Mauldin Economics

Dear Reader,

At May’s notably bearish Strategic Investment Conference, I was struck by how many blue-ribbon investors and analysts were bullish on one particular asset class.

That asset class makes up less than 1% of the average investment portfolio.

It has a long-term record of stability, yet continues to be under-owned and mispriced thanks to negative sentiment from the public and media. It can be tricky and risky for individual investors to buy and sell it—depending on the avenue they use. It is…

…Gold.

Cash Is Still King, but Gold Is a Timely Investment Today

Even experienced investors are floundering in today’s treacherous financial markets, buffeted by currency devaluations, negative interest rate policies, and sluggish economic growth, as well as geopolitical tidal waves like Brexit.

In this environment, raising cash and reducing your exposure to volatile financial markets make sense. The key, of course, is finding a safe, profitable investment opportunity to deploy your cash.

For legendary investor Jim Grant, that investment opportunity lies in gold. “Gold isn't so much a hedge against Armageddon… as it is against monetary shenanigans,” he said at the SIC. “When the economic establishment encourages the idea that gold is ‘good for nothing,’ it’s almost always a good time to buy [gold].”

The kicker about cash is that holding onto it will not make you wealthy. That’s because central banks can devalue a currency by simply printing more money:

Cash is an opportunistic asset class, which gives you much-needed flexibility during volatile times. Crises bring many once-in-a-lifetime investment opportunities that you can seize… but only if you have enough cash or other liquid assets at your disposal.

Why Gold Is the Best Hedge

History says that paper-based currencies will eventually fail.

The clock is clearly ticking on the dollar… it has now been 45 years since the US dollar became a completely paper-based currency. Gold, on the other hand, has been a preferred medium of global exchange for over 5,000 years. That makes gold the ultimate hedge against monetary collapse.

Things will go bad when the general public finally realizes that global central bankers have lost control. When this happens, we will end up with either a sharp breakdown in financial markets or a slow-rolling panic. Either way, the price of gold will soar.

As Grant Williams (of Things That Make You Go Hmmm… fame) said at the SIC, "It is not quite clear as yet, but it is getting there. The credibility of central bankers is slowly fading away."

The Second-Most Overvalued Stock Market in History

Today’s stock market valuations are another red flag. For example, the Wilshire 5000 Total Market Index—which is a composite of all the public companies currently listed on major US exchanges—is now greater than the country's overall GDP by over 20%.

The total market cap to GDP ratio is now at the second-highest point ever (only the dot-com bubble of 2000 saw a higher total market cap to GDP ratio).

The Fed’s balance sheet has never been bigger… at $4.5 trillion and counting. And interest rates have never been this low for this length of time. Something has to give, and relatively soon.

A Coming Supply Crunch?

When this something gives, demand for gold will soar, pushing its price higher. But not many realize how small the gold market really is and what an outsized impact a growing demand will have on the gold price.

If you look at the value of the total annual gold supply compared to the market cap of widely held stocks, you’ll see that Apple, for example, has a market cap three times greater than a full year’s supply of gold.

Plus, miners are currently all about cost reduction and balance sheet deleveraging. In this belt-tightening mode, they tend not to invest in new exploration and development, curbing future supply.

Add those factors together, and it’s easy to see how a rush on gold could see the metal become… well, like gold dust.

Gold is the New Black

It wasn’t just at the SIC that you could see the smart money moving toward gold. A quick scan of John Mauldin’s Thoughts from the Frontline this year shows iconic trader Stan Druckenmiller saying gold “remains our largest currency allocation” (Druckenmiller has allocated 30% of his portfolio to gold), and Michael Lewitt of The Credit Strategist prescribing: sell all your stocks, buy gold, and ride out the storm.

John believes in gold, too. Almost as much as he doesn’t believe in the Fed, their policies, and where they’re taking us. In fact, he has opened UTMA accounts (Uniform Transfers to Minors Act) for each of his grandkids with a company called the Hard Assets Alliance and makes regular gold contributions. The UTMA accounts allow John to give the gift of precious metals to his grandkids tax free.

For full disclosure, Mauldin Economics is a member of the Hard Assets Alliance, and I’m the alliance’s General Manager. I also have a Hard Assets Alliance account and regularly buy gold. And if you buy precious metals through the Hard Assets Alliance, Mauldin Economics will receive a small royalty for referring you.

I agreed to be the General Manager of the Hard Assets Alliance because I believe deeply in the company’s MO. Since its inception in 2012, the Alliance has revolutionized the way investors buy, sell, and store precious metals.

Everything You Need To Know About Gold Ownership… Free!

If you have never bought gold before, the process can be overwhelming. That’s why the Hard Assets Alliance makes buying precious metals as easy as investing in stocks.

Gone are the hidden fees and frustrating buying process found in other precious metals platforms. In just a couple of steps, you can add funds to your Hard Assets Alliance account from your bank, buy precious metal coins and bars for direct delivery or secure storage in non-bank facilities, track your trading activity, and manage your own personal portfolio of bullion holdings. Selling your metals through the Hard Assets Alliance is just as easy as buying.

And to make it even easier for you to start insuring your lifestyle with precious metals, the Hard Assets Alliance has created a comprehensive special report, the SmartMetals® Action Kit, which Mauldin Economics readers can access today, absolutely free.

Get your copy of the SmartMetals Action Kit and discover:

The keys to building your own disaster-proof gold storage strategy
How to buy precious metals for as little as $250 per month
The pros and cons of various storage options
How to tap into the Hard Asset Alliance’s insider wholesale network to ensure you benefit from exceptional pricing
How to gift precious metals to your kids and grandkids while avoiding the “gift tax”
The critical reasons why paper gold doesn’t hold a candle to physical gold
7 reasons why SmartMetals should be part of your diversification strategy

Gold truly glitters when it’s set against a stormy backdrop of economic and geopolitical woes.

Now, with the markets growing ever more unstable and central bank behavior becoming downright erratic, I decided it was the ideal time to share how you can use gold to hedge against soaring inflation or monetary collapse—and protect you and your family in the uncertain times ahead.

Get Your Copy of the SmartMetals Action Kit Now… for Free!

Sincerely,

Ed D'Agostino
Publisher

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