July 1 and the implementation of FATCA have come and gone, and those who had predicted an immediate crash of the dollar have been proven wrong. And now, we have some who are calling for the stock market to crash as well. After all, stocks are at an all-time high, and even the “Warren Buffett Indicator” is on sell-alert status. Is there any merit to these predictions? Can we believe them given that so many were wrong on the dollar and FATCA? And where do precious metals fit into any of this? Vince Miller and Will Hart break it all down for you in this week’s Market Report.
Mark Alyn: This is the Market Report from the Birch Gold Group. Hi, I’m Mark Alyn. We are joined in studio today with Vince Miller for the Birch Gold Group, and also Will Hart with the Birch Gold Group. Gentlemen, welcome to the Market Report.
Vince Miller: Hi Mark. How are you?
Will Hart: Hey Mark. Thanks for having me.
Mark Alyn: Thanks for being here. Let’s talk about FATCA. It just went into effect and the dollar did not crash as FATCA became law. What now?
Vince Miller: Well Mark, that’s a good question. I don’t think we actually ever expected the dollar to crash, per se, with FATCA. Personally, I think that there’s actually no president that’s going to allow that to really happen under their watch. It just doesn’t seem plausible that that would happen. However, just because the dollar didn’t crash didn’t mean that there’s not going to be some short, mid, and long-term effects on the dollar itself. One of the things that FATCA does as we’ve spoken about it before is that it encourages institutions to take their money and just invest it elsewhere and not bring their dollar here to the United States.
Mark Alyn: In other words, institutions are not investing in the dollar. They’re investing in other things like gold, silver, etc.
Vince Miller: That’s right. We are seeing that of course.
Mark Alyn: We didn’t expect it to crash the value of the dollar, but did we have some kind of anticipation, Will, that FATCA would have some effect?
Will Hart: Well I think a lot of the experts had predicted that there might be some sort of shake up immediately on July 1st, which had a lot of people of scared. You know, we here at Birch never felt we’d be waking up and it’d be the end. We just knew that there would be pressure on the dollar and that’s kind of what we expected and that’s kind of how it all played out. But again, to answer your question, we don’t know the ramifications down the road. You know, what are countries, behind closed doors, what are they saying about all this?
Mark Alyn: You said, “Put pressure on the dollar.” Can you explain that?
Will Hart: Sure. So here we are asking other countries, in a previous segment we had, where we talked about countries saying, “Wait, this is not how we do business. We do not request these types of transactions and so forth that we do on our own citizens, but we’re going to do it for the American citizens that bank with us?” And other countries may say, “You know what, this is ridiculous, enough is enough.” And another country may step out of the shadows and say, “Hey folks, we want to take over as the world reserve currency and we want to kind of maybe throw our hat in the ring and we have a gold backed currency.” I don’t know. Nobody knows.
Mark Alyn: So the Will and Vince island country, some place, could say, “We’ll do it.” And places like Switzerland or the Cayman Islands could say, “We’re not going to do it.”
Will Hart: Yeah, exactly.
Mark Alyn: Okay. Let’s talk about the longer term issue. How will FATCA, in your opinion, affect the economy here in the U.S.?
Will Hart: Based upon everything that I’m reading, the only thing that I can see how this is going to affect us, again, clients will call up and say, “That really doesn’t concern me because I don’t have a foreign bank account, so I’m not going to be hit with these taxes that the IRS is going to impose on me, you know, with my hidden monies in other countries.” How it may affect you and me is simply the fact that the dollar loses further value or perceived value in the world.
Mark Alyn: And so we won’t be able to buy as much. A loaf of bread will go from $4 to $6.
Will Hart: Exactly, we don’t know how this is going to play out.
Mark Alyn: Let’s talk about the stock market as to how it relates to all this right now. I guess a lot of experts are saying that the stock market is overvalued. First of all, what does that mean, the overvalued stock market?
Will Hart: Well, basically you have a market that is showing very, very high, S&P 500, we’re talking historical highs. And yet unemployment is at an all-time high, you’ve got companies that are struggling but yet if you look on the books, it looks like we’re thriving. It looks like our economy, our market is doing amazing. When in reality, we kind of all know where we’re at, and with our debt and everything else that’s sitting out there. So to answer your question, you know, these values, again, a lot of it is perceived value.
Mark Alyn: Vince, a lot of experts are saying that we potentially could be heading for another crash just like we experienced in about 2008 or so.
Vince Miller: That’s right. That’s absolutely true. Hedge fund manager Mark Spitznagel said that we have no right to be surprised by a severe and imminent stock market crash. In fact we should absolutely expect it. John Bogle, the founder of the Vanguard mutual fund made a rather startling statement as well. He basically predicted that the stock market would decline by 25-30, even 50% in the coming decade. These are guys at the top of their profession who know their stuff. And these are guys who have a vested interest in equities. And I really think it goes back to, the overvaluation started when the government started basically buying up the junk debt with Quantitative Easing. And now that the government is pulling back on QE3, as we talked about before, what it does is it removes the inflow of free money. And now we’re going to see what the whole thing is really made of when the Fed is not paying the bill.
Mark Alyn:We talked about Quantitative Easing on another podcast not long ago. So if you don’t know what that is you can always check our archives. This is the Market Report from the Birch Gold Group. Our guests in studio Vince Miller with the Birch Gold Group and Will Hart, also from the Birch Gold Group. We have to expect a crash, it’s not if, it’s when?
Will Hart: Correct. Vince mentioned a couple of well-known individuals, but I think the one that most people recognize as far as a name is billion dollar investor Warren Buffet, who is rumored to be preparing for the crash as well. There is what he calls the Warren Buffet Indicator, also known as the total market cap to GDP ratio, and it’s breaching sell alert status and a collapse may happen at any moment.
