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Before August 1971, gold had (in real terms) lost an average of 1.5% each year since 1900. Since then, it has averaged 3.7%. August 1971 was the ending of the Bretton Woods agreement. That event, which moved currencies backed by gold to currencies “backed by government fiat,” has lead us to unprecedented debt levels and unprecedented asset prices. Debt levels and asset prices are putting us on a course to another financial crisis. Without a gold standard to keep governments in check, central banks and central governments have provided $34 trillion in stimulus. The fuel for crisis is present and the spark could come from many different sources.
Here are a few of the catalysts to be wary of:
- A full blown recession with a central bank and government out of ammo to combat it
- The Fed’s unwind doesn’t go well and interest rates rise quickly
- Deflation and more stimulus, and yes lower rates (bad again for banking)
- Inflated equity and bond prices unaligned with valuation
- Lack of liquidity in certain markets because of “macroprudential regulation” (R. Christopher Whalen, The Institutional Risk Analyst, September 25,2017)
- Financial imbalances in Italy and China
- Japan’s enormous balance sheet with its demographic issues
- Brexit not going well
- Worldwide contagion of populism
- Geopolitical uncertainty in just about every place on the planet
Playing defense against a swarm of global macro risks will not be easy, and getting out of risky assets completely does not seem prudent. The US and world economy seems to be standing on two feet. But for how long? No one knows when the next crisis will come and forgoing market returns comes with a penalty. Cash is a drag on performance but it’s cheap protection and it is very liquid. Being greedy in a market that is long of tooth and, by most measures, overvalued will at some point render a lot of pain.
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New Riskalyze Risk Assessments Go Live for New Salt Creek Accounts Starting October 1st
New accounts on the Salt Creek platform will begin using the new Riskalyze risk assessments beginning October 1st, 2017. The new account workflow can be initiated from the new account wizard on Salt Creek’s advisor portal. Advisors.SaltCreekInvestors.com If you need assistance using the new client portal, contact Bob Dunne.
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SCI Highlights
Riskalyze Webinar
Mark your calendar…
On September 20th we will be hosting a webinar presented by Riskalyze to demonstrate their award winning technology. Invitations with the details will be emailed this week.
If you want to test-drive the Riskalyze risk assessment with your next new SCI account, contact Bob Dunne for your login and to set-up a demo time.
New SCI Advisor Portal
Advisors.SaltCreekInvestors.com New to Salt Creek Investors? You just need a #Gnumber to get started. Existing Salt Creek advisors can access the portal using their email address and LSIA advisor number to login. Contact Bob Dunne with any questions or to set up a one-on-one demo. The new account wizard is now available on the advisor portal, existing Salt Creek advisors should use it for opening new accounts.
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