Full episode: Market Call Tonight for Tuesday, April 16, 2019
Jaime Carrasco, portfolio manager at Canaccord Genuity
Focus: North American equities
While we continue to benefit from rising markets in our dividend-paying equities, I remain cautious due to a deteriorating global economy since last summer. As a result, I continue to recommend that investors hedge their portfolios with a 20-per-cent weighting in the precious metals sector in preparation for the next economic downturn. Furthermore, I’m amazed by the ambivalence investors are showing towards gold and precious metals, which is completely at odds to how the global banking system is positioning.
After a 40-year hiatus, gold has once again been reclassified as a Tier 1 asset within the global banking sector. This means that when the next economic crisis hits, gold reserves at banking institutions will be considered a capital asset unlike in 2008. The fact that China has transferred more than 18,000 tons of physical gold from Western vaults into the Chinese banking sector since that year will become very relevant when we’re forced once again to recapitalize the banks. China and all those countries holding physical gold reserves will be able to easily deal with a banking crisis by revaluing the value of that tonnage, while the Western institutions that let it go at a ridiculous price will be at the mercy of their governments for more handouts. It’s important to note that this is exactly what Franklin Roosevelt did in 1933 when he took the monetary reserve power from the U.K.
All in all, I believe these are clear signals of my assessment that the 1930s are repeating because the currency reserve is on its last legs. Considering that it’s not different this time, the transition will once again be done through the value of the total gold reserves circulating within the monetary system.
Throughout history the number 1 rule of power has been “who holds the gold makes the rules.” Going forward, I expect that economic pressures will continue blurring the line between politics and economics, increasing volatility, uncertainty and the need to hedge portfolios.
In Europe the social discourse continues to deteriorate, with open disputes between sovereign states and the European Central Bank and between sovereign states and their own citizens. The Italian government and the ECB are locked in an open conflict over who owns and controls Italian gold reserves, with the country’s Deputy Prime Minister Matteo Salvini claiming that it belongs to “the people” and ECB President Mario Draghi saying that it’s under the control of the bank. In France and other European countries, the Yellow Vest movement continues growing as people openly complain about rising tax burdens that have made the cost of living unbearable. In the U.K., there’s Brexit.
In the U.S., President Trump continues politicizing the Federal Reserve, openly questioning its policy and now even nominating two non-Keynesians for positions in the central bank. I expect that Trump will strong arm the Fed into restarting quantitative easing to fund his spending and institute an “it’s our dollar, but your problem” policy that would in effect kill the currency reserve as the world loses trust in the greenback.
Lastly, I have been watching the current flooding in the U.S. food basket with amazed horror, as we witness the destruction of stored grain supplies and the livelihood of many American farmers. Considering that winter is not yet over and that the flood plains will not reach peak for some time, I would not take this inflationary disaster lightly. It’s another reason to hedge for uncertainty and stagflation.
AMERICAS SILVER (USA.TO)
PAST PICKS: APRIL 3, 2018
- Then: $86.95
- Now: $97.18
- Return: 12%
- Total return: 13%
FISRT MAJESTIC SILVER (FR.TO)
- Then: $7.87
- Now: $8.09
- Return: 3%
- Total return: 3%
HIVE BLOCKCHAIN (HIVE.V)
- Then: $1.03
- Now: $0.76
- Return: -42%
- Total return: -42%
Total return average: -9%