What clueless millennials need to know before they start investing their money
A quick crash course
Text: Sophie Hong
The actual unedited interview is below.....
Hi David! Tell us more about yourself.
I have been a financial markets trader foremost and macroeconomic analyst since the mid 80’s when I started working for Rothschild’s investment bank. Since then I have moved across the world working as a senior trader and chief dealer for some of the largest banking institutions.
I first started investing quite heavily into precious metals from 2004 as my research led me in that direction due to the actions of the USA FED and chairman Alan Greenspan with the incredible expansion in ‘money stock’ numbers. I was simply looking for where the next great asset class appreciation was going to appear.
I left the investment banks in late 2006 to set up my own trading fund specifically targeting and forecasting a major economic downturn, which presented itself as the Global Financial Crisis (GFC) of 2007-09.
From the trading and investment success I had over the period of the GFC my research next pointed to specific cycles starting in late 2015 that the repercussions of the official global policy responses during the GFC was that an even greater crisis lay ahead of us.
So I moved my family back to Asia and built the bullion companies from 2014 to help protect and advise clients on the next great cyclical move into precious metals.
The largest global monetary debasement in recorded history was on its way and precious metals was going to be an essential beneficiary and wealth preservation asset capital tool.
Investing intimidates most people, especially those who feel financially inept. How can someone like that start investing?
Raising one's awareness to the global macroeconomic picture should be an essential part of every adult's education, however the financial institutions and wealth managers more often than not intimidate people with their financial jargon and purposefully obscure and make them unintelligible to the average layperson's language.
Understanding investment cycles is actually quite intuitive and instinctive, they are like waves on an ocean and understanding that buying at the top of the wave always leads to losses and then immediate disenchantment with investing.
For example everyone believes that buying property will always lead to great rewards but this is just not correct studying historical trends, the great rewards of owning property over the last 20 years cycle was built on a foundation of enormous debt growth, this foundation is now crumbling at this particular juncture on the long term cycles, which simply means property investment moving forward will lead to heavy losses.
Every asset class has its day in the sun and understanding the macroeconomic cycles is the only way to lead to wealth growth and shrewd investing.
Start simply and study long term investment cycles, we can help clients understand as we design our articles with the layperson in mind.
What questions should I be asking myself before I start investing?
What is your timeframe, are you looking for immediate investment profits or understand that actually investment cycles are exactly that - cyclical.
Probably one of the most successful analysis of market pattern recognition is the study of the Pi cycle, which demonstrates that investment cycles have lengths of 8.6 years (with multiples of this number thereof), and hence recognition of where we are within each cycle gives you the time frame to use as your foundation.
Also as another rough ‘rule of thumb’ when it comes to investing is that 80% of the move happens in the last 20% of the cycle time length of the asset class in question.
I would also never recommend leverage when investing across assets unless you clearly understand your exit levels and have a great deal of market trading experience.
Of course there’s this big question: “What are your financial goals?” What if I don’t know what my financial goals should be?
I think the financial goals of everyone are pretty much the same, financial asset security to protect you and your family, especially into your retirement years.
Also another rule I personally live by is always “cut your cloth” dependent on your means. Quite simply is building your life and family expenditure around your means (not your expected means), we are in the largest global debt crisis in history on the back of gigantic credit expansion to fund our proposed and wished for life-styles and not investment growth.
Investment in knowledge pays the best returns and also how many successful millionaires do you know who created wealth by investing into savings accounts in depreciating currency?
What are some of the most common misconceptions about investing that you’ll like to dispel?
Well just some investing obvious points and in no particular order….
You cannot lose with real estate - History proves categorically that property prices move in cycles, for just one prime example Japan’s property market fell dramatically for a full 25 years from 1989 into 2005.
Gold or precious metals do not earn you a yield - If you take a pile of cash and place it on the table and stare at intently will it yield you anything ? Of course not, the yield you can earn on cash is for you to lend your money to a bank (deposit) and they pay you an interest rate. Gold also has its own interest rate, the yellow metal is a tier one global monetary capital asset and if you lend your gold out you can earn a yield exactly the same way as cash currency.
Bonds cannot deliver growth - Bonds can deliver fantastic growth benefits, their physical price works inversely to interest rates, if interest rates fall demand to own a higher yielding bond becomes prominent and its price rises. However at the end of the longest recorded asset bubble in bonds of 40 years, interest rates are now zero to negative. With global record issuance of new debt securities and the fact interest rates have only one way to go which is higher then we are facing a devastating cyclical bear market in bonds in the years ahead.
Deficits no longer matter - Governments globally are embracing MMT (Modern Monetary Theory), the key concept of which is that the governments that control the issuance of its own currency can never go bankrupt (intuitively the readers know this is nonsense) because it can always issue money to pay off its creditors. However empirical evidence proves in just the last 20 years that sovereign nations regularly default on debt, as their only other way to escape the debt load is to inflate the debt away through currency value destruction which effectively damages the economy.
There are studies that shows that millennials would rather save than invest. Why should I look into investing? Isn’t it super risky?
Saving is an essential ingredient to a strong economy, it has been proven that higher savings can help finance higher levels of future investment and boost productivity over the longer term. Considering the devastating debt and asset bubbles that my generation (the parents to the millennials) have created then a solid dose of saving is a natural occurrence which is healthy.
