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2.28.20 - Stocks Face Biggest Weekly Losses Since 2008

Gold last traded at $1,581 an ounce. Silver at $16.59 an ounce.

NEWS SUMMARY: Precious metal prices eased back Friday as demand weakened and some investors sold gold to maintain liquidity. U.S. stocks tumbled further - ending the market's worst week since the 2008 financial crisis - as worries over the coronavirus and its impact on the economy continue to rattle investor sentiment.

Goldman sees $1,800 gold as 'haven of last resort' -Straits Times
"Goldman Sachs boosted its gold forecast to $1,800 an ounce as the coronavirus, depressed real rates, and increased focus on the US election continue to drive demand for the metal as a haven. Gold is trading near a seven-year high, supported by an increasing number of coronavirus cases worldwide that threaten to curtail global economic activity. The metal has outperformed traditional haven currencies including the Japanese yen and Swiss franc as 'the haven of last resort,' Goldman analyst Mikhail Sprogis said in a note on Wednesday. The bank raised its 12-month projection by $200, and said 'in the event that the virus effect spreads to Q2, we could see gold top $1,800/oz already on a 3-month basis.' The bank expects prices to climb to $1,700 an ounce in three months, and to $1,750 in six months. It previously forecast $1,600 for both time frames. Goldman also raised its silver forecast."

the economist The virus is coming -The Economist
"In public health, honesty is worth a lot more than hope. It has become clear in the past week that the new viral disease,covid-19 will spread around the world....Officials will have to act when they do not have all the facts, because much about the virus is unknown. A broad guess is that 25-70% of the population of any infected country may catch the disease. China's experience suggests that, of the cases that are detected, roughly 80% will be mild, 15% will need treatment in hospital and 5% will require intensive care. Experts say that the virus may be five to ten times as lethal as seasonal flu, which, with a fatality rate of 0.1%, kills 60,000 Americans in a bad year. Across the world, the death toll could be in the millions. If the pandemic is like a very severe flu, models point to global economic growth being two percentage points lower over 12 months, at around 1%; if it is worse still, the world economy could shrink. As that prospect sank in during the week, the S&P 500 fell by 10%....China's experience holds three important lessons - to talk to the public, to slow the transmission of the disease and to prepare health systems for a spike in demand. A good example of communication is America’s Centers for Disease Control, which issued a clear, unambiguous warning on February 25th....The best time to inform people about the disease is before the epidemic. One message is that fatality is correlated with age. If you are over 80 or you have an underlying condition you are at high risk; if you are under 50 you are not. Now is the moment to persuade the future 80% of mild cases to stay at home and not rush to a hospital....China's second lesson is that governments can slow the spread of the disease. Flattening the spike of the epidemic means that health systems are less overwhelmed, which saves lives....The third lesson is to prepare health systems for what is to come. That entails painstaking logistical planning. Hospitals need supplies of gowns, masks, gloves, oxygen and drugs....This virus has already exposed the strengths and weaknesses of China's authoritarianism. It will test all the political systems with which it comes into contact, in both rich and developing countries. China has bought governments time to prepare for a pandemic. They should use it."

Stocks Face Biggest Weekly Losses Since 2008 -Wall Street Journal
"Stock markets around the world extended a punishing selloff, dragged toward their worst week since the financial crisis by mounting investor unease about the economic fallout from the coronavirus epidemic....'We're drinking from a fireman’s hose this morning,' said Patrick Spencer, managing director at U.S. investment firm Baird...Fears about the coronavirus have rapidly mushroomed, with investor anxiety that its spread will dent economic growth around the world strengthening as new cases cropped up. Goldman Sachs Group Inc. said it’s now expecting 0% corporate earnings growth in 2020. Investors have been trading at a frenzied pace, fueling the swift decline. Stock trading volumes jumped to a year-long high on Thursday while listed options trading this week soared to some of the highest levels ever. The frenetic trading helped push the S&P 500 down more than 10% from its recent highs at unprecedented speed, with the S&P 500 falling from a record into a correction in just six sessions....Some investors have ramped up bets that the Federal Reserve will slash rates again this year, after decreasing them three times in 2019. But some analysts warn that central banks, which have cut rates and launched massive asset-purchase programs in recent years, might not be able to stem losses in the face of an outbreak that has a jittery public canceling travel plans and potentially curbing spending. 'I personally can't see why cheap money will stop this rout because this is the type of uncertainty that isn't economic. It isn't about Trump and trade uncertainty. This is about you and I deciding that we are going to change our behaviors for a while,' said Neil Dwane, global strategist at Allianz Global Investors."

