Precious Inversus Correlatus (SLV,QQQ)
There’s no easy way to speak about what’s coming down the pipe.
There’s going to be a great deal of difficulty headed our way in both the financial and social realms shortly, and there’s going to be a good deal of suffering, too. It’s our firm belief, however, that there are immediate, practical steps you can take today to prepare yourself for that eventuality and to insulate yourself – to some extent – from the slings and arrows that this way cometh.
When we talk about ‘close’, we mean inside a decade.
When we talk about ‘financial distress’, we mean a banking and currency crisis that will more than likely change the way people transact business for many years to come.
When we talk about ‘social’ fissures, we mean the kind that will plague cities, disrupt small towns and sweep unhappily through rural areas.
Civil unrest is difficult to describe. It’s a phenomenon that takes on the character of the locality it afflicts, sometimes along socio-economic lines, sometimes racial, yet always tied to some sort of ideology.
In short, there will be an upheaval as the excesses of the current system are squeezed from it, and all the misallocations and faulty financings that were undertaken are sent to receive judgment from the Great Accountant in the sky.
And then the deluge.
Here at Normandy we feel a responsibility to keep you apprised of all those forces and trends that could impinge upon your ability to earn – and keep – your money.
And that’s why we’ve advised you repeatedly over the last decade to make your preparations. That’s why we’ve pushed our ‘Four G’ investing rubric for the long term (Guns, Gold, Gas and Grub). And that’s why we also continue to admonish you to remain invested as this final, blowoff phase of the bull market draws to a close.
When we feel we’re close enough to the end, we will, of course, advise you to LIQUIDATE ALL YOUR HOLDINGS AND INVEST IN REAL ASSETS.
But we’re also not going to wait until the last moment to remind you of a few vital steps that can be taken to ease your transition into the reality that awaits. For example, we implore and beseech every man-Jack of you to secure for yourselves a modest patch of land in the country, with some tillable soil and a little pasture for a cow or a few goats. This is the greatest asset you could ever acquire as we move through these troubled times.
Stay Close… And Listen Well
We beg you not to take these words for granted, nor to pooh-pooh an idea that could save you and your family’s lives.
Even if you have a backyard, and the zoning permits it, you would do well to plant a cabbage patch and, if space permits, house a goat or two. Nothing else will prove so valuable if and when regular food supplies to cities and small towns are disrupted.
A look at the reality of Venezuela (or any Middle Eastern country over the last decade) proves the point. When a breakdown occurs, people start losing weight. They get desperate. And they begin to resort to activities and thoughts they never before entertained.
Again, we’ll have more to say about this as the ‘end’ draws nearer. And if you’ll excuse the millennial language (there’s really no other way to describe these things), we believe that heeding the call today will help you see things through with minimal difficulty when the crunch descends.
This Week in Investmentville
As the following graphic indicates, we could be in for a storm of some sort over the next few days. Whether it’s a buying or selling storm is hard to say. What is clear is that we’re now close to the end of a record number of days of ‘tranquility’, during which the market has failed to move appreciably in either direction. And that generally constitutes sufficient grounds for an explosion immediately thereafter.
Have a look –
It was last in the early 1960’s that we saw a stretch of days this long without any meaningful movement in the broad market.
So will we proceed higher or lower from here? The big spenders certainly believe lower, as our fellow scribbler, Matt McAbby, posted in Best be Bond Bound last week.
There, he showed the overwhelming splash created by the recent exit of funds from equities into Treasury bonds.
And it appears to be continuing this week.
Stats from Bloomberg show that despite the new highs set on the S&P 500, fund flows out of the world’s largest equity ETF, the SPDR S&P 500 ETF (NYSE:SPY) exploded this week to their highest levels in fourteen months.
In what we’re calling the ‘SPEXIT’, big money investors in SPY stock appear to have relinquished their holdings to smaller retail traders to the tune of $7.8 billion, the biggest such exit since January 2016.
Have a look –
Is the downside calling. It appears so.
So how do we play it?
How’s your risk appetite?
Generally speaking, the market moves with either a favorable or unfavorable disposition toward risk assets – what the financial media has come to term ‘risk on/risk off’.
Stocks generally move with the ‘risk on’ body of financial assets, while the precious metals tend to follow the ‘risk off’ group.
And it’s for this reason that we suspect any coming weakness in equities will be met with a beneficial surge in gold and silver.
From here it becomes clear that the two asset classes have correlated inversely for the entire period – with a wild divergence in just the last month.
We now believe it behooves us to set a pairs trade that exploits that relationship.
The gap will close.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
With kind regards,
Hugh L. O’Haynew