Hedging the Election

Hedging the Election

How You Might Win Big this November
By Avoiding a Costly Mistake Now


Craig R. Smith
Lowell Ponte

The economic uncertainty so many now feel is understandable.

The opening week of 2016 saw the sharpest year-opening percentage plunge in stock value ever recorded.

Stocks plummeted by 1,078 points and within days investors lost $1.36 Trillion. That vanished wealth equal to almost 38 percent of total annual federal budget outlays. Only treasuries and gold held and gained value while other investments showed their fragility; one of many signs that we may be slipping into another Great Recession.

“Investors have started the new year in panic mode,” said veteran investment advisor Ed Yardeni as the frightened herd turned away from stock hockers trying to corral and skin them.

Sixty-five percent of Americans now tell pollsters that our nation is on the wrong track. Eighty-one percent of us no longer trust our government to do the right thing.

But like a deer paralyzed by car headlights, many have decided to let government control their investment decisions. They wait for the Federal Reserve to announce a change in interest rates.

Even worse, many have hunkered down to see who wins the November presidential election before making any investment.

This could be a costly mistake.

Does It Matter Who Wins?

Government pervades and perverts America's once free-market economy. Thus we have learned to watch politicians and the Fed, not the quality of actual businesses, to predict when stocks on the juiced Wall Street casino will rise or fall.

But in this November's presidential election, we can already see what might make one asset go up sharply while others decline.

Our best guess is that it does not matter which of the four late-March finalists wins.

This key asset is likely to go up dramatically, whichever candidate becomes President. You, therefore, have no reason to wait for the election to take this step.

The power in your hands is to decide whether you will be the winner next November by electing to make a wise decision now to hedge against the vote's economic impact.

If you do not act now, protecting yourself and your family after the election might be a lot more expensive. You then could be kicking yourself for not acting decisively now.

Four Horsemen

The four “horsemen” in the presidential race appear to be very different, and will cause a host of impacts on our society and economy. All four have positioned themselves to get support from voters frustrated and angry over being ignored or lied to by the establishment elites of both major political parties.

Each of these candidates is likely to send the same key investment rising. You can be a winner in this race by putting a bit of your money not on one or another candidate but on one safe haven of value.

Let's look at each candidate to see what I mean:

(1) Vermont Senator Bernie Sanders, 74, a self-described democratic socialist, has surprised pundits and his chief Democratic opponent by winning Michigan and many other states.

A Progressive, Sanders has attracted large numbers of young, Latino and intellectual voters through two qualities: he is authentic and honest about his ideology, and he is Santa Claus; promising free college, “Medicare for All” single-payer socialized medicine, altogether at least $18.5 Trillion of additional social spending over the next 10 years. [1]

To pay for this, Sanders has proposed crushing new taxes on businesses and the rich, including a top marginal income tax rate of 90 percent, near-confiscatory death taxes, and a “speculation tax” on every stock, bond or derivative sold in the United States. He has also proposed breaking up America's largest banks and other businesses deemed a risk to the economy if they failed. [2]

A few far-left economists, such as Gerald Friedman at the University of Massachusetts Amherst, say that Sanders' taxing and spending would usher in a utopia of prosperity that would, in the words of National Review writer David French, put “gold at the end of every rainbow and a Unicorn in every stable.” [3]

A Republican House and/or Senate would block most such plans by a President Bernie Sanders, but Sanders likely would veto any Republican legislation to cut taxes or the size and regulatory power of government.

Worse, the election of an avowed socialist would signal investors throughout the world that the United States is no longer a secure pro-capitalism place to invest their money in new companies or hiring workers.

The economy would sink deeper into stagnation as investors flee the country. The Fed and Federal Government would almost certainly return to printing trillions of dollars out of thin air to prop up the stock market and growing welfare state. Real world inflation would be driven by debasing the dollar. In anticipation of this economic and monetary morass, the price of gold will probably increase dramatically.

(2) Former Secretary of State Hillary Clinton, echoes Sanders in calling herself a “Progressive” and in moving leftward by embracing his policies. The NBC comedy show Saturday Night Live in March depicted Clinton in a campaign ad literally morphing into Sanders. In the process, she has rejected the more “moderate” 1990s policies of her husband, President Bill Clinton.