But what do you save in? If you save in the government's currency that fully intends to devastatingly debase the cash in question and pay you sub-standard interest rates, then saving in real money is the natural choice as it will preserve its value.
Gold has been officially been reclassified as “money of last resort” by the globe's major sovereign central banks.
There are so many different types of investments to explore — property, stocks, art, precious metals, and cryptocurrency. How do I know which is right for me?
Study the investment cycles, every asset class has its day in the sun and vice versa; its day mired in a dark winter.
Cryptocurrency is a trading vehicle, an investment technical picture prognosis has to be built and measured with realised and understood stop-loss parameters (know when to get out!).
Precious metals are predominately a wealth preservation asset in times of crisis with real world industrial demand dynamics also being a major component, understanding and studying both these components can drive your level of participation and investment timing.
Art demands a great deal of skill and knowledge, alongside deep pockets invariably. Also art does not lend immediate liquidity to the investor, so this is generally long term investing.
Property yields have to be studied against the cost of capital and long-term debt dynamics, I really do not like the picture of property over the next 10 years. But of course great opportunities arise all the time, but yield recognition will give a clear picture of overvaluation or not.
Stocks there is so much information out there on analysing when to hold or sell, stay away from pundits who have an axe to grind, they are biased and want to sell a particular stock to the market and hence generally avoiding bank recommendations is a good idea.
What made you start Indigo Precious Metals and Auctus Metal Portfolios?
My research is pointing to a dramatic global monetary debasement due to the global debt crisis, precious metals will be substantially revalued in this cycle.
What drove me predominately is the sheer lack of real research and analysis into precious metals and correct portfolio diversification advice. Hence these ideologies are the spine of our companies.
Can you tell us more about the two companies?
Indigo Precious Metals was founded in 2014, is predominantly a retail outlet with research and advice as the foundation. I had quite a number of clients looking for professional advice with the intention of holding a diversification of their overall portfolios into precious metals, but had no real idea which metal in particular and often didn't recognize the enormous opportunities that some of the lesser known metals offered. They also didn't understand that a correctly weighted physical metal portfolio could outperform, for example, the benchmark for gold.
With the success we achieved in Indigo we partnered with a number of very large bullion companies to create the standalone Auctus company that complements our own bullion businesses and completes the full suite of client services that we offer in physical precious metals.
Auctus is a standalone company founded in 2018, it is neither a fund nor does it trade in paper metals. Auctus acts solely as a portfolio advisory service to identify re-weighting opportunities of the clients physical precious metal holdings within their own segregated vaults.
Auctus' business model manages clients ‘physical precious metal bullion’ portfolios and adjusts their percentage weightings across differing precious metals over time. Auctus Metal Portfolios deals exclusively with the following 5 precious metals; gold, silver, platinum, palladium and rhodium according to our proprietary algorithms. This enables us to deliver superior returns to our clients, over and above a purely static, physical metal holding.
We hear that business is booming for precious metals. Why is that?
Covid-19 has instigated the largest global industrial stoppage in over 100 years, the closest comparison was the Spanish Flu of 1918, it was recorded we had a -10% fall in GDP, this time around it is a much larger fall in GDP.
The global debt crisis and Covid-19 policy reactions are being met with a massive increase in fiscal and monetary expansion, basically a global currency debasement.
Property, bonds and corporate debt, currencies, banking stocks and stock prices are looking somewhat perilous and the investment drive into non-correlated safe haven assets is into precious metals globally, with the largest institutions, wealth managers and hedge fund portfolio managers all understanding suddenly the importance of gold.
I’m interested in investing in gold and other precious metals. What are the things I should know about before I start investing?
The metals to invest in and why, is it gold or silver, platinum or rhodium or a specific portfolio breakdown of some of them?
What are the best products to purchase in each metal that will lend you the best returns and liquidity ?
What are the tax implications, vaulting storage costs, and very importantly where am I going to garner the best liquidity when exiting metals and converting back into currencies ?
What can Indigo Precious Metals and Auctus Metal Portfolios do for me?
Our companies offers you solid foundational support and research as a core savings scheme, the opportunities these metals present are enormous.
An understanding on when to invest, when to step away or reduce exposure. It must also be noted we have a big price comparison advantage over our competitors.
Is there something you wished knew/did before in terms of personal finance? Please also tell us some final investing advice for clueless millennials.
Knowledge is all important and time should be wasted. Looking back at the many opportunities I was offered and wasted due to lack of awareness or more importantly I was young and time was on my side was a mistake.
Networking is extremely important to individuals, and finding the time to foster a growing network of forward looking energetic individuals is very important.
If you need any advice or help in your metal allocations then just give us a call.
Disclaimer : The information contained in this website should be used as general information only. It does not take into account the particular circumstances, investment objectives and needs for investment of any investor, or purport to be comprehensive or constitute investment advice and should not be relied upon as such. You should consult a financial adviser to help you form your own opinion of the information, and on whether the information is suitable for your individual needs and aims as an investor. You should consult appropriate professional advisers on any legal, taxation and accounting implications before making an investment.