Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, we focus on investing implications of the nascent recession.
Precious Metals:
Tyler Durden, at Zero Hedge: Why Russia Is Dumping Dollars And Buying Gold At The Fastest Pace In Decades.
o o o
SurvivalBlog reader “Doc Savage” wrote to offer two prescient observations: “For those who are considering investing in mining stocks, be aware they are very volatile. An alternative is to use royalty stocks. These companies pay mine owners for the right to sell part of their gold output. They are often more stable, tend to be less risky, and some of them pay dividends. These include, but are not limited to, Royal Gold, Franco-Nevada, and Wheaton Precious Metals. With respect to all the articles on the yield curve, there are many different parts of the curve. The most cited one is the 10 year-2 year Treasury — and it has not yet inverted, although it’s close. Historically, when this part of the curve inverts, we have 6-18 months before a recession. And note, a recession is not a national disaster, although it’s not pleasant. Everyone needs to take a breath and understand that the Democrats are shifting to the recession issue from the collusion issue because “OrangeManBad.”
Economy & Finance:
Global Trade Takes Sharp Turn With Biggest Drop Since 2009
o o o
o o o
At Seeking Alpha: How To Retire: Don’t Go To College.
Stocks:
This time, an inverted yield curve suggests the stock market has already peaked, some analysts say
o o o
Industries that thrive on recession
o o o
20 Best Recession Proof Dividend Stocks
Commodities:
This article is 10 years old, but is instructive: Commodities: Opportunity During Recession
o o o
Investing in Commodities During a Recession
Forex & Cryptos:
Wolf Richter: US Dollar Status as Global Reserve Currency Edges Down Further
o o o
The current rally in Bitcoin is encouraging, but be advised that it might be a trap. In my estimation, Bitcoin must hold above $4,000 for several months before this can be confirmed as a bull market.
o o o
Alt Season? Over 100 Crypto Assets Outperform Bitcoin in Q1 Surge
Tangibles Investing:
How the Great Recession Forever Changed Antique Collecting
o o o
Why Certain Artists’ Markets Can Weather a Recession While Others’ Flop
o o o
I found an interesting archived thread over at a watch collecting forum: Rolex prices after 2001 and 2008 recession
Provisos:
SurvivalBlog and its Editors are not paid investment counselors or advisers. Please see our Provisos page for our detailed disclaimers.
News Tips:
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who particularly watch individual markets. And due to their diligence and focus, we benefit from fresh “on target” investing news. We often get the scoop on economic and investing news that is probably ignored (or reported late) by mainstream American news outlets. Thanks!
The inverting yield curve is the Deep State’s new issue in the OrangeManBad idiocy. HTreasurere’s some interesting information. First, the 10 year – 2 year part of the curve is more important than the 10 year minus 3 month one because market forces play a
more important role in the 2 year Treasuries than in the shorter term issues. And the 10-2 curve has not yet inverted, although it’s close. The importance of this is that there are still gains to be had in stocks after an inversion.
The last time the yield curve inverted was January 2006. Stocks went up 26% over the next 21 months, peaking in October 2007. The yield curve inverted in September of 1998, and the market topped out in August of 2000. Between those dates and market went up 55%, and tech stocks went up 210%.
None of this means the same thing will necessarily happen after the next inversion. The point is not to be scared out of otherwise well-chosen investments. A further implication is the absolute necessity for a disciplined approach to selling. I’m a believer in the use of trailing stops, as I’ve mentioned before.
If we assume, for the purposes of discussion, no TEOTWAWKI event in the next 10 years, the technology that’s coming along will transform our world faster than anything we’ve ever seen. And on a totally different topic, did anyone notice that Trump started a government program to protect the country from an EMP event?
Good stuff Doc. Well said
More thoughts on what may come. The chances of a short recession are very small. The Bank for International Settlements did a study of 32,000 businesses in 14 countries. They found that 12% of these firms are so-called “zombie companies.” This means that they are at least 10 years old, and that they are not earning enough money to pay their ongoing debt obligations. When a crisis hits, these companies will quickly have to fold or be sold. This means that a downturn will tend to be hard and long, not shallow and short.
For investors, a significant part of invested wealth is held by retirees and pre-retirees. A significant part of this money is held in index funds, with the owners following a buy and hold approach, that is, ride the market down and then back up. Their experience from 2008 to today supports that. Unfortunately, the next crisis may well take 20 years or more to work itself out. These investors do not have that much time! What will they do when their wealth evaporates? Remember too that many pension funds index and follow a buy and hold approach as well. Insurance companies invest substantially in fixed income assets, mostly investment grade corporate bonds. They use this money to pay annuity recipients and insurance beneficiaries. The average investment grade corporate bond is now rated BBB, which is one level above junk. What will happen to retirees who depend on the insurance companies when the bonds in their portfolios start to shift into default?
This means that investors MUST have an exit strategy, a discipline that tells them when it is time to get out of stocks, out of bonds, and into cash and precious metals. Barterable goods may be important as well — think bars of soap, boxes of ammunition, bottles of bourbon, etc. I do not suggest overloading on these, just having some. Skills will be important as well, and are much more portable than boxes of stuff.
Just a few random thoughts.
Re: Don’t go to college
I think people need to be careful with the generalized anti-college rhetoric. Currently a liberal arts degree is pretty worthless. However STEM and certain medical degrees are well worth it. And while currently the country needs skilled labor (such as welders) I have watched the inflation adjusted price of skilled labor drop 25% in my working life adjusted for inflation. My nephew iron worker working in the same geographic area I did in 1981 makes 25% less than I did. (BTW he attributes much of that to illegals who despite being illegal have Rock solid documents they purchase). Interestingly I recently went through some of my father’s papers from just before he passed in 1978. They included some pay stubs that tell the same story.
This is not to say college is for everyone. Some (maybe most) should go into trades. Just don’t shout the anti-college rhetoric from the hill tops with a significant part of the story buried in the fine print.
Interestingly Adam Smith addressed this very issue in “The Wealth of Nations” published in 1776. He pointed out that an educated man of his day would be repaying college debt for a long time and that he better count the cost vs benefit wisely. He also stated that a London carpenter of the day typically lasted for eight years before they were too injured and or broken down to work anymore sometimes thrusting them into poverty. He concluded that both approaches carried significant risk. Which is an ongoing theme in his writing. Life is a battle regardless of the path you take.