Coronavirus Prompts a Whole City to Try Home Schooling -Wall Street Journal
"In Hong Kong, the home of schools that are the envy of high-achieving and aspirational parents everywhere, education is making a huge shift. To the dining room. Concerns about coronavirus have led to a two-month school closure for the city's 800,000 students, prompting a crash course in digital learning. Instead of calling off lessons, many schools expect students to keep up their work online, sending them assignments to complete and submit for grading. Six-year-olds are writing nonfiction books and toddlers are having live video interactions with nursery-school teachers. The academic experiment has children and their parents, many of whom also have to work at home because their offices are closed, crammed into the same space. It's a potential harbinger of what might face the U.S. if the virus continues to spread....Hong Kong, a densely populated city with 7.5 million people, has so far reported 91 confirmed coronavirus cases. Following a week-long Lunar New Year holiday, the government closed all schools starting Feb. 3 and said they won’t reopen until it is safe for students to congregate again. The earliest date schools could reopen is April 20....In mainland China, schools were on holiday until mid-February but now those closures have been extended and some are experimenting with online learning. South Korea has also closed some schools."

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2.27.20 - Gold Could Skyrocket as Market Crashes

Gold last traded at $1,649 an ounce. Silver at $17.84 an ounce.

NEWS SUMMARY: Precious metal prices rose Thursday on bargain-hunting and safe-haven buying. U.S. stocks fell into correction territory as investors worried the coronavirus may be spreading in the U.S. amid a slew of corporate and analyst warnings.

Gold Price Could Skyrocket as Stock Market Crash Looks Imminent -CCN
"A flurry of green days since Feb. 5 saw the yellow metal rise to almost $1,690 per ounce. This was the highest price since January 2013. Surging gold prices also coincided with a U.S. stock market crash as investors finally opened their eyes to a potential coronavirus pandemic....There are plenty of headwinds that can crash the U.S. stock market. A market crash will likely fuel another gold rally. Despite the Chinese government's best efforts, the world's second-largest economy has come to a dead stop. The 'world’s factory' is not operating anymore, and businesses around the globe have started feeling the effects of it....As the world enters a supply shock, 94% of the Fortune 1,000 companies are already witnessing disruptions in their supply chains. The situation will get a lot worse if the measures to contain coronavirus fail. As per Nikkei, over 85% of Chinese small-and-medium-sized firms expect to run out of cash within three months. Worse, a third of these companies expects to run out of money within a month. These businesses employ 80% of China's workforce. So their bankruptcy can cause the entire Chinese financial system to implode. The repercussions of that will be felt across the globe and gold is the safest available option to hedge against it....The economic headwinds will force global central banks to slash interest rates; monetary easing will cause gold price to rally. Lower interest rates will likely not help the stock markets this time. If companies are unable to operate due to coronavirus, printing money and lowering interest rates will have little effect. Amid mounting global uncertainties, more investors appear to be turning to gold at the expense of stocks."

black swan Containing the Coronavirus: What's the Risk to the Global Economy? -Wharton
"The markets' movements mirror the uncertainty that prevails and persists not just in the U.S. but all over the world. Several weeks into the coronavirus outbreak that has brought the world's second largest economy to its knees, some of the most basic aspects of the virus remain unknown. It's not yet clear how widely beyond China COVID-19 will spread; this week, numbers of infected individuals have surged outside China. Still, exactly how it is transmitted, how easily, and how lethal it might be are aspects of this coronavirus that remain to be uncovered, according to University of Pennsylvania scientists. As the human toll mounts, so does the economic damage. The business realm, of course, tends to shudder in the face of uncertainty, and right now, with reports on the seriousness of the coronavirus evolving each day if not each hour, the eyes of commerce are on epidemiology. 'This has many economic implications,' says Wharton management professor Mauro Guillen. 'It has implications not just for China but for the entire world...Some observers describe it as a classic 'black swan' - a random event that is completely unpredictable....With moneyed Chinese travelers forced to stay home, European tourism has taken a hit. 'It's seen as on par with an earthquake, a situation of emergency,' Mattia Morandi, spokesman for Italy's ministry of culture and tourism, told The New York Times. Supply chains in the retail sector and others have been disrupted, factories in China have gone quiet, and passenger air travel has been curtailed....Economic disruption related to the coronavirus is expected to rob the world economy of growth for the first time since 2009, according to London-based research firm Capital Economics....'Many of us have been saying for years that it's only a matter of time,' says Penn professor of medicine and infectious disease specialist Harvey Rubin, referring to the arrival of a serious epidemic or pandemic. 'If there is some message here, it's that this is totally predictable.'"

