‘It shone with the placid certainty of received tradition’
by Michael J. Kosares
“It is related of the illustrious Sandy McHoots that when, on the
occasion of winning the British Open Championship, he was interviewed by
reporters from the leading daily papers as to his views on Tariff Reform,
Bimetallism, the Trial by Jury System, and the Modern Crave for Dancing, all
they could extract from him was the word ‘Mphm!” Having uttered which he
shouldered his bag and went home to tea. A great man. I wish there were more
like him.” – P.G. Wodehouse
Regulars to this newsletter will recognize the quote
from Mr. Wodehouse gracing this issue’s masthead. It’s been there before —
almost always at summer’s start — and almost always with a reflection that
perhaps we can learn something from Mr. McHoots. After all how much of what
any one of us has to say about the current state of affairs matters much in
the scheme of things? Even the Open champion has limited sway on the course
of world events. So McHoots had solid justification for turning up his nose
at the prospect of answering the media’s inquiries.
Then there’s the issue of summertime and whether or not the world can be
put on hold while thoughts turn to the configuration of one’s gold swing,
landing the fly in precisely the right location on the stream, or simply
counting waves at the seaside. To a large degree we side with the McHoots
school on the issue of summertime, but we also know that summertime can
produce its unpleasant market surprises – dark thunderstorms that travel
across the investment landscape wreaking havoc far and wide.
Bank of America Merrill Lynch was thinking just that when it warned its
clients of a “grim summer” ahead and that they should consider moving money
out of stocks and bonds and into gold and cash. A good many others have
issued similar warnings. “Open your computer or smartphone these days,” says
MarketWatch’s Mitch Tuchman, “and the stock market warnings fly by in giant
type — ‘Summer Crash Imminent’ and ‘Sharp Correction Ahead'” blink at the top
of nearly every investing website.
Though the temptation might be great to retreat unphased into the comforts
of summertime, this might not be the year to do it. Of course, the best
course of action is to diversify one’s holdings in such a way that summer’s
pursuits need not suffer fully the consequences of that late afternoon window
rattler. Stock market practioners generally agree with that apporach, but
almost universally fail to mention the one item that truly gets the job done
for its owners – a tidy cache of gold and silver coins.
A telephone call from an old client and friend
Along these lines, I had the happy occasion recently of receiving a
telephone call from an old client and friend – a physician safely retired
near the sea and alongside one of the South’s oldest golf clubs. It was good
to hear from this student of the markets – one of life’s steady and
thoughtful practitioners. McHoots probably would have counted Doc, as I will
call him, a friend, since he thinks much like the character so skillfully
described by Mr. Wodehouse. Back at the turn of the century, Doc foresaw much
of what would happen economically in the United States and purchased what he
considered enough gold to see him through it.
Vanity Fair’s Matthew Hart offers this masterfully written overview of
those early years of the 21st century:
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896 –
an increase of almost 700 percent. On the way, it passed through some of the
stormiest periods of recent history, when banks collapsed and currencies
shivered. The gold price fed on these calamities. In a way, it came to stand
for them: it was the re-discovered idol at a time when other gods were
falling in a heap of subprime mortgages and credit default swaps and
derivative products too complicated to even understand. Against these, gold
shone with the placid certainty of received tradition. Honored through the
ages, the standard of wealth, the original money, the safe haven. The value
of gold was axiomatic. This view depends on a concept of gold as unchanging
and unchanged—nature’s hard asset.”
It was in that time frame, when gold was stuck in the
$300 to $400 per ounce price range, that Doc transferred roughly $500,000 of
his net worth into gold coins. His goal, like most of our clientele, was not
to become wealthy through gold ownership, but to protect the hard-earned
wealth he had already attained. After we had exchanged the usual
pleasantries, the conversation turned once again to the subject of gold and
the reason for his call.
“I still have all the gold I purchased from you,” he said simply. “Every
ounce of it. It’s now worth well-over $2,000,000. I want to thank you again
for your book and your advice. It made a great difference to me as you may
have gathered.”
(Ed note: At the interim top – the $1896 Matthew Hart mentions above –
Doc’s holdings reached a value well over $3,000,000!)
“That,” I said, “is the kind of story we enjoy hearing around here, Doc.
I’m happy for you. Happy gold could help you like it did.”
“We had some very interesting conversations back in the day,” he said with
a chuckle, “and gold did for me what we thought it would, what you said it
would.”
I mentioned to him that the book to which he referred, “The
ABCs of Gold Investing – How to Protect and Build Your Wealth with Gold,”
was now in its third edition and still introducing people to the advantages
of owning the metal and advising readers how to go about it. The conversation
then drifted to other of life’s pursuits for both of us and ultimately to the
purpose of his telephone call – a fresh gold transaction. We completed our
business and I left the conversation with a strong sense of satisfaction. We
get a steady stream of phone calls like Doc’s, but it is always good to hear
real-life tales about gold’s role in preserving our clients’ assets.
The fact of the matter, though rarely discussed, is that gold ownership
has as much to do with personal philosophy as it does finance and economics —
though by that I do not mean to diminish the importance of financial markets,
or politics for that matter, in our everyday lives. Things, though, do need
to be kept in perspective and gold helps toward that goal — once one
understands its true nature. In many ways, gold ownership, as Doc would
likely attest, is a rational portfolio decision that suits the times, but it
is also a life-style decision. As Richard Russell, the venerable purveyor of
Dow Theory Letters puts it, “I still sleep better at night
knowing that I hold some gold. If or when everything else falls apart, gold
will still be unquestioned wealth.” And one that helps you spend a quiet
summer enjoying family and friends no matter what happens on Wall Street or
Washington D.C.
If you appreciate the kind of gold-based analysis you just read, you
would probably enjoy and gain from our e-mail newsletter service which sends
you the link whenever a new issue is published. It comes free of charge and
you can opt out of the service at anytime. Last, we will not deluge you with
emails.
The rest of the July issue offers much to ponder . . . .
A little USAGOLD history. . . . Pictured are News & Views hard copies
from 1999 just before gold began its secular bull market. News & Views
first made its appearance at a time when gold-based publications were few and
far between. The “Big Breakout” headlined in the November, 1999 issue refers
to a price jump from $260 to $330 per ounce. Your editor sees a good many
similarities between that period and now.
