Gold sheds 2% on signs of U.S.-China trade thaw

China delays trade – Gold price lowers

* U.S. and China agree to continue trade talks

* Silver falls over 0.6%, palladium gains about 2%

* Dollar index rises 0.4% (Updates prices)

By Sumita Layek and Arpan Varghese

Aug 13 (Reuters) – Gold fell as much as 2% in a reversal from six-year highs on Tuesday, after the United States said it would delay tariffs on some Chinese products and on news that both sides agreed to continue trade talks.

Spot gold was down 0.7% at $1,501.22 per ounce at 2:00 p.m. EDT (1800 GMT), having earlier hit its highest level since April 2013 at $1,534.31.

U.S. gold futures settled down 0.2% to $1,514.1 an ounce.

The Office of the U.S. Trade Representative said the Trump administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month.

“A thawing, perhaps reconsideration of the new proposed tariffs has drained the heat from the (gold) rally for now,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“While this does not dramatically dim the overall positive outlook for gold, it will temper its momentum in the short term.”

U.S. stocks turned positive and the dollar rose on the news, with further momentum also coming from news that both sides had agreed to conduct phone calls on trade again in two weeks.

“Gold will be trading in a defensive position until the next two weeks; there will be some buying at the dips but the explosive moves higher we’ve seen in the last two weeks is not expected with the trade talks hanging over the market,” said Bob Haberkorn, senior market strategist at RJO Futures.

Gold’s rise to over 6-year highs earlier in the day was triggered by a rout in the Argentine peso and unrest in Hong Kong.

Market focus is now on the U.S. Federal Reserve’s annual symposium next week for clues on the future trajectory of interest rates. Traders see a 86.2% chance of a 25 basis-point rate cut by the U.S. central bank this September.

Meanwhile, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, jumped 0.9% to 847.77 tonnes on Monday.

Among other precious metals, silver fell 0.6% to $16.96 per ounce, while platinum was up 0.2% to $853.81. Palladium gained 1.9% at $1,454.03 an ounce. (Reporting by Sumita Layek and Arpan Varghese in Bengaluru; editing by Alistair Bell, Grant McCool and Richard Chang)

Source: Reuters

Trade Wars Not Building Enough Fear To Push Investors Into Gold – Analysts

Trade Wars are not pushing investors into Gold

(Kitco News) – Heightened global trade tensions are pumping volatility into financial markets, but there is still not enough fear to drive gold prices materially higher, according to some analysts.

Falling equity markets are helping gold prices end the week in positive territory, but the market remains trapped in a channel, unable to break critical resistance levels above $1,290 an ounce. June gold futures last traded at $1,288.70, up 0.5% from last Friday.

Gold’s lackluster performance during a week that saw equity markets drop more than 3.5% is not inspiring a lot of investor confidence in the near term, according to some analysts.

Bill Baruch, president of Blue Line Futures, said that he expects gold prices to struggle as this is traditionally a slow season for the precious metal. He added that despite all the market uncertainty, investors continue to bet on equity markets.

“Many people see the weakness in equities as a healthy correction,” he said. “The S&P is only 3% from its all-time highs. There still isn’t a lot of fear in the marketplace that would really give gold prices higher.”

Baruch said that he is neutral on gold in the near term as there is “solid ground” supporting prices. He added that he would expect gold prices to rally after the summer lull.

Trade Wars Not Driving Gold Prices

Gold’s disappointing performance comes as markets digest the news that the U.S. government has increased the tariff to 25% on $200 billion of Chinese imports.

Adam Button, managing director of Forexlive.com, said that one of the reasons there is not a lot of fear of the higher tariffs is because they don’t actually take effect for a few more week.

“A lot can happen between now and June and one tweet can change the sentiment around trade,” he said.

Button said that investors will have to see weaker economic growth as a result of the tariffs before they seek safe-haven assets like gold.

Jonathan Butcher, principal economist at Wood Mackenzie, warned in a research note Friday that the new tariffs could have a significant impact on global growth.

