Cash is in Trouble InvestorPlace

Cash is rubbish … huge government spending and ruining dollars … how to protect your wealth

Get out of cash.

Own stocks, real estate, bitcoin, gold, etc.

Every road leads to ruin. EVERY way.

This warning comes from our CEO, Brian Hunt.

It comes from an InvestorPlace internal email he sent yesterday to a handful of colleagues.

I asked for permission to reprint parts of it today Digest, because it contains a hard-to-hear, yet critical truth.

As an investor, you must be aware of this truth. In fact, it is crucial. It’s going to make a huge difference in your wealth, whether you see it coming or not.

In short, we are at a moment of sea change in our nation.

We are entering a very different era for America … for the US dollar … and for unknowing citizens who don’t know what’s on the way.

What is to come will be cruel to savers, and many Americans, for that matter. But it will also cause some assets to soar far above anything we have seen before, which will reward investors who set themselves up now.

But the truth? This new age is not just about “coming” – it’s already started, which means getting your assets in line now crucially.

So, today, let’s look at what’s going on. But more importantly, let’s take a look at what you can do to protect your wealth this decade, and even help it blast multiples higher.

*** Who would have guessed?

For newer Digest readers, Brian Hunt is our CEO. Beyond InvestorPlace’s helmet, he is a highly successful investor and trader.

Fortunately, he enjoys passing on his knowledge and experience. Many times, this comes through internal emails here at InvestorPlace, like the one he sent yesterday.

Turning to that email, here is Brian (quote):

… US dollars have just hit a multi-year fresh low.

Who would have guessed printing trillions on trillions of dollars… blasting the federal budget deficit… blasting the cost of the government burden on tax payers… while also facing the prospect of exploding entitlement spending over the next few decades…

Would it lead to currency ruin?

Of course, I’m not surprised it’s happening. After all, for a long time, we’ve been saying that every road leads to ruining dollars.

Now, let’s back up to make sure we’re all on the same page …

*** You probably know that the US government has been spending well beyond its capacity for years

In 2019, the United States ran its first $ 1 trillion budget deficit since 2012. This amount was 26% more than the budget deficit in 2018… and up a staggering 122% since 2015.

Those figures are for the annual budget deficit only … which is like comparing your annual salary against your annual expenses.

As for total debt?

At the end of 2019, our national debt TOTAL was $ 23 trillion … higher than ever.

For context, if all Americans were called upon to repay this debt, and the amount was divided equally, in 2019, every citizen would be owed $ 69,060.

That’s a steep bill given that nearly 40% of American adults don’t have the savings to cover the $ 400 crisis cost.

While most US citizens don’t pay these statistics, those who understand accounting or economics find it daunting.

And remember, these debt numbers are about 2019. A year ago, we had no idea what was to come in 2020 – and how it was going to make our national debt situation much, much worse.

*** The COVID-19 pandemic has been like kerosene on fire, blasting our national debt

In response to the pandemic, the government pumped more than $ 4 trillion into the economy.

Of course, the government did not tap a large, rainy day fund to get this money. There is no rainy day fund (or “lock box” as Al Gore used to say).

The US government created that $ 4 trillion out of thin air, which damaged its rapidly declining balance sheet further.

But words don’t really do justice to the scope of our national debt. So, below, you can see how it has evolved since 1900.


Now, keep in mind, our politicians are soon likely to pass another one stimulus package with a price tag of somewhere around $ 1 trillion.

While that amount is huge, it is nothing for President-elect, Joe Biden.

Referring to the latest $ 908 billion stimulus offer from a bipolar group of law makers, Biden said the amount would be “at best just a lower payment” on a much larger bill once he takes office.

*** Baseline – the United States has more money for more people than any country in world history … and it’s going to increase

We need more money than we can possibly pay back with solid money.

So, what will our politicians do?

Will they buckle up, re-spend in spending, and make tough but wise financial decisions?

No, they’re going to repay our debts with “funny money” – money created out of thin air.

The technical term for this is “currency debasement.”

Return to Brian’s email:

There is no political will to cut government spending. Too many voters receive a net tax now. They love to vote their own money from their neighbor’s wallets. They love more and more government programs. They don’t think for a second about how huge government spending is damaging the country’s long-term health.

This means that, nowadays, any politician running on fiscal responsibility is supposed to be beaten like a narc at a biker rally … and so the only way to pay the huge and growing liabilities is with money a ruined, depreciated currency.

This means one thing …

The coming age of inflation, and the decline of the US dollar.

*** It’s already happening

In the yesterday Digest, we identified a headline from Financial Times this week: “US inflation expectations hit 18-month high on vaccine hopes.”

