I had a conversation with an old friend of mine a few years ago where she continually asked – “but where do I put my money??” This was in response to looking around at the system and evaluating it had left her with more questions than answers. When stocks are ridiculously overvalued, what do you do?
This is a question I asked myself hundreds of times in 2019 when I read about the repo market blow up. And – it is true for a lot of people today almost 3 years later. My wife was 3 months pregnant, my mom was in the last weeks of her life, and I really went down some dark paths as to how to protect my family as I understood what the repo market melting meant. My mind was racing 24/7, unable to stop obsessing. I might have put on 20 pounds in this one month with all of the stress I was under. I sure as hell didn’t sleep much of that month of my life. It was pure fight or flight for almost an entire month.
That’s the setup for all of the mental gymnastics you see below. How I came to the best solution, for me, and what I’m seeing now.
At the time the repo market blew up, I had my house and two rental properties (one property is two units, the other is a 5BR house). One of them wasn’t renting out at the time, and the other I was losing money on monthly – I used to live there years ago and could not sell it without taking a bath, so decided to rent. With having 3 properties, all I kept thinking about was “The Big Short” and wondered how to more or less hedge my houses. I had some money in the stock market, but most of what I have I had bought with my paychecks since 2019. I make a decent living in IT, and with that, could rapidly buy up. I’ve never been one to have much cash sitting around. It’s always deployed into something. Even now, all of my cash is in the stock market getting hammered daily. I can rebuild that in perhaps a year of my income, so to me the risk of NOT being in the market shorting the dollar is greater than pulling everything out and watching everything go vertical at that moment. To each their own, but I can afford these losses, for now. This is not indefinite, but it’s how I’m playing it based on MY unique situation.
This is the setup for where I am today. Every person has a different setup, and with that, you cannot just take what I did as a blueprint. Nor should you.
WHY did I look at gold and silver in 2019? I’ll get to that below, but let’s look at what I observed in fall of 2019.
This was a few months before March 2020 when everything blew up. In January, everyone was talking how the market was overextended. COVID and lockdowns more or less were catalysts to pop what was happening.
Catalysts….this is a recurring theme I have seen in investing in my short time. Conditions are there, and something sparks a match and up in flames it goes. Everyone knows something is going to happen, but doesn’t, until this catalyst pushes over dominoes.
Below, I wanted to take a look at all of the different things you can put your money in, and why I came to my conclusions when I did. My “hypothesis” was put on snooze for 2 years as QE started hitting the system and blowing up the everything balloons. This “money printing”, if you will, then led to the tune of perhaps $6T USD pumped into the system. It was perhaps even more. Estimates were that 40% of all money, EVER created, was created in that 2 year window. Then you think about the Euros, Yen, and all other currencies that printed to oblivion. MMT on steroids.
As you recall, gold and silver shot up – but then August 2020, things started going downhill. People rotated out of “risk off” into “risk on” as interest rates were pushed lower. Some stocks went 5x from the bottom of 2020 to peak.
I missed all of that.
Why? I recall a debate between Peter Schiff and Harry Dent. You could make a proxy here for Dent and put Brent Johnson in his place – it was the same argument. Peter Schiff argued gold’s end destination was very high. Dent argued gold would first dip as the dollar got very strong, then gold would rip higher. Schiff put on a “fatality” when he said – “if the end game for both is that gold is going much higher, why take the risk that the dollar MAY go higher in the short term if you believe in the long term the destination is the same as mine?”
Ouch. This plays a lot into my thinking below.
So where do you put your money?
The main issue with stocks I have is that they are obviously businesses that borrow money to expand and grow. I felt there was going to be a problem with liquidity. I felt that “the big one” was coming, and with this, you would have a ton of companies with debt they cannot pay back with goods and services no one can buy. I had once read that 38% of S&P companies were “zombie” companies, and all it needed was a downturn in the economy for many of them to go insolvent. With PPP loans and forgiveness – I have no idea where this is today. But to me, the companies that make the staples may be around through this. The high flying tech or biotech stocks with a 100x P/E ratio I felt were at risk of collapse. Even moreso today.
