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The Five Risks that Keep Billionaires Up At Nights - Visual Capitalist

The Five Risks that Keep Billionaires Up At Nights - Visual Capitalist

Release Date:  Friday, March 23, 2018

Gold prices rose to a one month high on Friday as investors grew more concerned about a global trade war.  

“U.S. President Donald Trump signed a memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, prompting Beijing to urge the United States to ‘pull back from the brink’…[I]nvestors fear a trade war between the world’s two largest economies could develop with potentially dire consequences for global growth.

“Global markets were further rattled by Trump’s appointment of John Bolton as National Security Advisor. Bolton has previously advocated using military force against North Korea and Iran. World stock markets, the U.S. dollar and U.S. bond yields all fell. ‘Risk aversion is currently the name of the game in financial markets,’ said Peter Fertig, analyst at Quantitative Commodity Research. ‘Markets are looking for safe havens.’” (“Gold jumps as Trump tariffs shake global markets,” Reuters, 3/22/18.)

The Five Risks that Keep Billionaires Up At Nights – Visual Capitalist

Visual Capitalist published an infographic from Sprott Physical Bullion Trusts identifying the five risks that most worry some of the world’s elite investors. 

“If you’ve studied the history of markets, you know that sentiment can turn on a dime. Whether it is an unexpected wake-up call like the collapse of Lehman Brothers, or simply the popping of a bubble that’s blown too big, the tides can shift in a matter of hours or days. No one knows this better than the world’s most elite investors – and that’s why billionaires like Warren Buffett, Ray Dalio, Bill Gross, Paul Tudor Jones II, and Carl Icahn take the necessary precautions available to protect themselves from these big and unexpected market swings …

  • The Return of Inflation … Billionaire Carl Icahn is concerned about recent signs of incoming inflation … “If you have creeping inflation … you’re going to have higher interest rates , which I think will be difficult to deal with for the market…”
  • Record High Debt … Global debt continues to reach new highs … Meanwhile, for the U.S. which has over $20 trillion in national debt – it is already estimated that it will cost $5.6 trillion to service the debt over the next ten years…
  • Bond Market Worries … It’s no surprise then that hedge fund billionaire Paul Tudor Jones II  has this to say about bonds: … bonds are the most expensive they’ve ever been by virtually any metric….
  • Geopolitical Black Swans… Unexpected world events can also trigger big losses in the markets, as well… and in the case that a trade war or conflict breaks out, billionaires are already actively hedging their bets. 
  • Overzealous Central Banks … Many world-class investors are also concerned about the unintended after effects of massive central bank programs in recent years… With most central bank policy tools already “used up,” there’s a very tiny margin of error….” (“The 5 Biggest Market Risks That Billionaires are Hedging Against,” Visual Capitalist, 3/22/18.)

Gold to $1400 By End of the Year – CNBC

CNBC spoke with Vertical Research Partner Michael Dudas about the Federal Reserve’s interest rate hike and its effect on gold. Mr. Dudas sees strong support for gold with the yellow metal reaching $1400 per ounce by the end of 2018.

“If you look over the past twelve to fifteen months, gold prices have improved $150 to $200 higher while the dollar peaked … and moved lower ... The dollar has been the most important pressure on gold prices that we witnessed over the past few months and that is going to be key in which way the dollar is moving given all these [market] jitters... My 2018 target remains $1400….” (“ Frustration to break for gold bugs, metals expert Mike Dudas forecasts prices to rise,” CNBC, 3/21/18.)  

Economic Slowdown Coming; Gold to Rise – VanEck

Joe Foster, portfolio manager for the global money manager VanEck, warned investors that the current financial bull market is coming to an end. As such, investors will move to gold to protect their portfolios.

“Gold has been up for two years in a row now and technically as a very nice uptrending going now ... This expansion has been going on for eight, nine almost ten years now and these things don’t last forever and there are many signs in the economy that we are towards the end of the cycle. So I think in the next 12 to 18 months, you’re going to see an economic slowdown, probably a fall in the stock market, and more risk coming back in to financial system that will drive gold much higher…”  

Mr. Foster also addressed the rise of Bitcoin. “Bitcoin is not a substitute for gold. It’s a different type of investment … They don’t have the history, their not tangible, they’re not historic wealth like gold is.”  (“An Economic Slowdown Is Coming And Gold Looks Good Says VanEck,” Kitco News, 3/21/18.)

Inflation and Weak Dollar Will Lead to Higher Gold Prices – State Street Global Advisors

George Milling-Stanley, head of gold investments at State Street Global Advisors told TheStreet that the Federal Reserve’s meek position on interest rates and growing concerns about inflation will help gold break $1400 per ounce.

“A weight has been lifted from the gold market after the Federal Reserve signaled Wednesday that it is in no hurry to raise rates faster than it was already expecting this year, according to one gold analyst. In a telephone interview, George Milling-Stanley, head of gold investments at State Street Global Advisors said that he now expects gold prices to eventually retest the top of its recent range with a growing potential that market ultimately breaks through resistance ...

“’The latest Fed action is a continuation of its established moderate pace of normalization … So with this interest rate business out of the way we have a few months were gold can find its natural buoyancy. I would expect gold to take another crack at long-term resistance at $1,400.’ 

“As to what could drive gold above critical long-term resistance, Milling-Stanley said that he sees a couple of factors, the biggest one being inflation. ’Inflation is back in the conversation again … There is a growing concern that the recent tax cuts won't lead to economic growth but lead to higher inflation….’” (“Gold Prices Are Ready to Get Hot Again, Thanks to the Federal Reserve,” TheStreet, 3/22/18.)