I got a call from a client this week and he asked me a question that really got me thinking.

The question was where do I see opportunity in the “markets” at this time?

The first thing that came to mind is that it appears to me that the valuations of stocks are WAY off the charts. There are many good companies I would like to own but I believe patience will be rewarded here. What I mean by that is that it will be a much better time to buy after a large pullback than at all-time highs.

In the old days I would be shorting this market, but I stopped almost all shorting in 2011 when it became apparent that the Fed-with unlimited firepower- was going to prop up the “markets” and that any metrics that we used to use to determine if a share-price was expensive or cheap could be thrown out the window. It seems the worse the economy gets, which in the days of actual markets stocks would suffer- in our new paradigm the worse it gets the higher stocks climb.

Since the massive interventions have been taking place in most assets there is virtually NO PRICE DISCOVERY in almost any asset. A common saying from me is that 2+2=4 UNTIL the Fed steps in and if they say 2+2= 17 then you have to adjust your thinking because they will “print” their way to the desired outcome. This can only go on for a limited time so anyone thinking this won’t end- think again.

I see tremendous opportunity in stock markets AFTER an anticipated crash. I believe that this will bring on a massive opportunity to get great companies for a fraction of where they priced now. I also believe that MANY companies will go bankrupt. I also believe that this represents possibly the greatest opportunity going forward. I say this because as companies go bankrupt and many get wiped out many companies will reorganize. New shares will be issued first to secured bondholders and then to the public.

Think about the many companies that are overleveraged and could go bust but are critical to our way of life. Think about utilities, natural resource companies, defense contractors, water companies, etc. After a default the company’s assets are still intact MINUS the debt that was written off. Many of these companies could be paying more in dividends after the recovery than you paid for the reorganized company stock if you get in early enough.

Unfortunately, FAR too many people will be blindsided by this and will go down with the ship. Those who have the foresight to have assets that will give them purchasing power at this time can be a beneficiary of possibly the greatest transfer of wealth in history instead of a victim.

To me, domestic bonds are useless. A bond is nothing more than a promise to repay at a future date and to accrue interest along the way. With inflation raging- and in my opinion likely to get FAR worse- domestic bonds appear to be the weakest of all options at this time. Having said that we have many clients in T Bills for portfolio stabilization, a decent interest rate and no real fear of confiscation or default. Also, since a T Bill by definition is a short-term instrument, it would not see catastrophic losses in the event of an uncontrolled rise in interest rates.

Real Estate also appears to be in a bubble. Commercial Real Estate is already collapsing in major cities and will likely get far worse before it gets better. The economy has been collapsing for years and has been artificially propped up with tens of trillions of currency units to pretend that all is well. Too bad that when tenants can’t or won’t pay rent landlords can’t pay maintenance, mortgage, and taxes. Many buildings are selling for a fraction of what they were bought for- some within the last 5 years. This will also be a huge headwind for lenders (banks).

Housing affordability is at an all-time low as we speak. The sure sign of a bubble is when prices are so high an average person with an average income can’t afford an average house. Many can’t even afford to rent these days- hence the massive homelessness problems plaguing our country.

Again, I believe that real estate will once again offer a great buying opportunity- AFTER a price collapse.

Purchasing power just might allow you to own a property that you could only dream of owning today.

The mantra of investors is “Buy low, Sell high”.

It is interesting to note that Warren Buffett has SOLD massive stakes in companies and is holding over $325 BILLION in cash. One of the world’s most renowned stock investors is giving us a CLEAR sign that prices are so out of hand that he expects a better return- at least short-term in cash.

Being an ultimate insider, I think he may know something that you and I do not. We’ll see!

The only assets that I see that offer a high likelihood of good to great long-term returns are hard assets or possibly emerging market bonds. My thinking here is that the US dollar is losing value at an increasing pace. I don’t see an end to this until we get to what our dollar is actually worth- which is not far north of ZERO. It is backed by a promise to repay by the most indebted nation that has ever existed. Even if we had a moral society and had every intention of honoring our promises the numbers alone suggest it could never be done. In addition, when I look at the off-budget items and unfunded liabilities the $36 TRILLION that we admit to owing is dwarfed by these numbers. The fact that we are going $2 TRILLION per year deeper into debt- EXCLUDING off-budget items which could add another trillion or two- makes it appear that we have no intention of ever retiring this debt.

The hard assets that intrigue me the most are:

Gold- has been used as money for 5000 years, is recognized as money globally and holds its purchasing power over long periods of time. My opinion is that this is the ultimate hedge against collapsing currencies.

Silver- not as much of a monetary metal but it appears that China and Russia are reintroducing silver into monetary status as they are adding silver to their reserves. In addition, silver is used in most electronic devices, green energy, and unfortunately in bombs.

OIL-While many look at oil and assume it will fall in price because the world economy is slowing there are other metrics in play. Because of the rise of the global south demand for oil is still growing. I believe that a large price spike- probably because of middle east tensions- is more likely short-term than a meaningful price decline.

URANIUM- The only idea that makes any economic sense in moving into a green future is the use of nuclear power. Every instance of mankind’s advancement has been made when energy was made cheaper and more abundant than was previously available. Fossil fuels produce FAR more energy and more reliably than wind or solar farms. Nuclear power produces exponentially more energy at a far lower cost. India and China are building many new plants and here in the USA there is a resurgence of interest in nuclear power. Old plants are being allowed to operate for longer periods and new plants are being planned. There is also new technology that will allow for far smaller nuclear plants and that will also allow for greater safety.

FOOD

Natural Gas and pipeline infrastructure Should flourish under Trump.

Water

Copper, Tin, Aluminum, Nickel, Zinc, Lead, Rare Earth metals.

Having said all this, I would not be overly aggressive at this point. Even commodities could take a substantial hit if the markets correct as I fully expect them to.

My best guess is that we will likely see rising “markets” until President Trump is firmly in place. I would expect that a planned crash could take place (just a guess) in March of 2025 so Mr. Trump can take all of the blame for a situation that has been building up since 1971.

Of course, trying to time this is a fool’s errand, but you get the gist of what I mean.

In 1929-1932 the DOW lost 90% of its value. In that same time gold rose 75% and mining shares rose 525%. History doesn’t always repeat itself but often gives signs of what may be coming.

In 2000 the Nasdaq was 4697. It took until November 2014 to recover its 75% loss. In that same time gold went from $299.00 per ounce to $1282.00 per ounce- with full-throttle manipulation to keep the price suppressed. That is a 76.6 Gain during that same time. (Macrotrends charts)

Emerging market bonds could offer a decent long-term return also because of a falling US dollar, FAR less debt than developed nations and generally higher yields. There is also increased economic cooperation between many members of BRICS, SCO, ASEAN, and other trade organizations.

War could ruin it all.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.