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Via SchiffGold.com,

There seems to be some optimism in the markets that the end of the coronavirus shutdown is getting closer. There is also this resistant myth that the economy will just fire back up at the snap of a finger. Peter Schiff recently appeared on RT Boom Bust along with Christy Ai to talk about the markets and the pandemic.

He said people are still far too focused on the pin and not the bubble that it popped.

The US stock market has had some strong rally days recently with this growing optimism that we could be nearing the coronavirus peak. So, has the stock market found its bottom? Peter doesn’t think so.

Too many people are focused on the pin and are ignoring the bubble that the pin pricked. You know, before the COVID-19 shutdown, the economy was long overdue for a severe recession, and the US stock market was long overdue for a bear market. So, I think the COVID virus simply accelerated the onset of both…

So I would not get excited about this rally. I think we still have a long way to go on the downside. And the economy, I think, is going to be even worse.”

Christy agreed with Peter saying this is not the real bounce and we still have a long way drop. She pointed out that earnings still have a long way to fall and there is a massive unemployment tail from the pandemic.

Peter was asked about the response to the government stimulus package signed by President Trump.

As you would expect, a lot of people are trying to line up for whatever free money the government is handing out. But it’s not free. There’s going to be a heavy price to be paid in terms of the loss of purchasing power of the US dollar as prices respond to all the new money being created.”

Peter said the programs are also doing far more harm than good.

What they are doing is exacerbating the downturn and they are going to push the recovery off even further into the future because the government is basically encouraging businesses that should be downsizing and kind of adjusting their cost structure to the new reality — instead, the government is encouraging them to hold on to employees that they would be better off letting go and freeing up to do something else.

Instead, they are going to keep some employees entrenched in companies that are probably going to end up failing because they refuse to lay off people. And so instead, they are going to have to lay off even more people later.

And I think a lot of these loans are never going to be repaid because even the people that don’t fire their workers, a lot of these businesses are going to go out of business because they didn’t fire their workers and then everybody’s going to be out of a job. And the government is not going to get any money back because the loans have no security and there’s no personal guarantee.”

Christy reiterated that the tail of the coronavirus is very long and will be very long-lasting. It won’t be a V-shaped recovery as many seem to expect. We have both a severe supply shock that is morphing into a demand shock.

On the day of the show, both gold and stocks were in the midst of strong rallies. Peter was asked why gold was up when it seemed to be a “risk-on” day.

I think the risk is inflation. The only thing that’s propping up the stock market is the Fed and other central banks printing money, which is creating inflation. So, you don’t have earnings going for the stock market. All you have is all the cheap money that’s being created. And inflation is much better for gold than it is for the stock market. And so, that’s why both stocks and gold are going up.

But I think eventually, gold is going to be going up much more than the stock market and I think gold is going to be going up even as the stock market rolls over and goes down. So, I think in terms of gold, stock prices are going to continue to fall. In fact, they’re going to fall precipitously regardless of what happens to nominal stock prices because of the massive inflation being unleashed by the Fed and other central banks.”

Today’s minutes will provide detail on the Fed decisions announced on March 3 and March 15 after Fed Chair Jerome Powell convened emergency meetings as the scale of the pandemic and its risk to the U.S. economy became clear. The readout may also include their discussions of a slate of related actions that flowed from those two meetings. 

Amusingly, just five weeks before the surprise rate cut on March 3, Powell and his colleagues had wrapped up their first meeting of the year on Jan. 29 with an air of cautious optimism.

Since that emergency rate-cut (and the bazooka of all bazookas), The Dow is down around 9% and somewhat interestingly, the dollar, gold, and the long-bond are all up around 4%…

Source: Bloomberg

And at the same time, the volume of beta that The Fed will inevitably cut rates below zero has also surged…

Source: Bloomberg

As a reminder, today’s minutes may show just how dire a threat officials saw in those earliest moments and what spurred them to action.

The first move came on Feb. 28. With the S&P 500 Index tumbling 15% from its record high in just seven sessions and corporate credit spreads widening fast, Powell released an unscheduled statement at 2:30 p.m. pledging that Fed officials would “use our tools and act as appropriate to support the economy.”

The following Tuesday – March 3 – the Fed cut its benchmark lending rate by half a percentage point to a range of 1.00% to 1.25%.

“The fundamentals of the U.S. economy remain strong,” the U.S. central bank said.

“However, the coronavirus poses evolving risks to economic activity.”

One month later, the US economy was in a recession, or perhaps a depression.

