years old at the end of his first term. Both marks are the oldest in U.S. history for a president. Some individuals are still sharp in their late 70s. Biden is not one of them.
The result is that Biden will never be president de facto. With Trump out of the picture, Democrats wouldn’t need him anymore. Steps would be taken at some point to remove him from office on the grounds of mental incapacity under the Twenty-fifth Amendment. Nancy Pelosi recently proposed legislation to set up a commission to do just that as prescribed by the U.S. Constitution.
But while he remains in office, who will be the real president in a Biden administration? There are three camps contending for power:
The first camp is the Biden family led by Joe Biden’s wife Dr. Jill Biden, his son Hunter Biden, and Joe Biden’s brothers Jim Biden and Frank Biden. These are the individuals who have been enriched through association with Joe Biden by using or selling access to Biden’s power to win lucrative investment management roles, consulting engagements, construction contracts and other remunerative pursuits.
The Biden family will want to keep Joe in power (with Jill Biden pulling the strings) in order to keep their shakedown operation intact and avoid scrutiny.
The second camp is led by Kamala Harris and those who control her, including the Obama crew and the Resistance. If Biden is removed under the Twenty-Fifth Amendment, Harris becomes Acting President. If Biden resigns under threat of removal, Harris becomes the president.
She would be a front for the Obamas and Valerie Jarrett who would operate through a cabinet consisting of Obama family retainers including Susan Rice, Samantha Power, Sally Yates and Eric Holder.
The third camp is led by the extreme left wing of the party including Bernie Sanders, Alexandra Ocasio-Cortez (and The Squad), Elizabeth Warren and radical organizations such as BLM. This group is already embedded in the Biden campaign as part of a deal whereby Bernie Sanders agreed to end his primary campaign and endorse Joe Biden in exchange for Biden adopting most of the Sanders platform.
The most likely outcome is that the Obama crew and the Bernie Bros will join forces and run the Biden family off the road. The Bidens will be allowed to keep their Chinese and Russian money and will not face any scrutiny or prosecution in exchange for going away quietly.
The Obama crew will take charge of foreign policy (to preserve Obama’s deals on Iran, the Paris Climate Accord and the Trans-Pacific Partnership), while the Bernie Bros will get domestic policy including much higher taxes, free healthcare, free tuition, forgiveness of student loans, guaranteed basic income, Modern Monetary Theory and the Green New Deal.
A “Blue Wave” Could Have Meant The End of Republican Power in U.S. Politics
One initiative all Democrats can agree on is radical change in U.S. governance to ensure that Republicans never take power again. This agenda means ending the Senate filibuster so the Senate can operate with a simple majority instead of the 60 votes needed today. Democrats would add Puerto Rico and D.C. as states to ensure four new Senate seats that will likely all be Democrats.
Next, Democrats would pack the Supreme Court with six new liberal Justices to wipe out the recently achieved conservative majority after the confirmation of Amy Coney Barrett. Once these changes are in place, Democrats could take further steps to eliminate the Electoral College, which means that California and New York alone will choose all future presidents.
If these governance changes were in place, the Bernie Bros’ agenda could be implemented with ease and without fear of opposition from the courts.
But, it looks like this entire agenda will be stopped in its tracks. To ram it through, Democrats would have had to take control of the Senate. With the White House, Senate and House of Representatives controlled by Democrats, Republicans would be powerless to stop them.
But, it appears that the Republicans are going to retain control of the Senate. If that holds, the Democrats’ more radical legislation will never make it out of the Senate.
One of the reasons the stock market rallied so much after the election is because it expects gridlock in Washington, meaning no punitive taxes or other policies harmful to markets.
So if Biden holds on and Republicans hold onto the Senate, you can expect a lot of bickering and a lot of gridlock. And that might not be the worst thing.
- Source, Jim Rickards via the Daily Reckoning
Friday, November 6, 2020
Jim Rickards: Your Election Chaos Portfolio Plan
Once the votes are in, the die will be cast for the next four years, perhaps longer.
Trump or Biden? The difference could not be more clear, and the stakes could not be higher for you and your investments.
Again, this is the most consequential election of our lifetime.