“The tariffs introduced in 2018 had a clear and negative impact. There was a lag before the effects were realized, but China trade data showed a fall in volumes from the end of 2018 much greater than normally occurs at that time of year. This was not limited to China-US trade; there were clear spill-overs to other economies,” he said.

“We estimate that the negative impact of Friday’s tariff increase could be even greater. The 10% tariff of 2018 was not fully passed on to U.S. consumers – importers have absorbed some of the costs through margin compression. A tariff of 25% is much harder to ignore, and will cause more displacement and disruption to trade flows.”

The WoodMac economist said that escalating trade wars could drag economic growth to 2.3% to 2.4%, down from current growth forecasts of 2.6%.

U.S. Economy Remains Beacon Of Growth

David Madden, market analyst at CMC Markets, said that even in the face of a growing trade war, the gold market still suffers from the relative strength of the U.S. economy.

He added that even if the U.S. economy weakens, other major economies like Europe are expected to weaken at a greater pace.

“Even if the Fed does turn dovish, it would only be a matter of time before other central banks turn even more dovish and that continues to support the U.S. dollar,” he said. “When gold can’t surge higher when equities drop 400 points, that kind of tells you that the market doesn’t want to go higher.”

Madden said that in the current environment, gold prices could eventually push to $1,300 an ounce, but he added that he doesn’t see it going materially higher.

Button agreed that for many investors, the current economic worries are not strong enough to push gold higher.

He added that investors need to see a substantial drop in global economic growth that would prompt central banks around the world to loosen monetary policy.

Expected Rate Hikes Continue To Support Gold Prices

Although some analyst are not expecting gold prices to surge higher any time soon, the bearish case for the yellow metal is also not very strong.

Many analysts have said that rising volatility and the expectation that the Federal Reserve will cut interest rates by the end of the year continue to provide support for the yellow metal.

Bernard Dahdah, precious metals analyst at Natixis, said in a report Thursday that he thinks gold prices are current trading at their lows for the year. He added that prices should start to rise in the second half of 2019.

“We expect that the Fed will cut rates in December of this year. This will reduce the opportunity cost of holding gold and make the metal attractive. Moreover, the rate cut should put further pressure on the dollar, which will also suffer on the back of a widening budget deficit and slower growth,” he said.

The bank kept its current gold forecast for the year unchanged, seeing the yellow metal averaging $1,330 an ounce, rising to $1,380 in the fourth quarter.

Ole Hansen, head of commodity strategy at Saxo Bank, said that he also remain optimistic on gold and thinks it’s only a matter of time before prices break resistance above $1,292 an ounce. However, he added that it gold needs to see renewed interest from the paper market to make sustainable long-term gains.

“Despite gold’s dismal performance this week, I believe it will eventually break above $1,292 to challenge the April high,” he said.

The Final Say

With little major economic data to chew on, analysts have said that investors and traders will watch the news headlines for further insight into the trade negotiations between China and the U.S.

One of the economic reports that will garner attention next week will be Wednesday release of April retail sales. Markets will also receive housing construction data Thursday.

By Neils Christensen

SOURCE: Kitco News

Gold falls on dollar, stocks; on track for worst week since May 2017

Stock market and gold price fall

(Reuters) – Gold prices on Friday fell more than 1 percent to their lowest since the January, headed for their biggest weekly decline in more than 1-1/2 years, as the dollar strengthened and global stock advances spurred risk-taking.
Spot gold was at $1,293.38 an ounce at 2:18 pm ET (1918 GMT), having fallen below the key 1,300 level for the first time since Jan. 28. It is down about 2.6 percent…
2017.

The U.S. Bond Market Is Flashing ‘Danger’

U.S. Bond Market Flashes ‘Danger’

By Phoenix Capital Research | July 24, 2018

As I outlined in my bestselling book The Everything Bubble: The Endgame For Central Bank Policy, when the U.S. completely severed the U.S. dollar from the Gold Standard in 1971, U.S. sovereign bonds, also called Treasuries, became the bedrock of the financial system.

