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7 Best Index Funds To Buy For October

Index funds are passively managed mutual funds or exchange-traded funds (ETFs) that seek to replicate the performance of a major financial index, such…

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Index funds are passively managed mutual funds or exchange-traded funds (ETFs) that seek to replicate the performance of a major financial index, such as the S&P 500, Dow Jones Industrial Average (DJIA), or Nasdaq-100. These funds are popular among retail investors thanks to their broader stock diversification, mitigated risk and lower expenses.

Legendary investor Warren Buffett believes in the power of long-term investing in low cost index funds, especially one that tracks the S&P 500, gained slightly below 16% year-to-date (YTD). According to Buffett, even a beginner investor can benefit from impressive growth stories of some of our most important companies stateside. Examples of funds that track the S&P 500 include the iShares Core S&P 500 ETF (NYSEARCA:IVV), the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) or the Vanguard S&P 500 ETF (NYSEARCA:VOO).

As a passive investment tool, index funds do not promise big returns fast. On the contrary, they are typically designed to grow one’s investment over many years and, in fact, decades. Historically, buying and holding indexes have proven to be rewarding.

Despite occasional crashes or declines, in the long-run, the S&P 500 Index has delivered average annual gains of about 8% each year. If such returns were to continue going forward, the proverbial $10,000 invested now would be worth — without any additions — well over $68,000 in 25 years.

And if that investor were to add $3,600 each year — at the end of the year — as additional savings to the amount, the total amount would be over $333,000. Investing an extra $3,600 a year would mean about being able to save $10 a day.

Seasoned investors would concur that the stock market can be bring significant gains for those who simply invest patiently. With that information, here are seven index funds that could help you build your wealth for retirement without worrying about market volatility:

  • Fidelity Mid Cap Index Fund (MUTF:FSMDX)
  • Fidelity US Sustainability Index Fund (MUTF:FITLX)
  • Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP)
  • Schwab Emerging Markets Equity ETF (NYSEARCA:SCHE)
  • Schwab S&P 500 Index Fund (MUTF:SWPPX)
  • Vanguard Real Estate Index Fund ETF Shares (NYSEARCA:VNQ)

Now, let’s dive in and take a closer look at each one.

Index Funds: Fidelity Mid Cap Index Fund (FSMDX)

Source: Jonathan Weiss / Shutterstock.com

52-Week Range: $23.09 – $32.61

Dividend Yield: 1.03%

Expense Ratio: 0.03% per year

The Fidelity Mid Cap Index Fund provides exposure to mid-capitalization (cap) U.S. companies. The fund, which started trading in September 2011, typically invests at least 80% of assets in stocks included in the Russell Midcap Index.

Although different brokerages might have differing limits, mid-cap companies are defined as having a market value of between $2 billion to $10 billion. Most financial planners point out that they are less volatile than small-caps. On the other hand, they might offer higher growth opportunities than large-caps.

FSMDX currently has 831 holdings. Leading companies include social media heavyweight Twitter (NYSE:TWTR); pet products and services provider Idexx Laboratories (NASDAQ:IDXX); DocuSign (NASDAQ:DOCU), which provides electronic signature solution; content streaming platform Roku (NASDAQ:ROKU); and chip group Marvel Technology (NASDAQ:MRVL).

Information technology (19.04%), industrials (15.24%), consumer discretionary (12.66%), financials (12.13%) and healthcare (12.01%) companies lead the roster. The top ten holdings account for about 4.7% of net assets of $22.77 billion.

The fund is up close to 17% YTD and hit a record high in early September. The current price supports a modest dividend yield of around 1%. Interested readers could consider waiting for a pullback to invest in FSMDX.

Fidelity US Sustainability Index Fund (FITLX)

Fidelity Investments sign hangs from a buildingSource: Shutterstock

52-Week Range: $14.21 – $20.15

Dividend Yield: 0.86%

Expense Ratio: 0.11% per year

Next on our list is the Fidelity US Sustainability Index Fund, which provides exposure to equities of large- to mid-cap U.S. companies with high environmental, social, and governance (ESG) criteria. It began trading in May 2017.

