A healthy dose of humility is what all the great investors possess.
The ability to admit that they don’t know much more than they do is what allows the few, who do succeed, to make extraordinary gains.
On August 21, 1940, the Nazis torpedoed British troops and machine-gunned the survivors of the initial attack, as they attempted to escape in their lifeboats.
One little boat was able to flee with seven men on board. Five of them eventually died from lack of food and water, the scorching sun, and the unsanitary conditions on the tiny raft, but Robert Tapscott and Wilbert Widdicombe endured for seventy full days and 2,300 miles.
Their story reminds me of the importance of staying the course because, in the markets, longevity is the key.
Surviving the bad times, by a mixture of various strategies, which include diversification, tightened stop losses, short-positions when needed, a focus on utility companies to lower risks, an extra layer of patience above and beyond the norm, and the ability to sit on cash for months on end will be your biggest test when the markets finally turn.
Portfolio Wealth Global has realized that both gold and the USD are both going to rise simultaneously and on various occasions in the coming months.
This is critically important, since it means that while gold prices will continue to head north, the mining companies’ largest expense, oil, will probably remain stable, resulting in far better margins.
In other words, for the first time in over 2,000 days, we’ll see miners outperforming the spot price of the underlying commodities.
On top of this observation, it is important to note that a rising USD also means that stocks of American companies will probably do worse, as a strong dollar is counterproductive to U.S. exports.
Companies, based domestically, which also sell their goods and services within U.S. borders solely, will do better than multinationals.
The biggest question mark, without a doubt, is how investors will react to the rising yield in Treasury bonds.
The United States Treasury Department is willing to pay us 1.88% for a loan we make for 90 days.
Now, I decided that this is good enough for me, so for the first time in ten years, Uncle Sam just received a cash infusion from me.
At these rates, you can let the coupon mature and do it four times a year, receiving a total of 1.88%*4=7.52%.
I’m not the only one who is getting excited about this. Pension funds finally have a way of achieving their hopeful aspirations of an 8% a year, using a bit of leverage.
This yield is, of course, what keeps the price of gold in check, since there is no reason to buy it, if beating inflation just became so easy and profitable.
Importantly, it means there are fewer buyers for equities, which says that stock prices are also pressured, so it remains to be seen where Americans will send their tax savings dollars – bonds, stocks, or consumers items. We all know they will not frugally save those dollars, as that word was lost on them many years ago.
70 days on a lifeboat, hunting fish to survive, conserving rainwaters to drink and hoping that their fat reserves were enough to hold the body in check, is an amazing accomplishment. Fat reserves were the vital component, and in the markets, short-term liquidity is that much needed fat. Don’t be overly leveraged right now because tectonic shifts are occurring.
Research Partner, PortfolioWealthGlobal.com