The price of gold and silver has moved higher for 10 straight years and you're not yet invested? Why is that?
There are many legitimate reasons why you are not invested in these metals and most of them show the deck is stacked against you in learning the truth about gold and silver.
This article will reveal the five reasons why you haven't yet invested in gold and silver. Keep in mind, gold and silver are not in a bubble just because their price has moved higher. Long term, it is the U.S. dollar that is in a bubble.
The fact that gold and silver are moving higher despite some strength in the dollar is quite revealing. What will happen to the price of gold and silver when the dollar resumes its downward trend?
5 Reasons Why You Haven't Invested in Gold and Silver
Reason 1: Your Financial Adviser Doesn't Understand Real Diversification, Let Alone How Gold Fits Into a Diversified Portfolio
When it comes to retirement planning, most financial advisers miss the mark in properly diversifying portfolios. The missing ingredient is the insurance against what most U.S. investors currently own; U.S. Stocks, U.S. Corporate Bonds and U.S. Government Bonds. All of these assets are subject to U.S. dollar risk. I addressed this before in Challenging Financial Advisers on the Need to Diversify Into Gold.
For decades, the typical financial adviser diversified U.S. investor portfolios as follows:
5% Real Estate Investment Trust (REIT), Commodities, Other
One’s age and number of years from retirement would dictate the amount allocated to stocks. The old adage has been “subtract your age from 100 and that is the percentage you should be invested in stocks.” So if you’re 55, then 100-55 = 45, thus 45% of your portfolio should be invested in stocks.
The vehicles that advisers have typically used to invest in stocks would be a mixture of U.S. Large-Cap, Mid-Cap and Small-Cap mutual funds or ETFs diversified among a wide range of sectors, with some foreign exposure. The bonds would be a mixture of mostly U.S. corporate, with some allocated to U.S. Government bonds through GNMA funds or U.S. Treasuries. The cash would be parked in U.S. money market accounts waiting for future investment opportunities.
Outside of some foreign exposure that could take advantage of currency appreciation in other countries, what in this "typical" recommendation from your financial adviser counteracts the fall of the U.S. dollar?
The answer, is nothing. Financial advisers may add some TIPS that are supposed to be an inflation hedge, but TIPS only follow the manipulated CPI that doesn't take into account real inflation.
The fact of the matter is, an investor needs physical gold and silver bullion, not numismatic or "rare" coins (run, don't walk from anyone who tries to sell you numismatic coins), to hedge against the risk exposure your portfolio has to the U.S. dollar. Many financial advisers don't understand this diversification because they believe that the U.S. dollar and U.S. treasuries are "risk free." They are not.
Reason 2: The Media Is Biased Against Gold and Always Pro-Stocks
The media is almost always bullish on stocks and always trying to spin good news out of bad reports on the economy. As long as you are investing in stocks, they have done their job.
Gold is competition to stocks. Investing in physical gold doesn't do anything for the economy, but it does do something for your portfolio. It makes it appreciate as it has the last 10 years.
The media is owned by corporations. Corporations also do heavy advertising on various media as do Mutual Funds who try and get investors to buy corporations. It would be a conflict of interest for any media to talk negatively about the stock market in general as they are biting the hand that feeds them. If they say something negative about the economy, then people might pull their money from the stock market and thus owners of stocks could see their value go down.
When one turns on the financial media, listen to what they say about gold (they hardly ever, ever, mention silver). I've heard all of them on CNBC, at one time or another, mock those who recommend gold. In fact, I have recordings of them doing so that I'll put together for a forthcoming video. It's so much nicer to make fun of the media and their bias in their own words.
Steve Leisman and Ron Insanna were just on CNBC talking about how "the Fed has a tool box, its still effective and there is nothing to worry about." Yes Steve and Ron, all is well just because you say its well. We understand. Ron Insana and Marc Faber then proceeded to criticize a recent video by Tony Robbins warning people about a possible stock market decline. Then Melissa Lee came on and said, "to heck with Tony Robbins." Rah, rah, rah! Go stock market!
Reason 3: Our Education System Teaches Us Nothing About Gold, Let Alone Money
If you have young children, ask them to do some simple math calculations using money. Set up a little store with $1, $5 and $20 bills, quarters, dimes, nickel's and pennies. Pretend you are a customer and you with to purchase items from them (give them some items to purchase in advance). The purpose is, to see what they have learned in school about money. More likely than not, they may know how to add, subtract and even do multiplication tables, but they don't know how to give change for a $3.33 item when handed a $5 bill.
While children eventually learn how to make change, they are never taught anything about the Federal Reserve, the name printed on the top of all paper bills, let alone what gold used to represent in this country; money.
Fast forward to one's college education as high school teaches you nothing from an economic perspective, and the student is introduced to Keynesian economic philosophy. This philosophy fits right in with keeping the individual ignorant on how an economy is supposed to work, and in order to pass the class, one has to go along with the nonsense they teach;
* Debt is good.
* If there is deflation, print more money (quantitative easing).
* If companies and banks are in trouble, bail them out.
Reason 4: Your Neighbor Probably Won't Tell You They Bought Gold
Unlike the euphoria that surrounded the run up to the dot.com bust, when everyone and their neighbor was telling you to get into NASDAQ tech stocks, most people who own gold today, are quiet about it. They don't want the world to know they own gold. Gold is a private transaction and should be as the more people who know you own it, the more who may come busting down your door when and if a currency crisis hits.
In reality, the price of gold would be much higher if the owners of it were more vocal. The fact that it is moving higher despite financial advisers, media and little word of mouth supporting it means that its not just U.S. citizens who are buying, but the world is waking up to how gold can maintain one's wealth and purchasing power.
Reason 5: The Government Has An Incentive to Keep the Lid On Gold
If the government was forced to live within its means, something I fully support, then we wouldn't have the budget deficits, wars and other waste that has caused the national debt to surpass $13 trillion and march towards $14 trillion.
Republicans and democrats both are responsible for where we are. Anyone that thinks this spending will be curtailed at any point in the future simply doesn't understand the nature of politicians. As long as the choice is between the lesser of two evils, its still evil and they'll still spend. Increased spending depreciates the dollar.
But doesn't spending stimulate the economy? The answer is, it has produced some green shoots, but those green shoots have roots embedded in the earth of fiat wealth. In other words, it is not wealth at all, but just more debt.
The recent influx of government spending has done little to stimulate the economy and the only reason the dollar is presently not crashing is because during this deflationary credit contraction, people are putting their wealth in what is currently still perceived to be that "risk free" asset; the U.S. dollar.
At some point the dollar will become weaker. At some point, gold and silver will be double where they are today. At some point, you will buy gold and silver or be left with depreciating dollars.
Gold is still in its second and longest phase. The professionals will still try and buck you off the gold and silver bull. The dips will come. Holders of physical gold and silver care not that it falls 20% on its way to appreciating 100% or more.
The U.S. government and Federal Reserve will never change their colors. Our education system will always have flaws when it comes to helping people understand wealth and money and how to manage it. The media will always be biased against gold. And sooner or later financial advisers will wake up to the risk involved with the U.S. dollar and recommend physical gold and silver for your portfolio.
You insure your house for fire, you don't just insure the master bedroom.
10% to 20% of one's portfolio needs to be in physical gold and silver bullion as insurance against the risk associated with the rest of your portfolio having exposure to the U.S. dollar.
Disclosure: Long physical gold and silver