Enough About You, Let’s Talk About Me

I didn’t buy a note this year. As an individual investor I can wait for good deals and didn’t find a single one. Low interest rates are not good for either note creation nor risk-reward.

So where do I think one’s cash should be? Mine is in Australian and Canadian dollars and Euros (NYSE symbols FXA, FXE, FXC) and gold and silver (physical and NYSE: GLD, SLV, CEF, CTU). For physical gold, contact Franklin Sanders at the-moneychanger.com or 1-888-218-9226.

Don’t get spooked by the fact that gold and silver have had a run-up and will probably drop in price a bit over the next few weeks. That’s a healthy correction — and a buying opportunity.

For the past 25 years gold was a terrible investment. But when the economy started going south it became a different story. If you had bought gold coins as recently as mid-2005 you would have doubled your money. If you had waited and bought them a year ago, you would have made 40%.

I know, I know, “gold pays no interest.” Actually, it does; people just don’t understand the form it takes. Gold maintains its value; dollars don’t. Take any period of time — say, 1915. Gold was $20.67 per ounce. You could have bought an expensive man’s suit for the price of one ounce of gold. Fast-forward to today. Same thing. But those twenty 1915 dollars literally won’t buy a pair of socks now.

The reason is that gold is the only real money. The printed pieces of paper in your wallet are constantly going down in value (have you bought a steak, a gallon of milk or a gallon of gas lately?). The dollar-denominated paper in your wallet, bank accounts, IRA and 401(k) is losing value because of the decisions of the central bank, the Federal Reserve. The more paper dollars they print, the less each dollar is worth. That is common sense.

One dollar saved when the the Federal Reserve was created in 1913 is now worth 4 cents. The same dollar converted to gold is now worth $23.00.

I do think silver and gold should be a substantial part of one’s portfolio. I’m not keen on mining shares; although I have owned them off and on for years, and still have some, they are a very small part. I prefer the ETFs, such as SLV, GLD, GTU and CEF. They hold physical gold and silver and issue shares, so their share price is directly tied to the price of the metals. The problem with mining shares is that they can go down when the metal goes up due to strikes, mine output, increased extraction costs, changes in government regulations, management problems, etc., etc., etc…

I only subscribe to two financial newsletters; I don’t want to get confused with conflicting advice. The one I would suggest you consider is www.adenforecast.com It has a tremendous track record for the past 25 years.

FYI, here’s my favorite columnist, who believes the same things about gold and silver as I do, among other things: http://www.dailyreckoning.com/Writers/MogamboGuru.html

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” — John Maynard Keynes