April 2017 Information Line
By Rich Checkan
I believe now is the time for action. I believe, going forward, fence-sitting will cost you money.
In this article, and the three that follow, we’ll demonstrate why I believe what I believe. And, if I am successful in making you a believer who acts on your beliefs, I am certain you will be grateful in the years to come.
The First 100 Days
By the next time you read my thoughts in Perspective, we will have seen the completion of the first 100 days of the Trump presidency. If my math is right, Trump’s 100th day in office will be Saturday, April 29th.
If I were writing a book today about his first hundred days, it would be entitled, “Wide-eyed Enthusiasm Meets an Immovable Force.”
Last month, I shared a long list of areas covered in Executive Orders issued by Donald Trump… Wide-eyed Enthusiasm.
Yet, to date, we have seen very little change and a heaping helping of delays and opposition… Immovable Force.
As it turns out, getting entrenched Washington, D.C. power to embrace and enact change is an extremely difficult undertaking. Cast aside the rhetoric, and it seems clear to me the majority of the powerful elite in D.C. are happy to leave things just the way they are.
I know. They say a bunch of things suggesting they want change and they want the swamp drained, but actions speak much louder than words. More accurately in this case, the deafening silence of inaction is more telling.
Apparently, change requires more than a wide-eyed new president. It also requires the will to change.
First Quarter Markets
So, how did the markets perform in the first quarter against this backdrop of more of the same old political bickering?
I took an informal poll of 10-15 people who are more or less up to date with both traditional and alternative investments. And, I was not surprised by their answer when asked, “What asset class was the best performing asset class of the first quarter?”
Their answer – U.S. equities.
They were wrong, but I know why they said that. The Dow hit 21,000, and it was all over the news. U.S. equities are on an unprecedented 8-year run to high ground. Money is flowing into equities faster than the Federal Reserve can create it out of thin air.
Consumer confidence is high - fueled by the two things that make consumers feel good about their finances… higher home prices and higher stock prices. And, for the puppet masters pulling the strings on this consumer-driven economy, feeling good about your finances is all that matters. When consumers feel good, they consume. They spend. The engine runs – fueled by debt and optimism.
We wrote about this when Ben Bernanke announced QE3. In his explanatory remarks, he said how important it was for all of us to feel good. In his own words…
"If people feel that their financial situation is better because their 401(k) looks better or for whatever reason — their house is worth more — they're more willing to go out and spend. That's going to provide the demand that firms need in order to be willing to hire and to invest."
Actually being financially stable is much less important to the puppet masters than how you feel. And, from what I can see, we all feel pretty good.
Haven’t We Seen This Before?
I was driving home from work the other night, and I heard a commercial on the radio for a credit union which will remain nameless here. Two women are talking. One comments on how much she loves the other's new kitchen. The other reveals how she paid for it through a refinancing of her home.
It comes out that the other lady would love to remodel her deck, but the evil bank said she didn’t have enough equity in her home. The solution offered by the woman with the new kitchen is to go to her credit union. After all, the credit union is willing to offer… get this… 100% loans, with no down payment and no mortgage protection insurance. AND… she exclaims, “Jumbo loans are OK!”
If I recall, I believe I heard a lot of these commercials about 10 to 15 years ago. Does anybody recall what happened shortly thereafter?
Protect and Defend
When everyone is singing the praises of the invincible stock market, I take notice. When everyone starts turning his/her home into an ATM machine because equity is over-rated and home values can only go up, I take notice.
When everyone feels really good, I get skeptical. Then, I get downright nervous. Then, I take steps to protect and defend everything my wife and I worked so hard to achieve.
I am there, and I believe you should join me there.
We want you to Keep What’s Yours! Right now, in my opinion, that means protecting yourself a few ways…
- Rebalance. If your portfolio allocation is out of whack due to the increase in value of your equities, I believe you should sell some to bring your allocation back where you believe it should be.
- Use trailing stops. It is OK to make money in the equities markets… where money is made. But, remember, money is lost there too. And, paper profits can evaporate very quickly. Think back to 2008. Make sure you use trailing stops so a quick and meaningful downturn doesn’t mean you lose your paper profits AND a good portion of your principal.
- Buy real things. The U.S. dollar is still strong. Use that strength to buy tangible, intrinsically valuable assets such as precious metals, rare U.S. and world coins, and rare stamps and collectibles.
Time to Act
I know. This is the same course of action I have been suggesting for a couple years now.
What makes now the time to act?
A few things…
- Confidence. Consumer confidence in the stock market and in home prices is eerily similar to what it was right before the sub-prime crisis and the ensuing Great Recession of 2008 to 2009. If history repeats, can you weather another significant drop in your assets (40% back then) with no significant change in your lifestyle?