That said, today’s minutes are unlikely to contain anything to spook markets, given that it has rolled-out measures to assuage market concerns, and will likely reiterate its pledge to support the financial system. Of most interest will be whether there was any discussion in the minutes of if, when and under what, the Fed would start buying stocks.

Despite all The Fed has done, financial conditions are extremely tight still…

Source: Bloomberg

So just how freaked out were they over those two hectic weeks…

The short answer is “very”!

Policy makers saw risks pointing to the downside and warranting a “forceful” response, according to a record of their emergency gathering Sunday, March 15.

“All participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain,” minutes published Wednesday of the Federal Open Market Committee meeting showed.

At the unscheduled meeting, officials announced that they would cut their benchmark interest rate to nearly zero and relaunch massive bond-buying programs to pump cash into the financial system, as they sought to shelter the U.S. economy from the coronavirus pandemic.

Fed notes “extremely large degree of uncertainty” on outlook

In their consideration of monetary policy at this meeting, most participants judged that it would be appropriate to lower the target range for the federal funds rate by 100 basis points, to 0 to ¼ percent. In discussing the reasons for such a decision, these participants pointed to a likely decline in economic activity in the near term re-lated to the effects of the coronavirus outbreak and the extremely large degree of uncertainty regarding how long and severe such a decline in activity would be.

Fed advocated “forceful” monetary response

In light of the sharply increased downside risks to the economic outlook posed by the global coronavirus outbreak, these participants noted that risk-management considerations pointed toward a forceful monetary policy response, with the majority favoring a 100 basis point cut that would bring the target range to its effective lower bound (ELB). With regard to monetary policy beyond this meeting, these participants judged that it would be ap-propriate to maintain the target range for the federal funds rate at 0 to ¼ percent until policymakers were con-fident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals

Fed on the severe strain in bond markets:

Trading conditions across a range of markets were severely strained. In corporate bond markets, trading ac-tivity and liquidity were at very low levels, although not back to the low point reached in 2008. Market partici-pants expected that actions taken to slow the spread of the virus could have significant effects on the credit wor-thiness of certain borrowers, particularly those at the lower end of the credit spectrum. Market participants also increasingly pointed to concerns in other segments of the debt market. In securitized markets, including those for asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS), primary market is-suance slowed, and secondary market trading had be-come less orderly, with money managers selling short-dated liquid products to meet investor redemptions.

Fed on Treasury Markets

In the Treasury market, following several consecutive days of deteriorating conditions, market participants re-ported an acute decline in market liquidity. A number of primary dealers found it especially difficult to make markets in off-the-run Treasury securities and reported that this segment of the market had ceased to function effectively. This disruption in intermediation was at-tributed, in part, to sales of off-the-run Treasury securi-ties and flight-to-quality flows into the most liquid, on-the-run Treasury securities

Fed on short-term funding markets

Conditions in short-term funding markets also deterio-rated sharply amid a decline in market liquidity and chal-lenges in dealer intermediation. Over recent days, the premium paid to obtain dollars through the foreign ex-change swap market increased sharply, and the volumes in term repurchase agreement (repo) markets dropped significantly. Issuance of commercial paper (CP) matur-ing beyond one week reportedly almost dried up at the end of the week before the meeting, and primary- and secondary-market liquidity for financial and nonfinancial CP was described as nearly nonexistent at a time when investor concern about issuer credit risk was rising.

Fed on stress in the housing market

…social distancing, by financial uncertainty—including difficulties that households and businesses would face in meeting mortgage or rental payments—and by volatility in the market for MBS. Participants stressed the major down-side risk that the spread of the virus might intensify in those areas of the country currently less affected, thereby sidelining many more U.S. workers and further damping purchases by consumers. Participants expressed con-cern that households with low incomes had less of a sav-ings buffer with which to meet expenses during the in-terruption to economic activity. This situation made those households more vulnerable to a downturn in the economy and tended to magnify the reduction in aggre-gate demand associated with the nation’s response to the pandemic.

On ZIRP

“With regard to monetary policy beyond this meeting, these participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to 1/4 percent until policymakers were confident that the economy had weathered recent events…”

On NIRP:

A few participants also remarked that lowering the target range to the ELB could increase the likelihood that some market interest rates would turn negative, or foster investor expectations of negative policy rates. Such expectations would run counter to participants’ previously expressed views that they would prefer to use other monetary pol-icy tools to provide further accommodation at the ELB.

