Batten Down the Hatches

I think it’s important to point out that barring the volatility gold is rising right along with rising systemic risk, and it’s price continues to hold.

Furthermore, I think this strength is also based on the reality that we are financially ill prepared for this global emergency, and the need for governments and Central Banks to stimulate in order to keep up with this unfolding mess. Considering that we were already at the zero bound, these policies will only take us into further negative real rates, and in that economic reality gold and silver are the best hedge. Therefore, I continue to advice that clients have a minimum allocation to the one sector that is offering positive earnings correlation to rising systemic risk.

In the portfolios we continue to maintain high levels of cash, having recently decreased our minimum allocation to all sectors except precious metals, which we have now raised to 30% in the Equity Income portfolio. Regardless of the current share price of these assets, I think the herd will soon recognize that their earnings will only increase from here. Adding at these historically cheap levels confirms the great Monty Gordon’s number one rule of trading; “Jaime, there’s no money to be made when everybody gets it”.

 I’m speculating they will.

As for the overall markets I’ll observe caution and continue to maintain high levels of cash until the situation is contained. Furthermore, considering the high levels of debt in the system, I would question how long it can last without cash flow before it is pushed over the edge, which would makes a complete debt reset a probability of outcome.

On a historical note I find it rewarding that history is proving itself, and while the price does not currently reflect , the earnings of the producers are rising in bad times.

Hedge accordingly and Follow the Yellow Brick Road to safety

Here is link to the entire 45 min interview; FULL INTERVIEW

Show note; the price of gold in Canadian dollars is below $2,300, not $3,000 as I mistakenly stated.

Charts submitted for interview;

This chart shows the relative value of having invested $1.00 in each of these assets as of October 1, 2018. So far this bull market has been very stealth with very little investor participation.

This chart tracks gold and the HUI back to 2011, and clearly shows how undervalued the producers are currently priced in relation to the price of gold and by extension their current earnings. In essence earnings are rising right along with rising systemic risk.

My practice manages three segregated portfolios designed to help our clients with their cash management needs, capital growth, and dividend income generation. Portfolios are tailored to meet each client’s risk return profile based on their individual investment needs and are not suitable for everyone. The Special Opportunities Portfolio is designed as a stand-alone solution for those looking to get participation in the precious metals market, a sector long forgotten by most Investment Advisors. The Equity Income Portfolio is designed for growth and income through a “top down” industry specific approach. The Cash Management Portfolio is designed for short-term money management needs. All portfolios require a minimum investment account size of CAD$300,000.  

This newsletter is solely the work of the author for the private information of clients. Although the author is a registered investment advisor at Canaccord Genuity Corp. (“CG”), this is not an official publication of CG and the author is not a CG analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone and are not necessarily those of CG.