Why Everyone Should be Investing in Hard Assets in 2018

History is always replete with the failed attempts of nations to print their way to prosperity. The pursuit operates on the same principle as alchemy: trying to get something for nothing. It has invariably and always ended the same way. In losses and tears!

The irresponsible policy of creating “cheap money” by global central banks has only caused financial bubbles to be constant reoccurrence. As excess money flows into an asset or asset group, it causes its price to rise beyond a reasonable level. The US stock market crash in the 1930’s, tech stocks in the late 1990s or even the current crypto-currency craze are all are fine examples of this.

What’s more sinister is the hidden risk posed by both the Feds and the ECB who has secretly colluded and formed a dangerous “cartel”. They are in cahoots with a very compliant and complicit mainstream media. Thus, as an investor do not be fooled by either the authorities or media as both entities are doing everything in their vast and considerable power to spread lies. And the worst lie being, “tomorrow will be even better!”

Can’t Print Towards Prosperity

At first it, issuing more currency feels good because those closest to the money printing get stinking rich while doing practically nothing. As that trickles down, everybody initially feel smart and wealthier. Well, not everybody; but those running the system sure do!

After a while, though, all that feel-good activity is revealed as a fraud. It turns out prosperity wasn’t printed, instead it was redistributed. It’s usually from one party’s pocket into another. And in most cases, from poorer pockets into those of the already-privileged!

So let’s try and spot the major flaw in the ‘everything is awesome!’ meme that global central banks are trying to paint for everyone. An intelligent guess would be that these banks work as a collusive unit and dangerously flood the “markets” with so much thin-air liquidity (between US$ 150-$200 billion a month!) that nobody has any clue what anything is truly worth anymore[1].

Failed Monetary Policy

Amazingly, global central bank balance sheets have gone from US $6 trillion in 2007 to US $21 trillion today — and they are still being expanded at a staggering pace of US$ 200 billion every month[2]!

With all this “thin air” money being printed, we are now living with one of the most extreme wealth gaps in US history, with the top 1% (really, the top 0.1%) owning a greater percentage of the nation’s wealth than they ever had[3].

But it’s even more nefarious than that, because global central banks are not simply stealing from today’s public; it is also stealing the prosperity of future generations. When the party being stolen from hasn’t been born yet, it can’t fight back.

In short, you cannot print your way to prosperity. Yet somehow we’ve forgotten that. And we’re dooming ourselves (and our children and grandchildren) to becoming “slaves of the system”. If something cannot go on, it simply won’t!

Sadly, for global central banks under the leadership of academics are still unable to conceive any approach other than perpetuation the same system that has already been in place.

The main reason for this is that there is a completely new type of banking finance was invented; but all the risks involved had not been properly assessed. For a while, the debt pyramid will be allowed to grow, but it will soon collapse when its shaky and unsound foundation disintegrates.

Hard Assets Mitigate Risk

If we have learned anything from the past, is always good to be cautious even with all this reassuring global central banks rhetoric. In reality uncertain speculative asset bubbles have already formed in global financial markets and it’s ready to pop!

Thus, anecdotal evidence has suggested that three strong but simple arguments for investors to load-up on hard assets when dealing with future potential economic crisis. First, hard assets it’s a safe haven for your money, secondly they play an important role as a hedge and finally hard assets are proven to better options than putting your cash in banks. Let’s look at these three aspects in closer detail.

A Safe Haven

It is widely accepted that banks with vaults are expected to take reasonable care of their gems come rain or shine. In addition most hard assets investment companies provide the necessary insurance coverage. This in terms translates to asset safety.

Hard assets are usually considered “risk-free” (there are no stocks or financial assets that are considered as such). So as an investor, your goal must be capital preservation, and investing in hard assets is certainly an attractive alternative that provides a nice upside to your portfolio returns.

Often, an investor isn’t just making an investment but they are looking to buy a piece that they wish to hold-on to for its intrinsic value. The fact that the value of hard assets appreciates even when the demand is stagnant, is a pretty good deal from a commercial standpoint. The reasoning is that some of these hard assets are very hard to find in nature and once they are mined, their scarcity increases over time.

Owning hard assets offers investors an attractive option for portfolio diversification. Take any given asset class evaluated since the 2008 Global Financial Crisis , the most obvious was the herding mentality of fund managers to beef-up on hard assets, a strategy to potentially increase returns or substantially reduce risk. Furthermore, allocations off hard assets will help more cautious investors to further diversify their portfolios without impacting their expected returns.

Hedging Qualities

By holding hard assets investors can hedge against inflation much more effectively when compared to stocks. Hard assets also tend to steer clear from some of the risk of financial equities such a asset bubbles. Hard assets have either low or absolutely no correlation with stocks or bonds. This advantage of hard assets can be used as a tool to achieve the goals of diversification and inflation protection.