On Bank buybacks:

“Several participants commented that banks should be discouraged from repurchasing shares from, or paying dividends to, their equity holders.”

Developing…

*  *  *

Full Minutes below:

Sen. Kelly Loeffler (R-GA) and her husband Jeffrey Sprecher are liquidating the rest of their stock holdings and will instead invest in exchange traded funds (ETFs), according to Axios.

The move comes after Loeffler and other lawmakers came under fire for selling stocks following a private congressional briefing on coronavirus, and shortly before the market crashed. Loeffler bought and sold roughly $1.4 million in stock, according to the Wall Street Journal.

“Ms. Loeffler reported that she and her husband bought about $590,000 of stock and sold about $845,000 of stock from Feb. 18 through March 13. If they had held the shares they sold through Monday, the stock would have been valued at $86,000 less than what they sold it for, according to the Journal analysis.” -WSJ (03/31/2020)

In a Wednesday WSJ op-ed, Loeffler wrote that while she fully complied with the law, the move into ETFs will hopefully “end the distractions” caused by the corona-controversy. Of note, she faces a competitive election fight in November – while her Senate campaign told Axios that her opponents “are clearly using her stock portfolio as a political weapon for an assault on her character during a national crisis,” adding that the new strategy will end “untrue” accusations of insider trading.

More via Axios:

The campaign explains Loeffler’s investments are managed by third-party advisors at Morgan Stanley, Goldman Sachs, Sepio Capital and Wells Fargo, and neither Loeffler nor her husband — the CEO of the New York Stock Exchange’s owner — direct trading in these accounts.

• “As longtime executives at a Fortune 500 financial-services firm, my husband and I put this arrangement in place to insulate ourselves and our colleagues from these sorts of unfounded accusations,” Loeffler said.
• “I’m not doing this because I have to. I’ve done everything the right way and in compliance with Securities and Exchange Commission regulations, Senate ethics rules and U.S. law. I’m doing it because the issue isn’t worth the distraction,” she added.

Loeffler’s full statement: 

I have not profited or attempted to profit at any time based on my service in the Senate. This story was manufactured by a left-wing website, never fact checked and used as a weapon by the media and my political opponents as a baseless attack. There is no truth to any of it.

Our family’s investments have long been managed by outside investment advisors at Morgan Stanley, Goldman Sachs, Sepio Capital, and Wells Fargo. They make their investment decisions for our accounts, including buying and selling securities like stocks and options —without our input, direction or knowledge.

For my over-20-year career in the financial services industry—as well as since I’ve been in the Senate—I have done everything according to the spirit and the letter of the law, and have been recognized for my integrity, professionalism and hard work.

Amid this health crisis, the temptation to circulate lies and misinformation is too great for the media and my political opponents. That is why I’m taking steps to remove this temptation so that we can turn our focus back to where it belongs: on combating COVID-19 and restoring our country to health and economic recovery.

All of the individual stock and options holdings in these managed accounts will be liquidated by the investment managers and the proceeds will be reinvested into ETFs and mutual funds.

Let me be clear: I do not have to do this. I’ve done everything at or above the requirements for complying with the STOCK Act, SEC regulations, Senate Ethics rules, and US law, and of course, will continue to do so.

I’m doing this because this transparency is being abused for political gain, and the steps I’ve taken to distance myself from these accounts are being ignored. I left the private sector to serve the people of Georgia, not make a profit, and in fact donate my Senate pay to Georgia charities.

I believe Georgians can see with my results in just three months in the Senate that my focus is on delivering results for them, and delivering relief for those impacted by COVID-19. As an outsider, I came to get results and I won’t let politics get in the way of public service and keeping our state and our country strong.

Yesterday, Twitter CEO Jack Dorsey got a break from being the near-constant punching bag for tech “journalists” (a solid 50% of whom are leftwing hacks who lazily press him to hire more minorities while banning every conservative under the sun) and was lauded for dedicating (notice we didn’t say “donating”) one-third of his net worth, supposedly, to fighting the coronavirus, and then, whatever is left will be used to advance causes Dorsey cares about, namely, the advancement of women, and UBI.

In an attempt to appear “transparent”, Dorsey issued a few tweets explaining why he structured this new organization dedicated to seeing these efforts (the so-called “Start Small” initiative) as a “Donor-Advised Fund” or DAF.

