Welcome to your July issue of the Global Intelligence Wire.
This is the monthly digest exclusively for Global Intelligence Lifetime Circle members, in which I cut through the media chatter and highlight five underreported news stories from recent weeks.
First up this month…
The Mainstream Media Is Finally Coming Around to Gold
CBS News recently posted a story on the top 5 gold coins for investment purposes. Two thoughts I want to share with you about this story…
First, the fact that gold-as-an-investment is now showing up on mainstream TV-based news sites like CBS tells you gold is about to have its heyday.
TV news is always last to jump into an investment trend, which means the average American is only now beginning to hear this idea that “owning gold might be good for you.” And those average Americans are about to start thinking, “Hmm, Martha, maybe we should buy some gold with the grocery money this week…”
Soon enough, we’re going to see informercials begin to pop up on TV pitching gold coins. That’s exactly what happened in the late ’70s and early ’80s, when U.S. commemorative gold coins (those minted between 1903 and 1926) that were selling for a few hundred to a few thousand dollars each, were suddenly selling for tens of thousands of dollars. And demand was so great that coin dealers I know say they couldn’t find any supply.
Second, CBS is offering good advice… in bad fashion. The five coins it recommends are: American Gold Eagles, American Gold Buffaloes, Chinese Gold Pandas, Canadian Gold Maple Leafs, and South African Gold Kruggerands. Sorry, but four of those five are bad picks. The only wise choice is the Canadian Gold Maple Leaf.
I say that because these are ungraded, bullion coins… meaning an ounce of gold is an ounce of gold, no matter what design is on the front or which nation minted the coin. As such, the way to shop for basic bullion gold is to simply buy the coins with the smallest difference between the coin’s price and the spot price of gold.
A Canadian Gold Maple Leaf at Apmex.com, one of the U.S. coin dealers I respect, is priced 4.3% above the spot price for an ounce of gold, as I write this. The U.S. Gold Eagle is 7.4% above spot. But the difference between an eagle and a maple leaf on the coin isn’t worth nearly three percentage points. You’re buying bullion gold, not art. The cheaper the price, the better the return. (For the best collectible gold coins to own, check out the July 2022 issue of the Global Intelligence Letter.)
To that end, I do all my bullion coin buying at BullionStar in Singapore (where I also keep the coins in storage), and I always shop for the lowest priced coin there because, again, I don’t care what images are on the coin. I care about price. And as I write this, I can buy Canadian Gold Maple Leafs at a 3.4% markup. Aussie Gold Kangaroos are just 3.3% over spot. That’s the lowest markup I’ve seen.
Next up…
The Exploding Budget Deficit Spells Trouble Ahead for America
Uncle Sam is in deep dookie, financially speaking.
In the 12 months through June, the U.S. budget deficit blew out by $2.3 trillion—a 64% increase from a year earlier. That’s double the shortfall before the pandemic. Former Treasury Secretary Larry Summers says of the situation that the country is on a “completely unsustainable path.”
That’s sugar-coating it.
American politicians have so deeply bought into the boneheaded notion that “debt doesn’t matter,” that they no longer seem to consider the consequences of their spending. But spiraling debt is like the plot of that movie Fatal Attraction… fun and games early on, and then suddenly you wake up one day and the family’s pet rabbit is stewing on the stove.
I’ve been warning for years now that a financial reckoning is baked into the cake. It’s not an “if,” it’s a “when.” A crisis is a done deal, and will very likely happen before the end of the decade.
Now, others with far louder voices than me are stepping up to the bullhorn to warn of the same outcome. Billionaire investor Ray Dalio has been all over social media app TikTok with compelling videos explaining debt and how America is now in the early stages of a debt crisis. And famed former hedge fund manager Jim Rogers is warning that a crisis that “will be the worst of my lifetime” is racing toward us.
All I can say at this point is own healthy exposure to non-dollar assets like gold, bitcoin, and Swiss francs.
Moving on…
Generation X Is Shockingly Unprepared for Retirement: Report
Sad news for Generation X. The National Institute for Retirement Security recently published a report that “finds a dismal retirement outlook” for what is essentially a forgotten generation sandwiched between baby boomers and millennials.
