Everything That Goes Up Must Come Down!

A reader recently sent me a giddy email, asking if I still support the statement I made more than a year ago, that we’ll see a 10,000 DJIA, before we see 20,000. Not to rain on their parade, but I enthusiastically told them that I was more confident in the statement than ever before. First, I pointed out the obvious conditions that will lead to a precipitous drop in equity market value, like implementation of the President-elect’s infrastructure-focused jobs plan, which will most certainly add to the already soaring national debt. Likewise, the Fed is poised and ready to increase interest rates again, which will add substantially to the interest cost of the government’s borrowed money. Bond yields are declining and the best thing that can be said about treasury notes is that they’re not yet in negative territory like many other major powers, although when adjusted for inflation, there’s not really much wiggle room.

Low oil prices have given many investors a temporary reprieve at the pump, but those same prices have driven a number of oil producers to the brink of bankruptcy and after a global shakeout is completed, OPEC may have greater control than ever before regarding pricing and production. At the same time, investors have enjoyed regular gains on the real estate front, but that too is going to suffer with increasing interest rates, as the potential buying market gets squeezed and mortgage rates continue to increase.

The Bull Market has run its course and public companies that should have used the Fed’s cheap money for employee growth and product expansion, instead opted for the choice of immediate gratification with stock buyback programs that paid shareholders and executives, but in most cases left the company a pitiful shell requiring a major overhaul, rather than a simple tune-up. When today’s economic ether wears off, the market isn’t just going to die a slow, dwindling death. It’ll go supernova, eclipsing losses recorded in 2008. And the global economic slowdown will continue to swallow whole countries. Brexit and other isolationist plans will not work in favor of a necessary global solution, possibly forcing the hand of the International Monetary Fund.

Meanwhile, every bit of the news reported above works to the advantage of increasing precious metal prices. Add to that today’s absurdly low prices and it makes for the perfect time to secure your legacy with the safe haven anchor of gold and other precious metals. Then, consider the fact that 1.6 billion Muslims who have refrained from the precious metals market due to confusing interpretations of the Koran for years, will receive a very clear message on Tuesday, December 6, 2016, from the Accounting and Auditing Organization for Islamic Financial Institutions, which establishes standards for Islamic finance, stating that investment in gold and other precious metals is now to be permitted. Demand and prices will increase, while availability must shrink. Are you prepared?