Another Reason to Diversify into Precious Metals

by the Hard Assets Alliance Team:precious metals

Once upon a time, interest rates conveyed critical information about securities: the higher the rate, the riskier the investment.

Today, bond yields communicate little about underlying security risk and are arguably misleading. Consider the 1.57% yield on 10-year Spanish bonds. That level of return is hardly commensurate for a country suffering 23.9% unemployment.

The culprit for deceptive interest rates is a familiar one. Across the globe, central banks have suppressed rates to fend off crises or boost sagging economies—and zero percent is not the lowest band for this type of manipulation.

As an investor interested in precious metals, you’ve likely watched the growing number of countries shifting from zero interest rate policies (ZIRP) to negative interest rate policies (NIRP). Government bond yields in Germany, Switzerland, Japan, France, Holland, Denmark, and a handful of other countries have recently turned negative.

Negative real interest rates are nothing new, but we are talking about governments actually charging for the privilege of parking money with them. Yet another good reason to diversify into precious metals.

This shift from zero interest rate policies to negative interest rate policies epitomizes how detached financial markets have become from reality. More alarming, these radical polices exacerbate existing market distortions. By punishing bondholders, central bankers are forcing investors up the risk ladder, whether it be into junk bonds or equities.

You are better off tucking cash under your mattress than paying some profligate government to hold your money. But of course, there’s a better way. The utter insanity of a NIRP illustrates the critical importance of diversifying away from fiat currencies… and into previous metals.

Article originally posted in the February issue of Smart Metals Investor at HardAssetsAlliance.com.

MyRA-QE Taper Connection

submitted by jwithrow.Government Help

We have a question for you:

Is it a coincidence that the government has introduced the “myRA” plans just as the Federal Reserve has begun to taper its quantitative easing programs?

Let’s think this thing through for a minute.

We know:

  • China is now a net-seller of U.S. Treasuries so the Federal Reserve has had to step in and purchase U.S. Treasury Bonds in increasing quantities to support government spending.
  • The average American saves for retirement in a qualified retirement plan focusing primarily on mutual funds, exchange traded funds, and stocks with bonds comprising a small portion of the allocation.
  • The proposed myRA plans are designed to focus on U.S. Treasury Bonds.
  • The Federal Reserve’s quantitative easing programs have pumped massive amounts of liquidity into the system which has resulted in a broad increase of stock prices across the board.
  • Tapering QE will withdraw liquidity from the system which will almost certainly result in a broad decrease of stock prices across the board and quite possibly a severe stock market crash.
  • A falling stock market would likely cause many Americans to seek investment options that they deem “safer”.
  • The government is already hard-selling their myRA plans stating that there is “no risk to lose what you put in”.

Hmm.

Maybe our benevolent bureaucrats really do think that myRA plans will help the common man.

But we hold dearly to a personal mantra:

Maximize Capital,
Minimize Crap,
Never Trust the Government.

With that mantra echoing in our mind, we can’t help but be a little suspicious – something funny seems to be afoot.

What do you think?