I put almost all of my eggs in one basket – precious metals, energy and agriculture – with the bulk being in precious metals 10 years ago. These investments are diversified only in that they span physical, geography and company size. What I did has stood the test of time and, I expect, will hold me in good stead whatever happens in the years to come. Let me explain why I thought it was a good idea back then and still think it is today.
By Arnaldo Paulini www.munKNEE.com
From my perspective the economic and political risks on the U.S. and global horizon are even more serious than previously and, therefore, I still believe that the best way to preserve my equity, and secondarily, to grow it, is to invest in precious metals, energy and agriculture related assets. Other sectors like the stock and bond markets are currently either overpriced by historical standards and/or highly vulnerable and, as such, the downside risk of precious metals, energy, agriculture (as well as select base metals) is far less than these alternatives.
What will cause the system to implode, explode or go off on some tangent such as deflation or hyperinflation? A lot of events and circumstances could be the trigger, but I also think central bankers will continue to play for time along with their cheerleaders in the brokerage, corporate and banking sectors. It will probably be a sudden factor triggering yet others such as a leveraged hedge fund or sovereign debt collapse, unexpected military aggression or major terrorist activity. Whatever unfolds will definitely cause currency gyrations and imbalances which will all cause public opinion and confidence to shrink dramatically. It is that last component which is the truly ugly part for which manipulation by the power brokers will be ineffective to counteract.
There is virtually nothing on the economic and political horizon to tell me that any country – anywhere – is changing course. The U.S. with all of its current policies, practices and scary economic and financial realities continues to operate as if it is business as usual. Moreover, there is absolutely nothing in terms of facts to suggest to me that the system will get any better. U.S. politicians, for example, only have a time horizon spanning to the next election – 6 years for Senators, 4 for the President and 2 for Congressmen. Keep in mind this is the maximum time horizon with the calendar always shortening. Their goal to is to be reelected, not make waves, always bribe the voter with their own money – or borrowed – and never ever tell the ignorant masses, or the fifty percent who actually vote, the ugly truth because they are sure to turn on the messenger.
Denial always trumps an acceptance of the truth even when one is endorsing a system designed to leave one’s kids with bad values and worse circumstances than we have now. The public will always opt for the pleasure of the moment rather than deny themselves for a better future for themselves and/or their kids. Proof is everywhere you look – home “owners’ with no equity in their homes and mega-sized debts to the banks, credit card debt often in the tens of thousands of dollars, new leased cars in the driveway, expensive holidays they can’t afford, shopping sprees with money they don’t have, little or no savings in their bank account, either no retirement savings plans at all or ones that are totally under-funded, all topped off by a major aversion to paying their fair share of taxes to maintain the benefits their various levels of government provide. Ah, the good life!
So how do I end this rant? Economic and political realities are grim and getting worse. There is scant evidence of any serious and realistic policy initiatives. If there were the public would reject them because it would invariably entail sacrifice and deferral of an enhanced lifestyle until some unspecified future date.
My best advice is to put almost all your eggs in a basket of precious metals, agriculture and energy assets, allocated to a mix of physical, individual stocks and ETFs to preserve what monies you have and to make the most of the dire circumstances many “first world” nations find themselves in today – and will to a much greater degree in the months and years to come.
Remember, many people hatched their future fortunes by judicious acquisitions in the 1930’s when everything looked bleak and it is not too late for you to take both protective and profitable investment action today.
What do you gold and silver bugs have to say now after the recent correction in gold and silver and the rise of the dollar?
I have 90% of my assets in gold/silver, but heavily weighted towards silver. My definition of diversification? Assets spread between bullion and coins. Where do I store it? The unmarked grave, well away from home, work and the bank.
The day of financial reckoning is coming, and no one wants to believe it. They prefer to believe that the government won’t let a meltdown happen, and if it does, they will be taken care of. Good luck to them. Even if I’m wrong, the PM markets will continue to rise for the foreseeable future. Our leaders will continue to extend and pretend, with quantitative easing as long as is feasibly possible.
The entering of Donald Trump into the presidential race will be fun to watch, if only for it’s entertainment value. I would never vote for him, as he’s a bit unhinged with his remarks about how he’d tell OPEC that ‘you’ve had your fun’ etc. But D.C. needs a collective kick in the groin and he might be the one to do it.
Thank you for your wisdom. I am going to add you to my list of who to read when reading on Kitco.
I also have all of my eggs in one basket. Gold/Silver. The hard stuff.
I’m not fond of the IRS/Congress, so I’m not worried about reporting the imaginary inflated income in dollars to them when I sell. Thus, the “profits” are not taxed – at least yet.
The only thing I would say is that when you are in ETFs, stocks, etc, all of your profits are subject to quite a bit of taxation. Hard metal is so simple, risk free – a real no brainer, at least for the foreseeable future. Why assume the extra risk, and the tax that goes with it?
I received the following email from a reader from down under in Australia that is a very interesting read.
The 2 recent articles you wrote, “Why Investing in Precious Metals and Energy is STILL the Way to Go” and “Confessions of a “Conservative” Investor” were like reading a memoir of sorts… I got on the gold/silver crazy train, as well, back in 2000/2001… I funneled my income into gold/silver bullion when Au was $355, Ag was $5, and dollar-cost-averaged in weekly as I got payed.
For 10 years now I have endured ridicule, demonization, laughter, derision, apathy, mockery, and have been the butt of many jokes from the MBA type, especially from 2000-2006…. when I was telling people to cash out of stocks/housing (AMID the boom in the equities and housing markets of the early-mid 2000’s) and put 1/2 HALF of their cash in gold/silver and maybe bear funds or put options on a few things if they wanted to trade a bit.
Out of the thousands of people by now I have tried to wake up to coming collapse (before Schiff was saying it, before there were 1000’s of YouTube videos on gold/silver, before all the pop books on the bookshelves now saying all that is now apparent, before radio stations cliched buying gold, etc)… NO ONE WAS TALKING ABOUT GOLD/SILVER UP UNTIL ABOUT 2007… at least on any common level.. there was James Turk/Roubino, Russell, Griffin, and a handful of others.. and us nameless and tireless and passionate researchers with more than a pea-brain who could see the writing on the wall…
I love when people laughed, and told me I was nuts and wrong, and outright delusional… I’ve been right 10 years out of 10… the fundamentals of GOld/silver haven’t changed for 6000 years, and they won’t now certainly… Au – $3500-$5000Ag – $200-$300 within less than 3 years..
Take care my friend, ps. I am now 31yrs old… so imagine a then 21yr old kid, self-educated, with tattoos and a GED/no college telling people and shouting gold/silver from the rooftops for all these years… esp back when you couldn’t GIVE gold and silver away… lol…