Insights From Our Conference

First, a news flash: Donald Trump is proposing another tax cut.

‘Huh?’ wondered Washington and the media. ‘How are we going to pay for government? The deficit is already out of control.’

‘The Donald works in mysterious ways,’ replied his fans.

But it’s not so mysterious to us or our dear readers, is it? No one has more to lose from a correction than Donald J Trump.

He’s claimed credit for the bubble on Wall Street…and staked his credibility (to the extent that he has any) on the expansion on Main Street (such as it is).

Not only that, but his personal fortune in real estate was built on artificially low interest rates, which boosted New York metropolitan area property values. Higher interest rates could cost him billions.

So how can he keep the boom going? Pump in more money! That’s why he is attacking the Fed’s ‘normalisation’ policy…And it’s why he’s preparing the nation for another tax cut.

Stay tuned…This is going to be exciting.

 

Gee whizzy

Meanwhile, one of the big subjects at last week’s inaugural Legacy Investment Summit in Bermuda was the effect of new technology on the future.

Several of the speakers — Glenn Beck, Doug Casey, Jeff Brown, and Teeka Tiwari, for example — were remarkably positive.

They believe technology is going to unleash some gee-whizzy things in the years ahead…and that the world even 10 years from now will bear little resemblance to the world today.

It will be a ‘glorious time,’ said Beck, with more changes and innovations in the next 10 years than in the entire history of mankind up to this point.

This progress, they say, will come from artificial general intelligence (AGI) — a term we had not heard before.

AGI refers to the ability of a machine to do anything a human can do…and more. Apparently, it will be able to do things we didn’t even know needed doing. And maybe some things we don’t want done, too.

So we’ll take the other side of the trade.

Information technology hasn’t brought about a glorious future so far; it has just created more noisy distractions. And today, we’ll explain why two of the noisiest — Facebook and Google — are likely to grow quiet in the years ahead.

But before we get to that, let’s pass along some ‘takeaways’ from Bermuda…

 

Some takeaways

Cryptocurrencies — Two analysts, Teeka Tiwari and Marco Wutzer — editors of Palm Beach Confidential and Disruptive Profits, respectively — were very positive and upbeat…They’re sure that cryptos are going to the moon.

Why?

The big Wall Street firms have realized that there’s a demand for crypto products. When they start buying cryptocurrencies to feed their new crypto products to sell to clients, cryptos will go mainstream…and they’ll go up.

Our view: Maybe. Maybe not.

Gold — This was, after all, a ‘hard-money’ conference. So several analysts were bullish on gold.

One argument in its favour: Consumer prices will rise as the trade war begins to bite. Investors will flock to gold to protect their purchasing power.

Another: Political crises…sanctions against Iranian oil…election results — there are any number of pins that might prick this stock market bubble. Investors will want gold to protect themselves.

And another: Gold has been in a bear market since July 2011; it’s time for a trend change.

To which we will add one of our own: The world’s debt is unpayable. It must be either inflated away…or deflated away.

Donald J Trump, the ‘King of Debt,’ is an inflation guy. He’ll do everything he can to make sure the coming debt crisis is resolved with inflation, not deflation.

Our view: Gold is now fairly priced. The coming crisis (whatever form it takes) will probably mean a higher gold price. But we do not recommend gold as a way to make money; we only recommend it as a way not to lose money.

Pot Stocks — Nick Giambruno, editor of Crisis Investing, made a good case for the expansion of the marijuana trade in the US

Once politicians see how much money can be made by making cannabis legal, they will get behind it. Even the Trump administration is said to be eyeing weed and preparing to remove the federal prohibition.

Sales will go up, and so should the major suppliers’ stock prices.

Our view: Nick is probably right. But weed stocks have entered dangerous territory.

Vancouver is the leading market-maker. But whenever something gets red-hot in Vancouver, it’s time to get out.

Former mining exploration companies are now switching to weed — just as they added ‘dot-com’ to their names in the late ’90s and ‘blockchain’ or ‘crypto’ in 2017.

Most pot stocks will disappear. A few will probably make good money.

Commodities — Billionaire resource investor Rick Rule gave a coherent and persuasive argument in favour of commodities, as he always does. They’ve been despised for many years. So apart from the shale oil scam, little money has gone into new exploration.

The commodity cycle is a long cycle, Rick explained. It takes many years for a new mine to begin supplying the market.

This means that between the time the need is rediscovered and the time the need is satisfied with more supply, there’s a long period in which stock prices in the commodity sector rise astronomically.

Our view: Rick is right. Commodity producers seem cheap. This is probably a good time to buy. But be prepared to wait.

Stocks — No consensus emerged from among the analysts at the Summit.

Jason Bodner, editor of Palm Beach Trader, pointed to the economic data as justification for higher stock prices ahead. And Jeff Brown, our own chief technology analyst, believes the bull market in stocks still has a ways to run. There were no raging bulls.

But the bears were also in attendance. Dan Denning, our co-author on The Bill Bonner Letter, shook the crowd when he told them they ought to expect stocks to be halved before the next bear market is over.

Our view: You make money by buying low and selling high. Stocks are high; this is not the moment to buy.

In addition, stocks are high for the wrong reasons — because they’ve been pumped up by fake money and unpayable debt. The money could disappear in a trice. The debt could vanish. Stocks could crash and not recover in our lifetimes. Stand clear.

 

Enrich society

But let us now turn to two of the biggest — and perhaps most overpriced — of all stocks: Facebook and Google. These are the companies, among others, that were supposed to make their shareholders…and the rest of us…rich.

Did they enrich the whole of society, like the giants of the Industrial Age? Did they bring growth and prosperity, like Ford Motor Company or Standard Oil?

Nope. Not even close.

Growth rates began going down after the ’60s. Hourly wage growth flattened in the ’70s. Google began in 1998. Facebook took off in 2004. Since then, what have these tech giants wrought?

Apparently, very little…Growth rates continued to sink over the past 20 years and are now only half of what they were in the ’60s. Real wages are scarcely more than they were when the new century began.

What the tech companies have given us are distractions that steal our most valuable resource — time. The average person now spends 11 hours per day on electronic media, leaving him less time to work…

…and, more importantly, less time to think.

More to follow…on why Facebook and Google are doomed…and why we are, too.

 

Regards,
Bill Bonner


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.


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