By: Aaron Lavinthal – 06/05/17
What a ride we have been on! With absolute surety and gusto, the past 6 months have provided a rollercoaster of emotions within the political and economic spheres for U.S. investors.
Since President Trump has assumed his position to lead our great nation for the next 4 years, we have seen:
- Equity markets continuing to hit fresh highs
- Investors pouring money into equities
- Introduction of negative rate bonds
- MOAB get dropped on Afghanistan
- Heightened threats from N. Korea with nuclear warfare
- Turmoil within the White House hierarchy
- FBI Director Comey got fired
- Allegations of sensitive information sharing with Russian intelligence
- Global cyber-attacks starting to aim at the banking and financial systems
- Comparisons between Trump & Nixon
- Talks of impeachment
- Comparisons between the markets presently to those of ’87, ’94, ’00, ‘08
- Record high amounts of student debt
- The largest group of investors taking money out of the markets
- Auto loans under fire as the next “sub-prime” crisis
- Housing markets on the verge of entering another phase of perilous declines
- Zero momentum regarding healthcare, taxes, infrastructure, banking reform
Looking at the above, you would think the economic and political landscapes are on some shaky ground. Uncertainty seems to be looming around every corner and nobody seems to have the answers. Top Wall Street executives can be heard day after day, struggling with the current climate and trying to understand where (or more importantly “how”) to squeeze growth out of our stock market which has now entered a territory of “no man’s land.” This couldn’t be more evident than by our very own Fed proclaiming recently “vulnerabilities appeared to have increased for assets valuation pressures.” This sounds a lot like a warning of “bubbles” and our current levels within equities. We are playing with borrowed time and are now overdue for contraction and a recession.
Fixed income expert, Peter Tchir said, “I think summer’s a particularly dangerous time if we’re complacent, because there is less liquidity.” FX trading guru Douglas Borthwick, recently announced “This is a spring of prepping, and you should be prepping for what I believe will be some [bad] events over the summer. I’d much rather set up positions now for a market piece of information that’s going to change things to the negative just because it ‘smells’ so much like 2007.” Sell in May and go away?
If you haven’t already done so, now is the time to be analyzing and re-balancing your portfolio accordingly. Although the stock market is continuously hitting new highs, it’s attracting investors and portfolio managers who buy the leftovers, or the positions less attractive than what was targeted in hopes of still finding value in the less desirable companies. Performance of actively managed funds compared with their benchmarks resulted in an abysmal 10% success rate in 2016. Unfortunately, the last time this happened was in 1999, during the dot-com bubble, and we know how that story ended. Investors are now starved for yield and picking investments with lackluster performance merely to keep up with income needs. Additionally, the landscape provides minimal options to choose from so investors are disregarding their fundamentals in hopes of staying ahead of the curve. This is a dangerous game and elicits an emotional response and short-sightedness rather than conservative optimism based on fundamentals and sound decision making abilities.
It is interesting when speaking to investors as many are unaware (still) of where their money is, what it is doing, what they are paying in fees, or (more importantly) why they took a beating in any of the previous recessions. Although gold is up roughly 10% so far this year, investors believe their equity positions are impervious to political uncertainty and frothy valuations. This is the very same “irrational exuberance” that has tormented investors and savers who are not prepared or have become reliant on their conditioned acceptance of “this is the norm” or “you’re in it for the long haul so selling out now will have you missing on gains.” What “real” gains have your portfolio, IRA’s, and/or investment positions provided you recently? As the backbone of $33 billion-dollar hedge fund company Elliot Management, Paul singer recently became overtly boisterous in his letter to investors, warning of perils lurking just beneath the surface. Singer asserts in his letter “Given groupthink and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose (don’t ask us what hell looks like …)” Strong words coming from one of the wealthiest and smartest minds in finance. Mark Yusko took it one step further at the Mauldin Economics Conference recently, lamenting “I’m telling you right now, the US is going to have a crash and it will be massive. Every time a president leaves the White House after two terms, there is a recession within the first year of the new administration. I believe this time will be no different.”
