Market Commentary & Analysis For March 11, 2020

The market this week is a turbulent thus far for many investors and traders. As I have been saying for many years, on any given day, there will be a drastic financial reckoning. We would not know-how, and in all likelihood, we would have rather short advance notice. That event is hereabouts. 

Financial market(s) have collapsed around the world. Markets from Europe to Asia to Oceania fell nearly as much as 7% in a matter of a few hours, and are off as much 20%. 

Crude oil prices plunged due to unsuccessful the Organization of the Petroleum Exporting Countries (OPEC) meeting, and the price of crude oil plummeted last weekend to $27/bbl and are depressed by almost 50% from only two weeks ago. 

This is going to wreak havoc on the global financial system. Crude oil is the world’s most important commodity by market percentage. In U.S. Dollar terms, the crude oil market is more significant than all other commodity markets combined, including Gold.

What does it all mean for the global economy:

First of all, it cripples the global oil industry, which produces its profits by selling oil. When the crude oil price declines, the oil industry earns much thinner profits. The most vulnerable and most indebted oil companies in the world are located in the United States and Canada. About eleven percent of junk bond issuers are gas and crude oil companies.

Secondly, it harms the American government severely because whenever the crude oil price declines, Middle Eastern and Saudi Arabia, oil producers make much fewer petrodollars from their production.

As a result, these countries will not be able to convert as many petrodollars back to the United States government in the cheap form of loans.

Gold Market

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WTI is in the progress of steadily to lower mode testing Key Sup $30.0 price level and a possible retest of complete Inner Oil Dip $27.5, while the upside doorway is an advancement to our Mean Res $39.30.

The ultimate result is, the decline in crude oil prices signifies a severe instability of financial markets. This is why commodities, equity markets, and foreign currencies are all tumbling around the world. 

From an economic point of view, we are very certainly going to see a significant recession. Consumers are not spending as much as used to, and businesses are lending and investing to a lesser degree, asset prices are declining, and neither the central banksters nor the governments have the ability to stop it.

Market action

The market rebounded roughly 5%, while U.S. Treasuries sold off in yesterday's very volatile trading session as traders and investors weighed the likelihood of a fiscal stimulus package from President Trump. 

The significant indices began the trading session up almost 4%, then briefly fell to negative territory as traders and investors sold into strength, and later staging a powerful rally into the closing hour.

The S&P 500 index surged 4.9%, the DJI Average climbed 4.9%, and the heavy tech loaded Nasdaq Composite index advanced 5.0%. The small-cap Russell 2000 index raised merely 2.9%. The leading sector increases ranged from utilities posting 1.0% to information technology print 6.6%. 

The massive moves in the U.S. Treasury market, while, seemed to command investor sentiment. Equities surrendered gains as resumed buying interest in bond market dragged yields from earlier highs; however, a resurgence in selling stake concurred with the late rally in stocks. 

The Two-year yield closed with 15 basis points higher, posting a 0.47%, and the Ten-year yield ended 25 basis points higher with the print of 0.75%. The United States Dollar Index climbed 1.6% to close at 96.45 on the day.

Separately, crude oil bounced from its most damaging trading day since 1991. The news reports indicated that the Russian Federation could be interested in talks to support and stabilize the oil markets.

A significant market domino just dropped, what next?

As I have said numerous times, the world's market(s) and the financial system practice can't tolerate a robust U.S. Dollar. In an effort for liquidity to move and for the current banking system to work, the U.S. Dollar needs to be weak.

So, the government and central banksters are going to have to "reset” this by devaluing the U.S. Dollar as well as all other fiat currencies relative to the yellow metal.  

Last weekend’s crude oil news story was a significant market domino to occur in this narrative. Hence the Fed and other central banksters around the world will accelerate their money printing scheme and expand their balance sheets.

We are also about to witness debt bailouts, helicopter money, loan guarantees, and a massive infrastructure modernization plan. I believe we may even receive free healthcare for C-virus patients, funded, of course, with newly printed fiat money.

More numerous government defaults becoming the norm

Last weekend a Lebanese government announced it was moving towards bond default on a $1.2 billion issue. For the next several years, we are going to witness many more sovereign governments defaulting on their debt, perhaps including the United States.

However, unlike Lebanon, I do not anticipate the United States to default. The United States has a primary printing press at hand, and I envision a watered-down version of the dollar value default relative to food, energy, clothing, necessary materials, precious metals, etc.

The current global financial system is irredeemably and entirely broken. We are staying by on the sidelines invested in physical Gold and Silver till the Dow-to-Gold ratio scale will drop under 5, and only then will it be safe to begin acquiring valuable stocks again.

The timing of this crude oil collapse is fascinating. The Russians, Chinese, and India have been the world’s most active buyers of Gold for many years now, and they have bought hundreds of tons for their treasuries. 

These countries have also lessened their use of United States Treasury bonds as reserve assets. The question of the day: what if they are trying to form a new world monetary order that will use Gold as the primary reserve asset rather then United States securities?

The United States had an unstable, tottering, very indebted economy that had started to show signs of a slowdown. Then there was an outpouring outbreak of C-virus. The Americans were on the “wrong side of the bed”: Is President Putin marked America’s vulnerability and seized on it?. 

The current collapse of oil prices is not just an assault on the United States oil industry. It was an assault on the whole U.S. Dollar based financial system. The ongoing economic war is equivalent to Pearl Harbor.

The Russian Federation has its crude. The Chinese can trade produced world's goods for Saudi Arabian oil utilizing the Chinese currency. When the Federal Reserve waters down the U.S. Dollar, it will not hurt China’s or Russia’s access way to oil.

In conclusion

For now, seek to work up and keep a sensible attitude. Life at times can be a pretty scary some times when markets crash and burn - while the internet informs us that we are all doomed.

There are definite challenges ahead of us. But also tremendous opportunities for anyone with the spirit, courage, and presence of mind to keep ahead in the game.


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