“Oh Beautiful for Heroes Proved…”

 

As we anticipate the upcoming Memorial Day weekend—I hope we all take some time to reflect on the men and women who are serving or have served in the military. Every one of them deserves our honor and heartfelt thanks for their service and sacrifice. We owe them so much.

At PM Capital, we are proud to be recognized as a company that is committed to standing with and supporting our Veterans and those serving in the U.S. Armed Forces.

I recently had the privilege of spending time with Jason Redman, a retired Navy SEAL who served valiantly for 21 years, nearly losing his life for our country. He shared some great insights about leadership and life that resonated with me and gave me a renewed focus on what it means to lead with integrity and an others-centered heart. (FULL Video Below)

Our military men and women recognize the value of expending energy for someone else. They wake up every day with that in mind. If they didn’t, they could not serve.

They are motivated by what matters. They weave discipline and hard work into the tapestry of their lives.

Jason talks about his “new 100%” after being wounded in battle and undergoing multiple surgeries. There is no hint in his voice or his actions that somehow he gets to phone it in from now on. That somehow when his military service ended, so too did his responsibility to others and his commitment to make a difference. That when he was forced to lay in a hospital bed, he could lay down his drive and determination to fight for what is right, what is good, what is important. Rather, in his toughest battle, he found his “new 100%.” He stepped it up even more. What a great life lesson.

It’s no wonder that many great business leaders have a military background. Fred Smith, CEO of FedEx, served in the U.S. Marines. Jim Skinner, former CEO of Walgreens and McDonald’s and Lowell McAdam, CEO of Verizon, served in the U.S. Navy. Alex Gorsky, CEO of Johnson and Johnson, served in the U.S. Army as did Louisa Long Jaffe, co-founder of Technical and Project Engineering and Phyllis Newhouse, founder of Xtreme Solutions.

These veterans, and countless more, have excelled in business and life due in large part to the skills mastered in the military. They lead. They assess risk and manage a crisis. They are laser-focused on what’s important. They know that hard work and discipline matters. That effort should be recognized and results rewarded. That love of country and others shapes one’s character and actions in ways that leave a lasting legacy long after their final breath. So they run businesses, hold political office, start nonprofits, give motivational talks, pastor congregations, lead universities, author books and do whatever they can, for as long as they can, to make a difference in our lives and our country.

So on this Memorial Day, let’s all stop for a few moments to give thanks for those that serve and have served. Let’s give thanks for our freedom and for those who fight for it. And, let’s never forget all those who died defending it.

jason Redman Interview YouTube play

The Rise of Cryptocurrencies

crypticurrencies

The rise of cryptocurrencies

More and more investors are asking me about Bitcoin. And Litecoin. And Ethereum. And a myriad of other new kinds of “digital money” that have entered the global financial market in the last few years. The conversation typically goes something like “Scott, I’m hearing more and more about bitcoin and am hoping you can tell me if I need to understand it, invest in it, or just chalk it up as a 21st century unicorn?”

It reminds me of a conversation I had with my sons about 12 years ago. At the time, they were in high school and were trying to explain to me this trendy exclusive networking website that college students were using and high school kids were trying to gain access to but couldn’t without a college email address. I thought at the time it was just a cute way for kids to exert their independence and create their own space, as I couldn’t come up with any financial model I had studied in b-school that would enable it to make a profit. Anyone heard of Facebook?

Cryptocurrencies cannot be ignored.

With rising global financial and geopolitical uncertainty, escalating global currency disorders, and increasing distrust of governments around the world, I believe that the cryptocurrency market will continue to evolve. As investors and consumers we should understand these digital currencies, the inherent risks associated with them and how they may affect our financial future.

What is this thing called bitcoin?

Right now bitcoin is the most popular of hundreds of cryptocurrencies—sometimes referred to as crypto money or crypto assets. Think of it as a form of digital money. Or virtual currency. Or a virtual commodity.

