By Scott Carter, CEO of PM Capital
When an economic downturn hits, will your financial portfolio be prepared to withstand it? We are in very turbulent times, and many investors are nervous. Investment strategies are being re-evaluated in light of the heavy burden of our $20 trillion national debt and unfunded liabilities like Social Security and Medicare. And, when you couple our debt crisis with our student loan crisis, our drastically unfunded public pension crisis, our household debt crisis, unprecedented global instability and the Fed’s tightening policies… you start to appreciate that we may well be headed towards a major system-wide correction or reset.
An article I read recently pointed to this by emphasizing that America is dependent on multiple asset bubbles never popping…something history suggests is not possible. And what happens when the bubbles pop? The “entire socio-political/financial system will go through a system re-set in which all the fantasy-based valuations, political denials, false promises and fraudulent claims collapse in a heap.”
Brad McMillan, Chief Investment Officer at Commonwealth Financial, when interviewed last Friday on CNBC said—“It’s time to be prepared.” He paralleled five current financial measures and indexes with the 1999 dot.com bubble, where stocks soared before tumbling. “It looks very much like they did in 1999. It’s remarkable. We’re at the end of a long boom. People don’t see it that way, but it really has been.”
“When you live in Florida and you know hurricane season is coming, that doesn’t mean you move back to Massachusetts. But it does mean you’re aware of it, you plan for it, and you’re prepared if something happens to it,” McMillan said. “I’m not saying we have to panic, I’m just saying it’s time to think about stormy weather.”
In other words—are you prepared for an adverse event?
What happens to YOU if a drop occurs? Does your hard-earned wealth collapse? Undiversified portfolios are at extreme risk. Paper assets, particularly those held in central institutions, will not go unscathed. Stocks tumble. Retirement accounts lose value. And the dollar devalues so that we can’t buy what we bought just the day before.
That’s why we are seeing more and more investors turning to hard assets such as gold and silver as a hedge against the inevitable reset that at some point will occur. They see the intrinsic value of hard assets, and they are diversifying their portfolios so that they can weather the volatility and uncertainty of paper assets.
Don’t be caught having built your wealth solely on a piece of paper. Solidify it and preserve it with precious metals so you will be better able to weather a direct hit on your financial portfolio. Diversification is a smart strategy. Be prepared.