Even after this week's plunge in the Dow, bargains are hard to find.
The air is just starting to be let out of the 10-year “everything bull market” caused by a decade of ultra-low interest rates and the Fed printing trillions of dollars.
I don’t know if the volatility we’re seeing now is just a blip or the start of a much larger correction. But I do know we’re closer to the end of this cycle than the beginning. And a correction is due.
While we’re waiting on the market to plunge, remember, the US has amassed a record $21 trillion in debt… and is running $1 trillion deficits. And this is during “boom” times. Normally deficits of that size occur when governments are funding giant wars or staving off a recession.
At the same time the government is ratcheting up its debt pile, the Federal Reserve is reversing course and raising interest rates, meaning all of that debt will be more expensive in the future (and 70% of the government’s debt matures in the next five years).
Last year, the government spent $263 billion just paying the interest on its debt. A recent Wall Street Journal article estimates the government will spend more on interest than it spends on Medicaid in 2020; more in 2023 than it spends on defense and more in 2025 than it spends on all nondefense programs.
By 2028, the Congressional Budget Office estimates the US government will be paying nearly $1 TRILLION in annual interest payments.
It’s a vicious cycle of debt. And it will eventually mean disaster for the US dollar.
Diversifying your wealth outside of your home currency is an important part of any Plan B. That’s why I advocate owning gold, holding money in offshore bank accounts (ideally in a different currency) and investing in productive assets domestically and abroad.
But today, you’ve got an opportunity to diversify your wealth outside of the US dollar buying a precious metal that has almost never been this cheap in history.
Today, an ounce of gold costs $1,200. It’s one of the few assets that hasn’t exploded to record high prices in the decade.
But you can buy an ounce of platinum for just $857 today – a nearly 30% discount to the price of gold.
That’s one of the largest discounts in history (historically platinum is one-third more expensive than gold). And it’s an incredible bargain considering platinum is 100 times rarer than gold and costs way more produce.
Even the richest platinum ore gives up only about one ounce of end-product for every five tons of it mined.
More than 70% of the world’s platinum supply is mined in South Africa, and vulnerable to supply interruptions due to the power shortages that plague the country… so in addition to being an excellent way to diversify out of the dollar, owning platinum is also going long instability in South Africa – a solid bet.
The biggest industrial use for platinum is in catalytic converters for automobiles. And the metal has sold off recently over trade war fears and the emergence of electric vehicles.
However, every time platinum’s discount to gold has gotten so large, it’s corrected itself. Sure, it’s possible gold falls, but it’s much more likely that platinum soars given that gold is already so cheap.
There are a few ways you can gain exposure to platinum. You can buy the physical metal from a dealer. You can also buy a Platinum ETF – our friends at Sprott offer a good one. Or you can get more speculative and buy small, platinum miners like this…
