In the certified financial planner industry, there are certain undeniable facts that often get overlooked. Many are as simple as could possibly be, but are ignored because of a good story or the euphoria of rising asset prices. Also, the Fear of Missing Out is also a factor.
One of the most basic ideas is to buy low and sell high. Unfortunately, many buy into a hyped up story that may or may not be true and drive the price of a stock higher. One good example would be the “marijuana story” stocks that were bid straight up in 2017 and are crashing back to earth in 2018. As I had written in 2017 – in doing research in this area I found that a number of junior mining companies were now being touted as “marijuana stocks.” They all came with flashy stories of legalization and massive profit opportunities. Of course, it has been exposed that as weed is legalized, the price will fall because of likely oversupply and the massive profit opportunities just might not materialize after all.
I also know, because of my research into some junior miners, that this space is littered with folks that have great stories and are great at raising money and that happens to be about it. The exception is hitting the “big one” not the rule.
Others, fearing they may be missing something, join in and drive the stock price even higher. If the stock that is being bought is indeed a solid company with a real business buying at any point could be a good idea. If, however, the company in question is a flash in the pan or a fad that fails to take off, there could be large losses.
As we look at the current setup in the US stock markets, it appears that they are severely overvalued. This, however, has not led to less interest but more interest. US bonds, indeed, most developed world bonds, are at yields that can likely only be maintained by constant interventions by the ECB, the Fed, the Japanese Central Bank, and others. It appears that any time there is an attempt to let the markets actually decide what a fair rate is (that is the idea of markets by the way) the rates spike up and massive buying takes place to stem the tide and keep rates artificially low. Similarly, if stock indexes fall, there appears to be an invisible hand that steps in and buys to stem the losses. This is obvious in the USA and Japan in particular.
Since this has been taking place for so long, it is likely not possible that anyone notices these machinations unless they are actually looking for it. All of this information shows up in charts, central bank balance sheets, and even in financial news publications. Sometimes, the numbers are so large and the interference so egregious that even Jim Cramer has to say — this isn’t real — this doesn’t happen! (That was when the Dow was down 1600 points and a second later it was “only” down 1100 points.
Of course, the most influential financial news sources rarely, if ever, mention the underlying processes to manage even the most minute details of asset prices.
It appears to me that these illusions being produced are to keep us as UNINFORMED about what is actually happening in our economy. This way, the regular folks will just keep piling into stocks, bonds, and real estate, and, as we are witnessing, go deeper into debt to continue to play. Margin debt remains near all-time highs in the stock markets as I write this.
On the other side, assets such as gold and silver are being actively suppressed by many of the same actors working to keep the bubble assets inflated. Why?
- Number one: to disguise what is actually happening to the value of “printed” currencies as they are created in obscene amounts out of thin air.
- Number two: to make profits by shorting paper contracts. With cheap money, they can create paper contracts in the gold and silver markets and manipulate the price. This allows them to short and make money.
- Number three: and I can only go by what is reported, to acquire these metals for a lower price than they could get them for if there was a fair price discovery mechanism.
How much less? According to USDebtclock.org, the ratio of dollars to gold is 4,739. To put that into perspective in 1913 there were 29.08 dollars for each ounce of gold. Today, there are 4,739 dollars for each ounce of gold. In 1913 gold was pegged at $20.67 so even then, the number of dollars was slightly higher than it actually should have been. Today we can see that based on the number of dollars gold is vastly underpriced at around $1,345.00. A more fair price could be the $4,739.00 because of the “printing” that has taken place since 1971 and has gone all-out crazy since 2008.
I am not even going into the tens of trillions of dollars that have been keystroked into existence and can’t be accounted for at HUD and the Pentagon. Or the $24 trillion that the banks have been given since 2009. These numbers are likely not a part of these calculations either.
Many times I have said — watch what these banks do — not what they say.
Many major banks, like JP Morgan (silver), HSBC, Goldman Sachs (gold) and many central banks (China, India, Russia, Turkey, Iran, etc.) have been buying tons of gold (literally). Many other countries are repatriating their gold that has been stored in other countries.
Only here in the USA does there seem to be such a negative sentiment towards gold and silver. It is always depicted as a barbarous relic. It is not looked at as a viable investment even though, quietly, gold has risen 20 percent in 24 months. Silver has only risen 2 percent during that time and appears to me to be one of the most undervalued assets on the planet at this time.
Because of the misinformation about the actual metals, the mining stocks also appear to be undervalued at this time. When interest is revived in this area the change in sentiment could result in large moves in short periods of time.
Could it be that central banks and the world’s largest banks are aware that “printing” your way to prosperity is a myth that always ends in tears? Are they seeing the real economic numbers and figuring that this can’t go on much longer? Are they purchasing an asset that has been used as money and a store of value throughout history to hedge against a collapse of fiat currency values? Or, are they, like me, just seeing value in these assets? In a world where most assets are severely overvalued, it appears that gold and silver are assets that just still might allow us to buy low and sell high in a near-term timeframe. My guess is that to some extent — all of the above.
If you want expert guidance, contact a certified financial planner today. The finance or retirement planning world can be confusing and overwhelming, but I will be there to help inform and guide you through every step. Learn more about how I can help you assess your risk and get in touch today with any questions.
Mike Savage, ChFC, Financial Advisor
2642 Route 940 Pocono Summit, Pa. 18346
Securities are offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
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