The premise of my best-selling book “Revenue Sourcing” is that an aspiring retiree needs to plan for one of two economic outcomes, either inflation followed by deflation or just deflation. As time has evolved, it has become increasingly apparent that we are seeing inflation soon to be followed by deflation.
In this week’s “Portfolio Watch”, I want to give you a preview as I think it’s important to understand how evolving money leads to economic seasons and what I believe are predictable investing conditions.
The reality is that inflation is a result of extremely loose, I would argue reckless, monetary policy.
Russia has now loosely tied its currency, the Ruble, to gold and requires any country that Russia deems to be unfriendly to use Rubles or gold when trading with Russia.
Despite the ever-so-slight rally in stocks this week, I view the primary stock market trend as down. Unless the market highs of the end of 2021 are exceeded, this will be the case.
Thomas Paine, a hero at the time of the Revolutionary War but later much maligned over his views said, “Money is money and paper currency is paper. All the invention of man cannot make them otherwise.”
Stocks rallied and gold fell last week. At this point, I don’t view these developments as trend-changing, rather as counter-trend rallies.
The Dow to Gold ratio continued to fall last week. As currency devaluation continues, this is an indicator that becomes more meaningful in my view.
We are living in an interesting time, to say the least. Stocks and bonds are in a bubble. Regardless of the reason given for the decline in stocks by the pundits, overvalued assets eventually return to their real value.
With the Russian invasion of Ukraine, the Federal Reserve may now slow the taper. As noted in an article this past week by Lance Roberts, it would not be the first time the Fed used geopolitical risk to reverse or soften monetary policy.