RANCHO SANTANA, NICARAGUA – We cannot remember, understand, or keep track of complicated investment tactics. We have to keep it simple.
In our Grand Strategic Plan, we buy stocks when they are cheap relative to gold; when they are not cheap, we keep our money in gold.
We’ve explained our Dow-to-gold allocation model several times. It is very effective and very safe.
But not many people have the patience for it. Sometimes, you have to wait decades before making a move… or realizing a profit.
Today, we let you in on another impractical investment plan.
Blood in the Streets
“Buy when blood is running in the streets,” was the advice of some ancient Rothschild. We would add that you need to make sure it’s not your blood.
Which is what had us a little concerned when we arrived in Managua, the capital of Nicaragua, on Tuesday… and again yesterday when we were flying around in a helicopter.
“Do you think you can land there,” we had asked the pilot. It’s the windy season in Nicaragua and we had taken the little Robinson helicopter on an exploratory mission. We wanted to see what blood in the streets of Managua had wrought on the coast.
An estimated 300 people have died in demonstrations against the government here. To hear the locals tell the story, hundreds more have been “disappeared” by death squads working for President Danny Ortega.
Whether that is true or not, we don’t know. And when you get in this situation, you often don’t know much at all; real news is scarce while rumors run riot.
Apart from the statistics, we have our own measures to work with. Traffic at our restaurant and hotel has fallen as much as 50%. We keep the lights on – just barely.
Most of our competitors have turned them off to cut their losses. All up and down the coast, people are desperate for work… for customers… and for money.
“I just bought a nearly-new Toyota pickup,” said our man on the scene. “It was about half price. So many people have these things on leases… and they can’t make the payments. So, they go back to the dealers… who want to get rid of them.”
When the tourists stopped coming in, so did the money.
Yesterday afternoon, we met one of the brave few who dared to come. “Doctor Fred” is a pediatrician from Boston who donates his time and skills at the local clinic. Rather than letting himself be frightened away by the political crisis, he figured that the area’s children needed him more than ever.
“I love working with them… they’re all so nice. And they need me,” he said modestly. “I’ve always believed in giving back.”
Our own motives were less salutary. We’re giving… but hoping to take a little, too.
Since blood is now said to be running in the streets of Managua, property prices are falling all over the country. We went out in the yellow helicopter to have a look.
Bill prepares to board the helicopter
Bill and company look for a place to land on the coast
The idea was to land on a tiny plot on the top of a ridge, where we could have a good view, and walk down to the beach far below. But when the helicopter approached the postage-stamp cut out of the forest, a gust of wind shook it aloft and rattled three of its four passengers.
The other one, the pilot – a veteran of flying Soviet era helicopters during the Sandinista episode – was muy tranquilo.
“We better land somewhere else,” was all he said.
When we finally put down, settled our stomachs, and got out to explore, we found the beach was stunning. A few years ago, it had been for sale, but the owners wanted a fantastic price. Now, they are more reasonable.
Our editor discovers a picturesque beach
The secluded beach along the Pacific coast
Our “buy when blood is running in the streets” rule may work for anything. We use it only for real estate… when we can apply it almost literally. But it requires an almost inhuman patience.
Our own record with the strategy is mixed. We began buying in Baltimore when blood was running in the streets – in the 1980s – and paid $1 for our first building. Today, prices are higher. But not that much higher. Now we own several buildings. And blood is still running in the streets.
Our next opportunity came right here, in Nicaragua. Almost by accident, one of our analysts found an extraordinary property that was also extraordinarily cheap… less than $100 an acre, right on the Pacific. It was so cheap, we bought without seeing it.
But buying cheap is no substitute for knowing what you are doing. Over the next 20 years, we proved that you can lose money, even with the most attractive land bought at the most attractive price.
But we didn’t give up on the strategy. In Argentina, a financial crisis in the early 2000s led to some very cheap property deals.
Since we had a publishing team there, it seemed logical to take advantage of the turmoil to buy an office.
But we were a little slow on the draw. The property we got – where our office is now – was well-located, and well-priced, but no great bargain. And when we had finished with the repairs and upgrades, it was no bargain at all.
And now Argentina is in another crisis – with inflation at 40% per year… and a government that may or may not survive the next elections. Maybe we could get our money out… and maybe we couldn’t. We don’t want to find out.
Unbowed… and perhaps no wiser… we tried a fourth time. We took advantage of the real estate crisis in Ireland following the worldwide credit crunch of 2008.
