Lacking Exposure
From a macro economic standpoint, it looks like we’re going to start this week like any other over the past, however many years, with all eyes on central bank noise and policies.
The rhetoric will be the same, “whilst we don’t believe there is a bubble in any asset market, we’ll do every “accommodation” we can think of to make sure that we replace all air leaving current bubble with more air into any bubble, that doesn’t exist”.
Accommodation like, money printing on scale never seen, like below:
And, like last week from the US Fed, the promise of low interests rates until almost forever but, for now, a stated 2023.
Even in Australia, rates are arguably negative already.
So, even though “there is no bubble”, the current bubble has created a new type of speculator, the type that are using fresh $, gifted from a benevolent .gov, to “invest” in the stock market instead of a sports punt!! Better odds!!!
The reason is represented in the background of the poster child of this new type of “investor” below, Dave Portnoy. Cripes, this guy has been so “hot” in recent months, he’s even met the POTUS.
The problem is, through unhinged self-belief and a solid dose of leverage he’s feeling quite a bit of pain right now. But he knows it’ll be ok because, “stocks only go up”, or ‘just buy the dip”, a solid strategy over the last 12 years or so.
Now here’s where things get interesting. Dave may or may not realise that his entire investment strategy is completely dependent on the Europeans, English and US Central Banks catching up to the Japanese and Swiss Central banks in the money printing caper, to keep the asset bubbles afloat, that don’t exist.
See chart below and don’t say we never send you anything positive. There “appears” to be so much MORE to do!!
We also understand that these international Central Banks machinations may seem a long way from the business news that may come through domestic news feeds but please remember the financial system, as it exists today, has the USD as a reserve currency, of sorts. This is why the markets of the US, or the demise of, matter the most.
As such, US Treasuries have been the bedrock of this current system since inception post WW2, give or take a few periods. The US removing any “relevance “ of gold to the USD in 1971 seemed to only intensify the importance of US Treasuries as Tier 1 capital!!
The largest looming problem to this system is an acceleration in the perilous state of US finances, even compared to “normal”, confidence in Treasury markets, expressed through currency in a downward trajectory.
Those that argue the point of “the clean dirtiest shirt” in defence of the US dollar demise are also the ones that argue there can never be a change to this system as there is no viable alternative.
We certainly agree with the second point but as to the first, not so much.
Here’s some context as to the trajectory of the US budget!
Now, if you add the quadrillion pieces of derivative paper attached to every asset class……don’t worry, it all nets out.
With the USD looking increasingly week as a “petrodollar” reserve currency, particularly in view of battery tech emergence, how amazing is it that it’s taken this long for some asset managers and private family offices to start allocating some serious money to gold, either through shares or actual bullion? It is interesting that most private investors still use ETF’s for precious metal exposure, story for another day.
Even so, according to many analysts, gold as a percentage of overall investable assets currently sits somewhere between 0.4% and 0.5%,versus a multi decade average of over 5%, including multi-year allocations of 10% not being uncommon.
Therefore, It was of great interest when we came across this chart, below, in Marc Faber’s latest monthly analysis.
Global Family Offices’ Strategic Asset Allocation 2019
Even professionally managed family offices have less than a 1% exposure to gold right now?
Even with the current money printing madness and inflationary threats breathing down our necks?
It’s hard to see this staying under 1% for much longer. Precious metals have the smallest market share of savings and investment products they’ve ever had globally.
The question will be, at what price will those late to the party have to pay for entrance?
We look forward to collating some commentary on allocating to Precious Metals in the near future!!
In the meantime, this 1930’s analogue for equities remains intact.!! Dead cat bounce anyone?