It’s actually a simple investment model. Current conventional hard assets all have value independent of their cash value. Trends in portfolio management these days see investors who are actively seeking hard assets for further diversification benefits. This has become the standard and pragmatic approach taken by current risk averse investors.

Better Than Banks

Sometimes owning hard assets such are quite simply the only decent option. The returns on hard assets spelt out in value of appreciation are typically greater than the rates paid by banks on savings accounts. Hard assets are almost like a fixed contract, so it is relatively easy to forecast your returns.

As a result, if you are saving and you don’t need the money in the short term, hard assets will give you the greatest return without posing too much risk. A good example is to channel funds into the hard asset markets that provide safety and security.

Depositing your money in the bank is a start, but it’s not going to give you any phenomenal returns. So, to all you investors out there planning to get back into active investing, hard assets are the way to go!

Remember, when owning hard assets, you have another “powerful vehicle” as your savings. If you are a risk averse investor and choose not to put your money at risk, than conventional physical assets are for you! In the business of buying and selling hard assets there are no tricks, insider-knowledge or irrationality that often makes the difference between profit and loss.

Conclusion

Global central banks are desperately seeking to keep the status quo in place, praying that somehow things turn out OK, but in reality are clearly scared to death behind the scenes. Since the Fed began printing as much money as it has dared for the time being, they have now handed the baton over to the ECB, and the Bank of Japan, who have stepped in to keep the wheels of the world’s debt production well-greased.

The question is what have they done with the trillions in “thin air” currency they have printed up? Are they handing them to other big banks, to speculators or the already wealthy? In the meantime, they’ve blown another “Mother of All Financial Bubbles” in the bitcoin market. When this bubble burst, just like always does, it will be another massively destructive event. There will literally be nowhere to hide from the repercussions.

Investing in hard assets can be one of the safest investments in economically difficult times. As we are entering a period where the worse may not as yet be behind us, investing in hard assets may only help preserve your wealth against the uncertainty of financial asset performance or the damage caused by inflation on your wealth. The bottom-line is that when you include hard assets in your portfolio, there is a high possibility that you can reduce risk.

To conclude, you simply cannot count on anyone in power in this day and age to give you anything like timely warning or useful advice in advance. You need to find accurate, trustworthy indicators on your own, and then decide how you’re going to position yourself, your loved ones, and your wealth accordingly!

___________________________________________________________________

[1] Bloomberg

[2] The Economist

[3] CNBC.com


Why Hard Assets Will Be Popular in 2018

1) Current Monetary Policy

Since the financial crisis in 2008, the availability of cheap money and low interest rates (artificially kept low by Central Banks) have over-inflated financial asset prices and now has lead to inflation.

Quantitative Easing

Implications:
When global central banks print more money, usually firms and households will have more cash and more money to spend on goods, i.e. causing inflation;
When government doubles money supply, people have more money to buy financial assets. Thus, prices such as stocks would over-inflate (creating financial bubbles).
Or when there is more money chasing the same amount of goods, firms will just increase prices that in-turn leads to inflation (more money chasing less goods produced);
Usually printing more money doesn’t affect the output or production levels, so the money itself becomes less valuable as inflation erodes value of money/wealth.
People suffer money illusion. — True you have more money, but if everything is more expensive, you are not any better off.

Low interest rates

Implications:
Dangers of record-low interest rates is they inflate asset prices (creation of asset bubbles);
Financial assets such as stocks and bonds will trade at higher valuations;
When asset prices are high due to low interest rates, it means each dollar you spend buying an asset means you purchase less dollars of dividends, interest and rents;
In the case of companies, lower interest rates means they borrow at dirt cheap rates and invest more on its business (i.e. injecting more money that in-turn leads to inflation).

2) Expected Monetary Policy in 2018

Reducing money printing while hiking interest rates

Implications:
Asset Prices Fall When Interest Rates Rise Because the Opportunity Cost of the “Risk-Free” Rate Becomes More Attractive:
Investors have common sense to park their money in traditional assets that provide “risk-free” rates such as U.S. Treasury bills, bonds, and notes. Demand for stocks will drop
Companies will have to pay more for debt financing.
Companies face higher interest payments, resulting in the company becoming less profitable.

Why Investors stock-up on hard assets when there’s inflation:

1.The movement of hard asset prices is generally less correlated with the movement of other financial asset classes such as stocks.

a. The beauty of hard asset stock is the fact that they are not correlated to US large cap stocks as a whole.

2. Second, hard assets have a unique (and positive) reaction to inflationary pressures.

a. When we have a period of high inflation then there will be a devaluation of the dollar, resulting in you losing a significant amount of buying power to inflation. Thus, hard assets investments provide a true inflation hedge.

3. There are periods in the longer term economic cycle when including hard assets helps boost returns.

a. Due to the underlying value of a tangible commodity its earnings are tied to inflation as their resources are worth more as the dollar declines in value.

Chronology of Events