UPDATES: David Rosenberg, chief economist at Gluskin Sheff & Associates sees odds of a recession in Canada at 80%. While Canada has bucked the slowdown trend Rosenberg wonders how long Canada can hold out against the US-China trade war. David Wolf, part of the asset allocation team at Fidelity Investments Canada is also quite bearish on the Canadian economy and specifically the CAD. He notes that “If a recession does come, it could actually be a lot more severe than people think”. He also went on to say that he is underweight the Canadian dollar and expects to see a “pretty significant depreciation in the currency” over the medium to long term. At Guildhall, we have seen gold average 9% per year in CAD over the last 15+ years.
Michael Every of Rabobank penned a piece about the unintended consequences of low interest rates titled Oops: IMF Admits Policy It Was Pushing For Years Has Led World To Edge Of Disaster. This is about the IMF walking back the benefits of too-low-for-too-long interest rate policy. Even the IMF now cites two major unintended consequences of low rates; 1) That it provides a false sense of safety to investors who’s appetite for risk is way to high. 2) It forces the financial sector to search for yield which perpetuates risk. Not to mention corporate debt. The IMF says they hope to utilize “macro prudential tools” to combat the issues, but we at GWM question if these are actual tools and if they could ever possibly be effective.
SEGMENT 2, 3 & 4: We return to the theme of the ‘War on Savers’ and look at high interest savings accounts vs. the opportunity cost to own precious metals. There is also a discussion on the gold/silver ratio and how investors are using the indicator to trade metals. We also look at an article produced by Edward Jones on the Pros and Cons of RRSPs vs. TFSAs. This is a great segment for those considering making a contribution this year or next.
ARTICLE OF THE WEEK: A shocking admission by a central bank, Zerohedge published an article titled Central Bank Issues Stunning Warning: If the Entire System Collapses, Gold Will be Needed to Start Over. The source is the Dutch Central Bank which put out a paper recently discussing the benefits of gold as a strategic asset for the central bank. The paper states “if the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.” The paper goes on to state that “a bar of gold retains its value, even in times of crisis. This makes it the opposite of shares, bonds, and other securities all of which have inherent risk and prices can go down. Most importantly, the DCB calls gold a TRUST ANCHOR, “Gold is… the trust anchor for the financial system. If the whole system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank’s balance sheet”. These are some incredible statements by a central bank so we had to spend some time to present and discuss the piece.