Post
by pmward » Sat May 25, 2019 8:38 am
I personally think the only real risk in gold ETF's in a crisis is that the holding company decides to cash you out and hold the gold for themselves. At the very least, they have to cash you out for fair value, the SEC will make sure of this in the very least. I think ETF's are safe. But I still have a number in mind I want to build up to and hold physical just because I think there is value in having some of your assets in physical form. The gold I hold physical I plan on holding for life and never selling, except in a crisis scenario. Over a lifetime hold, the cost is nil.
As for the next 10 years... here's my speculative guess of a base case scenario:
Economy: I think we start the decade off struggling with deflationary forces caused by corporate debt deleveraging. I predict there will be at least 1 major company that gets bailed out or goes bankrupt in this time. This won't be as bad as 2008, but will still be a decent recession. The Fed lowers rates back to 0 and it does all of squat, so they have to start the QE machine back up again. In line with that MMT gets a test run in congress since the Fed is not able to reflate the economy with their limited firepower. We get some form of tax cuts, infrastructure spending, and/or helicopter money in unison with the QE (i.e. MMT the legal way here in the U.S.) and that successfully reflates the economy and gets things moving again. The problem being, that while it works to reflate the economy in the next recession, politicians take that as a green light to start abusing it after and we get back up into mid to upper single digit inflation by decades end. I also think the odds of war in the next decade are also high, just by looking back at the history of growing nationalism and populism tending to lead to war. Wars tend to be inflationary in the economy. This makes it hard for the Fed to fight the inflation, as they have to be easy for the sake of funding the war efforts.
Stocks: Going to be a volatile decade. At the end of the decade, in real inflation adjusted returns, this decade will return much lower than average. I think value stocks wind up out performing growth in the 2020's as bottom line growth starts to become scarce and valuations start to matter again for safety reasons. I also think we will have some antitrust proceedings against some of the large growth tech companies early to mid-2020s and that will put a wet blanket on growth temporarily. Late 2020s - 2030's will be gangbusters for growth stocks however as the deflationary forces provided by the boomers retiring will have finally run its course, millennials will finally be fully into the work force and spending/investing at a large clip, AI technology (as well as some other yet to be thought up technology that comes in the next 10 years) starts to finally work its way into our daily lives and prove profitable, the potential breakup spinoff companies from any tech antitrust proceedings start getting their footing and start growing at a faster clip than they did when they were a part of the large monolith, and of course an uptick in inflation helps over leveraged "growth" companies to delever and further invest in growth that finally starts hitting the bottom line in the late 2020's to early 2030's (and that means 2030's are going to be a monster decade for stocks obviously).
Bonds: Going to be a volatile decade here as well. We are going to rally really hard over the next couple of years while the entire globe struggles with a lot of disinflationary forces. I think we have potential to see a "blowoff top" in bonds to end the long bull run with a bang. As such, bonds will be the best returning asset the first couple of years of the decade. However, we will reach the turning point where inflation will pick up, yields will finally rise, and the long awaited bear market in bonds will finally begin... of course, this will start at the very moment when the markets are most bullish on bonds.
Gold: Going to move sideways in the same boring bullish wedge formation it's been in since 2013. Somewhere around 2020 - 2022 it will finally break out above that strong 1350-1375ish resistance level, and when it breaks out it is going to break out like it stole something. We will start the next official bull market in gold, and by the end of the decade gold will be the best performer of the next 10 years overall. Cryptos might also have a monstrous decade; that is the ones that don't face plant and actually become a legit long term asset. If this happens, cryptos might prove to be a potential digital gold replacement.
TLDR: decade starts with bonds rallying hard, stocks and gold neutral to slightly up. Decade ends with gold out performing, bonds finally in the long awaited bear market, and stocks in real inflation adjusted terms averaging below historic return rates (probably something like 2-4% CAGR when it's all said and done). The PP, of course, continues to chug along and averages it's dependable 3-5% real over the decade.