Mark Alyn: At any moment. How would investing in gold, at least part of my portfolio, protect my investment?
Vince Miller: Well Mark, that’s a good question that you’re asking and I think that that’s a question people have been asked themselves over the years. The thing that I have noticed as I’ve talked to people more and more, the one thing that they always tell me is they say you know, “I wanted to buy gold 12 years ago, my stock broker talked me out of it. I wanted to buy gold 5 years ago, my stock broker talked me out of it. Here I am today…” The sentiment seems to be, among investors, is that this feels a lot like 2007, 2006, where there was an escalation of the economy where everybody was saying how high can we go, when will this stop, how far can we fall? And I think as we’ve mentioned before, most people will tell you the general rule of Wall Street is to buy undervalued assets and sell overvalued assets. And I think it just comes down to the fact that the Dow is at an all-time, the S&P are at record levels, and gold is at a 3 year low. So you have to determine what you truly believe. Do you think it’s going to continue to go up as they did with the housing market, where they kept betting on the housing market never to fail, never to fail. And it wasn’t just individuals that bought into it, it was institutions that were selling these products. It was the government and governments all over the world that were buying those funds, those derivatives and those mortgage backed securities. So here we are today, history does not normally repeat itself so soon afterwards and I know that most people have a very short-term memory, I know I do. I don’t remember what I had for dinner last night. So 2007, 2008 seem like a long time ago but I do know from talking to people, when they look at the spreadsheet, they look at their IRAs or when they look at their account statements, they still feel that pain of the losses that incurred back when the markets crashed in 2008.
Mark Alyn: And yet, even if you have money invested, your buying power, that value of the dollar, has certainly declined over the last 5 or 6 years.
Vince Miller: Right, I think that’s the real point here. I think the way that when people anticipate a dollar crash, I think what people tend to look at is they always look for a cataclysmic event. And I think the way the dollar crashes is not something that you wake up one day, you turn on the TV and you say, “Oh my God the dollar is gone, there’s no value.” It doesn’t happen like that. It happens over time. It’s that old saying, how do you boil a frog? You put him in boiling water, he’ll jump right out. But if you put a frog in just cold water and turn the heat up a little bit, gradually over time, eventually the water will start to boil, the frog won’t move out of the water before it dies. And I think that dollar devaluation is happening as we speak. As we said, gas is at a 14-month high right now, you have groceries that are, again, substantially up in 2014. That is the frog in the water and it’s getting hotter. And things like you said, like FATCA, things like what to do about dollar crashing and all that. Portfolio devaluations generally happen over time. Depressions, like what we had back in the old days or what we had in ’08, those segments in our economy don’t happen every day. I don’t think that this particular thing is going to happen in an instant. I think that this is going to be more of a devaluation over time and that’s why the move into metal as a defensive hedge is the way to go.
Mark Alyn: It’s again, as I said, it’s not if, it’s when. I’m curious about something. If stocks don’t crash, and maybe they won’t because they didn’t when FATCA went into effect, why is gold still a good investment?
Will Hart: Well, again, in a paper product, it could go from where it’s at to zero overnight. With gold, you’re not going to wake up and see gold at zero. No one’s going to be taking their gold jewelry, their gold investments, their gold coins and throwing them out the window because they became worthless. Gold is still on this planet. It has been used over 5,000 years, the whole world looks at gold. So if our dollar, as an example Mark, were to go, as Vince said, slowly in that boiling water. When he was saying that, I was thinking of Quantitative Easing. That’s exactly what Quantitative Easing is doing, it’s slowly turning the heat up making that dollar worth less and less. In essence, boiling the dollar.
Mark Alyn: And right now we’re at a simmer.
Will Hart: Correct, and we’re starting to see the bubbles forming. But, you know, it really comes down to what do you feel inside? Is that paper product going to be there for you in the long term, or is that gold that you’ve got in your account a safer way to protect and preserve your buying power?
Vince Miller: Right, Mark. And I don’t think that it’s for everybody. I mean, just because it’s what we do here, this is not for everybody. And if you think that it’s going to get better then that’s fine. Then you don’t want to own gold because it goes against what you believe. And you don’t buy gold because you do this to make money, you’re not trying to get rich quick. This is strictly a defensive move. It’s about protecting. And that’s what the metal has done, not just through the last 10 or 12 years, but thousands of years. And there has been thousands of currencies and monies in different economies throughout the world, throughout history. But like Will said, gold has remained the standard of money. And dollars are not true money, it’s what backs it that is what’s valuable.
Will Hart: Right, and right now it’s perceived value. We all have fiat currencies so it’s all perception. As Vince said, there’s nothing backing any paper product out there.
Mark Alyn: And somebody who is listening right now who may have an IRA or 401(k) plan, they can turn those into self-directed plans at the Birch Gold Group and at least turn part of that retirement fund into metal.
Mark Alyn: You know, what I’d like to do on an episode coming up, on our next edition or so, is to talk about what you do when you buy gold. Can you take it to the market and buy a loaf of bread? So we’ll do that on our next program. Gentlemen, thank you very much for joining me here on the Market Report. If you have questions about gold and how it can help you, we encourage you to write us at [email protected], that’s [email protected] You can visit us, there’s a lot of information on the Birch Gold website, go to www.birchgold.com, that’s www.birchgold.com. Or you can actually call a gold specialist and talk to somebody, a human, and talk to them about why gold could work for you. Give them a call at (800) 355-2116, that’s (800) 355-2116. I’m Mark Alyn for the Market Report, we’ll see you next time. Thanks a lot for listening.
fatca, quantitative easing, stock market, us dollar, warren buffett
January 9, 2020
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