FITLX, which has 279 holdings, follows the MSCI USA ESG Index. This fund is also weighted towards IT (28.76%), followed by health care (13.43%), consumer discretionary (12.06%), communication services (12.02%), and financials (11.09%).

The top 10 holdings comprise about 32% of net assets of over $1.5 billion. Among the leading names, we see Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), Tesla (NASDAQ:TSLA), and Nvidia (NASDAQ:NVDA).

So far in 2021, FITLX is up almost 20% and has returned close to 27% within the last 52 weeks. By comparison, the YTD returns of some environmental, social and corporate governance (ESG) indices are as follow:

  • Dow Jones Sustainability North America Composite Index — up 16.7% YTD;
  • S&P 500 ESG Index — up 17.3% YTD;
  • MSCI USA ESG Leaders Index — up 17.5% YTD.

Recent studies have shown that ESG investments can outperform traditional ones as a result of increased sustainability awareness. Therefore, interested investors should keep FITLX on their radar.

Index Funds: Invesco S&P 500 Equal Weight ETF (RSP)

Invesco logo in blue with mountain imageSource: Shutterstock

52-Week Range: $105.95 – $157.46

Dividend Yield: 1.41%

Expense Ratio: 0.2% per year

The Invesco S&P 500 Equal Weight ETF provides exposure to S&P 500 companies with an equally-weighted approach. In other words, no single company dominates the ETF.

RSP tracks the S&P 500 Equal Weight Index and currently has 506 holdings. The fund which is rebalanced quarterly, started trading in April 2003. In terms of the sub-sectoral breakdown, IT comprises the highest portion with 14.45%, followed by industrials and financials with 14.45% and 13.57%, respectively.

The top-10 holdings account for 2.48% of net assets of $28.62 billion. Large-cap companies comprise 42.3% of the fund while mid-cap have a share of around 57%.

Energy firms Diamondback Energy (NASDAQ:FANG), Devon Energy (NYSE:DVN) and Marathon Oil (NYSE:MRO); hydrogen and nitrogen products manufacturer CF Industries (NYSE:CF); and crude oil and natural gas producer EOG Resources (NYSE:EOG) lead the names in the fund.

So far this year, RSP is up almost 20% and has outperformed the S&P 500 Index. Right now, it is a buy-and-hold that investors might want to wait for a pullback in.

Schwab Emerging Markets Equity ETF (SCHE)

charles schwab sign outside of a buildingSource: Isabelle OHara / Shutterstock.com

52-Week Range: $27.10 – $34.74

Dividend Yield: 2.33%

Expense Ratio: 0.11% per year

Out next fund takes us overseas. The Schwab Emerging Markets Equity ETF provides exposure to large and mid-capitalization companies from over 20 emerging market countries.

The fund, which started trading in January 2010, follows the FTSE Emerging Index. Its net market value has reached over $9.4 billion since inception in January 2010.

Financials lead with 19.36% in sectoral allocation, followed by consumer discretionary (17.71%), IT (16.08%), communication services (11.16%), and materials (8.87%). SCHE currently has 1,639 holdings in the portfolio. The top-10 names comprise around a quarter of of net assets.

Taiwan-based chip heavyweight Taiwan Semiconductor Manufacturing (NYSE:TSM), China-based social media group Tencent (OTCMKTS:TCEHY), e-commerce and cloud networking juggernaut Alibaba (NYSE:BABA), Chinese food-delivery platform Meituan (OTCMKTS:MPNGY) and Brazil-based iron ore miner Vale (NYSE:VALE) lead the holdings in the roster.

YTD, the ETF is up nearly 2% and hit a record high in mid-February. The fund’s trailing price-earnings (P/E) and price-book (P/B) ratios stand at 16.34 times and 2.09 times, respectively. Readers who seek broad exposure to emerging markets, especially China, could consider investing in SCHE around these levels.

Index Funds: Schwab S&P 500 Index Fund (SWPPX)

Colorful arrows pointing at the multicolored word "ETF" against a cement surfaceSource: shutterstock.com/eamesBot

52-Week Range: $50.75 – $70.03

Dividend Yield: 1.49%

Expense Ratio: 0.02% per year

The Schwab S&P 500 Index Fund provides access to 500 top U.S. companies, tracking the S&P 500 Index. Sectors represented in the fund include IT (27.43%), healthcare (12.99%), consumer discretionary (12.28%), financials (11.28%) and communication services (11.14%).

