911, What's Your Emergency: Trump Driving Dollar Off A Cliff!
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Ray Dalio, the world's No.1 hedge fund manager, studies economic cycles going back 600 years and more. I've read all of his books and essays – the research is unbelievable. Bridgewater Associates has 1,500 analysts on its payroll, as well as wildly expensive computing machines, but for the cost of a meal and sometimes even free of charge, Dalio publishes key data in his books, essays, and interviews. Listening to them earns you leverage, lots of it.
Similar to my earliest investing mentor, Peter Lynch (the greatest stock picker that ever lived), he concludes recessions to be inevitable and that the best focus of time is in how the portfolio is set up to profit from it and from the eventual rebound and expansion.
Dalio sees a 40% chance of a recession in 2020, by the time we reach the elections. The Bank of America CEO sees no chance of it. The investing community is SCARED SHITLESS of it and Donald even rang Jamie Dimon, CEO of JPMorgan, as well as CEOs of BofA and Citigroup, when the markets dropped like bricks on Wednesday. The truth is that there are hundreds of conflicting opinions on the recession and when it's due.
Everyone is on their tiptoes right now.
Courtesy: U.S. Global Investors
Two things I know are: (1) the entire planet is bearish, driving $16T into owning negative-yielding sovereign debt, so a recession is very much a talked-about subject, which isn't consistent with when these things usually creep up on you – when they're least expected. And, (2) recession or not, diversification has been a tremendous risk-reducer. Our portfolio, consisting of Dividend Aristocrats, the S&P 500, gold, silver, Bitcoin, residential rental properties, private lending and cash, has been so lucrative that we get no fewer than 4 emails a month from analysts at various global hedge funds and investment banks, thanking us for inspiring them with the confidence to go against the FAANG herd, which has been the wrong strategy for over a year.
In 2008, when the FED cut rates to zero, the U.S. economy initially suffered from massive unemployment, real estate was falling apart, and stock market indices were at multi-year lows. Recently, when the FED cut rates, the U.S. economy enjoyed record-low unemployment, indices at all-time highs, and real estate was in a very stable spot.
Additionally, this yield inversion is a different beast than before. Europe is basically all about negative yields, so inversion in the U.S. is not such a shocker to me.
In other words, I haven't been selling much of my U.S. equities thus far. This yield inversion could prove to be, for the first time, not that reliable in anticipating huge bear markets. I stick with facts and historical data, and we have time to adjust.
Take a look:
On average, even with this inversion, we have a year until the market peak and an additional 21.8%, which is a massive potential gain.
Don't get swept away by headlines or become over-panicked. Look around you; there are no mass layoffs, no bankruptcies, and no foreclosures, at least not in any meaningful way.
The U.S. economy is not red-hot, but it's definitely growing.
There's a rush to U.S. safety, which is a bubble in my book. True safety isn't found in American bonds, but that's where investors are flocking. It's unreal!
U.S. corporations are simply the most trusted. 94% of the income that bond investors make is generated by American businesses – that's a bubble, as you can see.
The reason is that Europe is, in essence, DYING, financially.
Germany's economy, the world’s 4th largest, contracted in the 1st quarter. Factory output in China, the world’s second-largest economy, is growing at its slowest rate in seventeen years.
Britain looks horrible. Italy is on the brink. Hong Kong is chaotic. Mexico is crashing and so is Brazil.
So, here she is, in all her glory:
Contemplate that number. Think about it. It is beyond repair. It is the stuff that inflationary devaluations, debt jubilees, and debt restructuring are made of.
You want to know why central banks are buying more tons of gold than in any calendar year since 1967? It is because they want to hedge a currency war that is going to intensify.
What I know is that everyone is extremely worried. No government trusts the other to do the conventional thing; I'm certain of that as well.
So far, the physical price has gone up by 26% since bottoming and is forming a new trend line. The majors have performed brilliantly. The ETFs that I invest in are at 52-week highs, but the junior miners have not joined in yet.
Take a look:
Courtesy: U.S. Global Investors
The mining sector has been a horrible industry for a whole decade.
I do not see that changing just yet. Many gold stocks need $1,700 gold and $20 silver to inspire speculators to back them, but a SPECIAL GROUP of juniors have a unique attribute that is set to send them soaring right now.
In fact, I'm seeing the first signs of it. We watch 14 indicators that must all turn green before we proceed with our next trade. Our systems are, literally, waiting for the 14th one. 13 out 14 are locked and loaded.
It's going to be stunning.