Chief Investment Strategist, The Freeport Society
Powell’s termination cannot come fast enough.
– President Trump
The president is right about one thing…
Fed chairman Jerome Powell is terrible at his job.
His quantitative easing in 2020 and 2021 gave us one of the most absurd asset bubbles in history.
It gave us meme stocks, dog-themed cryptocurrencies, and – my personal favorite – cartoon images of apes that sold for millions of dollars.
This Bored Ape Yacht Club NFT sold for $3.4 million at a Sotheby’s in 2021
Then, after his “transitory” inflation had become ingrained, Powell gave us the fastest rate tightening cycle in history. He jacked up interest rates by 5.25% in just 16 months.
Thanks to the spike in interest rates on mortgages this caused, this put the housing market in deep freeze. Home sellers went from fighting off potential buyers to being unable to find any takers at all.
Then, as icing on the cake, last year Powell cut rates – when the job market was still tight, the economy booming, and inflation was far from dead.
In any normal world, the man would have resigned in disgrace sometime around late 2021.
And yet…
Trump’s threat to fire Powell before his term is up next year was enough to send stocks into a tailspin today.
As I type, the S&P 500, the Dow, and the tech-heavy Nasdaq are down about 3%.
But not everything has been going down.
Gold – a traditional safe haven and hedge against dollar debasement – shot up about 3% to hit an all-time high of $3,421 an ounce.
What is going on here?
As we’ll look at today, the gold market is sending a clear message.
The U.S. dollar – and by extension Treasury bonds, which are priced in dollars – are at risk.
And investors are starting to realize that what we’ve been saying in these pages since we launched the Freeport Society in December 2023 is true.
You should own gold and other dollar hedges in your portfolio to protect against the coming dollar crisis.
A Brief History of Dollar Destruction
I’m not saying that the dollar will fall to zero like the Argentine peso or the old Weimar Germany’s Papiermark.
But could the dollar lose 40-50% of its value?
Yes.
In fact, it already has – twice – in the past 40 years.
Following the tech wreck of 2000, the exchange value of the dollar plunged.
The U.S. Dollar Index tracks the performance of the dollar against a basket of trading-partner currencies.
Between 2001 and 2008, it dropped by 42%.
And following the 1985 Plaza Accord currency agreement the dollar dropped by about 52% over seven years.
That’s when President Reagan negotiated a controlled decline of the dollar relative to other major world currencies to boost U.S. exports.
He was alarmed at how quickly America’s trade deficit was expanding. He believed a controlled devaluation of the dollar would make American exports more competitive.
Now, President Trump believes the dollar is overvalued and wants to do something about it.
It’s time to pay attention. Your wealth depends on it.
So, how do you protect yourself?
Buy These U.S. Dollar Hedges Now
At the risk of sounding like a broken record, you need dollar hedges in your portfolio.
And the best place to start is gold.
We’ve held gold as part of our model portfolio at our flagship Freeport Investor advisory since we launched in December 2023.
We’re up close to 70% on that recommendation.
We also own gold mining stocks – with open positions up 27% and 50%.
And if history is any guide, gold is still in the early innings of its bull market.
The last bull market in gold, for instance, lasted from 2001 to 2011. Over that time, the metal went from $270 to $1,920 an ounce – a rise of roughly 600%.
The current bull market has taken gold from a low of about $1,170 an ounce in August 2018 to $3,421 an ounce today – “only” a 200% jump.
That suggests another 400% rise could be on the way.
You should also look for opportunities overseas.
It’s another move we’ve made at Freeport Investor. And it’s also working out well.
The S&P 500 is down 10% so far this year. But the three European defense stocks I recommended in Freeport Investor in March are up between 10% and 19%.
You don’t have to be a stock picking genius to get exposure to European stocks. For instant access to Europe’s blue chips, take a look at the Vanguard FTSE Europe ETF (VGK). It gives you exposure to the markets of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
If investors were concerned about the trade war wrecking Europe’s economy, you wouldn’t know it from the performance of the Old World’s stocks. VGK is up about 9% this year and is within about 6% of new multi-year highs.
To life, liberty and the pursuit of wealth,
Charles Sizemore
Chief Investment Strategist, The Freeport Society