What can be said about gold and precious metals? Gold has always started out as sound money, followed by monetary expansion, devaluation, and eventual collapse. Take the Roman Empire for example, money started as solid gold coins which eventually expanded with a mixture of base metal, than became worthless. Remember when a quarter was silver, penny was copper, and the rest was a mixture of silver, copper? Now? They are worthless base metals. This trend continued throughout history. Here we are again. This read will go through some of the current economic conditions with some commentary and suggestions. So, let's start with some recent economic news:
- 7 out of 9 recessions since 1950 came after rate hikes.
- Auto-Loan Delinquencies are higher today than the peak of 2008 recession.
- Corporate Debt has doubled since the 2008 recession.
- National, student, personal, and credit card debt is higher now than 2008. At Record Levels*
- Germany and Italy GDP Growth Rate is -0.2, Japan GDP Growth Rate is -0.6
- New Home Sales fell 19% in 2018. Existing Home Sales have fallen.
- Auto-Sales are down on average 3%, up to 6% by manufacturer report.
- Credit Card delinquencies are up 17% since Q1 2016.
- Derivatives up more than $100 trillion since 2009.
- China posted two-consecutive contraction in manufacturing.
- 1 in 3 Americans have less than $5,000 saved for retirement.
- 69% Of Americans Have Less Than $1000 In Savings
So, what's going to happen?
- The ugly truth is economic and monetary pain. Global economic weakness and contraction is here. Once the markets finally react to the toxicity of the monetary system, the central banks will react like they have in the passed with slashing interest rates, debt purchasing, and bond buying programs. But this time, resulting in the weakening or even failure of a currency. Let's go back to that monetary trend. Gold, expansion, devaluation, and than collapse. It's obvious where in the trend the monetary system is. We should expect astronomical injection of liquidity, purchasing of debts, and QE.... as a start. There are a few nations which have foreseen this and have been buying gold like never before. So, if they can foresee the problem and offset their exposure to it.. why aren't you? Have you noticed that gold has made a dramatic comeback after the bear market started? Gold has broke $1300 barrier with ease, and continued upward even with the stock market gains. Regardless, the price of gold must keep up with inflation. This tells us that the smart investors are starting to pile into safe havens, regardless what the market or central banks do. The recent actions from the Fed have proven that the stock market is indeed a bubble. The 0% interest rates fueled the bubble, the interest rate hikes popped the bubble. We saw proof of this:
*Dec 21st, 2015 - (Dow 17,700) - Interest hiked, Dow fell 2,060 points until the Fed calmed markets by stopping rate hikes until after elections.
*Feb 2018 - Dow fell 2,244 points.
*Sept-Dec 2018 - Dow fell from 26,828 to 21,792 a drop of 5,036 points.
*Feb 2018 - Fed announces pause in rate hikes, Dow jumps 400-points.
As you can see, the Fed and interest rates have a direct impact on the stock market. Rising interest rates have put Emerging Markets in a tough spot, as 2018 saw EM Currencies drop anywhere from 20-50%. Recession is on the horizon, even in Europe. The fear is that the ECB will be powerless to calm any financial turmoil as ECB interest rates are already negative and QE is still being implemented. In the US, the Fed will slash rates to 0% immediately, followed by QE, but, this time the dollar will take a severe hit.
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What to do from here?
You see the storm far off and it's growing as well as coming towards you but where you stand, it's relatively calm. The problem is complacency in the calm or believing the storm is long away from hitting. But, storms are variable and can move any direction and gain speed. So, why not acknowledge the problem and prepare now? Now that gold is not $2,000+/oz. Why not look into gold mining stocks that are up 8-25% since November? Start putting more into precious metals and less into stocks, forex, and crypto. 15%-20% of your portfolio is not enough. Stocks, currencies, crypto can drop 90% in less than a year, but precious metals will always have value. Ask yourself how long it took for the Dow to reach 26,600 points and then ask yourself how long it took to drop 4,000 points? Take a moment to think about that. 10-years to grow to 26,000 vs 4-months to fall 5,036, where is the stability in that? This isn't a case of "eventually it will happen", it's already begun. The gains and drops are volatility that has set in.
Gold Price Targets: North of $2,000 / OZ. Realistic, 3-5
Is Cryptocurrency a good investment?
No. It is now commonly known as digital fools gold. Without internet, you can't access or spend it. It has no value, its another form of fiat. As long as the people believe crypto is worth something, it has "value" but based on its current price, investors and traders are realizing its true worth. Worthless. Nothing. Nada.
What are some good mining stocks?
BTG - WRN - ASM - AUY - GLD, most of these stocks are up anywhere from 10%-20% (1-Week to 3-Month). Compare that to stock market, which are down on average 20%.
What stage are we at and when could this happen?
We're Q1 of 2007, heading into Q2. Remember, Q2 is where all the trouble began when rates adjusted.
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In conclusion.
The numbers are out there, you can see it all for yourself. It doesn't take an expert to see the numbers are bad and the financials are toxic. It just takes effort and interest. If we take all of our financial news from major financial news organizations (stars with C and the other with B), then we're not going to see it until after it hits. Just remember, their "experts" said there was no recession coming and this were great. A recession isn't official acknowledged until its already here. What stage are we at and when could this happen? We're Q1 of 2007, heading into Q2. Remember, Q2 is where all the trouble began.