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April 27, 2020 | Lawrence Lepard: Global Margin Call For A Leveraged World

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What To Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004 and sold it in 2022.

Lawrence Lepard, managing partner with Equity Management Associates, just published a quarterly report in which he explains — among many other things — why current US policy has created a “doom loop” and “a gold opportunity.”

Here’s the summary page. For a PDF copy of the full 36-page report, email Lawrence at [email protected]


•  Q1 2020, Global margin call for a leveraged world.
•  Credit bubble burst and is unwinding.
•  Reason bubble occurred was ZIRP policy (2008-2015) which led to capital misallocation.
•  Fed (monetary) and US Government (fiscal) response was massive and aggressive.

Monetary Policy
•  Aggressive monetary expansion began (again). QE open-ended.
•  All categories: Treasuries, Agencies, Corporates, Munis, Money Market Funds, Auto Loans, Student Loans. Basically everything.
•  Fed purchase of equities also a future possibility.
•  Financial Repression: yield curve control is in the Fed’s back pocket.
•  Emergence of currency debasement and yield curve control may cause the Fed to lose control of the bond market.
•  Fed purchases of bonds could lead to a doom loop. Or at least be a big problem.

Fiscal Policy
•  Rubicon crossed. US Government “Goes Direct” with Helicopter money.
•  Safety net is needed during this difficult period; however, Helicopter money and Federal deficits are a slippery slope.
•  US fiscal condition just deteriorated. Much larger Federal deficits are ahead.
• Inflation. Recently considered not a risk. Just became a very real medium-term risk.

Inflation-Two kinds
•  Demand pull, cost push; and  “CSIP” (currency substitution inflation psychology).
•  Deflation is a risk in the short-run given the likely recession and lack of velocity of money.

Gold Opportunity is Here
•  Gold is a natural “store of value” alternative currency. No counterparty risk. BK impossible.
•  Gold has performed well (11% pa) since December 2015 but still early days. 1st or 2nd inning.
•  Gold investment supply is only 0.06% of worldwide financial assets (cash, stocks, bonds).
•  Gold stocks remain very cheap and provide leverage and growth versus the metal.

For a PDF copy of the full 36-page report, email Lawrence at [email protected]

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April 27th, 2020

Posted In: John Rubino Substack

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