Peter Schiff says: No.
At the VRIC, Schiff spoke on a number of topics and the message was clear: It is time for gold. More specifically he spoke about physical gold. Not ETFs, funds or certificates. All of these are paper or numbers referring to price action. None are actual gold. This is something I have been screaming to anyone who will listen. Get physical gold during this turmoil. There is no downside. Take the portion of your short term money, near term or cash and move it into gold. Buy this as insurance instead of taking a position in currency. Right now you do not realize you are taking a position in the US dollar that looking back upon was not a good idea. Schiff points out that when the Fed increased rates gold increased 9%. People thought it would tank but it has not. It has been quietly climbing. And people are buying. Are you one of them? You have Mnuchen talking up a weak dollar which also helps gold and China scolding the US for being protectionist because it wants to put America First. No one likes to sit down with a client and tell them that things could go bad quickly, it is much more fun to talk about the opportunities and there are great opportunities in commodities, precious metals, real and actual wealth.
I have spent years in the insurance sector and can tell you that long term care is difficult to price and GE has illustrated this with a $6.2 billion write down on insurance and a $15 billion dollar over seven year reserve ratio increase. That is $21 billion for a company with a market cap of $140 billion and $160 billion of debt (yes, you read that right). GE was one of the first components of the Dow back in 1897, yet here we are, a sign of the times, or just company specific?
To make matters worse this blue chip has had some interesting accounting procedures that have been likened to Enron or Tycho. The once revered Jack Welch was using the different divisions to move assets around in which eventually caught up to GE in 2009. GE is down 30% for the year (http://money.cnn.com/2017/10/25/investing/ge-stock-dow-exit/index.html) Is this a harbinger of what is to come?
Caterpillar a leader in heavy machine sales has seen a sharp increase in retail sales, from 26-34% in December. North American sales up 23% for November. This is an incredible sign of what is to come in the commodity sector. Having walked around many service providers at AME, i can tell you that spirits are high, and people are ramping up drilling programs for this spring/summer. We last saw this spike in sales back in 2011 which led to increases in inflation which is another reason to get into gold.
The Amazon model of running the suggested core business at a loss with government and investment banking subsidies to destroy competition is working. Record retailers are being bankrupted as the push for less options, and Globalism increases. For some reason they are allowed to undercut prices, selling at a loss each time but run this model indefinitely. Why? Because eventually they will be able to up the price once every one else is bankrupt. They are on track.
Citing debt Nine West reveals a 1.9 billion restructuring of debt, that free money added up and smart people see the writing on the wall as interest’s rates move up. It will not take too much of a push to put so many of these debt laden companies out of business with the Globalist companies sitting proudly over the demise of competition. My argument is that Bezos is not some genius mastermind he simply has access to the Free money tree that no one else does. 2017 was the leading year from retail bankruptcy and Amazon is arguably the biggest reason why. But the disease of this e-commerce and Globalist approach has taken a toll on Western culture. Kids stop interacting. Are forced consumerism and absurd ideologies 24/7 on their computer screens and phones through media. I am no fan of consumerism, but that is the culture of America. At least in the past there was a mall, the meeting place. People used to enjoy going to the mall and shopping a little and socializing. It was designed as a social adult playground. Now it was destined to fail as it was actually about consumerism and thus just a shallow manipulation, but it at least attempted to keep people busy and excited about seeing other people and mixing within the community. There are people lamenting this loss. Kids now stare profoundly dumbfounded at smartphones worrying about likes from photos and believing in actual oxymorons like diversity is strength. We live in a world that does not want competition. A world that is controlled by technocrats
Click here tIt is no surprise to hear Ray Dalio speaking strong against the bond market. You will recall Bridgewater, the largest hedge fund in the world dramatically increased its holdings in gold by 575%. With the price of gold now trading in the $1,300’s levels I wonder if this is the new trading range, or baseline for gold? The debt issue is massive. It is not just the US but the entire world has stepped up and decided to play along. One country in particular started building with this money and went on a shopping spree throughout Africa, Canada and the US buying up resources and real estate. The Chinese have strategically positioned themselves for growth. The West spent the money on cell phones and sneakers.
The one positive on the side of debt is that it seems that most of the world has debt levels that can barely be serviced if interest rates return to historic norms. This means that raising interest rates must be done at a snail pace, if at all. As long as the rest of the world is willing to play along then this can go on indefinitely. However, if any country like China decides it does not believe in the ‘magic money tree’ that Fed has stashed away in the Federal Reserve building then problems will ensue.
China as we have mentioned before is a major holder of gold and all its production of gold remains within the country. Why when you know these facts are you not doing what these people and institutions are doing? Consider moving some of your portfolio into physical gold, even if it is just 10%. Contact me directly and lets discuss.
Valuations are so elevated in the bond market that a mere 100 basis move would instigate a massive crash. Since, borrowing has expanded to nearly every sector due to ‘free money’ from the Fed and it's magical money tree that would mean every sector would be hit. Dalio mentions that :
"at current duration levels, a 1 percentage point increase in interest rates would lead to a decline of almost $1.2 trillion in the securities underlying the index."
This could be the greatest bond crisis in 40 years. Dalio further believes that the Fed will raise interest rates despite claims otherwise.
The levels of growing debt is not just the retail level or household debt but the massive of increase of corporate bond debt at historically low rates. It does not take much to double interest rates from 2% to 4%. That can happen in a couple years and that would be devastating to the market.
The economic experiment run by the Fed is continuing to cast a dark cloud over the horizons. It appears that printing money wildly to get out of the 2008 investment bank grab to the destruction of the mortgage market might have negative effects moving forward. To many observers and analysts, it seems as though you are sitting in the valley looking up towards a steep mountain and an ominous sky. It is time to take some action, but what can you as an individual investor do. Do what the wealthy do!
Get into physical assets, and not necessarily houses - that has had an enormous run.
Where is the opportunity? Commodities. Precious metals, copper, lithium, cobalt, and uranium are all physical commodities that are desperately needed. There either have a store of wealth and value like gold with a 6000-year history or are vital in technology of batteries, computers, cell phones and most of our technology. These are real technologies not ‘virtual’, intellectual property plays at social media or selling more stuff we do not need. This is actual products we need and use daily. We need to start putting aside money into physical commodities and those that mine it.
Trump provides a tax break and its main funding gent for money, China, says they do not want to buy US Treasuries. That sounds like a tremendous problem. With raising interest rates, an inflated and increasing stock market, political turmoil, and potential wars looming who is going to fund all of this if China does not. We have had unprecedented levels of borrowing by citizens as well as companies like GE that have increased their borrowing dramatically. Amazon got a $16 billion dollar loan back in August. I have reflected on other news stories that have highlighted the incredible US debt on a retail level, a corporate level, and of course the Federal. What will happen of the pendulum swings back past historical averages of 6% to the incredibly high rates of 18% during the 80’s? It has often been stated that China lends money to the US, so that the citizens can buy the products China makes. China then continues to build its massive One Belt One Road Initiative, owning massive ‘city sea ports’ and driving growth through the massively overpopulated Asian countries and into Europe. It seems less and less interested in funding US treasuries.
This article seems to continue to reflect the lack of confidence in the Fed, the US dollar and perhaps the whole notion of fiat currency. We have followed China and its accumulation of actual wealth and assets and must wonder if they see the writing on the wall.
It is doubtful. It would seem like the Fed is running out of tricks... but perhaps crypto currencies will open the door to pools of money creation?