- Zach Scheidt: Vibing on gold
- A gold mine opportunity…
- … without the gold mine?
- I’m not panicking, YOU’RE panicking!
- General Motors threatens Musk
- From “slackers” to “sandwich”
- Readers trade hand sanitizer recipes.
Does your heart skip a beat when you hear the word gold? If not, here’s why it should…
According to our income specialist and former hedge fund manager Zach Scheidt: “Plenty of investors love the yellow metal — insisting that it’s the only real form of money… and that it should be the foundation of a well-rounded portfolio.”
[We’ve said it before at The 5, and it bears repeating: Macroeconomics expert Jim Rickards — whom Dave featured Monday — recommends 10% of your portfolio be allocated to precious metals.]
“I also wouldn’t be surprised if you saw the word ‘gold’ and started shaking your head in disbelief,” says Zach. “You could be one of those investors who doesn’t believe there’s anything special about gold.”
For Zach’s money, he loves income-generating dividend stocks. Gold doesn’t offer a dividend, nor does the yellow metal earn interest. And ultimately, gold’s at the mercy of supply and demand. “Not to mention market manipulations,” says Zach, “that govern every asset in existence.
“So I wouldn’t blame you for being skeptical about any claim [about] gold,” Zach says. “But the fact is gold is looking better than it has in a long time.”
Apropos of supply and demand: “Demand for gold has been outpacing new supply for several years now…
While gold has some industrial applications (not like palladium or even platinum… but that’s a story for another day), jewelers are first in line for the precious metal, but next in line are investors — especially central banks.
“In fact, central banks bought a record amount of gold in 2018,” Zach says. “Then they broke that record again in 2019… And according to the World Gold Council, central banks bought more gold than they’ve sold for 10 straight years!”
Because miners can’t keep up with demand, jewelers and investors alike rely on “recycled” gold… but that’s a moot point if the majority of gold bullion is stockpiled in central bank vaults.
Zach says: “That fact alone should cause gold prices to creep higher. Even then, however, investors, central banks and institutions may still be reluctant to sell their hoards.”
Regardless, the demand for gold’s spiking — here’s why…
“Whenever bad news threatens the world,” says Zach, “gold prices tend to soar. In fact, gold’s most recent spike started thanks to coronavirus fears finally hitting Wall Street in late February…”
“That’s because people have more faith in the yellow metal than anything else.” Well, many people, that is…
And more people would have faith in gold — particularly during a global crisis — if they really understood the difference between hard currency and fiat currency.
“Fiat currency just means there’s nothing backing its value,” says Zach. “For instance, the only reason a $20 bill is worth something is because the U.S. government says it is.” (Ahem… Thanks, Richard Nixon, for unpegging the U.S. dollar from gold.)
Then there’s hard currency that’s actually tied to gold: “A government with a hard currency can only print so many bills,” Zach says. “The total value of its currency is limited by how much gold the government owns.”
But when it comes to fiat currency? Governments are free to print away!
“Funny money, then, is subject to inflation and deflation. Zach says: “Owning gold is a way to hedge against that risk.
“That’s why central banks hold so much of the stuff,” he continues. “Today’s record-low interest rates are playing a role, too.”
While central banks have historically relied on the stability of government bonds, many governments are issuing bonds with negative interest rates. (We see you, eurozone! And the U.S. might be joining you soon.)
“Meaning buyers will get back less than they paid for their bonds,” Zach says. “So even though gold doesn’t pay interest, it’s preferable to losing money!
“Better to hold onto the gold, then, no matter what happens to the price,” he says. “Of course, that just increases the gap between available supply and demand — which will inevitably cause gold prices to surge.”
Here’s how Zach says to best take advantage of the inevitable surge…
“Higher precious metals prices should be great for companies that mine gold… but that’s not actually guaranteed.
“Mining is a risky, expensive business, and companies can fail for reasons that have nothing to do with what price gold is selling for,” Zach says.
Miners have an uphill battle considering the uncertainty of finding gold deposits, prepping the land, pulling permits… the list goes on and on. In fact, “most miners spend close to $1,000 for every ounce of gold they get out of the ground.”
To Zach’s way of thinking: “A better way to invest in surging metals prices is to buy a mining company that doesn’t own any mines” (emphasis added).
Zach’s talking about gold royalty companies that don’t “have to worry about exploration risks, equipment upkeep or environmental issues that come with operating a mine,” says Zach.
Here’s how royalty companies work: They “might give a small mining company $1 million to break ground on a new mine.” In return, they contract for a portion of the miners’ gold at a discounted rate.
“Then [they] sell that gold… for the going market price,” Zach says. “That means tremendous profit margin — one that most gold producers can only dream of.”
Zach’s takeaway? Gold royalty companies are “the smartest gold play you can make right now,” he concludes. “Wide profit margins mean your investment should hold its value…
“If precious metals prices do surge… look out,” he says. Gold royalty companies’ “share prices will take off like a rocket.”
[Ed. note: Zach doesn’t just specialize in income investments — he’s also got his ear to the ground when it comes to headline-making M&A activity…
And while billion-dollar buyouts were once unpredictable events for anyone outside Wall Street, Zach’s leveled the playing field.
