Dow Up 5%+: Covid-19 Cure or Biden? Gold Tanks

Pfizer announced this AM that the Covid-19 vaccine being developed by Pfizer Inc. and BioNTech SE prevented more than 90% of infections in a study of tens of thousands of volunteers, the most encouraging scientific advance so far in the battle against the coronavirus.

Eight months into the worst pandemic in a century, the preliminary results pave the way for the companies to seek an emergency-use authorization from regulators if further research shows the shot is also safe.

US Treasuries? The 10-year Treasury Note rose 10.8 basis points.

Gold?

For commodities, gold is down 4.52% while silver is down 6.46%.

A possible cure to the infection caused by Covid or a career bureaucrat that has been in DC for 47 years with little to show for it? I’ll go for the Covid cure!

Government Spending And Debt: The Fallacy Of Modern Monetary Theory (Gold Rises With Investor Fears Of Insane Gov’t Spending And Debt)

Politicians and economists are seemingly all on board with Modern Monetary Theory. MMT translates to “American has the world’s biggest printing press and they can print as much currency as the want.” The logic is that if Japan can do it, the USA can do it.”

Government debt as a percent of GDP was under 40% until the Reagan Administration tried outspending the Soviet Union eventually leading to its collapse. But the growth of government debt to GDP abated briefly under Clinton when House Speaker Gingrich refused to go along with Clinton’s spending fantasies, so Clinton paid off some of the long-term debt outstanding. But as soon as Gingrich was outed as House Speaker and Bush I got us in a war with Iraq, government debt growth resumed at a modest pace (around 60% public debt as a % of GDP). Then came the housing bubble burst and the ensuing financial crisis and bank bailout that saw public debt to GDP rise from 62.7% in Q3 2007 to 100.45% in Q4 2012.

Politicians figured out that the voters don’t care or are too uninformed. Starting in 2000 you can see the concern of investors about out-of-control government spending and debt issuance. Gold rose from $270 per ounce in 2001 to almost $2,000 per ounce today.

Here is an interesting article from Reason Magazine on Biden’s spending and regulation wishes.

Biden is proposing $11 trillion in brand-new spending over the next decade. Among his biggest-ticket items are $1.4 trillion to expand Obamacare; $2 trillion for his version of the Green New Deal; $1 trillion in new Social Security and Supplemental Security Income spending; and 1.5 trillion more dollars for preschool, K-12, and higher education. He has also signed on to a $3.3 trillion stimulus spending plan pushed by House and Senate Democrats. 

That all comes after nearly $7 trillion in federal spending this past year, up from a then-record $4.4 trillion in 2019. To pay for this new largess, Biden has laid out $3.6 trillion in tax hikes over the coming decade, resulting in what the Manhattan Institute’s Brian Riedl calls “the largest permanent tax increase since World War II.” But Biden’s spending plan, as laid out in his campaign, is so out of control that it would still manage to increase the national debt by about $5.6 trillion by 2030, according to the Committee for a Responsible Federal Budget.

Biden should sing a version of Sting’s “Fields of Gold” called “Rivers of Debt.”

Are we turning Japanese??

Week Wrap-up! Bitcoin Soars Above 15,500 As Investors Seek Protection From Eroding US Dollar (Ethereum Up 6.90%, Silver Up 1.95%)

Bitcoin, the popular Cryptocurrency, soared to about 15,500 as investors fear an eroding US Dollar.

In percentage terms, Ethereum is up 6.90% today.

The US Dollar seems to be spiraling down from a cycle high.

But silver is up 1.95% while gold is only up 0.23%. Hi-yo Silver!

Iron ore is up 3.87%, but my neighbors would be rather angry if I had 5 tons of iron ore dumped on my driveway.

Speaking of Bitcoin,

Thousands of bitcoins — worth $1 billion — were seized by law enforcement this week in what the Justice Department said was the largest seizure of cryptocurrency in the history of agency. The cryptocurrency is linked to sales of illicit drugs and goods on Silk Road, a dark web marketplace that shut down in 2013.

Good Thing! Challenger Job Cuts Drop From 185.9% YoY In September To 60.4% YoY In October (Initial Jobless Claims Remain The Same, Bitcoin and Gold Up)

Good Thing! Challenger US Job Cut Announcements Year Over Year Percent Change fell from 185.9% in September to 60.4% in October.

However, unit labor costs (a favorite measure of The Fed) fell from +9.0% to -8.9%.

Both Gold and Bitcoin are up this morning.

And the Dow Mini is up over 300 points prior to opening.

Markets drive me crazy.

This may be the most misleading ad campaign of all time.

Commercial And Residential Real Estate Dependent on Fed Stimulus

The Federal Reserves is the largest holder of US Treasury debt and it looks like they are here to stay.

Both commercial and residential real estate have benefited from the massive expansion of The Fed’s intervention in financial markets since late 2008. Zero interest rate policies and massive balance sheet expansion ALMOST went away under Powell (2019), but Covid killed their exit plan.

No worries. The Fed is here to stay!!

Dow Mini Up 800 Points, Gold And Bitcoin Up Too

Everything is coming up roses as the US economy continues to expand. The Dow Mini is up around 800 points prior to opening. Gold and Bitcoin are also up.

The US Dollar tanked before stock market opening.

Contagion! Covid Strikes, Fed Reacts, Dollar Crashes, Bitcoin And Gold Rise (Hedge Disaster With Gold … And Bitcoin)

Covid struck in late 2019, but really hit markets hard in March. The Federal Reserve’s reaction to the Covid crisis (cutting of their target rate and expansion of The Fed’s balance sheet) has led to a crash in the US Dollar.

How do you hedge the negative effects of Covid and Fed intervention (two potentially lethal viruses?? Gold and Bitcoin, although gold has been trailing off lately.

Cryptocurrencies are taking it on the chin this morning, especially EOS.

This morning, the US Dollar (green for greenbacks) is up, Bitcoin (white) is down and gold (gold?) is recovering from an early decline.

As we know, Bitcoin is not a coin.

But gold is … gold.

Jesse’s Cafe Americain has excellent metals charts.

This post goes out to Brittany Murphy. No, not that one.

US Core Inflation Clocks In At … 1.7% YoY And Real Avg Weekly Earnings At 4.1% YoY, Rent Inflation Falls To 2.5% YoY (Taylor Rule Suggests Fed Funds Target Rate Of -0.51%)

Well, the Consumer Price Index less food and energy remain near the same level, 1.7133% YoY and is leading the Core PCE growth of 1.5934% YoY.

US Real Average Weekly Earnings YoY checked it at 4.1% YoY.

US CPI Urban Consumers Owners Equivalent Rent of Residences YoY fell to 2.5% YoY despite massive Fed intervention.

The Rudebusch variation of the Taylor Rule suggests that the Fed Funds Target rate should be at -0.51%.

On a side note, the US Dollar rose and gold got clubbed downwards.