My Bullish Signal Is HERE!
Yesterday, I sat in a room filled with family offices and advisors to pension funds and insurance companies and heard a presentation about the world’s largest fund of its kind, founded by a British billionaire.
For nearly an hour, I listened as this battle-tested veteran explained why the world’s largest companies will continue to be net-sellers in this environment.
As the baby boomers retire at the fastest pace of any generation in human history, they want out of stocks and into bonds and cash; this is a dramatic outflow from equities, and as you can see below, money-market accounts have morphed into income-producing assets:
With each passing day, I am seeing how the economic system that I’ve come to know in my adult life (2002-2023) is transforming, and I am adapting to this with blistering speed.
When I speak with my hedge fund manager, we talk about a few main characteristics that we believe are the most crucial to understand about the economy:
- The world of zero interest rates is over.
Essentially, what this means is that new companies, with disruptive ideas, will grow slower and attract less money than before.
If I can call a fund manager that runs a credit portfolio and earn 10%-12%, why in the world would I choose to go anywhere else?
- Global political conflicts.
Russia is now in a situation that requires a major enlistment of more soldiers for it to complete its objectives; that means that in April and May, as the mud on the battle field dries, we’ll see them give it their all, in what could escalate economic collapse in many regions and serve as the bedrock for a hard landing.
What the zero-Covid policies did to China is truly unprecedented and we now see demand coming back big, with the new agenda of getting the economy up and running!
Courtesy: Zerohedge.com, World Gold Council
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Now comes the part where the conflicting data comes in; is gold going to break out, north of $2,000, or is it headed to $1,500, testing its multiyear resistance line?
I want to present both sides of the equation and tell you what I’m doing.
The BEAR CASE
Looking at the short-term trends, gold has broken down, because of the CPI report that confirmed what I’ve been saying for close to six months: The inflation data will not show a clear downtrend, rather it will be choppy and force the FED to continue keeping rates at historically-high levels, while they dump bonds into the market, shrinking their balance sheet.
If a money-market account dishes out 4.50%, the demand for cash will be high and the dollar will remain strong.
This is the conventional wisdom; the dollar will remain strong, so long as yields stay where they are, but you can’t just follow that logic, because it DOESN’T hold water.
I want to show you something very interesting and it is that today mirrors the very same conditions, which started gold’s bull market from $250 to $1,900 in 2001:
Courtesy: Zerohedge.com, Bloomberg
Compare how it was then to where we are now: Bonds were far more attractive than stocks, the dollar finished a massive bull market (that lasted eight years) and the commodities sector ended a bear market.
China, Russia, Iran, NATO — this cocktail is toxic.
Gold is the antidote.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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