When we look back on this year it will turn out to be a more important year than 2001 was with 9/11. This year will be as key of a historic year as 1989 was with the Fall of the Berlin Wall or 1929 was with stock market crash.
This year we are going through three events all at once intertwined together:
1)A global pandemic.
2)A financial debt bubble bust to mark the end of a thirty year bond bull market.
3)A coming big recession full of woes.
We are all going to have to ride out this situation together and survive and find a way to thrive.
Today I was taking a walk and saw something for sale I never saw before.
That’s a “quarantine basket.”
All the restaurants and bars are closed. I went to the mall and it was closed too. The schools are shut and the biggest factory just laid off over 1000 workers where I live. The unemployment rate must be close to 20% – all happening in a week.
People have been told they could be back to work in a few weeks. But Trump has talked about things getting back to normal in July/August and he has been told that this pandemic situation could run for 18 months. That doesn’t mean things will be locked down for that long, but it is hard to project how it will really play out. I feel like going into hiding for a year and coming back after the bad news has run its course.
However, it is actually the financial bubble bust that I think is going to end up being the event of the year with more long lasting consequences in the eyes of the historians who write the story of our times fifty years from now.
At this moment safe havens really are not working and the only thing that has gone up in the past few weeks is the US dollar index.
Most people in the US are still thinking that the best thing to do is buy stocks or hold and hope on what stocks they own against the bear market trend. Gap up days bring a reason to believe, but the DOW bull market trend line going back to 2009 has been busted just like the one before it got busted in January of 2008. Markets that trade below their 200-day moving averages like this become very difficult to make money in.
It is going to be some time now before the market goes into a new bull market. And most still think bonds are “safe” when they no longer are. The US dollar index shows that cash is actually a position going up in value now as everything else is falling against it.
Gold though is falling less than the stock market and trading less volatile than the stock market is too. Notice on up days in the market gold is going up better than the stock market and on down days gold doesn’t fall as much as stocks. When this current leg down in the markets ends expect gold to soar and to continue to outperform the markets for years.
People think that averaging into stocks is how to invest, but in reality averaging into gold is now the smarter play. The idea of throwing 50% of your money into bonds 50% into stocks as “safe” investing no longer makes sense.
-Mike
