In the end, trees don’t grow to the sky, and few things go to zero by Michael J. Kosares


	“In the end, trees don’t grow to the sky, and few things go to zero. Rather, most phenomena turn out to be cyclical.” ― Howard Marks, Oaktree Capital These charts are dedicated to those who understand the wisdom the legendary investor, Howard Marks, is attempting to impart. His observation resides at the philosophical core of the enlightened gold owner. Why? Because he or she understands the cyclical certainty (or is it uncertainty?) of markets and the economy, indeed the cyclical certainty in the grand scheme of things of which the markets are only a small part. “A true cycle,” says historian Arthur Schlesinger, “is self-generating. It cannot be determined, short of catastrophe, by external events. Wars, depressions, inflations may heighten or complicate moods, but the cycle itself rolls on, self-contained, self-sufficient and autonomous. . .The roots of cyclical self sufficiency lies deep in the natural life of humanity. There is a cyclical pattern in organic nature — in the tides, in the seasons, in night and day, in the systole and diastole of the human heart.” At no point along the historical continuum are we ever at an end, nor are we ever at a beginning, and that in a nutshell is why people own gold. So it is that we can see the systole and diastole of the gold and dollar markets in the top chart showing the first (OBVERSE) and second (REVERSE) halves of 2016, as well as in the longer term relationship shown in the second chart. In the end, the enlightened gold owner might buy into the latest investment fad and run with the crowd, if he or she so chooses. It is fundamentally better though to engage the madness of crowds with one’s safety net solidly in place. I will leave you with a couple final quotes. The first from the famed investor, Bernard Baruch, one of the original Wall Street contrarians who made a fortune betting against the crowd. In the late 1920s he became a gold owner because, he was “beginning to have doubts about the currency.” “Have you ever seen in some wood,” he asks, “on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.” The second is from the philosopher Frederich Nietzche whose observation fits nicely with the Baruch quote (as well as with the current mentality in the markets): “Madness,” he said, “is rare in individuals – but in groups, parties, nations, and ages it is the rule.”

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