Will Plummeting Stocks Stimulate a New U.S. Gold Rush?James Cordelaine
Only two weeks into the new year, and yet another warning about the stock market, with today on track to be the worst of the year? The real danger is that we become numb to the news, or distracted by “happy talk” politicians who steadfastly refuse to address the issues – because it’s not their future security at risk. So I’m going to tell you again, because ultimately this blog is about your money.
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If you’re still holding on to your stocks hoping and praying for a miracle, think about this. According to analyst Anthony Mirhaydari, stocks just seemed to tank on Wednesday without any “specific catalyst.” Investors have been selling equities the way panic-stricken movie-goers scramble out of a theater when they hear the word “fire!”
Mirhaydari traces much of the current investor anxiety to the Fed Board of Governors, who waited too long to raise rates and re-introduce inflation to our beleaguered economy. Nobody ever said timing was the Fed’s strong suit. So now the NYSE Composite Index is down nearly seventeen percent from its high in May of last year; and small-cap stocks are down twenty-two percent.
The best this market can hope for is scavengers to scoop up some of the low-priced remains of the day. But some prudent consideration of why these leftovers are thick upon the ground is in order; Mirhaydari warns us “2016 is shaping up to do something nasty.”
Of course some will always insist analysts like Mirhaydari is are “just a solitary voice.” But the chorus is growing and he’s in some esteemed company—all sounding the same alarm. Albert Edwards, a strategist at Société Générale, one of Europe’s leading financial groups, predicts the U.S. stock market could fall as much as seventy-five percent.
Now that the Fed has stopped buying bonds and removed its artificial growth stimulus, claims Edwards, “the illusion of prosperity is shattered as boom now turns to bust ….”
Edwards also points out that China, the second-biggest economy in the world, is in a critical bind. If they attempt another devaluation of the yuan, the country’s wealthy could yank even more of their cash from the already-struggling economy, leading to even greater destabilization. Now that they’ve invested too much in a manufacturing sector which can no longer budge, the Chinese are faced with the ugly prospect of having to slash prices – a decision that can only lead to deflation.
Chinese stocks have shaved almost four percent; at the same time oil prices have plunged below thirty dollars per barrel. Europe’s and Japan’s stock markets are performing just as badly, creating an unwinnable situation for those relying on stocks for their financial wellbeing.
Is it any wonder that an increasing number of investors worldwide are turning to gold? Given the plunge in paper assets, where else is there to turn for credible value, if not to a tangible asset like the yellow metal?
It’s a horrible time for stocks, but an excellent opportunity for physical gold. Right now, the price of gold is like a coiled spring, and as the bad news piles up for stocks – with no relief in sight, pretty soon the world will be divided between the quick and the dead.