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Gold, Canned Goods, and Firearms

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These seem to be the best investments now. Confidence in government is so weak, all that is necessary for another big rip is a blunder. Anything. A bridge collapsing, another Too-Big-To-Fail bank getting into trouble, a trade kerfuffle with China or Russia. Everybody is stressed and uncertain about the future.
I spent an hour chatting with an ex-colleague from Lehman Brothers who is now in London. He speaks to a wide range of clients, and they are all uniformly terrified - terrified of losing money, terrified of losing their investment mandates if the markets rally and they miss it, and terrified of the consequences of government that is incapable of action.  The level of uncertainty within financial institutions as to job security is the lowest I have ever encountered in 20 years.

Various portfolios - modeled and cash -  all confirm these sentiments. All are in cash. If they are not cash, they are short equities.  If they are not short equities, they are in metals. If they are not in metals, they are in bonds. Long bonds looked good 3 months ago. Now they are coming off. From 1947 to 1976, UK bonds lost 75% of their purchasing power. So even in this "Safe" space, gnawing loses can continue for decades.
My Grandfather was walking with my Father along the beach in San Diego in 1942. He pointed to a prominent house on the beach, and said, "That house sold for $20,000 in 1928, and the bank was finally able to sell it in 1932 for $200." The value of hard assets is not immutable. It is predicated on the assumption of a willing buyer. If the world sees an ongoing liquidation of erstwhile illiquid assets, we could be in the 2nd inning, rather than the 7th.
Alternatively, if we are entering a period where governments will be debasing their currencies in order to meet their liabilities, then we could be entering a period where the nominal prices of assets rise inexorably, only to lose value versus other proxies such as gold. In this environment, its not impossible to to imagine gold at $5,000/ounce or more. This is not due to some massive migration away from fiat currencies, but a reasoned response to the preponderance of dollars/euros/yen, and limited policy responses to reabsorb this currency.
For your consideration

 




 

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Guest Monday, 25 May 2020