The Jig Is Up! Covid-19 And The Defenestration Of The Central Bankers -Stockman/Zero Hedge
"Let it be said that historians will surely marvel - and at some point soon - about the grand delusion of the present era. Namely, the near universal belief that central bankers could print, peg and palaver the main street economy into unfailing expansion and ever rising prosperity and that there were essentially no macro-risks to soaring stock prices that their toolkits couldn't contain and counteract. That misbegotten belief had huge untoward consequences. It made economies brittle with too much leverage, financialization and speculation; and fragile with too few shock absorbers and insurance mechanism such as just-in-case inventories, second suppliers and local sources for physical production and back-up liquidity lines and balance sheet reserves for financial operations. Then came the Black Bat of 2020 with its toxic economic contagion. Racing with virtually lightening speed through an infinitely complex and deeply integrated global supply chain anchored in the Red Ponzi, the breakdown of economic activity is already proving that the central banks are not omnipotent after all. Just as they cannot print antibodies to stop the coronavirus disease, they can't print raw materials, intermediates, components and sub-assembly to restart broken supply chains....The predicate of central bank omnipotence should now be swept into the dustpan of history. Not only can the Fed not repair and revive disrupted supply chains, but it can't even accomplish the conventional tasks it has defined for itself....That is to say, by imperiously violating over the last 30 years every law of sound finance, honest money and common sense that the world had learned over the centuries, the central bankers have ended up creating a monster which will be bring on their own demise. And none too soon."

Chinese bank to destroy cash in areas hit by coronavirus -New York Post
"China's central bank will reportedly destroy some cash in areas hard-hit by the coronavirus to prevent contagion. People's Bank of China has ordered the return of paper currency in circulation at hospitals, animal markets and buses near the country's hot zones in order to destruct potentially-contaminated bills, the South China Morning Post reported. During the quarantine, the cash will be subjected to a disinfection process that involves ultraviolet light. 'Money from key virus-hit areas will be sanitized with ultraviolet rays or heated and locked up for at least 14 days, before it is distributed again,' PBOC deputy governor, Fan Yifei, said. Nearly 7.8 billion yuan, or $1.1 billion, was removed from circulation in the Guangdong province between Feb. 3 and 13, while another 3 billion yuan, $429 million, or was put back into circulation, South China Morning Post reported. The government has also halted the transfer of cash across provinces, as well as between cities most impacted by the epidemic, according to Bloomberg."

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2.26.20 - How Do You Price a Pandemic Vaccine?

Gold last traded at $1,644 an ounce. Silver at $17.86 an ounce.

NEWS SUMMARY: Precious metal prices steadied Wednesday after recent short-term profit taking. U.S. stocks tried to find some stability after two consecutive days of sharp selling.

A Few Questions for the Many Critics of the Gold Standard -Tamny/Real Clear Markets
"The fact that current Federal Reserve Board nominee Judy Shelton has long expressed support for a gold-defined dollar has propelled the 'gold standard' back into the economics discussion. Some who support a commodity anchor for the dollar side with Shelton, while all-too-many who disagree with Shelton have dismissed the notion of a gold-defined dollar as the stuff of witless cranks. Up front, count yours truly as an energetic supporter of Shelton and a return to a commodity definition for the dollar....Why gold? This is a question that's been answered by producers over millennia. Producers stressed stability of value when it came to money...Money defined in terms of gold would be heavily circulated precisely because the definer of it was 'least influenced by any of the causes that produce fluctuations in value.'....Stated simply, supporters of a gold standard, commodity standard, or currency stability more broadly seek just that given our view that it elevates money to its highest purpose as a facilitator of the exchange and investment that pushes people and physical resources to their highest use....Stable, credible currencies are logically the most 'supplied' or circulated currencies, while floating, volatile, uncertain currencies can rarely be found in the marketplace....Which leads to the questions for gold-standard critics: 1. Why money? In particular, do gold-standard critics believe money is a medium of exchange? If no, what is money? 2. If yes, do critics agree that underlying monetary exchanges is the exchange of goods and services for goods and services? 3. If money largely exists to facilitate exchange, why do gold-standard critics think that gold emerged globally in the marketplace of currencies? 4. If gold is a past tense concept, as in if it is no longer necessary as an anchor for currencies, why were currency trading markets rather non-existent before 1973? And then why is currency trading a $5 trillion/day industry today? In short, if gold is some barbarous relic, why all the trading among currencies meant to mitigate their modern instability; instability that is plainly a consequence of a lack of a commodity anchor?"

