 Gold (and Silver) Chart is Hyperbolic Whenever a commodity rises 80% in price within 1 year you have to sit up and take notice. I don’t have any insights into why this has occurred with gold and silver this year but I don’t think it is a coincidence that US Government debt has risen to close to $38 trillion as we speak. That is an increase from $37 trillion just this August 8th and $36 trillion last November. Apparently, this is above the mandated ceiling set by the US Government which effectively shuts down the US but of course this is just a form of kicking the can down the road. Tariffs aside, there will have to be a massive decrease in Government spending just to get the debt under any semblance of control. Stocks Have Also Become Inflated It is not a surprise to me that the equity markets have also hit all time high levels as the denominator (US$) has been diluted. What has surprised me is that the US$ has held up quite well against other world currencies. I chalk this up to the fact that this playbook of flooding the market with dollars has been taken up by all other major economies around the world. Obviously, this is inflationary with the winners being capitalists and the losers being the average worker. I am still not overly worried as I can still find pockets of value in small capitalized stocks. Prior to 2020, I had trouble finding any fundamentally cheap stocks and held most of my investments in preferred shares collecting dividends. So until value dries up, I am still fully invested in equities. Bonds not so much as the possibility of lower interest rates is getting less likely because of inflationary pressures like Government debt. Some Valuations are Crazy
I follow BRP (Bombardier Recreational Products) shares quite closely as this is a heavily manipulated stock - by Bain Capital and its friends – and this gives me a read on the optimism versus pessimism in the market. Are we at the peak of optimism in growth stocks influenced by the introduction of AI (Artificial Intelligence)? Well, BRP has risen from roughly $45 only six months ago to $92 today. They make Ski Doos and Sea Doos along with other recreational toys. So, we are not talking about any revolutionary product. Just like Dollarama they are backed by Bain Capital. What I “like” about Dollarama is they keep paying increasing dividends out of les and less cash. In fact, they are going into more and more debt just to pay back shareholders in dividends and share buybacks. This is lunacy at its finest. Except this is also effectively what the US Government is doing too. For me, I am just looking for how many people are getting on the bus (buying into the markets) and how many are getting off. Once the bus is full, we will definitely have some problems. Are we at the point of maximum optimism? I don’t know but I’m not recommending any go-go (growth) funds. Value funds have performed well recently and still have a way to go. |
