In today’s Money Morning… be fearful when others are greedy… the vaccine you really need… valuable lessons for all… and more…
Have you checked out Jim Rickards’ latest book yet?
His deep dive into the COVID-19 pandemic’s impact on the economy, and more importantly its lingering effects, is a must read. A no-holds-barred take on an impending financial crisis that will shock the world.
Because as Jim tweeted back on 15 August, the real ramifications may be yet to manifest:
‘COVID-19 will fade. Not soon, but eventually. The economy will recover. Not quickly, but it will slowly recover. What will not fade soon is the new depression. The effects will be inter- generational.’
Needless to say, it is a grim prediction. One that you may or may not agree with.
After all, we’ve seen both the US and Aussie stock markets roaring lately. So, could Jim have got it wrong?
All I’ll say on the matter is that I respect Jim Rickards’ opinion. Because even if I don’t always agree with him, he provides insights and analysis that few other people can. Someone who is always worth listening to.
Which of course brings us to the subject of his latest book: The New Great Depression: Winners and Losers in a Post-Pandemic World. A cautionary tale about what may be coming, and how best to defend against it.
Be fearful when others are greedy
If you’re familiar with Jim, you’ll know that he certainly likes to err on the side of caution. Some might call him ‘bearish’, but I think it’s more nuanced than that.
He doesn’t just see markets enduring a correction or prolonged dip — he sees a total destruction of our monetary system. A breakdown that will (hopefully) make way for a new and better system.
As it says in the title of his book, he believes we are on the cusp of a ‘New Great Depression’.
Like I said though, that may seem like a bold claim given the state of markets. We’re seeing assets of all kinds, be it stocks, property, or otherwise, all booming in value. A scenario that at first glance may seem to undermine Jim’s argument.
But don’t be fooled.
As the great Warren Buffett famously said: ‘You should be fearful when others are greedy.’ And right now, we’re seeing levels of unprecedented greed.
In this regard, I do think Jim is right. Our system has reached a point where there is no going back. Our modern, central bank-sponsored, QE-inflated stock markets are doomed to implode. With my money betting on a massive market melt-up before it all comes crumbling down.
Because the only real difference between my outlook and Jim’s is timing.
While he sees the crisis coming imminently, prolonged by the aftereffects and steep societal changes of COVID-19, I would disagree. I think the central bankers have shown that they will do anything to avoid that.
As I wrote earlier this month, on 4 February, the RBA has already committed to low rates until at least 2024. A signal in my eyes, that asset price growth will continue unabated for at least three more years.
As for which of us will be right, well, only time will tell.
The vaccine you really need
So, what does this all mean for you as an investor?
It means you have a critical choice to make. To decide whether to side with the bulls or the bears — either temporarily or for a longer period.
Fortunately, no matter which side you choose there are investment options. Ways to get your money out of the current system and preserve your wealth through whatever may come.
Jim, for instance, loves gold.
Always has, and probably always will.
And his justifications for owning gold are rock solid. An argument that anyone can and should buy into if they want true asset diversification. Because despite what your financial advisor may tell you, portfolio diversification amongst stocks doesn’t mean much if fiat currencies implode.
A vaccine to prevent your wealth from being eroded.
However, just like COVID-19, there is more than one vaccine to choose from.
For example, although I know Jim hasn’t been a fan in the past, bitcoin is also a great antidote. Putting your ‘wealth’ outside of the current fiat system.
Plus, compared to gold, it has been absolutely flying lately. It hit a new all-time high of US$52,294 just yesterday. Surpassing nearly all expectations (at least for those who have doubted it in the past).
And while I’d argue that this ‘dollar value’ isn’t what you should be looking at long term, it does showcase the kind of change Jim is talking about. A systemic change that will likely upend society far more than the initial spread of the pandemic has.
So, again, don’t miss out on Jim’s book. Because whether you’re siding with the bulls or the bears, it has valuable lessons for all.
Because I promise you will at least learn a new thing or two.
Editor, Money Morning
Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.