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What to buy?

Recently a client wrote: “In 2004, I started buying gold and silver because of increasing US debt, thinking that inflation would come about and the dollar would suffer.  Now David Stockman (former Budget Director under Ronald Reagan) forecasts imminent doom for the stock and the bond markets.  And, I agree that it will most likely happen at some point.  I skim through his articles from time to time but have never read anything he thinks makes sense to have money invested in. Have you?”

As I remember, Stockman has only said to get out of stocks.  I don’t remember him saying to buy anything specific, which is interesting.  If you’re “out of stocks,” does that mean be in cash, which the world’s central banks have proven will create to buy anything with?  I remember Stockman writing about all the stocks, ETFs and bonds that central banks have bought.

Basically, he’s saying that central banks cannot staunch the bleeding once the public moves for the exit.  So, what to buy?

I remain active in at CMI because it would be like leaving a play before the climactic scene.  I believe that that there will be a major move into gold and silver, brought on by either a bear market in stocks and bonds or a realization that our national debt will continue to balloon and be financed by printing press money.

I don’t know if the selling starts next week or two years from now, but I will not be surprised when it starts.  I have my metals position.  Still, Stockman’s recent issue makes me want to consider a self-sufficient farm in Idaho.

What I find most interesting is Stockman’s position that the proposed tax cut will not stimulate economic activity because it will not go to the middle class, which would spend the money.  I remember also all his declarations that many of the proposed tax changes will not pass Congress because of the removal of deductions for state taxes, charitable contributions and mortgage interest.

Maybe when it becomes evident that there will be no meaningful tax changes, it will also become evident that the rise to $41 – $42 trillion in debt will be financed by freshly created money.  With all the additional spending that Trump wants — such as infrastructure, military, border wall — eight years under him could easily produce a $50 trillion national debt.  Then, will stocks collapse and the metals soar?

With stocks hitting new highs almost daily, I keep remembering the adage: Buy the rumors, sell on the news.  Maybe this stock market will start down with the realization that the tax reform will be but a fraction of what was hoped for.

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