Bitcoins are essentially a sequence of encrypted “bits” transmitted over a network by a process called cryptography. Hence the names bitcoin and cryptocurrency. And just like we have multiple fiat currencies like the US dollar, the British pound or the Chinese Yuan, we now have multiple cryptocurrencies like bitcoin, litecoin, and ethereum. And bitcoin to cryptocurrencies is like the US dollar to fiat currencies. It’s the reserve currency of the crypto-world.

What’s the point of creating this cyber money?

Bitcoin was created in 2009 by a mysterious developer named Satoshi Nakmoto as an electronic payment system devoid of any central authority or high transaction fees. The most important point is that it is completely DECENTRALIZED unlike centralized banking and economic systems such as the Federal Reserve System and other central banks around the world.

Alexander Hamilton (who led the fight to establish the first central bank in the US) is probably rolling over in his grave.

I can guarantee you that if we were eavesdropping on conversations behind closed doors, central banks and governments and others who tout centralization as the linchpin of monetary policy are all taking this cyber-phenomenon very seriously and are scrambling to figure out what to do, how to regulate, how to control, how to tax, and how to stop uncontrolled movement of it across borders. It is becoming a head-on challenge to central banks’ historical control and influence over the monetary systems and policies around the world.

What is the technology powering it?

All bitcoin transactions are kept track of in something called “blockchain”–a technology that is like one big transaction log/ledger where all involved in a transaction can see all the other transactions in the network. It’s a peer-to-peer network keeping a consensus about accounts and balances, but the actual identities of the people making the transactions are anonymous. The ‘gatekeepers’ that keep track and verify everything are called miners and they use computer power from all over the world to run these self-contained cryptocurrency systems.

While it is hard for me to see the intrinsic value in bitcoin as money for the future, I do see the value of the technology platform. So do major tech companies like Microsoft and Amazon–they are making significant investments in blockchain technology. Some believe it could be the future for financial transactions, so you know that venture capital firms and others will find avenues to invest in this market if there is value in its technology.

What does it take to get Bitcoin?

The easiest way now to get them is to buy them. But first you get an electronic “wallet”— either on your mobile device or your desktop.   But buyer beware! Countries differ on the legality of cryptocurrencies. In Japan—the use of this “currency” is legal. But in Bangladesh, you go to jail. As of 2014 in the US, the I.R.S. said it would treat all virtual currencies as “property” not currency.

There are bitcoin exchanges where you can purchase the virtual currency, and some are buying it for investment purposes rather than a means of paying for goods and services. But because it is still in its development phase and doesn’t have a long track record or credibility, it is a very high-risk investment to make.

What could happen?

Forbes recently wrote a good piece on the future of bitcoin. It noted that while we are far off from any government declaring it a preferred form of currency, we are already seeing some places accepting it as an alternative means of payment.

But will it become a widely accepted method of payment or an alternative investment to other asset classes?

Enthusiasts hope so, but many economists say no way.

The issue with all surrogate currencies that have tried to replace accepted currencies is that they are not backed by anything other than the market determination of their value. There is no intrinsic value in them. There is no government declaring their value. And, digital currencies are not a commodity (like gold) that has stood the test of time and proven to be a solid investment.

What are the risks?

Regulators all around the world will figure out how to regulate this market. They have no other option because as a competitor to a government currency, the cryptocurrencies can be used on the black market for illegal activities and tax evasion. As governments and regulatory bodies scramble to enact rules, there will be varying laws and regulations that without clear global uniformity (which will be impossible to attain in this era of political instability and unrest) will significantly challenge the longevity and liquidity of this asset class. Any government could ban the use of or restrict the sale of these crypto assets at any time.

Further, bitcoin exchanges and, in fact, the entire cryptocurrency market, is digital, and at significant risk of hackers, scammers, malware and meltdowns like we have seen in recent years with other seemingly impenetrable systems getting hacked or shutdown, operationally paralyzing companies and citizens around the globe. This actually happened to the cryptomarket several years ago in Japan when a Bitcoin exchange (Mt. Gox) got hacked and had to close down after millions of dollars worth of bitcoin were stolen.

