As per above I'd wait until the blood has well and truly drained from the streets. At the moment we are still in the blood letting stage. The GFC took about 6 months from peak to trough.
My take on the situation is that the financial part of this crisis started before the virus came along when the Fed started bailing out (intervening in) the repo market. Some estimates have the quantum of money supplied to this market so far at about US$650 billion, which is staggering considering the hogwash the market was fed about US banks having fortress balance sheets. The Fed intervention in the repo market in my mind is undoubtably because a large financial institution was about to fail, potentially triggering contagion in the system. The difference between this crisis and previous ones is that the trigger for the broader market crash is external, ie not related to the financial system itself, however it has the ability to caused real world economic effects because of people's reactions to containment of the virus etc. The banksters fundamentally have little control on how the "street" reacts and therefore no control over the economic impacts. The banksters have finally learnt that the monster they created is not easy to keep caged. The canyons of Wall St have been breached. It also didn't take very long at all for the long end of the US debt market to become badly effect with yields on 10 year notes hitting record lows, the flight to safety was instant. The problem however is that government debt markets and equity markets coalesced at the end of 2018 when yields on US equity markets fell below 10 year treasury yields. That's when the equity markets should have turned over, instead we have had 2 years of rapid bubble inflation instead. If the market had have turned over at the end of 2018 as logic should have dictated then we wouldn't be suffering this disorderly event now and things would be far more manageable. The problem with equity market yields being less than debt market yields is that it just doesn't make sense in traditional market parlance, although the talking heads of Wall St just fobbed that event off like all the other irrationalities which have come into existence post GFC. Basically you can't have stock markets and government debt on par with one another and if you do you have created an unnatural equivalence. Somehow the market has accepted this situation as normal, remember in 2016 Japan started using government debt (printed money) to make ETF purchases in US stock markets. How mad was that, an effective admission by the BOJ that the best use for printed money they could find was to help inflate a foreign equity market. Why would the bank of Japan issue debt over their citizens for this bizarre purpose? In conclusion when you have zero/negative interest rates and yields in equity markets fall below yields in government issued debt markets you've got no differentiation in these classes of assets anymore. I suppose the only difference then is which asset class can become less valuable the fastest.
As mentioned in another thread physical gold is a great contrarian tangible asset which when push comes to shove can sit outside of the banking system all together because if you buy an oz of gold and bury it in your backyard its yours and there are no counter parties that own it or have any right to it although the banksters have constructed derivative markets where the price is manipulated through leverage. The thing is however when those derivative markets blow up or when the primary collateral of those markets becomes less attractive than gold itself then the price of gold can start to float to its own level. We are still some way off this situation occurring but it could happen as part of this market rout if it goes really deep IMO. In the meantime gold is also a good source of liquidity so it can be dragged down along with everything else but still maintain an attractive bias relative to other asset classes. I'm happy with its current price considering all the things that are going on at the moment. Gold stocks on the other hand were in their own bubble territories before the crisis as I'd been saying if you follow some of my commentary on other stocks, so I'm not at all surprised by the apparent counterintuitive fall in gold stock prices. Gold stocks are fundamentally just overvalued paper like everything else and when US ETF funds get hold of paper it is treated with the same disrespect and contempt as all other paper when the brown stuff hits fan.
In this situation, assuming things are going to get worse before they get better is a sensible and safe bet IMO. Wait for the blood to drain and the streets to be swept clean before throwing hard earned money at this market IMO. Most investors find the habit of speculation hard to break because the banksters have trained it into us like Pavlov's dogs but in markets like these that habit may end up biting you harder than you think. So far despite the hefty falls this rout has been pretty tame (aside from oil stocks) as no big name has yet fallen, ie declared bankruptcy. If a big name goes down watch this space, this will just be the beginning. The best place to watch for the next and most dangerous wave of selling are the share prices of third party insures in the US, some of these names have suffered daily deep double digit losses. Watch that space, names like LNC, MET, PRU, AMP, AIG.Esh
RSG Price at posting:
71.5¢ Sentiment: None Disclosure: Not Held
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