The Fear of Gold

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Previously
by Jeff Berwick: The
Dollar Vigilante Kidnapped and Handcuffed in PalmSprings

I was on a
panel at the recent California Investment Conference in Palm Springs
and the question was asked, "What percentage of your portfolio
should be in gold bullion?"

The first panelist
answered 20%. The second panelist said, up to 30%. Then it came
to me.

"I have
no problem with someone having 100% of their portfolio in gold,"
I stated bluntly. Many in the crowd laughed. Their laughter confused
me. What’s so funny about that, I thought?

I went on,
"I think it’s weird that people find my answer weird."

GOLD IS
REAL MONEY

After all,
we are talking about time tested and true money. The only money
that has lasted for thousands of years and is still fully accepted
worldwide as a store of wealth. Even Warren Buffet had to recently
admit that “Meanwhile, if you own one ounce of gold for an
eternity, you will still own one ounce at its end.”

And that from
a man who hates gold the way Whitney Houston fans hate Bobby Brown.

So, by stating
that I have no problem with someone having 100% of their portfolio
in gold I am making an ultra conservative statement. I am stating
that I’d have no problem with someone having their entire portfolio
in "cash". In real money.

What would
you rather hold "for eternity"? US dollars? A paper debt
obligation of a bankrupt nation state?

The fact that
so many found that to be a shocking statement says a lot about where
we are in this current process of the collapse of the fiat currency
system.

THE FEAR
OF GOLD

There is such
a "fear of gold" amongst most people that it must be due
to statist indoctrination and propaganda. It makes no rational sense
to have such a fear of such a time tested and true store of wealth.

The same people
who fear gold seem to have no problem holding a significant amount
of their assets in euros in a European bank as Europe burns around
them, both figuratively and literally. The euro might not exist
12 months from now but no one seems too concerned. They act like
its been around forever and always will be, but it only was dreamt
up by globalists in 1999.

YOUR BROKER
FEARS GOLD

Near the end
of 2007 a good friend of mine who had been wanting to sell her house
called me. I had been telling her for a few months to sell her house
and buy gold because a big housing crash was coming.

She said she
had received a good offer for her house and checked with me to make
sure I was certain about her selling, buying gold with the proceeds,
and renting for a few years. I told her, emphatically, yes.

So she sold
her house. At the time gold was around $750 per ounce. We fell out
of touch for a few years and she contacted me last year around when
gold was near $2,000 per ounce. I smiled when she called, waiting
for her to tell me about the fortune she made.

"So?"
I asked, waiting for the exhaltation.

"What?"
she also asked, confused.

"How’d
that trade work out for you?" I asked.

"Oh. Well
I sold the house. And I put the funds into my brokerage account
with my (government registered) financial advisor," she responded.

My heart sank.
I knew what she was going to say.

He talked her
out of it. He said putting all her assets into gold was far too
risky. Where in the government training manuals does it tell you
to even own any gold!

She got worried
too and less than a year after selling, under pressure from her
old Chinese parents, bought another house. It was a bit cheaper
but after transaction and moving costs it was a loss.

GOLD IS
IN A BUBBLE

Of course,
now, with gold over $1,700, it is nearly impossible to get anyone
from the general public to buy gold. It’s gone too high, they cry!
CNBC says it was a bubble, they repeat like trained seals.

It’s gone from
near $300 to nearly $2,000 in the last decade. Surely that is a
bubble and if it hasn’t already popped it soon will, right?

No. That’s
not right. This is the problem with watching the value of anything
in terms of constantly depreciating US Federal Reserve Notes. In
the following chart, when looking at the price of gold in nominal
dollar terms it looks like an insane rocket ride of epic proportions.
But, when adjusted by the US Government’s own, heavily massaged
inflation statistic (the Consumer Price Index, or CPI), the price
of gold has just finally reached nearly the same level it was at
in 1980 and looks far less spectacular.

PORTFOLIO
ALLOCATIONS

Getting back
to the initial question posed on the panel as to what percentage
we recommend people hold gold bullion as a percentage of their portfolio.
While I stated I’d have no problem with 100%, we actually recommend
to TDV subscribers holding 30% of their portfolio in bullion – both
gold and silver.

We also recommend,
at this time holding 20% of your portfolio in gold mining juniors
and 15% in gold mining major stocks amongst other things. That’s
because we are expecting all the monetary printing going on with
abandon in the western world to foment a true bubble, not only in
the price of gold but even moreso in the price of the mining shares,
especially the juniors.

We are expecting
a mania for the ages in these stocks. And, how will we know when
to sell? When I am asked what percentage of their portfolio should
be held in gold bullion and I say 100% and no one laughs.

Reprinted
with permission from The
Dollar Vigilante
.

February
23, 2012

Jeff
Berwick [send him mail]
is an anarcho-capitalist freedom fighter and Chief Editor of the
libertarian, Austrian economics grounded newsletter, The
Dollar Vigilante
. The Dollar Vigilante focuses on strategies,
investments and expatriation opportunities to survive & prosper
during and after the US dollar collapse.

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