INVESTMENT TRACK RECORD
In the latter-half of 2006 I wrote the content for the new website, which I named whichwayhome.com. It's mission was to explain the complex, volatile world of investments in a straightforward way. Seeking to identify winning investment themes ahead of time and to position readers to profit from its ‘big picture’ views, it published unwavering medium- to long-term views and refused to get swayed by short-term volatility or pushed media noise.
At the time, buying a home seemed like a daunting task. Even if you found a property that met your requirements, the financial commitment was colossal. Given the high valuation of property, many readers found themselves asking the difficult question “Should I buy a house or not?” hence the origin of the website’s name ‘Which Way Home’.
Whichwayhome.com was among the tiny number of publications worldwide which successfully predicted the 2007/08 Credit Crisis, the 60% stock market dislocation, the real estate crash (prices fell 33% in the U.S. and 21% in the U.K.), plummeting interest rates, and major blue-chip and Wall Street bankruptcies. The site described how these events would unfold and documented the collapse in real time.
The first thing I wrote was what I called ‘The Essentials’, eight key facts that readers needed to know in order to make sense of the market and to inform their decision making. Following $640 billion of new ‘subprime’ loans made in the U.S.A., such loans amounted to a massive 17% of all home purchases that year. Substantially owned by financial institutions and hedge funds, 13% of these loans were delinquent and 2% were in foreclosure.6 And this was the picture while the economy was supposedly healthy! It didn't take much imagination to realise that further deterioration of these loans would have widespread implications for the financial markets.
As 2007 progressed I published more detailed views on the markets. The economy was beginning to turn, and it was likely that easy money would disappear from the table. I concluded that the increase in loan defaults would accelerate, forcing banks to become more conservative, bringing about a collapse in credit. As credit contracted, high stock prices and house prices would be unsustainable, leading to a massive dislocation in both markets.
A year after whichwayhome.com was launched, Wall Street collapsed, house prices crashed, global stock markets crumbled and governments around the world began to bail out disintegrating financial institutions. Despite successfully predicting one of the biggest bubbles and collapses of all time, and despite many of my readers benefiting from those predictions, there was no rest for the wicked. All my readers wanted to know was… “What’s next?” Back to work for me then!
I had already recommended that my readers buy precious metals in the first quarter of 2007 in order to protect their wealth from inflationary pressures. In 2008 I began shifting more of my focus towards metals.
Money printing had become even more prevalent in response to the global credit crisis, as the monetary powers focused on bailing out the financial system. Central banks were pumping truly vast sums of money into the economy. They were trying their best to provide a financial fix; however, the problem was too much debt, and by focusing very intently on adding more debt they were inadvertently creating bigger problems for themselves further down the line.
I could foresee an increase in inflation in the years ahead and believed that the price of gold and silver would increase as a safe haven, a store of wealth and a hedge against that inflation. While the precious metals were likely to suffer from market volatility over the short term, I believed that their long-term destiny had already been set out by the actions of governments and central banks. From the point I recommended buying precious metals until their peak in 2011, both gold and silver tripled in value.