The fund has reached a net asset value of more than $63.5 billion since its inception in May 1997. The top ten holdings account for almost 29% of total net assets. In contrast to our earlier fund, RSP, it is not equally-weighted, but rather market-cap weighted. The top names in the roster include Apple (NASDAQ:AAPL), Microsoft, Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) and Alphabet.

SWPPX returned over 17% YTD and almost 23% in the last 52 weeks. The fund’s trailing P/E and P/B ratios stand at 26.07 times and 4.32 times, respectively. Given the low expense ratio and the current dividend yield of 1.57%, SWPPX deserves your attention.

SPDR S&P Dividend ETF (SDY)

An image of three glass piggy banks with ETF written on the sides on a table.Source: Maxx-Studio/ShutterStock.com

52-Week Range: $90.62 – $128.90

Dividend Yield: 2.61%

Expense Ratio: 0.35% per year

Our next fund is the SPDR S&P Dividend ETF which tracks the returns of the S&P High Yield Dividend Aristocrats Index. The ETF provides exposure to a yield-weighted index of companies in the S&P 500 that have increased dividends for at least 20 consecutive years.

SDY currently has 112 holdings, that range from financials (17.15%) to consumer staples (15.23%), industrials (14.1%), utilities (14.27%) and materials (8.61%). The fund has reached a net asset value of almost $19.7 billion since it started trading in November 2005.

The top ten holdings account for about 20% of the fund. Among the leading names in the roster include telecommunications giant AT&T (NYSE:T), oil majors Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX); utility group South Jersey Industries (NYSE:SJI), and technology giant International Business Machines (NYSE:IBM).

SDY returned over 13.3% YTD and just more than 22% in the last 52 weeks. The ETF’s trailing P/E ratio stands at 20.82 times. The fund currently supports a dividend yield of 2.65%. Interested investors would find better value between $110-$115.

Index Funds: Vanguard Real Estate ETF (VNQ)

vanguard website displayed on a mobile phone screen representing vanguard etfsSource: Shutterstock

52-Week Range: $76.01 – $110.89

Dividend Yield: 2.65%

Expense Ratio: 0.12% per year

Finally, we look at the Vanguard Real Estate ETF. The fund, which started trading in September 2004, provides exposure to U.S. real estate investment trusts (REITs).

VNQ tracks the returns of the MSCI US Investable Market Real Estate 25/50 Index and currently holds a portfolio of 171 equities. The top-10 holdings weigh about 45% of total net assets of $83.3 billion.

Leading stocks include the Vanguard Real Estate II Index Fund (NASDAQ:VRTPX); American Tower (NYSE:AMT), which operates communications infrastructure assets globally; logistics REIT Prologis (NYSE:PLD); cell tower REIT Crown Castle International (NYSE:CCI); and digital infrastructure company Equinix (NASDAQ:EQIX).

Specialized REITs have the highest slice with 38.40%. Next, we see residential REITs (14.70%) and industrial REITs (11.20%).

So far this year, VNQ is up about 21.4% and hit a 52-week high in early September. The ETF’s P/E and P/B ratios currently stand at 43.4x and 3.2x, respectively. Investors, who seek broad exposure to REITs could consider buying below $100.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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Energy & Critical Metals

The Ethical Investor: ESG moves, lessons from the energy crisis and JP Equities’ stock tips

The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity … Read More
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The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity Partners’ director and partner, Nic Brownbill.

The world is in the grip of an ongoing global power crisis that has seen energy prices soaring by thousands of percentage points.

From China to Europe and now India, the cost of energy is surging drastically. The price of natural gas has even quadrupled in some parts of the world.

 

Source: IEA via Reuters

 

But economists are now warning this might be just the first of many power crunches the world will see as we transition into the new economy.

According to a research paper by CommBank’s analyst Vivek Dhar, there are two main root causes that led to the crisis — a strong demand recovery from the pandemic, and an acute shortage of two key power-producing fuels – natural gas and thermal coal.

