If you’re long the precious metals, beatings like they’re taking today (gold down 4%, silver down 6%) can seriously shake your confidence. At times of self-doubt like these, I look to learn what people smarter than I are thinking; as there’s a good chance they’re seeing the big picture more clearly.
Over the past week, I’ve had a lot of good fortune to do just that. The bottom line? More than ever, the smart minds see fewer better options than the precious metals for preserving (and likely increasing) the purchasing power of one’s wealth.
Last Friday, Chris and I had the pleasure of spending the day with John Hussman, John Mauldin, Jim Chanos, Mike “”Mish” Shedlock and Michael Pettis the the Wine Country Conference in Sonoma, CA to benefit ALS Research. It was simply amazing to spend time in such rarified company and engage with each of these impressive thinkers 1on1. I’ll post a more detailed write-up of my experience at the conference next week when I have more time to write (Chris and I are still on the road).
What struck me was the consistency with which nearly all of these speakers advise holding precious metals.
Some, like Hussman, see markets as dangerously out of equilibrium; with precious metals providing safe haven security during the inevitable correction to a more natural market state. Mauldin, while perhaps less pessimistic about the future, sees gold as essential insurance against central bank monetary recklessness – and explained to me how he personally follows a disciplined process for making regular purchases, no matter what the market action is. Mish – the deflationist among the group – devoted much of his presentation to making the case why renewed stress in the credit markets is inevitable, and that gold will be one of the smartest/safest places to park capital during this time.
Charles Hugh Smith also attended the conference. He’s been mentoring me on the basics of options investing, and as we’re trading the miners, we’ve been watching the precious metals closely together. As Charles has written many times on PeakProsperity.com, he sees both cash and gold as prudent positions given market fundamentals and thinks both will likely rise from here. As for the recent weakness in PMs and today’s bloodbath in particular, he can see no fundamental reason for it.
But most influential for me was a private meeting Chris and I had yesterday with Richard Russell, a true legend in the economic analysis business. Richard’s impressively successful career has spanned over 50 years; he lived through the Great Depression, flew bombers in WWII, and followed nearly every market cycle known to modern man. Which is why I take his assessment very seriously when he refers to today’s financial market conditions as “unprecedented in his lifetime”. He sees today’s elevated market prices as dangerously unsupported by fundamentals and primarily caused by central planner manipulation and opportunistic self-interest by the the agencies in power (big banks, politicians, corporations). “What else but gold?” should investors hold at this point, he asked us, genuinely interested if we had any good alternatives to offer.
When a legend like Russell is this concerned – someone who has demonstrated a lifetime of balanced analysis, willing to switch between the bull and the bear sides based on the data – we all better pay close attention.
And last night, Chris and I had dinner with Mike Maloney, of GoldSilver.com. As founder of one of the world’s largest dealers of precious metals, Mike’s support for owning PMs comes as little surprise. But what does surprise me is the tone his argument for ownership takes. He’s frustrated by the efforts to suppress the prices of gold and silver, even though it’s allowing savvy investors to accumulate metal at a cost far below what he believes fair market value to be. But the false signals that today’s prices give keeps the smaller investor, who arguably would benefit most on a relative basis from protecting their wealth, from entering the market. And even though he remains confident precious metals prices will be higher – much higher – in the future, there’s a sadness behind this prediction. Those high prices will be the result of a destruction of our monetary system and a corruption of our free markets, fundamental underpinnings that made our society great. Without them, yes, those who hold PMs will be better positioned than most (MUCH better positioned in Mike’s view) – but we all will have lost something much more valuable.
What struck me from each of these interactions was that none of these smarter minds would I describe as a PM ‘cheerleader’. Their positions were arrived at through empirical, data-driven analysis; and in many cases, their endorsement of gold and silver is made with a measure of emotional reluctance. These are not people pushing gold to make a buck or advance an ideological agenda. These are concerned men looking to find options that will help their followers prosper, and finding few.
So, while the anxiety and emotions swirl powerfully on price smashes like today, I’m able to withstand them better due to the sober counsel I’ve received from those mentioned above. If you’re playing the long game (as I am), days like today are just noise. In fact, they’re good opportunities to add to your positions at lower cost, if you have the dry powder and the courage to do so.
Hopefully, the insights above help those of you holding the precious metals similarly ignore the noise. And orient on building true wealth of the kind ourReslientLife.com community focuses on. Many of the conversations Chris and I had with these smarter minds above ended in a discussion of the importance of the resiliency-building we advocate and enable here on Peak Prosperity. We are beginning to see these precious metals experts validate our position that, while important, money is not wealth. True wealth is your safety, health, relationships, work, community, knowledge, skills, etc. And advancing those are what will ensure a prosperous future.