The price of gold has hit an all-time high in Euros and a 40-yr high in Japanese Yen. Gold started climbing in December 2015 (four years and one month ago) and is now up 55%, since then. During this time, (1) the FED was tightening, (2) inflation was low, (3) the stock market SOARED, (4) the dollar was hitting ALL-TIME highs and other commodities didn’t participate in a rally.
In other words, gold’s price gains a few days ago from $1,053 to $1,610 is extremely weird, to put it mildly. In the 1970s, when gold quadrupled by a factor of 24, from $35 to $850, inflation was soaring. In the 2000s, when it rose from $250 to $1,915, interest rates were slashed, China boomed, oil went from $10/barrel to over $150 and the U.S. markets traded sideways for 8 years.
This current bull market is unique. Many seasoned billionaires are indicating that this current environment is totally confusing to them. Ray Dalio, for example, the pioneer of Risk Parity, suffered his 1st full-year loss in 19 years. In 28 years, Dalio has only lost money for investors in four calendar years. What’s even odder is that the S&P 500 has just closed on its best year since 2013.
As individual investors, we are freed from the nuisance of performing on a quarterly basis or an annual basis. We look at markets in increments of 5-10 years and allow investments to mature. Ideally, our active income generated from our main career compounds fast, so that we can add new funds to our portfolios every single month.
I stick with these 16 Life-Principles to experience a BLOWOUT year!
As you can see above, through organic trends, such as demographics and productivity, as well as through the successful economic measures of the Trump administration, the U.S. economy has reached an exceptional point. Historically, this happens before recessions and before market peaks and wage growth is higher than unemployment rates.
As you can see, this is predictive of yield curve steepening, which is the most reliable recessionary indicator that economists use.
The Dow Jones eclipsed 29,000 points this past week for the 1st time ever. About 55% of Americans, or 181 million citizens, have ZERO exposure to stocks. To them, this means that others are getting wealthier, but the way for them to own equities is getting more distanced. At $27/hour – the average worker compensation across all industries – you’d have to work over 1,000 hours to own one point of the Dow Jones Industrial Average.
Nearly half of the workforce earns roughly $30K/annum, so you can see how most families find it IMPOSSIBLE to create the secondary wealth engine called passive income stream.
2020 started good for stocks. When the initial trading week begins this way, the S&P 500 finishes up on 82 out of every 100 years. On top of that, the average return is over 13%.
Like I said, this looks to be another year of generous market returns, BUT with a dollar bear market attached to it!
In a few days, China and the U.S. will officially sign the Phase 1 deal. To my knowledge, we were the FIRST to draw the correlation between the dollar bear market and the trade deal.
As we see it, The European Central Bank and the Bank of Japan will EASE far less than the FED will in 2020, so the dollar will continue to head down. In fact, on a technical analysis basis, its 50-DMA just did a Death Cross.
This, of course, is good for commodities and the valuation of mining stocks.
Lastly, I want to make sure you understand that while more price gains are highly likely to come this year, the stock market is TRULY expensive:
As you can see, when this ratio reaches a PEAK, both in 1971, 2000 and today (most likely), gold prices go UP, UP AND AWAY.
Gold has been one of the best investments of the past 19 years, up more than 600%.
After its best year since 2010, this could be a PIVOTAL time for it to gain double digits, which will result in $1,700/ounce at some point during 2020.
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