I posted this Tweet early yesterday morning on my way to work and man….I got a ton of comments about gold’s 10 year window of investment. Here’s the Tweet:
It then got a lot of RT and bitcoin guys seems to invite their friends to the party.
Probably after I re-posted this – where I was what I believe THE FIRST to compare BTC to a form of NUGT to the SPY. That seemed to not go over well with them. I’m giving you some context here as to what happened next.
So I’m going to run down some points, but mostly focus on the 10 year window for all of the maxis that are goldfish and only look at a 10 year time frame due to the gaslighting issues they have.
ONE – The S&P doesn’t exist
Yeah, no. Never said that. Never. I advised him to watch Maloney’s wealth cycles video. Then, you get comments back hating on Maloney, probably because he sells gold and is going to make money. Well, I think Maloney has done the world a service advising the West about gold, when all of our education systems wipe gold from the curriculum.
In a nutshell, the Maloney Wealth Cycles video here shows you that at times, asset classes outperform and underperform and find their way back towards a relative mean to each other, then overshoot. Essentially, there are times when housing is priced high relative to gold, so you might sell your house and buy gold. Other times, gold is priced high relative to a house or stocks, and you might want to sell gold to buy stocks.
Everyone I know that invests in gold (and silver) has essentially these traits in common:
- Want to buy and hold gold/silver in some small quantity to protect against a currency collapse. It is insurance.
- Sees how gold is extremely undervalued to markets and real estate and see an arb opportunity. Either the markets/real estate will crash and the money poured into gold will get them more house/stocks, or gold will shoot up and do the same thing.
- Wants to hold SOME PMs long term to protect some purchasing power.
- Wants to play some miners in the stock market as a leverage to the movements of gold and silver to come (this is my main focus, not holding a brick yard of shiny)
- Wants to see a massive move in gold/silver that is due to then sell a portion or all to pay off debt or buy things cheaper with the “catch up” effect of gold/silver.
None of the people I follow advocate for holding all of your wealth in gold for 40-60 years. We ALL know it’s a cyclical investment, and with this, feel a strong up cycle is coming with $30T in debt as we watch money printers printing, the east accumulating gold, central banks buying, and the manipulation of gold coming center focus for prosecutors now.
So. Yeah, chief. I’m out of my gold/silver miners when I feel a top is in – I see summer 2023 being a top, and perhaps another correction, then a strong move up to perhaps 2026-2030 as I see that a time when the USD world hegemony is challenged as the world reserve currency of choice. In THAT scenario, USD will flood our shores and gold will go up like we have never seen.
In the meantime, keep buying BTC at $69,000 telling yourself it’s going to a million. It very well could. But you are speculating, and you should know that – based on IF the stock market will continue to rocket higher, and it just might.
What I am trying to do is buy an undervalued asset, relative to its historic norms.
Here we see the NASDAQ to gold ratio
In 2011, you could see where it was, at about 1.25. Today, it is 6.5, and gold recently hit another ATH. So why buy NASDAQ here when I can buy gold? Same with…
DJIA – which might give you more history back to 1964
The “projected path” is starting to form. You can see that at one point in 1980, gold and dow were 1:1. I don’t see it getting back there, but at 18:1 currently, you can perhaps see a situation where not only does the dow correct down, but gold corrects up.
All of the business expansions you see over the last 40 years which led to the 60% stocks/40% bonds in a FA portfolio were led by cheap interest rates – led by “low” inflation due to globalism.
If it costs me $.10 to make a pencil in the US, I could then put out a worldwide contract bid and perhaps see Vietnam could make the pencil for $.01. This led to cheaper goods for the US. This also led to a lot of US-based companies then outsourcing parts, labor, and all manufacturing to these countries – making huge profits and driving markets higher. So we are not in 1:1 Dow to gold territory now, or perhaps ever again.
But this depends on globalism, and with the idea that we can continuously drive down costs with a COMEX that forces higher cost materials producers out of business in favor of those who can be more efficient and deliver at lower costs. But, those days are over. Why?
- Materials are getting harder to find – grades are reduced by a LOT
- Discoveries have slowed/stopped due to lack of investment/malinvestment
- ESG has driven costs up
- Lack of discovery and ESG created higher energy costs, which are now being seen in everything
- The emergence of BRICS will challenge the USD hegemony, and with it, create trade alliances, reduce dependence on USD, and force the US to make pencils at home.
All of the above are inflationary. This squeezes producers’ margins, and these costs must be passed to the consumer or they go out of business. This now also rears its ugly head in supply side issues.
So…my bet is the shiny rocks that are in the ground that are needed for money and for 1000 industrial products (green revolution needs silver for solar panels, EV) – which has my bets in a palladium-like moment happening in a lot of metals. Soon. Happened in lithium. Happened in nickel until LME destroyed their reputation. And about to happen in many others.
Meanwhile, things in terms of USD will cost a lot more to buy. This puts pressure on markets as demand will wane and margins subside. This is a recipe for major indexes to shrink, by a lot.
In the meantime, you have real estate at an ATH and rates doubled in 4 months. To me, this will slow home growth but also decimate the housing construction/materials industry here.
Then you 40% of all USD created in the last 2 years, which will have a delayed effect on inflation. Many said 18 months, which is why early last year I started ranting and raving about inflation.
To me, with 9-17% inflation on the USD, and no one wanting to buy 3% debt with a guaranteed loss of 6-14%, gold is the proven hedge here, over 5,000 years.
I could be wrong. We could see 1930s deflation. In that respect gold also holds up much better than the markets. And, if markets are tanking, BTC will tank much faster than markets, as I demonstrated.
