Recently, the stock market has experienced ups and downs. During the financial crisis, gold, bonds, and even bitcoin, which have been regarded as value-preserving, have depreciated. Can't help but make many investors confused, why is it like this?
Gold On February 24, due to the stock market crash, a large number of institutions sold gold to make up for the losses of these institutions in the stock market and to increase margin. The price of gold resumed its rise in early March and then fell to a lower level again on March 9. Many investors were confused. Should n’t gold be a hedge? Should n’t gold and the stock market rise in the opposite direction? All of this has nothing to do with the shortage of funds in the repo market.
The Fed ’s bailout ceiling is far from enough, and then the Fed issued an emergency statement on March 12. "Starting on March 12, 500 billion bailouts will be provided. Tomorrow the Fed will provide another 500 billion three-month repurchase loans and 500 billion one-month repurchase loans. In the remaining three months, each week will provide a total of 1 trillion bailout funds. "I do n’t know if you are stunned by this pile of numbers. In other words, the Fed will provide a total of $ 1.125 trillion in bailout funds every week. Some friends may say that the repurchase of market loans needs to be repaid and cannot be accumulated like this, but let us consider that this week ’s 1.125 trillion loans, most of the long-term repurchase loans have a term of 1 month and 3 months. In other words, at least until April 13, the Fed will not receive any refunds.
Before all the bailouts, is this just bare money, and then the huge bailouts in the repurchase market have anything to do with the depreciation of gold we see? Not just gold, but many other financial products that should be kept. Like Bitcoin, it fell from the US $ 12,000 to the US $ 7,000. Low-risk corporate bonds, plus 10 years of the national debt, interest rates both soared. All of this is because, even though the Fed provides a lot of liquidity to solve the shortage of funds, the problem is that all these institutions go to buy back market loans and need to provide collateral. The problem in the market now is that although the Fed provides liquidity, everyone has no collateral! Therefore, when many institutions need a lot of liquidity, many institutions have the problem of lacking original repo collateral. If there is no collateral, even if the repo market is rich, they will not borrow it! This has led various institutions to start selling their gold, 10-year Treasury bonds, corporate bonds, and even bitcoin. After cash, they will use cash to buy Treasury bills.
After analyzing the reasons for the depreciation of gold and other value-preserving financial assets, let's take a look at the latest situation of crude oil. The price of crude oil plunged by 24% on March 8, 2020, making it the worst day since 1991. This incident came from cruise ships around the world, and airlines began to stop operating. Therefore, global crude oil consumption has been greatly reduced. If demand is low and supply remains unchanged, then crude oil prices will be greatly reduced. Therefore, OPEC, headed by Saudi Arabia, negotiated with Russia, another major oil producer.
What Saudi Arabia means is that demand is very low now. Let us reduce production together. This prevents prices from falling. The problem is that oil and natural gas account for 30% of Russia ’s GDP. Of course, Russia is not willing to reduce production. This not only lowered the price of crude oil, but also issued a statement saying that it would substantially increase crude oil production, and crude oil fell directly to $ 33 per barrel. As a result, Trump saw an opportunity. Many countries have internal oil reserves. To prevent certain major disasters from disrupting the supply of crude oil, the U.S. oil reserves may reach 727 million barrels. The U.S. oil reserves are sufficient. On March 13, 2020, Trang Pu also ordered that the current crude oil prices are really good and the United States will replenish its oil reserves. In other words, 90 million barrels of crude oil will be purchased. With this order, the price of crude oil rebounded by 5%. Trump bought a lot of crude oil at a low price. In addition to stabilizing crude oil prices, it is estimated that political factors will not decrease. Then Saudi Arabia and Russia will We will wait and see what kind of turbulence it will bring to the crude oil market.
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| gold |
Gold On February 24, due to the stock market crash, a large number of institutions sold gold to make up for the losses of these institutions in the stock market and to increase margin. The price of gold resumed its rise in early March and then fell to a lower level again on March 9. Many investors were confused. Should n’t gold be a hedge? Should n’t gold and the stock market rise in the opposite direction? All of this has nothing to do with the shortage of funds in the repo market.
The Fed ’s bailout ceiling is far from enough, and then the Fed issued an emergency statement on March 12. "Starting on March 12, 500 billion bailouts will be provided. Tomorrow the Fed will provide another 500 billion three-month repurchase loans and 500 billion one-month repurchase loans. In the remaining three months, each week will provide a total of 1 trillion bailout funds. "I do n’t know if you are stunned by this pile of numbers. In other words, the Fed will provide a total of $ 1.125 trillion in bailout funds every week. Some friends may say that the repurchase of market loans needs to be repaid and cannot be accumulated like this, but let us consider that this week ’s 1.125 trillion loans, most of the long-term repurchase loans have a term of 1 month and 3 months. In other words, at least until April 13, the Fed will not receive any refunds.
Before all the bailouts, is this just bare money, and then the huge bailouts in the repurchase market have anything to do with the depreciation of gold we see? Not just gold, but many other financial products that should be kept. Like Bitcoin, it fell from the US $ 12,000 to the US $ 7,000. Low-risk corporate bonds, plus 10 years of the national debt, interest rates both soared. All of this is because, even though the Fed provides a lot of liquidity to solve the shortage of funds, the problem is that all these institutions go to buy back market loans and need to provide collateral. The problem in the market now is that although the Fed provides liquidity, everyone has no collateral! Therefore, when many institutions need a lot of liquidity, many institutions have the problem of lacking original repo collateral. If there is no collateral, even if the repo market is rich, they will not borrow it! This has led various institutions to start selling their gold, 10-year Treasury bonds, corporate bonds, and even bitcoin. After cash, they will use cash to buy Treasury bills.
 |
| crude oil |
After analyzing the reasons for the depreciation of gold and other value-preserving financial assets, let's take a look at the latest situation of crude oil. The price of crude oil plunged by 24% on March 8, 2020, making it the worst day since 1991. This incident came from cruise ships around the world, and airlines began to stop operating. Therefore, global crude oil consumption has been greatly reduced. If demand is low and supply remains unchanged, then crude oil prices will be greatly reduced. Therefore, OPEC, headed by Saudi Arabia, negotiated with Russia, another major oil producer.
What Saudi Arabia means is that demand is very low now. Let us reduce production together. This prevents prices from falling. The problem is that oil and natural gas account for 30% of Russia ’s GDP. Of course, Russia is not willing to reduce production. This not only lowered the price of crude oil, but also issued a statement saying that it would substantially increase crude oil production, and crude oil fell directly to $ 33 per barrel. As a result, Trump saw an opportunity. Many countries have internal oil reserves. To prevent certain major disasters from disrupting the supply of crude oil, the U.S. oil reserves may reach 727 million barrels. The U.S. oil reserves are sufficient. On March 13, 2020, Trang Pu also ordered that the current crude oil prices are really good and the United States will replenish its oil reserves. In other words, 90 million barrels of crude oil will be purchased. With this order, the price of crude oil rebounded by 5%. Trump bought a lot of crude oil at a low price. In addition to stabilizing crude oil prices, it is estimated that political factors will not decrease. Then Saudi Arabia and Russia will We will wait and see what kind of turbulence it will bring to the crude oil market.
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