It’s All a Confidence Game

Hey everyone and welcome to another weekly recap post for August 21, 2020. A lot of crazy things are happening right now so let’s talk about it.

But first, my disclaimer: this post contains affiliate links where the blog may receive a small commission on any sales from Silver Gold Bull, EQ Bank, Questrade and Tangerine.

US-China Trade Deal Falls Apart

Last weekend, Trump called off further trade talks with China which means the deal is effectively dead. There’s just too much animosity on both sides to ever negotiate a deal of this magnitude in good faith.

I’ve said repeatedly on this blog that the market expected a comprehensive trade deal with China but has, over time, received the smallest of baby steps in the form of the phase 1 deal signed in January.

Recently, it’s been reported that China has not purchased its share of agricultural and manufactured products that was established in the Phase 1 Deal. So I think it’s unlikely that we’ll ever see a US-China Trade Deal and that global growth will ever return to pre-pandemic levels.

The Worst Economy Since the Great Depression

This week, Fed minutes were released from their July meeting where they expressed deep concerns about the state of the US (and Global) economy! Not only is the Fed worried, but they’ve got no ammunition left if things fall apart again! Their hope is that Washington will get its act together and pump out more stimulus checks.

Main Street is hurting and the longer this health crisis continues, the more businesses go bankrupt and the less things will bounce back.

Restaurants, malls, hotels and hospitality, airlines, casinos, sports, entertainment, etc. All these industries are hurting bad right now.

Banks are bracing for the fallout of a collapse in commercial loans. And then there’s the problem of residential mortgages which will likely be felt in the coming quarters.

Smart investors like Warren Buffett see the writing on the wall and have sold off positions in major banks like JP Morgan.

Canadian banks report next week and consensus is that it will be another terrible quarter, but the silver lining may be that it’s not as bad the 50% decline experienced in Q2.

Market Hit New All-time High?

Against this dire backdrop, you’d think that the markets would be down at least 50% from the February high. After all, it’s the end of August, and where are we:

the virus is still spreading uncontrollably around the world;

We have no vaccine or even effective drugs to combat it;

Stimulus has either run out (US) or will run out next month (Canada);

We’re likely headed for a another global banking crisis as the giant global debt balloon pops;

We’re likely headed for a currency crisis as central banks in the US, Canada, Japan, the EU, the UK etc., print trillions and debase their currencies;

Gold and Silver are going crazy;

And the S&P 500 hit a new all-time high this week!

So my question to you all is simple: what is the sell signal?

It’s all a Confidence Game

Markets, the financial system, and currencies, rely on our collective confidence in them. Once that starts to collapse, people will come rushing into gold and silver. Don’t believe me? Check out what’s going on in Turkey.

That’s why a lot of the smart money has been moving into the sector since March. Last week we saw that Buffett joined the party.

I’ve been steadily increasing my exposure to both, physical gold and silver (via Silver Gold Bull), as well as to paper gold (MNT, NGT, ABX, XGD) to protect my finances from all of these risks.

I don’t feel like the stick to your plan, keep your head in the sand traditional financial industry advice will prepare people for what’s coming.

I think balance and diversification will be key going forward. By diversification I don’t mean the usual stocks and bonds portfolio. I think people need to have exposure to precious metals, commodities and real estate.

Save, Invest, Build Wealth and Prosper

In case you’re wondering here’s where I park my money and some financial services that I use:

For my precious metals I use Silver Gold Bull because they price match and offer fast, insured, delivery.

For my Daily banking I use Tangerine. 

For my Savings I use the EQ Bank Savings Plus Account. Never heard of it? Click the link to check out my EQ Bank Savings Plus Account Review.

For investing I use a combination of TD Waterhouse (for legacy investments) and Questrade (low cost stock purchases and free ETF purchases).  If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around.  Get $50 in Free Trades when you signup for Questrade through this link.