As economies reopen, there is a sudden pent up demand from consumers which meant that factories were forced to switch on their production capacity at short notice. This was exacerbated by a colder than usual European autumn, as the continent potentially faces a more-freezing-than-usual winter season.

In China, the crisis mainly stemmed from an undersupply in local production of coals, according to Dhar, adding that coal supply has been hampered in China because of the government’s own environmental protection regulations.

So what can we learn from all this?

Dhar reckons that we are transitioning into the new economy too fast, too soon.

“What the recent energy crisis has shown is that the energy transition needs to be planned carefully,” Dhar wrote.

“This will mean significant investment in renewable generation, batteries, electricity grids and hydrogen.”

But he thinks the roll-out of a decarbonised grid and role of gas need to be clearly defined too.

“Under-investing in gas infrastructure relative to its role in coming years will only serve to make Europe’s energy market more vulnerable to prolonged gas shortages, and increase dependence on Russia.”

Like Europe, China’s decarbonisation ambition will need to be planned as well, Dhar said.

“If coal mines and coal power plants are closed before a renewable replacement is in place, power shortages in China could be an ongoing concern.”
 

What’s happening in Australia

Australians have chosen climate change as the top ESG priority, according to the latest survey conducted by global ESG consultant, SEC Newgate.

And more than half of the 1,000 Aussies surveyed said they were happy with the direction the government is taking on the environment.

ESG Rio
Source: Survey by SEC Newgate

 

Aussie respondents also nominated retailers Coles Group (ASX:COL) and Woolworths (ASX:WOW) as the top local companies when it came to doing well on ESG metrics.

These results should provide food for thought for PM Scott Morrison, who’s currently caught in a political wrangle with the Nationals in setting our 2050 climate goals.

The PM has told Liberal colleagues that he wants to bring a binding 2050 net zero commitment to the COP26 Summit in Glasgow next month, without having to upgrade Australia’s 2030 commitments.

Nationals Leader and also Deputy PM, Barnaby Joyce, said however that he was willing to back the 2050 targets only if funding for regional producers and farmers were made as part of the deal.
 

Special guest JP Equities’ Nic Brownbill shares his views and ESG stocks

Nic Brownbill, a partner at JP Equity, told Stockhead that decarbonisation is a mega global investment opportunity, one that JP Equity wants to be all in on.

How big is the potential for ESG investing?

“We see the whole decarbonisation theme as the next mega global investment opportunity. An estimated $41 trillion is required to decarbonise the planet. It’s going to be a bigger opportunity than the crypto market, because unlike cryptos, the carbon market is going to be mandated by governments, major asset managers and pension funds.”

Which segment of the ESG market do you see outperforming?

“Some companies will fall short in trying to make their carbon targets, so the balance will need to be met with carbon credits. I think carbon emissions will eventually be metricated, and the carbon offset market is going to be a way for major companies to offset their emissions.”

Would that investment opportunity catch on in Australia?

“I believe the Australian market hasn’t really caught on to the opportunity of this yet. But I think something will really start to emerge from the COP26 conference in November, where you’ll see a sustained mega theme starting to unfold in this country.

“I think we will start to see a complete emergence of Australian companies in the carbon space over the next few months and beyond.”

What are the ASX stocks that JP Equity likes in the carbon credit space?

One ASX stock that we’ve been watching very closely is  Fertoz (ASX:FTZ). They’re a leading North American fertiliser manufacturer that produces a unique low-emission rock phosphate product that increases crop yield by 15%.

“Importantly, it can generate significantly lower CO2 emissions in manufacturing compared with other commercial fertilisers.

“This presents a really significant opportunity because agriculture as a sector accounts for 24% of all human generated greenhouse emissions. Fertoz is one of the first movers in the carbon credit market, and since May this year has been issuing carbon offset credit certificates.

“It’s not a matter of if, but when disclosure of carbon emissions will become metricated. And as a result, Fertoz is getting some strong enquiries from other companies looking to offset their footprints by buying carbon credits.”

Any other ASX stocks you like in the ESG space?

“We’re also bullish on Mpower (ASX:MPR). The company is Australia’s leading specialist in renewable energy, battery storage and micro-grid business. It has a focus on five megawatt solar farms, and is in the process of creating an initial portfolio of 20 sites across Australia in the coming years.