Also, from yesterday, legendary macro-hedge fund manager Paul Tudor Jones said in an interview:

I think the stock market is on a combination of a fiscal beatdown that we have never seen before in history, nothing like this …

… You’re going to see commodity prices in a rally, you see inflation coming back. There will be a whole series of things that, again, I think are largely baked in the cake.

We can also see this dynamic already in action by looking at what Brian directed towards the end of this Digest – US dollar hits new multi-year low.

We can see this by looking at the US Dollar Index. It is a measure of the value of the US dollar compared to the basket value of six major global currencies – the Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Krona from Sweden.

Below, you can see it drop to levels not seen in more than two years, rapidly approaching its 5-year low.

*** For savers with their money in dollar-denominated savings accounts, here’s what poorer looks like – and don’t expect it to stop

You are likely to be aware that President Joe Biden’s treasury secretary nominee is Janet Yellen. He served as Chairman of the United States Federal Reserve under President Obama.

Speaking on Tuesday about the coronavirus and its impact on the economy, he said:

It is an American tragedy and it is vital that we move quickly. Inaction will produce self-reinforcing deterioration, causing even more destruction…

(Translation – we need to spend…)

Yellen went on to say that it is important that the economic recovery leaves no one, and promised to…

… Find a shared purpose to manage the pandemic and build our economy back better than before.

(Translation – and keep spending…)

Did she finish with…

I pledge as secretary of the treasury to work every day toward rebuilding their dream for all Americans. For the American people, we will be an organization that wakes up every morning thinking about you, your jobs, your pay checks, your struggles, your hopes, your dignity and your unlimited potential.

(Translation – and when you think you can’t spend more, reach deep, and spend much more.)

The reality is that Yellen will be a strong ally of Biden’s spending proposals. Now, consider what those proposals are …

Biden supports spending an astronomical $ 2 trillion on restructuring our energy grid to combat climate change.

Biden has introduced a $ 1.3 trillion plan to make huge investments in US infrastructure, aimed at creating jobs and rebuilding roads.

Biden plans to spend $ 775 billion on the so-called “21st Century Care and Education Workforce,” which will focus on day care and care of the elderly.

Biden has approved a plan to spend an estimated $ 750 billion on higher education. The main aim of the scheme is to make community college free for up to two years.

Biden has laid out a plan to expand Obamacare by spending $ 750 billion over the next 10 years. This will undoubtedly provide more and more social welfare programs paid for by taxpayers.

Overall, the Responsible Federal Budget Committee (CRFB) estimates that Biden’s plans will increase the national debt by $ 5.6 trillion, possibly up to $ 8.3 trillion – and this excludes any COVID-19 relief offers.

Here’s more from the CRFB:

Debt would rise from 98 percent of Gross Domestic Product (GDP) today to… 127 percent under Vice President Biden…

Now, question…

How long could you spend 127% of your income without it destroying your finances?

Baseline, Biden has pledged loudly and often intends to remake America … with government control and spending leading the way.

The result will be one of the largest banknotes depreciation in history.

Keep in mind, the buying power of the US consumer dollar is already in the toilet compared to history.

Below is a chart from the Federal Reserve Bank of St. Louis. It shows the buying power of the consumer dollar.

The chart gives you a big picture sense of how much “stuff” your dollar can buy today compared to the past.

Today, we are at the lowest value on record (since 1913):

But in our current trajectory, it’s going to go much lower from here.

*** At this point, let’s pause

We just covered a lot of bad news.

So what can you do about this?

Well, it’s simple …

If the dollar is going to weaken, that means more dollars will be needed to buy the same basket of assets as before, all in equal measure.

So, say gold used to cost $ 1,800. Well, all else being equal, if the dollar loses value, that means more dollars will be needed to buy the same amount of gold as before – say, $ 1,950.

This bear market in cash is at the same time a bull market in gold. (This dynamic echoes Brian’s wonderful piece on the topic I encourage you to read here.)

If your wealth is in gold, not the dollar, then the buying power of your wealth has remained strong relative to the dollar – possibly even increased.

But if your wealth is in dollars, you only became poorer.

It’s not just gold.

This dynamic one will play out with many different asset classes – strong stocks, elite altcoins, quality real estate, valuables, fine art, collectibles, wine…

Not just cash.

My colleague, Luis Hernandez, and I have made this argument several times in the past Summaries, but it’s at a point now where we’re “pushing the table” on it. It’s that important.

Please understand, I’m not saying catch no cash. You still need some on hand for basic living expenses, crises, and even buying opportunities in various investment assets.

But overall, holding a large chunk of your net worth in cash – and planning to keep it in cash – is extremely dangerous to your financial well-being.

Let’s conclude today by returning to Brian’s original quote, as he sums it up quite nicely:

Get out of cash.

Own stocks, real estate, bitcoin, gold, etc.

Every road leads to ruin. EVERY way.

Have a good night,

Jeff Remsburg