Overall, IF a depression (of sorts) was coming, I had to consider not owning stocks in “regular” companies. Companies that sold widgets would sell less widgets. High inflation would have margins crushed. I saw all of this in July 2020 prior to QE really taking off – and this is happening now.
To me, the stock market is high risk at the moment. Most were thinking a pivot would happen like in 2018. I put out there that it may not happen this time. I wondered what would happen if the Fed ACTUALLY raised rates and cut the balance sheet as they said? That seems to be playing out right now. In it, I even discuss how the 10yr and mortgage rates are pretty much exactly where they are now. I did not CALL this like a fortune teller. I gamed out a scenario that no one was paying much attention to and just wondered how that would work out. It is scary accurate to where we are today.
To me, I would not own much in the stock market other than very large blue chip companies with zero debt and limit to those US companies that make staples. Think about how if a depression hit, people still need toilet paper, tooth paste, aspirin, and diapers.
This is an extension of the above where I asked if they may let it burn. If you are offering to sell debt at 3%, and inflation is 10%, it’s a tough pill to swallow to ask someone to put money into this vehicle to lock in losses. The only people who MIGHT buy this would be buying this because everything else is dog shit. Also, they might buy with the anticipation a year from now inflation may be 2% and people run back into bonds and with this, the value of the bond goes up.
I can tell you if there is a “hyperstagflation” event where inflation remains perhaps above 5-6% (official numbers, we know, aren’t as high as shadowstats) – then bonds eventually will have to come up. People will sell out of them to find something else of yield. Eventually, rates may go over the rate of inflation.
On the flip side, if this shock and awe with the fed raising rates and reducing their balance sheet is any indication of things to come, you could see complete demand destruction – and asset prices of everything drop. This would be due to mass layoffs of large companies getting their asses handed to them. These mass layoffs, coupled with lack of savings, could then lead to liquidation of homes – first by homeowners realizing they cannot afford a $4,000 payment with no savings, then by mass selling driving home prices into the gutter, then by banks foreclosing and selling at auctions for perhaps 30-50% of what the value was. This cannot be good for banking.
I wrote an article on this LONG before anyone was picking up on this – I pontificated that crypto was to the stock market as gold was to NUGT. It was a levered play on a stock market running up. I felt that at its root, it was worthless – but the investors had a very speculative nature to them. Most were very young and were trying to level up an investment just to afford a down payment on a house. I cannot blame them for chasing it.
At issue then is that a lot of the crypto world is also buying on leverage. We have clearly seen how that has gone with people getting liquidated. Furthermore, the big problem here is most crypto investors saw the 10x potential, but had virtually no clue about the underlying risk in the speculation. I did a video with Jim Forsythe at C4SM where I laid out that crypto was highly speculative beach front property and NOT digital gold as promised. I get a lot of heat for that, but I own that shit. If you are a SUCCESSFUL crypto owner, you got in early, speculated, and sold a lot of what you had at 20-50x and got out. It doesn’t mean what you invested in will change the world. It means hype drove the price up, you found bag holders, and you were smart enough to get out.
COULD this evolve into something? Perhaps. But the risk was too high for me to get involved with, as I am 46. To those of you who claim I don’t understand it, I have two master’s degrees (one of them in cybersecurity) and a bachelors in IT. I have worked in IT as a technical leader for some of the world’s largest companies. I can tell you how this stuff works at the bit and byte level. I think it is interesting. Which is why I then liked this technology enough to take an investment in Kinesis. More on that below, but I took the best parts of your crypto idea and merged that with a 5,000 year old asset class.
Given the above, I already had housing. What I wanted to do was to find a way to PRESERVE it. I will talk about gold and silver below, but the idea was that if this asset class was blowing up in a bubble, the time to buy is not now, but after the bubble bursts. During that time, I want to not lose what I have. I took advantage of refinancing at like 2.75% on my home, and refinanced a rental at 4%. I am set with these, and am looking to move the other rental, now significantly higher in paper value than I paid for it.
I can see a day where it is hard for people to afford rentals. Most definitely. What about the taxes on these? You have to mitigate these risks by having liquidity to cover a lot of these downturns AND to put money in an asset class that might perform well during a housing crisis. Meaning, if houses go down, the value of that asset might go up. More on that below.