If that sounds like an overstatement, it's not. If Trump wins, he may actually be able to finish his task of cleaning out Deep State actors, reducing regulation and taxes, securing US energy independence, facilitating peace in the Middle East and finally bringing US troops home from multi-decade wars in Iraq and Afghanistan.
If Biden wins, brace yourself for higher taxes, the end of fracking, the Green New Deal, free tuition, free healthcare and free child care (of course, none of this is truly "free," it's just paid for with more debt financed by higher taxes or more money printing).
In a Trump administration, the decoupling from China will continue, and China's ability to spy on the US and steal our best ideas will be curtailed. If Biden wins, it will be back to business as usual with China stealing US jobs, stealing US intellectual property and cheating on their obligations to the World Trade Organization and the IMF.
This list of policy differences goes on, but those differences are not even the most important distinction between Trump or Biden in the White House. The main difference is that the country will set out on two entirely different paths depending on the outcome.
In that sense, this will be the most consequential election since 1860, when a vote for Lincoln pointed toward a possible Civil War because the South had already made its intentions clear if Lincoln won.
Today, the Rebels are not Southern secessionists. They are home-grown neo-Marxists, anarchists, thugs and goon squads who are rioting and looting daily in scores of US cities.
If Trump wins, you can expect to find US cities in flames within 24 hours of the election results. If Biden wins, the neo-Marxists will have a seat at the table in the form of Bernie Sanders and Alexandria Ocasio-Cortez as they insist on full implementation of their agenda.
This includes higher taxes, higher spending, more regulation and permanent changes to US governance in the form of an end to the Electoral College, a packed Supreme Court (by expanding the number of justices), single-party rule in the Senate (by ending the filibuster) and more.
Think that's bad? It gets worse. The two paths involving riots or left-wing governance depend on someone winning. What if there is no winner?
Millions of votes are being cast in the form of mail-in ballots. State counting systems have broken down lately when they had to count a few hundred thousand ballots in close races. What happens when the ballots are in the tens of millions?
Secretaries of State in swing states such as Michigan, Wisconsin and Pennsylvania will be ordered by Democratic governors not to certify the results. Armies of lawyers will descend on courthouses demanding extending voting hours, impoundment of mail-in ballots and
counting of all ballots regardless of postmarks, timely mailing, timely receipt and other formalities. Other lawyers will push back.
Neither side will concede. The outcome could be uncertain for weeks. The riots will continue in the meantime.
And if Biden does win, it's entirely possible he won't be President for more than a few months. His cognitive decline, probably the result of Alzheimer's Disease or some other form of dementia, is already apparent to observers. I realize he performed well during his debate with Trump, but Alzheimer's does not progress in a straight line.
The type of cognitive decline Biden is suffering is not a continuous downhill slide. It's what's called a "step function." That means the mental ability drops suddenly, then stabilizes or plateaus for a while, then drops again. It never improves, but it can appear stable for a time until the next sudden drop comes.
It will be relatively simple to remove Biden from office under the 25th Amendment and install Kamala Harris as Acting President. This could be followed by a formal resignation by Biden, at which point Harris would become President.
This was hinted at on September 12 when Kamala Harris made reference to a coming "Harris Administration" and again on September 15 when Joe Biden referred to the "Harris-Biden administration" at a campaign event.
These are not mere slips of the tongue, but rather a preview of the fact that a vote for Biden is really a vote for President Harris. Kamala Harris does not have the cognitive challenges of Joe Biden, but she is a malleable blank slate who will be easily handled by the radicals whom she supports.
Compared to disputed election results and the removal of Joe Biden (if he wins) coming so soon after the removal of Donald Trump (through mail-in ballot fraud), maybe a 39.6% capital gains tax doesn't seem so bad. Actually, it should. It will tank the stock market as savvy investors get out ahead of the 2021 tax law change by selling stocks in late 2020.
All of these issues – taxes, regulation, foreign affairs, social unrest – are now playing out against the backdrop of the process to replace Ruth Bader Ginsburg on the Supreme Court. That vacancy emerged when Justice Ginsburg passed away on the evening of September 18.