From this point onward, these bonds represented the “risk-free” rate of return, the baseline against which ALL risk assets (including stocks) were valued. What followed was exponential debt growth as the U.S. took advantage of this fact to go on a massive debt binge.

The U.S. Bond Market Is Flashing 'Danger'

ALL of this debt requires U.S. bond yields to continue to fall. Put another way, in order for this massive debt bubble to be maintained the bond markets must make it continuously cheaper/easier for the US to pay/service its debts.

Which is why the recent breakout of bond yields is a MAJOR concern.

The U.S. Bond Market Is Flashing 'Danger'

As you can see, the yield on the United States 10-Year has broken above its long-term trendline – in the WRONG direction. This chart is telling us that it has become more expensive for the U.S. to issue/service its debts.

Granted, this is not a systemic issue yet, but unless yields reverse soon, the Everything Bubble will begin to burst.

Source: Investing.com

Morgan Stanley Expects The Inverted Yield Curve—Harbinger Of Recession—In 2019

Morgan Stanley expects Inverted Yield curve in 2019

 

By Sue Change | July 12, 2018

10-year Treasury yield predicted to slide to 2.50% over the next 12 months

Morgan Stanley Expected The Inverted Yield Curve Harbinger Of Recession In 2019

Morgan Stanley expects the inverted yield curve, the Four Horsemen of the Apocalypse for the economy, to show up in 2019.

 

The inverted yield curve is the Four Horsemen of the Apocalypse of the economy — investors fear them because in the past they have often preceded recessions.

Strategists at Morgan Stanley on Thursday predicted the yield curve will invert by the middle of 2019, although they stopped short of issuing a recession warning.

An inverted yield curve is where long-term yields, typically the 10-year Treasury yield moves below short-term rates and tends to indicate a lack of confidence in the economy in the near term. The spread between the two durations has steadily narrowed this year, in part because of the Federal Reserve’s move to hike interest rates in keeping with its effort to normalize monetary policy.

However, Morgan Stanley strategists believe the Fed will curtail its normalization process sooner than expected and announce a halt as early as March.

“At its March 2019 meeting, we expect the Fed to (1) raise the effective federal funds rate target range by 25 basis points to 2.25-2.50%, (2) lower interest on reserves within the range by 5 basis points, and (3) announce that it will begin implementing its plan to end balance sheet normalization in April,” they wrote.

The strategists predicted the 10-year treasury yield will be at 2.7% by the end of 2018, versus 2.85% currently, and 2.50% by mid-2019, resulting in an inverted curve.

They also warned that investors are underestimating the size of the System Open Market Account required to keep EFFR within the Fed’s target range. The SOMA is a portfolio of assets that the central bank buys in open-market operations.

“We expect the SOMA portfolio to be just above $3.8 trillion at the end of 2020, assuming the Fed does not take rates to the zero lower bound by then,” said the strategists. “Our projection assumes that balance sheet normalization ends in September 2019.”

As such, Morgan Stanley is recommending investors to overweight Treasuries and underweight corporate bonds.

Source: MarketWatch

 

WSJ: Next Recession May Hit In 2020

Recession may hit in 2020

By Tyler Durden | Published July 1, 2018

The second-longest economic expansion in US history will most likely end in 2020 as the Fed raises interest rates to cool off an overheating economy, reports the Wall Street Journal which surveyed 76 forecasters.

Some 59% of private-sector economists surveyed in recent days said the expansion was most likely to end in 2020. An additional 22% selected 2021, and smaller camps predicted the next recession would arrive next year, in 2022 or at some unspecified later date. –WSJ

“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Bank of the West’s chief economist Scott Anderson, chief economist, who thinks a 2020 recession is likely.

As for the cause – 62% of forecasters said that an overheating economy would lead to Fed tightening, while other economists (at least 5%) said that another financial crisis, bubble bursting or disruptions to international trade would be the culprits.

