In this episode of Finance U, Paul Kiker and I discuss Gold, Inflation, Federal Reserve actions, and the lack of ethics on Wall Street all coming together to create one of the greatest periods of market uncertainty we’ve ever faced.
It’s clear that “”markets”” are powering higher for reasons other than fundamentals, at least if the green close on Eurostocks after a truly dismal -6/7% industrial print is any indication (which it is).
Join in for another fabulous conversation.
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When Bloomberg’s newsletter starts talking opening for the plebs to read about the “market” being in a bubble, you’ve got to know it’s dire times. Hopefully I got the link to work without a paywall.
I do like listening to these “finance U” segments, but often wonder how it applies to my own situation.
Today’s was a blast furnace of logic, truth and what to do.
I consider the value on my membership paid in full.
If owning gold carries optionality against the system, then owning options on gold would be a compound option (an option on an option). Since the GVZ (CBOE Gold Volatility Index) has been in a down-trend for four years since the Covid spike, one can argue that these compound options are on sale. I’ll take two!
I’ve been taking all of this stuff in for a while, and I think I’m running out of time to make some uncomfortable decisions. This is what I’m wrestling with:
I have about £1m of “financial assets” and earn a decent income.
This means that the whole “buy an extra can of food per week” advice (while good) isn’t really for me. Not trying to show off, but I fill the house with canned food out of earnings if I wanted to. But that would be a bit mental, wouldn’t it?
I am in a position (fortunately) where I should be thinking about land, property and gold.
I love the idea of some kind of land, but that’s a different thing in the UK vs the US, I think. Also land and animals can be tying and costly. With some reluctance, I have (almost) given up the idea of land. Though I will still keep an eye on local sales - can’t help it. I have access to plenty of land though as I get on with some local farmers and landowners and do things they value, so I get some (not all of the) benefits with zero cost. Maybe that’s a good and cheap compromise.
On that, I live a little bit rurally. Lots of woodland. I do some pest control on land locally as a hobby and conservation thing, and keep bees on someone’s land. My location is great - it’s not like I’m in a city. eg I have access to way more wood than I could ever use and store as it is basically worthless to landowners. For my pest control and dealing with some wind blown trees, I can take all the wood I want. Woodland round here is kind of a liability to own - but expensive to buy. That’s basically the story of rural land in the UK - a liability to own but expensive to buy!
Property (as in buildings) is being squeezed tighter and tighter in the UK with more and more costs and rules per year. Whatever (normal) gains you might make could well be eliminated by annual costs. Also, I don’t think prices have fallen much/at all considering mortgage rates have gone from sub 1% to 4.5%. At a lower price, I’d be a buyer, but there hasn’t been any visible blood spilt yet, but it must be swilling around internally, ready to blow out.
I have some money in shares, but I cashed a lot in and bought gilts (gov bonds) given high share prices and decent yields on the gilts. I know that isn’t a long term solution. It’s a “holding pattern”. I thought of it as money I could use if asset prices fall - which I probably can. But if a Great Taking occurs (rather than a normal recession/fall in asset prices) those gilts might be worth nothing.
= If property and land is out, I wonder if I am left with gold. It feels a bit mad buying several hundred k of gold. You feel mad especially as the money is yielding 5% interest, whereas gold yields nothing. So you feel like you’re giving up income. But then I think, yes, but the value of money is falling by more than 5% pa so buy an asset that holds value. I do think gold will do better than 5% pa as I think we must be reaching a climax with fiat money and debt levels. I guess it’s years of conditioning that makes me feel that buying a load of gold would be a bit mad. But I’m kinda thinking it is the right thing to do. It’s like Chris says, it feels like an over reaction now, but it will feel like an under reaction. Even if it turns out to be mental and the world doesn’t change - I can sell it - or my work will more than cover the bills (in an unchanged world). More and more, I think I really should just buy a f load. Not a few coins here and there like I have done for a while. But a f load. It will feel properly mental, but I can always sell them in 5-10 years, so it isn’t really that mental is it? It’s like there is still a part of me that thinks if you buy 500k (or whatever) of gold (and I’d buy it in physical, as premiums are pretty low still on coins), you must be a properly signed up conspiracy theorist/mentalist. I mean, I am (well, I really only have time for stuff that hard facts point to - like fiat money being sht and going into exponential overdrive - ie US debt 1trn per hundred days, Euro going to go to pot as German economy is cratering due to lack of energy), but that’s more than being one on the internet. That’s full on doing it.
Chris and Paul are bang on when they say that fortunes will be made and lost. The wheels must be coming off with the rate that fiat is being printed all over the west and how economies are shrinking. I really do think it is now or never. I really do think time is running out and I should bite the bullet and buy a f load of gold. I can always sell in the future and/or trade it for land.
All this has been bothering me for a while. I am leaning more and more to just getting it done and then letting the chips fall where they may. Heck, if things really go to pot, I’ll probably either be dead or rounded up to go to war - so I might as well withdraw my consent to the system and swap their pieces of paper for solid coins. Even if I bury them in the garden, at least some random person in the future will have a cool windfall. They won’t if I bury fiat, will they?
Sorry. I know I sound properly mad. Just how I feel at the moment. It would almost be easier if I had nothing to lose/only enough money to do the “one tin a week” detail at the supermarket. As it is, I’ve given up so many hours learning and working to put money away, and now that money is being rotted away quickly - that time I put in is being stolen. I have to do something with it in order to keep it. I’m going off again.
Sorry, I’ll stop! All replies welcome. Please - talk to me!
FWIW, ever since gold became legal again in the US in 1973, it has ‘re-priced’ from $35/Oz to $2100/Oz over those 51 years.
The compounding math is (2100/35)^(1/51) - 1 = 8.4% annual returns.
Now that’s a long time, and I don’t think that’s necessarily a fair way to look at things because it covers some unusual financial and monetary territory, but it sets the stage.
Over that time frame I consider that a quite fair approximation of inflation and so I judge that gold has a durable history of protecting one’s wealth from monetary debasement.
Again, I don’t invest in gold to get rich, I buy gold so I can have a fair and square way of preserving my fair and square earned wealth.
Naturally, the raccoons on Wall Street and in London’s financial district would much prefer that we all lose out on their various schemes and scams, so they badmouth gold whenever possible.
For its part, the US financial press is doing everything it can to badmouth gold (including understating its returns by including a 40+ year period where it was illegal to trade and was not pre-priced but held at a fixed number):
Now, why would they do that? Besides being lazy and incurious I mean?
I don’t know, but it’s the sort of hit pieces you get when the price to ‘borrow’ (e.g. ‘short’) gold from GLD spikes to new recent highs (indicating a shortage of the metal):