Ireland had overdone it; it had borrowed far too much and pushed up property prices far too high. Result: Property prices crashed in 2008, some to silly levels.
It was then that we decided to make Ireland the center of our global publishing business. And after a few false starts, we found a suitable building, fixed it up, and it now serves us well.
Bill’s Irish headquarters
The renovated interior of Bill’s Irish HQ
But between making the decision to invest… and finally getting the building ready for use… at least four years had passed.
By then, the blood had coagulated. What looked like a quick, opportunistic investment turned into a long-term placement with a modest rate of return.
So, you see, dear reader, the theory is probably still correct. Buy when blood is running in the streets. But it looks easier to do than it really is.
RESOURCE INSIGHT: WHY WE BUY GOLD
By Dave Forest, Editor, International Speculator
Everyone is getting bored waiting for the gold price to take off.
But there’s good reason to believe we’ll see it pick up again soon. That’s because owning a hard asset such as gold is a time-tested way to protect wealth during troubled economic times.
Right now, we’re nearly 10 years into the current bull market on Wall Street. As this bull market gives way to the next bear market, gold is going to be a great asset to have in your portfolio.
Hard assets don’t carry any counterparty risk. Unlike a stock or a bond, you don’t depend on someone else’s promise to pay. So you don’t have to worry about the issuer going broke, as so often happens in a financial collapse.
It’s a subject my team and I did a deep dive on in the most recent issue of International Speculator. We looked at how different metals performed in the last four financial crashes – the Japanese meltdown (1990-1992), the Asian financial crisis (1997-1998), the dot-com bubble (2000-2002), and the Great Financial Crisis (2007-2009).
We then took the metals that have comprehensive historical data available: gold, silver, platinum, palladium, copper, zinc, vanadium, tin, nickel, and aluminum.
And we plotted their performance during the three “acts” of each crisis… First, one year prior to the crisis. Second, the period during the crisis. And finally, one year after the crisis.
Our analysis revealed which metals were the best stores of value during a financial panic.
Let’s just focus on the first five metals here – gold, silver, platinum, palladium, and copper. Those are the ones you will likely be most familiar with.
Here’s how they performed over the three acts of previous crises…
As you can see, gold is the way to go during uncertain times.
During the last four major financial crises, gold was the only one of the five metals that increased in value during a crash (gray bars on the chart). It gained an average 3%.
That may not sound like a lot. But remember, in a financial crisis, most of your stock portfolio is going to be taking on water.
Gold also delivered gains before (dark blue bars) and after (green bars) the crashes – rising an average 4% in the year prior to a crash, and 10% in the year after.
So you can see why gold is the safest place to be in uncertain times.
It holds up consistently well during financial panics. Which is why it belongs in everyone’s portfolio.
– Dave Forest
P.S. As Bill has been telling you, gold is a great “insurance policy” for your wealth. But there is a way to double, triple, even 10X your money when gold prices rise. I’m talking about speculating on junior mining stocks. You just have to know which mining company is the right one.
Luckily, my team and I have developed a patented satellite technology. Using this “Digital Treasure Map,” we can pinpoint which companies are sitting on a literal goldmine before a shovel ever goes into the ground. Sound too good to be true? I’ve compiled all my evidence. See the proof for yourself right here.
Powell’s Dovish Pivot
Yesterday, the thinkable happened. Fed Chair Jerome Powell announced that rate hikes are off the table for now. But a curious paradox is emerging here. If the U.S. economy is “solid,” then why can’t it handle higher rates?
Investing: A Game of Failure
In baseball, the best batters will fail 65% of the time. It’s the same idea in investing, but to an extreme level. Back-testing shows that from 1926 to 2016, only 10% of stocks accounted for 100% of wealth created.
Self-Driving Cars Are Here
You may not realize it. Few newspapers reported on it. But a self-driving vehicle recently made a coast-to-coast trip – from California to New York – without a human touching the steering wheel once. That alone is impressive, but it’s what the car was carrying in the trunk that you need to pay attention to…
In the mailbag, Congresswoman Alexandria Ocasio-Cortez, and her “wealth tax” proposal, are on readers’ minds…
The real problem with AOC’s tax hike is that smart people, like Bill, who are heedful, aware, and realist, expect that the country/society will go through a very tumultuous period, and ultimately a reset. Which has happened, historically, 100% of the time. When the wagon sitters run the show, and the wagon pullers are decimated, what to do?
