Update - January 11, 2022

The No. 1 Thing All Investors Must Know

I talked with a couple of pals in the industry yesterday. They’re gold bugs. One is a big-time gold dealer and the other creates truly unique investments for fans of precious metals.

We talked about the plans for the webinar they invited me to join next week.

When they asked me about the No. 1 thing that must be discussed… my answer was obvious.

We absolutely must talk about what’s happening with the Federal Reserve.

“The guy who gets ahead of its moves,” I said, “is the one who takes home the biggest prize in 2022.”

All parties agreed.

With the yield on the 10-year Treasury surging higher to start the year, a lot of investors are wondering if the free-money bonanza is over. As rates climb, many investors assume the market’s biggest and fastest gains are over. But are they?

Some context will make the answer clear.

Getting Warmer?

As I write, the yield on the 10-year Treasury is 1.77%. Yes, the yield is three times higher than it was in the summer of 2020. But that’s like saying the weather is three times hotter when the thermometer jumps from 1 degree to 3 degrees Fahrenheit.

It’s still darn cold. We’re still going to put on our hat and gloves to go outside.

With a bit more of a historical view, we can see that nominal yields have simply climbed back to where they were in March of last year… the height of the market’s cheap-money free-for-all.

Real yields (which subtract the market’s inflation expectations) remain lower than they were for most of last spring.

Again, this tells us that rumors of the death of easy money are exaggerated. Yes, it’s “warmer” out… but companies and individuals aren’t going to stop borrowing and spending just because rates went from “insanely low” to “ridiculously low.”

The price of money remains historically low.

That makes right now a tremendous buying opportunity.

Don’t Jump

But what if the Fed makes good on its promise to raise rates? Most folks expect three or maybe even four rate hikes this year.

Three hikes would barely pull real rates out of negative territory, and four would take us back to where we were in late 2019… when worries of a recession were pulling yields down.

Bottom line… our strategy remains the same. With real rates in negative territory, we must continue to focus on companies and opportunities that are actively taking advantage of dirt-cheap money.

It may be tempting to try to get ahead of things and start to rotate into the assets that will do well when real rates turn positive, but we could be a year or more from that – especially if my prediction of a recession comes true later this year.

Jumping ahead would be a mistake.

Gold Quietly Shines

Looking at our portfolio, you can see the power of our strategy. Despite a volatile market, our positions remain strong and profitable.

One company I’ll almost certainly talk about in next week’s webinar is Sandstorm Gold (SAND). Just yesterday, the gold royalty company announced record gold sales and revenue.

It sold the equivalent of 16,600 ounces of gold, good for $29.8 million.

Shares of the company jumped 4%.

It proves that owning a royalty company is a smart way to gain exposure to gold, especially when the price of the real stuff is stubbornly flat.

Stick to the strategy. It’s a proven winner.

If you’d like to tune in to next week’s free live webinar, simply click here and sign up.

Be well,

Andy