Mike Maroney Interviews Aftershock Investor co-author Bob Wiedemer - March 2017
Mike Maroney: Good afternoon! My name is Mike Maroney and I'm talking with Bob Wiedemer today. Bob came to us here at Monex in October of 2016 and he said, "Mike, there's going to be a lot of uncertainty in 2017, but the word is going to be tossed about in a very frequent fashion." As a matter of fact, he felt that this would be something that investors would want to read about and hear about. Low and behold, over the last few months the buzz word on the street has certainly been "uncertainty." We've had uncertainty in the financial markets, the political markets, and we've seen a lot of action in stocks as they've made new highs, and precious metals have been flying to the upside. Interestingly enough, we're really starting to see the inflationary news kick in, and a matter of fact, if you watch what's happening, for the first time in many years, wage inflation is actually starting to come into play. Bob... great to talk with you today. What do you think about that wage inflation? And talk to us a little bit about the inflation uncertainty.
Bob Wiedemer: Yeah, great to talk to you Mike. It's a huge issue. In fact, we'll deal with that inflation first. You're definitely starting to see inflation, that was kind of expected a little bit over the last few months, reflation--the reflation trade--but it's going around the world. In fact, China is starting to see some significant inflation. You're starting to certainly see it in the U.S., as well. Interest rates likely to go up again here shortly in March. So, I think that's very much something we've got to look at and I think the genie is coming out of the bottle. Terms of uncertainty, absolutely, it's one of the most talked about words you can find these days in financial journalism--lots of uncertainty. I know from looking at the stock market it looks like there is none in a way. It seems like the market certainly goes up, but we know that there has to be some uncertainty out there. Not only do we read it, but if you look at how gold and silver have gone up and often outperformed the market since the beginning of this year, it tends to indicate there's some anxiety there. That's not normal that gold and silver is just suddenly going to go up when the market is roaring forward. Usually it goes down. So, the fact that it's going up, I think is a very clear indication there's some uncertainty and anxiety out there.
Mike Maroney: Well it's interesting, Bob. As usual, you're ahead of the curve. You were a couple of months in front of everyone else. Now, one of the things we spoke about the last time we had a chance to chat was the $1 Trillion infrastructure package that Mr. Trump was potentially going to implement. Now, obviously, the money is going to have to come from somewhere. What does that do as far as debt is concerned and will that be an additional catalyst as far as the inflation is concerned?
Bob Wiedemer: Well, there's no question that debt is going up and what's sad is it's not going up just because of President Trump's plans for infrastructure spending and clearly the extent he does settle on that will add to the debt, but our debt is already heading up to a $1 Trillion deficit a year just based on Medi-Care and Social Security increases. That's one reason that the Republicans, in particular Paul Ryan, the Speaker of the House, is so concerned about trying to get Social Security and Medi-Care under control, because we're seeing more and more debt even without whatever President Trump is going to add to it for infrastructure, defense, or whatever. So, absolutely, this is an issue that's big and could only get bigger depending on what President Trump can get through Congress.
Mike Maroney: You know Bob, it was interesting, I had a chance on Monday to talk to a friend of mine who is an Institutional Trader over in Germany and he was like, "Mike, there is a lot of uncertainty in the market." Now, I thought he was talking about what was happening over in Europe. It seems as if the Europeans are very uncomfortable basically with our President, because they're fearful of a lot of geopolitical possibilities. Could you talk a little bit about that?
Bob Wiedemer: Well, I think it's a great point. It's uncertainty. When I talked about uncertainty, even back in October, I wasn't just talking about the U.S., I was very much talking about the world and how the world looks at us. You know, rightly or wrongly, they are concerned about President Trump, what he might do, what he might say, what he is doing, what he is saying, talk about NATO and so forth. It does give foreign investors uncertainty about investing in the U.S., or if nothing else, uncertainty about investments at all. I think, that's almost certainly part of what's pushing gold and silver up is it's not just U.S. uncertainty, I know it's a U.S. President, but this is the leader of the free world, and it's hugely affecting Europe and other countries and certainly their investor's uncertainty as well.
Mike Maroney: Now, you talked a little bit about how gold and silver have performed against the S&P since the beginning of the year, most people don't even realize that. If you look at silver and if you look at gold, I think they've almost outperformed.
Bob Wiedemer: Most of the time, they have. Most of the time since the beginning of the year, they've been outperforming. You know, obviously, when we have the big post-Presidential State of the Union Address and things like that it might go under a little bit, but I think, it's a terribly important point for gold and silver and I'm not the only one making this... other people have pointed this out...the fact that it's keeping up with a rapidly rising stock market and outperforming much of the time. That's a new trend for gold and silver and a very positive one. So, I think, we got to look at this, because what if we start seeing more of the problem side of this, or the market starts getting uncertain, or foreign investors get more worried, you could see a real take off.
Mike Maroney: So, the stock market is making new all-time highs, the bond market looks like it's put in a high, and potentially the 30 plus year bull market may be coming to an end, and we're starting to see that classic sector rotation, and more and more money seems to be flowing into precious metals because of the uncertainty. I think, what you may have been eluding to was in a bear market, bad news pushes the metals down and good news basically does nothing. What we've seen recently, even in the face of an all-time high in the stock market and major moves in stocks, precious metals are still moving up. So, investors are starting to really use it as a way to diversify. Do you think that's a strong statement? Do you think that is something that will continue?
Bob Wiedemer: I think that's exactly correct. We're seeing other people... maybe stock oriented or so forth, talking about the need to diversify this market. Where it seems funny that bother stocks and bonds are going up and I'm going to tell you I'm still bullish on the market. I think, this market could go further, but it does seem to be... you know... that's not negative for gold and silver. We all know, of course, that the good times don't last forever. There will be a downturn and when you go up this fast it could be a fairly sharp downturn in the stock market at which point that's going to create uncertainty and fear. Again, also very good for gold and silver and a good reason to diversify. I think, people are getting that message and that is also part of what you're seeing in this... you know... strong rise in gold and silver even in the face of a very fast rising stock market.
Mike Maroney: Well, the nice thing today, we saw the silver market move from $15.80 all the way up to $18.50, since December 20th. Gold moved from $1130 all the way up to $1265 and we really didn't see any pullback. Fortunately, today, we're seeing both of the metals pullback a little bit. So, now may be a great time for people to get those early positions in or at least get their foot wet, as far as the metals are concerned. What do you think, Bob?
Bob Wiedemer: Well, "Buy the dips" is the motto for a lot of stock investors and it has worked. Buy the dips, in particularly, in this kind of gold and silver market when we're seeing increases and a positive stock market, likely to continue or get stronger in a negative stock market. Buy the dips, makes a lot of sense.
Mike Maroney: You know what? We're going to continue to communicate with Bob, because he sees a lot of things before they really get out there in the news that affect the price of precious metals. Obviously, in October, November, he talked about how if investors had an opportunity to start to build a position in precious metals it was something that they would need to do based on a much higher level of uncertainty. We're seeing that uncertainty throughout the world. We're starting to see that inflation genie, you know...kind of come out of the bottle. Obviously, there are many more things out on the horizon. So, Bob, you'll continue to keep us abreast of the things that you see and obviously, if there's any major news, please give us a call so we can get it out to our customers and our prospects.
Bob Wiedemer: Absolutely! A lot is happening. I will make sure we stay in touch and I keep you up-to-date on what I'm seeing.
Mike Maroney: Fantastic! Have a great day, Bob!
Bob Wiedemer: Thank you! Bye.