Posted on 04/12/2025 6:02:10 AM PDT by delta7
Global markets have reached a day of reckoning. This has been decades in the making. Now, massive changes are sweeping the world.
No, what we’re seeing in the markets is not “normal.” Instead, this is the:
Moment precious metal investors have been waiting for Birth of a multipolar world order (U.S. is no longer the sole superpower) Start of a very uncertain period for bonds and fiat currency Peak of globalization In short, you no longer have the luxury of relying on the old rules, the old way of thinking. It’s time for a new playbook.
Bond Outlook: Murky
Since the early 1980s until recently, U.S. Treasury Bonds have been the perfect compliment to stocks. When stocks were doing poorly, bonds did well. And vice versa. Hence why the 60/40 (60% stocks, 40% bonds) was such a popular portfolio model.
This relationship is breaking down. As U.S. stocks have been crashing, the value of bonds is also falling. This can be seen in the chart below, which shows the U.S. 10-year Treasury Bond yield (as the value of the bond falls, the yield rises). This chart shows the yield on the 10-year bond year-to-date.
See that big spike in yields over the last week? That’s a worrying sign. Investors are selling bonds when they “should” be buying.
Scott Bessent’s Treasury Department has about $9 trillion worth of treasuries maturing over the next year. Those bonds and bills will need to be refinanced. If rates are high when these new treasury securities are issued, the government’s interest costs will soar even higher (already over $1 trillion/year).
At some point, the Fed will have to get involved. Emergency rate cuts and eventually a massive new round of QE (money printing to buy treasuries) seem inevitable. Who else is going to buy $9 trillion worth of treasuries over the next year?
Eventually the Fed may even have to begin “yield curve control”, which means pegging the yield on treasuries at artificially low levels. For example, during and after WW2, when the U.S. was heavily indebted, the Fed froze the 10-year yield at 2.5%, even as inflation raged as high as 14%.
The goal was to dramatically lower U.S. debt-to-gdp levels by encouraging inflation and capping yields. Bond holders and savers got hosed. This is known as financial repression. And it could happen again.
Yield curve control and financial repression are probably some years out. But I much prefer to keep the “safe” part of my portfolio in gold and silver instead of government bonds. The upside potential is far higher, and taxes can be deferred for decades (until you decide to sell).
Gold and Silver: Just Getting Started
Rick Rule famously says, “I don’t own gold because I think it’s going to $3,500. I own it because I’m afraid it’s going to $10,000.”
This is an excellent way to look at our current situation. This move in gold, which just surpassed $3,200/oz, is a flashing warning signal. The global debt-based monetary system is on the verge of breaking down.
And instead of rushing into treasuries as a safe haven, the world’s central banks are increasingly turning to gold.
If you want an idea of just how high gold could potentially go, be sure to read Jim Rickards’ $27,000 Gold if you haven’t yet. This is not an arbitrary price target, but the result of Jim’s careful calculation. Of course, Jim doesn’t guarantee we get there, but it should give you an idea of what’s possible.
My message here is that if you’re just now thinking about starting a position in gold, you’re not too late.
Interest in precious metal miners is just now picking up. One of the largest gold miners, Newmont (NEM), which we highlighted as a buy last week at around $45, soared to $55 today.
And don’t get me started about silver, which is still about 35% below its 2011 high of $49.50.
Once we break through silver’s $35/oz level, it’ll be off to the races. I’m a buyer of silver here. And gold miners still haven’t caught up with the spot price of bullion, so I will look to add there on dips.
The vast majority of investors still have almost no exposure to gold, silver, and miners. This will change over the coming years. My advice is to get positioned for the shift now. You are not too late.
Back in the summer of 24 I was very concerned about the consequences of Trump NOT winning and I shifted 15% of our portfolio to gold.
Right now I wish it was 55% 😉
U.S. Treasury Secretary Scott Bessent has said the yield spike is not unusual or worrisome, pinning the blame on professional investors who had borrowed too much and needed to sell.
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Deleveraging financial markets and putting money to work for the real economy is a 50 year overdue action.
The miners are still cheap. That’s where you’ll make the most fiat money.
Consider that the GSR now, this weekend, is close to 100.
This is way out of whack - the long term mean has been 15, the ratio out of the ground is around 10.
Bottom line is, gold is the trend setter and silver lags, and there is much more upside to silver than gold. Good to hold physical gold AND silver. You choose the mixture.
Gold is a compact store of wealth; silver more useable.
That jives with my thinking. During covid stock market crash I sold my bond mutual funds and switched to stock index funds. It was a no-brainer. Stocks were down much more than bonds.
The recent 20% drop in SPX was another such opportunity. But personally I did not do the switch this time because stocks are still more overvalued than at peak in 1929 before the crash.
Lots of mine companies in Mexico. If/when fiat really goes haywire, watch the government take control of the country’s mines.
Right now I wish it was 55%
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Still not to late. Pull up the legendary trader James Sinclair’s forecast from years ago….the “ Angels” way back when are back in full force….his Fibonacci number correlation shows where Gold is headed.
Throw in Richard Russell’s legendary DOW Theory Letters affirms what is dead ahead.
Cycles, a good read, but it was written in 2009…..
https://www.gold-eagle.com/article/richard-russell-gold
Many here are youngsters, learn from the past.
The miners are still cheap. That’s where you’ll make the most fiat money.
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Amen to that…..but choose very carefully, and be sure to trade some of the fiat winnings into real wealth.
The miners are still cheap. That’s where you’ll make the most fiat money.
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Amen to that…..but choose very carefully, and be sure to trade some of the fiat winnings into real wealth.
The Federal Reserve can simply buy US government bonds paying 2% in sufficient quantity.
There’s also the possibility of a value added tax. At 8%, it would bring in about $1.6 trillion a year.
Peter Schiff knows who has gold in the ground vs the ones that say they do.
Stocks are still more overvalued
Agree they are a long term deal for the win.
Exceptions do happen sometimes.
Agree
I wonder how much of the money that people got by selling stocks is just sitting at a brokerage as cash waiting for things to settle down.
It’d be interesting to see the breakdown of where the money from the sale of stock went - cash, gold, foreign currencies, other assets.
Maybe the US should not spend $1 trillion a year on the DoD.
Fiber optic drones are fairly cheap and highly effective.
The US has entered the dreaded Debt Death Spiral….it will run its course, slowly, but surely. After the “ burnout”, the “new” system will emerge hopefully based on equal weights and measures.
Re: https://iask.ai/?mode=question&options[detail_level]=detailed&q=Compare+the+performance+of+Gold+versus+S%26P+500+funds+that+reinvest+their+dividends.
Solution: restore confidence in the dollar, which means Congress has got to stop bingeing on debt spending. Elon is doing that, but the GOP has failed miserably in educating the public what's going on. And to those idiots who thought a smaller gov't didn't mean firing public employees, grow up. The GOP should be tarred and feathered for the piss-poor job they've done explaining how short run pinches now means no amputations in the long run.
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