And, of course, important to investors, bitcoin cannot be included in any tax-advantaged retirement accounts nor are they insured by any federal or government program like your bank account is with the FDIC.

What should you do?

Security and stability around our investments and our currencies, whether it’s fiat or crypto is important and savvy investors make every effort to stay diversified to keep their purchasing power strong and at less risk for being significantly devalued.

So we need to be making very smart decisions about our portfolios.

We are early in the crypto game and it is highly speculative to think that it will become the next form of money or that it will be a sustainable and strong investment.

I do know is that gold has been around longer than all other forms of money. From cows to cash to credit cards and now potentially crypto, the one constant throughout the history of money, is gold.

I am going to keep investing in a physical commodity that is mined and minted in reality, not just virtually. And by reputable companies and government mints, not by a group of “people” whose identities are mysterious.

I am not going to jump on the bitcoin bandwagon. At least not until some of the significant risks and uncertainties play out and there are signs of stability, longevity, uniformity and liquidity.

But then again, I thought Facebook was going to be short lived.

Gold’s Here to Stay When Cash Goes Away

Gold Bars

There is a global war on cash. Governments and central banks around the world would like to eliminate it and move exclusively to electronic money, making it easier to track our transactions. Granted, many of us no longer buy things with cash. We have already become a less-cash society. We use online banking, Paypal, Apple Pay, and other digital wallets. But how would you feel to not have a single dollar bill in your possession? To not be able to go to an ATM and get a few bucks to spend?

 Cashless transactions are growing exponentially around the globe—more than doubling in the last five years. Countries are beginning to talk about eliminate cash altogether. Last year the largest bank in Norway proposed a ban on cash to cut down on black market sales and crimes. South Korea has stated that it wants to eliminate paper money by 2020. Greece requires citizens to report all cash over a certain amount—even if held in a personal safe or “under the mattress.” And right here in the U.S. discussions have begun about eliminating higher denomination bills.

So what is the big deal whether cash is dethroned or banished altogether? Well—how much do you want the government to know about EVERY transaction and EVERY penny that you have worked so hard to accumulate? Do you want to be able to keep some for that rainy day? Do you want to lose the freedom to store wealth “outside the system?” Do you want your private transactions to become public?

These issues are becoming a big concern to people around the globe. Many are responding by acquiring physical gold and silver as a safe haven against the huge systemic risk of electronic money. Precious metals provide a significant hedge against a likely cyber attack or cyber crime, which we are witnessing more and more. Protecting wealth, especially in a less-cash or cashless society, is extremely important to individuals and savers. As countries, including the U.S. exert more and more control over private income, holding gold and silver as part of a diversified portfolio is the right way to protect your wealth and savings.

When you can’t get to your cash and a crisis occurs, you will quickly realize how important the privilege is of holding something that is valuable and liquid. It’s a privilege that we have had since the founding of our country. When the government decides that they want to charge you to put your money in the bank, but then you no longer have the capability to take the money out, you are going to wish you had a monetary asset like gold or silver for the crisis at hand. The real possibility of this is leading savvy investors to make sure they are diversified in their financial portfolios, with at least 10-20% in precious metals. A cashless society is coming. Protect yourself now with gold and silver in your possession.

The Bear Market Is Coming

THE BEAR MARKET IS COMING. ARE YOU READY?

Bloomberg made it clear this past week that the extreme volatility the new administration has ushered in has yet to spill over into the stock market. But it will. There is always a high probability that investors will experience a bear market during the tenure of a president, and when you add the extreme uncertainty of this current administration’s policies and plans, the Bloomberg writer is urging people to get prepared, even if they are enjoying the stock market at near record highs. It is not sustainable. And the bear is bearing down.

This chart shows that since World War II there have been 15 bear markets in the S&P 500 and when then hit they lasted a year and stocks fell, on average, 30%!

The writer of the Bloomberg article stressed that

“History can provide a blueprint for the way things usually play out, but it’s worth remembering that every cycle is different. The pendulum swing from euphoria to panic can play out over many years — as it did from 2000 to 2002 — or it can happen in an instant — as it did in 1987. All investors need to have a backup plan, because the markets rarely cooperate and unfold exactly as you wish. People are repeatedly shocked by what happens in the markets because they don’t plan ahead.”