(The Clinton Administration has been credited with creating prosperity. What Mr. Clinton in fact did was simply cash the spending refund, the “peace dividend,” that Republican Presidents Ronald Reagan and George H.W. Bush earned by ending 50 years of the Cold War. This dividend should have been returned to taxpayers in tax cuts, but the Clintons instead diverted it to social welfare spending to buy votes.)

Like Sanders, Mrs. Clinton favors heavier taxes on the rich and business. She also favors a transaction tax and a tax on high-speed market trading. Unlike Sanders' proposal to break up major banks, Clinton wants to impose a “graduated risk fee every year” on big banks, and to milk these banks for billions in fees and penalties as Barack Obama's Administration has done. [4]

Sanders has challenged Clinton to release the transcripts of three speeches for which the megabank Goldman Sachs paid Mrs. Clinton $675,000. Clinton, a former board member of Arkansas-headquartered WalMart, has dodged the request by saying she will release the speech texts only if all of her other opponents release transcripts of all their speeches. Even the New York Times has editorialized that Mrs. Clinton should release the potentially-embarrassing transcripts that might not endear her to young socialist voters.

The Clintons reportedly have taken more than $158 Million in special interest money in recent years. But to win in a political party that has drifted far to the left, Mrs. Clinton herself has moved far left and portrayed herself as offering to become the third term of President Obama.

Few investors or workers would look favorably on more years of the hostile anti-free market, “you-didn't-build-that” crony capitalism of President Obama which has caused nearly eight years of stagnant growth and wages. Yet this implicitly is what Mrs. Clinton is promising.

If elected, she will be constrained by Republicans in Congress, but she may decide to rule by decree and the regulatory state, as President Obama has done. Like Sanders, she will face a worsening economy and the need to print more trillions out of thin air to keep the stock market afloat and the welfare state expanding. As this shrinks the value of the dollar, and the dollar's status as the world's reserve currency weakens, the price of gold – which has been the world's “other” reserve currency for the past few thousand years – might rise steeply as investors rush to escape the sinking dollar.

(3) Donald Trump, billionaire real estate developer, deal maker, author and reality television star, was at the start of Spring 2016 leading in the race for the Republican presidential nomination.

Trump has won a large following not only of Republicans but also of independents and blue-collar Democrats because of his populist proposals to “Make America Great Again” by building a wall on the Mexican border and renegotiating foreign trade deals so as to prevent American jobs from being taken by illegal aliens or moving to other countries. [5]

Trump calls himself a “commonsense conservative” capitalist, but others call him a populist who mobilizes voters by nationalist ideas and radical Chicago community organizer Saul Alinsky-like confrontational oratory. Mr. Trump says he favors free enterprise, yet also says he would impose a 35 percent import tax on Mexican goods and a 45 percent tax on Chinese goods. [6]

Critics also call Trump a crony capitalist who for decades enriched himself by funding, and being rewarded by, both Republican and Democratic politicians with the best government money can buy.

Supporters say that Donald Trump is now too rich to be bought off or intimidated. They see him as disgusted with a system in which the ruling establishment of both parties sells out the middle class and working class by allowing massive illegal immigration. Democrats are doing this to create a permanent majority of government-dependent class warfare voters, and Republicans at the bidding of big business, do it to provide cheap labor that drives down wages.

Trump has the potential to fundamentally transform the Republican Party from its current conservatism to the kind of anti-establishment populism now rapidly rising in several European countries; including the United Kingdom, France and Germany. [7]

Trump's shifting views have at times called for eliminating most federal income tax deductions for the very rich, a massive new military expansion and government-funded healthcare for all, akin to what socialist Bernie Sanders advocates. Trump says he would not cut Social Security or Medicare, the two costliest federal programs in urgent need of reform.

On the other hand, Trump has proposed a 15 percent ceiling on business taxes, nearly cutting in half what have become the heaviest business taxes among advanced nations. He advocates cutting the income tax rate for most taxpayers and eliminating inheritance taxes for all.

