With six consecutive intraday triple digit swings from high to low in the DJIA index, here’s the safest bet during these uncertain times. Beginning last Thursday, volatility has returned to US markets with a vengeance. So who’s going to win the battle between the bulls and bears now? With the loss in confidence in global markets and the further exposure of the rigging games of markets precipitated by the 700 point drop in the DJIA in ten minutes last Thursday, sustained volatility and further corrections are likely in our near future. If so, then where’s the safest place to be now? The same place it has been for the past five years — precious metals.
Since we’ve launched our investment newsletter in June of 2007, precious metals have been a core holding of our newsletter. Since we began publishing our newsletter, at times we have held Chinese RE and technology stocks, Brazilian oil producers, various agricultural stocks and so on, depending upon our assessment of the risk-reward parameters of holding stocks in these specific countries and specific sectors. During other times, our holdings in precious metals have been much more concentrated. However, the common denominator throughout all 35 months we have published our newsletter has been the holding of precious metals. During this 35-month period, our Crisis Investment Opportunities newsletter has outperformed (as of May 12, 2010) the Australian ASX 200, the UK FTSE 100 & the US S&P 500 by +308.89%, +304.87%, and +300.85% during the comparable investment period.
And yes, our core foundation in precious metals is what has provided stability and tremendous growth to the core portfolio of our investment newsletter during this time. Listen to the propaganda of western commercial firms, however, and you may not even know PMs are an investment asset. Consider the following story reported by the Los Angeles Times in April 5, 2010:
At least one-third of Kimberly Sterling’s clients have sought advice in the last year about investing in gold. The Orlando financial planner has successfully discouraged all but one from doing so. That one investor insisted on having some gold in his portfolio, she said, despite her warnings. Eventually she referred him to a gold-commodities exchange-traded fund that has done well during the metal’s decade-long run-up in price. But her firm, Resource Consulting Group, still wouldn’t buy in. “Our bottom line is this: Gold is a bubble now, and it is too late to get in,” she said recently. “It is like someone who bought real estate in 2006, at the height of that bubble. You could get hurt really badly.”
Since the time that article ran, gold has since returned +10.08% and silver +10.17%. The S&P 500? Negative 2.5%. Terrible advice like the above is typical from advisers that work for large commercial investment firms because (1) most are willing participants in the massive fraud inherent in the world’s stock markets today; and (2) they fail to understand the mechanisms of our monetary system. If they truly understood the mechanisms of financial markets today, they would understand that all the commercial investment advice about gold being a risky asset is pure propaganda along with 90% of the other advice they dole out to their clients. We’ve seen this same misunderstanding among some of our prospects that sign up for the trial evaluation of our investment newsletter and then send us emails stating that our newsletter portfolio will blow up due to our concentration in PMs at certain times. What they failed to understand is that during the times we decide to concentrate our portfolio with minimal assets, this is due to the risks we unearth in the overall stock markets, and that by concentrating, we are actually REDUCING THE RISK of our portfolio.
If you understand how the global monetary system and financial markets truly operate, then your vision will expand from the tunnel vision of most commercial investment firm advisers to a much wider perspective that would recognize the importance of owning gold and silver.
Almost four years ago in this article, on August 16, 2006, I stated the following:
“Over 7- ½ years, if your portfolio has tracked the S&P 500’s index as some 97% of professional money managers aim to do, you have about the same amount of money you had 7- ½ years ago. Only with the rapid devaluation of the dollar, your same amount of dollars buys much less today, so…tracking the index has lost you money…And that’s the good news. The bad news is, as of 2006, the US stock market’s performance will likely become even worse for the rest of the decade.”
Though it’s hard to remember the sentiment surrounding US stock markets four years ago, I can assure you that at the time I delivered my above predictions, the general consensus was that I was crazy. So how did my above prediction pan out? On August 16, 2006, the S&P 500 closed at 1,295.43. Today, it stands at 1,157.43 for a loss of 10.65%. Consider the devaluation of the dollar and your losses amount to a much more significant amount than 10.65%. And what about gold during this time period? On August 16th, gold was selling for $629.75 an ounce. Since then, at $1,236.80 an ounce, gold has risen 96.40% (less the inflation of the dollar during this time). But even back on August 16, 2006, thousands of advisors that work for global commercial investment firms were dispensing terrible advice similar to Kimberly Sterling’s even as I was outlining, in this article, the reasons why “Gold’s Speculative Stigma is Unwarranted”.