That being said, I would not be buying houses to live in, at these prices, at these rates, right now. We are starting to see cracks in the market here in the US, but Canada, Hong Kong, and Australia are screwed when this really unwinds.
Land is more speculative, and the wife said she would divorce me if I bought some. I was late on this trade, and anything I really saw I didn’t like much – except one. One was 11 acres on a mountain – so there was slope on a lot of it. But, had a perfect flat area for perhaps half an acre with a gravel road to it to put an RV on it to get out of dodge. Lots of hunting there it seemed. High ground. Access to water with streams. Someday I might buy this when values of a lot of these things crash – IF they do.
I had also looked at these, but missed this trade. I will look into this IF there’s a massive crash in the next year or so. I have a RAM 1500, so I’m limited with the size I can buy. I am looking for one perhaps $5,000-$10,000 that I could use a few times a year or keep on a plot of secluded land to run to if needed. The wife liked the idea, but the cash didn’t materialize from some assets, at this time. So I will hit the snooze on this. I think many of you got in on this early, and I applaud you.
This is something I invested in heavily. I built a pantry in my basement and stocked it with about a year of food. I eventually bought a stand up freezer and buy locally for half pigs, quarter cows, etc. The local farmers aren’t hit by inflation nearly as badly as the giant producers. I probably have about 2 years of food here for the family. I bought a lot of this prior to any form of higher inflation – and a lot of the grains/beans/rice I have will last for 2+ years.
I took out half of my gold/silver miner investments in July 2020, accidentally. I ended up using a lot of this to build finished basement myself over a year and used some to then re-do one investment property I have from the ground up to then get rental cash from it. Maloney’s “wealth cycles” played a role in me taking profits and with this, I rotated them into the house I live in, and investment property. Both of those properties are valued massively higher, so I was successful in one element of my investment here – until the housing market starts going the other way, that is.
July 2021 I started getting nervous about energy. I had these freezers and refrigerators with meat, but what if they do rolling blackouts? Brownouts? What about price caps and shortages? I looked into a generator, and wanted to do a generac natural gas generator. I called them twice, no one ever called me back, and when I was looking up Generac, I saw an ad for solar. I had heard solar was too expensive.
I looked deeper and did the numbers. I then decided to get 2 Tesla Powerwalls with the 31 panels. I make 116% of the energy I need, and I sell it back to the grid. Only 6 months in operation, and I’m at the breakeven monthly price I would have been paying beforehand. Essentially, I got the powerwalls for free. What we are seeing now in Europe terrifies me, and I believe many of these people will be voted out. I believe inside of 6 months, we may see the sanctions on Russia dropped and a return to natural gas and coal – but with this, I believe there will be organic plans to get off of these items over 30 years rather than shut off your energy to then be reliant on an enemy to provide you nat gas.
Could we face rolling blackouts in the states? Look at California. The continuously have problems with EVs that charge overnight – and one nuke plant left. They are then forcing the temp of houses to 78 in some states, and California has blackouts coming.
With cash, the risk is debauchment of the currency further. This means you are losing perhaps 10-15% purchasing power per year. One reason I don’t hold cash is that reason. But right now, IF there’s a deflationary shock, cash MAY be the best game in town to scoop up items dirt cheap. One of my rentals I’m trying to sell I wish to stash some cash for a rainy day.
What I do NOT want to do with cash is hold it for 5 years as these people print currency into infinity. You can see in Europe, the solution to their high energy bills is not to fire up the coal or nuke plants – NO – it is to have governments commit they will print money to assist people. While you cannot print energy, apparently you can debauch the currency to infinity and NOT create inflation. Yeah.
You have someone like Brent doing his victory laps of 110 DXY, but this is largely due to the invasion of Ukraine by Russia. This has had the EUR/GBP/JPY all more or less at the mercy of Russia and with this, their currencies have gone in the toilet – which is the core reason the DXY is 110. How does one win that trade? You have to be adept with FX trading and you had to have sold the JPY/GBP/EUR short. Meaning, he would win by shorting the other currencies in that basket OR perhaps shorting gold. But he would have been blown out several times had he shorted gold in that pairing.