Economists are debating whether Trump's policies would, on balance, create more growth and employment and prosperity, or higher prices, more debt and an enlarged welfare state. [8]

Some analysts conclude that a Trump presidency would be “good for gold.” His proposals, they argue, would greatly increase government borrowing and massive money printing, would require deals with congressional Democrats to increase social spending, would lead to retaliation by other nations over tariffs and trade restrictions and would beget ongoing trade wars and hot wars as President Trump asserted U.S. power around the world. [9]

If Trump and Secretary Clinton are the choice this November, famed political analyst and doomsayer Marc Faber has said: “I will vote for Trump, because Hillary will destroy the whole world.” [10]

Candidates Trump and Clinton are in many ways poles apart, yet either might send gold prices much, much higher soon after their election...or even nomination, as investors begin to consider the economic consequences of either becoming president.

(4) Texas Senator Ted Cruz of these four horse riders may be the closest to a conventional American conservative, but in some ways he has proposed the most radical shift back to the economics of our nation's Framers. [11]

Senator Cruz advocates a mandatory annual balancing of the federal budget, as happens (often via dubious bookkeeping gimmicks) in the annual budget of every state except Bernie Sanders' Vermont.

Cruz proposes a consumption “flat tax” that critics argue might not be that different from the Value-Added Taxes (VATs) of European welfare states. (Progressives love VATs because they can be adjusted upwards immediately and repeatedly.)

Cruz asserts that his “flat tax” of around 17 percent would replace the income tax, the Internal Revenue Service and other taxes on the American people. It would, he says, provide a huge boost to the economy, savings and prosperity.

Cruz favors eliminating the government's Export-Import Bank, sometimes called the “Bank of Boeing,” which provides billions of taxpayer dollars to some of America's largest corporations to facilitate foreign sales of their products. Cruz sees this as cronyism welfare for “corporate fat cats” that puts an unfair burden on taxpayers.

Regarding the dollar and the Federal Reserve, Senator Cruz has said: “Instead of adjusting monetary policy according to whims and getting it wrong over and over again and causing booms and busts, what the Fed should be doing is...keeping our money tied to a stable level of gold.”

“We need sound money,” said Cruz during the October 28 Republican national debate hosted by the CNBC business channel. “I think the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold.” [12]

Yes, Cruz calls for a return to hard money, to the gold standard of more than 100 years ago that required every paper dollar to be backed by a guaranteed amount of gold.

Today's Progressive welfare state was built on the government's ability to conjure billions and trillions of paper fiat dollars magically out of thin air. Take that away and the Left's power to endlessly expand government collapses. A restored true gold standard would handcuff the politicians by requiring them to back each new dollar with actual gold.

Cruz is by no means the first modern candidate to call for restoring honest money. President Ronald Reagan appointed a gold commission to consider the idea, and former 2016 presidential candidate Rand Paul's father, Congressman Ron Paul, was a commission member.

Among those running in the 2012 GOP presidential race, Rep. Paul, businessman Herman Cain, and former Speaker of the House Newt Gingrich all openly called for a return to the gold standard. So have journalist and sometime presidential candidate Steve Forbes, technology genius George Gilder, and many others.

Texas Governor Greg Abbott is creating a state bullion depository that will make saving and doing business in gold much easier. We discuss this in detail in our 2015 book We Have Seen The Future And It Looks Like Baltimore: American Dream vs. Progressive Dream.[13] Governor Abbott and former Texas Governor Rick Perry, another gold depository advocate, have endorsed Cruz for president.

Among 2016 GOP presidential candidates, Senator Cruz may be the only one to formally endorse returning to a gold standard – but several other candidates spoke positively of studying or considering the idea, including former Arkansas Governor Mike Huckabee, famed neurosurgeon Ben Carson, Kentucky Senator Rand Paul, New Jersey Governor Chris Christie and frontrunner Donald Trump.

On the Left, the idea of returning to a gold standard is widely attacked because, after all, it would take away their cookie jar for feeding and fattening the ever-expanding welfare state. Critics rarely admit this, however, preferring to attack by claiming that the gold standard is “unworkable” and a threat to using economist John Maynard Keynes' kind of stimulus spending to fuel the economy, and a factor in causing the Great Depression. [14]

Leftist economists know that several kinds of gold standards exist. Rather than attack the classical gold standard of the late 1800s that made America the world's most successful economy – the same gold standard advocated by Ted Cruz – these economists evoke a politically-imposed bastardization, a gold “straw man” known as the “Interwar gold-exchange standard.” This had replaced the classical gold standard 10 years before the Great Depression and therefore did not cause it. [15]

A return to the classical gold standard is quite plausible, but a gold standard works because of gold's scarcity. After thousands of years of mining this incorruptible precious metal, the entire world supply would fit into a single cube only about 67 feet on a side.

