There is no education like actual experience.
Here is a small snapshot of what we have learned and the biggest winners and losers in the first 10 days of March.
Gold: The first revelation is that gold is far more than the “pet rock” that Wall Street and the talking heads on CNBC would have you believe. In a sea of red, gold continued to keep its head well above water, often the only asset in the green on the several 1,000-point down days the market has suffered. While every major asset class was down, with the exception of Treasuries (which saw unheard of safe haven demand with their yield sinking to the lowest in history at one point below .35%), gold rose above the carnage up an impressive 5% while the market dropped 17%. In the last 18 months gold is up 40% versus the stock market down 5%. The good news for gold investors is that this just scratches the surface and gold is headed to all-time highs before the end of the year.
Mining Stocks:- The second revelation is that mining stocks are not gold. Any investor who owns them in their portfolio has watched in disbelief. As the stock market collapsed 7% on Black Monday, the gold miners got monkey hammered even further. GDX (the ETF that tracks the major gold miners) has lost 10% in two days at the same time gold has held firm. The paper market carnage blatantly proves the warning that gold experts have always known: physical gold and paper miners are a completely different animal class. Unfortunately, many investors have learned the hard way that the miners are not portfolio protection and are as much of a gamble as the manipulated equity markets at this stage.
Treasuries: The reputation as the “safest asset to own” remains untarnished through the Black Monday drama. Investors poured into government debt, driving yields to previously unthinkable lows. The 10-year Treasury nearly breached a .3% handle, indicating how frightened investors truly are and how terribly behind the curve the Federal Reserve is. The move predicts that we can expect another rate cut soon, at the next meeting or even before. That is if the market allows them to wait that long. What’s truly fascinating about the flow moving into Treasuries is that it forgets entirely loans to our heavily indebted government can only be paid back with diluted dollars. Trump's trillion dollar deficits will look like small potatoes if the Democrats win the election, or worse yet, if COVID -19 continues to surge. Should the latter occur, we can expect deficits of $2 trillion to $3 trillion annually. The bond bubble is the biggest bubble in history and we will soon all learn it doesn’t make sense to lend money to institutions that cannot pay you back. Unfortunately, Treasuries are “trading sardines” not “buying sardines” and investors holding for the duration are virtually guaranteeing long-term losses.
Trump: The president may have had his worst week in office. His cavalier dismissal of the dangers of the coronavirus outbreak and his contradictions of chosen top scientists has revealed him to be a man who lacks the wisdom to rise above the moment. Trump has approached the problem attempting to diminish its reality and positioning it as more "fake news" from the left. His concerns have been about the stock market staying elevated, and not the level of the health of the citizens. It’s a bad look and one that could come back to bite him. Trump had tied his entire fate to the stock market. We all know it. Reminding us of that fact only serves to highlight his biggest weaknesses. Stocks are headed lower and so is Trump if he maintains this approach. Trump has come across small and lacking empathy at a time when the country most needs leadership.
Biden: "Sleepy Joe" has risen from the grave and is flying higher than at anytime in his political career. Two weeks ago, this guy was dead on arrival, now he is the heavy favorite to secure the nomination. A Biden win in Michigan may effectively knock Uncle Bernie out of the race. Joe’s mental weaknesses are most evident when he is forced to make oral arguments and string together cogent thoughts for extended periods. If there is one positive for Trump, it’s the Biden momentum. The one guy Trump truly fears is Bernie, who could very well go toe-to-toe with him in a debate. It’s hard to imagine Biden not getting stomped against Trump in a one-on-one debate.
Sanders: If anyone had a worse week than Trump, it was Bernie Sanders. Sanders witnessed a quadruple whammy from the establishment. Klobuchar and Buttigieg, drop out on the same day and throwing their support behind Sleepy Joe and are then joined by what seems like the entire Democratic establishment. Bloomberg and Harris immediately followed and turned what looked like a Bernie boom into one that has quickly soured faster than the stock market. Making matters worse for Uncle Bernie is that unlike stocks, he won’t get a major dose of outside stimulus. Elizabeth Warren has withheld her support virtually sealing Bernie’s fate. The one thing to remember for the establishment is that Bernie won’t quit. He took Hilary all the way in 2016 and will likely do so again with Biden. Our bet is that after the first Biden v Bernie debate the field will become more level as Biden becomes exposed and voters realize how inadequate Biden would look on the same stage with Trump.
Adam Baratta is the author of the national best-selling book "Gold Is A Better Way." He is one of the leading voices in the field of investments and precious metals today. Adam is the co-owner of Advantage Gold, the highest rated precious metal firms in the country, and the creator of an educational member site. To receive a free copy of his book, click here now.
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