I’m moving $1B of my Square equity (~28% of my wealth) to #startsmall LLC to fund global COVID-19 relief. After we disarm this pandemic, the focus will shift to girl’s health and education, and UBI. It will operate transparently, all flows tracked here: https://t.co/hVkUczDQmz

— jack (@jack) April 7, 2020

Why pull just from Square and not Twitter? Simply: I own a lot more Square. And I’ll need to pace the sales over some time. The impact this money will have should benefit both companies over the long-term because it’s helping the people we want to serve.

— jack (@jack) April 7, 2020

Why now? The needs are increasingly urgent, and I want to see the impact in my lifetime. I hope this inspires others to do something similar. Life is too short, so let’s do everything we can today to help people now. ✌🏼

— jack (@jack) April 7, 2020

Why the transparency? It’s important to show my work so I and others can learn. I’ve discovered and funded ($40mm) many orgs with proven impact and efficiency in the past, mostly anonymously. Going forward, all grants will be public. Suggestions welcome. Drop your cash app 😉

— jack (@jack) April 7, 2020

However, one thing he neglected to explain, or even mention, was how this decision would allow Dorsey maximum tax benefi.

As it turns out, Recode published a lengthy investigation into these “DAFS” last year. The rise of these “DAFs” in the philanthropy world, particularly within Silicon Valley, has raised questions about their founders’ motives. As the story points out, not only is there an instant tax benefit, but the fund is under zero pressure to spend that money. Legally, Dorsey could simply leave it alone, then claim it as an asset for his children.

Our point here is: He’s benefiting from a massive tax windfall before he even contributes anything to a noble cause. Then afterwards, he’d be free to do little or nothing with the money. Though the funds can’t be returned to Dorsey, and they must be spent on the fund’s intended purpose, many have pointed out that the structure lends itself to tax abuse.

One Silicon Valley VC said as much on twitter, and was soundly bashed for making Dorsey “look bad” by raising a legitimate point.

Jack is smart
Jack’s PR people very smart
Jack’s tax-advisers are smartest

The REAL INEQUALITY is not wealth of the 1%––but the cynical knowing of stuff––the masses don’t.

This is not illegal, not tax evasion
But it IS tax avoidance––spun brilliantly
WIT https://t.co/UgzIbUHg0S https://t.co/7Wl4l5kRDz

— Josh Wolfe (@wolfejosh) April 7, 2020

2/ IF
Jack gives to charity (so far $100k—not $1B even though tax benefits accrue go to full $1B)
THEN
he is heroic + humanitarian + awesome

BUT if it is used like others than it deserves public scrutiny.

Don’t read if you just prefer headline good newshttps://t.co/z0IpqXUBP7

— Josh Wolfe (@wolfejosh) April 8, 2020

3/ You can interpret the take as overly cynical. This is a system that was set up for good intentions but is abused. https://t.co/KY7GIDfD4T

— Josh Wolfe (@wolfejosh) April 8, 2020

In response to one of his interlocutors, Wolfe clarified that the tax benefits accrued to Dorsey can be used the same year the fund is established, meaning before the money is actually spent on anything charitable.

pic.twitter.com/hRLpYM47ww

— Josh Wolfe (@wolfejosh) April 8, 2020

Few probably remember this, but Dorsey pledged to give away a huge chunk of his Square wealth years ago, but that never materialized.

Like everything else he does, this definitely deserves scrutiny.

Remember when Jack Dorsey said he would give away nearly a third of his stake in Square?

That was five years ago. Spoiler: He never did.

Why we should be asking @jack more questions about his new philanthropic promises, in my latest @techchronicle: https://t.co/7C31iALg25

— Owen Thomas (@owenthomas) April 8, 2020

For everyone on twitter complaining that this is a “harsh” or “uncharitable” (no pun intended) interpretation of Dorsey’s motives here, we wonder: Would you say the same if it was Trump, not Dorsey, doing the giving?

No, in that case it would be critical analysis that the public deserves to understand.

Authored by BMO Capital Markets rates strategists Ian Lyngen, Ben Jeffery and Jon Hill

It’s Wednesday morning – or effectively Thursday afternoon when accounting for Friday’s market holiday and tomorrow’s early close. Yep, still counting the hours to the long weekend; gotta have a goal. Suffice it to say, the pace of trading, volatility, macro developments, policy responses, and the outbreak itself resulted in the year-long month of March – at least it felt that way. This week has brought with it a sense of market calm and budding optimism largely lacking in the crisis up to this point. This followed what appears to be a plateau in Covid-19 in parts of Europe and the subsequent extrapolation of the overseas timeline to the domestic outbreak. What remains to be seen is whether the experience in other nations truly translates onshore.