Are you prepared for the next Bear Market? Have you planned ahead? It can take a lot of time to recover—years in some cases. After the hit to the market in 2007, it took over 4 years to make your money back that was lost. After the 2000-2002 bear market, it took almost 6 years! So you need to prepare now with a diversified portfolio to weather the coming stock downturn. You “need to have other asset classes to keep you afloat and sane during these severe market downturns.” Hard assets, like precious metals, are a great hedge and safe haven for just such times. That is why you see many savvy investors diversifying and adding precious metals to their holdings right now—so they can maintain their wealth even in uncertain and volatile financial times.
Referenced article:

https://www.bloomberg.com/view/articles/2017-02-06/be-prepared-for-a-bear-market

Yellen Vs Trump – A Closely Watched Match

It’s no secret that President Trump doesn’t like Janet Yellen, Federal Reserve Board of Governors Chairwoman who was nominated by Obama in 2013 and began her 4-year term in 2014. They have been at odds since his campaign days. But it would be monumental if he fired her, as that almost never happens since the Federal Reserve is supposed to be independent. But who knows with Trump. Anything could happen. Her term ends next year, at which time Trump will appoint a new chair and vice chair. Probably someone more in line with his position on weakening the dollar and loosening the strict regulatory and risk-taking environment to give smaller banks more room to maneuver and conduct business and organizations more ability to get loans to run and expand their businesses.

Last fall Trump stated that interest rates are “staying at zero because (Yellen is) obviously political and doing what Obama wants her to do. … The people that were hurt the worst are people that saved their money all their lives and thought they would live off their interest, and those people are getting just absolutely creamed. The ones that did it right. They saved their money and cut down on their mortgages and did all the things they did, everything exactly right, and now they are getting practically zero interest on the money they worked so hard for over 40 years.”

Yellen testified on Feb 14-15 on the economy and monetary policy before the House Financial Services Committee and the market saw signals of an interest rate hike, which The Fed has already forecast could be as many as three this year. As we all know, rates have been kept near zero for 8 years while we printed trillions of dollars to stimulate the economy and keep people’s purchasing power intact. IN her speech, Yellen sent a strong message about a rate hike when she said– “As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. “
What does Yellen actually do and why does it matter? As with all Chairs, she is responsible for guiding the central bank’s monetary policy by leading the board and the FOMC (Federal Open Market Committee) to set and execute policy. Because of such importance of this role, Yellen’s words can sway markets, which is why her meetings are all monitored very closely.

Economists spend lots of time talking about the balance between inflationary pressures and rate increases and their impact on financial markets—too many increases too fast could cause a downturn in the trajectory of the stock market because companies’ borrowing costs go up, or even worse, cause a recession. Too few could cause surging inflation. But what about the everyday person like you and me? How does a rate increase affect us day to day? Want to buy a home? Mortgages rates will be going up, so less of us will be buying houses or refinancing our current mortgages. Trying to get out of your credit card debt? Your annual percentage rate (A.P.R.) could uptick a few points—causing you to pay more interest on what you owe, leaving less available money for other expenses. Student Loans? It will cost more to send your kids to college because the government’s student loan rates will rise as the interest rate rises. Thinking about a new car? Better buy it now while interest rates are still favorable. Renting your housing now? If rates rise, that means landlords will pass their increased costs along to renters. As you can see, all sorts of expenses can uptick as rates rise, leaving people with less money to spend, invest, save.

Savvy investors are watching closely the anticipated interest rate hikes because they know how volatile the stock market is when this happens, and they also know that there is a fine line between raising interest rates and keeping the economy growing. When rates go up, less money flows into the economy and new job creation can be stifled and another recession could occur. Add to this the uncertainty of Trump’s policies, the instability of the global financial markets, and you see more investors diversifying their portfolios to make sure they are not relying solely on stock investments as their ticket to retirement. Yellen affirmed this troubling uncertainty in her speech.  “As always, considerable uncertainty attends the economic outlook. Among the sources of uncertainty are possible changes in U.S. fiscal and other policies, the future path of productivity growth, and developments abroad.”