WSJ: Next Recession May Hit In 2020

Recessions are notoriously difficult to predict, and sometimes are tricky to recognize even after they start. The recession that began in December 2007 wasn’t officially proclaimed by the National Bureau of Economic Research’s recession-dating committee until a year had gone by. Forecasters saw the chances of a recession rise back in 2011 and in 2016; both turned out to be false alarms. –WSJ

“Recessions occur because of unforeseen shocks, so by definition, there is no meaningful answer,” said Daniel Bachman – an economist with Deloitte who declined to estimate either the timing or cause of the next downturn.

WSJ: Next Recession May Hit In 2020

WSJ: Next Recession May Hit In 2020

The takeaway: while a recession isn’t imminent, the economy won’t expand forever – and the next downturn may arrive during the 2020 presidential campaign.

“Any year from 2019 onward is in play,” Lou Crandall, chief economist at Wrightson ICAP told the Journal.

On average, economists predicted gross domestic product will expand 2.9% in the fourth quarter of 2018 compared with a year earlier, up from 2.6% growth in 2017. The unemployment rate, which fell to 3.9% in April, was expected to slide further to 3.7% by the end of this year and 3.6% by mid-2019. The average risk of a recession in the next 12 months was pegged at 15%. –WSJ

The forecasters also predicted that the unemployment would rise slightly going into the next election and that the Fed Funds rate would top 3%.

WSJ: Next Recession May Hit In 2020

WSJ: Next Recession May Hit In 2020

One positive note: Economists think that sluggish US productivity should pick up over the next few years.

Labor-productivity gains averaged just 1.2% a year in 2007 through 2017, according to the Labor Department, a weak trend that threatens to restrain the pace of economic growth. After remaining flat in 2016, nonfarm business labor productivity rose 1.3% in 2017, and economists on average predicted annual growth will average 1.5% over the next five years. –WSJ

“More capital investment should help revive productivity,” said Lynn Reaser of Point Loma Nazarene University.

In fact, 71% of economists say there’s a good chance that productivity growth will exceed forecasts rather than disappoint.

Tax cuts

While Trump’s corporate and personal tax cuts provided a boost to the economy, most of the surveyed professionals said that it isn’t the sole explanation for the recent surge in US business investment. Most said that the tax-code changes were one of several major causes – with only 5% attributing the cuts to the primary driver.

WSJ: Next Recession May Hit In 2020

Source: ZeroHedge

Federal Debt To Reach $100 Trillion: CBO

Federal Debt to Reach $100 Trillion

By Stephen Dinan | Published June 26, 2018

Federal Debt To Reach $100 Trillion: CBO

The government is now staring at $100 trillion in total debt, the Congressional Budget Office said Tuesday, chronicling the disastrous trajectory of federal fiscal health.

The eye-popping figure, part of the CBO’s latest long-term budget projections that look out over the 30-year window, foresee plenty of grim news.

Spending will surge, while taxes will only tick up slightly, producing deep annual deficits that will amass into a potentially catastrophic debt burden.

CBO analysts said debt held by the public, which is 78 percent of gross domestic product today, will reach 152 percent in 2048. And given that GDP will be $65 trillion that year, it means a debt total of $98.8 trillion.

CBO also projected that Social Security will become insolvent early in the 2030s.

“Lawmakers need to come to the table and address this situation before it gets further out of hand,” said the Committee for a Responsible Federal Budget.

The government’s finances have been slipping for about a decade, dating back to the massive infusion of spending and tax cuts designed to counter the 2008 Wall Street collapse.

A brief respite when Republicans took over control of the House in 2011 has dissipated, and the GOP-led Congress over the last six months has approved deep tax cuts and major discretionary spending increases.

“Today’s report is another reminder about the true costs of handing out massive tax breaks to billionaires and large corporations,” said Senate Minority Leader Charles E. Schumer, New York Democrat.

Republicans countered that taxes, while historically low now, will be above average by the end of the three-decade window. They said that means the problem isn’t a lack of government money, but too much government payouts.

“One thing has been clear for years: Washington does not have a revenue problem; it has a spending problem,” said Rep. Kevin Brady, Texas Republican, and chairman of the House Ways and Means Committee.