- Strong dollar. We noted some chinks in the almighty dollar’s armor last month. Yet, as I write, the dollar’s strength can go a long way toward building up your tangible and rare tangible asset allocations. Strong dollars and reduced premiums make now an excellent time to make this move.
- Gold/Silver Ratio (GSR). Take a look at the next article on the GSR. The scenario we started talking about over two years ago is unfolding before our very eyes. If you have not acted on this indicator yet, you missed the move from 83 down below 69. Do you want to sit on the fence and watch it go from 69 down to 50… or even further to 35?
- Volatility. Right now, volatility is muted. But, there are a myriad of catalysts for instability looming on the horizon. Read the front page of the paper, and you are bound to read about four or five. And, each of them, alone, could send traditional markets reeling. Collectibles are your antidote for volatility. They don’t react. They don’t care. They store and grow value.
Prudence… Not Fear
I just spent a few pages making the case for why now is the time to act to protect you from a whole host of threats to your wealth. Yet, please understand, I am not preaching ‘gloom and doom.’ My cup is always half full or more.
Please understand I am preaching prudence.
We care about you. We believe we offer options to provide much needed protection for your wealth and (as a result) for the preservation and elevation of your standard of living. We are passionate about what we do.
Let us help you do just that. Call us at 800-831-0007, or send an email to set-up a consultation.
Gold/Silver Ratio Alive, Well and Unfolding as Predicted
By Rich Checkan
Are you on board yet?
We’ve written extensively on the Gold/Silver Ratio (GSR) for over two years now. Since we started talking about this ‘magic number,’ it seems everyone has jumped on the bandwagon.
Knowing the relationship and the history is one thing. More importantly, how do you use this information to your advantage?
What is the GSR magic number?
Simply put, this ‘magic number’ is just the number of ounces of silver it takes to buy one ounce of gold. Over the past 20 years, the GSR has been a pretty steady indicator of a turn in the market.
Consider the following chart depicting the gold to silver ratio over the past 30 years.
In the past 3 decades, gold was over 80 times more expensive than silver only three times previously. We just experienced the fourth. In every case, within about a year and a half, the gold to silver ratio corrected downward by 40% to 60%... because silver outpaced gold as they both moved higher from that point.
You see, silver follows gold once gold starts moving down in price. Then, it typically outpaces gold to the downside because it is a thinner, more volatile market.
We tend to see the same thing in reverse on moves upward in price as well. Gold starts moving up, and silver follows. More often than not, silver overtakes gold as they both move higher.
This relationship is very clearly depicted in the chart above. Notice, the timespan between each of the three occurrences was 6-7 years.
Right now, we are showing a GSR of just over 69… as the ratio corrects to its norm somewhere between 35 and 50. The GSR peaked above 83 (and it stayed there for a few weeks) at the beginning of March of last year.
How do you take advantage of the GSR?
Right now, there is an opportunity in gold and silver.
While there are no guarantees in life – and past performance is no guarantee of future performance – you might consider paying close attention to this number right now.
If the scenario above plays out and the pattern continues, here are three options to consider to take advantage of the situation…
- Insurance – If your overriding objective is to buy precious metals for insurance, consider buying some insurance – gold – here. Your premium may not be cheaper for your insurance policy for another 6-7 years.
- Speculation – Considering the volatile nature of silver, with wider swings to the downside followed by wider swings to the upside, profit-motivated precious metals buyers may consider purchasing some silver here.
- Trading – Historically, this is the most common use of the GSR indicator. Traders will look to the height of the GSR – near this ‘magic number’ of 80 – to sell some gold and buy some silver with the proceeds. Then, when the GSR hits new lows, they sell the silver and buy back gold.
What’s best for you?
Let’s face it. Most of us are not traders.
Most of us are interested in both portfolio insurance and profit potential.
With the GSR signaling a fledgling bull market in gold and silver last year, your insurance premium on gold and your cost to own silver with significant upside are both fairly low. We see opportunity here.
If insurance is your prime motivator, buy both gold and silver… but weight your purchase toward gold.
If profit is your prime motivator, buy both gold and silver… but weight your purchase in favor of silver.
We believe now is the time to put these strategies to work so you can Keep What’s Yours!
Venezuela: The Crisis Continues
By Ryan Kirsch
There is a major conflict brewing, right now, in the Western Hemisphere. No, it’s not an impending terrorist plot or major military campaign. Nevertheless, the “blast radius” of this disaster could certainly reach all the way to the U.S.
It may seem a farfetched scenario to imagine for Americans, but everyone in the United States should pay close attention to the current situation in Venezuela.
