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Kill the Disease or the Patient?

04-07-2020

The SPOOs were higher overnight and in literally the blink-of-an-eye today they were up almost 3% before backing off to gain a little over 1% by midday. In the afternoon, the rally fizzle, and the gains evaporated, with the market closing fractionally in the red.

The Lesser of All Evils Away from stocks, green paper was weaker. On that subject, I've touched recently on my skepticism regarding the supposed dollar shortage that has so many people's hair on fire. I continue to think the argument has essentially no merit, but I guess we'll find out as we move forward. Of course, no currency has a real advantage over the other, because all the major ones are run by central bankers who are out of their minds with their arrogance, dogma, and reckless money printing.

Yes, I know, in times of crisis the Fed's actions seem to make sense, but all you have to look at it is how big the problems were, which they created, when we entered the crisis. The pandemic caused extreme economic damage, but the financial turmoil has been (and will be) exacerbated due to the 10-year bubble we just went through, although by now every reader already knows that.

Turning back to the action, the bond market was weaker today and the metals saw quite a wild ride. The nearby gold futures contract traded to $1,740-ish last night, which is a $50 premium over the spot price, indicating that there is still some pain in the futures complex. Today in New York, both spot gold and the futures were a little weaker, but the spread remained about $30. As for silver, it added a few pennies. The miners were quite strong early on but gave up ground as gold did and most finished a little lower.

Federal Solutions to Representative Problems I would like to make a comment about the governmental approach to the virus. I think it's clear that shutdowns, masks and social distancing have been an effective strategy thus far, but we don't really know where we are because, as has been the case all along, all the data we're seeing is a couple of weeks old. That can only be changed by serious across-the-board testing and we're not in a position to do that yet.

That said, I think in many locales the powers that be are freaking out and extending shutdowns at this moment in time, which seems like a very bad decision given how the data is rolling in. Some cities will certainly require more time, but others probably don't and at some point we need to think of the collective economic damage that is being done to so many individuals despite the government's recent actions to help them.

Recovering Their Tracks As I noted yesterday, it seems like some of the people in charge are trying to make up for their poor decisions early on. As someone who was concerned early about the virus, I believe we now have to think long and hard about how to make sure that the economic damage isn't needlessly exacerbated. It's a complex topic, but we need to hope that those making decisions are thinking about both sides of the problem.