Hey everyone, in these uncertain times it is essential to protect your wealth so welcome to another weekly recap post for October 19, 2020. Since March, the big question on investors’ minds has been will we get a V shaped recovery or sink back into the abyss? 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.
Virus Resurgence Leads to More Lockdowns
Around the world we’re seeing the dreaded second wave of the virus that’s leading to more lockdowns.
France, Italy and the UK have already started shutting down and, in Canada, the re-opening is getting rolled back.
The World Health Organization (WHO) has said that the world is in the midst of a second, much larger, wave.
Last week saw a string of bad news on the vaccine front. Several major vaccine producers were compelled to shutdown their phase 3 trials due to strange illnesses in a small number of participants.
Along side that disappointing news, came a statement from the WHO that said Remdesivir had no noticeable effect on sick patients.
So basically, vaccines are dead in the water and we have no effective antiviral medicine to treat the sickness.
Stimulus Hopes Dashed, Then an Olive Branch (or Ultimatum)
The markets have been slowly sinking lately (after the big September sell off) because investors now realize that there is a very slim chance that we’ll see any stimulus before the election.
Politicians just don’t see the urgency in the matter. After all, there’s an election in 2 weeks!
But the horrible economic data keeps piling up. Jobless claims are trending up again. Last week saw a lot of new lay-offs in the airline industry and others. Retail, restaurants and hospitality are getting killed. So is commercial real estate.
This is not good news for markets and is increasing the likelihood of a massive deflationary event – a crash.
The US Fed has been saying for weeks now that it is out of ammo and that Congress needs to pass more stimulus fast.
And still they dither…
A Global Monetary Reset?
More and more people are waking up to the realization that the massive global debt bubble will not go on forever.
Organizations like the International Monetary Fund (IMF) have been calling for a new global monetary framework. This will have implications for every national currency, especially the US dollar.
I’m not going to pretend that I know what such a reset will look like, but I do know that we’ve been living in the post-Bretton Woods system for nearly 50 years (since 1971 when Nixon took the US off the gold standard).
The amount of money printing by central banks since then has been astonishing and has only been accelerating since the 2008-09 Global Financial Crisis.
Global Debt on every level has only increased astronomically since then. Individuals, Corporations and Governments have taken on an enormous amount of debt.
Last week the US National Debt surpassed $27 trillion dollars, Canada is on track to hit $1 Trillion mark this year. Japan has been on this road for decades.
Asset Prices Have Never Been This Expensive…Ever
All of the money printing and gorging on debt at ultra cheap interest rates has caused nearly every asset class to rise to astronomical heights.
The stock market (S&P 500) has never been higher in real terms than it is today. Houses have never been as expensive as they are today. Bonds, the traditional go to safe haven asset have never been as expensive as they are today. The 10 year US treasury yields a negligible 0.767%. In August 1981 it was yielding 15.5%.
Pension funds, insurance companies, retirees – all rely on a safe, reliable return to protect their capital and control risk.
Investors use the 10 year rate to calculate the discounted present value of stocks etc.
These ultra low rates are essentially screwing everything and everyone.
Record low rates are pushing everyone to take greater and greater risks in the search for yield. This won’t end well when it all unwinds.
How To Protect Your Wealth
Given this ugly back drop, it is essential to protect your wealth. I’m holding some cash in my investing accounts and I continue to slowly accumulate precious metals like gold and silver from Silver Gold Bull.
I own some physical gold and silver strictly as protection from the unknown. If there is a monetary reset they will come in handy. After all, there is a reason that Russia and China have been stockpiling these metals for the past decade.
I’m definitely not as bullish going into the winter as I was a month ago. So I’m playing defense and keeping a long term perspective.
As I’ve always said on this blog, it’s all about balance. Don’t take on too much debt, and try to pay it off ASAP. Buy cash flowing investments like dividend stocks and rentals. Keep some cash on hand for opportunities and safety. And finally, own a bit of gold and silver as a hedge.
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.
Thanks for reading the post: Protect Your Wealth From Uncertainty.