|
|
Many
erroneously view gains in absolute terms, forgetting one’s
financial standing is more relevant in relative terms to
“competing” investors. For example, even when gold fell 30% in
late 2008 (entirely due to the Cartel, I might add), it dramatically
outperformed stocks, real estate, and ALL commodities. Not that
investors strive for “less losses” – as opposed to
“more gains” – but markets cannot be controlled,
particularly when government intervention is a key systemic factor.
PM
investors have been put through sheer agony over the past decade, with many destroyed
by the Cartel and others – like myself –scarred but better
for the experience. However, gold and silver prices have risen more than any
asset class over this period, doing so while others – residential real
estate, for example – actually declined. Thus, PM holders were
rewarded for their mettle with the double jackpot of superior absolute and
relative returns.
Better
yet, after twelve years of rising prices, PM fundamentals are stronger than
ever, thanks to GLOBAL MONEY PRINTING rising faster than gold production AND
a Cartel that has suppressed prices below market-clearing levels. Not to
mention, those who survived this long have become STRONG HANDS – i.e.,
unlikely to sell under any circumstance – particularly if they
were wise enough to convert a significant portion of their PM
“investments” into PHYSICAL gold and silver. Remember, PAPER gold
and silver (GLD, SLV, futures, mining shares) are “investments”
that fluctuate in value, while PHYSICAL bullion is “savings” that
CANNOT be lost unless required to be sold for near-term financial
obligations.
Once
again, I want to note the secular nature of most investors’
thought processes, focusing solely on absolute price levels, ignoring
countless, equally important factors. The first is the aforementioned relative
returns, the second is real returns (adjusting for inflation), and
finally, “seismic shifts” in global investment trends such as the
movement out of PAPER assets and into REAL ITEMS OF VALUE – PHYSICAL
gold and silver, ENERGY, and AGRICULTURAL PRODUCTS, to name a few.
Throughout
history, politicians have always succumbed to the temptation of fiat
currency, lured by rich, charismatic bankers that bribe them with campaign
contributions and other perks in exchange for the monetary reigns. This is
why we have seen a series of debt-fueled booms over the centuries, with the
same inevitable result – exponential MONEY PRINTING, financial
collapse, and hyperinflation.
Such busts
occurred “microcosmically” in the 1930s and 1970s due to loose
monetary policy (i.e., isolated to certain nations), but in both cases
yielded dramatic increases in gold as a percentage of global assets,
per the chart below. In 1932, gold prices were fixed at $20.67/oz, so its growth to 20% of ALL GLOBAL ASSETS was due to
the aforementioned “relative effect” – i.e., gold stood
still while everything else crashed; while in the late 1970s, gold and mining
shares surged while other assets stagnated, particularly in real terms
as inflation was a major factor. Remember, in the 1930s, the U.S. and other
nations were still on gold standards – thus, inflation was not an issue
– as opposed to the 1970s, when all gold standards had been
effectively abandoned.
Due to the
incredible, still expanding bubble in PAPER assets fostered by acceptance of
a WORLDWIDE FIAT STANDARD in 1971, gold still represents just 1% of
global assets. This is truly an incredible statement – as gold has
outperformed ALL asset classes by many multiples over the past decade
– demonstrating just how much PAPER has been created. As you can see
above, gold was calculated to be 0.8% of global assets in 2009, and still
remained around 1.0% two years later. Given the catastrophic failure we have
seen in PAPER assets since the music stopped in mid-2008, it should be quite
obvious to any unbiased, sentient being that this asset allocation imbalance
will not continue for long, no matter how hard TPTB fight to “extend
and pretend” the current system.
Will gold
return to 20%-25% of global assets as it did in the 1930s and 1980s, or will
it continue to be considered a “barbarous relic” by the Western
world? Frankly, it doesn’t matter what the West thinks, as the East has
the capital and industrial base, as well as far greater respect for
PM’s historical monetary properties.
And again,
it is not absolute returns that necessarily matter, but relative
returns, and – in the upcoming hyperinflationary environment – real
returns. A good way of measuring the former – and in some ways the
latter – is the Dow/Gold ratio, per below. In many ways, it is an
arbitrary measure, but does an excellent job depicting the boom/bust cycles
of PAPER stocks compared to PHYSICAL assets, and I have no doubt it will
continue to serve this function in the coming years. I have ZERO doubt this
ratio will return to 1:1 (or below) this decade, the only question being will
the Dow and gold cross at 2,000, 10,000, or 100,000? Frankly, I don’t
think it could cross at 100,000, as such values suggest all-out
hyperinflation, likely yielding shuttered stock
exchanges and social chaos.
All
bubbles burst, and none have been so profound and
destructive as that of the same financial institutions noted above, who
lobbied and bribed their PAPER Ponzi scheme into existence over the past four
decades. The MASSIVE “head and shoulders” top in financials as a
percentage of the S&P 500 (coincidentally, at 20%-25%) will crash in the
coming years to low single-digits, either via deflationary crash or relative
underperformance to materials stocks during hyperinflation. I cannot vouch
for what will happen to mining stocks in such a scenario, as nationalization
and windfall taxes could destroy them as soundly as financial stocks, but I
KNOW what the Dow/Gold ratio will do, and I KNOW fortunes will be lost
– and gained – by understanding these immutable truths.
There is
no way of knowing how things will happen, but thanks to the
machinations of global Central banks and the gold Cartel, the end
result is set in stone. The ONLY proven way to protect oneself from the upcoming financial horrors will be
PHYSICAL gold and silver, with ALL other investments possessing substantial
risks, be they absolute, relative, or real.
PROTECT
YOURSELF, and do it NOW!
|
|