“That gives them an aggregate capacity of around 100 megawatts, and an estimated value of more than $150 million. It’s now down to what the team can deliver in some of those projects to build up the portfolio.”

 

Notable ASX ESG-related news during the week

Rio Tinto (ASX:RIO)

The energy giant announced that it was targeting a 50% reduction in Scope 1 and 2 emissions by 2030, and a 15% reduction by 2025 from a 2018 baseline of 32.6Mt.

Around $7.5 billion in direct capital expenditure will be spent on decarbonising Rio Tinto’s assets from 2022 to 2030, including $0.5 billion per year from 2022 to 2024.

Strandline Resources (ASX:STA)

The company released its Sustainability Report for 2021, outlining its commitment to the United Nations Sustainable Development Goals (UNSDGs).

STA said it’s focused on managing development risks at its Coburn project in WA to safeguard workers and ensure environmental compliance.

Lithium Power (ASX:LPI)

The company has appointed global consulting firm Deloitte to ensure a robust ESG program at its Maricunga project in Chile.

Deloitte has been tasked to imbed sustainable protocols in LPI’s lithium extraction operations, and to establish ambitious standards for LPI to become a carbon neutral producer, while keeping high standards on the social aspects.

Jadar Resources (ASX:JDR)

The company also said it has completed its maiden Sustainability Plan, with strategies aligned to the UNSDGs.

 

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

The post The Ethical Investor: ESG moves, lessons from the energy crisis and JP Equities’ stock tips appeared first on Stockhead.




Author: Eddy Sunarto

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Emerita Sees Continued Success In Spain

Emerita Resources Corp (TSXV:EMO) continues to report excellent results from the Infanta drill program at its Iberia Belt West Project
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Emerita Resources Corp (TSXV:EMO) continues to report excellent results from the Infanta drill program at its Iberia Belt West Project in Spain, which hosts three previously identified high-grade deposits: La Infanta, Romanera and El Cura. These are all open for expansion along strike and at depth.

On October 22, the company announced assays for the first step-out drill hole from the Infanta drill program and also the final in-fill drill holes. The significance of the in-fill program was to verify the historical drill results. They will now enable a proper 3D modelling of the deposit and will also provide additional data to be used for future metallurgical testing.

At Infanta, the step-out was conducted to expand the outer perimeter of the deposit, and the in-fill drilling was intended to confirm historical drill data within Infanta’s known mineralization zone. Step-out drill hole IN018 was drilled 40 metres to the west of the historical limits of the deposit and intersected 8.2 metres with a grade of 2.5% copper, 8.7% lead, 17.3% zinc, 223.5 g/t silver and 0.5 g/t gold. A second step-out hole was drilled 50 metres to the west of hole IN018 and intersected two zones of massive sulfide but assays have not been returned yet.

In-fill drill hole IN014 intersected 5.7 metres of 2.4% copper, 7.3 %lead, 13.4% zinc, 225 g/t silver and 0.6 g/t gold. The ongoing geophysical survey, which was suspended along with other exploration activities for the region’s hunting season, is expected to resume by the end of October.

Emerita plans to have five drill rigs operating by the end of 2021 and will include the Romanera deposit, El Cura, and other targets identified by previous geophysics work. The two drills currently on site will now focus on step-out drilling to increase the size of the deposit.

Emerita also recently provided investors with an update on the legal proceedings for the Aznalcóllar Project and the company is expecting a ruling by the Administrative Court of Andalucia in Emerita’s favour in the near future.

The Aznalcóllar Zinc Project is located in the prolific Iberian Pyrite Belt in the Andalusia region of southern Spain and is considered to be one of the world’s largest and most productive volcanogenic massive sulfide (VMS) structures. It has been mined for over a thousand years and has produced over 2000 million tons of ore.

Aznalcóllar is considered to be one of the world’s top undeveloped zinc deposits, and the project is essentially a world-class pre-production development asset. Here, the main deposit is referred to as Los Frailes, which contains a historical open pit mineral resource. Two other deposits exist on the property as well, which require further development. The Los Frailes mine operated during the 1990s until it closed due to a combination of tailings-related environmental failure and low metal prices.

