This Changes Everything!
Inflation-Adjusted Perspective
The persistent growth in stocks over the past half century has apparently been a huge boon to investors and retirees. Just invest in an index fund and watch your wealth explode over time!
Unfortunately, the real cost of living has been growing exponentially during this same time period. As a result, the inflation-adjusted returns are practically nil over the long term. Add in costs of capital and trading and taxes, and you’re probably down versus just holding a long-term store of value such as gold.
If you change your perspective on the market by taking a log chart and rotating it clockwise 21˚, you can see the inflation-adjusted market movements more easily. By this measure, today we’re at the exact same level as during the Dot-Com Bubble. And the downside target of the current head-and-shoulders reversal pattern will take us back to the exact same level as the GFC and the mid-1980s by sometime around the beginning of 2026.
The only real way to make money in the markets is to speculate in bubbles — but those are fleeting in real terms and timing is hard — or buy high-value dividend-paying stocks at market bottoms and make your money off of the income rather than capital gains.
In the current environment, it’s best to get out of the market or sell short and wait for good prices on quality stocks over the next two years. In the meantime, put your money into precious metals and capital investments such as solar panels on your house or a garden. You may need them during the coming financial catastrophe…
If we see money market funds (MMF) "break the buck" during the coming budget showdown, government shutdown, and 2023 financial crisis, it will spark an unprecedented run because so many people have sought safe haven there. Fitch Ratings warned in February that the potential for investor redemptions and volatility in money market funds would rise if investors believed the government were at risk of defaulting. The question is, to where will investors/savers run next? They've already bailed from the banks (deposits are at all-time lows and banks are borrowing heavily from emergency lending facilities at the Fed) and if Treasuries are suspect and stocks are crashing, what can they possibly do? If they try to withdraw cash as bills, this represents quite another issue -- there's only about $2.3 trillion of cash in circulation (53 billion notes) versus $17.6 trillion of deposits at commercial banks and $5.25 trillion in MMFs. In other words, only 10% of "cash" is actually able to be withdrawn and held as physical bills and coins. That's only about $7 per American man, woman, and child. So when you go to your ATM, if you're not first in line, you likely won't get any money out.
Where should you deposit your funds instead of MMFs, bonds, bank accounts, or physical cash? I would highly recommend putting them into an *allocated* precious metals account which is regularly audited to ensure that all of the metal is there 100% backing your deposits and not subject to any creditor claims whatsoever. Here are two that I recommend:
BullionVault - https://PassantGardant.com/BullionVault
Either of these companies will be able to store your wealth in gold, silver, or platinum in any number of fully insured vaults around the world. BullionVault has vaults in New York, London, Toronto, Zurich, and Singapore. OwnX has vaults in Delaware and Texas. Both will allow you to transfer money to and from any bank account and trade metals online. Not only will keeping your wealth in precious metals protect against bank runs and money market runs, but it'll also protect you against inflation and hyperinflation.
When should you move your wealth to precious metals? I would recommend doing so immediately, as the prices of gold and silver will likely be skyrocketing soon as everyone tries to rush into the protection they provide. Companies like BullionVault and OwnX may need to turn away new customers if they cannot secure enough precious metals to meet depositors needs since they are 100% backed by physical metal. Unlike with banks and MMFs, allocated precious metals repositories cannot suffer runs because customer assets are segregated and allocated to them specifically. There's no loss of value or first mover advantage to redeeming your assets. They'll still be there no matter how many other customers want to take delivery.
Should I trust unallocated precious metals accounts such as the Perth Mint? It would be better than a savings or money market account, but you have to realize that an unallocated precious metals account makes you a creditor to the institution you're buying from. They will "owe" you gold or silver without necessarily having any at the time. They are essentially short of gold and silver, which is not a good place to be right now. When it comes to withdrawing your metal, they will seek to find it in the market, or if they can't, will owe you the dollar equivalent value of it. This is a risky bet compared to allocated accounts which have the metal stored in your name in serial-numbered bars.
Again, I recommend allocated accounts first and foremost, but unallocated if that's all that's available by the time you get around to it. Best to act quickly now.
What about holding physical gold and silver directly? Yes, absolutely, that's a good idea up to a certain amount. Having too much in your own possession can be risky because of theft, but having enough on hand to barter for food, fuel, etc., for up to a month or two would be a great idea, especially if there's a bank holiday and you can't access cash. You can also document your precious metals holdings to your home insurance in case of theft or fire to be at least partly protected. My recommended dealer for physical precious metals is:
MoneyMetals - https://PassantGardant.com/MoneyMetals
Any other ways to protect or grow wealth during this financial crisis? Sure, you can also purchase precious metals related equities such as royalty and mining companies using your brokerage account. Some good tickers include AG, EMX, EXK, FNV, FSM, HL, JNUG, MTA, PAAS, RGLD, SAND, SILJ, and WPM. This is not trading advice however -- do your own due diligence. If you don't yet have a brokerage, I would recommend:
Robinhood - http://PassantGardant.com/Robinhood
Mining and royalty companies represent leverage to the underlying metals, which are likely to be going up in price significantly as people rush to protect themselves from the collapsing global financial system.
How can I stay informed about what's going on?
Unfortunately, I expect censorship to significantly restrict the free flow of information going forward. Rep. Thomas Massie wrote on Twitter that the government is looking to shut down any social media posts that discuss anything which might "promote a bank run". Manually check back to this Substack often as it may not appear in your feed. And also watch less censored alternative media such as ZeroHedge and Rumble.
Once again, my four recommendations to protect yourself and potentially profit from this crisis include:
BullionVault - https://PassantGardant.com/BullionVault
MoneyMetals - https://PassantGardant.com/MoneyMetals
Robinhood - http://PassantGardant.com/Robinhood
Good luck and be safe! Please share this post with your friends and family so that they are also protected!