We’re Already In the Next Big Financial Crisis
by Nick Hodge
An old family friend and one of my first bosses sent me a note this week.
He’s been asking my mom about the coming digitization of the dollar he’s been reading about in the fear-based marketing of certain newsletters.
After assuaging his digital dollar fears, I told him to reach out if he ever had any questions. Here part of his reply:
I can only imagine many of you have similar questions given the current state of the market. Below is my response in case you find it helpful.
We are already in the next big financial crisis. It's just happening at a time when stocks are at record prices.
But stocks aren't at record prices because of fundamentals (employment and other indicators have been recessionary, or worse).
Stocks, and indeed many asset classes, are vastly inflated in price because of Federal Reserve actions and government spending and debt.
Every dollar in your pocket has lost 20-cents in buying power since I worked for you 20 years ago.
This erosion of buying power, coupled with historically low interest rates (the 10-year US bond yields 1.5%) is boiling people alive, especially those closer to retirement who would traditionally rely on bond yields for fixed income.
I don't know how it's all going to culminate. I’m not smart enough for that. My best guess is some sort of new Bretton Woods agreement like was made after WWII. The debts are simply too high for any sovereign nation to ever pay back, so there will be a global restructuring.
This is where you get conspiracy theories from financial publishers and others like gold going to $10,000 per ounce or the government taking way physical dollars.
Again, I don't know the exact end game. What I do know is that Social Security will be non-existent and traditional retirement (pensions, etc.) and the backstops that come with it will likely be gone in 10 years' time.
The people who don't understand this are — and will continue — getting boiled alive financially.
This also leads to extreme wealth inequality and unrest/turmoil in the populace, some of which you're seeing now with protests and insurrections.
I am not a personal financial planner but I write nearly every single day about all of this and how I've prepared for it. The basic tenets are things anyone can implement, though they are not mainstream:
- Manage as much of your money on your own as you're comfortable doing. If you need someone to manage it, find someone who is "fee-only" or who charges a percent of assets, and isn't incentivised or commissioned to have you in a certain group of funds, or commissioned based on trading activity in your account.
- Own real things. The values being assigned to companies that don't make money is insane. We are in an epic bubble. (In 2018, for example, 80% of companies that IPO'd were not profitable.) Own the things that will cost more in ever-deflating dollars. Things that are necessary to build the future: copper, lithium, oil, energy, medicine, housing/real estate. Not Facebook/apps/things that are dependent on free internet users.
- Own things that pay yield that aren't bonds. The government won't be able to pay back its debts. Tobacco companies, Railroads, and giant industrial companies will all yield you more than bonds and you'll get capital appreciation too.
- Hold 5-10% of your worth in precious metals.
- Own as much of this as you can in tax-deferred accounts.
That's a pretty good start.
I've been posting a free weekly video and daily commentary on my site here.
And I write a monthly premium research letter that covers macro themes and comes with a model portfolio. It's $99 for the first year. Info here.
Thanks for the kind words and not cutting me too much slack when I was younger. The work ethic it helped develop paid off.
Call it like you see it,
Nick Hodge,
Publisher, Resource Stock Digest
Nick Hodge is the co-owner and publisher of Resource Stock Digest. He's also the founder and editor of Hodge Family Office, Family Office Advantage, and Foundational Profits . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.
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