coronavirus C.D.C. Tells Americans to Prepare for Coronavirus Outbreak -New York Times
"The coronavirus almost certainly will begin spreading in communities in the United States, and Americans should begin preparations now, officials at the Centers for Disease Control and Prevention said on Tuesday. 'It's not so much of a question of if this will happen anymore but rather more of a question of exactly when this will happen,' Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases, said in a news briefing. The news caps weeks of fear that the coronavirus spreading from China may become a pandemic, disrupting the global economy and political landscape in ways that are difficult to forecast. Iran, South Korea and Italy are now grappling with clusters of infection, even as the epidemic in China's Hubei Province seems to be slowing....Officials at the C.D.C. said they did not know whether spread of the disease to the United States would be mild or severe. But Americans should be ready for a significant disruption to their daily lives, she added. 'We are asking the American public to prepare for the expectation that this might be bad,' Dr. Messonnier said....'This is an unprecedented potentially severe health challenge globally,' Alex M. Azar II, the health and human services secretary, told a Senate subcommittee....There are persistent doubts about the accuracy of infection figures reported by China's government, raising the possibility that the true magnitude of the outbreak remains underreported."

How Do You Price a Pandemic? -Kolchinsky/City Journal
"The pandemic unfolding in China makes a compelling context for the drug-pricing debate in Washington, in which one side insists that we don’t need innovation if patients can't afford it, implying that we have better things to spend our money on than supposedly overpriced medicines. Do Americans really believe that, though - especially under current circumstances?....What the Wuhan crisis shows is that we are all patients with a common symptom - fear, which many are suffering from now over the prospect of a deadly virus, COVID-19, terrorizing communities and families. Fear comes with its own costs, as the global economy is already discovering, with travel bans and quarantines. A treatment or vaccine would ease our minds, even if most of us don't wind up using it. How should we price the value of peace of mind? Health economists don't know. Reports suggest that the coronavirus kills 2 percent of those whom it infects, though its mortality rate may be lower than that - more like 0.5 percent to 1 percent. Still, if you have 60 people in your circle - colleagues, friends, family members - then a 0.5 percent mortality rate means that there's a 25 percent chance that one of those people will die of coronavirus...It's hardly irrational, then, to think about this virus, to talk about it and worry about it - and yes, to start washing our hands for the recommended 20 seconds. But that's not all we can do. Most people don't realize that America has been preparing for Wuhan for decades...More than two dozen companies are busy applying their tools to the challenge of stopping COVID-19....Considering how important it is to pay for the novel medicines that keep our biotechnology sector up and running, it's wrong to ask the vulnerable, sick, and poor among us to pay for the infrastructure that brings all of us peace of mind. So Congress and other policymakers should beware of reformers seeking to define 'fair' prices for pandemic vaccines or any other drug in our growing armamentarium...The surest way to discourage scientists and investors is by undervaluing their solutions. We'll appear to have saved some money, but we'll pay with diminished peace of mind."

Rivals Focus on Sanders at South Carolina Debate -Wall Street Journal
"Sen. Bernie Sanders bore the brunt of the attacks from his presidential rivals during a cacophonous debate that highlighted his rival candidates' anxiety over the possibility of a self-described democratic socialist facing President Trump in November. Michael Bloomberg, the former New York City mayor, also endured several jabs Tuesday night as the other candidates on stage in Charleston, S.C., sought to distinguish themselves in what is likely to be their last national appearance before two defining voting days that may force some to withdraw. 'We are looking at a party that has decided that we're either going to support someone who is a democratic socialist or somebody who has a long history of being a Republican,' billionaire activist Tom Steyer said, referring to Messrs. Sanders and Bloomberg. 'If we cannot pull this party together, if we go to one of those extremes, we take a terrible risk of re-electing Donald Trump,' he added later....The urgency of the moment - days ahead of the South Carolina primary and a week from the delegate-rich Super Tuesday contests - was clear as the candidates jockeyed for airtime by interrupting, insulting and provoking one another, often speaking over their time limits and their rival candidates. Mr. Sanders, coming off his resounding win in Nevada last week that cemented him as the front-runner, heightened the stakes for the others on the stage....The candidates did agree on one thing: Mr. Trump needed to take the threat of the coronavirus more seriously. Federal health authorities said Tuesday they expect a wider spread of the coronavirus in the U.S. and are preparing for a potential pandemic."

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2.25.20 - Will Gold Prices Hit $2,020/oz. in 2020?