But even so – holding USD over the last 2 years? With this inflation, he could have perhaps lost 15-20% of the purchasing power. No doubt had he shorted the hell out of them he would have made loot.
But now, the question is, do the Greta politicians get voted out when it gets colder and you see your 2 year old freezing to death? My guess here is these currencies are very much oversold, and when the sanctions are dropped, there will be a massive snap back.
I’m taking PMs out of this. I had wanted to get involved in futures like lumber, corn, soy – and I will someday. But I didn’t know these markets well and futures sort of scare me with the crazy leverage some of this has. I am standing up a news site (in its early phase) that is like a Drudge Report – which will have a ton of the alt news I’ve been seeing on Twitter over the years that more or less forecasted everything going on. I believe that there will be a severe global recession coming, and with this, lots of deflationary forces. I am also not brave enough to short a lot of things other than the dollar – but I don’t short it how you might think. Answer in the next section.
But with commodities, I’m big on copper, battery metals, uranium, oil, nat gas, and a few others. I’m going to stay away from a lot of the food commodities as I don’t know a ton about them – but many of us saw this whole thing unfold with fertilizer, corn, soy – many months ago. I think the news service I have (in infancy here as a shell of what I’m looking at to do on the cheap) might be really good with driving micro cap macro investors like you and me towards some trades that can really be lopsided in our favor with getting in early. Mainstream media doesn’t cover most of this until weeks/months later, so getting our underground informed on events that no one is tracking could prove interesting.
This is a dangerous game that I would really only advise the pros to use. It’s one thing to experiment with puts here and there. In 2020 or so, my buddy (former IRS agent) was telling me he was looking at the books of GameStop and was telling me how overvalued it was. We both experimented with puts. I did ok – I doubled my money on a short term put. I got my double and walked away. A week or so later is when you saw everyone pile in and that’s when the WallStreet crowd piled in. My buddy had found a distressed company which is where you look to short.
Had we piled in, KNOWING that GME was going to go broke, we would have lost everything – assuming we didn’t put stops on and went to work, that is. The thing with shorting is that you have INFINITE losses. So when I was looking up how to hedge my real estate holdings, I then was considering the concept of finding ways to short the dollar. I figured if housing is in a depressed state, there’s a ton of layoffs, things would be distressed, and the dollar would be down. How I shorted the dollar is covered in the next section – I didn’t do it with FX leverage and shorting the dollar. I bought something I felt would go up if the dollar went down.
That being said, Burry shorted the housing market starting in 2005 and it wasn’t until YEARS later where he was rewarded. He was right, but he was early. UNTIL the market catches up to you, you can be very wrong a long time before you are very right. During that time, you may have lost opportunity costs of other things going up that you missed.
C’est la vie.
I saved this for last. Most of you reading this are gold and silver bugs. I STARTED this to short the dollar. How? If the dollar is debauched into nothing, like Weimar, then gold in dollar terms goes sky high. Most are conflating the DXY (the value of the USD relative to the EUR/JPY/GBP and others) to the dollar against assets. If the DXY goes up, in a sense the Euro/Yen/Pound are perhaps printing faster than we are. If the DXY goes down, the reverse is true. But, if you think about how gold was equal to $35 in 1971 and now close to $1700, you see gold shoot up in value, right? No. Gold didn’t change. It was the number of currency units needed to buy it that increased.
So if we were going to have a Lehman moment, perhaps the value of my houses could plummet by 50%. This is people losing jobs, selling what’s not nailed down – and you could see the US getting money bombers gassed up and ready to deploy money. This creates more money units, which causes monetary inflation.
Those who want to say, “but it doesn’t cause inflation” are not able to see things from a 50,000 ft view. When all of this money is borrowed into existence – it flows to things. For example, let’s say I bought a house at 6% for $300,000 and had a $3100 mortgage/tax payment. And a year ago rates were at 2.5%. When these rates went down, people cared about the $3100 payment. So with a $3100 payment, you could buy a $500,000 house. Or, someone like me refinances. I then have a $2,000 payment. AND – my home value goes to $480,000.
