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Statements are sometimes repeated
to the point that they acquire the status of truth despite being deceptively false. In my mind I am
undecided as to whether
the greater morons are those that make
such statements or those that accept
them. The statement that "gold pays no interest"
is one of the finest examples of intellectual bankruptcy and dishonesty.
There will of course be those that
will point to the period between 1980 and 2000 when gold
went backwards. These people do not deserve a detailed reply
in respect of that period
unless they can open the doors to Fort Knox
for inspection and unless the paper
games played by JP Morgan
and friends come to a close. We
need to be reminded once again of those startlingly clear words of Chris Powell that there are no markets anymore, just interventions.
My interim reply to those that berate gold is that the last decade has punished them with a badly
faltering stock market, a
hideous real estate market and a laughable rate of interest on their savings. These people are now perhaps more respectful of Mark Twain's words to the effect that ''I am much
more interested in the return of my capital than in the return on
my capital."
As events unfold in Europe, China and in the USA, it may well
be that the next decade will
be just as punishing and cruel to those that place their trust in money
printing and market interference
by government.
SO HOW CAN GOLD PAY INTEREST?
In the spreadsheet below I have 11 investors. The
first one bought $100,000 worth
of gold on January 1, 2000 (or the first trading day), the second one bought $100,000 on January 1,
2001 and so on and so forth until the 11th investor bought gold in January 1, 2010.
On the last trading day of each year,
each investor sold $4,000 worth of gold which equates to a fair rate of return on $100,000.
Let us examine how they
faired.
So the investor who made his or her initial investment of
$100,000 in gold in January 2000, was able to draw an income of $44,000 over 11 years
(by selling $4,000 worth
of gold each year) and was also able to see his or her
investment grow by another $272,654 or 12.7% compounding over 11 years.
SO YOU STILL BELIEVE THAT GOLD PAYS NO INTEREST?
But the spreadsheet above also puts
to rest that other piece of misinformation peddled by the
fiat fakes, namely, that only the early investors are the ones that made the most. How do they explain the performance of the investor
who entered the gold market in January 2006 making an income of $20,000,
and a capital gain of $133,919 or 18.52% per annum compounding up to December 31, 2010?
SO GOLD PAYS NO INTEREST? THINK AGAIN AND THINK
HARD.
What would you pay for an investment adviser that performed so well?
Even Bernie Madoff could not match such an outcome despite his Ponzi performance.
HOW TO PAY OFF THE LOAN WITHOUT REPAYMENTS
In the Year 2000,
Sydney Australia was hosting the summer Olympics. Two close friends from the USA were visiting at the time. Both were avid real estate investors. I will not bore you with the details but their strategy at that time was to buy houses
and multi unit type accommodation with a 25% down payment and interest only payments. They felt that
the capital gain over a period
of time would enable repayment at a later stage.
Well we all know what happened to the
expectations of capital gain since that time.
But this story has a twist. Perhaps by nature and certainly through experience I advised against relying on capital gain
for loan repayments and instead offered an alternative.
The alternative was to put down only
a 15% down payment and to use the other 10% to buy gold as a hedge. Each year
a small portion of the gold portfolio would be liquidated
to cover the interest expense associated with borrowing an additional 10%.
Initially they both thought I was crazy but upon further discussion and reflection, one of my two friends adopted
and stuck to this strategy. Look at the spreadsheet above and you will get
a rough idea of how that
10% gold investment on the purchase
price of each dwelling has grown so as to effectively "pay off"' a major portion of each
loan.
I am not an investment adviser, but in today's political/economic climate, it would appear
that Americans and Europeans have few options for safe
and profitable investing. Retirees
need to ponder the above spreadsheet before buying an off the shelf annuity.
The road ahead is bumpy and uneven. Who will
you choose to travel with? Your investment adviser and your fiat currencies or your gold and silver?
SO GOLD PAYS NO INTEREST?
DON'T MAKE LAUGH AND DON'T LET ME HEAR THAT
STATEMENT AGAIN UNTIL BEN CHANGES STRATEGY !!!
Peter
Souleles
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