Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trade Wars and Other Black Swan Threats to Your Investments

Stock-Markets / Financial Markets 2019 May 15, 2019 - 11:39 AM GMT

By: MoneyMetals

Stock-Markets

An unexpected news event caused the stock market to plunge over the past week, with the Dow Jones Industrials losing several hundred points. Stocks had been crawling back up toward new highs last month in low volatility trading…until suddenly, a black swan arrived.

According to Investopedia, “A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict.”

In the current era, a black swan can arrive by way of a simple tweet.

President Donald Trump took to Twitter to announce his administration would impose new tariffs on $200 billion in Chinese goods as soon as Friday while threatening an additional 25% levy on Chinese exports “shortly.”



“Trump’s tweets initially sent the market reeling,” reported CNBC. Added Bank of America, “The latest escalation of the trade war was completely unexpected... Fasten your seatbelt.”

And then, just yesterday, China retaliated with some new tariffs of its own on U.S. agricultural exports – sending the stock market down again.

In the big picture, the current stock market selloff may not amount to much. It doesn’t appear to be on par with other infamous black swan events such as the 1987 stock market crash. Then again, the current selling could just be the start of a brutal bear market that makes the 2008 financial crisis look mild by comparison.

Markets are inherently unpredictable. They can trend calmly, lull investors into complacency, then turn on a dime and become unstable for reasons nobody could have anticipated.

By their nature, black swan events are difficult to prepare for. They can come in the form of natural disasters – or technological, political, or financial disasters.

How Gold Can Help De-Risk an Investment Portfolio

The best way to prepare for an uncertain future is to become resilient to whole categories of potential threats. One obvious strategy is asset diversification, including into alternative assets held outside of the banking and brokerage systems.

Gold and silver provided a measure of stability and safety over the past week as stocks tumbled. Gold prices have logged some decent gains.

Academic studies have shown that a modest allocation to gold improves the risk-adjusted performance of an investment portfolio. Gold often zigs when conventional financial assets zag.

You don’t necessarily own gold because you think it’s going higher.

If you’re an optimist on financial assets, you may even be hoping that gold prices go nowhere.

But much like you take out insurance on your home in the hope you won’t need it, you own precious metals as a form of insurance against various threats – up to and including a total collapse of the U.S. dollar-based financial system.

Could You Financially Survive These Scenarios?

The demise of the dollar as world reserve currency will likely play out in slow motion in the years to come. But it could be accelerated by any number of potential black swan events.

What if China further retaliates against Trump’s tariffs by dumping its massive stockpile of U.S. Treasuries and revaluing its own currency upward? U.S. consumer prices and interest rates would spike.

7China is a big enough player in world trade to single-handedly threaten U.S. dollar hegemony.

Other black swan threats to the financial system may hit its technological or algorithmic underpinnings.

What if a cyber attack on the Federal Reserve system and/or major U.S. banks halted all electronic commerce in the economy? Security experts at major financial institutions all say that malicious computer hacking is one of the threats that most concerns them.

We’ve seen cyber attacks pulled off successfully at crypto-currency exchanges multiple times. Yet some people describe Bitcoin as “digital gold.”

The whole point of owning gold is that it’s a non-digital asset. It’s completely off grid, whereas cryptocurrencies depend entirely on a functioning and secure internet.

If you own gold in the form of a financial derivative product – whether through a futures contract, exchange-traded fund, or offshore account – you’re not getting the full protection or versatility of physical gold ownership. At the end of the day, gold is a tangible asset that you should be able to touch, transport, and discretely barter and trade with should the need arise.

Of course, gold and other precious metals aren’t the only assets that can help you prepare for black swans.

Given their unpredictability, it’s possible that the next black swan triggers a temporary rush into dollars and Treasuries instead of gold. The next great inflationary melt up might be preceded by a brief deflationary meltdown.

Americans might elect a new socialist president in 2020. Such a political black swan might come as a bigger surprise to markets than Donald Trump’s victory in 2016. It might trigger the biggest stock market crash in history. But in the meantime, the Dow might soar to 36,000.

The point isn’t whether these particular scenarios actually will play out. The point is to consider how your investment portfolio would hold up any conceivable scenario. Because sooner or later, an extreme, unforeseen event will put it to the test.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in