How Much Gold do we Need?

There will be no bailout. Since the Great Financial Crisis (since 9/11, actually), the central banks of the world have been slashing rates and enjoying the endless deflationary tailwind of China’s urbanization and Russian subsidized commodities to offset any excess credit.

Let me repeat this in simple terms: for at least 25 years, central banks could lower interest rates and buy Treasuries or mortgage-backed securities and not risk inflation bursting, but the conditions that led to the greatest deflationary forces in modern history are over!

Inflation is back to normal, so printing more currency leads to higher prices.

Central banks are out of the game of currency creation and artificially lowering interest rates.

If anything, they are at risk of doing the opposite.

I really want to stress this and tell you what I did yesterday. For one full hour, I conditioned my subconscious to ignore, deny, and disregard the past 15 years of my investment career.

Whatever the asset allocation model appropriate for the 2010s was, it has nothing to do with what will help mitigate risk and generate optimal returns in the deglobalization era we just entered.

Just stop whatever you are doing and tell yourself 100 times that it’s over for central bank bailouts. It’s over!

Central banks around the world have raised rates 520 times in two years, and they’re probably going to do more in the next couple of years because inflation is still a caged animal that’s ready to be unleashed when it’s given a chance.

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Courtesy: Zerohedge.com

There might not be any central bank bailouts or easing of interest rates, and you must invest accordingly.

If central banks aren’t bailing out anyone, the 60/40 portfolio and the correlation between bonds and stocks as a hedge are no longer the ultimate position sizing structures for Wall Street. This means that owning a portfolio of commodities is essential (just ask Warren Buffett).

What you’re seeing right now with consumers talking about easing inflationary conditions is the last bit of denial left… You can’t be fooled by this, and I implore you not to fall prey to this data!

Inflation is not getting crushed by the FED’s policies, and all they are doing is helping Wall Street adjust to the new reality.

Courtesy: Zerohedge.com

We are seemingly forever exiting the twilight zone, the world of deflationary tailwind, and entering a new era.

I’ve thought long and hard about the simplest and most efficient strategy I could personally be engaged in, and it’s to be more aggressive than ever on inflationary assets.

We were early to call the end of the deflationary era, but now that it’s here, I can’t allow myself to proceed with less than full and utter conviction that normality is back.

One of the best ways to begin the journey into this new investment era is to understand that savers are still being punished in the new world, but the trick this time is to lure them into money market accounts where they’ll get paid 4%-5% while inflation washes the gains away.

The bubble is in thinking that saving is suddenly profitable. 

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Best Regards,

Lior Gantz
President, WealthResearchGroup.com