Update - May 5, 2020

If This Guy Wins, We’re All in Trouble

Oh boy… the money police are at it again.

I’ve had a copy of a Harvard research report on my desk for more than a year now. I use the piece as a reminder to never overlook the efforts of some heavy-handed folks to control the economy.

The paper was penned by Andrew Lilley and Kenneth Rogoff. It’s aimed at a topic I’ve researched and written about extensively.

It’s titled “The Case for Implementing Effective Negative Interest Rate Policy.”

Never mind the fact that the title implies a negative interest rate policy would be ineffective on its face, this paper goes deep into the rationale behind one of the craziest monetary policies I can imagine.

It forms the backbone of my “death of cash” theory.

The only way to make negative rates “effective,” the idea goes… is to outlaw cash.

But here’s the thing. This isn’t a far-flung idea and the subject of some one-off report. In fact, this idea is in the news TODAY.

The mainstream money press is pushing the story front and center.

And once again, Rogoff is calling for the death of cash.

Here’s what he wrote in an editorial published by MarketWatch:

Now, imagine that, rather than shoring up markets solely via guarantees, the Fed could push most short-term interest rates across the economy to near or below zero. Europe and Japan already have tiptoed into negative rate territory. Suppose central banks pushed back against today’s flight into government debt by going further, cutting short-term policy rates to, say, minus 3% or lower.

Yikes. That would definitely change the math in a few equations.

But it gets worse…

A number of important steps are required to make deep negative rates feasible and effective. The most important, which no central bank (including the European Central Bank) has yet taken, is to preclude large-scale hoarding of cash by financial firms, pension funds, and insurance companies. Various combinations of regulation, a time-varying fee for large-scale re-deposits of cash at the central bank, and phasing out large-denomination banknotes should do the trick.

Imagine that… Rogoff wants the same governments that are bailing out companies with failing balance sheets to punish the few who have the ability to “hoard” cash.

Worse yet… he wants to do the same to you and me. By outlawing high-denomination bills, Rogoff’s plan would force us into his system.

Let’s hope he doesn’t get his way.

But in the meantime, it’s important that we prepare. My team and I have published several reports on the subject. They are all available to you as a subscriber on our website.

I urge you to read them, understand what’s happening (and what could soon happen) and adjust your investing outlook accordingly.

Gold is good. But so are stakes in the companies that will win from this perhaps inevitable economic shift.

Earnings Growth

Elsewhere, keep a close eye on our latest position tomorrow. Scotts Miracle-Gro (SMG) will release its second quarter earnings figures before the opening bell.
I expect good news. But the short-term direction of the stock will depend on the market’s overall mood. If prices dip, use it as a buying opportunity.

Scotts is the main player in a booming at-home gardening trend. I continue to hear from folks planting their first-ever vegetable gardens. They’re buying Scotts’ products to make it happen.

Speaking of making things happen, I’d like to ask you for a personal favor.

Calling in a Favor

Today is Giving Tuesday… and it’s more important than ever.
With the coronavirus outbreak, charities across the planet are hurting. Folks are out of jobs, building their savings and cutting back on their charitable giving.

That’s why I urge you to count your blessings this afternoon… and see if you can spare a few.

If so, I’d love it if you helped out one of my favorite charities – a group that I give to every month.

It’s the Roberto Clemente Health Clinic in Nicaragua. I visited it in February, and, let me tell you, the dedicated staff and volunteers at the clinic are doing incredible good in this poor, virtually unserved community.

The clinic is where babies are born, lives are saved and folks can get information they can trust. And, as you can imagine, with a pandemic rocking the healthcare world, supplies are tight and demand is higher than ever.

That’s why I’ve teamed up with my friends at The Oxford Club to match all donations that come in today.

Here’s a link to a page where you can donate.

This is where our Connections mean the most.

Let’s make them count.

Be well,

Andy