After the Aznalcóllar site was rehabilitated, the government initiated a public tender process for the rights to the project and it was initially awarded to another major mining company, however Emerita believed that their bid was superior. It subsequently requested an investigation into the tender process for the property and filed a lawsuit in 2015.

In early 2021, the Spanish court concluded that the process was fraught with corruption, fraud and other malfeasance and rescinded the rights that were awarded and criminal charges were sought for the perpetrators and their enablers. In July 2021, a Spanish judge issued additional criminal indictments against the mining company and government officials who participated in undermining the public tender process for the project.

Under Spanish law, if a crime was committed during the tender process, the rights are then awarded to the next best qualified competing bid, which in this case was Emerita. Subsequently, Emerita has been waiting for the Administrative Court to conclude the process to formally award the rights to the Aznalcóllar Project to the company, which brings us to present day.

The company is planning to develop the deposit into an underground mining operation focused on mining the high-grade zones, which are estimated to contain 20 million tonnes at a grade of 6.65% zinc, 3.87% lead, 0.29% copper and 84 ppm silver. As a requirement of the project’s public tender process, Emerita submitted comprehensive. engineering, environmental and water management studies to the government, and now the company is expecting to be given the green light to proceed developing the Aznalcóllar project into an eventual producer.

Emerita is well financed, having completed a $20 million bought deal private placement in July 2021. Emerita has 182.42 million shares outstanding and due to the recent increase in the Company’s share price, a market capitalization now of $556.38 million. Even so, barring any unforeseen negative developments regarding the legal issues, Emerita Resources Corp still appears to be potentially undervalued relative to the potential value of the world-class assets it is developing.

Shares of Emerita Resources Corp last traded at $3.05.


FULL DISCLOSURE: Emerita Resources is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Emerita Resources on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

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Author: Phil Gracin

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Von Greyerz: Shortages & Hyperinflation Lead To Total Misery

Von Greyerz: Shortages & Hyperinflation Lead To Total Misery

Authored by Egon von Greyerz via GoldSwitzerland.com,

At the end of major…

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Von Greyerz: Shortages & Hyperinflation Lead To Total Misery

Authored by Egon von Greyerz via GoldSwitzerland.com,

At the end of major economic cycles, shortages develop in all areas of the economy. And this is what the world is experiencing today on a global basis. There is a general lack of labour, whether it is restaurant staff, truck drivers or medical personnel.

There are also shortages of raw materials, lithium (electric car batteries), semi-conductors, food,  a great deal of consumer products, cardboard boxes, energy and etc, etc. The list is endless.

SHORTAGES EVERYWHERE

Everything is of course blamed on Covid but most of these shortages are due to structural problems. We have today a global system which cannot cope with the tiniest imbalances in the supply chain.

Just one small component missing could change history as the nursery rhyme below explains:

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a 
horseshoe nail
.

The world is not just vulnerable to shortages of goods and services.

BOMBSHELLS

Bombshells could appear from anywhere. Let’s just list a few like:

  • Dollar collapse (and other currencies)

  • Stock market crash

  • Debt defaults, bond collapse (e.g. Evergrande)

  • Liquidity crisis  (if  money printing stops or has no effect)

  • Inflation leading to hyperinflation

There is a high likelihood that not just one of the above will happen in the next few years but all of them.

Because this is how empires and economic bubbles end.

The Roman Empire needed 500,000 troops to control its vast empire.

Emperor Septimius Severus (200 AD) advised his sons to “Enrich the troops with gold but no one else”.

As costs and taxes soared,  Rome resorted to the same trick that every single government resorts to when they overextend and money runs out – Currency Debasement.

So between 180 and 280 AD the Roman coin, the Denarius, went form 100% silver content to ZERO.

And in those days, the soldiers were shrewd and demanded payment in gold coins and not debased silver coins.

Although the US is not officially in military conflict with any country, there are still 173,000 US troops in 159 countries with 750 bases in 80 countries. The US spends 11% of the budget or $730 billion on military costs.

Since the start of the US involvement in Afghanistan, Pentagon has spent a total of $14 trillion, 35-50% of which going to defence contractors.

