Mexico… Gold… Reverse Mortgages… and Bonds
Harry Dent | July 31, 2019 | It's been too long since we've shared our Q&As with our readers. So, today we remedy that. Here's what readers have been asking Rodney and me… and how we answered them. Remember, if you have any questions we don't answer below, write to us at economyandmarkets@dentresearch.com. Karen S. emailed the following… I have been an avid follower of yours since 2000… I was just 33 years old then. I bought all of your books and read and reread them many times. I am Canadian, and when the Great Recession hit in the U.S., it got real for my husband and me. We sold our house and bought a boat. We got out with a small profit and were pleased. Canada never had the correction the U.S. did, and had we waited to sell our house eight years later, we'd have made another million dollars. I wouldn't change a thing we did though. A million dollars would have prevented us from an incredible adventure on our boat (seven best years of our life) as well as saving enough money to finally retire two years ago, at age 49. Learning to release ourselves from debt so we could experience life is invaluable. We have now settled in Merida Mexico for retirement… leaving Canada and its health care behind. High taxes and long wait times are now behind us. We love it here and will never look back. Vacations in Canada are incredible, but I want to live here. My question to you: How is Mexico going to fair in this coming downturn? Properties here typically don't (or can't) have a mortgage, so defaulting isn't common, but having to sell because you need the cash is. Does this new government help of hinder Mexico in recovering from this upcoming depression? Lastly, thank you for sharing your knowledge and experience. Your advice pointed us in the right direction and I am forever grateful. To Karen, Rodney replied… Thank you for your continued support! It sounds like you carved out a great life. As far as Mexico goes, that country is dependent on the success of the U.S. As we go, they go, because so much of their output ends up here. They will go through a pretty significant downturn along with us. The AMLO Government is doing good work rooting out corruption, but his tendency to nationalize could hurt. So far, he hasn't gone it, but that was part of his platform for years before taking office. If he tries to nationalize industries during a downturn, it will make matters worse. I added… Mexico does have better demographic trends and less overall debt compared to GDP than the U.S. While they may endure a significant downturn when we do, I think their economy will still fair better than ours. Properties there are also not as overvalued. You got out of Canada at the right time. Property there faces a painful crash… worse than what we can expect State side. Roy H. and Bradley N. both wrote in to ask about gold. Roy specifically asked… Bill Bonner and Doug Casey have always said, and keep saying, "Buy Gold!!!" Why do you disagree? My answer to that is simple… In the very short term, gold is in a bullish pattern. But, by the middle of next year, it should be falling again. It could dip near, or even through, $750 an ounce in the depth of the downturn ahead. After that, say by 2025, it should be moving higher again, and be in an upward patter for years after that. The thing is, Bill and Doug view gold as an inflationary hedge and see the potential for hyperinflation due to money printing. The difference between us is that I don't see any inflation in the near future. In fact, I see the opposite. When the crisis hits early to mid-2020, deflation is going to become a serious problem… and deflation is very bad news for gold. Gold correlates with one thing over the long term: inflation. If it correlated with financial crises, it would have gone up rather than down in late 2008. Rather, the dollar proved to be the safe haven during the Great Recession, and it will prove to be the same in the coming crisis. Ken and Carol emailed… We are both in our 70s and don't want to sell our home and downsize yet. Should we look at a reverse mortgage before home prices drop? My response was… This is a good question. I always say it's better to sell now, before the largest fall in real estate prices likely in your lifetime. Optimally, sell now and rebuy in a few years. Rent or take a trip around the world, in the meantime. A second option is to downsize now rather than in a few years' time. If you wait, you may suffer a much larger loss on your present home. Rodney added… Reverse mortgages tend to be very specific to a person's situation. They are typically for people who intend to stay in their homes as long as possible, and aren't considered a safeguard, or put option, against the price of the home. If a person intends to say in the home for as much of their lifetime as possible, now would be a good time to consider it, when values are high. And Wayne H. wrote asking Rodney… Where do think bond futures are heading? To which Rodney answered: I think bond prices are going higher and rates are heading lower. The Fed will pull down the short end, and I think we're looking at a global slowdown over the next several months, which will weigh on the long end. I think the whole curve moves down a bit. Thank you to those who emailed. Remember, if you have questions, ask us. Or if you just want to send a note, we always love hearing from you. Again, you can reach us at economyandmarkets@dentresearch.com. 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