Many investors are making sure that they have a portion of their portfolios in hard assets—like gold and silver—as a hedge against what The Fed may do and how the stock market may react. They also see precious metals as a way to save and secure their financial future.

So, you can see that it’s important to watch closely to what Janet Yellen says and how President Trump responds, but also to make sure that no matter what happens, you are prepared with a diversified portfolio that can weather the changing financial landscape that lies ahead.

http://www.cnbc.com/2017/02/13/janet-yellen-is-facing-a-whole-new-world-and-it-starts-wednesday.html

https://www.thebalance.com/janet-yellen-3305503

http://www.cnbc.com/2017/02/13/the-associated-press-trump-on-yellens-fed-in-his-own-words-a-lot-of-sour-notes.html

https:/www.nytimes.com/2016/12/14/business/economy/how-the-feds-interest-rate-increase-can-affect-you.html

Druckenmiller Is Buying Gold

Stanley Druckenmiller

GOLD IS ASCENDING AND HEDGE-FUND TITAN DRUCKENMILLER IS BUYING

Stanley Druckenmiller, well-known hedge fund titan is buying gold and other big investors are following suit. Right now he’s bullish on metals and he is seizing the opportunity to ride the ascending gold prices and make millions. Gold prices have been rising in the first six weeks of 2017—6% in the first week of February alone.

In a Blooomberg interview this week Druckenmiller said he has been buying since December when both U.S. Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi warned that economic growth could be headed for disaster. The billionaire knows something is afoot in the financial markets as they react to increasing geopolitical uncertainty in Europe and significant pressure on the US dollar. And he sees what many other investors see—a need to hedge what is happening and hold hard assets as a safe haven against the global tumult.

Expected currency devaluations, a Eurozone that is destabilizing, political elections that are drastically changing the legislative landscape, increasing global tensions, staggering national and global debt and uncertainly with President Trump’s agenda are pushing investors to flock to gold. On top of those explosive issues, China is facing a real estate bubble and crash that will make the one in the U.S. look small. Japan, among other major countries, is on an unsustainable trajectory and is headed for a full-blown solvency crisis. Greece is on its 4th bailout. Savvy investors use commodities—hard assets—to hedge their bets and diversify their portfolios, especially in times of such confusion and volatility. Like Druckenmiller, they are buying the yellow metal. Gold.

http://www.marketwatch.com/story/latest-gold-rally-stretches-to-fifth-day-2017-02-08?siteid=rss&rss=1

https://dailyreckoning.com/use-this-gold-chart-to-bank-20-gains/

http://www.zerohedge.com/news/2017-02-08/druckenmiller-reverses-buying-gold-again

 

Protectionism

PROTECTIONISM. DOES IT MATTER?

America First. President Trump campaigned on it and stressed it in his Inaugural Address:

“We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength.”

On his first week in office, he acted upon his protectionist promise by withdrawing the US from the Trans-Pacific Partnership, a complex multinational trade agreement that had been negotiated by Obama, sending geopolitical shock waves across the globe. Then he appointed Peter Navarro as his trade advisor further solidifying his shift to a protectionist stance for America. Mr. Navarro is an outspoken critic of China’s trade policies, calling them a

“conquest of the world’s export markets, which has vaporized literally millions of manufacturing jobs and driven down wages.”

Protecting American jobs and putting America first sounds like a great position to take. But what really is protectionism and how will it impact the economy? Even more importantly, how will it affect you?

Protectionism is a position an administration takes with the intent to protect local businesses and jobs from foreign competitors. It involves government actions and policies that restrict or restrain international trade, and usually includes tariffs and quotas on imports and subsidies and tax cuts to domestic businesses. The primary objective of protectionism is to make local businesses or industries more competitive by increasing the price or restricting the quantity of imports entering the country.

