Between press conference bust ups, tariff announcements, peace deals, and cryptocurrency reserve proclamations, it has been a busy month and a half.
Despite all this, our global economic outlook remains relatively unchanged: we’re still anticipating a pretty serious bout of inflation around the world, and I’ll explain why.
Inflation isn’t hard to understand. We all see it when we go to the grocery store, fill up our cars, or pay for tuition, daycare, or medical services.
The pandemic was the perfect illustration of how this happens; governments worldwide locked people in their homes, halting the production of goods and services. Meanwhile, they borrowed and ‘printed’ trillions of dollars, flooding the economy with money.
The obvious result was inflation. More money was chasing fewer goods and services, so prices for just about everything increased, from stocks, crypto, and real estate to eggs and bacon.
We’ve long argued that this trend will continue. And while there was a brief respite, this cycle of debt and central bank money printing is poised to accelerate again.
Germany, for example, just announced roughly €500 billion in spending, almost all of which will be fueled by debt. And that figure appears to be just a modest down payment in their overall spending plan. They want the rest of Europe to join them in this debt binge as well.
Bear in mind, Germany is supposed to be the ‘responsible’ country that lives within its means and spends conservatively. Yet practically overnight, they have adopted a ‘whatever it takes’ mentality, and are working to eliminate legal restrictions on government expenditures so that they can spend even more.
Not to be outdone, the Chinese Communist Party earlier this week announced its own spending bonanza designed to prop up the economy and increase consumer spending.
This is all literally just from the past few days. And the implications cannot be overstated. Similar to what we saw during the pandemic, the flood of new money into the global economy will be inflationary.
We also don’t think it’s going to stop with Germany or China. Most Western nations are poised to spend beyond their means… almost as if locked in a deficit-spending ‘arms race’ So, again, our inflationary outlook has not changed.
This is why we continue to view real assets as a safe haven.
It probably also helps that, in general, real assets are at a remarkably cheap spot in their market cycle, especially when compared to financial assets.
In fact, the last time real assets (commodities specifically) were this cheap relative to stocks was in 1999 at the peak of the dot-com bubble. Commodities and related industries surged 2,000% in the years that followed, dwarfing the returns of the Dow Jones and S&P 500.
We’ve paid very special attention to real asset businesses which are trading at laughably cheap valuations even while gold is near its all time high.
Here’s a great example— last month in our highest-level investment research service, The 4th Pillar, we highlighted a precious metals business operating in one of the worlds best jurisdictions. It has a pristine balance sheet and is quite profitable, yet its stock price trades at a mere 3 times forward earnings.
In our most recent edition, which will be sent to 4th Pillar subscribers tomorrow, is another precious metals business that has been completely overlooked by investors. It too is profitable and has a fantastic balance sheet, yet also trades at a multiple of less than 3.
It’s extremely uncommon to see such healthy, well-managed businesses have enormous growth potential, yet simultaneously be so inexpensive. As a comparison, many popular tech companies have Price/Earnings multiples in excess of 30 or 40.
It’s crazy when you think about it; gold has gone through the roof, yet extremely profitable gold-related companies have seen their share prices languish.
In other words, the share prices of these precious metals companies don’t reflect the fact that gold is already near its all-time high… and they certainly don’t reflect the additional upside potential that gold could continue to surge in the coming years as foreign central banks continue to trade part of their US dollar reserves for gold.
Our investment research service, the 4th Pillar, focuses very heavily on these deeply undervalued real asset businesses: profitable companies with fantastic balance sheets and serious growth prospects that are trading at ridiculous discounts right now.
We don’t believe this anomaly is going to last, i.e. gold surging to fresh, all-time highs, yet gold company share prices languishing.
For the past few weeks we’ve been offering an annual subscription to the 4th Pillar at a steep 50% discount as well. But this too won’t last. In fact we’ll be closing out our special, promotional offer in the next couple of days.
So if you’d like to learn more about the 4th Pillar investment research— and these deeply undervalued real asset businesses, click here for more information while the promotional offer lasts.
