Another week and another 751,000 people filing for initial unemployment claims along with the 22 million that are still currently collecting.  (Bloomberg) This is certainly not an indication of ANY type of recovery- particularly since the long-awaited stimulus is still being debated rather than deployed. Of course, any “recovery” would just be inspired by more debt so it would not last for any meaningful period of time anyway.

While many are well aware that here in the US, and indeed in the world, we are drowning in debt and piling it on in record amounts to keep the illusion of solvency alive, many are NOT aware that when this party comes to an end all of this debt created to pay off prior debts and allow many to continue to spend and survive – all that will be left is the debt.

This debt being created is not like the debt created to build roads, dams, and infrastructure. This debt is being consumed to placate the masses as the rich get ridiculously wealthy at our expense. It is also being used to disguise the real value of assets. Many people are in line to find out that most of their “wealth” is nothing but an illusion on a computer screen.

What is the value of a debt owed by someone who can’t pay? What is the value of a company when it is drowning in debt and can’t pay the interest on their bonds? That is called bankruptcy and the common share holders generally lose 100%. You can’t come back from a 100% LOSS!

S& P Global ratings is projecting global debt to GDP will get to 265% this year! They are also expecting insolvencies and defaults to reach levels that have not been seen since 2009. This has led them to downgrade 22% of both corporate and sovereign debt issuers globally. According to the IIF (Institute of International Finance) global debt rose by $10 trillion in 2019 and is a full $87 TRILLION HIGHER than it was in 2008. This appears to me what it looks like when you think more debt can cure being too far in debt to be able to even pay the interest on it if rates were ANYWHERE near normal.

I really believe that when historians look back at this period we will look even worse than those that bid the price of tulip bulbs up to ridiculous amounts centuries ago. Imagine assigning monster values to an “asset” that is nothing more than a mathematical equation or a computer blip. There is no tangible value- only PERCEIVED value that can go to ZERO in an instant- or more likely when the central banks issue their own digital currencies and likely mandate that all other cryptos are verboten and go to zero over a VERY short timespan.

In other news it appears that our “election” is going to be in a state of flux for a while. Regardless of who actually winds up in the White House they will likely be presiding over the implosion of our economy and the loss of our reserve currency status. In reality, the economy has been imploding for at least 3 years even with the unprecedented “Printing, buying assets, and debt creation”. It is now to a point where it can’t be hidden anymore and many are waking up. The sad part is that those “in charge” are so emboldened at this point that they aren’t even hiding the fraud anymore. They pay their fines and continue on.

What must we look like to the rest of the world today? I used to laugh at the banana republics and the fights that took place there. Today, we appear to be the laughingstock as we can’t get along and can’t find common ground. The pie is getting smaller (except for those at the top) and everyone appears to be in a free-for-all for the scraps that are left. What a portrait to put out and having the expectation that the rest of the world will continue to entrust the world’s finances to this mess we call the US.

I am more convinced than ever that we are nearing a point where asset values are going to reflect ACTUAL value rather than PERCEIVED value. This will only happen when the central planners lose control. Many think that can’t happen but it will- it is only a question of when. It will happen when too many currency units are produced and nobody wants to accept it as payment. Already, many (including central banks, major banks and billionaires- all who benefit from “printing money”) are buying real stuff- like gold and silver in record amounts. The only reason I can come up with for this is that they don’t expect the “printing” to work for much longer.

It appears to me that the illusion that debt is wealth is going to be exposed for the fraud that it is- just like “printing” money can make you wealthy.

In this scenario I expect most hard assets to outperform paper assets but I am expecting an explosion in the metals  because of the paper games being played to keep the price suppressed. Let’s not forget that silver was $50.00 in 1980 and again in 2011. After all of this “printing” it is $25.00 as I write this. Gold was $1900.00 in 2011. It is a little over $1940.00 as I write this after massive currency creation across the globe. What should the REAL price be? I believe we will find out soon. In the meantime, keep this in mind.

In 1913 the Fed was created. At that time, according to the, there was $29.00 in existence for each ounce of gold. Gold was $20.67 per ounce. Not perfect but at least in the ballpark. The US dollar had tangible value. There were $2.65 dollars in existence for each ounce of silver. Today, it is $32,539.00 in existence for each ounce of gold. There are $4273.00 in existence for each ounce of silver. More interesting to me is that at the end of 2019 there were “only” about 23,000.00 for each ounce of gold. Quite an explosion of dollars in the past 9 months or so! This appears to be on an exponential growth path that cannot be stopped without an implosion. Time will tell.

Everyone has different investment timelines and goals. There is no “one size fits all” investment plan. I will say, however, that I believe everyone should have at least some exposure to the metals. All paper assets have the ability to go to zero- and many have. While “value” can fluctuate the price of gold and silver has never been ZERO. Anything in great demand sees the price of it rise. My guess is that the central banks have suppressed the price, given the illusion of risk- by manipulating the price all while buying record amounts and listing the gold bought as a “riskless asset” on their books.

I believe that we should always watch what they do- not what they say. They deceive with their mouths and their “printing” but their actions show their true intentions and can give us all a clue as to what we should likely be doing.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.