$20 bills when you sell it
This guy seemed to think you buy gold, and no one on the planet wants to buy it back and you take a bath on it. You can literally go into any coin shop, pawn shop, or jewelry shop in the WORLD and sell your gold and silver for spot. The dealer makes money on the premium and spread. This just seemed to be an ill informed person who doesn’t realize gold is a $15T industry and gold is extremely liquid.
This is also why it is a nice hedge against inflation. Yes, real estate can go up with inflation. Sure. So can your business. But in a split second, you can sell your gold for spot. It could take you weeks to sell your home. Or appreciated set of golf clubs. Or “stuff” that is more valuable now, just takes long to offload. Could you sell your pizza shop in a day? Not likely. Could you sell shares in a business? YES! But you have to also understand gold is a “risk off” asset. So while things may appreciate at different times during an inflation cycle, at some point gold and the indexes are going to bifurcate – so gold will continue to rise and indexes will fall – reducing the ratios, but also making the liquidity in your business shares harder to sell at lower prices.
So….gold is liquid.
When all else fails, insult someone’s education. Good one chief. My example was taking a $20 bill and putting it IN A SAFE, not a bank. That being said, for that $20 bill in a bank to appreciate as much as gold did, you needed an average of 4.5% savings returns to get that. I remember 5% as a kid in the 1980s. But today’s rates are like .5%. So, good luck with that.
It was a thought experiment to show how the actual paper dollar loses its value over time to “stuff”. Gold is extremely liquid, so sure, you could have put that $20 up against a house or something. But gold is more liquid than the house, which makes it a better hedge against inflation than a house. And, as demonstrated above, there are wealth cycles, so there are times you want to buy a house, like 2013 here, and times you don’t want to buy a house, like 2007.
My MBA was across 3 different schools. And none of them had a single whisper about gold. I took finance like all of you. But my thought experiment was to show how the dollar falls in value relative to things. And that was missed probably by some ivy league guy who owes $300,000 in student loans right now. I guess they didn’t teach ROI at your school.
My point is that my MBA had several different focuses. Each school has their own unique identity with an MBA. One of the schools had a heavy focus on finance, accounting, operations management, and financial ratios – most of my professors were Wharton grads and prepared you for perhaps a Wall St or financial management career. Another school was awesome with learning to manage widget production as the city I’m in has a TON on manufacturing, and it was more or less teaching you how to run a factory. Another was a more global school and had teachers from all over the world, and the focus was on international marketing and world economic systems – which is great to understand globalism – and we had a large focus on emerging markets and BRICS.
My MBA was completed over 4 years, and with this, I have a healthy macro perspective on a lot of things. And yes, my financial ratios helped me better understand Maloney’s wealth cycles than you. Meaning, I would not hold the gold for 100 years, but if I would, cash value in a vault is destroyed against gold.
10 year investment window
I get this from the Saylor guys. It’s as if they all read off of cue cards and have no concept of ability to think for themselves. Could bitcoin go to a million? Not likely, but assume it does. Why would you need to attack gold, which is NOT the same as BTC. I demonstrated above how BTC acts in a raging bull market. Sadly, none of the guys with the 10 year window of investment have seen a recession. Or have lost their jobs due to recession. I have.
The last 10 years has been a raging bull market – mostly fueled by cheap, easy money and continued near zero interest rates. Many don’t grasp that gold is a RISK OFF asset, and with this, the last 10 years were RISK ON.
Meaning, yes…over 10 years, gold didn’t perform well. But you need context.
Between 2000 and 2011, gold ran from $250 to $1923.
Then, QT happened. The idea was that the US would get back to fiscal sanity. Gold sold off during the next period, here….
That is, in a 4 year retracement, gold hit the .5 Fib level. This is a correction to an 8x move, chief.
Then, we have 2015 to 2020….
Gold almost doubled here….
We then have a consolidation, now, which has been ongoing to digest that move.
That has now retraced to the .382.
But you also have this….
Which looks a lot like…
So….could the cup and handle formation lead to $5000 gold? Possibly. Could a double top at $2080ish lead to a break down? Possibly.
All of this is probability. But to insinuate gold is dead due to a selective 10 year time frame is dishonest. In the “metrics” universe, this is known as framing, and will get you booted out of any board room. Why? Because you put nothing in context and only frame the data to suit a specific narrative. Which is why I feel the Saylors of the world have some serious lawsuits coming their way, someday. It’s not to say your snake oil won’t go up…it’s the methods in finding those bag holders which will prove hurt them in lawsuits.
So, frame this data at your own legal peril.
This is how you can look at it, in context….
Now, you can’t just say “10 years”. Because again, it’s misrepresenting gold’s 55x or so move from 1971 to now. Gold has had bull markets, it’s had bear markets, and it’s gone sideways. But, you can clearly see the uptrend over 50 years which has it outperforming most markets in that time frame.
Could gold break down? What we see now is paper selling, not physical selling. Central banks are accumulating. Russia has sniffed a gold-backed ruble and it resulted in the dollar losing 55% against it in 3 months.
I think it’s important to note in this framing context, no recessions took place in that 10 years. This is huge, because gold acts as a RISK OFF asset, and when you are not in a recession, money goes to RISK ON. As we are now entering a recession for the first time in 10 years, perhaps everything may be hit hard, but as RISK OFF becomes clearer by the day, this will chase bonds and gold. And, with 3% bond yields and 9-17% inflation, bonds may actually be scrapped in favor of gold.
Rick Rule also likes to point out that the 30 year mean for gold as a percentage of a portfolio is about 1.5%, and it’s about .5% today. Rick states gold only needs to have a mean reversion to moon shot. I’m paraphrasing.
So, let’s revisit that 10 year window in a few years in 2025 and compare the $1000 gold in 2015 with the $3000-$5000 gold in 2025.