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Like I said in my last blog/newsletter, just because we flipped the calendar doesn’t mean anything magical changed. The financial markets may have seasonal trends but the current times we live in are anything but normal. Change is happening under our feet at a swift pace while we are distracted by the media and our governments by stuff of little consequence to our children and grandchildren’s future. A dear friend shared a 15-minute clip with me that reminded me that we are in a war that is not political, but rather spiritual. Email me back if you would like the clip. I may make a post on Facebook as well because here is where we talk about your money and your family’s wealth and protecting and growing it as efficiently as possible instead of being distracted by the buffoonery of the Biden’s and Trudeau’s of the world.
To start off let’s recap 2022 returns:
NASDAQ - 33%
S&P 500 - 19%
TSX – Toronto - 6.8%
Cdn Aggregate Bonds - 12%
US Aggregate Bonds - 13%
Gold + 2.1%
As mentioned in the last newsletter we are positioning for protection and growth while continuing to follow our indicators, namely the Equity Action Call which tells us whether we should be in the stock market or not. As most of you know our clients spent most of the year out of both the stock and bond markets avoiding 95% of the carnage that BUY and HOLD investors experienced. We might not have made anything, but we never lost 20% either. And that is the beauty of the Rules Based Investment (RBI) process I have used since the crash of 2008. Having been an Advisor through two stock market crashes in one decade led me to the best decision I ever made in finance, and that was adopting the RBI system.
Not every client portfolio will be exactly the same, but they will be similar. With trades going through this week and maybe into next week we will be positioned with roughly 33% in Government or Investment Grade Corporate Bonds yielding over 4%, 33% in Money Market or Treasury Bills yielding roughly 4% and 33% in either a Tactical Bond Fund or Equities depending on where our Equity Action Call is.
This portfolio provides protection, flexibility, yield and the opportunity for growth. If the markets do as we believe they will, and that is remain in the red zone which means we own little to no stocks. And we also are very cognizant of the ever-present chance of a flash crash. A Flash Crash is generally called a Black Swan event which means it was unexpected, out of the blue. In 2001 it was the bankruptcy of Enron and in 2008 it was the bankruptcy of the US banks Lehman and Bear Stearns. In 2020 it was the announcement of the Covid lockdown. These events shock the markets and leaves investors scrambling to the exits. The initial hit usually results in massive drawdowns causing much financial harm to everyone holding equities and Junk Bonds which are those bonds that are below investment grade. Investment grade is BBB, A, AA and AAA. We will not own anything less in this dangeroius environment.
The best portfolio in our opinion right now is:
· High quality bonds that pay a nice yield and have the potential for a nice capital gain as they are considered safe havens and are fresh off their worst year in centuries.
· Cash like investments such as Daily Interest Savings, Money Market and Treasury Bills that pay a nice yield, hold their par value and can be liquidated quickly if the unforeseen happens and the stock markets fund a trend upwards. A “real trend” not a blip.
· Precious metals, namely the physical kind as in the event of a big drop in the stock market as most mutual funds or ETFs holding silver contracts is just paper.
· Tangible assets like farmland, collectibles, and such.
The flexibility of holding cash like investments allows us to re-enter the stock market if for some strange reason the equity markets turn upwards by flipping the 33% in Money Market/Treasury Bills into the equity market very quickly. While we can see no “rational” reason for the markets to turn positive for a long time, we understand the markets have people with agendas and can influence change regardless of how irrational it might be. The simple fact that the USA has printed $17 trillion new greenbacks since 2020 alone helps one understand how horrendously bloated the markets are with cheap money. $17 trillion is a lot to add to your currency when prior to that the US somehow survived on $4 Trillion. Do the math, 81% of the US dollars in circulation today were printed in the past 2 years! Let that sink in. Talk about devaluation by oversupply, and it is backed by nothing at all.
This massive over printing cheapens the value of the currency and is one of the main culprits for inflation which is currently crippling the entire world and setting us up for the biggest financial collapse in the history of our generation. We do not know when, but the “if” is no longer a question. Do not allow the calmness of the past few months lull you into a state of complacency. I believe it is a navy seal saying that goes something like this; “when things are going fast think slow and when things are going slow, think fast.”
This over printing of a currency isn’t just a United State problem. All of the western nations are guilty of the obscene debasement of their currency and the collapse of Europe could be the Black Swan. Europe has engaged along with other countries in some of the most irrational and irresponsible economic and political decisions never thought possible years ago. They are so absurd many think it is an intentional attack to destroy western civilization to achieve the United Nations goals of making every country on Earth equal. But that requires a whole other blog.
But while every country/region such as Europe, Canada, the UK and Japan have all debased their currencies which will crush their economies and thus their citizens wealth, the USD is still the world’s largest economy and therefore it’s economy, it’s stock market and “this time”, its currency are extremely important and influence the rest of the world.
Which leads to the next newsletter where I will explain what has been happening in the currency world and the implications that a new gold backed currency will have on the global economy.
In the meantime. Being we are in RRSP season I remind you that the placing physical gold and silver into an RRSP, or any investment strategy, is an excellent way to diversify away from paper assets like stocks and bonds as well as diversify your currency. Ask us how.
We are bullion dealers that are able to access the best products sourced anywhere in the world. Email us at daryl@preservation-capital.com or call us at 306-343-7800
Yours in Faith, Family and Freedom,
Daryl