What then happens is I now have $1100 more every month to pump into the economy. If I bought my house at $300,000 and sold last week at $480,000 – that created $180,000 out of nothing I then pump back into the economy. New housing, stocks, etc.
But as rates go up, like now, the reverse is true. There’s no more refinancing. Zero. And, if you just bought your house for $480,000 and have a $3100 per month payment, you are locked into that for 30 years. Why? As rates go up, people care about the $3100 payment and with this, your $480,000 home eventually becomes worth $300,000. No new homes are being built.
No new money is being borrowed into existence. In fact, you see loans completing every day then and the amount of money in the system starts to decline. Rapidly. Credit seizes up. Layoffs begin. Houses then start to revert back to their pre-orgy levels. You start to see deep recession and money bombers coming to prevent total collapse.
This is where the dollar starts to lose its value as homes drop considerably in value, as gold then catches the fear bid and sees the full debauchery ahead.
Those who believe in the Dent/Milkshake theories also have gold as an end destination. Gold went from $35 in 1971 to $800 in 1980. It went from $250 in 2000 to $1900 in 2011. And here, it may go from $1047 in 2015 to $5000-$8000 in 2026.
So my goal was to short the dollar and create a hedge against the value of my properties declining. What DID happen the last two years was that I was taken to the woodshed in gold and silver, but my properties went hockey stick in value. With this, I’d like to sell one of them and buy a very unloved asset right now and hold some cash!!
Edit: Adding a note on Kinesis here. I trash cryptos above, but I am a firm believer and stakeholder in Kinesis Monetary System. It uses the concept of the ledger/blockchain, but instead of that empty parking spot with your name on it, the parking spot has a Rolls Royce sitting in it with your name on it. Whether it be Cache, Load, or KMS, having metals in your name which you can send to others, to me, is the 2.0 version of crypto that many will move to – as the stability of it is based on the underlying metals prices and not the “scarcity” of the token itself. While the blockchain tech is cool, what makes it life altering is not its existence of parking spaces, but the fact that you can fill those parking spaces with goods and services and you can send them to others instantly and removing banks from the transaction. The big drawback of using gold or silver is – “who is walking around with a satchel full of coins???”. Taking a gold ounce to the supermarket to get a loaf of bread is awkward when dealing with the concept of change. If you can spend a fraction of your gold coin for bread electronically, that changes it all. The gold/silver BACKING is what makes this money, much like this was money for a long time. And, if you are tired of the system, you can take out as little as 100g of gold or 200oz of silver.
The END destination to me is clearer to me than many. And with this, executing trades, getting cash, finding opportunities may be harder and harder. I have my gold/silver and gold/silver miners. I’m even on my metals, but down 50% or more on my mining stocks. At times, I took profits and rotated them into items that were appreciating in value. But now, my trading account looks like shit – because my hedge did its job. I bought this to hedge against my housing from falling apart. Instead, my housing went into orbit and my mining stocks are in the tank.
On paper, I have 6x gains in real estate relative to my loss in metals/miners, by ratio. Re-read that to understand why I’m not upset daily at metals going down. Meaning, for a math example, I gained $30,000 in equity in my 3 homes while I lost $5,000 in miners. But it’s all paper gains/losses until I sell something. I am selling one now, if I didn’t wait too long. But I didn’t sell any of my miners/metals in the last year, and I am expecting this to go the other way soon. I certainly did not expect the $6T in QE to do what it did.
Today, as a metals investor, you are probably down unless you are one of the guys who was buying silver at $4 in 2001 or so and didn’t sell at $50 for some reason. I believe those tides are changing. Here’s the setup now.
- QT happening in real time going to crush the stock market more. I heard some silly number like stocks are down 30%, but the Nasdaq is still at 48x PE (I’m butchering it, but you get the idea). I believe a fear play is coming for gold soon where a realization of brutal pain is coming and stocks begin to sell. In Feb 2020, we saw gold trade opposite stocks with a fear play. I see that coming back as most sellers have already sold. Perhaps it is hopium, but if you know a great deflation is coming, you are probably getting into cash first – but if you also know the money bombers are coming later, you are rotating some of your cash into gold.