How do I know this? Because when gold was trading at $500 an ounce, I recall reading analyst reports by precious metal “experts” at top financial firms that warned their clients of a massive gold bubble and a pending crash of gold from $500 an ounce back to the $250-$300 an ounce range. How can these experts have been so wrong?
Three reasons.
ONE: Commercial investment firms do not earn fees from their clients buying gold and silver. Thus, the reason they perpetually discourage it. Precious metals are the enemy of all fraudulent fiat money including the SDRs of the IMF and the financial derivative products of Wall Street. Consider this story in which HSBC ordered their clients to remove their gold from their vaults, all at their own expense.
TWO: Commercial investment firms do not educate their financial consultants regarding precious metals. Most of their consultants probably could not even properly explain something as basic as the difference between ounces of metals classified as resources and those classified as reserves and the significance of the different categories among these classifications. Having no basic understanding of precious metals leaves their consultants woefully unprepared to provide any type of meaningful guidance regarding PMs. For example, when the aforementioned Kimberly Sterling finally gave in to her one client that insisted on owning gold, she steered him into a paper gold ETF. But here’s why even that advice will most likely turn out to be a huge mistake.
THREE: Most commercial investment firms rely on the naïve trust their clients place in them and their client’s lack of understanding about how they reap their profits to exploit them. They manipulate their clients’ fear about volatility and misunderstanding about diversification to ensure that their clients don’t invest in PMs and instead, invest in financial instruments likely to return less but generate more fees.
Yes, gold and silver are volatile, and have historically been volatile due to the price suppression schemes against them engineered by Central Banks to discourage investors from investing in gold and silver. Remember that I noted above that gold has increased, in US dollar terms by 96.40% since August 16, 2006. How then, have we been able to produce a 281.80% return in our investment newsletter since the later date of June 15, 2007 (in a tax-deferred account)? Simply by understanding how the global monetary system operates and using this knowledge to predict the effects of these price suppression schemes in advance. Commercial investment firms always tell their clients that volatility is terrible and to fear volatility, but the only reason to fear volatility is if you don’t understand what causes it. Of course, whenever volatility occurs in the stock markets, they inform you not to be shaken out of the stock market, because the stock market always goes higher in the long run (a myth we have also deconstructed in this article, unless your investment time frame is 50 to 100 years). When volatility strikes the PM markets, however, they seize this opportunity to label PMs as risky. As long as Central Banks and their governments scheme against PMs, gold and silver will continue to have sharp, scary drops in the future at times. If, however, one understands what causes the volatility in the gold and silver markets, one can actually leverage volatility to one’s advantage.
The myth about volatility in gold/silver being bad while volatility in stock markets is okay is equivalent, on a propaganda level, to the myth about the “safety” of diversification. In this video here, I explain why diversification is more Wall Street propaganda as well. In conclusion, one should know that ulterior motives and ignorance drive commercial investment firms to misinform you that precious metals are a risky investment while stock markets are the safe place to be. Furthermore, the 30, 40, 50-year time frame that commercial investment firms’ gold analysts utilize to belittle gold’s performance is also bogus. When Alan Greenspan was Chairman of the US Federal Reserve, one of his stated missions was to get the world to view the dollar as if it were backed by gold even when it was backed by nothing, and for a while, he succeeded in selling the world the lie of a strong dollar. However, now that this deceit has been revealed to the world, one needs to assess gold as an investment asset under a much more narrow time frame. Unless you figure out that Wall Street has flipped this equation upside down, you’re liable to be hurt very badly in the coming years. Of course, if you’re from Germany, Argentina, Thailand, South Korea, Zimbabwe, or any other country that has undergone a severe monetary crisis that produced bank holidays, runaway inflation, and government pleas to their citizens to hand over their gold, then you don’t need me to tell you this.
About the author: JS Kim is the Chief Investment Strategist and Managing Director of maalamalama, LLC, a fiercely independent wealth consultancy company that guides investors in the best ways to build wealth through the progression of this global financial crisis. Since its inception in June, 2007, until August 26, 2010 his Crisis Investment Opportunities newsletter has returned a cumulative profit of 120.62% (in a tax-deferred account, cumulative returns for the investment period, June 15, 2007 to May 12, 2010).
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