In assessing this question, investors will continue to track the incoming coronavirus stats and gauge the official response. Lockdown life will continue for the time being, even as the macro conversation has shifted to reopening strategies and the prospects of getting back to the new normal.

This is a generation defining episode in world history; an observation which isn’t intended as needless hyperbole. The fact of the matter is that investor and consumer behavior will change in the wake of the current health crisis… for a while.

The reality of emptied college campuses, mothballed air fleets, shuttered car plants, and retail ghost towns will have a dramatic impact on the labor force statistics over the coming months; a massive drain, followed by a reemployment surge. This much is easy enough to envision, if not perfectly forecast. The next major unknown is how the reopening transpires – and of course when.

Trump is reportedly crafting a plan to reopen certain sections of the economy not particularly hard hit by the coronavirus, while keeping areas still struggling with significant cases shuttered; New York is top of mind in this regard. Partial reopenings will be undoubtedly be the unifying theme of the headlines on this topic over the course of the next several sessions and our expectation is that it will be a net positive for risk assets. Before investors can move forward with estimating the cost of the outbreak in economic terms, an end date is required and this has become the market’s newest preoccupation. Our take is there will be an eventual return to pre-virus normality, but the timeline will be measured in quarters, or years – not weeks or months.

This brings us to the current stage of evaluating the leg in Treasury yields. Our base case for this week remains the process of defining the near-term range will extend – although to a large degree there are a several key levels already in place. In 10-year yields there are two trading zones to watch; the narrower at 56.4 bp to 89 bp and the broader at 31.4 bp to 127.3 bp. The tighter range has held since March 23 and there is no reason to anticipate it breaks in the coming weeks. It will take a concrete reopening schedule and significant progress in battling Covid-19 in the US before 1-handle 10s return to the realm of conceivable outcomes.

The very front end of the curve is going to remain in a much narrower and lower range for a very long time – 2s at 25 bp appears to be establishing some semblance of equilibrium. Negative front-end yields are still on our radar in the event of another risk-off impulse from new depths of the economic fallout expectations; the bounce in risk assets has lessened the urgency for the sector at the moment. It’s difficult to envision another liquidity crunch and dash for cash comparable to that seen during March, therefore another repricing to lower rates will be a slow and methodical grind as recovery prospects eventually come into finer focus.

There isn’t a cookie jar in the world that Nancy Pelosi (D-CA) and Chuck Schumer (D-NY) won’t stick their hands in – as the pair have insisted on adding hundreds of billions of dollars ‘for their own priorities’ on top of $250 billion in new emergency aid for small businesses requested by President Trump, according to the New York Times.

Trump is looking to secure congressional passage of the additional $250 billion for the recently launched small-business payroll program, for which he’ll need the support of top Democrats.

Blocking his path, per usual, are Peosi and Schumer, who say they will approve Trump’s request as long as $125 billion of that is diverted to ‘community-based financial institutions that serve farmers, families, women, minorities and veterans.’

They say they will approve the $250 billion in assistance to small businesses, but want $125 billion of that channeled through community-based financial institutions that serve farmers, families, women, minorities and veterans.

They’re also calling for an additional $100 billion for hospitals and community health centers to provide testing supplies and protective equipment like masks and gowns. They are seeking another $150 billion for state and local governments to manage the coronavirus crisis

They also want a 15 percent increase to the maximum Supplemental Nutrition Assistance Program food stamp benefits, a proposal that could draw GOP opposition. -New York Times

“The heartbreaking acceleration of the coronavirus crisis demands bold, urgent and ongoing action from Congress to protect Americans’ lives and livelihoods,” said Pelosi and Schumer in a Wednesday joint statement. “The American people need to know that their government is there for them in their time of great need.”

The new stimulus would follow a sweeping $2.2 trillion coronavirus rescue package after unemployment claims spiked by more than 10 million in March. One of the programs, a $350 billion Paycheck Protection Program, has been plagued with technical glitches as businesses rush too tap into more than $10 million in forgivable loans in order to maintain payroll during the pandemic.

The additional $250 billion was requested by Treasury Secretary Steven Mnuchin during private calls to Pelosi and Senate Majority Leader Mitch McConnell (R-KY) – the latter of whom wants to swiftly pass the legislation through Congress this weed amid a virtual shutdown.

Meanwhile, congress is also compiling the next coronavirus rescue package.