One of the World's Greatest Investors Agrees
One of the world's greatest investors agrees... Buffett is holding a huge pile of cash... The yield curve falls deeper into 'inversion'... Another gold record falls... How to make up to 10 times more money from precious metals today...
Regular Digest readers know we've been urging you to be a little more cautious lately...
And as you may have grown tired of hearing... one of the best and easiest ways to do this is to simply hold some extra cash... generally through FDIC-insured bank or brokerage accounts or short-term U.S. Treasurys.
This advice isn't exactly popular... and it's certainly not sexy. But we are in good company...
Even most novice investors are familiar with Warren Buffett...
Through his holding company Berkshire Hathaway (BRK-B), the so-called "Oracle of Omaha" has delivered investors an average annualized return of more than 20% over the last 50-plus years.
That's enough to turn every $100 invested into more than $2 million.
Buffett hasn't been shy about sharing his feelings about the U.S. stock market, particularly over the past 10 years...
He famously penned a New York Times op-ed in October 2008, during the peak of the great financial crisis. He told readers he was personally buying U.S. stocks for the first time in years and urged them to do the same. And he's appeared in the financial media countless times since, continuing to praise the opportunities in U.S. equities.
But in the past year or so, Buffett has slowed his "cheerleading." He's not actively warning about the market yet – like he did in the run-up to the 2000 dot-com crash. But we believe his actions speak even louder than his words.
You see, Buffett is holding a huge amount of cash right now...
As our colleagues Ben Morris and Drew McConnell noted to their DailyWealth Trader subscribers yesterday, Berkshire Hathaway was holding a record $122 billion position in cash at the end of last quarter.
This massive cash hoard works out to more than 50% of the value of Berkshire's entire portfolio of public companies. In other words, Buffett already has more than a third of his portfolio in cash. The only time it's been higher was right before the financial crisis.
Ben and Drew explained that this is as strong of a warning as you're likely to get from one of the world's greatest investors...
Clearly, Buffett doesn't see many [great opportunities in stocks.] If you want to follow the ultimate guru's lead, you should hold plenty of cash today.
Why is Buffett so concerned?
We can't say for certain. But we will point out that his favorite market valuation metric – total market capitalization-to-gross domestic product ("GDP") – sits at more than 150% today.
By this measure, the broad market is currently more expensive than it was at either of the last two bull market peaks in 2000 and 2007.
Elsewhere in the markets, one of the most reliable 'early warning' signals continues to flash...
Earlier this month, we noted that the most-widely followed measure of the U.S. Treasury yield curve – the difference (or "spread") between the yields on 10- and two-year U.S. Treasury notes – had dipped below zero for the first time in more than a decade.
Since at least 1950, these "inversions" have predictably been followed by recessions and bear markets several months later.
If there was a silver lining, it was that this inversion was brief... The "2-10" spread fell to -0.02% the morning of August 14, but it closed the day back above zero. Typically, this spread has dropped well below zero for several days or weeks before triggering a clear "countdown" signal.
Unfortunately, this spread didn't stay in positive territory for long...
It inverted again last Thursday, closing below zero for the first time. And it has continued to fall further since. This morning, it hit a new decade low of -0.05%.
Given this news, we're not surprised to see precious metals doing well...
Despite plenty of signs that both gold and silver are due for a "breather," both metals remain near multiyear highs.
Gold touched a fresh six-year high above $1,550 an ounce on Monday. Silver just hit a new three-year high above $18.00 an ounce today.
They're also continuing to do well outside the U.S.
Earlier this month, we noted that gold had already broken out to new all-time highs in several major currencies, including the British pound sterling, the Australian dollar, the Canadian dollar, the Swedish krona, and the New Zealand dollar, among others.
We also showed you gold was less than 10% from making a new all-time high in the euro, the world's second-most important currency behind the U.S. dollar. Well, as you can see in the updated chart below, that record has now fallen, too...
We said it before, and we'll say it again...
This is a big deal.
Gold and silver have broken out to multiyear highs here in the U.S. But as bullish as this price action has been, it's not the whole story.
This latest rally has been a global phenomenon... and it suggests it is simply a matter of time before we see new all-time highs in gold and silver here in the U.S. as well.
Again, we're sure to hit sharp corrections along the way... We're probably overdue for one right now. But history says significantly higher prices are likely.
Of course, if you tuned in for our special gold event with legendary analyst John Doody last week, you know that when gold and silver move significantly higher, the best gold stocks can absolutely soar.
John's audited track record shows his recommendations gained an incredible 1,070% over the final years of the last precious metals bull market.
That's 10 times more money than you would've made in gold... four times more than you would've made in silver... and more than three times more than you would've made in the average gold or silver stock over the same period.
When it comes to making money in gold and silver stocks, there's simply no one better than John. Click here to learn more about his excellent service.
New 52-week highs (as of 8/27/19): Agnico Eagle Mines (AEM), First Majestic Silver (AG), Alexco Resource (AXU), Sprott Physical Gold and Silver Trust (CEF), DB Gold Double Long ETN (DGP), New Oriental Education & Technology (EDU), Franco-Nevada (FNV), SPDR Gold Shares (GLD), Barrick Gold (GOLD), Hershey (HSY), Kirkland Lake Gold (KL), Coca-Cola (KO), Leagold Mining (LMCNF), Lundin Gold (TSX: LUG), MAG Silver (MAG), MarketAxess (MKTX), NovaGold Resources (NG), Pan American Silver (PAAS), PepsiCo (PEP), Procter & Gamble (PG), Polymetal (LSE: POLY), Royal Gold (RGLD), Seabridge Gold (SA), SilverCrest Metals (SILV), Torex Gold Resources (TORXF), Vanguard Inflation-Protected Securities Fund (VIPSX), Belo Sun Mining (VNNHF), Wheaton Precious Metals (WPM), and short position in Advance Auto Parts (AAP).
The feedback on Steve Sjuggerud's controversial proposal to "retire the penny" is still rolling in. What's on your mind? Let us know at feedback@stansberryresearch.com.
"Neither the scale (Gordon F.) nor the utility (Gary A.) are as important as the attitude towards real value in a currency. It's not just the Federal Reserve Notes that replaced the Gold and Silver Certificates—what little real residual value remaining in our coins is an indictment of the system. Do we as Stansberry-educated investors really accept the surrender of our monetary tokens to the control of a cashless system? Resetting and LOCKING the value of a USD to gold (e.g. $5,000/oz) is one of the few proposals that make sense. Silver, nickel, platinum, etc. would quickly fall in line." – Paid-up subscriber John M.
Regards,
Justin Brill
Baltimore, Maryland
August 28, 2019