The typical Xer household has just $40,000 saved for retirement. The bottom half has about $4,300 saved. And overall, 40% of Gen Xers have nothing saved for retirement.
A big culprit, as the report notes, is the fact that Gen X was the first generation to join the workforce without a so-called “defined benefit pension plan,” like those that once characterized work at nearly every American company before the arrival of the 401(k).
At this point, catching up will be difficult for Xers. They’re caught caring for older parents, while still supporting younger children who have failed to launch into their lives financially. Plus, America ain’t the cheapest place in the world to live, so the basic cost structure of a Gen X lifestyle, even at the frugal end of the scale, doesn’t leave much money to squirrel away at the end of the month.
There is one option that I wish more of the Xer cohort would consider: Moving abroad, either to save money in preparation for retirement (if that’s viable) or in retirement. I’m just back from a week in Portugal, where I’m relocating next month. And even in the high-end beach town of Cascais, the cost of living is 30% to 50% cheaper than Average Town, America.
Portugal is just one example. Costa Rica, Panama, Mexico, Spain, Italy, Greece… heck, even France is markedly cheaper than retirement in America.
Something to think about as the clock ticks away on the rest of your working career.
Next up…
The Crisis and Opportunity in the Global Energy Markets
I’ve been writing to you for a while now about the energy fiasco we’re racing toward, or what I call the energy “super shock,” one of three super shocks that are going to impact our economy through the end of this decade. Well, to that end comes an interesting story from CNBC noting that “renewable energy is growing, but overall energy demand is growing faster.”
Gee willikers! Who could’ve imagined that?
This is precisely what I’ve been saying. The world is moving way too quickly toward green energy, but green energy hasn’t got the capacity to meet growing global energy demand.
As CNBC notes: “The world wants to ‘transition’ away from fossil fuels toward green energy, but the difficult reality is this: Dirty fuels are not going away—or even declining—anytime soon.”
That’s creating not just a crisis, but an opportunity.
The melodramatic push for “green energy now!” means that fossil fuel companies had been loath to spend on finding new reserves. But with global demand growing much faster than green energy’s capacity to ramp up supply, we’re plunging toward a crisis: We aren’t going to have enough fossil fuels available when we need it.
Yes, the energy is there underground—the oil and gas. But absent adequate spending to find the new, untapped reserves, we will come upon a moment when there’s simply not enough producible supply to meet demand.
And in that moment, energy prices are going to surge to unexpected levels. Floor prices for oil will be in the $150 range, and spikes on various events will see prices hit $250.
This is why we maintain such deep exposure to energy stocks in the Global Intelligence Portfolio, one of which—Transocean, a deep-ocean driller—is now up nearly 60%. I expect we will continue to see energy stocks outperform for a good while longer still.
Finally this month…
“The Big Rip” Comes for America
More than a decade ago, I wrote a story predicting that America was going to cleave into two distinct countries: one deeply conservative, the other deeply liberal. I called it “The Big Rip”—the idea that American society was going to essentially rip itself apart so that the unified country we have known will be no more.
Cue the laugh track. People dismissed everything I wrote as alarmist and nonsensical.
Alas, here we are… a country that, as the Associated Press recently reported, “grows more polarized.”
As the AP wrote: “Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history.”
The news service noted that increasingly, conservatives are migrating to red states, while liberals are headed to historically blue states, or blue cities within red states.
At some point, this is naturally going to lead to big and challenging questions that will test, strain, and ultimately break the ties that (already tenuously) bind Americans together. Wealthier blue states will want nothing to do with funding less wealthy red states, and conservative red state voters are going to want nothing to do with liberal belief systems.
A split is coming. It’s one of my other super shocks in the works—a political crisis that fundamentally reshapes America. I think it happens before 2030 arrives, likely in the 2027-2028 timeframe.
There’s nothing any of us can do to stop that. This train is already in motion and approaching top speed. All we can do is prep for the fallout. Best thing we can do is own non-dollar and safe-haven assets: gold, bitcoin, and Swiss francs. It’s the same prescription as with America’s debt crisis above since both events will have a similar impact on the dollar.
And with that, we’ve reached the end of this month’s Wire. If you have any feedback or topics you’d like me to address in a future issue, you can reach me through the contact form on the Global Intelligence website.
Thanks for reading and for being a Global Intelligence subscriber.
