Are the markets overvalued? Is there a market correction looming? Are gold, silver, and other precious metals undervalued? Is there a story between bitcoin and gold?
The Largest Bull Market in the History of the United States
This is the largest bull market in the history of the United States. Now that’s a fact and it must set alarm bells at everyone’s head. Every time we hear about a record bull market, or about a stock that’s gone up 30 days in a row, you must ask yourself, could that be sustainable, and what is there to sustain the bull market?
The Role of the Fed
When the Fed announced the further cutting of interest rates it did so to sustain the market as it is and keep the recession that might occur from not happening.
The way the fed is handling the situation at the moment is totally wrong. There is a number of bad news coming in right now. The economy and the GDP are slowing, the number of jobs available is dropping, and the Fed wants to get involved to stop the recession from happening.
In fact, the Fed acts as a market manipulator to interrupt the normal market cycles. In my opinion, the Fed’s action might postpone the inevitable, but when the inevitable takes place, then its effect will be much worse.
The market cycles should be allowed to come back. After all, the market should be free. I am confident the market can handle it. Bear in mind, today isn’t 2008 when the Fed intervened and rightly so, to stop the financial meltdown. The Fed should not be allowed to stop these natural cycles from happening. The Fed should be there to act when needed as it did back in 2008.
Market Correction is Looming
After a ten-year bull market, the longest in United States history It is only natural for a market correction to take place. A 30% correction is possible. Many will think an up to 30% correction will be a disaster.
This is not the case. The question is, where did this disaster actually come from? When you see a stock up 150% and then down 30%, and all of that in a bear market, then this is not a disaster. It is a market correction. From 2009 to now if we get a 30% correction, then I call this healthy.
Gold is Still Undervalued
What does gold have to do with all this? Some will say gold has already made a big move with a pleasing 9% so far in this year. My opinion is that after a ten-year consolidation for gold, its price should have been much higher. Gold has the potential and the room to make up the lost ground.
Silver is Also Undervalued
The same applies to the rest of the precious metals. They are all undervalued as is gold. In particular, if we check the ratio between gold and silver, we will see it is not where it should be.
It is commonly accepted the ratio between gold and silver should be at 60, meaning that the value of sixty ounces of silver should be equal to the value of one ounce of gold.
Right now the ratio between gold and silver is at 88 meaning that silver is not only undervalued but it has some catching up to do. Silver has more room to move, than gold. Over the course of time, the ratio between the two will come close to sixty.
In my opinion, the time for precious metals in general to break the ten-year drought is close and this is great news for the investors.
The Enigmatic Bitcoin and Gold
And what about Bitcoin and gold? Well, they have nothing to do with each other. Investors can own both. Bitcoin could be a great balance investment as long as the investment remains small. In a portfolio, the different types of investment (stocks, gold, government bonds, etc.) should be at around 10% maybe a bit more.
When it comes to bitcoin, the commitment should be much lower. Bitcoin is an investment that blends high profits with high risks. The cryptocurrency market is an unregulated market and is subject to extreme volatility.
Numerous people made money and an even larger number lost their money. Remember what happened a couple of years ago when bitcoin lost over 10,000 points and many investors went to ruins. My advice is yes to Bitcoin, but be cautious and invest small.