Tuesday, September 1, 2020

A Wild Two Month Ride into November 3rd?

Readers here know that we try hard not to push any kind of political agenda here. The goal here is to just try to provide the best solid information we can find. However, with the electric election atmosphere we have coming up over the next couple of months in the US, it would be almost irresponsible not to try and alert readers to keep an eye out for just about any kind of wild series of events over the next two months. 

Below we will try make a bullet point list of just some of the major potential trigger points for all kinds of wild market activity between now and the election.


First. let's try and assess the ongoing tensions between the US and China which could certainly be potential triggers for volatile market behavior. Here are just some I can think of:

-the US feels China played a role in the spread of the virus pandemic and this has hurt US-China relations significantly

-in response the US has become more aggressive in taking confrontational moves against China including restricting access to US dollars

-some have suggested the US could go further and attempt to freeze China out of the SWIFT system (international payments system) and the CHIPS system

- Jim Rickards has suggested the US can put a hold on the $1.4 Trillion in US bonds held by China legally without defaulting on the bonds as a claim for reparations from financial damage incurred from the virus

-China has been working hard to setup an alternative payments system to bypass the SWIFT system if needed and to reduce dependence globally on the US dollar

-numerous articles are appearing in both western and eastern media suggesting the US dollar is being weaponized as part of the buildup of tensions 

-some articles have appeared suggesting that China could be the entity taking large physical deliveries of gold as part of this ramped up "cold war" with the US and the west (perhaps to try to drive the gold price sharply higher and add further disruption to markets heading into the election?). This is speculation, but we know some large entity or entities have been taking large deliveries of physical gold this year in markets that usually trade mostly paper futures contracts.

If we accept news reports that US and Chinese relations have soured and that China might prefer a Biden Administration over another Trump Administration, we then have even more speculations that could increase tensions further. These include suggestions China is trying to influence the US elections. Some reports have China supporting VP Biden and Russia supporting President Trump. Whether these reports are accurate or not, the potential exists for all this to come into play in a negative way if the US election is very close (and perhaps even not quickly decided). Whoever loses the election is more likely to claim they lost because of foreign interference in the election process. No one will be surprised if the losing party refuses to accept the winner as valid (So yes, 2020 could get even worse).

I think it goes without saying that another election with no immediate clear winner (like the 2000 election) could be a significant trigger for market volatility. We are already seeing reports that both sides have hired hundreds of lawyers. Allegations of possible voter fraud won't surprise anyone. This could also mean the winner won't be known quickly after the election. 

If all that is not enough, I suspect that anyone with a pulse thinks that both sides involved in this election will pull out all the stops to win. We should not be surprised at any kind of major unsavory news that surfaces just prior to the election (or any dramatic attention grabbing events). If there was ever an election year to somewhat anticipate an "October surprise", it would have to this one. 

On top of everything else, we have the US and the world struggling with a once in a century global pandemic and all kinds of disruption to both normal economic activity and just regular social activity. Frustrations from all this continue to be high and we can expect that everyone trying to win this election will be wanting to assist voters in knowing who to blame for all this. We have seen tensions flare up from this situation all year long already.

With just 60 days until the election. all the ingredients described above (and others I didn't even think of) create the potential for a very wild ride into early November. How wild could things get? Jim Rickards forwarded me this link to an article that explains it could get wilder than than any of us might imagineIt is possible the wild ride could go well beyond November 3rd; depending upon how the election turns out and how the public accepts the results. 

I cannot stress strongly enough to readers here that you should be prepared for all kinds of unusual events and possible market volatility under these conditions. You should think carefully about some kind of plan to try and insure against very high levels of uncertainty heading into this election and beyond that into 2021. There is nothing that suggests the deep divisions that exist in the US will disappear after the election no matter who wins.

Added note: Readers here know that this blog is not a commercial venture and that I don't promote any products for sale since the goal here is to be a free information resource to the public. I do not receive any kind of income from anything I mention on the blog such as a book. If I ever did do that, I would make readers aware of it. 

With that in mind, I do want to let readers know that Jim Rickards does have a new book coming out in October that will provide his latest analysis and  recommendations on how to deal with all the uncertainty mentioned above. I can recommend any book Jim writes because he has been very good at projecting possible future economic scenarios and the information he provides often can be helpful to people like myself in trying to decide how to prepare for uncertainty.  The goal of this blog is to try and be helpful to people like myself who are not trained in economics. 

If all goes as planned, I will get an advance copy of his new book and will do a Q&A style  interview with Jim sometime in October assuming his schedule will allow time for it. I discussed with him the idea of trying to do some interview questions around the theme of -- What can millennials do to help themselves prepare for whatever may lie ahead?  

We have tried to do some articles focused on millennials on this blog recently (here, here and here).  Of course the information in the book would apply to everyone as well as millennials, but millennials have more future to deal with than people from my generation (Boomers).

Hopefully we will be able to do this interview. Jim has been very kind over the years to offer his time and comments for readers here at no personal benefit to himself. I have no problem alerting readers to his new book and I expect they would benefit from the information that will be in it. This is especially the case as we are living in crisis conditions right now much as he has predicted we would see for many years. 

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