Strategic investments are made for the long run and with no intent of
short term gains or concern of short term fluctuations. This kind of
investing is based on buying undervalued and unloved assets and holding them
for a very long term. This is what we did with gold in early 2002 for our
investors and ourselves.
Having come down from $850 in 1980, not only did gold represent incredible
value at $300 in 2002, but it was also the best insurance possible against a
financial system which was turning increasingly unsound. Sixteen years later
we are still sitting on our gold. We have seen a high of $1,920 in 2011 and a
low of $1,050 in 2015. Have we ever been tempted to sell the gold? No, not
for one second. We would rather buy more than sell an ounce.
We will patiently hold the gold until one or more of the following
events have happened:
- The financial system has been miraculously
restructured and debt has vanished – IMPOSSIBLE
- Major sovereign nations are running surpluses
and have reduced debt substantially – NEVER
- The financial system is backed by gold,
guaranteeing the value of money – UNLIKELY
- We can swap some of the gold for real assets at
values 90-99% below today – LIKELY
We would never sell gold just because it reaches a certain price. Nobody
knows today the level gold will reach. Will it be $10,000, $100,000 or $100
trillion. That depends on the amount of money that will be printed in the
next few years. The nominal value of gold at that point is irrelevant. It is
only the purchasing power that counts. When the crisis peaks, so will the
gold price, although there will be some time lag. At that point it serves no
point of course to sell the gold since the financial system will be on its
knees. But it could make sense to swap some gold against safe high yielding
assets at a bargain price or even against sound businesses that have survived
the crisis and can be picked up for a song. There will be plenty of bargains
around at that time.
INCREDIBLE INVESTMENT OPPORTUNITIES COMING
It
is these opportunities that investors should now prepare for. Sell your Tesla
shares, Amazons , Facebooks and your government bonds and buy gold and then
wait. The next 5-10 years will give us opportunities that only happen
once every few hundred years. And due to the massive debt and asset bubbles
we are in today, this time the bargains are likely to be greater than any
time in history.
Sadly, only a fraction of 1% of the investment population can see this
opportunity. But Remember the Golden Rule: “Whoever holds the gold
makes the rules.”
THIS TIME IT WILL BE DIFFERENT
Most investors will hold on to their bubble assets until they have
declined by 85-100%. They will again believe that central banks will save
them. But this time it will really be different although
nobody can see that, until it is too late. The transfer of wealth in
coming years will be of a magnitude that few can realise today. Most
billionaires will disappear and not understand what has happened. They all
thought it it was their own ability that created their wealth. They will soon
become aware that their wealth was based on the central bank money printing
bonanza that favoured a few and impoverished not just the poor but also the
middle classes. But when bubbles burst, debts implode and so do asset
values.
FLATION
Many ask how we can have hyperinflation when so many assets will implode
which is deflationary. As I have explained before, we will have
“FLATION” in coming years. This means both deflation, stagflation, inflation
and hyperinflation simultaneously.
All bubble assets will deflate and the economy will have deflation
which is inflation with economic stagnation. Consumer products, foods, raw
materials and many commodities will hyperinflate. Most people don’t
understand that we can have hyperinflation without high demand. Just look at
Venezuela to understand how this is possible.
HYPERINFLATION IS A CURRENCY EVENT
Venezuela’s economy is totally collapsing with most people living in
absolute poverty and squalor. There is very little demand for products or
even food since there is none and people can’t afford it. Still prices are
going up exponentially. This has nothing to do with demand but with the
currency. Hyperinflation is a currency event and when a country
prints unlimited amounts of money the currency collapses. And this is what
creates hyperinflation.
FROM IMMORALITY TO MORALITY IS A LONG ROAD
We live in a world where real values and morals have been replaced by
instant gratification and worship of the golden calf. Loyalty and friendships
are gone, instead it is everyone for himself and win-lose rather than
win-win. This is what happens in an unsound and immoral economy manipulated
by an elite. The next phase that the world will go through will eradicate
this system which is rotten in its core. After a long period of very
unpleasant transition, real moral and ethical values will return. But before
that, there will unfortunately be a lot of suffering in the world.
GOLD HAS BROKEN OUT IN MANY CURRENCIES
For holders of gold and silver who are impatient, I don’t think we are far
from the next major move up. The problem with looking at gold in just US
dollars is that it doesn’t give the full picture. Gold must be measured in
the home currency of the holder.
Just look at the charts below. Gold in Swiss francs has broken out and is
in a clear uptrend to new highs. And gold in Swedish kronor is near the 2012
highs. So is gold in Canadian and Australian dollars. Gold in US dollars and
other currencies will follow soon.
Looking at gold in the weak South American economies, we can see the
effect of collapsing currencies and the resulting hyperinflation.
Gold in Argentine Pesos is today ARS 27,000 from ARS 300 in 2000. And gold
in Venezuelan Bolivars is now VEF 88 million. It was VEF 75 million last week
and VEF 200 in 2000. So that is what real hyperinflation looks like.
The gold charts for Dollars, Euros, Pounds and Yen will look the same as
the two charts above, in a few years time. Take my word for it. All these
countries will have unlimited money printing and hyperinflation.
Please don’t ignore the risks and don’t ignore history. Physical
gold and silver will be your saviour.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management AG
GoldSwitzerland.com
Contact Us
