“Conservative investors sleep well.” — Philip Fisher (p. 135, “Maxims of Wall Street”)
Like most Americans, my wife recently went to the grocery store and stocked up on food and other essentials in preparation for the economic lockdown.
One of my favorite foods is Lipton’s chicken soup, which is highly nutritious and even medicinal for the common cold and the flu. That purchase reminded me of something.
I have a copy in my library of the bestseller, “Chicken Soup for the Soul,” by Jack Canfield and Mark Victor Hansen. We had Mark Victor Hansen speak at FreedomFest several years ago.
Flight to Safety
Today, in the midst of these difficult times, what is the chicken soup for investors? What is the best way to protect your wealth?
In bear markets, dividend-paying stocks have traditionally been a good choice. The extra income coming in every month or quarter helps cushion the fall. I’ve been recommending “growth and income” stocks for years in Forecasts & Strategies.
But this time around, with the government forcing most businesses to shut down or operate from home, income stocks have been hit hard. Investors fear that dividends may be cut or discontinued. I am hopeful that my core income stocks will be spared the knife, but the future is uncertain.
The U.S. Dollar is Strong
Fortunately, there is good news. There have been two great investments that have helped investors feel good about their portfolio: investing in the U.S. dollar and gold!
I have been recommending both this year.
Despite a weak U.S. economy, the dollar has enjoyed a bullish upward trend as other currencies are struggling even more than our own currency in America. The dollar is still the world’s safe-haven currency, and the demand for dollars is creating a liquidity crisis. I recommend an exchange-traded fund (ETF) that invests in U.S. dollar futures contracts against major currencies such as the euro, the pound and the yen, plus a position in long-term Treasuries. For more information, go to www.markskousen.com.
Gold as the Ultimate Hedge
Gold also has done well during this health care and economic crisis. It was $1,600 an ounce at the beginning and the end of March! Although the yellow metal rose and fell in between, overall, it held its own while the stock market collapsed. Gold is up 4% this year compared to minus 20% for the S&P 500 Index.
Gold has proven itself once again as a crisis hedge and safe haven. It may seem odd to recommend both the U.S. paper dollar and gold. Usually, when the dollar is strong, gold is weak. They tend to move in opposite directions. But during this crisis, both have offered a flight to safety. I have been recommending a gold ETF that has proven to be a solid choice during this crisis.
Paper Money vs. Hard Money
However, once the crisis ends in the next month or two, I expect the dollar to weaken and gold to rise sharply.
Here’s why the outlook for gold is bright — it is also an inflation hedge. This year, the Federal Reserve has once again adopted a “zero” interest rate policy and quantitative easing (QE), pumping trillions of new dollars into the monetary system. The money supply (M2) has been growing rapidly.
At the same time, Congress has gone on another spending binge, adding trillions to the national debt.
A super active fiscal and monetary policy can mean only one thing — more price inflation ahead. As Julian Snyder writes, “The impact of the rate of inflation on the price of gold is like tracking the footprints of an animal.” (p. 151 of “Maxims”)
I expect gold to move up to $2,000 an ounce or more in the coming years.
A Viennese Waltz Down Wall Street: A Golden Treasure of Wisdom
Only the Austrian and supply-side schools of economics understand the role of gold in today’s monetary system. All other schools of thought are anti-gold. In my book, “A Viennese Waltz Down Wall Street: Austrian Economics for Investors,” I have an important chapter on the vital role of gold and silver in your portfolio. See the section “A Tale of Two Dollars,” pp. 205-232. It includes the famous story of the time I tore up Milton Friedman’s $20 bill! See pp. 212-214 for a verbal fight over the gold standard.
George Gilder, the king of technology, said this about my book: “Mark Skousen is America’s leading economic author because he roots his luminous books in the real world, in the grand tradition of the great Austrian economists. He is the Hayek of our era.”
Now that everyone is sequestered at home these days, many people are searching for a good book to read. I suggest you curl up on your couch or in bed with a copy of “A Viennese Waltz Down Wall Street.” It tells the story of all the great Austrian economists, including Ludwig von Mises, Friedrich Hayek and Murray Rothbard, and how to apply their sound economics to your investments and business.
The price of this 250-page book is only $20. I will autograph each copy and pay for the postage. To buy this book, go to www.skousenbooks.com, or call Harold at Ensign Publishing at 1-866-254-2057.
The Calming Influence of the ‘Maxims of Wall Street’
At the same time, you also may want to buy a copy of my classic bestseller, “The Maxims of Wall Street: A Compendium of Financial Adages, Ancient Proverbs and Worldly Wisdom.”
Demand for my book is strong during this crisis. I’ve received several letters from investors lately who say that reading quotations from “The Maxims” has been comforting in these trying times when the market is tanking. I’ve been around the markets since the 1970s and have endured many crashes and busts. It never gets easy.
If you want a copy of the new 7th edition, go to www.skousenbooks.com, or call Harold at Ensign Publishing at 1-866-254-2057. The price is only $20 for the first copy and $10 for all additional copies (they make great gifts). If you buy a box of 32 copies, the price is only $300.
I know subscribers who have a copy on their nightstand. It is a good source of wisdom for everyone who is staying at home these days. As Dennis Gartman said, “It’s amazing the wisdom one can gain from just one line in your book. I read it every day.”
Good investing, AEIOU,
You Blew it!
Pennsylvania Turnpike Closes Down Truck Stops… Then Reverses Itself
By Mark Skousen
One of my long-time subscribers is the president of a nationwide trucking company. He told me that Pennsylvania Turnpike officials had closed all the truck stops along the turnpike in response to the coronavirus panic.
He said, “It’s just killing our business.” Imagine truckers working overtime hauling food and other essential goods that are desperately needed to restock shelves, and now having nowhere to stop and rest. Unbelievable.
As my friend told me, “It also proves that government personnel, no matter how smart or cordial, just do NOT understand how businesses or our economic systems work.”
Fortunately, government officials heard the complaints loud and clear. Two days later, PennDOT and the Pennsylvania Turnpike Commission reopened and restored services at rest stops to meet the needs of truck drivers.
It is time government officials recognized that business knows more than they do, and it should be left up to free enterprise to make the best decisions for their customers, employees and suppliers, not some top-down bureaucrat telling them what to do. See my article, “Persuasion vs. Force,” for more: http://mskousen.com/articles/politics-and-liberty/persuasion-vs-force-by-mark-skousen/.