Because Progressives have printed so many paper dollars out of thin air to fund their welfare state, each dollar's fixed value under a new gold standard might be only 1/5,000th of an ounce of gold or less.

In other words, implementing a new classical gold standard might cause the price of gold to jump to $5,000 per ounce or more.

The election, or even nomination, of a President Ted Cruz would signal the world that America and its voters may be returning to the classical gold standard – and returning to our former economic greatness. Honest money has once again become thinkable.

What might this do to the world price of gold, the once and future honest universal reserve currency?

All Roads Lead To Gold

Economic historians might look back on 2016 as the year that four wildly different candidates were the final four chosen by voters to be President. And yet, perhaps by destiny, a victory by any one of them could potentially send the price of gold soaring upward.

2016 will be a year of dramatic change that redefines America – but not just in our politics. This is a year that could also redefine and restore our very idea of the integrity of money and value.

Got gold? That is what the wise are electing to get now, before the political conventions and November balloting. Their decisiveness could make them big winners in the 2016 election.


[1] Emily Stewart, “If Socialist Candidate Bernie Sanders Was President, Here's What Would Happen to the U.S. Economy,” TheStreet.com, March 10, 2016.

[2] Jim Zarroli, “How Bernie Sanders' Wall Street Tax Would Work,” Npr.com (National Public Radio), February 22, 2016.

[3] David French, “If Sanders Wins, There Will Be Gold at the End of Every Rainbow and a Unicorn in Every Stable,” National Review, February 9, 2016.

[4] Leon Lazaroff, “If Hillary Clinton Is Elected President, Here's What Will Happen to the U.S. Economy,” TheStreet.com, March 1, 2016.

[5] Tyler Durden, “Trump 'Would Be Impeached' Over China, Mexico Tariffs, Chamber of Commerce CEO Says,” ZeroHedge.com, March 19, 2016.

[6] Binyamin Appelbaum, “On Trade, Donald Trump Breaks With 200 Years of Economic Orthodoxy,” New York Times, March 10, 2016.

[7] Patrick Buchanan, “TheTrump Rebellion – Suicide Of The GOP...Or Rebirth?” ZeroHedge.com, March 18, 2016.

[8] Emily Stewart, “If Donald Trump Was President, Here's What Would Happen to the U.S. Economy,” TheStreet.com, March 11, 2016; Tyler Durden, “Will A Trump Presidency Really Change Anything For the Better?” ZeroHedge.com, March 16, 2016.

[9] Tyler Durden, “Five Reasons A Trump Presidency Would Be Good For Gold,” ZeroHedge.com, March 17, 2016.

[10] Tyler Durden, “Marc Faber: 'I Will Vote For Trump, Because Hillary Will Destroy The Whole World,'” ZeroHedge.com, March 18, 2016.

[11] Ross Kenneth Urken, “If Ted Cruz Were President, Here's What Would Happen to the U.S. Economy,” TheStreet.com, March 14, 2016.

[12] Taylor Tepper, “What a Return to the Gold Standard Means for Your Money,” Time.com/money, November 5, 2015.

[13] Craig R. Smith and Lowell Ponte, We Have Seen The Future And It Looks Like Baltimore: American Dream Vs. Progressive Dream. Phoenix: P2 Publishing, 2015. Pages 144-147.

[14] Michael Hiltzik, “The Worst Idea in the Presidential Debate: A Return to the Gold Standard,” Los Angeles Times, December 31, 2015.

[15] Ralph Benko, “Ted Cruz Has The Best Idea In The Presidential Debate: A Return To The Gold Standard,” Forbes, January 4, 2016; Ralph Benko, “Cruz Is Smart to Campaign on the Gold Standard,” The Hill, January 28, 2016.

More Links

Weekly Charts

Current Spot Prices

Weekly Charts
Current Spot Prices