Throughout human history, inflation continually represents the flashpoint of trouble for individuals and countries alike. It erodes purchasing power, denigrates national solvency, and turns economic systems upside down. Existing on a parallel track, though, is the perfect counterweight and secret weapon to triumph over this menace: gold.
When economists warn of the perils of inflation, what they’re ultimately talking about is hyperinflation, defined as a monthly rate of inflation in excess of 50%. This is a chaotic period of economic upheaval, when fixed incomes become worthless, when wheelbarrows are required to transport paper money to the market for simple transactions, and when restaurants write menu prices in pencil because they change every hour.
One of the most extreme examples of this insanity is Zimbabwe in 2007, when inflation reached a peak of 230,000,000%, with prices doubling every day. No, that number is not a typo: in such an environment, the $3 loaf of bread you bought Monday morning would cost $96 by Friday afternoon. How would you react? People would scoff at those numbers, at first, but extend that out further… by the next pay period, that same loaf skyrockets to $49,152.
What we are now witnessing in Venezuela is perilously close to hyperinflation. Once a relatively rich country, blessed with natural resources, Venezuela has fallen on hard times, with an inept government unable to right the course anytime soon. Starkly contrasting their periods of prosperity and President Chavez’s bold “21st Century Socialism” agenda, economic experts expect the rate of inflation to rise to anywhere from 1,100% to 2,000% in 2017 alone.
I was recently in neighboring Colombia, which is a rising economic star in South America. Walking through the streets of Cartagena, I made a curious observation. Apparently, an increasing number of individuals setting up shop on the street corners, in the parks, and even brick-and-mortar businesses were not Colombians, but instead, fleeing Venezuelans. The influx is apparently even more noticeable in border cities like Cucuta, Valledupar, and Bucaramanga.
While President Nicolas Maduro ordered the border closed to stem the tide, people seem to be bolting from the current (and impending) devastating circumstances by any means necessary. It looks like a migration crisis in its early stages, as people sneak across borders to exchange currency, buy basic goods, or even sell their hair for a few meals worth of Colombian pesos. Despite the Colombian optimism at their new era of peace and prosperity, there’s no telling what a complete collapse, or perhaps armed rebellion, within Venezuela would create.
How did we get here? First, Venezuela has suffered through over three years of recession, with its economy expected to contract by a whopping 10 percent in 2017. The price of oil, down since 2014, has crippled its revenues. Since oil comprises almost all of Venezuela’s exports, the low cost of crude is disastrous. Meanwhile, costs are going through the roof. Shortages of food and medical supplies have started a humanitarian crisis.
The government has printed more money, infusing cash into circulation to pay for the enormous increases in the prices of goods. As the value of the bolivar falls, panicked citizens have tried to convert their money into U.S. dollars, which has led to a scarcity of U.S. dollars, which has wreaked havoc on the exchange rate. There are now two exchange rates printed in the Wall Street Journal—the official rate of exchange, and the black market rate of exchange. The former shows the Venezuela bolivar trading at about six to the dollar, a respectable if not flashy number; the black market peaked at 4,402 to the dollar in December 2016, and remains over 4,000 to the dollar today.
Turn to Gold
In order to stave off complete collapse, the Venezuelan government began selling their gold reserves, the 16th-largest in the world, in 2015. As the crisis deepened in 2016, they again sold more. However, unlike bolivars, dollars, or other paper currencies, gold cannot be printed to infinity. These reserves will run out at some point.
Times of uncertainty and crisis have a way of removing the obscurity between what governments or financial powers say, and what they actually do in a real situation. The gold Venezuela previously held allowed them a measure of security, a way to maintain their purchasing power regardless of the domestic situation. However, once they sold the metal, hyperinflation again became the enemy to those newly-realized funds.
There’s a reason these events reoccur throughout history. Fiscal mismanagement and government interference are two symptoms which eventually lead to the inflation illness.
Do not for a second think the U.S., or the Federal Reserve, are immune to these ailments, or from a scenario similar to Venezuela’s. When populism reaches its advanced stages, the scenarios described play out with little difference regarding geography, politics, or former economic might.
The results of the Fed’s Quantitative Easing policies have yet to fully materialize, but there are already some cracks forming. In addition to still-anemic growth numbers, keep watch on the balance between interest rate hikes and bond prices. As interest rates rise, bond prices fall… and the Fed owns trillions in bonds. Fall too far, and these low bond prices could drive the Federal Reserve, the most important and powerful bank on Earth, into insolvency. What then?
The antidote you need in your back pocket for your portfolio, your peace of mind, and your future well-being is clear. Owning something real and intrinsically-valuable, with no attached debts or IOU’s, is the solution. Sound familiar? The answer is gold. Throughout history, and even in this recent Venezuelan case study, the answer has been “turn to gold.”
