by Simon Popple
Posted 16th February 2017
I’m sure you’ll agree, right now, we live in an “Uncertain” world.
And Uncertainty is an important part of our jigsaw. Something which is good for gold. But I’ll get on to that later.
With uncertainty, I think there is a certain amount of fear and how we manage that fear on many fronts is vital. But today I want to talk about investing.
I don’t think there’s a huge difference between stress and fear. One thing I do know is stress is not good for your health and living in fear can’t be that good either.
Fear and stress often lead to poor decision making. They seem to jumble our minds, leading to poor choices. I’m sure we’ve all had moments when a child, a pet or even a good friend or family member has been driving us mad and we’ve basically lost it. I’m not talking about shouting or screaming – but being incapable of completing the most simple of tasks. Like putting something in the fridge that really shouldn’t be there! We’ve all done it – at least I hope so!
My point being that under real stress we probably won’t function very well. So you need to prepare for times when your life may be stressful – in advance. In our day to day lives this could be booking a holiday or getting away from the kids for a few days. But you should also plan your investments as well. Rainy days will happen and it’s best to have done your thinking before stress jumbles your mind.
Before we go any further I’d like to show you two graphs. The first is US Treasury Yields going back as far as I could. As you can see, 5, 10 and 30 year treasury yields are close to their all-time lows. Remember, the lower the yield, the higher the price. So bonds are already trading at very high prices relative to where they’ve been.
The second graph is US equities. Here is the S&P index over the past 100 years. Again, it shows an asset class trading at all-time highs.
But it’s “uncertainty” that I want you to think about today.
People tend to like certainty – it’s a good thing. So logically, uncertainty must be a bad thing.
But is it?
It can be. But if you’ve already got at least some of your investments in an asset class which typically does well in times of uncertainty. That must surely be a good thing.
Looking at the world today, you don’t have to look very hard to see uncertainty, stress and fear. In times like these people typically move to bonds and cash. But this time could be different.
Firstly, any cash sitting in a bank is likely to lose “value” thanks to inflation exceeding whatever paltry interest you’re able to earn. There’s also the much smaller risk of the bank defaulting.
Secondly, with bond prices already so high, is it really safe to move into them now? Like your cash balance, you could well see inflation erode their value and there’s also the chance of seeing your principal tumble if bond prices fall – which they can.
What are we so uncertain about?
Where do I start?
Trump seems to be on a lot of people’s minds at the moment. So let me start there.
He’s a maverick.
Some say a businessman and not a politician.
Now that may be a good thing. We don’t know. What we do know, is, somewhat ironically – that we don’t know a lot. There’s huge uncertainty about not only what he plans to do. But also how he plans to do it.
Will he build a wall across Mexico? – Surely bullish for silver prices
Does he want a weak US dollar? – Bullish for gold
Is he going to spend vast amounts on infrastructure? – Bullish for gold
Right now, we don’t know. We can only play with the cards we’ve been dealt, when trying to protect at least some of our capital if things get messy.
With that in mind, let me show you a few graphs that may reassure you that by investing in gold, you may be doing the right thing.
Firstly, this is what happened to gold when the Dow tumbled 28% in 1977-1978. It went up 92%.
More recently there was the crash of 1987 when the Dow fell 39% and gold was up 8%.
And finally this is what happened in 2008/9. The Dow fell by 32% and gold went up 44%.
Now remember, gold miners have leverage to gold. If the gold price goes up, I’d expect them to go up more. A lot more.
Perhaps you’ve already got at least some investments in the mining sector. In which case, then if, and of course there’s an if – we have a “correction,” you won’t need to panic, because you’ve already positioned at least part of your portfolio for what could be challenging “uncertain” times.
When everyone else is in a state of extreme stress and fear, hopefully your investments, or at least some of them, will be doing just fine.
by Ben Traynor
Posted March 23, 2017
by Glenn Fisher
Posted March 9, 2017
by David Stevenson
Posted March 17, 2017