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Friday, September 26, 2014

Gold : it makes sense to hold it for diversification

Well, first of all we had the gold bull market from 1999 to 2011 and we’ve been in depression since then. If I compare the credit growth, monetary growth and asset growth among central banks and the whole banking wealth accumulation that we had in the last fifteen years, I don’t think that gold is terribly expensive. I hold physical gold for the reason that one day I may not be able to remit money from one country to another. I don’t know when this final systemic collapse that I am foreseeing will occur but all I can say is that in monetary, inflationary times, when inflation is measured properly, in real terms: stocks usually don’t do particularly well but gold does. Nobody knows how the world will look like in five years’ time. I don’t think that gold investment is the best over the long run, because it doesn’t generate cash flows and doesn’t “grow”. But I think it makes sense to hold it for diversification. My business depends on financial markets, so I own stocks, bonds etc. Most of it is in “paper” and I want to be diversified out of paper into something that is not the liability of someone else. In the bank account, I depend on the bank. If I own corporate bonds, I depend on the corporation to pay me back. In the case of physical gold, I don’t depend on anyone to pay me back, but I do rely on well-established property rights. All governments now largely consist of bureaucrat socialists that are anti-wealth – and this also goes for the Swiss bureaucrats. If a proposal to collect all the gold from banks and Swiss owners of gold comes up, they are likely to follow through. I think that the collection of one’s gold by the bureaucrats is the largest risk we have today.

When you print money it benefits few people

When you print money it benefits few people. Those with assets such as property and stocks get richer, while the rest see their cost of living rise while their wages do not go up commensurately. I believe we are in the midst of the generation that for the first time in Europe, US and Japan will die poorer than their parents.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

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