Gold last traded at $1,651 an ounce. Silver at $18.22 an ounce.

NEWS SUMMARY: Precious metal prices held most of the previous day's gains Tuesday in cautious trading. U.S. stocks extended losses amid global growth fears following the market’s worst day in two years.

Gold May Hit $2,020 In 2020 -Seeking Alpha
"It didn't seem possible this time last year but, yes, $2020 gold is no longer a 'pie in the sky' number. The adage 'good as gold' actually means something again. Gold is currently the strongest commodity on the board with the exception of palladium. That gold is rallying in the face of a surging dollar is even more impressive. Gold's break over new highs means it's within shouting distance of our next upside objective of $1,650 per ounce...We are adding a new $1,950 per ounce objective to our existing $1,650 and $1,775 targets...Five Fundamental Factors Power the Bull Market in Gold; 1) Gold is acting like money again. 2) Central banks are buying a lot of gold. 3) Low and negative interest rates. 4) Gold has a history of being a hedge against global chaos. 5) Demand from low-priced ETFs is soaring."

coronavirus Making Sense of Stocks' Rude Awakening to Virus Scare -Wall Street Journal
"Did stocks tank on Monday because they were finally noticing danger signs that the bond market has been screaming about for weeks? Or did equities just react in a reasonable way to the rapid spread of Covid-19 in South Korea and Italy over the weekend? The answer matters because overexuberant shares tend to fall further and faster than they otherwise would. That means the virus-induced stock selloff could turn into a nasty recoupling if there was an irrational divergence between bonds and the stock market....Consider three pieces of evidence. First, many sectors of the market did precisely what one would expect. Even before Monday's plunge, the energy sector was down 8.7% including dividends from Jan. 20, the day human-to-human transmission of the new coronavirus was confirmed....The second piece of evidence: duration. The longer in the future that profits are likely, the more sensitive a stock should be to bond yields....Finally, the credit markets have been telling the same story as the equity markets: an expectation of a contained outbreak....Put it all together and it looks like investors shifted over the weekend from a belief in an economy weakened a bit by coronavirus problems in China to growing concern about a much more serious global problem. This really matters, both for human health and stock prices. But it is a reasonable response to the news about a hard-to-predict viral outbreak."

Harvard Professor Says 40-70% Of People Worldwide Will Be Infected With Covid-19 -Zero Hedge
"Harvard epidemiology professor Marc Lipsitch says that the coronavirus will not be containable and that 40-70 of people worldwide will be infected. In an article entitled You're Likely to Get the Coronavirus, the Atlantic explains how the coronavirus is particularly dangerous because it may cause cause no symptoms at all in many carriers of the infection....The professor clarifies that this doesn't mean all of those victims will become seriously ill and that 'many will have mild disease, or may be asymptomatic.' Lipsitch's 'very, very rough' estimate (banking on 'multiple assumptions piled on top of each other') was that 100 or 200 people in the U.S. were infected. That's all it would take to seed the disease widely. (so far 35 cases confirmed in the U.S.)....Meanwhile, a World Health Organization adviser says that coronavirus could be the widely feared 'Disease X' that experts have been warning about for years."

Desperate to stop virus’ spread, countries limit travel -Associated Press
"Police manned checkpoints in quarantined towns, guests were confined to their rooms in a hotel in the Canary Islands, governments issued travel warnings and more flights were suspended Tuesday as officials desperately sought to stop the seemingly inevitable spread of a new virus. Clusters of the illness continued to balloon outside mainland China, fueling apprehension across the globe that was reflected in sagging financial markets. The crisis pushed into areas seen as among the worst-equipped to deal with an outbreak as well as some of the world's richest nations, including South Korea and Italy. As it proliferates, the virus is bringing a sense of urgency for local officials determined to contain it but often unsure how....In Italy's north, where more than 200 people were sickened, a dozen towns were sealed off and police wearing face masks patrolled....Even in places where no cases have sprouted up, leaders kept a wary eye, such as Denmark, where two former military barracks were being prepared as quarantine centers. Still, uncertainty remained about how to effectively limit the epidemic....China reported 508 new cases and another 71 deaths, 68 of them in the central city of Wuhan, where the epidemic was first detected in December. The updates bring mainland China’s totals to 77,658 cases and 2,663 deaths. But while China remained home to the vast majority of the world's cases, the world's attention increasingly moved to where the outbreak would spread next. Iran was eyed as a source for new transmissions in the Middle East, including in Iraq, Kuwait and Oman, which were grappling with the spread past their borders."

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