Weekly Rundown: The Endless Printing of Money
As the pandemic continues to envelope our world, shaking our economies, governments keep leaning into the same solution - print more money. Just last month, the European Central Bank added a further 600 billion euros to its coronavirus rescue plan, bringing the total European stimulus package to an astonishing 1.35 trillion euros.
But this doesn’t compare to the measures the U.S. has taken. Since the start of the COVID-19 pandemic, the Federal Reserve has expanded its balance sheet by more than 75% to a whopping $7+ trillion.
Meanwhile, a small Washington state town is printing its own wooden money. Yes, you read that right. Tenino, a railroad town of 2,000 brought back a wooden printing press out of a museum that lay dormant since the Great Depression. The $25 wooden bills can be used at the town's quaint Main Street for everything except alcohol, tobacco, cannabis and lottery tickets. Tenino's city government backs the local currency, which merchants can exchange for U.S. dollars at city hall at a 1:1 rate.
Lebanon also tried to print its way out of a crisis, currently undergoing a monthly inflation rate of 85%, making the Lebanese Lira increasingly worthless and the people dependent on it in peril. Lebanon is at a point of no return, where an entire overhaul of its monetary system will be required. [READ FULL ANALYSIS ON LEBANON HERE.]
It is said that our robust investment industry was created to protect us against inevitable inflation, targeted at 2%. Inflationary effects can be delayed during a market contraction, but they are coming. At first, inflation looks like a boom, an illusion, a rise in asset prices across the board. It can seem like our economy is invincible. But then, every so sharply and suddenly, the cost of goods also goes up. Your grocery bill is bigger. You are shopping for a house, but find that prices have gone up overnight.
Inflation is the hidden taxation on its people. It hurts those of us that are dependent on cash for our everyday spending the most. It hurts the working class and the backbone of our economy.
One sobering realization is looking at our stock market priced in gold. Keep in mind, gold has maintained its purchasing power for thousands of years. A hearty meal in Italy five hundred years ago cost the same amount of gold as a steak dinner today, and a fancy belted toga in Ancient Rome the same as buying a suit today.
Looking at the S&P 500 priced in Gold, it appears that the last true boom cycle was in 2000, and overall, the S&P 500 is at the same level as 1971 (when Nixon existed the gold standard). That means our stock market has remained at a similar level for 50 years, when accounting for U.S. inflation.
This is a time to take a hard look at your investment portfolio. Are you invested in sectors that are truly poised for growth? Are you diversified into uncorrelated assets like gold, real estate and bitcoin?
This Week By The Numbers
A wave of anxiety is building behind the continued stock rally as more traders are taking short positions, and the Volatility Index starts to wake up. If you are trading in this market, exercise caution. We are not out of the woods. Record cash reserves are still sitting on the sidelines, waiting for another correction.
Top Stories of the Week
Palantir Technologies files to go public
Palantir is one of the tech industry’s most valuable private companies, with a valuation of $20 billion. Founded in 2003 by Peter Thiel, Joe Lonsdale, Nathan Gettings, Stephen Cohen and Alex Karp, the company began working with governments, law enforcement and the defense industry to analyze and process their data, but has expanded into other areas. Palantir had avoided listing its shares, in part because of the secretive nature of its business. A public listing would reveal a fuller picture of Palantir’s work, particularly with government agencies, for the first time. Read Full Story.
Electric car maker Fisker eyes deal to go public
Electric vehicle maker Fisker Inc is in talks to go public through a sale to a so-called blank-check acquisition company. Nikola shares are up more than 60% since it went public last month through such a deal, as investors place bets on which startup will be the next Tesla Inc (TSLA.O). Spartan Energy Acquisition Corp (SPAQ_u.N), which is backed by private equity firm Apollo Global Management Inc (APO.N), is leading a bidding war among blank-check companies for Fisker, and could clinch a deal for close to $2 billion as early as next week. Read Full Story.
TikTok users fear app shutdown as security concerns grow
Fears over TikTok’s Chinese ownership are setting up a battle between the Trump administration and the site’s users. Secretary of State Mike Pompeo told Fox News that the administration was “certainly looking at it,” when she asked if the government was considering banning the app after India prohibited it and some other Chinese-owned apps. The Democratic National Committee also sent an email to campaigns Friday warning them about security risks that could be associated with using TikTok on their devices. TikTok hired a former Disney executive, Kevin Mayer, to be its new chief executive in May as it works to convince people that it is not affiliated with the Chinese government. Read Full Story.
Supreme Court rules Manhattan prosecutor can access Trump financial records
The Supreme Court on Thursday ruled that Manhattan's chief prosecutor can obtain troves of President Trump's business records and tax returns, a momentous defeat for the president in his efforts to shield his personal financial information from state investigators. The high court ruled 7-2 in favor of Manhattan District Attorney Cyrus Vance, who is conducting a criminal investigation into the president's business dealings and hush-money payments made to two women who allegedly had affairs with the president years before he was elected. Justices Neil Gorsuch and Brett Kavanaugh, appointed to the high court by Mr. Trump, joined the majority, while Justices Clarence Thomas and Samuel Alito dissented. Read Full Story.
Harvard and MIT sue ICE over new visa guidelines for international students
Harvard and MIT seek a temporary restraining order, and a preliminary and permanent injunctive relief, that would prevent the Department of Homeland Security and U.S. Immigration and Customs Enforcement (ICE) from removing foreign students if their universities are not holding in-person classes this fall. Cornell, Dartmouth and Princeton have also announced that they are supporting Harvard and MIT’s lawsuit. New federal guidelines presented a difficult choice to universities across America: Either they reopen their schools and do not teach entirely remotely, or have their international students be deported. Read Full Story.
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