– Richard B.
If tax increases are so useless as a means to reduce inequality, why in hell have the rich been lobbying so hard (and successfully) for tax cuts? Sure, they dodge around them, but that just means the taxes are not well designed. I’d like to ask you, Bill, as an honest commentator, what means would you employ to reduce the hugely growing level of inequality in the country, and not just the U.S., that has had such a damaging effect on society?
You need to do some homework. Your position and fear of the new congresswoman is skewed due to your perverse perspective that it is alright that extractive capitalism can classify labor as a commodity and reduce their benefits and destroy their representation in unions. All while paying their managing class exponential wadges to make sure the investors pick up the savings in their benefits. Why wouldn’t those who are not considered stakeholders in the companies rebel against the new feudalism of those with the capital?
– George P.
Reading your essays and the mailbags brings to mind Winston Churchill’s observation: “The greatest argument against democracy is a five minute conversation with the average voter.”
– Maron M.
Meanwhile, discussion turns to a serious economic matter. As Bill explained, Modern Monetary Theory (MMT) broadly states that a sovereign nation that issues its own currency can never go broke. Deficits, therefore, really don’t matter. Dear readers weigh in…
As an economist, I reject your notion that MMT is the predominant or even a common view of economists. An obvious objection to MMT is that it creates an absolute totalitarian sovereign with the complete loss of liberty. That, in itself, would cause most economists to reject the theory.
Despite the hypothesized claims, MMT would not create economic stability. It does not solve the problem that ultimately defeated the Soviet Union. That is the failure to stimulate production from a subjugated labor force. The MMT you highlight hypothesizes that the sovereign has unlimited spending. However, that is not exactly true. We have not repealed scarcity nor the need to produce before you can consume. And every unit of production “consumed” or “transferred” by the sovereign, is one less unit consumed by the producing sectors. The sovereign must “tax” (appropriate/steal) this from the producers. And the more you tax, the less the producers are inclined to produce, regardless of the threats of the sovereign. Witness Stalin’s attempt to collectivize farming. MMT would not stabilize the economy, it would probably spiral downward as the sovereign attempted to increase its “share.” And the repression combined with economic privation would foment violent uprisings. Yes, even a nation of sheep will revolt.
As long as there are economic problems such as the investment accelerator, droughts, etc. there will be both man-made and nature-made business cycles. In general, economists recognize that neither monetary policy nor fiscal policy are much help in ameliorating such cycles. Furthermore, such policies may exacerbate the cycle or have other unintended consequences. Those economists who proffer MMT have a political agenda, not a theoretical insight. And they apparently are inclined to ignore or dismiss the totalitarian implications and the likely economic disaster.
If you are disinclined to support dubious monetary policy, I refer you to Milton Friedman (and others) who have basically suggested that money should grow at the rate of population plus productivity growth to maintain stable prices. However, I would not give that authority to the sovereign. That implies we need an agency to oversee bank regulation… maybe, but not necessarily, the Fed (fox in the hen house), but no stabilization nonsense. I do find it fascinating that MMT theory is being presented at a Fed retreat. The Fed is the bastion of banking, money grubbing, capitalistic, near monopoly private sector banking, and not exactly inclined to surrender its power to the sovereign, even though we could do quite well without it.
– Kendrick M.
MMT is just double speak for the government owns everything. They take a portion of whatever is produced using “their” money, and in addition, print more of “their” money to buy whatever “they” want and provide for whomever “they” think is worthy, rich or poor. In this regard, all capacity to produce, consume, grow wealthy, or become poor is in “their” hands. GATA [Gold Anti-Trust Action Committee] asked The Treasury if “they” reserved the right to confiscate gold? The Treasury replied “they” reserved the right to seize all your assets. What’s that tell you? As far as “they’re” concerned, “they” own it all already and “they” decide how much you get to keep and who will be given the fruits of your production using both deficit spending and taxation, which are nothing but tools for determining what is produced and by whom. Add in the military and extend this policy to the entire world, in which nothing has changed since the beginning of recorded history.
– Mike R.
IN CASE YOU MISSED IT…
This will be the biggest tech trend of the next 10 years…
That’s the message from Jeff Brown, Bill’s go-to tech expert.
Jeff says 99% of investors will miss out entirely on this opportunity. But for those paying attention, they stand to make a small fortune. Click here.