Hard Assets In an Age of Negative Interest Rates

https://mises.org/blog/hard-assets-age-negative-interest-rates

One Major Firm’s Chief Investment Strategist Just Said It’s Time To Own Gold, Silver And Other Hard Assets

Saut is a well-respected analyst in the mainstream financial community.  Typically, he's a cheerleader for equities and not a fan of gold.  However, he has recently turned bullish on real assets, including gold.  I don't think he fully understands the precious metals markets (after all, he is part of Wall Street status quo), but he definitely has an eye for market timing and fundamental analysis.

http://kingworldnews.com/one-major-firms-chief-investment-strategist-says-its-time-to-own-gold-silver/

Louise Yamada - Gold, Art, Hard Assets, Euro & U.S. Dollar

Mainstream economists and technical traders are slowly joining the conspiracy theory cult regarding gold manipulation.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/8/8_Louise_Yamada_-_Gold%2C_Art%2C_Hard_Assets%2C_Euro_%26_U.S._Dollar.html

The Soft Cost Curves Of Hard Assets: Where The Cash Flow Hits The Road

http://www.zerohedge.com/news/2013-04-18/soft-cost-curves-hard-assets-where-cash-flow-hits-road

Here Is What Will Fuel The Move Higher In Hard Assets

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/10/27_Here_Is_What_Will_Fuel_The_Move_Higher_In_Hard_Assets.html

Why Money Is Now Pouring Into Hard Assets All Over The World

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/10/20_Why_Money_Is_Now_Pouring_Into_Hard_Assets_All_Over_The_World.html

Jim Rogers

Legendary billionaire investor and hedge fund manager Jim Rogers gives his summary on asset classes in a CNBC interview. It is instructive to watch the whole video to the end.



Rogers is especially critical of Fed Chairman Bernanke, US Treasury Secretary Geithner, and President Obama for printing too many USDollars, and castigates central banks worldwide for turning on the printing presses.

The only disagreement I have is on owning certain foreign currencies. He suggested the Swiss Franc, Japanese Yen, and Canadian Dollar. The Swiss Franc has traditionally been a stable currency due to their conservative monetary policies, but even Swiss banks have veered away from financial discipline, making bad real estate loans to the Baltic States and eastern Europe. Japan is in worse fiscal shape than the US, as their national debt has grown to monstrous levels relative to gross domestic product. On the other hand, the Canadian Dollar is a safe bet, as they are a resource-rich country which will benefit from the appreciation of hard assets (precious metals, rare earth metals, energy). The Brazilian real, Australian Dollar, and Norwegian Krona are other foreign currencies which should do well going forward, since they are creditor nations with sound fiscal policies and exporters of natural resources.

Disclosure: no position in foreign currencies, long gold and silver mining shares, long natural gas pipeline master limited partnerships.

Is it time to take profits on the reflation play?

We've participated in a strong rally in commodities, including energy, crops, and precious metals, achieving triple digit gains in some cases.

Actually, I've already lightened up on some major gold mining positions, and replaced them more speculative gold prospectors with impressive track records and land holdings. This should give me more upside on any advances in rallies in gold, but also gives me more exposure should gold correct. Short-term, this could be a mistake on my part, but long-term, it should pay off if they continue to find more gold deposits.

Is this rally in hard assets sustainable, given my bearish outlook on an economic recovery? The rally can be explained due to dollar weakness and poor participation in long-dated US Treasury bond auctions. In other words, we called it right. But has this rally gone too far too fast? Will I be able to pick up these same assets at a lower price in the future, once this phantom economic recovery is exposed? Personal and corporate debt is still strangling the US consumer, and government debt is at an all-time high with no end in sight. Can China's recent upsurge in demand replace continued demand destruction in Europe and the US?

I'll continue to play the binary-event driven biotechs, hoping for continued outsized gains. The overall market could become irrationally extended despite deteriorating fundamentals, climbing the "wall of worry". But I feel the need to lighten up just a little more to lock in profits. I may miss out on the absolute top, sacrificing another 10-20%, but at current levels, I believe there is more downside risk. I hope I'm wrong, but I can't act on hope alone.

Most people are terrible market timers, and I am one of them. Generally, I will miss the exact bottoms and tops of markets. But if I can participate in the majority of a big move, like the rally since March 2009, and if I can avoid the majority of a big decline like I did in 2008, I can live to see another day.

Investing is risky and you can lose most or all your investment. Please do your due diligence. Good luck to all.

Two charts: ABX and TBT

ABX: http://finance.yahoo.com/echarts?s=ABX#chart1:symbol=abx;range=5d;indicator=sma+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Up over 16% in 5 days, while my call options have tripled in 5 days. Actually, in 10 minutes, it's gone up another 8 %. This is not the ramblings of the lunatic fringe--this is a clear indication that inflationary fears are resurfacing, and that the market is climbing the wall of worry about USDollar debasing. For technical traders, it also means the gold short sellers are getting squeezed, and are scrambling for physical delivery.

TBT: http://finance.yahoo.com/echarts?s=TBT#symbol=TBT;range=5d

Up over 17% in 5 days.

What does this tell us? The markets are beginning to believe that Obama's stimulative program may work. While I agree it will "work"--we'll certainly create more jobs (temporarily), but due to high deficit spending, it'll be a vegetative recovery, and markets will remain highly volatile. I do not believe it will be a productive recovery, and asset values in equities and real estate will remain grim for at least 5 years.

The prevailing attitude will be: "well, at least I have a construction job, even though my paycheck is constantly being eroded by a weakening dollar and high inflation." With the debasement of the USDollar and every other currency due to these stimulus packages, gold will retain its real value. Every dollar spent to bailout failing industries will be one less dollar to invest in the productive private sector. This "Newer Deal" will again prove disastrous for years.

Having said that, I am protecting my capital with hard assets in the precious metals, and retaining my purchasing power by nibbling in the soft commodities.