Today’s election is a big day for the future of our country. While gold doesn’t take political sides, we still salute our remarkable electoral system that allows every American to express themselves through the power of the ballot box.
We see the same polls you do and hear the same pundits. What will be the outcome? Who knows… but the results could easily create a lot of volatility and unrest.
It is easy to feel powerless when the diet of television and Internet news is so rich in scary news. We have no tea leaves to consult on what tomorrow (or even later today) will look like.
Still, not knowing the future is no excuse for not getting prepared for it!
On days like this, it pays to take stock of your own personal “State of the Union” with your retirement assets. Are you exposed in a way that could be painful if a market crash happens?
A STOCK MARKET THAT EVEN SCARES WARREN BUFFETT
Not even Warren Buffett can find a decent bargain on the stock market these days.
Except with one thing… shares of Berkshire Hathaway. Yes, Buffett’s company just bought back almost $1 billion of its own shares.
According to the Wall Street Journal, “Buffett sees a dearth of appealing investment options for his company’s large cash pile.”
This attitude is nothing new, in fact. Berkshire hasn’t made a major acquisition of any kind in two years!
The stock market seemed to agree with Buffett’s pessimism in October. Concerns about rising rates and slowing growth for tech giants drove down shares hard and took investors on a painful ride.
Buffett’s legendary investment record is driven by value investing. That means he tries to hunt down a bargain that no one else sees. These days, he doesn’t seem to see many bargains anywhere.
In doing a buyback, he is actually using a strategy he has long argued against! Historically, Buffett has said that the best way to build shareholder value is to make good investments, not do buybacks. But where can a good investment be found after 10 years of rising shares?
Buffett isn’t the only one wary of stocks.
Central banks around the world are also seeking alternative places to park cash. “Investors should pay attention to the latest uptick in central banks’ gold purchases, as these institutions have historically bought gold on the dips,” said Jeffrey Christian, managing partner of CPM Group.
After an incredible run, could this stock market really have further to go?
There are powerful indicators that say the market could be headed for trouble. According to a front page Wall Street Journal story, today’s market is eerily similar to other pre-crash periods.
3 CLAWS ON THE BEAR’S PAW
Investors have been hugely enriched from a bull market that has risen over 300% since 2009.
But the S&P 500 has just fallen over 6% from its recent all-time high.
So is a bear market – one that falls more than 20% from a recent peak – just around the corner?
The Wall Street Journal recently dug deep into a variety of important technical market indicators. These are the ones that have been known to flash red just before a bear market.
Let’s take a look at three of these signals and what to watch out for:
1. Bond Spreads
• Widening high-yield bond spreads can be a sign of economic stress.
• Higher borrowing costs for companies means lower profits and rising loan defaults, which can hurt the economy.
…What’s happening now: Federal Reserve data shows that spreads are showing a pattern similar to the one-year periods before the 2000 and 2008 market routs.
2. Steepness of the Yield Curve
• If short term bond yields end up higher than long term yields, we have what is called an inverted yield curve.
• This means investors are losing confidence in the long term outlook.
• The resulting pressure on both business and consumer spending can slow the economy and hurt profits.
…What’s happening now: Federal Reserve data shows the gap between 10-year and 2-year Treasuries is near inversion, just as it was prior to the 2000 and 2008 market crashes.
3. Merger Activity
• In the past, a big rise in mergers and deals has sometimes been evident just before big stock market peaks.
• According the WSJ, M&A activity spiked in both 2000 and 2007 just ahead of stock market peaks.
…What’s happening now: Dealogic data shows that the recent period of 2014-2018 has seen a large burst of activity similar in scope to that of just before 2000 and 2008 market crashes.
So, do these indicators sound like they are flashing red to you, or yellow, or even green? Who knows. They can’t all be 100% accurate, or everyone on Wall Street would be rich!
So it is natural to consider what alternatives there might be, especially if you feel over-invested in stocks.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, says “Gold’s appreciation potential remains [strong], given the macroeconomic implications as the [stock] market becomes increasingly coiled.”
Bloomberg just reiterated their forecast for $1,400/oz for gold prices ahead. “If the greenback resumes the mean-reversion process of 2017, gold should head toward $1,400,” said McGlone. “The market’s about as trend-ready as it gets.”
PLACE YOUR VOTE ON YOURSELF
Combining civic duty with stalwart self-reliance is a time-honored strategy favored by our nation’s best leaders, such as Ronald Reagan.
So please vote… and please pay attention to the risk levels in your IRA.
Precious metals don’t care about political parties. Gold doesn’t even care about the rise and fall of currencies. Or even the fate of entire civilizations.
It’s been a safe-haven asset of enduring value across all of human history. That’s an amazing record of survival through all times.
Caring for yourself means finding ways to be sure your wealth is there for you in good times and bad. Whenever you or your family needs it.
Bloomberg’s Mike McGlone says gold is an investment that can “benefit most portfolios.”
How do you know if you fall in that category? Only one way to find out… get educated!
If your goal is to preserve your wealth, physical gold and silver are truly worth considering.
If periods of market volatility like we’re experiencing right now keep you up at night, I urge you to consider adding gold to your IRA.
If your legacy is at risk today because of a lack of diversification, privacy and security, then it is time to talk about gold.