The CBO didn’t take sides but did highlight the large projected growth in spending on entitlement programs such as Social Security and Medicare as major drivers of debt.

The government will pay out a staggering $4 trillion a year in Social Security payments and nearly $4.5 trillion in Medicare benefits in 2048, the CBO said. That would account for about half of the deficit that year.

Interest on the debt will also eat up the budget, rising from about $300 billion this year, or less than 2 percent of GDP, to $4 trillion, or 6.3 percent, in three decades.

All told, government spending will consume up nearly one-third of GDP in 2018 — approaching the level of some European governments.

Tax revenue, meanwhile, is projected to rise slowly — and will still be below 20 percent of GDP in 2048.

The numbers could be even worse.

The CBO used current law to make its calculations, anticipating the GOP tax cuts expire within a decade.

Should Congress choose to extend the tax cuts and to continue heightened spending envisioned in the latest spending law, the situation gets even bleaker.

The Committee for a Responsible Federal Budget says debt could reach about 200 percent of GDP — or about $130 trillion — in 2048.

As it is, debt at 152 percent — the CBO’s projection — would be the highest in U.S. history, “by far” surpassing even the worst years of World War II, the government analysts said.

“We knew already that federal debt was heading towards unsustainable levels,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, “but the new projections give us a picture of just how bad the problem will be in 30 years, when our children and grandchildren will have to foot the bill.”

Source: The Washington Times

The End Of The (Monetary) World As We Know It

Precious Metals reflect the value of a currency

By The FatCat Investor | June 25, 2018

The End Of The (Monetary) World As We Know It

The most significant event in monetary history since 1971 occurred a few weeks ago. An event that threatens to upend the global balance of power, the economy of the world, and your portfolio.

To understand the significance of this event and the potential scale of its consequences, a little monetary history is in order.

For at least 5000 years, gold and silver have been considered intrinsically valuable, and therefore have been used as a store of wealth and as money. Governments and societies throughout time have used actual silver or gold as their coined currencies.

This gave way to gold and silver backed currency––|the currency itself consisted of paper or other metals of little value but could be exchanged for an equivalent amount of gold or silver at any time.

The End Of The (Monetary) World As We Know It

This was the situation in the United States (and most of the major powers) in the late 1800’s. A twenty-dollar bill was worth one ounce of gold,[i] and could be exchanged for a physical ounce of gold at any bank. Coins themselves didn’t require such an exchange, as they were forged from silver, at a purity of 90%.

This was the system envisioned by our founding fathers and embedded into our constitution, Article I Section 10,

“No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”

This system limited the amount of currency our government could print to the amount of silver and gold it owned. This period (1880-1914) is known as the classical gold standard.

The Federal Reserve Act of 1913 changed the rules, allowing for a US Dollar partially backed by gold, at a ratio of 40%; for every ounce of gold in the treasury, $50 could now be printed instead of $20.

Then the world went to war. Redemption rights throughout Europe were suspended, as nations resorted to the printing press and debt to finance the fight.

The US was late to join the first world war (as well as the second), and in the meantime profited greatly, as Europe consumed American goods––in exchange for gold. And by providing loans to the countries at war, America flooded the world with dollars.

By the end of both world wars, America owned two-thirds of all the gold bullion ever mined.

In 1944, the world’s powers formalized a new monetary system with the Bretton-Woods Agreement. Under the new arrangement, the dollar officially became the world reserve currency––every currency would be pegged to the US dollar at a fixed ratio, and the dollar would be fixed to gold at $35/oz. Redemption rights for the physical metal would be limited to central banks.

Bretton-Woods didn’t mandate, however, a reserve ratio of actual gold that the United States would be required to hold in relation to the amount of US Dollars in circulation.

Over the next two and a half decades, the US would print 12 times more money than it had in its vaults (an 8.3% reserve ratio). As sole issuer of the world reserve currency, America could buy and spend without limit and without consequence.

Eventually, though, other countries became wise to the fact and unhappy with the arrangement. Most notably, French President Charles de Gaulle called for a return to the gold standard in 1965.

