By: Aaron Lavinthal – 12/09/16
It’s been just over a month since our new President-elect Donald Trump was announced. During the days proceeding, the paper markets started to see some drastic increases when others thought the markets would start to crumble, but why? Many experts attribute the stock increase to the new policies proposed and how those markets will be positively impacted. Others, however, are referring to it as a “Trump-bump” or a minor shift in markets immediately following a large geo-political structure change within the world’s super power and reserve currency nation. In either case, the vote from the experts seems to be unanimous that investors should not weigh too heavily on these immediate moves. As the dust settles from this announcement, hedge fund managers and economic experts are all saying the same things. David Stockman, former economic adviser for Reagan, said in an interview with CNBC “This 5 percent eruption is meaningless. It’s some robo machine trying to tag new highs.” He continued to say “I see a recession coming down the pike in 2017. The stock market is going to go down and it’s going to stay down long and hard because, for the first time in 25 years, there’s nothing to bail it out.” He attributes a majority of this to uncertainty behind Trump’s policies, the artificial bubble created by the Fed and our $20 trillion worth of debt that is continuing to grow.
What does one of the smartest men in the country suggest? Stockman has come out publicly to advise investors the only safe place to store your wealth is gold and cash. Now, nobody that we’re aware of has a crystal ball, however there is a reason the saying “history repeats itself” exists to this day. What we do know at this point is that once a recurring theme pops up on several occasions with the same indicators being the driving force, it becomes a trend. The trend most are seeing right now is we have gone through 8 consecutive years of growth without a recession and we are now overdue. Abysmal economic growth and a 15-month earnings recession have pushed valuations skyward to the point where, should we be able to prolong this momentum past August of 2018, we are on the precipice of advancements that will surpass all previous growth. Let’s hope our new POTUS can make good on his word, but can his word and policies keep the markets from imploding and our debt from skyrocketing? Jim McDonald, chief investment strategist at Northern Trust Corp. told Bloomberg recently, “Any incumbent president wants to get a bear market over early. Not that they can always control that, but there’s a strong relationship between the performance of the stock market in the year of the election and whether the incumbent party gets elected.” Being that US government debt has surpassed $20 trillion and increased by 150% since 2006, this feat could prove easier said than done. Inflation and spending have pushed some bond yields 15%. With economic growth beginning to stall and inflation becoming more prominent at the consumer level in several economies, stagflation has become a topic of conversation once again. Although not seen since the ‘70’s, stagflation tripled the price of gold in the beginning and end of that decade. Recent downward pressure on the metals makes timing impeccable for positioning.
Metals tend to do best during economic uncertainty, severe market volatility, lack of trust towards the banks and currency, as well as geopolitical unrest. As David Stockman reiterated to CNBC in his interview, “My call stands. Sell the stocks, sell the bonds, get out of the casino.” Picture this for a moment, and let’s paint a picture. If you view the paper markets as a casino and yourself, the gambler, you have some choices to make. Imagine, you’ve just gone on a run at the roulette table, however the odds are against you continuing to win roll after roll. Your chips are up 30% above your principal; at this moment one must think to themselves, do I continue to take my chances and bet that I will continue winning or should I cash out now while I’m ahead and perhaps look for a new game? What if I take my principal off the table as insurance? The professional gambler understands that once you start winning, the ONLY decision is to take your principal off the table and play with the house money. This way, if you lose your profits, you can still walk away with your principal. A strong voice of reason must fall on every investor during times like these to understand what type of investor (gambler) they are. The choice is always up to the one “rolling the dice” but in this type of economic uncertainty with a looming recession based on history and numbers, the odds seem to be against you continuing to “bet” or “gamble” your life savings, investment portfolio or IRA’s on a complete unknown that appears to be in favor of “the house.” Although the Dow is hitting new, all-time highs, chances are your portfolio and retirement are not reflecting the same movement and growth…just look at your statement. Isn’t it just a bit ironic that most of your wealth is in “risky” assets and the “safe haven” asset only represents a minority of your investments, if any? Shouldn’t it be the other way around? When playing this game of investing, you can’t lose what you don’t put in. With an economic environment that rivals some of the largest downturns in US history, I would rather err on the side of safety than risk losing a large portion to circumstances I have no control over. At least with gold and silver, in their physical form, not only do I have control, but I own the physical metal in my hand and can get liquid anywhere in the world! Try getting money out of failed stock certificates.
Think it’s time to safeguard part of your savings, IRA’s or investment portfolio in gold and silver? Join the 33 million people who already own physical precious metals to bolster and protect their wealth. Contact the professionals with Scottsdale Gold & Silver to receive your free 30-minute consultation at 800-899-3558.