Everything Works, Until It Doesn’t

Yesterday, August 5, 2024, was one of the worst days in the history of the global financial markets, with far-reaching consequences across various asset classes.

"We have never been down 1,000+ points ever on the Nasdaq, not even intraday,” reported Fox Business as the U.S. stock market witnessed a historic sell-off, wiping out over $2 trillion in market value.

But the market turmoil wasn't confined to the United States.

Japan's Nikkei 225 experienced its worst single-day decline since 1987.

Taiwan's stock market also recorded its worst day in 57 years.

The cryptocurrency market was not spared, with $1.2 billion liquidated.

The Volatility Index (VIX) surged above 65, levels not seen since the market turbulence in April 2020.

The market is now closely watching the Federal Reserve's next moves. Wharton Professor Jeremy Siegel has called for an emergency 0.75% rate cut.

Systemic Issues

The biggest “carry trade” the world has ever seen—the Yen Carry Trade—is being unwound. In short, firms borrow Yen at very low interest rates and convert them to other currencies where yields are higher. Think of it as an interest rate arbitrage.

However, as the Yen rose ~5% recently and now leveraged traders using Yen to buy global stocks are being liquidated, likely to take some unexpected players with it. Maybe that’s a hedge fund, a family office, or worse. Only time will tell.

The market crash has also exposed vulnerabilities in the financial system. Several major brokers, including Charles Schwab, TD Ameritrade, Vanguard, E-Trade, Fidelity, and Robinhood halted trading during yesterday’s sell-off. This raises concerns about asset accessibility and counterparty risk, as shares are often held in street name by brokers.

Implications for Gold and Silver

In times of financial turmoil, physical gold and silver serve as safe-haven assets.

While precious metals may initially experience selling pressure due to margin calls, they typically rebound as investors seek stability and increase in value long-term as financial and global tensions increase.

As we navigate these uncertain times, physical gold and silver, held in your possession as your private property, provide a refuge independent of the banking system.

At Silver Bullion, we remain committed to helping you protect and grow your wealth. If you have any questions or concerns about your portfolio, please don't hesitate to contact us.

Limited-Time Silver Promo

You asked, we listened. American Eagles are one of most stunning coins ever produced in America and are seldom discounted.

For a limited time, Silver Eagles are now available at only 4 USD/oz over spot, representing a ~30% lower premium than our largest competitors.

Click here to view the promotion.

Sincerely,

Gregor J. Gregersen 
Founder, Silver Bullion Pte Ltd