Not many investors trade gold or silver using futures contracts. But tracking them gives an idea of where prices really are. As you can see below, gold topped $5,000 and silver $100 today.
The precious metals aficionados make a big creeping deal about the ratio of the price of gold to silver and will argue that one or the other is over/under-priced. That kind of speculation is way beyond my interest or pay grade. In fact, I think it’s irrelevant, because the run in silver is simply a supply/demand issue now that there is such a strong industrial demand for the metal and such a short supply.
The runup in gold, however, should be seen as a short on the $US dollar and the supposed strength of the $US economy, both of which are “cruising for a bruising” due to the same three reasons that always bring an end to empires: miliary over-extension, funded by deficit spending, enabled by currency debasement.
In short, if you’re long gold and silver, as you should be, you’re in the cat’s bird’s seat with respect to that portion of your portfolio. But you should be starting to be worried about some or much of the rest of it and begin to think defensively. (IMHO, natch)
What financial planners always trot out is how well stocks have done over the long haul. Typically, they use a starting date long before any of us were born, much less managing our own investment money, such as 1928. However, if a more recent date is used, such as 1999, how have stocks done versus gold?
Are you ready for this? Even with all of the price support the Fed has given to stock prices over the past 26 years, that asset class --as represented by the SP500 with divs reinvested-- has returned barely 59% of what owning gold did.
If you doubt me, then pull the numbers and build your own spreadsheet.
Not cherry picking at all, but actual dates that reflect some of my own personal investing history. I didn’t own gold during that time frame. I only got into it recently. But I’d predict this. Stocks will perform miserably going forward, because the Fed won’t be able to keep printing.
Yes, for sure. Yesterday’s market cannot be bought, which is why TMF’s claims about their stock picking track record are so suspicious and so hypocritical. Their supposed forte is high beta, small and mid cap growth stocks, yet they benchmark themselves against a large cap blend index with a beta of 1.0. That’s like saying your Ferrari can beat my KIA Soul.
And, NO. Stocks have not destroyed anything but many investor’s savings, whereas gold is an asset with no counter-party risk. It’s not something to bet the farm on, but it does have a place in building portfolios that can endure the inevitable market crashes, many of which are still ahead of us.
If you want to claim that stocks always outperform other asset classes, then prove it. You can’t, because they don’t. Sometimes, they do well. Sometimes they don’t, never mind that stocks –as an asset class– are far more volatile than other asset classes. Hence, comparing them with other asset classes is, at best, an apples to oranges comparison.
But here’s an actual gold trade that is out-performing stocks. On 09/2322, I bought shares in IAU, an ETF that tracks the physical at 31.17. IAU closed today at 97.79, giving me a decent enough 300.9% gain.
By comparison, had you bought an ETF that you use as a proxy for “the stock market”, namely, SPY, your entry price on 09/23/22 would have been 367.95. SPY closed today at 689.23. Do the math. Your gain would have been a very underwhelming 87.3%, or a 3.79x UNDER-performance compared with doing the sensible thing of beginning to rotate away from the very over-bought US stock market.
I do buy stocks, because they can offer decent returns. E.g., I got into UAMY a month ago, and I’m now up 96.53% on it. But what really matters isn’t being committed to one asset class or another but responding appropriately to investing opportunities as they arise. Sometimes, that means that one buys stocks. Sometimes, it means that one buys other things or just sits in cash. It all depends.
Right now, with the $US dollar being depreciated and the US economy in shambles, never mind its foreign follies, isn’t the time to be doing much buying of the stocks that TMF favors. In fact, many of them would make better shorts.
