“In our view, gold is nothing more than a commodity. There will be times that gold outperforms other investments due to supply-demand imbalances that drive its price up. As an inflation hedge, gold has been replaced by more effective financial instruments. Alternatives to gold are short-term Treasury certificates or money market accounts that will benefit from higher short-term interest rates if inflation heats up. Gold has a poor long-term track record as an investment vehicle. In an inflation-adjusted basis, the metal is trading at roughly the same price it did in 1833.” This is a direct quote (including ending a sentence with a preposition) from one of the foremost investment firms in the US. It was in answer to my query about gold.
This is the attitude of 99% of investment managers and advisors, and this is why probably less than 1% of Americans own gold or silver; and why I do. First of all, the majority are usually wrong, and the above arguments are easily defeated, as I will now proceed to do.
“Nothing more than a commodity.” True! However, steel, orange juice, beans, pork bellies, and a hundred other things we need and use, are also commodities. What’s wrong with being a commodity? The dictionary definition of a commodity is: “1. Any useful thing. 2. Anything bought and sold. 3. Staple products, as of agriculture.” Without commodities, there would be no human race. We eat commodities, and use them in every facet of our life. It is then patently obvious to me, that since commodities covers everything there is, for all practical purposes, we should use commodities to trade with, and use as money. Money, also as defined in the dictionary, are things used in trade. Commodities are physical, tangible things. Commodities can be held, weighed, seen for what they are, and used for whatever purpose they serve, be they beans, aluminum, gold, or pig iron. Gold, being a commodity, has a symbol, and it is AU. Silver’s symbol is AG, palladium PA, and platinum PT. (Plutonium is PU for a small laugh). There is no symbol for paper and ink, because they are not commodities.
“Alternatives to gold are short-term Treasury securities or money market accounts.” First of all, money market accounts are totally dependent on who manages them; just like pension plans, most of which have decreased in value drastically by placing their clients dollars in the stock market. The stock market is over-priced with its current P/E ratios, and there is no question about that. A money-market account seems to be so totally secure, but it can fail as can any other “account.” I place that word “account” in quotes, because whenever you have an “account” with a department store, bank, or any entity, that account’s honesty, reliability, and trustworthiness is dependent on its managers. Money market accounts are just that. Gold and silver are not “accounts,” but what you have is what you can see, hold, and use. “Short-term Treasury securities,” is another phrase which needs to be examined. A “security” by dictionary definition is, “something given as a pledge of repayment.” In other words, you give the government your dollars, and they pledge to repay it. Note that there is no guarantee that your repayment will be given as equal value. Only repayment in dollars. With the M3 going up a billion dollars a day, those dollars are losing value (inflation) faster than any repayment can possibly be made of equal value, even with interest. Repayment only in dollars, with no inflation figured in. There are a few government investments which have an inflation hedge built in, but they lie to their gills about inflation, because if the truth were known, millions would invest elsewhere. Why do we believe government figures, when most, if not all of them, are patent lies, be it about WMD’s or anything else? Because they control the statistic issuing machinery, and it is always slanted towards them, regardless of facts. Statistics are so blatantly wrong currently, that few really believe them. In other words, you’ll get your dollars repaid, but not necessarily dollars with the same purchasing power as when you invested in them.
“In an inflation adjusted basis, gold is trading at roughly the same price as it did in 1833.” Great! In other words gold will still buy now, what it bought in 1833. In 1833, an ounce of gold bought a man’s suit, and still will roughly. Gold will buy today, what it bought in 1833. What’s wrong with that? In 1933, the same thing was true. There will always be exceptions to any observation, and gold is no exception, but compare gold to a dollar in 1833, which is an absurd comparison, because an 1833 dollar would buy at least 150 times more than a 2004 dollar will buy. Remember also, that all paper currencies fail eventually. Literally. No paper currency has ever survived. All have become worthless eventually, and what has caused this phenomenon, is endless printing of them for government to pay its bills. Is this happening now? No one could possibly deny this. Some liken the current printing of dollars craze, as being similar to Germany in about 1922, before it really got going in 1924, and the Reichsmark went to zero.
As far as “supply-demand imbalances,” this is true with all commodities, and far more so with paper and ink investments. Nothing is certain in this world absolutely nothing other than taxes and death. So we must make our decisions on the facts available. Facts, not advice. Advice is cheap, and sales people can offer advice, which may be bad advice, but it may help them with commissions received from selling you something. Boiler rooms are multitudinous, with people making thousands of phone calls, urging this or than investment or purchase. Hang up on them. They are interested in themselves, not you. This is why hundreds of millions of dollars in fines have been levied on those advice givers, stock brokers, and financial advisors. Most of them are as level as the road to the top of Pike’s Peak.
No interest? (They didn’t mention this) That’s correct, but it doesn’t go down in purchasing power, as do all paper currencies. Gold and silver don’t depend on managers, and that’s a good thing to note. Managers of anything, can make terrible mistakes, as witness K-Mart, or a thousand other enterprises that have failed due to poor management. When I go into a theatre or store, the manager’s influence is always present and visible. Managing anything, is a job which many are not qualified to hold. Managing your financial matters is best left to you, not a financial manager or advisor who has some degree or other. The dart throwers are classic. Every year, the expert’s advice on what stocks to buy, is checked with the office steno throwing darts at a board with the stocks on it. More often than not, the dart throwers win. This how valuable an advisor or manager’s advice can be. There are literally hundreds of mutual funds around, and all are managed by experts. Many lose, and many win. Owning gold and silver guarantees you to hold valuable, tangible, fungible, magnificently beautiful commodities. No managers, advisors, endless paperwork, accounts, computer glitches, frauds, ineptness, foolishness, and trust in anyone or anything. Just wonderful commodities which will still buy what they bought in 1833 according to this outfit’s claims, which they say is a reason not to own it. I say it is a damned good reason to do so.
The financial managers with their degrees and endless mistakes, usually charge a 10% commission on the amounts they manage for you, even if they goof up, which they often do. Placing gold and silver in your hot little hands costs you a tiny initial percentage, and when you sell, nothing; at least from me. Get it from whom you wish, but you call them. When someone calls you with this great bargain; hang up, because they are interested in themselves, not you. “Hello, I am from the government, and I am here to help you,” is a phrase we all will shy away from, I am certain. “Hello, I Barney Fife, financial manager, and I am here to help you,” means simply that he wants your bucks and the commissions he can get on a continual basis for his management. Think and act for yourself. Statistics are easily invented and slanted. Unbacked pieces of paper with glorious engravings and promises, are no better than what backs them. A deed to a property? Sure! A dollar bill? You must be kidding! Protect yourself.