Monday, September 7, 2020

What Happens in 2021 Regardless of Who Wins the US Elections? Michael Oliver Interview

Massive attention is now focused on the upcoming US elections. Most everyone believes that who wins the election will have a huge impact on their daily lives. Of course both sides feel that if the other side wins, the impact will be very bad and if their side wins, the impact will be very good. We won't try to get involved with any of that here. First, we don't know who the next President will be. Next, we don't know if that person will have a Congress controlled by his own party or not. Finally, if this election turns out to be very close, we don't even know for sure how long it will be before we know who our next President will be or who will be the new members of Congress. All of that is beyond our ability to forecast here.

What we can do is try to look at all the possible outcomes and then try to assess how they might impact our economy and our monetary system which is what we focus on here. We listed three possible scenarios:

1- President Trump wins re election (but what will Congress look like?)
2- Former VP Joe Biden is elected (but what will Congress look like?)
3- We have no clear winner in November and it takes weeks to months to get a winner (both for President and in terms of which party controls the House and Senate)

That's three scenarios, but all the additional possible scenarios depending on who controls the House and Senate create a complicated matrix of possibilities.

How are we to deal with this much complexity and uncertainty in terms of trying to assess the future and make personal financial decisions? Let's look at this a bit differently in terms of how it might impact our economy and our monetary system going forward.

Obviously, which side wins will impact the fiscal policies put forward by the Federal government. Both sides have made it pretty clear what they would do if elected so that is not all that complicated. If one side or the other sweeps the election and controls Congress and The White House, you can assume they will move to implement the taxing and spending policies they have outlined. Complication sets in if neither side is able to gain control of both The White House and Congress. In that scenario, it is reasonable to expect just more of the same we have had for a long time now (deadlock) and the intensity of opposition to whoever is in The White House ramped up even higher -- as hard as that may be to imagine. The US is no longer a nation of a majority being in the middle. It has split into two very divergent camps that have made it clear they will carry on a "resistance" using all means available against the other side if they are not in power. So we should expect all the above no matter who wins this November.

Perhaps another way to look at this is to ask: Will there really be a major disruption in our economic system and our monetary system in the next four years or not? Regardless of who our next President may be?

This, we think this is the more important question to consider because if we don't see all that much major change (just tweaking of tax rates and which special interests benefit the most from government spending as usual), we can make one set of personal financial decisions based on that scenario relatively easily.

On the other hand, what if next year in 2021 (or even earlier), we really do start to see major disruption in our present system? Either from radical changes in fiscal policies, major declines ramping up in the stock and bond markets, or from lingering effects from the economic fallout from the global pandemic. This is the scenario predicted by  Michael Oliver in the interview just below. We recommend readers listen to the full interview to get his perspective on what to expect. Further below we will offer a summary of his view and some added thoughts on what that means for each of us trying to make personal financial decisions

Michael Oliver is an investment adviser who has had a very solid track record forecasting future long term market trends over time. He is now laying out a long term forecast that is in line with what others we have noted here are saying (like Jim Rickards and Ray Dalio for example). They are predicting we will start seeing events that will finally lead to disruption of our existing economic and monetary system. All of them are advising people to take a defensive position and acquire hard assets as insurance against an uncertain future. Lately, we see even Berkshire taking a more defensive position in it's portfolio.

In the interview above, Michael Oliver sees a US stock market peaking out soon (perhaps in September) and starting into a long term slow decline (not a crash, a long term slow decline). He sees the bond market following that later on next year as the Fed loses its ability to control longer term interest rates. He says the downturns in the stock and bond markets will lead to more money flowing into commodities of all kinds including gold and silver in the coming years. He says that these changes are due to decades long trends that cannot be reversed no matter who wins the elections this fall. Analyzing these kinds of long term trends is his area of expertise.

In our view here, this is what readers need to consider for personal financial decisions. Not so much who wins the upcoming elections, but what will actually happen next year regardless of who has won. If nothing much changes in the basic system, then readers can use one set of assumptions in making personal financial decisions. If Michael Oliver and others are right, readers would likely use a  different set of assumptions in making personal decisions because markets that have worked for a long time may not continue to work while others take over and move into long term up trends.

The view here is that having a plan in mind for either outcome (not much change or the major changes Michael Oliver predicts) is a good idea. We are living in possibly the most uncertain time in my lifetime in terms of projecting where things are going in the next four years after this election. This is the time to think more broadly about how to plan for that rather than more narrowly. I say this in terms of being ready for several more years of just minor tweaks to the system or being ready for big market shifts out of stocks and bonds and into hard assets. There is a growing list of credible mainstream market analysts predicting the latter. As an example, the Telegraph (UK) runs this article. (See note below for more on this article in The Telegraph)
Note to readers: Coming up on the blog over the next week are two articles with direct input from experts. First, Dr. Warren Coats comments on a recent article calling for a new allocation of SDRs at the IMF in response to COVID-19. Dr. Coats is the former head of the SDR Division at the IMF.

Next, Robert Pringle comments on an article appearing in the The Telegraph (UK) that talks about gold's recent rise versus fiat currencies. Robert offers some insight based on his personal involvement with one of the events mentioned in this Telegraph article (the UK sale of some of its gold reserves). 

These are two upcoming articles I encourage readers not to miss.

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