As I write this, my thoughts and prayers are with those in California affected by the wildfires. The fires have not only claimed 23 lives, but they have also claimed the livelihood of thousands of others, turning tens of thousands of acres and thousands of homes and businesses to ash. The flames continue to rage and are threatening an estimated $65 billion in further damage if they cannot be stopped before they reach Napa or Santa Rosa.
The U.S. has also been battered by Hurricane Harvey and Hurricane Irma in recent months and I’m sure these won’t be the last catastrophic events to touch us. If these natural disasters continue with this frequency and intensity, I don’t know how the insurance companies will be able to keep up and fulfill their promises to restore belongings, homes and businesses. I wonder if they could take a page out of our government’s book and merely raise their “debt ceiling?”
Also no stranger to disaster as of late, Puerto Rico saw “apocalyptic” devastation from Hurricane Maria. Most tragically the territory saw loss of lives and housing, but its economy, which has already been struggling greatly, has also taken a serious hit.
And in just one interview, President Trump was able to devalue the Puerto Rican debt, suggesting we “wipe out” their debt. This prompted their bond price to crumble within seconds.
According to Doug Mills of The New York Times, “The Trump administration on Wednesdaywalked back the president’s apparent vow, suggesting that the island would have to solve its own fiscal woes despite the catastrophic damage it has endured from two powerful hurricanes.” This will surely make it harder for them to continue to borrow to help rebuild and restart their citizens’ lives and the island’s infrastructure.
In other global news, and a different type of disaster headed for the U.S., China is bypassing the Petrodollar. As the largest shareholder of U.S. debt, China is making a power move to dilute our Dollar to give themselves another boost as the new world reserve currency producer. This shows that they don’t care to lose all their investments in U.S. debt if it means they wield this status. China begins their annual Party Congress meetings today, which only happen twice every 10 years. You can bet that economic analysts across the globe will keep a close eye on the proceedings, searching for particular hints on their domestic economic policy initiatives. Be sure to keep a close watch on this. It just so happens to line up with the new launch of the Shanghai Exchange. This exchange allows other countries to trade oil for Yuan, ultimately allowing them to trade that Yuan for gold with this exchange. This has extreme implications on the physical side of gold and silver inventories. If Saudi Arabia converts just 10% of their oil exports into gold from the ShanghaiExchange, it would equate to nearly one year of global mining production! I need not expand further as to what that means for gold and silver price appreciations.
For some time now, China has been making moves with Saudi Arabia and Russia to bypass the Petrodollar and trade crude oil in Yuan, which is convertible into gold, thus taking away the need to hold other currency to trade or spend. What will this do to the Petrodollar and, in due course, the U.S. financial markets? Ultimately, the Petrodollar is what gives our capital markets liquidity and low interest rates — removing one is removing the other. When that happens, it will not be an overnight conversion but it will increase the borrowing costs for everyone — businesses, consumers and even government — as foundations of currency start to dry up.
This is yet another dart that is pointed right at our market bubble. Whether it is the one that pops it is still to be determined.
Many forces beyond our borders have the capability to strategically dismantle our capital markets. As fiduciary advisors we need to be very mindful of investing clients’ assets into markets that have screamed all-time highs nearly 50 times… so far this year. It is time to look for a hedge against these markets to protect what you have invested in them. Gold and silver have that ability and can help offset the market correction that is closing in on us all. It may be time to take some winners off the table and to start playing with house money.
We have developed an email that you can send out to your clients to get an understanding of whether this is something they seek. Their feedback may surprise you. We have had several advisors take this email, tailor it to their brand and send it out. The responses have been remarkable. When we sent out letters earlier this year stating that 1:6 of your clients are looking for this, we meant it. In today’s world where the only thing certain is disaster and taxes. Your clients are looking for ways to protect their hard earned wealth.
Give us a call today to learn more about our marketing and strategies. Gold and silver is another tool that makes you different from the “advisor down the road.” Letting your clients know you have a source for precious metal helps you fulfill your fiduciary role. People are searching for gold and silver. I am sure you have noticed all the of ads on TV and radio recently. Make sure they call YOU instead of the unknown and unregulated company down the street.