Keiser Report | MOAR MONEY!!! | E1538

[Danke]

Lawrence Lepard (llepard) starts at 13 minutes in.

[Danke]

Lawrence wrote a quarterly update and released it on March 31, 2020. It is a must read and you can email him at llepard@ema2.com and request a copy. If you are an accredited investor you may want to know that for 2019 the fund’s return was 97%. Or you can just go here.
A year ago I published an easy to read book I called Basic Investing in Resource Stocks, The Idiot’s Guide. You can read the book in a couple of hours; it’s not rocket science or brain surgery. It has just about the highest rating of any book I have ever seen on Amazon. That speaks well of how readers valued it, I think.
In the book one of the chapters talks about the predictions of “Experts”. In early 2011 someone approached me and asked me to forecast the price of gold. They had gone to 148 other “Experts” and each had picked a number. I’m not that smart and I don’t come equipped with crystal balls so I passed. No one can predict the future.
In his quarterly report, Lawrence Lepard had some interesting thoughts about the state of the economy and what gold might do. It’s a 26-page paper so I’m going to cut and paste the pertinent bits only.
QUARTERLY OVERVIEW
The US equity and most major stock markets crashed in the first quarter of 2020. The largest credit driven financial bubble in the history of the world just burst. The last time something like this happened was 1929, nearly 100 years ago. In the US, everything appeared to be fine until the peak on February 19th and then the bottom fell out. In the span of five weeks, the stock market (S&P500) plunged 34% from peak to trough. The COVID-19 virus was the trigger, but the US stock market was extremely overvalued and vulnerable. The three best performing assets in the quarter were cash, physical gold and government bonds. If you had money in most other financial assets, you lost money.
What happened in the first quarter amounted to a global margin call, as investors rushed to sell assets and raise cash or pay off debt. It was one of the strongest deflationary impulses in the history of markets. In many ways it resembled the crash of 1929 with the differences being that this one happened much more quickly and was not quite as deep. In 1929, the initial total decrease was 45% but it took 2.5 months. This one happened in five weeks. Note that in the Great Depression that began in 1929, from top to bottom, the Dow fell by 89% but it took three years to do so (with six intermittent big rallies in the stock market of between 16% and 48% during that multi-year bear market).
… gold stocks were not spared in the first quarter of 2020 and, in fact, did worse than the general market. This is similar to what happened in the 2008 GFC. Gold and gold stocks fell, only to recover quickly within the next three months. They then went up 2.8x (gold) and 4.0x (gold stocks) over the next three years.
…CREDIT BUBBLE, BUSINESS CYCLES AND THE VIRUS
What happened here (2008-2020) is that a classic credit bubble was blown as the byproduct of the Fed’s ZIRP policy (2008-2015). Artificially low interest rates fooled business people into misallocating credit and over expanding. As long as the free money flowed everything was fine.
…In the eyes of the Fed “Deflation is the Devil”; thus, it is easy to anticipate the Government’s fiscal and monetary response. They will be required to deficit spend and print money with almost no end. Perhaps, they likely will resort to other measures, as their only alternative is to watch collapsing asset values and deflation wreak havoc on the economy. This would closely be followed by massive unemployment and widespread bankruptcies (i.e., a Depression).
With this current crisis, the amount of new money that needs to be created, to make up for the potential losses, is staggering. Credible analysts suggest that it could be in the range of between $10 and $40 Trillion. All to maintain the current pricing structure (i.e., no severe deflation). I believe there is some chance that it could be larger than these figures.
…but the bottom line is that the Fed just agreed to back stop: the entire banking system; US government debt market; US Agency debt market; commercial paper market; money market funds; municipal bond market; foreign central banks; primary dealers (brokerage firms); student loans; car loans and other asset backed securities. In some cases the amounts involved are unlimited and in other cases there are limits which the Treasury and Fed have implied would be raised, if necessary.
What you have right here is the largest open ended, coordinated money printing operation in the history of mankind. The Fed is almost nationalizing a large portion of the US securities markets in order to prevent further collapse or a deflationary melt down. By the way they are behaving and coordinating their actions, it appears that the US Treasury and the Fed have effectively merged and become one entity.
…This rate of growth in the Fed balance sheet is truly staggering. But wait, there is more. In conjunction with the programs above, the US Treasury announced a plan to reimburse employers for sick pay leave in conjunction with the COVID crisis. They also delayed the 2019 income tax filing deadline from April 15 to July 15. Finally, the US Congress got involved and passed the CARES Act which provides the following:

• Direct payments to taxpayers of $1,200 per individual or $2,500 per couple plus $500 per child. This is pure “Helicopter money” albeit a compassionate and necessary safety net, IMO; arguably, should be much larger.

So far I have agreed with just about everything Lawrence Lepard included in his quarterly review right up to the point he say the safety net should be much higher.

Of course a giant reason I think so much of Lawrence Lepard is that the conclusions he has come up with pretty much jibe with what I have been predicting for years. I’m perfectly comfortable knowing that if I happen to be dead wrong and look like an utter fool, at least I have someone I can hold hands with secure in the belief that great minds come from the same gutter.

Full article: http://www.321gold.com/editorials/moriarty/moriarty050420.html

[Madison320]

I don't see how we can possibly avoid hyperinflation.

I always make the case that if printing money doesn't raise prices proportional to the amount printed then the logical conclusion is we can all stay home and let the government print for us.

Now it looks like we're actually going to test that theory.