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“The only winning move is not to play”…
The Wall Street Journal reports the mood out of last week’s World Economic Forum is somber.
The annual conference in Davos, Switzerland, boasts some 2,500 attendees. They represent some of the world’s top business, political, and intellectual names.
This year’s overriding theme was dire: The world’s central banks can’t “save” us anymore.
The banks have been on an unprecedented money-printing experiment since the Great Recession began in 2008-2009. Bankers call this experiment “quantitative easing” (QE).
They’ve also lowered interest rates worldwide to near zero. (Some places, like the Netherlands, now have negative interest rates.)
The banks’ goals were to raise asset prices, improve balance sheets, and thereby get the global debt-fueled economy moving again.
The first part happened. Asset prices are higher almost across the board. But the second part of the equation—increased global productivity growth—never materialized.
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Industry moguls vented their frustrations in Davos…
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“There may be no limit to what the [European Central Bank] is willing to do, but there is a very clear limit to what QE can and will achieve.” – Alex Weber, chairman, UBS AG “If central banks double down on their policies of QE, ZIRP [zero interest rate policy], and NIRP [negative interest rate policy], it could cause a loss of confidence in central bankers, paper money in general, or one or more currencies, and lead to a collapse in bonds and stock prices.” – Paul Singer, $26 billion hedge fund manager “The only thing we can do [now] is extend credit we would normally not do, and that leads to an accident waiting to happen.” – Ralph Hamers, chairman, ING NV |
Perhaps the most insightful quote came from Nikhil Srinivasan. He’s chief investment officer for $480 billion European insurer Generali…
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The trade now is to hold as much cash as possible [emphasis added]. Equity markets could go down 15% to 20%. |
These quotes won’t surprise longtime Palm Beach Letter readers. They know the move towards holding more cash is just beginning.
It’s due to the titanic shift underway in the world’s currency markets. The U.S. dollar’s now rising against all other currencies.
As Tom explained in November’s PBL…
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The crash all around the world in foreign currencies will throw out tons of opportunities. By the time this trend is over, the world will look starkly different. People will feel very comfortable holding money in cash—specifically, dollars. There will be an almost greedy feeling about saving. Investors will hoard money. This will be due to a general apathy toward investments. Not just stocks. There will also be a general disdain for bonds, commodities, real estate, and foreign investments. In essence, a general movement away from investments. Away from risk and toward conservative, safe, cash-like investing. |
The dollar bull market will wreak havoc on most assets… and it’ll last for years. Tom’s recommending positions that will benefit from the chaos to his Palm Beach Letter subscribers. One of them is already up over 18% in two months.
If you’re wondering how to protect your portfolio from the limits of central bank intervention, watch the four-minute video below.
It features an interview with legendary hedge fund manager Ray Dalio. Dalio’s Bridgewater Associates has $169 billion under management.
If you don’t have time to watch the whole video, here’s Dalio’s final advice for investors:
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…the best thing for the average person is to know how to create a well-diversified portfolio. |
That should resonate with longtime PBRG subscribers. Real diversification—through intelligent asset allocation—is the core of our approach to protect your wealth… in all economic environments.
We just released our 2016 Asset Allocation Guide. It’s the most comprehensive diversification “how-to” manual in investment newsletter history. And it’s the blueprint for “sleep-at-night” security… as the rest of the investment world crumbles.