The doctrine of protectionism contrasts with the doctrine of free trade, where governments reduce as much as possible the barriers to trade. There is significant debate surrounding the merits of protectionism vs. free trade. Critics argue that over the long term, protectionism can hurt the people it is intended to protect so free trade is the better alternative to it. Advocates of protectionism argue that the policies provide competitive advantages and job opportunities. President Lincoln and Theodore Roosevelt were proponents of protectionism. After World War II, most administrations, including Obama, were free-trade advocates, signing a number of trade agreements with other major countries including the North American Free Trade Agreement (NAFTA), which was negotiated by President George H.W. Bush pushed through Congress by President Clinton. President Trump has vowed to renegotiate NAFTA, or withdraw from it if necessary to protect America.

So what is the financial world saying about this major shift to protectionism? Economists and investors are still trying to analyze and gauge what the political and economic fallout will be of Trump moving to a substantially new trade position. In the most recent Bank of America Merrill Lynch Fund Managers Survey, there is strong consensus that it is a tail risk, i.e. a rare event that could substantially move the market and therefore needs to be hedged against. As you see from the chart below, protectionism is the biggest tail risk.

When asked what is the biggest factor that will cause an end to the longer than normal run of the bull market, protectionism was definitively the top reason, with higher interest rates (which are coming according to Janet Yellen, Federal Reserve Chair) a close second:

Importantly, when asked what assets will perform well if the world moves towards protectionism, which is already happening, gold was at the top of the list:

It is clear that major fund managers and others who are watching carefully what the current administration is going to do on trade, are anticipating that it will have a negative impact on the global economy and in turn, a negative impact on the US economy. As the chart above suggests, it will particularly affect the stock market, which is at the bottom of the list of assets that would perform well in this coming trade environment. Therefore hedging against what is likely to occur is a smart strategy for investors, and precious metals should be at the top of your list of assets to consider, as it is at the top of the list for those considered experts in managing people’s money.

Article used in research:

https://www.theatlantic.com/business/archive/2017/01/trumps-protectionisteconomic-plan-is-nothing-new/512585/

http://www.reuters.com/article/us-usa-economy-poll-idUSKBN1521OL

http://www.cnbc.com/2017/01/30/trumps-protectionism-biggest-threat-to-useconomys-growth-cnbc-fed-survey-respondents-say.html

http://theweek.com/articles/671332/political-brilliance-donald-trumpsprotectionism

http://www.politico.com/magazine/story/2017/02/peter-navarro-trump-tradechina-214772

https://hbr.org/2016/04/americas-uneasy-history-with-free-trade

https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html

Silver Shines Bright

Silver, the white precious metal, is shining bright even as many other paper investments are losing their luster.  All precious metals are a safe haven against equity market and geopolitical concerns but silver, in particular, is enjoying strong momentum due to its continued increase in demand by investors and manufacturers worldwide.  “Even amid concerns that the Federal Reserve could hike interest rates in March, silver appears poised for more near-term upside,” according to ETF Trends.

“Along with rallying with its golden counterpart as a safe store of wealth, silver bullion may be strengthening on increased industrial demand while global economies rebound.”

Silver enjoys a unique position among precious metals because of the industrial demand for it.  More and more silver is being used in technology, electrical, and medical applications because it is a great thermal and electrical conductor and has antibacterial properties, making it an extremely important metal in operating rooms across the globe.   Fox Business recently noted

“if markets take a breather, silver could provide portfolios with some insulation against a decline. And if industrial production improves because of optimism over infrastructure spending or tax reform, then silver could still head higher, regardless of the direction of equities.”

Like gold, silver has been considered a precious element for thousands of years and has been a trading metal in ancient and modern cultures. Today it still holds intrinsic value, and therefore investors are quickly adding this secure and affordable hard asset to their portfolios. “A combination of higher inflation, a weakening US dollar (in first half of year) and improving manufacturing growth is likely to see silver prices trade higher to US$21/oz in 2017,” said Nitesh Shah, Commodity Strategist at ETF Securities. ETF Trends also stressed that due to its demand and fundamentals, silver is the most attractive metal right now for investment purposes.