Trump has nominated Amy Coney Barrett, a judicial conservative who once clerked for Antonin Scalia. Those who oppose her fear she's a threat to abortion rights and other causes supported by progressives.
A Supreme Court Justice confirmation fight is an intense political battle at the best of times. This has been true since the Robert Bork nomination to the Supreme Court by Ronald Reagan in 1987. The Senate rejected the Bork nomination, but that confirmation process set the standard for personal attacks and the extreme political invective that has been with us ever since.
This personal attack process was on full display in the confirmation hearing for Justice Brett Kavanaugh in the summer and fall of 2018. Many members of the Senate Judiciary
Committee who engaged in the Kavanaugh attacks, including Democratic Vice Presidential nominee Kamala Harris and Presidential candidates Cory Booker and Amy Klobuchar, are still on that committee.
There is every reason to expect that this new confirmation process will be just as bitter and divisive as those for Bork and Kavanaugh. In the broader context, this is just another wild card in what has already been an unpredictable and contentious electoral year.
Uncertainty will reign until Election Day. Investors understand this. What is not as well understood is that uncertainty will continue to reign after Election Day.
If Trump wins, the Resistance will not take it well. They will challenge the outcome in court, deny the legitimacy of a Trump victory, and extreme elements in the Resistance will burn American cities.
If Biden wins, his behind-the-scenes handlers will come to the fore with demands for high taxes, more regulation, the Green New Deal and other elements of the Socialist and globalist agendas.
Markets are not fully priced for any of this. They're not priced for anti-Trump chaos, and they're not priced for the Bernie Bros' hidden agenda that will be foisted on Biden.
Although markets may not be prepared, you should be. A reduced exposure to equities, an increased allocation to Treasury notes and cash, and a 10% portfolio allocation to gold will offer true diversification, high returns and be robust to the turmoil that is in store.
Trump or Biden? The difference could not be more clear, and the stakes could not be higher for you and your investments.
Again, this is the most consequential election of our lifetime.
If that sounds like an overstatement, it's not. If Trump wins, he may actually be able to finish his task of cleaning out Deep State actors, reducing regulation and taxes, securing US energy independence, facilitating peace in the Middle East and finally bringing US troops home from multi-decade wars in Iraq and Afghanistan.
If Biden wins, brace yourself for higher taxes, the end of fracking, the Green New Deal, free tuition, free healthcare and free child care (of course, none of this is truly "free," it's just paid for with more debt financed by higher taxes or more money printing).
In a Trump administration, the decoupling from China will continue, and China's ability to spy on the US and steal our best ideas will be curtailed. If Biden wins, it will be back to business as usual with China stealing US jobs, stealing US intellectual property and cheating on their obligations to the World Trade Organization and the IMF.
This list of policy differences goes on, but those differences are not even the most important distinction between Trump or Biden in the White House. The main difference is that the country will set out on two entirely different paths depending on the outcome.
In that sense, this will be the most consequential election since 1860, when a vote for Lincoln pointed toward a possible Civil War because the South had already made its intentions clear if Lincoln won.
Today, the Rebels are not Southern secessionists. They are home-grown neo-Marxists, anarchists, thugs and goon squads who are rioting and looting daily in scores of US cities.
If Trump wins, you can expect to find US cities in flames within 24 hours of the election results. If Biden wins, the neo-Marxists will have a seat at the table in the form of Bernie Sanders and Alexandria Ocasio-Cortez as they insist on full implementation of their agenda.
This includes higher taxes, higher spending, more regulation and permanent changes to US governance in the form of an end to the Electoral College, a packed Supreme Court (by expanding the number of justices), single-party rule in the Senate (by ending the filibuster) and more.
Think that's bad? It gets worse. The two paths involving riots or left-wing governance depend on someone winning. What if there is no winner?
Millions of votes are being cast in the form of mail-in ballots. State counting systems have broken down lately when they had to count a few hundred thousand ballots in close races. What happens when the ballots are in the tens of millions?
Secretaries of State in swing states such as Michigan, Wisconsin and Pennsylvania will be ordered by Democratic governors not to certify the results. Armies of lawyers will descend on courthouses demanding extending voting hours, impoundment of mail-in ballots and
counting of all ballots regardless of postmarks, timely mailing, timely receipt and other formalities. Other lawyers will push back.
