Seriously, the last few days have been monumental – it’s happening right now and traditional investments are doomed to fail. Bonds around the world are yielding next to nothing, or even less than zero, where you’re paying the government to lend it money, instead of the other way around. The blue-chip stock-market indices are looking horrible, like they’re having a cardiac arrest.
In fact, both bonds and large-cap stocks are expected to provide pathetic returns over the next 12 months.
Rate cuts are coming, since the U.S. wants to compete with the rest of the world, with central banks in Europe and Asia relentlessly cutting their own bond yields. In the past, interest rate cutting in the U.S. propped up the large-cap stock market – but for the first time in 10 years, rate cuts will actually do more for gold than for stocks.
I feel sorry for anyone who’s not reading this today, because they’re probably going to put their hard-earned money into stocks at the tail end of the bull market.
They’re jumping into a sinking ship: by the New York Federal Reserve’s own admission, the likelihood of a U.S. recession within the next year is elevated, just like it was in 2000 and 2007.
Courtesy: New York Federal Reserve
This indicator, based on the spread between the 10-year and 3-month Treasury bill yields, has accurately predicted impending economic recessions and stock-market contractions since 1959. The Fed is understating the actual likelihood of a recession, and the last thing they want to do is alarm investors and thereby make the inevitable happen even sooner.
Statistically speaking, a reading above 30% in the Fed’s indicator means that you can, on average, expect the stock market to return -3.6% over the next six months. The Federal Reserve will actually precipitate this decline with its so-called “insurance cuts,” which will only deepen the spread between the 10-year and 3-month bond yields.
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The mainstream press is concerned with the U.S.-China trade war, but the bigger issue is the Federal Reserve’s diminishing ability to use its only tool, interest-rate cuts, to save the economy and keep the markets from imploding. In other words, tariff-war escalations could easily start a market crash, but central-bank folly will be the ultimate root cause.
And so, while news outlets are distracting you with the symptoms instead of what’s actually killing the economy, economists like Larry Summers and Mohamed El-Erian are pounding the table, warning about what’s coming but nobody’s listening. In contrast to the Fed’s projections, JPMorgan has the odds of a recession within 12 months pegged at 40%-50%, while Rabobank’s indicator has it at 81% within 17 months.
Courtesy: Rabobank, Zerohedge
What’s your best bet, then, in this dreadful market environment? Like Ray Dalio, Paul Tudor Jones, and Stanley Druckenmiller, I’ve been staying the course and recommending gold as both a safe haven and a vehicle for portfolio growth. Meanwhile, my readers have made a killing from my gold-sector picks, which made outstanding gains this past week.
Check the charts on Royal Gold (RGLD) and Franco-Nevada (FNV) for the last two months since we’ve alerted on them, and you’ll see exactly what I’m talking about.
And that’s just the beginning, as I’ll be releasing my next pick very soon – a potential ten-bagger, so be ready because first movers get the spoils while latecomers get the scraps.
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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