No Growth in Global Economy, Cash is King, Gold Shines
Looking at the global economy today we see several worrying developments.
Currency devaluations and negative interest rate policies, + slow-to-no economic growth in both developed and developing economies.
Experienced investors are trying to make “heads or tails” of today’s financial markets.
The Big Q: Where is money safe?
In an interview at the 2016 Mauldin Economics Strategic Investment Conference, investor Jim Grant noted, “Cash is King and enables one to retain wealth, with an eye towards being opportunistic.”
Raising cash and reducing your exposure to volatile financial markets in turbulent times obviously make sense. The Key is finding a safe, profitable investment opportunity to deploy cash.
Mr. Grant believes Gold may be that investment.
In the interview, he went on to say, “Gold isn’t so much a hedge against Armageddon… as it is against monetary shenanigans.”
He also noted he expects Gold to continue moving up: “When the economic establishment encourages the idea that gold is ‘good for nothing,’ it’s almost always a good time to buy Gold.”
Keep in mind that holding onto cash itself will not make you wealthy. That is because central banks can devalue a currency by printing more money that is what they have been doing for decades.
Cash is an opportunistic asset class, which gives you much-needed flexibility during volatile times. Crises bring many once-in-a-lifetime investment opportunities that you can seize… but only if you have enough cash or other liquid assets at your disposal.
History tells up that paper-based currencies will eventually fail.
The clock is ticking against the USD.
It has been 45 years since the Buck became a full paper-based currency. Gold, on the other hand, has been a preferred medium of global exchange for over 5,000 years, making Gold the ultimate hedge against monetary collapse.
Despite its long-term record of stability, Gold as an asset class makes up less than 1% of the average investment portfolio. Negative sentiment from the public and media is a Key reason why Gold is still under owned and mispriced.
As Mr. Williams explained in the interview, “Every day, the picture is becoming more and more discernible It is not quite clear as yet, but it is getting there. The credibility of central bankers is slowly fading away.”
Things will go bad when the general public finally realizes that global central bankers have run out of stimulus tools and lost control. When this happens, we will end up with either a sharp breakdown in financial markets or a rolling panic. Either way, the price of Gold and Silver will rise to hew heights.
The stock market valuations today are very high.
The Wilshire 5000 Total Market Index, a composite of all the public companies currently listed on major US exchanges, is now greater than the country’s overall GDP by over 20%.
The total market cap to GDP ratio is now at the 2nd-highest point ever, only the .Com bubble of Y 2000 saw a higher total market cap to GDP ratio.
The US Fed’s balance sheet has never been bigger, now at $4.5-T and counting. And interest rates have never been this low for this long a time.
Something has to give, and it will.
Savvy investors know that physical Gold is the best hedge in turbulent economic times. The precious Yellow metal will certainly soar in value when the global central banks can no longer hide it has run out of ability to stimulate the equity markets.
|HeffX-LTN Analysis for GLD:||Overall||Short||Intermediate||Long|
|Bullish (0.25)||Bullish (0.43)||Bullish (0.35)||Neutral (-0.03)|
|HeffX-LTN Analysis for SLV:||Overall||Short||Intermediate||Long|
|Bullish (0.39)||Bullish (0.45)||Very Bullish (0.65)||Neutral (0.07)|
Have a terrific 4th of July.