The fact that many countries accept as principle dollars being as good as gold…leads Americans to get into debt, and to get into debt for free, at the expense of other countries, because what the US owes them is paid, at least in part, with dollars only they are allowed to emit…We consider necessary that international trade be established…on an indisputable monetary base. . .GOLD. 

-Charles de Gaulle

Charles sent the French Navy across the Atlantic and successfully exchanged his country’s dollars for bullion. Other countries followed suit. From 1959 to 1971, America had lost HALF her gold reserves to redemption, a situation the United States could not allow to continue.

In 1971 Nixon changed the rules, suspending the rights of central banks to exchange their dollars for gold. Every currency was pegged to the dollar, but the dollar was no longer pegged to gold. Overnight, money worldwide became free-floating. The value of the dollar (in terms of gold) plummeted; the gold price exploded, from $35/oz. to $123/oz. by 1973. Dollar hegemony was under threat.

The United States needed another way to maintain control of the monetary system, one that would require countries to continue to conduct business in dollars, but absent of gold redemption.

She found her answer in oil.

Gold had 5,000 years of monetary history and universally recognized intrinsic value, but oil was the world’s most needed commodity, essential to a modern way of life. And, the size of the oil market dwarfs not just that of gold; oil is bigger than of the metal markets combined.

America was the largest consumer of oil on the planet, Saudi Arabia the biggest producer. An arrangement between the two countries in 1973 gave birth to the petrodollar:

-Saudi Arabia agreed to price its oil only in U.S. Dollars, and store their petrodollar revenue in U.S. Treasuries, thereby financing U.S. Debt.

-In exchange, the United States would ensure the continuity of the ruling house of Saud, providing military protection and American weaponry.

By 1975, all of OPEC had agreed to sell oil exclusively in dollars. This created an immense, sustained demand for Dollars because every country would have to buy dollars to buy oil.

The petrodollar’s reign has continued to this day. Incredibly, it appears to be defended by a mystical, supernatural force…kind of like all those guys that mysteriously died after unearthing King Tut, A particularly nasty bout of bad luck tends to follow countries that challenge the system.

After Iran announced it would be pricing all its oil in Euros instead of dollars, it came under fire from the west for its alleged nuclear program, resulting in a litany of sanctions and banishment from the international monetary system, when it was shut out of the swift payment network.

Saddam Hussein wanted to sell his oil in Euros, and Gadhafi planned to switch from dollars to a gold-backed dinar…we know what happened to them.

Other countries who’ve sought to skirt or undermine the petrodollar include Venezuela, North Korea, and Syria.

America’s hostility toward that group is, of course, purely coincidental.

And whilst the petrodollar was living happily ever after, bigger, more powerful countries became increasingly resentful of the dollar’s dominance in their affairs.

Like Charles de Gaulle before them, China and Russia have been openly critical of the dollar’s world reserve currency status.

Along with countries like Brazil and South Africa, Russia and China have actively sought to sidestep the dollar wherever possible, often with individual bilateral agreements, where two countries exchange goods with one another using only each other’s currency.

But these protests have stopped short of presenting to the world a replacement to the petrodollar––in other words, an alternative system. A move that bold should be planned for, calculated, organized.

In the background, some curious and unrelated events:

-Russia and China have been stockpiling gold, on a level unprecedented since WWII.

-In 2016 the Yuan was finally awarded a place among the International Monetary Fund’s Special Drawing Right Basket­­––a form of international money––alongside the US dollar, the Japanese Yen, the Euro, and Pound Sterling.

If central banks had a boss, it would be the IMF, likely the only institution with the power and reach to bail out central banks. In the event of a New Bretton Woods, China now has a seat at the table.

 

Fast forward to present day. America is no longer the world’s largest importer of oil, China is. And Saudi Arabia is no longer the world’s largest producer of oil, Russia is.

And it appears the time has come to make a play.

This week, China launched the Shanghai Crude Futures Contract. What is it?

