ABA is the new investment strategy. Anything But America. Knowing Me, Knowing You, I have a feeling many of you are already doing just this.
The risk is that one doesn’t invest at all, not anywhere. Yet three of the opportunities which we have persistently identified in the last 2-3 years have come into their own. For example, here are some growth numbers year-to-date:
Gold Miners 90%
Gold 40%
Silver 32%
Hong Kong 30%
Shanghai Comp 14%
FTSE 100 14%
S&P 500 12%
The question then becomes are these opportunities still there for the taking, or was that it? Is it all over? We believe it is the former, and I look at these in more detail in the webinar from earlier today, a recording of which you can access here.
Gold is most obviously the one where it has been suggested it is now expensive. The problem is that there is no consistently useful way to value gold. Even so, what can be observed as a matter of fact is the trend for gold, and the behaviour of buyers.
The current uptrend did not begin in May 2024, when retail investors became net buyers of gold ETFs. It began in 2015, 10 years ago. There was decent demand until 2020, but then retail money started piling into the sexy alternatives of tech and bitcoin and a spectrum of crazy investments which will only ever fly midst a mania. Yet the price of gold continued to trend up from 2020 because there was another cohort of big gold buyers, led by the world’s central banks and, probably, the hyper wealthy. I look at why in the webinar.
From May 2024, retail investors also became net buyers, and as the last year progressed gold featured regularly in the headlines, and the TV adverts for gold coins or selling your jewellery began to proliferate. Yet investor behaviour is not manic, not yet.
The gold trend might feel mature after 9 years, but it does not feel close to the end. Commodity bull markets tend to end with big spikes higher as investors fight to get on board, just at the wrong moment. Before we get to that point we might expect gold miners to be the notable outperformer vs the yellow metal as that mania unfolds, and even bigger profits from silver and silver miners. None of that is happening yet, and the miners look cheap.
Though that sounds very positive, the yellow shiny metal has probably suckered more people through history than anything else. With that in mind, if you buy gold now there is the possibility of a notable correction just ahead – not a multi-year peak, but frustrating if you were expecting mega profits from gold miners in the months ahead.
For example, when the gold price peaked in April we thought it might fall further than it did, though it took 5 months before the April peak was exceeded. Don’t be surprised if something similar happens just ahead, but on a bigger scale. That’s not a prediction, it just means be prepared.
Over the week, Japan and China (HK not mainland) gained 4%, with other winners less than 2% e.g. Europe and S&P 500, and there were no big losers. In commodities, gold, silver, and copper miners were all up 6%, with the underlying metals up 1.5%-2.5%. Why? Miners are cheap, supply of the metals is limited, inventories are low, and demand continues to grow. For an ABA investor that has considerable attractions.
The UK stock market remains cheap, which is why it hasn’t fallen much or at all recently despite political musical chairs – stronger leadership would certainly be helpful, along with more control over noisy Think Tanks full of half-baked ideas. The flat economic growth numbers this week served to encouraged investors focussed on 2026/7, and an economy benefitting from (substantial?) rate cuts.
China is also cheap, appears to be early in a multi-year uptrend and, in the short term, was unmoved by reports that Trump had told the EU that they needed to impose 100% tariffs on India and China for buying Russian oil. As is increasingly the case, Trump was ignored.
US inflation and unemployment both headed up on Thursday. This paints a picture of stagflation-lite, which is very unhelpful for the Federal Reserve beyond a 0.25% rate cut next week. It should prove to be a fascinating week or two ahead for US financial markets.
Even OpenAI’s Sam Altman recently told his audience “Are investors over excited? My opinion is yes. I think some investors are likely to lose a lot of money.” At which point Emperor Trump might well find he meets his Waterloo, and the Money Money Money will Take A Chance On ABA.