He’s spotted phenomenal deals in time for everyday investors to take advantage of extraordinary windfalls.
And Zach expects buyout deals to break out this year, triggered by less red tape, low interest rates and the 2020 presidential race. But these catalysts won’t be around forever…
To get started… simply click here for all the particulars. But hurry… this offer expires TOMORROW at MIDNIGHT.]
Germany’s Chancellor Angela Merkel sure is keeping cool, calm and collected when it comes to the spread of coronavirus. (We kid.)
At a press conference this morning she said: “When the virus is out there, the population has no immunity and no therapy exists, then 60–70% of the population will be infected.
“The process has to be focused on not overburdening the health system by slowing the virus’s spread… It’s about winning time.”
Way NOT to yell “fire” in a crowded theater…
Oh — and then there’s this — the WHO is finally uttering the “P” word. P-A-N-D-E-M-I-C.
With that, it’s a market sell-off avalanche with the Dow down 1,000 points to 23,970 and the S&P 500 Index down 113 points to 2,670. As for the tech-heavy Nasdaq, it’s down 300 points to 8,040.
Checking in with commodities: Oil’s slip slidin’ away, down $1.17 to $33.19 for a barrel of West Texas crude; meanwhile, gold’s consolidating to $1,647 per ounce.
And the 10-year U.S. Treasury yield is 0.8% — up fractionally.
According to technology maven Ray Blanco, General Motors — the brand best known for trucks and SUVs — might beat Tesla at its electric vehicle (EV) game.
“GM’s new EV plan goes by the name Ultium,” says Ray. “And it’s a new EV platform on which the company can build any number of different vehicles, from performance coupes to family-hauling SUVs, reports GM.”
In 2020, it’s about time a major auto company takes the wraps off a new EV platform, but GM has the scale to actually, well, scale electric vehicles to compete with the likes of Tesla.
And GM doesn’t have to contend with the theatrics of lightning-rod CEO Elon Musk; plus, the company “has been making a record number of cars and trucks since the company was founded way back in 1908,” says Ray. “It’s a boring company, but in a good way.
“On the other hand,” he continues, “Tesla has run into issues with consumer cost and scale. Until recently, Tesla had no ability to manufacture overseas and even the lowest-cost Tesla Model 3 is still too expensive for the average person to buy.”
With factories all over the world, “GM plans to reduce cost by reducing what it sees as needless complexity while simultaneously increasing battery capacity.”
Ray says: “[GM’s Ultium] platform will support somewhere around 400 miles of range.” That’s better than Tesla’s longest-range battery capacity by 10 miles.
“Ultium will also support fast charging. This is essential because the Ultium’s battery range will go from 50 kWh all the way up to 200 kWh — twice as large as any currently offered Tesla battery.”
What really sets Ultium apart? General Motors brands — including Chevy, Buick, Cadillac and GMC — can manufacture any model vehicle using the Ultium platform. “Compare that with Tesla’s three (four if you count the upcoming Model Y) cars it currently offers.”
According to a GM press release, the company anticipates selling 1 million electric vehicles annually by 2025; while GM’s a few years away from seriously putting a dent in Tesla’s market share, they’re coming for you, Elon…
Speaking of Gen Xers, a survey by the National Association of Realtors found applicants 40–54 years old were denied mortgages more often than any other age group. The reasons? Low credit scores. High debt-to-income ratios. The usual. Oh, and this…
“Generation X has a higher share of denied mortgages because they are most likely to have sold a distressed house or have been underwater during the recession. Plus, they may have taken on more debt from their children’s student loans,” says Jessica Lautz, a VP at the National Association of Realtors (emphasis ours).
*shaking head at Gen X* (I’m not upset… just disappointed — in my own, oft-overlooked generation.)
Many Gen Xers have delayed homeownership — by about five years — after being dogged by their own student loan debt. Have we learned nothing?
“While there are a lot of myths about how each generation acts, Generation X does behave differently,” said Ms. Lautz. “They face different family pressures.”
Huh… from “slacker generation” to “sandwich generation”…
“Guys, you got it wrong,” says a self-described prepper and longtime reader…
“You need two parts Everclear to one part aloe… Eek, don’t kill your subscribers!”
Along the same lines, a reader says: “For hand sanitizer to be effective it must contain at least 60% alcohol.”
He adds: “I know the math is hard for the scientifically illiterate, so that translates to more like 2.5 parts Everclear to 1.5 parts aloe to be on the safe side.
“Some of your readers will no doubt try your formula out of ignorance, so you might want to clarify for the sake of public health. Just saying.”
The 5: For the sake of public health, skip the Everclear and score some Purell.
On second thought, don’t skip the Everclear… it might come in handy. (Just not handy.)
The 5 Min. Forecast
P.S. A rare opportunity just popped up a few days ago — and out of 1.1 million readers, you’re first in line to get the inside scoop.
That’s why it’s vital to check out this short clip before it’s scrubbed from the internet.
Watch now, before this time-sensitive content is pulled down.