Throughout history, wars have mostly started out as profitable ventures, “stealing” natural resources (like gold or grains) and other goods–often due to shortages. But the Afghan war can hardly be regarded as economically successful and the US would have needed a more profitable venture than the Afghan war to balance its budget.

US HOPELESSLY BANKRUPT  – NEEDS TO BORROW 46% OF BUDGET

The US annual Federal Spending is $7 trillion and the revenues are $3.8 trillion.

So the US spends $3.2 trillion more every year than it earns in tax revenues. Thus, in order to “balance” the budget, the declining US empire must borrow or print 46% of its total spending.

Not even the Roman Empire, with its military might, would have got away with borrowing or printing half of its expenditure.

TOTAL MISERY AS MR MICAWBER SAID:

As Mr Micawber in Charles Dickens’ David Copperfield said:

‘Annual income 20 pounds, annual expenditure 19 [pounds] 19 [shillings] and six [pence], result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery.’

And when, like in the case of the US, you spend almost twice as much as you earn that is TOTAL MISERY.

Neither an individual, nor a country can spend 100% more than their earnings without serious consequences. I have written many articles about these consequences and how to survive the Everything Bubble

INFLATION IS HERE

The most obvious course of events is continuous shortages combined with prices of goods and services going up rapidly. I remember it well in the 1970s how for example oil prices trebled between 1974 and 1975 from $3 to $10 and by 1980 had gone up 10x to $40.

The same is happening now all over the world.

That puts Central banks between a Rock and a Hard place as inflation is coming from all parts of the economy and is NOT TRANSITORY!

Real inflation is today 13.5% as the chart below shows, based on how inflation was calculated in the 1980s

IMPLOSION OR EXPLOSION

The central bankers can either squash the chronic inflation by tapering and at the same time create a liquidity squeeze that will totally kill an economy in constant need of stimulus. Or they can continue to print unlimited amounts of worthless fiat money whether it is paper or digital dollars.

If central banks starve the economy of liquidity or flood it, the result will be disastrous. Whether the financial system dies from an implosion or an explosion is really irrelevant. Both will lead to total misery.

Their choice is obvious since they would never dare to starve an economy craving for poisonous potions of stimulus.

History tells us that central banks will do the only thing they know in these circumstances which is to push the inflation accelerator pedal to the bottom.

Based of the Austrian economics definition, we have had chronic inflation for years as increases in money supply is what creates inflation. Still, it has not been the normal consumer inflation but asset inflation which has benefitted a small elite greatly and starved the masses of an increase standard of living.

As the elite amassed incredible wealth, the masses just had more debts.

So what we are now seeing is the beginning of a chronic consumer inflation that most of the world hasn’t experienced  for decades.

THE INEVITABLE CONSEQUENCES OF CURRENCY DESTRUCTION

This is the inevitable consequence of the destruction of money through unlimited printing until it reaches its the intrinsic value of Zero. Since the dollar has already lost 98% of its purchasing power since 1971, there is a mere 2% fall before it reaches zero. But we must remember that the fall will be 100% from the current level.

As the value of money is likely to be destroyed in the next 5-10 years, wealth preservation is critical.  For individuals who want to protect themselves from total loss as fiat money dies, one or several gold coins are needed.

So back to the nursery rhyme:

For want of a nail gold coin, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a horseshoe nail gold coin.

Gold is not the only solution to the coming problems in the world economy. Still, it will protect you from the coming economic crisis like it has done every time in history

And remember that if you don’t hold properly stored gold you don’t understand:

  • What happens when bubbles burst

  • You are living in a fake world with fake money and fake valuations

  • Your fake money will be revalued to its intrinsic value of ZERO

  • Assets that were bought with this fake money will lose over 90% of their value

  • Stocks will go down by over 90% in real terms

  • Bonds will go down by 90% to 100% as borrowers default

  • You lack regard for your stakeholders whether they are family or investors

  • You don’t understand history

  • You don’t understand risk

The 1980  gold price high of $850 would today be $21,900,  adjusted for real inflation

So gold at $1,800 today is grossly undervalued and unloved and likely to soon reflect the true value of the dollar.

Tyler Durden
Sat, 10/23/2021 – 14:30











Author: Tyler Durden

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