We’re not totally sure that a stock market collapse is right around the corner, but this article certainly makes some good points about how overvalued most markets are in comparison to precious metals.
There are some big money players that have not so quietly moved to the sidelines in recent months, so that should give us all pause for thought…
By Justin Spittler
Jeffrey Gundlach has a message for you.
Sell your stocks and buy gold.
As you may know, Gundlach is a world-class investor. His firm, DoubleLine Capital, manages more than $100 billion. Many on Wall Street call him “The Bond King,” a title PIMCO founder Bill Gross held for years.
Lately, Gundlach’s been very vocal about U.S. stocks…and he hasn’t had many good things to say.
In November, he said the stock market was “vulnerable” due to weak earnings and steep valuations. In January, he warned that 2016 would be a tough year for investors. Last month, Gundlach said there was “big money” to be made shorting (betting against) stocks.
On Friday, Gundlach issued another warning. He was even more blunt than usual. CNBC reported:
“The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel—sell everything. Nothing here looks good,” Gundlach said in a telephone interview. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”
Today, we’ll show you why it would be a big mistake to ignore Gundlach. We’ll also show you how he’s protecting his clients’ money and how he plans to profit from a stock market crash.
• Gundlach thinks stocks are too expensive…
Regular readers know we couldn’t agree more. For months, we’ve been saying the stock market has lost touch with reality. According to the popular CAPE valuation ratio, stocks in the S&P 500 are now 61% more expensive than their historic average.
U.S. stocks have only been more expensive three times since 1881: before the Great Depression, during the dot-com bubble, and leading up to the 2008 financial crisis. And they’re only getting more expensive…
• Earnings for companies in the S&P 500 are on track to decline for the fifth straight quarter…
That hasn’t happened since the 2008–2009 financial crisis.
And yet, stock prices keep climbing. Over the past month, the S&P 500 has hit seven new all-time highs. The Dow Jones Industrial Average also hit a new record high two weeks ago.
This might seem like a good thing. But Dispatch readers know the recent rally has only made stocks more dangerous. With earnings falling and stock prices rising, stocks are getting more expensive by the day. And the more expensive stocks get, the further they’ll fall when the market turns down.
• Gundlach doesn’t think stocks should be rallying…
That’s why he’s shorting U.S. stocks. It’s also a major reason why he owns gold.
As we often point out, gold is real money. It’s preserved wealth for centuries because it’s unlike any other asset. It’s durable, easy to transport, and easily divisible.
Gold is also the ultimate safe haven. Investors buy it when they’re nervous about the economy or financial system. Its value can soar during a financial crisis.
• According to Gundlach, gold is the only asset worth owning right now…
Reuters reported last month:
Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Wednesday that gold remains the best investment amid fears of instability in the European Union and prolonged global stagnation, as well as concerns over the effectiveness of central bank policies.
“Things are shaky and feeling dangerous,” Gundlach said in a telephone interview. “I am not selling gold.”
But Gundlach doesn’t just own gold. He’s also invested in gold stocks. As you may know, gold stocks are leveraged to the price of gold. A small jump in gold can cause gold stocks to take off.
• Right now, many of the world’s greatest investors are also loading up on gold…
Take Stan Druckenmiller, one of the greatest traders ever. From 1986 to 2010, Druckenmiller earned average annual returns of 30%. Incredibly, he didn’t have one down year during that stretch.
Like Gundlach, Druckenmiller thinks you should steer clear of U.S. stocks right now. In May, he urged anyone listening to “get out of the stock market.” He’s put about $300 million, or about one-third of his money, into gold.
George Soros, another legendary investor and Druckenmiller’s former trading partner, has also placed a huge bet on gold. Earlier this year, Soros invested $264 million in Barrick Gold (ABX), the world’s largest gold miner. This is the largest position in Soros’ portfolio today.
David Einhorn, founder of Greenlight Capital, is also betting on higher gold prices. Einhorn, who’s beat the S&P 500 nearly 2-to-1 since 1996, owns $165 million worth of GDX, a fund that tracks large gold mining stocks.
Some of the biggest names in investing are betting big on gold. This tells us a couple things: 1) Something is very wrong with the global economy and financial system. 2) You should buy gold if you haven’t already.
• The price of gold has jumped 26% since the start of the year…
Gold is now trading at its highest price in two years. But it could go much higher.
Casey Research Founder Doug Casey says gold could easily triple in the coming years…but not just because stocks are about to crash. Doug sees a much bigger and far more dangerous crisis on the horizon.
To learn about this coming crisis, watch this short video. As you’ll see, this crisis will reach you even if you don’t have a single dime in the stock market. What’s worse, this crisis is already well underway. Each day, the economy gets closer to its breaking point.
The good news is that you can still prepare. This free video shows you simple yet proven ways to crisis proof your wealth. Click here to learn about these strategies today.
Chart of the Day
Gold stocks just hit a new three-year high.
Today’s chart shows the performance of GDX since 2013. As we said earlier, this fund tracks large gold mining stocks.
You can see that GDX took off in January. It’s now up 129% since the start of the year. It’s trading at the highest level since April 2013.
If Gundlach and company are right about gold, gold stocks could skyrocket. During the 2000–2003 bull market, the average stock gained 602%. The best ones jumped 1,000% or more.
Doug Casey thinks gold stocks could go even higher this time around. That’s because investors could stampede into gold stocks as the crisis he sees coming unfolds. Doug wrote in March:
I say the odds are extremely high that as gold goes up, a lot of this funny money is going to be directed into these gold stocks, which are not just a microcap area of the market but a nanocap area of the market. The combined market capitalization of the 10 biggest U.S.-listed gold stocks is less than 29% of the size of Facebook.
I’ve said it before, and I’ll say it again: When the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.
That’s why it’s so important that you act today if you wish to own gold stocks, before it’s too late…