Transcripts
Erik: Joining me now is Eric Peters, founder of One River Asset Management.
Eric, I guess obviously the question that’s on everybody’s mind is this coronavirus crisis and how long it’s going to last and so forth. Was the coronavirus the cause of this market dislocation? Or is it more the case that the virus was the pin that popped a bubble that was already ready to pop? And, either way, how do you see this crisis unfolding from here?
Eric: Hey, Erik, nice to be back. Thanks for having me again. Always good, particularly in really interesting periods for markets like this.
Clearly this virus is the catalyst for this move. And that’s obvious. But in terms of the move itself and the market structure, I would say that we’ve been building into the market structure a lot of fragility over many years that were, largely speaking, just underappreciated.
Erik: Joining me now is Josh Crumb, who formerly was the head of precious metals research for Goldman Sachs, went on to found GoldMoney, and has since gone on to found Abaxx Technologies. We’ll talk about that at the end of the interview.
But first, Josh, it’s great to have you back on the show. So much to talk about with so much going on in the gold market.
Josh, help me navigate the current opportunities in the gold market. And I’ll just start by telling you how I see it.
On one hand, I really think, first of all, when there’s a panic, people rush into gold. We’ve kind of seen what’s looking like a blow-off top. It’s starting to correct lower.
I think there’s a really good argument that says that the stock market is not done with the downside from the COVID-19 crisis yet.
What we saw in 2008, it seems like there’s a lot of good reason to think it’s coming back, which is correlations go to one in a crisis. Everything sells off. Even though the fundamentals for gold are improving, people are selling it to raise cash. And the price ends up going down, even when you would hope it would go up under those circumstances.
Erik: Joining me now is Simon White, cofounder of Variant Perception.
Simon, there is an old saying in finance that sometimes nothing happens for decades and then there are weeks during which decades happen. I think this is one of those weeks.
Monday morning just after 8am this week, we got news that the Federal Reserve made what I think was the biggest monetary intervention announcement in recorded history, announcing unlimited quantitative easing to react to the coronavirus crisis.
It was very, very controversial when QE2 was introduced several years ago. That was a spending program of $500 billion over the course of about eight months. And it was very controversial. A lot of people thought that was just too much and they shouldn’t do it.
What the Fed announced this week is, first, they’re going to spend more than that this week alone. And they’re going to continue spending at that rate indefinitely.
The thing that I think is even more – we could do a whole show about that announcement, but what I think is even more newsworthy is the market’s reaction. Of course, asset markets had to jerk higher on the news. That lasted, Simon, less than two hours before the move up in asset prices had fully retraced. Which really speaks volumes, in my mind.
It says that the Fed put has finally expired worthless. Please give us your interpretation of these events. And what are the knock-on effects and consequences as you expect them to play out in financial markets?
Erik: Joining me now is the one guy in finance who was all over the coronavirus story even before I was. That’s Bianco Research founder, Jim Bianco.
I want to refer our listeners – we don’t have a slide deck today because Jim has just been flat out with the various situations in markets. Jim’s timeline on Twitter has some of the best graphs and charts showing the case growth of COVID-19 cases around the world. So I encourage our listeners to check that out.
Jim, I want to start with the big picture of, okay, monetary policy two weeks ago versus today is a very, very different story. I think some of our listeners have been overwhelmed.
We know there was a massive intervention last weekend. We know there is an alphabet soup of new accommodative facilities, but almost nobody can keep track of all of them.
Give us the big-picture summary. What has happened? What are central banks doing? And what’s the summary of all the actions that they’ve taken?
Erik: Joining me now is Axel Merk, founder of Merk Investments. Axel, it’s great to get you back on the show. It’s been way too long. I’m really looking forward to this interview.
Let’s start with the high-level big picture of what’s going on – both the stock market coming off of its all-time highs, new all-time lows in bond yields.
Is this all about the coronavirus crisis? Or is the coronavirus just a catalyst that brought something else about?
Axel: Great to be with you. In this industry we always love to give a story to the action and, by all means, let’s fit that story, right?
Clearly, we’ve had a many-year bull market, stocks were at an all-time high – that may have been due for a correction according to many. And sure enough, we got a shock. And it helped us. And so, ultimately, does it really matter?
One of the things, if you’ve been around the block a few times now, is that there is a storyline that starts these things. And then these stories evolve. Remember in 2000 for example (or whenever you’ve had a crisis or a bear market coming), it starts somewhere. But then suddenly there are ripple effects that you don’t foresee.
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