Precious Metals Entering, Stocks And Bonds Exiting Bull Market

Stocks have been in an uptrend for more than five years and the Dow Jones Industrial Average (NYSEARCA:DIA) has more than tripled since 2008 lows. Smart investors are getting nervous as they realize that no market goes straight up forever. The question now is not if but when will the next bear market in equities occurs. It does not take a PhD rocket scientist to observe the record gains in the US stock market for a lengthy period of time without any major corrections. It begs the question is any of this through the use of record low interest rates and quantitative easing since the start of the credit crisis to achieve this?

I am concerned that these gains are overinflated and pumped higher through these policies of the Central Bankers and stocks are way overvalued and extremely overbought, not reflecting the real economy which to me is the worst it has been in a long time. Unemployment still remains high, small business growth is almost non-existent and government spending remains out of control. Interest rates are going negative and the appetite for precious metals is rising.

Because we have not seen a meaningful correction in the Dow in more than seven years, the chance of a significant bear market remains higher than ever. I believe the US stock markets are at dangerous overbought levels and we should now be hedged with precious metals and mining stocks which are generally considered counter cyclical to equities.

I believe the Dow-Gold ratio is about to turn in favor of precious metals in a big way. I am focused on mining companies that are backed with assets rather than pipe dreams like so many tech stocks (NASDAQ:QQQ). While the lemmings were chasing stocks in 2015 I continued to build positions in deeply discounted mining companies with near term production, top notch management teams and in mining friendly jurisdictions. Now in 2016 although stocks remain high, the miners (NYSEARCA:GDX) have outperformed. This may be just the beginning because I expect even greater capital rotation into precious metals and junior miners when stocks begin crashing.

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Disclosure:

 I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 ...

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