Armed protesters stormed the US Capitol building. An historic moment I’ll never forget…
That people died assures that we’ll see politics at its worst as a result. For instance, we’ll probably see more infringement against the right to keep and bear arms going forward.
There are many things I could say about all this, but the aspect I want to focus on as an investor is the way mainstream media is plastered with headlines about how this is all Donald Trump’s fault. Twitter and Facebook have shut his accounts down. There are new calls for removing him from office.
I am not saying that Trump is an innocent bystander.
I do say that Trump is a sign of our times—not its cause.
A politician is someone who sees a parade and jumps in front, shouting “Follow me!” It’s important not to lose sight of the fact that the parade was already underway when this happens.
Specifically to investors, I want to stress that it would be a big mistake to think that now that Trump is headed out, “Trumpism” will fade away.
In fact, it’s not Trumpism.
Even if Trump himself were to have a heart attack tomorrow and leave the field of battle, the conflict would continue. It might even make it worse if Trump became a martyr figure.
Key Point: Like it or not, the MAGA movement—like the Tea Party movement before it—is an expression of a large and important part of American culture.
The great danger is that people in that culture and their ideological opponents have become so deeply at odds, dialog has all but ceased.
And when irreconcilable opponents can’t talk, it’s common for them to resort to their fists.
The only surprise I felt watching events yesterday was that the authorities in DC were so ill-prepared for the violence that anyone could see coming. Indeed, there were vocal warnings.
Blue vs. red…
It was once blue vs. grey.
And the outcome of that conflict was unspeakable devastation.
I do hope it doesn’t come to that again. But frankly, with dialog at an end (both sides shouting slogans is not a dialog), I don’t see how the escalating conflict can be diffused.
But I’m not here to lament the sad state of human affairs in the world today. I’m here to offer guidance to investors.
Here’s how I see the US context for the next few years:
- The red vs. blue conflict will continue. This will have political and social consequences, and those will impact investments.
- The deep divide in the US will have financial consequences for business and investors, depending on which jurisdictions they are domiciled in. State laws and regulations may become more important, not less, in the years ahead.
- The division between Wall Street and Main Street is not sustainable. Something must give. I think it’ll be Wall Street that gives.
- Political instability is not good for business, but it is good for safe-haven assets like real property and monetary metals.
- Democratic control of both chambers of Congress as well as the White House—at a time when a pandemic justifies the most extreme measures and the Fed is telling legislators to go ahead and spend all they want—is almost certain to lock the money-printing presses in overdrive. I do see higher inflation ahead.
- Federal funding for new green energy infrastructure may be a boondoggle, but it’s almost certainly on the way. This is very bullish for key energy metals, including copper, nickel—and silver.
- The Biden administration is likely to undo as much of what Trump did by executive order as it can via its own executive orders. Resource investors should watch out for a much less cooperative EPA, US Forest Service, and even BLM as well.
- Wall Street doesn’t seem to fear the Biden/Harris tax agenda—but watch out when it does.
The bottom line for me as an investor is that all of this—as well as the continuing fallout from the COVID-19 shutdowns—is very bullish for monetary metals.
But if this is so, why did gold and silver drop when the news broke about the Democrats winning control of the US Senate?
Well, first off, it was a minor fluctuation that left gold above $1,900 and silver above $27 at the close.
As for why, the US 10-year shot up, creating the impression of higher real rates, which does tend to correlate inversely with gold. The US dollar was up as well, which is a headwind for gold.
Again, it’s best not to get all worked up about daily fluctuations. It brings little understanding, but plenty of heartburn.
Fact: Gold and silver had a great 2020.
Though I don’t like the political and social direction the US is taking—and I fear the deepening conflict as a result—the next four years look better than ever for commodities and monetary metals.
Key Point: We don’t need higher gold and silver prices to make money.
The best mines and projects can deliver in spades at current price levels, and even lower.
As a human being, I am sad today. As a resource speculator, I’m an extremely optimistic bull.
But as always, I’m a disciplined one.
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