Update - December 15, 2020

Big Gains in Our Modern Asset Portfolio

The Modern Asset Portfolio is doing exactly what I designed it to do…

It’s outpacing the market and doing it with far less risk.

Take our latest position, for example. If you took the advice I just laid out in the December issue to buy shares of Afterpay (ASX: APT), you are already up nearly 20% on the position.

Very nice.

It’s the same with our play on digital money… Monero (XMR). It’s up by more than 60% since I recommended it in early October.

And our play on rising taxes – Avalara (AVLR) – that we got into in November is up another 15% or so.

That’s three positions in three months that have all easily outpaced the broad market.

There’s an Australian credit provider… a private form of money… and a company that makes tax compliance much less complicated.

At first glance, they don’t have all that much in common.

But when we dig deeper and start putting some clues together, we see they have one very important thing in common. They all are poised to take full advantage of one of the most rapidly evolving economies in world history.

The “Real” Story

Take a look at the chart below. It’s a long-term look at a number that I include in every monthly issue. It depicts the “real” interest rate on the 10-year Treasury. That’s the nominal rate that is popularly portrayed by the media each day… minus the “official” rate of inflation. (Who knows how far in the red we’d be if we measured the real-world inflation rate.)

This simple chart tells us a lot. A savvy economist could write a book on it.

The first thing it shows is that the long-term trend is not good.

At the minimum, an ultra-safe bond should net more than the rate of inflation. Historically, that’s never been a problem. After all… earning money on the cash we lend to somebody is a high covenant of any healthy economy. The idea dates back thousands of years.

But in today’s ultra-stimulated world, where free money is piling up at a once-unfathomable rate, that’s no longer the case. In fact, nine months (and many trillions of dollars) into this COVID crisis, real rates continue to make record lows – deep into negative territory.

It’s a function of government-mandated interest rates that are locked at zero and the rising inflationary pressure of all of that spending.

It means that – despite headlines that blindly declare inflation dead – inflation is quickly gnawing away the foundation of any portfolio that’s built on the rules of yesteryear.

That’s key. It’s a big part of the issue that I’ll have in your hands in the next few weeks. It’s our popular yearly “big prediction” issue.

Disruption Is Here

For now, though, please heed the advice from our most recent issues. Most simply, grab shares of the stocks I’ve recommended… especially an international disruptor like Afterpay. Its stock is rising quickly. You’ll almost certainly have to pay more for your shares next week.

The idea behind the company ties perfectly to the chart above.

Consumers know that high interest rates on credit cards are doubly dangerous when real rates are so low. They know that their monthly charges are obscene and harmful to their financial health.

That’s why they’re rushing into the zero-rate offerings from Afterpay. They can get nearly the same credit offering… without crazy fees.

And as I said in the December issue… what started as a big hit in the Australian market has now spread across the globe. Here in the States, in fact, the company just hit a big milestone in November.

It posted $1 billion worth of U.S. monthly sales – up more than 180% from the same time a year ago.

All told, the company reported $2.1 billion in sales last month… up 100% from last year.

That’s huge growth. But it represents just a fraction of the overall potential.

If you don’t have shares yet… get them.

A Golden Tether… Just Broke

But there’s another asset in our Modern Asset Portfolio that isn’t getting the attention it deserves these days… gold.

Take a look at this chart from our pals at Crescat Capital…

Using the real yield on the 5-year Treasury as its proxy, the chart shows a clear and obvious connection between gold and real interest rates. It makes sense. The further real yields go negative (in this chart, that means a rising black line), the less investors mind that gold pays no interest.

But we see a distinct breaking of the trend starting around August as the markets got mixed up in stimulus and election hoopla.

It’s a bullish sign for our gold allocation, as the trend will eventually resume.

There’s a strong chance the shiny metal will bounce back to its record highs around $2,000 per ounce between now and the inauguration.

Again, that makes now a good time to buy.

I’m quite excited about the Modern Asset Portfolio. By tossing aside outdated market gospel and instead thinking about investing in more modern, real-world terms, we’re far outpacing the herd.

The trend will only favor us more and more as the months go on.

Congratulations on the gains.

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