- Real estate pains. Evergrande and China RE are really tumbling hard. This is a global slowdown then in RE. Bonds going to go bust. Fed selling MBS and RE rates will continue higher. Australia, Canada, HK all due for massive RE tumbles. Many markets in the US starting to crack. RE gonna hurt. This is the hedge moment I was waiting for. Fire sales may start soon.
- Crypto a dumpster fire. Tether and other stablecoins backed by “commercial paper” going to go the way of the dodo. This may have a lot of pain with cryptos ahead. You could see $3,000-$5,000 BTC in a total washout, but this may be what the crypto market needs to purge itself of the 10,000 shitcoins to then have 3-5 which end up as the Visa/Mastercard/Discover of the crypto world. I think BTC is shit but if it hits $3,000 I’m a spec buyer here for 2-4 coins and totally ok with that investment going to zero. It pissed people off when BTC was $65,000 and me telling them I’m a buyer at $3,000 – but I had zero emotion in that spec ponzi. IF it is $3,000 – it is a new beach front property opening up that I can throw “fuck it” money at to perhaps hit that million dollar lottery all of you talk about. If $3,000 goes to zero, ok. If it goes to a million, I’d be selling half at $6,000 to get my $3,000 back and let the rest run.
- Silver markets tightening as expected. With the paper selling and silver registered at the lowest levels I’ve seen ever – you even have Keith Weiner writing articles about how lease rates are going up showing how tight the market is. While there is obviously industrial uses for silver at 50%, you have a ravenous investment community gobbling up all it can. A fear play can then create a short squeeze of epic proportions. The markets look in for a tumble, but you have many investors who scooped up all loose retail silver. Registered dropping like a rock on the COMEX as overseas markets stand up physical markets with higher metals prices that creates an arb to take from paper sellers.
- BRICS stacking gold. You have West promoting money printing and MMT and the East seeming to promote sound money. I strongly feel MMT loses this battle. Again – physical markets coming online will gobble up all of the $1700 gold out there that people want to sell.
- Stock markets STILL wildly overvalued. Why are you putting money into this? Buying the dip?
- Bonds going to get murdered. If Fed isn’t buying, Japan isn’t buying, and China and BRICS are dumping – who is buying 3-4% bonds at 8% inflation (official)? It stands to reason we could see a 6% 10yr before all is said and done.
- Cash is trash. By holding cash, you guarantee a loss of spending power by at least 8%, and possibly 17% if you are looking at shadowstats. Still – cash might be king until a cliff drop happens.
- Staple stocks in trouble. Even when you wanted to buy stocks of companies that make things like toilet paper, you hear the largest TP company in Germany is insolvent due to high energy costs.
- Commodities and paper shorting. With a looming recession, paper sellers are out there pushing prices down with lack of buyers having a negative effect on pricing. At issue here is anticipation of something big coming. Why would you be in on copper if demand is going away? Those shorting oil are really ballsy given energy issues worldwide. Commodities aren’t the place to be unless you like the idea of holding paper shit derivatives that could melt. Look at nickel and the LME. “Demand destruction” right now appears to be a Fed policy, and who wants to fight the Fed?
- Shorting created meme stocks that took down a ton of people and hedge funds. IF you short, knowing things are going down – have tight stops, or better yet, find something to buy that acts like a counter balance to what you think is going down. When you can have infinite losses, this is not a good look when you go off to work and come back and find WallStreetBets turned the stock you shorted into a meme stock.
- Energy – it looks like we might be seeing energy prices continuously move up for 20 years to come. Solar panels/batteries now backed up 6 months, and liquidity to loan might be hard to get now. You might have missed this move.
If you look above, there are two clear answers at this point. Cash first, then PMs on a fear trade as stocks continue to slide with no end in sight. Could the Fed pivot next week? Sure. But I think what you are seeing is what I was talking about in my July piece. They have to sacrifice the markets to save the dollar – and they plan to build the markets back up later, but they need to defend the dollar now as a national security event.
September may bring a lot of pain to everyone, even those in cash who may see 10-25% YoY loss of spending power, depending on your country of origin.