Only fools buy gold

“Where should I put my money?”.  It’s a question one of my friends asked me because they saved some money over the past years and only have a savings account, except for a small pension fund.  No bonds, no stocks, no gold, no bitcoin, no nothing.  Just a savings account.

Everything depends on your own personal situation and the risks you are prepared to take, but I wouldn’t certainly leave everything in a savings account.

Investing in yourself (education, at any age) and your own house comes first I think.  And then, yes, the savings account or cash, because you want some money that is readily available when you have some bad luck.

Only after that it would be stocks, but if you are not a financial expert and don’t want too much risk, I wouldn’t go too much in stocks in 2018 with the high valuations.   It’s not the right time for bonds either, or even less.

And then there is gold.  Banks will make you feel stupid, if you even consider gold as an investment.

No interests, just a dead piece of metal, and they will bring up a nice chart, starting in 1980 when gold spiked at 850 USD, going lower for 20 years, only to be back at 841 USD in 2007 after a long 27 years.  Calculate inflation and gold was probably the most stupid thing you could buy in 1980 for the long term.

On top of that, it was already considered a barbarous relic according to Keynes, so now in digital ages, it must be even more barbarous.  Music CD’s have become mp3, paper books became epub files on your ereader, movies are streamed on Amazon or Netflix, and cash money disappears, so why would gold – something that only a very small percentage of the population still considers money – not just be replaced by a cryptocurrency?

Jim Rogers said once he doesn’t want to bet against some stupid (but persistent) idea to consider gold as something of value, simply because we do this for more than 4000 years and he believes humanity will be stupid enough in the same way for a while longer.  He’s probably right, but it’s not because we are used to something for a thousands of years that it will last another lifetime, in times when technology changes everything at a speed never seen before.   In the 80’s we wouldn’t think of something like the 500 year old Gutenberg printing habit to disappear, or to have an encyclopedia in your pocket.

One problem however is that gold is still the only thing you can keep in your hand without being dependent on the government, someone else or a system.   And if it was worth nothing, why would central banks, or countries like Russia or China still buy more gold?   If there is a next world war, and the internet as we know it goes dark, you can still have the gold but your crypto may vanish in the cloud.    A crypto may have a lot of similarities to gold but in the real world in a real crisis it may become a very different story.

That’s why it may be wise to be foolish enough to buy some gold, at least 10% or 15%.  Physical, the stuff you can hold in your hands.   Maybe another option to real physical could be to buy gold with an online account like those of goldmoney.com  or bullionvault.com, but then you are dependent on a 3rd party.   When it comes to gold, you only want the real stuff because first of all, you want gold as an insurance when the whole financial whorehouse comes down.   And some day it will.  Because fiat money is still fiat money.

If Lisa Marie Presley decided to buy gold with half of her 80 million dollar heritage in 1993, she would still have 80 million today, and have a nice life for 25 years spending the other 40 million, without losing it all.  Maybe that doesn’t make sense, but a bank showing you a gold chart from 1980 until 2000 doesn’t make sense either.

In fact, you can own only one asset, keep it for over 10 years and be right.

In recent history we had times to own stocks, and times to own bonds, but now it may be the time to own gold again.   At least, a small percentage.  It won’t do too much harm to be a fool for only 10%.

Initial setup of a virtual portfolio

A lot of people will tell you to buy or sell stocks because this or that will make them skyrocket.  When they tell you to buy and later the stock goes belly up, you don’t hear them anymore.

In fact, it is exactly what commercial financial sites do all the time.  They talk about 10 stocks you should buy and after 6 months or a year they are screaming about the gigantic profits you would have made with one of those stocks, devoting long articles about how they saw this coming with a complex analysis.  They will remain silent about the 9 others stocks they advised you.

That is why I added a virtual portfolio of stocks I believe in today.  A test, a game, call it whatever you want. Anyway, I won’t be able to lie about the performance.  This is it.

Currently, this means a lot of gold and commodities, and some cash.

Have a look at the S&P or Nasdaq chart over 30 years and you don’t have to be a technical genius to see this bull market in stocks is coming to an end some day.  Maybe this year, maybe in 2 years or maybe it can last as long as 14 years as Jeff Staut was saying this week?

I believe there may be one last run higher this year, but when the shit hits the fan it will probably be the most horrible crash ever seen, faster then ever before.  Not yet however: the economy is still in good shape, rates are going up but very slowly and a rising inflation is on the horizon.

The recent correction in the market felt for the happy ones like the electricity at the party was accidentally cut off but was restored quickly. Oh, it was nothing, let’s party on!  Hmmm, if this party continues for years I will lose, but I don’t believe it can continu for years and even if it does having one more look at that 30-year chart you can probably buy stocks in the future at a much lower price even if you have to wait 5 years from now.  I don’t want to be in the next crash, I can wait.