To help you down this path, we want to offer some soon-to-be historical relics alongside ANY purchase of 1 or more ounces of gold.* If you buy 1 or more ounces of gold, in any form, we will send you some Venezuelan bolivares as a reminder of what sort of havoc inflation can wreak. Keep them visible, show them to friends and family, and tell the story of Venezuelan hyperinflation. Most importantly, remember why gold has stood the test of time for millennia. The answer is in all the examples above, and many more as well.
Call us at 800-831-0007 and mention promo code ‘VENEZUELA’ to make sure you have the proper portfolio allocation in gold, and to receive your FREE bolivares with your purchase.
*You must mention promo code ‘VENEZUELA’ when you place your order to receive the free notes. Offer for free Venezuela bolivares expires Friday, April 14, 2017. Notes will be shipped seperately in 2-3 weeks after order is placed.
The Retirement Report
Gold is a Tool for Successful, Happy Aging in Place
By Adriane Berg
One vital rule for successful aging is being financially prepared so you can have access to the best technology to age-in-place. I recently attended the yearly Environments for Aging Conference with a group of architects, gerontologists, and builders of senior communities and healthcare facilities. Their presentations led me to realize that every innovation of note that enhances our longevity has a price.
The EFA Conference, the Electronic Consumer Show, the World Future Society and numerous conferences on aging are abuzz with personal care companions, like PARO, the $5,000 robotic seal that acts as a companion for the elderly. Another companion robot named Robear, can also lift you out of bed, place you into a wheelchair and assist you in walking.
As exciting as these new technologies are, it is one thing to be aware of all the great new innovations, but it is quite another to afford them.
How will we pay for technology to age-in-place, enjoy life and ultimately leave a legacy? The solution to this dilemma lies, in part, in appreciating the role that gold, silver, platinum and palladium play in your investment portfolio.
Here are just some of the reasons why these assets must be part of your retirement planning if you intend to have access to future healthcare discoveries.
Inflation: As prices for healthcare and home renovations increase, our bank accounts can’t keep up. Inflation can turn any real return on cash into a net negative. Thus, your rainy-day cash cannot really serve you. Precious metals tend to rise with inflation, so their inclusion in your investments will soften the ‘ravages’ of inflation.
Economic Downturn: The price of precious metals usually rises in a crisis. If we have a downturn, your gold is there to protect you. Without protection, could you really withstand a simultaneous market crisis and personal health crisis at the same time?
When you put financial stability into your nest egg, you can weather economic changes and maintain the happiness that aging brings.
Researchers have established that happiness is enhanced by age. The U curve, developed from happiness studies with findings consistent across cultures, countries and individuals, shows that we get happier after mid-age.
One aspect of happiness is the development of economic security over the years. But, what happens when that feeling of financial security is threatened?
Brooking Institute’s researcher Carol Graham, makes it clear in her article, Adapting to Adversity: Happiness and the 2009 Economic Crisis in the United States, 2010, that the older we get, the more economic crises threaten our achieved happiness.
Elders feel the effects of an economic downturn more harshly because they do not have the time to replace their losses. This is why portfolios should include gold, silver, platinum and palladium to balance us both emotionally and monetarily as we age.
We never want to skimp on independence. Aging-in-place technology costs money. And, research also shows that personal well-being alone does not make for complete happiness as we age.
The happiness curve increases with our contribution to others. After retirement, we can replace measurable results at work with legacy and lasting impact on family, friends and charitable pursuits.
It’s no surprise that ASI, a family business itself, has long-established avenues for protecting and growing your wealth through precious metals.
One of the easiest ways to invest in precious metals is through ASI Precious Metals Direct (ASIPMD), an online trading platform. Through ASIPMD, you’ll have access to competitive pricing for gold, silver, platinum and palladium products. Plus, you’ll be able to buy, sell and store your metals 24 hours a day, 5 days a week.
ASI believes ASIPMD is one of the best and easiest ways to buy, sell and store precious metals for your personal or IRA holdings. As an incentive to get you to see it for yourself, when you make your first purchase by April 30th, 2017, they will offer you FREE storage for the 2nd quarter in New York or Singapore until June 30th, 2017 – on the house!*
If you’d like to get your core portfolio going to secure your future and discuss your approach to aging, speak with an ASI Representative at 800-831-0007, or send them an email!
Keep What’s Yours to foster happy, aging in place. And… be sure to ask about gifting and accumulation plan options as well!
*Open an ASIPMD relationship and make your first purchase by 04/30/17 in order to receive free precious metals storage for the 2nd quarter until 06/30/17 in New York or Singapore. Personal or IRA accounts only.