Neither side will concede. The outcome could be uncertain for weeks. The riots will continue in the meantime.
And if Biden does win, it's entirely possible he won't be President for more than a few months. His cognitive decline, probably the result of Alzheimer's Disease or some other form of dementia, is already apparent to observers. I realize he performed well during his debate with Trump, but Alzheimer's does not progress in a straight line.
The type of cognitive decline Biden is suffering is not a continuous downhill slide. It's what's called a "step function." That means the mental ability drops suddenly, then stabilizes or plateaus for a while, then drops again. It never improves, but it can appear stable for a time until the next sudden drop comes.
It will be relatively simple to remove Biden from office under the 25th Amendment and install Kamala Harris as Acting President. This could be followed by a formal resignation by Biden, at which point Harris would become President.
This was hinted at on September 12 when Kamala Harris made reference to a coming "Harris Administration" and again on September 15 when Joe Biden referred to the "Harris-Biden administration" at a campaign event.
These are not mere slips of the tongue, but rather a preview of the fact that a vote for Biden is really a vote for President Harris. Kamala Harris does not have the cognitive challenges of Joe Biden, but she is a malleable blank slate who will be easily handled by the radicals whom she supports.
Compared to disputed election results and the removal of Joe Biden (if he wins) coming so soon after the removal of Donald Trump (through mail-in ballot fraud), maybe a 39.6% capital gains tax doesn't seem so bad. Actually, it should. It will tank the stock market as savvy investors get out ahead of the 2021 tax law change by selling stocks in late 2020.
All of these issues – taxes, regulation, foreign affairs, social unrest – are now playing out against the backdrop of the process to replace Ruth Bader Ginsburg on the Supreme Court. That vacancy emerged when Justice Ginsburg passed away on the evening of September 18.
Trump has nominated Amy Coney Barrett, a judicial conservative who once clerked for Antonin Scalia. Those who oppose her fear she's a threat to abortion rights and other causes supported by progressives.
A Supreme Court Justice confirmation fight is an intense political battle at the best of times. This has been true since the Robert Bork nomination to the Supreme Court by Ronald Reagan in 1987. The Senate rejected the Bork nomination, but that confirmation process set the standard for personal attacks and the extreme political invective that has been with us ever since.
This personal attack process was on full display in the confirmation hearing for Justice Brett Kavanaugh in the summer and fall of 2018. Many members of the Senate Judiciary
Committee who engaged in the Kavanaugh attacks, including Democratic Vice Presidential nominee Kamala Harris and Presidential candidates Cory Booker and Amy Klobuchar, are still on that committee.
There is every reason to expect that this new confirmation process will be just as bitter and divisive as those for Bork and Kavanaugh. In the broader context, this is just another wild card in what has already been an unpredictable and contentious electoral year.
Uncertainty will reign until Election Day. Investors understand this. What is not as well understood is that uncertainty will continue to reign after Election Day.
If Trump wins, the Resistance will not take it well. They will challenge the outcome in court, deny the legitimacy of a Trump victory, and extreme elements in the Resistance will burn American cities.
If Biden wins, his behind-the-scenes handlers will come to the fore with demands for high taxes, more regulation, the Green New Deal and other elements of the Socialist and globalist agendas.
Markets are not fully priced for any of this. They're not priced for anti-Trump chaos, and they're not priced for the Bernie Bros' hidden agenda that will be foisted on Biden.
Although markets may not be prepared, you should be. A reduced exposure to equities, an increased allocation to Treasury notes and cash, and a 10% portfolio allocation to gold will offer true diversification, high returns and be robust to the turmoil that is in store.
- Source, James Rickards
Monday, November 2, 2020
Jim Rickards on the US Election: It’s Much Closer than You Think and Why the Polls Are Wrong
Jim believes that the election is ‘closer than you think’ and explains why the polls could be wrong like they were in 2016.
Jim predicts that Trump is likely to win the US presidential election this time around too.
- Source, The Daily Reckoning
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