It’s a way for the world to buy and sell oil, without using the dollar. The contract will be settled in Yuan. Short on Yuan? No problem, you can buy as much as you want…with gold.

The implications?

-Disgruntled countries can now buy oil without first buying dollars, and do so with a widely traded mainstream instrument, settled in the currency of the world’s 2nd largest economy.

-All the money diverted to this new system equates to an equal amount of money not buying dollars. A decrease in demand = downward pressure on the price of the dollar.

-Increased demand for Yuan and/or Gold will put upward price pressure on the currency, and is incredibly bullish for the metal.

-If enough countries follow China’s lead, the petrodollar monetary system America has enjoyed for 40+ years could dissolve overnight, and the dollar could lose its world reserve currency status.

The economic and political chaos that would accompany such an event….

Three days after launching the contract, the Chinese announced that they will begin to buy all their oil with Yuan, instead of the dollar, as early as this year.

And just today the headlines at Zerohedge read,

“China’s State-Owned Media Proclaims Petroyuan Will “Shake People’s Confidence In The US Dollar.”

It should come as little surprise that the same week the Petroyuan was introduced, Trump released a flood of tariffs on Chinese exports – the first in a series of retaliatory efforts we could expect, setting the stage for an all-out trade war between the world’s two largest economies.

There may be no easy way out of this one, but as an investor, you can protect yourself. If your portfolio is entirely composed of instruments denominated in US dollars, now might be a good time to rethink the mix.

And what’s bad for the US dollar could bode well for precious metals, which is why keeping at least 10% of your portfolio in physical bullion is a precaution worth taking.

-Christoph Grizzard, The FatCat Investor

Source: ZeroHedge

Hedge-Fund Boss Who Predicted ’87 Crash Says Next Recession Will Be ‘Really Frightening’

Hedge Fund Boss says next Recession will be ‘really frightening’

By Mark DeCambre | Published June 19, 2018

‘We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers’ says Jones.

Hedge-Fund Boss Who Predicted '87 Crash Says Next Recession Will Be 'Really Frightening'

Paul Tudor Jones

Paul Tudor Jones, a hedge-fund luminary, on Monday said the next economic downturn confronted by the U.S. could be an ugly one.

“The next recession is really frightening because we don’t have any stabilizers,” he said, speaking at an event sponsored by Goldman Sachs GS, -1.33% and hosted by its CEO Lloyd Blankfein called “Talk at GS.”

“We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers,” Jones said.

The billionaire investor said the dynamic created by the Federal Reserve, as it attempts to normalize interest-rate policy from the 2007-’09 financial crisis, is unsustainable, referring to valuations for stocks that many on Wall Street view as pricey.

Jones’s comments come after he told CNBC last week that stock market and bond yields are set for a ‘crazy’ rise.

“I think you’ll see rates go up and stocks go up in tandem at the end of the year,” Jones said last Tuesday. He made the case that real rates remain historically low and that rising bond yields, which move inversely to bond prices, won’t deter investors from scooping up stocks.

That is conducive to equities being “jacked up and ready to go,” he said during his interview with Blankfein on Monday.

On Tuesday, the Dow Jones Industrial Average DJIA, -1.15% ended the session down 287 points, or 1.2%, at 24,700, wiping out all the blue-chip benchmark’s 2018 gains as heightened concerns about trade tensions between China and the U.S. roiled global markets.

The Nasdaq Composite Index COMP, -0.28% meanwhile, closed off 0.3%, while the broad-market S&P 500 index SPX, -0.40% finished Tuesday trade down 0.4%.

Jones is widely credited with predicting, and profiting, from the stock-market crash on Oct. 19, 1987, which saw the Dow lose nearly 23% of its value, marking the largest one-day percentage decline for the blue-chip benchmark in its history. Jones founded Tudor in 1980 and became known for trading everything from currencies to commodities. His record has featured middling returns and an exodus of billions from his hedge fund in more recent years. According to a Forbes list of billionaires, Jones boasts a net worth of $4.7 billion.

Source: MarketWatch