We may have been young during the assassinations and rioting of the late Sixties and early Seventies, but we were definitely old enough to know what was going on. The Vietnam War caused a huge rift in America. It seemed like everyone was on edge. Police and protesters were dying in the streets. The murders of MLK, RFK and shooting of students at Kent State lit up our TVs. It was bad, really bad. Yet today’s divisions feel deeper and far more dangerous.
The conflicts of that era wound down as the war did. New ones developed, but the war was the focal point. Virtually all Americans received their news from three major television networks that broadcast the same information. We all shared the same facts. Liberals and conservatives may have interpreted those facts in different ways, but neither disputed them.
Fast forward to today: cable TV and social media have changed everything. TV stations number in the hundreds, competing for the audience once shared by just three. Advertising revenue is driven by viewers. Sensationalism and hyperbole tend to attract more eyeballs, so it shouldn’t be surprising that exaggeration rules cable news.
Social media makes its money from “clicks.” Clicks require engagement and time online. Powerful computer algorithms are specifically designed to keep you addicted to your phone and feed you the information your on-screen profile has determined you are most engaged with. Much of this is political propaganda designed to make us angry and fearful. Even the algos know that fear is the strongest human emotion. Much of this content doesn’t just confirm what we already believe – it demonizes those in the other political party.
No Room for Compromise
Liberals are no longer just progressive thinkers who believe government should be a beneficial engine of change; they become evil “Socialists” in cahoots with Saul Alinsky and Paul Soros intent on hatching a “one world” plan to destroy America and democracy. Conservatives are no longer just freedom-loving cheerleaders for small government; they become “racist,” Trumpian “cult worshipers” who will be satisfied with nothing less than white nationalist dictatorship that will doom democracy and end the noble “American Experiment” once and for all.
There is not much room for compromise. Yes, we’ve exaggerated these examples. But this is stuff large numbers of people on both sides actually believe! Most of us know at least one of these folks. They are often our friends and family members. Nothing you (or anyone) can say will convince them their beliefs are false. We may have been angry in the late Sixties and early Seventies, but we could still talk to each other. That era can’t hold a candle to the divisiveness percolating through the electorate now.
Both parties contain sub-groups of people convinced the “other side” wants to destroy the America they hold dear, and that the only way to avoid disaster is to completely vanquish the opposite party. One party is going to lose. This is a recipe for big trouble, but it is what America faces heading into the November 3rd election.
Hope for the Best …
Will election violence incite a new “civil war?” Unfortunately, it is not outside the realm of possibility. The last time Americans were so divided was the actual Civil War, making the threat of election-driven violence very real. An August 6 article in the USA Today puts this divisiveness front and center.
“A study from the Democracy Fund Voter Study Group found nearly 1 out of 4 voters – 22% of Democrats and 21% of Republicans – said some amount of “violence” would be justified if the candidate they oppose wins the White House.
“Nearly-one third of Americans, 29%, said it would be appropriate if Trump loses but refuses to leave office because he claims he has credible evidence of illegal voting. An even greater number of Democrats, 58%, said it would be appropriate to call for an election do-over if Biden wins the popular vote but loses the Electoral College.”
Because we are not social scientists, we are not qualified to do a deep-dive on what forces led our nation here. However, the fact that this many Americans would be okay with violence if their side loses is disheartening and disturbing. Our hope is that better angels will prevail and the election will go off without a hitch. Alas, hope is not a plan.
…But Prepare for the Worst
Gold has been a “go to” chaos hedge for centuries. RMB Group trading customers and Big Move Trade blog followers know we have been using 100oz COMEX call options to stay long the yellow metal for a long time. The reasons go beyond the coming election. A weak dollar, promises by Jerome Powell and the Fed to hold interest rates at “zero”, and a welcomed return of inflation have helped keep a solid floor under gold since the onset of the pandemic. We still like gold as a long-term play no matter what the outcome on November 3rd, so continue to hold your longer-term bullish option strategies.
Data Source: Reuters/Datastream
The trade below is specifically designed to hedge against and/or capitalize on political and economic chaos caused by a contested election. We expect gold to soar should things get unhinged. This trade has a shorter life than most of our bullish gold strategies. The November 24, 2020 expiration of the December COMEX calls we are using keeps us long through the election and its immediate aftermath only. This makes it much cheaper than longer-dated alternatives.
Our upside targets of $2,150 and $2,350 per ounce have been adjusted down from the targets in our last blog post on gold due to gold’s sideways price action since then. Last night’s close was the second in a row over a previous day’s high. It is an encouraging sign that the current correction may be over. A few more could set the stage for another assault on the all- time high of $2,089 in the December futures contract.
RMB trading customers should consider buying December 2020 $2,050 gold calls while simultaneously selling an equal number of December 2020 $2,150 calls for $980 or less, looking for the December futures to hit our $2,150 upside objective prior to option expiration. Your maximum risk is the amount you pay for your spreads plus transaction cost.
Each $2,050 / $2,150 spread has the potential to be worth at $10,000 on expiration day. Consider exiting your entire position if our $2,150 per ounce objective is hit sooner. Prices can and will change, so contact your RMB Group broker for the latest.
Please be advised that you need a futures account to trade the markets in this post. The RMB Group has been helping our clientele trade futures and options since 1991. RMB Group brokers are familiar with the option strategies described in this report. Call us toll-free at 800-345-7026 or 312-373-4970 (direct) for more information and/or to open a trading account. Or visit our website at www.rmbgroup.com. Want to know more about trading futures and options? Download our FREE Report, the RMB Group “Short Course in Futures and Options.”
* * * * * * * *
The RMB Group
222 South Riverside Plaza, Suite 1200, Chicago, IL 60606
This material has been prepared by a sales or trading employee or agent of R.J. O’Brien & Associates (“RJO”)/RMB Group and is, or is in the nature of, a solicitation. This material is not a research report prepared by a Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO/RMB believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.