Hurricanes Are Coming!
Hurricane Dorian is traveling (September 1) toward the United States. The destruction could be impressive.
Hurricane Federal Reserve has devalued the dollar for over a century. The destruction has been large. A few benefited, many lost wealth, purchasing power, pensions, jobs, and homes.
Hurricane National Debt has reached Cat 5 status, over $22 trillion in unpayable debt that weakens the U.S. economy, strains the government budget with half a trillion in annual interest payments, and sucks capital away from more beneficial uses. This debt hurricane should reach Cat 6 soon.
Hurricane Pension Default sits at only Cat 1 status today, but it will strengthen during the next recession. Low and negative interest rates will make it worse.
Hurricane Crazy Politics is building into a major force, expected to reach Cat 5 in October 2020.
TOO MANY DANGEROUS HURRICANES…
SO WHAT? HOW TO PREPARE FOR CAT 5 HURRICANES IN OUR LIFE?
First: What do we know for certain?
Second: Make Wise Choices.
Third: How do I learn about Good Choices?
Fourth: What Can I do?
Fifth: WHAT TRENDS AND RATIOS?
Debt increases more rapidly than the population. Examine this (scary) log scale chart of official national debt divided by US population.
Debt increases exponentially. There is no sign (as of 2019) that debt creation will decrease. As debt increases, dollars buy less. Plan on price inflation. Don’t expect this insane debt increase to end well.
Gold prices (and stock indices) increase as the dollar devalues. The price of gold may spike higher or fall too low for several years, but it will rise as dollars are devalued. In many currencies, gold sells at all-time highs. Gold prices will exceed the dollar high of $1923, perhaps in 2020.
The correlation between annual gold prices and population adjusted national debt since 1971 exceeds 90%. More national debt means higher gold prices. Plan on it.
The gold to S&P 500 Index ratio (65 week moving average) shows when gold is overpriced or underpriced compared to the S&P. During the past 50 years the ratio has been relatively constant, except during the metals blow-off in January 1980.
This graph shows a ten-year trend (1970—1980) of increasing gold to S&P ratios, a 20-year decline until about 9-11, a ten-year increase to 2011, and an 8-year fall until late 2018.
Conclusion: Gold is underpriced relative to the S&P. Silver (not shown) is also underpriced. Buy gold and silver knowing that our financial and political system will increase debt, devalue the dollar, and boost gold and silver prices much higher. The S&P is over-valued.
TIMING THE LONG-TERM EXCHANGE BETWEEN GOLD AND THE S&P:
Buy gold in 1971—1972. Sell gold and buy the S&P in 1980. Buy gold in 2001, sell gold in 2011, and buy gold in late 2018 and early 2019. Don’t be surprised if gold corrects for a few weeks in September.
Of course not. We don’t know where Dorian will make landfall or how much flooding it will cause. We don’t know what disasters our politicians and central bankers will create during the next recession. And, despite decades of history, politicians might reduce spending, balance the budget, audit Fort Knox, lower taxes, abolish the Fed and push gold prices lower. Doubtful but possible.
Harry Dent tells everyone that gold prices will drop to $700 or lower. I think that is nonsense, but…
The Elliott Wave (subscription service) people are highly intelligent. They stated:
Intelligent people can be wrong about the long-term direction of the gold market. We’ll see.
Debt will rise, politicians will spend, bankers will devalue, gold prices will rise. In the short term, gold and silver have had a nice run and should correct. Sentiment is excessively positive (dangerous) at the end of August 2019.
Expect a huge rally into next decade following a correction.
From Adam Taggart: “How to Ride the Gold (& Silver) Bull.”
From Alasdair Macleod: “Negative Interest Rates and Gold”
From Bill Holter: “Infinity is Here!”
From Gary Christenson: “The Big Cons Will Boost Metals Prices.”
Miles Franklin will transfer fiat currency into real money—gold and silver. This year—2019—looks like an ideal time to shift into metals and out of paper assets. The metals bull run could last 5—10 years.
The Deviant Investor
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