History repeats itself when lessons are not learned, misinformation distorts rational decision-making abilities and emotions turn logic into hopes. Unfortunately, we cannot rely on hopes and dreams to get us through the next financial downturn. What we can do is be realistic about our expectations and prepare ourselves so that this time is not as bad as the previous experience. There is a very understandable reason some of the brightest minds in finance consider the stock market now to be a casino. Let’s call it like it is, you may have a financial advisor or planner that has done well for you over the past few years or perhaps they are a friend and have been good to you throughout the years, but what does that mean for your finances? They have no control over the markets and where they are headed, however they do have control over how they position you and your wealth. Regardless of your relationship, investors should not only be cognizant to the economic environment, their gut, the political climate and history, but also of their own needs. Investors should be able to take the previous experiences during economic downturns and now use them to their advantage. I have yet to meet an individual with a close relationship to their financial guru, that has not taken a firm position within physical precious metals presently. These folks have learned from their mistakes and taken wisdom from the prior calamity to instill confidence, logic and sound strategic advice so ultimately, ’00 or ’08 doesn’t wipe away 10 years of financial gains. After any of the previous recessions or economic downturns, have you ever heard of a financial advisor apologizing or reimbursing their client for losing a significant portion of their investments and/or retirement? Do you have another 10 years for the market to turn around again after the next recession? Most people have financial goals that need to be met and a timeline that it must happen in.
Tony Robbins has recently released his second book entitled, “Un-shakable”. After scouring the globe for the smartest minds in the world to collaborate with, Tony ultimately teamed up with the only financial advisor in U.S. history to be ranked #1 in his field for 3 consecutive years, Peter Mallouk. One of the biggest take-aways of this book is also one of the oldest investing principles known, buy low and sell high. It’s incredible that we have distanced ourselves so far from logic only to point fingers and still be left behind the 8-ball. If we take the given circumstances presently: political uncertainty, over-valued equity markets, overdue recession, and irrational exuberance or the “herd mentality” into consideration, NOW is the ultimate time to be restructuring your portfolio to fit this climate. We too often become greedy or have a fear of missing out which clouds our better judgement. Finger-pointing will always be around as a coping mechanism to deal with any type of problem, however it’s a much nicer feeling knowing that you don’t have to blame anyone because you aren’t in a bad position.
Let’s take Tony’s logic of buy low and sell high to relate it back to the Great Recession of ’08. If you had a million-dollar portfolio of equities, savings, IRA’s and mutual funds in 2007, you would have realized that much of your portfolio had risen dramatically from the dot-com bubble of 2000 and given you a typical timeframe for the next recession, therefore making your equity position and risk levels “high.” By merely re-balancing your portfolio to understand the “casino,” investors were easily able to mitigate risk and financial ruin. Those who took our advice of utilizing roughly 25% of their investible paper portfolios to hedge with gold and silver, came out up 8-10% when the dust cleared coming into 2012. They then followed the same logic as before of buying low to sell high and have continued riding the wave of letting money work for you rather than chasing the markets. Many become even more surprised by learning of how they could realize 10-22%+ returns keeping a diversified position in metals since 2011. In this economic environment, who doesn’t want to bolster their portfolio with an asset yielding that kind of growth? Looking at our present situation, things are eerily similar and so the timing is imperative to re-balance your portfolio. We understand that it is often hard to “miss out” or to be proactive, however without having a crystal ball, the immediate future is a huge gamble for equities and the stock market. Should you become the “reactive” investor, you may find yourself in a similar position to 2000 or 2008 where you were chasing markets for protection, only to have less funds available with your protection costing more. Seems rather counterproductive, no? So the question remains, are you still feeling lucky?
Scottsdale Gold and Silver CEO, Mike Rowlands recently said, “Even the gamblers at the “casino” are nervous this time around… and they should be! Those who don’t trust their gut and aren’t re-balancing their portfolios now are only hurting themselves and their future financial situation. The Rubik’s cube known as investing is more like a game of tic-tac-toe. People need to stop making it more complicated than it is and focus on the key factors to let them realize financial freedom. Misinformation and emotion are clouding investors judgement. I just hope they can quickly realize the danger they are creating for themselves and give us a call so we can help them see the forest for the trees.”
Join over 30 million American investors who are securely, privately, conservatively protecting their wealth within physical precious metals. A 30 second call can ultimately result in receiving an education, proper diversification, safeguarding wealth in tangible assets, a hedge, and anywhere from 10-500% growth! To find out how Scottsdale Gold and Silver can help you avoid another ’00 or ’08, call us today at (800) 899-3558 to reserve your spot for a free, 30-minute consultation with a Wealth Coach. If you own metals, we can assess if you are in the correct product for your objectives or if it is time to re-position. If you are not in metals, our Wealth Coaches will analyze your current position, financial objectives, and options to help you reach your financial goals. Don’t let the “casino” win again. Take control of your financial future and lead a golden lifestyle.
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