Swim Against the Stream
For many it may seem counter-intuitive to swim against the current, however in the world of investing, those who are brave enough to go against the flow can uncover a myriad of hidden wealth opportunities. Warren Buffett, the world-renown investment tycoon has built his entire 78.9-billion-dollar fortune by searching out once-in-a-lifetime buying opportunities where others have failed to take notice. Buffett has a long history of utilizing recessions and market crashes as an opportunity to invest in undervalued companies that have later transformed into literal diamonds in the rough.
Buffett has coined the widely known saying: “Be fearful when others are greedy, and greedy when others are fearful.” If you take a look at the current markets it is fairly obvious that they are absolutely overwrought with greed. Stocks are continuing to climb higher, and many are immensely overvalued.
What would Buffett do?
Given the man’s history of success, in the current market it would be wise to ask yourself, what is Buffett doing? Well, while others are going hog-wild and continuing to inflate the already swollen stock bubble. Buffett is defensively protecting his portfolio by trimming shares and selling stakes. Buffett’s is clearly positioning himself for another market crash.
Is a market crash pandemic related?
The markets were precariously teetering on a crash even before the pandemic came pulling the rug out from under us all. Prior to Covid-19, the oil and gas sector were in a total rut, global debt was spiraling out of control and there was an inverted yield curve, which historically precedes recessions in the US.
Today, we have compiled all the problems that existed a year ago, and have compounded the issues through economic troubles following the onslaught of the pandemic. Global debt increased by $15 trillion between January and September in 2020. The total global debt is expected to soar to $277 trillion by the end of 2020. Sadly, the pandemic is far from over. We are seeing an increasing number of cases, plus we are nearing the holidays where many will ignore warnings to stay home in an effort to be near loved ones. With a vaccine that is unlikely to truly reach the public for another year, the cases and deaths resulting from Covid-19 will have continual negative economic impact on the US economy.
Going Back to “what would Buffett do?”
Buffett is clearly positioning his portfolio for a significant recession. In the past, he has felt strongly against investing in precious metals. While silver has utilitarian purposes in tech and medical devices, gold investments does not do anything to help grow the economy and turn around a slump. However, in this current market, Buffett has broken his mold. He recently acquired a gold mining company to help protect his portfolio against recession. Buffett knows something is looming, and the single most important way to protect a portfolio is to hedge it with precious metals. If the economy tanks, which it is certainly pointing that way, gold and silver will skyrocket and the companies producing these precious metals will grow exponentially.
As an investor, it would be wise to take a page from Warren Buffet’s play book and get in on this quickly dissipating investment opportunity. Precious metals are becoming increasingly difficult to procure, and yet they are finest wealth insurance you could purchase to protect your portfolio against recession and inflation. Conventional wisdom states that your clients should hold 10-20% of investible assets in pre-1933 in order to hedge their portfolios against an inevitable recession.
Take advantage of this significant opportunity while supplies last and the “strong dollar” keeps metal prices affordable.