I Just Don’t Get the Goldbugs

I was one of the three largest wholesale gold dealers going into 1980. I wrote the law making gold not taxable for the State of New Jersey stating it would not be taxed unless “converted to use” only to have the bureaucrats change that saying it was taxable because it was an “investment use” and the judges rewrote the law to accommodate the bureaucrats. The IRS came in and declared me to be a bank so they could audit all our customers (over 3,000) in 1981. I was there when the Hunt Brothers were buying silver 10 years before anyone heard of them shipping 5,000 ounce bars of silver. I have studied this market not for dogma but to make money. I am a trader – not a religious guru preaching something. Gold is a market with its ups and downs. I do not understand people who just say buy and never sell. That is what stock brokers told their clients during the Great Depression and that did not work out very well.

Anyone can preach “fiat” and inflation to hyperinflation and just tell everyone to buy and hold forever for one day you will be right just like a broken clock is correct twice a day. The problem is, gold is mortal. It declined by 50% from $200 to $100 into 1976 and it declined for 19 years from 1980 to 1999. This is about a market. Not about some religious belief in metals. It is what it is. Nothing more. There will be NO HYPERINFLATION – government will defend the bankers and wage war against its citizens rather than print money oblivious to everything.

The system is collapsing from its own weight. You can die from extreme cold or extreme heat – both will kill you. The same is true of hyperinflation and deflation. This is NOT about how high will gold soar in price – that assumes the dollar survives even as a measurement tool. This is about a store of wealth for the transition to the new currency that will inevitably be forced upon the world. Communism collapsed – now it is the Socialist’s turn.Sorry, but even in hyperinflation, real estate rose in value in Germany and became the backing of the new currency.

Yes, we were always well capitalized and spent more on research than most analysts made in a lifetime. My personal philosophy was simple – I knew nothing and followed the breadcrumbs and let the markets teach me what they were all about. Predetermined concepts produce inevitable losses.

On reader wrote:

Hi Martin,

Yesterday, at the end of his show, a listener called [HOST] and asked him the same question about the relationship between real estate and interest rates, which is the subject of your last post. [The HOST] gave the exact opposite answer than you…

I listen to his show every day only by curiosity. Every single day he says :”Buy gold, buy gold, it will go up”. When it goes up, he says:” I told you so!”; and when it goes down, he says: “It is the best time to buy!”. And 2 or 3 weeks ago, a listener asked him if gold and inflation are exactly correlated. He answered that it is not a perfect correlation, sometimes they diverge for a short period of time and he gave as an example the period 1980-1999 saying that it was a time to accumulate. 19 years = a short period of time? It is more than half my life! He should instead advice people to emigrate to a country where the government is not hungry of their money, it is a much better alternative than the passive buying of magical gold.

Fortunately your write posts, which prevents me to become (or stay) as dumb as the majority, including those who have PhDs.