“Lower for longer” favors gold, and looking at the last cycle suggests at least a five-fold increase in the price of gold…
Last week I visited beautiful Vancouver to attend the CEO Martini Party. The annual event, hosted by Stockhouse, is an opportunity for business leaders representing a number of industries to connect and meet with newsletter writers and potential investors.
It was great to catch up with some old faces and to get to know some new ones. I want to thank Cindy Broad and everyone else at Stockhouse for putting on another successful event!
In my keynote address, I explained why I’m bullish going forward despite signs that the world could be facing its worst economic slowdown since the financial crisis. Just last week, the International Monetary Fund (IMF) downgraded its 2019 growth forecast to 3 percent, a significant drop from the past couple of years.
The reason for my bullishness is simple: Bad news is good news. Policymakers and heads of states see the threat of a slowdown and are more likely to enact stimulus measures to prevent a full-blown recession. This is especially the case in nations with upcoming federal elections—the biggest one being the U.S. presidential election.
President Donald Trump is under pressure from a series of House investigations, not to mention an impeachment inquiry that’s near guaranteed to result in official articles of impeachment. Be that as it may, Trump is the only U.S. president that I’m aware of who sees the market as a barometer of his policies’ success. Every morning, after he wakes up and coifs his hair in the mirror, he wonders what his administration can do to drive stocks higher. We’ve already seen aggressive corporate tax cuts and a wave of deregulation, and we may expect to see more as Trump seeks reelection. So even though you may not like the man’s governing style or his Twitter activity, he always has investors’ interests in mind.
Fiscal-Monetary Imbalance Is a Global Growth Headwind
The same cannot be said of policymakers in the European Union (EU), where much of the slowdown is currently happening. Germany, the world’s fourth largest economy, is facing a recession. The problem is that there’s a massive imbalance between fiscal and monetary policymaking. Instead of doing as the U.S. has done—cutting taxes, rolling back business-killing regulations—EU strategy has been to keep rates at near-zero or lower. Denmark, for instance, now pays borrowers to take out a mortgage.
This is unsustainable, and there are many market watchers, including Bill Gross, who believe we’ve seen the end of what negative rates can achieve. In his most recent investment outlook, the legendary co-founder of PIMCO says that zero-bound easing may have helped asset markets over the past decade, but it will not be enough to keep the bull market running.
Central bank governors “are becoming wise to the negative effects of rates at zero (or less) that literally rob small savers and larger financial institutions such as banks, insurance companies and pension funds of their ability to earn historically ‘guaranteed’ carry,” Gross writes.
To prepare for “slow economic growth globally,” he has a tried-and-true solution: “High yielding, secure-dividend stocks are what an astute investor should begin to own.”
I agree, and Gross’ advice is in line with what I told listeners at the Stockhouse event last week: If you’re not long, you’re wrong.
Gold Continues to Look Attractive in a Low-Rate Environment
Lower-for-longer rates also favor commodities and gold prices. The last time we saw gold go in a cycle like this, it went from the mid-$200s up to $1,900 an ounce. You can easily get a fivefold increase or more in its price, which is why I believe $10,000 gold could happen the longer supply trails behind money supply.
Speaking of gold… On October 31, I’ll be participating in a webcast on investing opportunities in the gold mining industry. I’m excited to tell you that I’ll be joined by mining legend Pierre Lassonde, who recently said that the yellow metal could hit $25,000 by 2049. To register for the webcast, just email us at [email protected]. Slots are filling up fast!
A Year Since Canada Legalized Recreational Cannabis
One year ago last week, Canada became the first major country to legalize recreational cannabis for adults. (Uruguay was the very first to do so, in December 2013.) As such, a few other countries—including Luxembourg, Mexico, New Zealand and Russia—are keeping their eyes on Canada to see how things are going.
And with good reason: It’s estimated that the size of Canada’s recreational market will hit $5.2 billion by 2024, up from $569 million in 2018, for an incredible compound annual growth rate (CAGR) of 44.4 percent.
As I told you, I was in Vancouver last week, and the local news spent a lot of time reflecting on this important milestone. I was surprised to learn that, despite legalization, a significant percent of Canadians still get their cannabis from illegal sources. About half of Canadians said they bought supply from a legal source in the first half of 2019, while a whopping 42 percent said they bought it from an illegal source.
The main reason for this is that rollout has been cautiously slow. To date there are only seven official BC Cannabis Store locations in all of British Columbia, none of them in Greater Vancouver.
The same caution is being taken with edibles, which became legal for the first time this past week. (“Edibles” is the catch-all term for THC-infused products such as gummies, cookies, beverages and topical creams.) Even though they’re now legal, they won’t actually be on store shelves for another few weeks as the Canadian government begins accepting applications from companies seeking to produce and sell the products.
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Compound annual growth rate, or CAGR, is the mean annual growth rate of an investment over a specified period of time longer than one year. It represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios, and anything that can rise or fall in value over time.
There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.
The money supply is the entire stock of currency and other liquid instruments circulating in a country’s economy as of a particular time. The money supply can include cash, coins, and balances held in checking and savings accounts, and other near money substitutes. Economists analyze the money supply as a key variable to understanding the macroeconomy and guiding macroeconomic policy.