RE: Be wary of the race to the tech stocks ...31 Jul 2020 19:56
Hi All!
I guess we're all the products of our experience. I worked in Russia in the early 1990s, so I've actually lived through a hyper-inflationary episode almost equal to the Weimar Republic or Zimbabwe. I once was paid $4,000 in cash (in roubles) - the bundles of banknotes filled a big holdall. I figured that if anybody tried to mug me, I was just going to hit them with the money and run off. That's what you call hard currency! Then, when I got the roubles home, I didn't know where to hide them, so I just packed the fridge with them. I think my sub-conscious was telling me that the roubles would go off if they weren't kept fresh. No wonder the Russians nicknamed them "kapusta" - cabbage.
Overall, the rouble-dollar exchange rate dropped from about 1:1 to 50,000 to 1 in a couple of years. All savings were destroyed, pensioners were left in complete penury, and spivs, money-changers, and criminals became Russia's new aristocracy. Later, the police and KGB moved in on the criminals' rackets and took them over for themselves, and that pretty much is where Russia still is today - a country which, for all its glorious culture, is run by wolves and jackals.
If any of you ever do have to live through hyper-inflation, remember money will still work as a means of exchange, but it will cease to work as a store of value. So as soon as you lay hands on any cash, immediately go out and buy whatever long life goods are available. You can work out how to sell them later. (Obviously gold and silver are the best option, but failing that, cars and tinned food also work. I have a friend who was (for a while) the proud owner of three tractors, even though he'd never left downtown Moscow in his life.)
As for the here and now, I think we all know that the wider stock market is wildly overpriced, especially as we are in a serious recession. And that printing money is a very dangerous game; at some point the real value of the dollar (and even more so, our poor pound) is going to be questioned by the market. Things just can't go on like this. My own opinion is that things are so precarious that it will only take one unexpected bad news headline to set off an avalanche.
However, inflation hasn't arrived yet, though it may be coming. So holding cash is (for now) a viable option.
The key question I ask myself is how will gold and gold miner shares behave when the stock market slides. I think the answer depends on whether the slide is market sudden and violent (in which case even gold will get swept away in the desperate need for liquidity), or whether it will be more gradual, allowing gold to rise against the falling stock market). I'm inclined to thinking the former is more likely than the latter, but that's only my best guess.
If I'm right, then I'll be in cash for the bottom of the maybe coming stock market crash, at which point I will pile into the most stable gold miner shares I can find - obviously one of them will be Centamin.
Sign In
Follow the stocks
