Weekly Market Update by Retirement Lifestyle Advocates

Markets were once again fairly subdued last week.  Stocks and metals both declined marginally as did the US Dollar and the 30-Year US Treasury bond.

The Dow to Gold ratio, one of our favorite stock value indicators now stands at just under 14.  We are firmly standing by our forecast of this ratio reaching at least two, perhaps even one.

There is a surprising amount of bullishness relating to stocks presently. In his terrific weekly newsletter, “Thoughts from the Frontline”, John Mauldin reported this week that 39% of money managers are bullish and 41% are neutral.  Only 20% are bearish.

Our view is that the only upside in stocks at this point is the potential upside from artificial forces – namely the Plunge Protection Team that we’ve discussed in past issues of
“Portfolio Watch”.

In other words, we remain skeptical as to the probability of a “V-shaped” recovery and a resumption of the bull market in stocks.

Lost in the mainstream media coverage of the coronavirus situation are the rather radical currency changes being proposed.  It’s no secret to those interested in financial and economic matters that many policymakers and government leaders have long dreamed of a day we have a cashless society.

Following the advice of former White House Chief of Staff and Chicago Mayor, Rahm Emmanuel who said that those governing should never let a crisis go to waste, there have been credible proposals recently to create a digital dollar.

While none of these proposals seem to have enough support presently to become reality, one should keep in mind that in the current economic and political environment, things are rapidly changing, and anything may be possible.

This month’s “You May Not Know Report” delves into this issue in great depth, but we think it’s important to make our “Portfolio Watch” readers aware of these trends as well since they are not being widely reported.

The CARES Act passed in response to the corona-virus situation originally contained a provision for the creation of a “digital dollar” which was removed from the bill before final passage. 

This from “Coindesk” (Source: Source:  https://www.coindesk.com/house-stimulus-bills-envision-digital-dollar-to-ease-coronavirus-recession) (emphasis added):

Proposed legislation meant to shore up the U.S. economy during the coronavirus pandemic includes a recommendation to create a digital dollar.

This virtual greenback would help individuals and families survive the shutdown of businesses and a series of “shelter-in-place” orders which resulted in skyrocketing unemployment claims and a potentially severe recession.

Under the draft bills shared last week, dubbed the “Take Responsibility for Workers and Families Act” and the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act,” the Federal Reserve – the nation's central bank – could use a “digital dollar” and digital wallets to send
payments to “qualified individuals,” consisting of $1,000 for minors and $2,000 to legal adults.

Both bills employ identical language around the digital dollar suggestion.

“The term ‘digital dollar’ shall mean a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System),” the bills read.

The Fed would likewise be in charge of the digital wallets, maintaining them for recipients. 

Any citizen concerned about financial privacy should be highly concerned in our view.

Presently, there is another bill pending that would resurrect the idea of a digital dollar merely one month after the first run at establishing the digital dollar failed.  (Source: https://www.coindesk.com/digital-dollar-reintroduced-by-us-lawmakers-in-latest-stimulus-bill) (emphasis added):

Congresswomen Rashida Tlaib (D-Mich.) and Pramila Jayapal (D-Wash.) introduced a new proposal to have the federal government issue $2,000 per month to residents by minting a pair of $1 trillion coins and using these to back the payments.

The Automatic BOOST to Communities Act (ABC Act) also brings back the idea of a digital dollar, describing the concept using similar language to a series of
bills introduced last month.

Under the ABC Act, Congress would authorize the Federal Reserve to create “FedAccounts,” meaning “Digital Dollar Account Wallets,” which would allow U.S. residents, citizens, and businesses located in the country to access financial services.“No later than January 1, 2021, the Secretary shall offer all recipients of BOOST payments the option to receive their payments in digital dollar wallets,” Thursday’s bill read.

As a side note, the bill contains some provisions that are, at least from our viewpoint, alarming.  The Automatic BOOST to Communities Act would give each of these individuals a $2000 initial payment for each member of a household, followed by $1,000 each month for each household member until 12 months after the pandemic ends. The
payments would be made in digital dollars and loaded each month to a BOOST debit card.

Payments under this proposal would be made to taxpayers, dependents, non-citizens, and individuals with no bank account, no Social Security number, or no permanent address.  At the risk of offending our readers by offering an admittedly subjective opinion, that is simply absurd.  Even more delusional is the notion that this program can be funded by minting two trillion-dollar coins.

History teaches us that the money printing rooster always comes home to roost.  This bill, should it pass, will just make that day happen that much faster and take away financial privacy in the process.

But the bill does confirm that worldwide the idea of digital money is gaining steam worldwide.

China is presently testing a digital currency.  “The Guardian” recently reported that as of the first of May, China is testing a digital currency in some parts of the country.

In recent months, China’s central bank has stepped up its development of the e-RMB, which is set to be the first digital currency operated by a major economy.

It has reportedly begun trials in several cities, including Shenzhen, Suzhou, Chengdu, as well as a new area south of Beijing, Xiong’an, and areas that will host some of the events for the 2022 Beijing Winter Olympics.

Digital payment platforms are already widespread in China, namely Alipay, owned by Alibaba’s Ant Financial, and WeChat Pay, owned by Tencent, but they do not replace existing currency.

Of course, cryptocurrencies originating in the private sector using blockchain technology have been around for the past decade.  Despite their longevity relatively speaking, they have not been widely used in commerce largely due to their wild price fluctuations.  Total cryptocurrency market capitalization is now about $250 billion. 

Despite the fact that cryptocurrencies have not been widely adopted by the world population, they have provided governments and central banks with a model to follow.  And, they are pursuing it with a vengeance.

This from “Seeking Alpha”:

In addition to the Facebook attempt to create a digital currency, other “higher profile” efforts have also been made to bring on the digital age. For example, Sherrod Brown, a Democratic Senator, has pushed for the Federal Reserve to get into the game and produce “digital dollar accounts and wallets for all citizens.” Senator Brown attempted to get this into some of the Covid-19 legislative efforts.

In Sweden, the Riksbank, Sweden’s central bank, has looked into the possibility of a digital currency. Already, it is reported that 87 percent of money transactions in Sweden is done digitally by means of private payment companies. So, the move would not seem to be that great.  Bloomberg News even had a story on the Marshall Islands and the efforts being made to create its own digital currency.

But it’s not just central banks looking to move to digital. The International Monetary Fund, the central bank of central banks, is also moving toward digital.  Much of this
discussion is taking place in the context of replacing the US Dollar as the world reserve currency.  Watch for this month’s “You May Not Know Report” for more on this topic.

If you’re not a client of our company but would like a complimentary copy, give the office a call at 1-866-921-3613.

We urge you to continue to educate yourself.

If you are a client of our company, you are getting an invite to a private, client-only webinar update.

We do have a public educational webinar coming up this week as well.  This contains the information that our clients already have.  It is designed to educate and inform about
maximizing Social Security benefits and the two-bucket approach to money management in today’s environment.   If you are not a client or our company but would like to learn more about current circumstances and strategies that you might employ to not only survive financially but possibly prosper, you may call the office to register at
1-866-921-3613.

This week’s RLA radio show features an interview with Dr. Robert McHugh, a skilled technical analyst.  We get his forecast for stocks, gold, and the US Dollar.

“Happiness is having a large, loving, caring, close-knit family in another city.”

                                                                   -George Burns