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written by reader Which way is the wind blowing

By testing, March 23, 2017

Well Travis I have a conundrum for you as I look at the landscape of newsletters and what is being hawked today. So I am not asking advice on my portfolio, but your take on which way the wind is blowing. Here’s what I see: Jim Rickards (Agora) is promoting gold in discriminate amounts according to the size of the portfolio, Harry Dent says that gold is going to $250/oz., Rickards also points out that at least 12 major CEO’s are selling their shares in significant numbers and intimating that something is likely to happen. Dent sounds like the lone wolf, and when you throw in M Lombardi’s comments it sounds like another conformation of Rickards position for a crash. I know enough to look for the trends, but why would the CEO’s of IBM, Intel, etc. sell their stock when they are repatriating their funds to the US? This prepossess that a dividend or a repurchase of stock may a occurring, when the Trump plan to return overseas profits to the US. Do yu have some thoughts to either expand my thinking or suggestions about the general direction.


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Travis Johnson, Stock Gumshoe

The simple answer is, those predicting extremes have a very low likelihood of being right… but the rewards for those who are willing to predict extremes are much higher than for those who are somewhere in the middle of the road when it comes to optimism or pessimism. No one signs up for a newsletter whose ads trumpet caution or skepticism or patience, they sign up because the story of either boom or collapse is enticing enough to make them pull out their credit card.

I don’t know which way the wind is blowing. Right I think now the markets are awash with optimism, priced for tax cuts and deregulation and reinvigorated growth and some small acceleration in inflation. Whether or not that ends up being good for gold probably depends on how inflationary things become, and whether people begin to lose faith in the US$ as the basic unit of reserve and exchange in the world… I’d say that even with a highly unpredictable President, the safe bet is probably that things will keep going along as they have been, with increasing debt and ups and downs in economic growth. I sway a bit to the pessimistic right now because the market is richly valued, and because the potential for large-scale uncertainty or shock seems very high (presidential tweeting, resurgent wars in the Middle East, confrontation with China, you name it), so I keep what is probably an above-average allocation to gold, personally… but I will be better off, on balance, if gold goes to $250, because that probably will mean that things are happy and placid and inflation is under control and global currencies and trade relationships are not collapsing.

In my opinion, allowing yourself to have any certainty about what direction the world or the markets will take over the next few years is just a recipe for allowing your portfolio to be dominated by your emotional response to an over-informed and under-wisdomed world. Diversification and patience are the only things I can routinely fall back on — though I do have more cash in my portfolio than usual, and physical gold (and silver) is a meaningful part of my long-term savings plan.

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