Why Invest In Gold? Former Wall St Insider tells All – Mike Maloney

by birtanpublished on September 14, 2020

I just can't believe this and I thank Steven Feldman so much for writing this because this is coming from a like a Wall Street you know a mainstream Wall Street guy that was working you know right from Goldman Sachs today I want to go right to the goldsilver.com news page

And this featured article here I want to point that out why Goldman Sachs is mistaken about gold and this is by my friend colleague and business associate Steven Feldman and as a former partner of Goldman Sachs and

Current gold industry executive now Steven spent a few decades in with the Wall Street elite he really knows that sector he came from goldman sachs and he it came as no surprise when dozens of customers and colleagues reached out to

Me this week to get my take on the latest research note from Goldman Sachs's investment strategy group is G in the note is G response to a number of Goldman Sachs's wealth management clients who had inquired about adding

Gold to their portfolios during these unprecedented times and these are unprecedented times this has never happened in all of history we have a huge percentage of the world's population inves invested in paper

Assets and those paper assets were all blown into hyper bubbles by the world's central banks in short the investment strategy group stated that Goldman Sachs does not recommend gold as a strategic asset class in a well diversified

Portfolio I find this I love what Steven wrote here but I find Goldman Stax's Goldman Sachs's stance just unimaginable gold is money stocks are something else gold is a store of value it's the ultimate form of

Money actually gold and silver are the only forms of money everything else is currency unlike stocks gold is not supposed to be an income-producing asset or a dividend generating security therefore comparing

Gold to stocks as akin to comparing apples to oranges I'd call it comparing money to oranges because the stocks being oranges gold being money because people say well you can't eat gold well you know what you

Can take your money and can buy more oranges later as the investment strategy group points out gold is more appropriately compared to the u.s. dollar like the US dollar gold is a medium of exchange that is accepted

Around the world like gold the US dollar pays no dividend well take a couple thousand bucks and an ounce of gold stick them in a drawer for a decade and come back and see how much stuff you can buy with the proceeds that US dollar is

Probably going headed toward zero and the in fact you know over and over again I see currencies where they will make a certain bill no longer legal tender where you can't go and you know it's it's ad they actually like just make

Them trash they just said this is no longer currency I went to Jamaica once I'll show a picture of it in some future video and when I was coming back the British $20.00 pound note they were no longer accepting the old version only

The new version of the British Pound and I see this country after country will change their currency periodically and the biggest difference between gold and the US dollars that unlike US dollars or any other fiat currency on the planet

The supply of gold is limited yes on April 6th 2020 the Financial Times released a projection that puts the difference between gold and the US dollar in stark relief the projected fed balance sheet will increase five

Trillion dollars to nine trillion by the end of the year now I want to point out actually that last September the Fed's balance sheet was at three point seven seven trillion and now it's going to be over nine so it's an even greater than

This five trillion dollars but you know that's an increase but you're talking about more than doubling by the end of this year so just seven months ago three points point seven seven trillion that balance

Sheet figure in and of itself is nearly as large as the value of all the gold that exists in the world now I want to remind you that he's just talking about the Fed's balance sheet not including the Fed the European Central Bank the

Bank of Japan the People's Bank of China the central banks of Australia New Zealand and every other advanced economy in the world that is currently expand they're hyper inflating all of their base currency supplies all over the

Planet and so if you include that then all of the world's gold is valued as a fraction of what's happening across the planet as far as the expansion of the central bank's balance sheets moreover the Fed will continue to set or

Drive interest rates to zero consequence aquela maintain its multi millennia status as the only form of money that maintains absolute purchasing power over time well this is what makes gold money and makes everything else currency it

Maintains its absolute purchasing power over time over long periods of time so I probably would have put the period right there because it's the only form of money period as demonstrated in the chart below gold will likely outperform

All major fiat currencies as it has for the past 120 years so this chart goes back 120 years ago to the year 1900 and shows the mark the rice mark which went to zero in World War two and then the deutsche mark spliced to the European

Union and as it continued in the European Union and then spliced to the euro and then we've got the US dollar the pound sterling and the Japanese yen here so all of these major currencies going to zero investment strategy groups

Argument number one against gold is not a reliable inflation hedge and they contend that we do not expect inflation to increase in any infull way when the US and other economies recover from its this pandemic

Now first we're going into severe deflation into this pandemic it'll probably last a little bit after the pandemic because it changes people's psychology and everybody is going to be scared and they're going to save and you

That you know episode 7 hidden secrets of money if you haven't watched it yet nevertheless the long-term inflation is difficult to predict especially when the global economy is in the midst of a dramatic transformation and this is the

Greatest transfer transformation that has ever happened and you are going to see this short-term severe deflation a stabilization and then after the pandemic sometime there will come a point where some of that currency that

Is created during this deflationary period starts to come out of hiding from people's savings and when it does were going into a big inflation potentially a hyperinflation putting aside the for a moment the risk

Of short or long term inflation the question mark remains investment strategy group is investment strategy group right is right about the relationship between inflation and gold the historic record provide provides the

Clear answer gold outperforms rising inflation gold even outperforms periods where a fear rather than any reality of rising inflation exists and investment strategy group admits that gold does have an attractive risk premium above

Inflation to warrant an allocation but then it says that that's negated the slight edge is negated by the storage and in insurance fees and Stephen points out as somebody that was in that industry for more than two decades as a

Wall Street veteran I got a chuckle out of that line if the investment strategy group is going to base its aversion to physical gold investment on storage fees then I would be remiss if I did not point out the myriad of fees that are

Loaded into most investment choices let's assume that a hedge fund does in fact hedge risk a dubious claim for many hedge funds which are merely leveraged long equities in other words they take out futures and options to

Give them leverage to the equities so they usually perform in multiples of whatever the equity does and their long equities betting that they're going to go up but that leverage also cuts in the reverse direction when the SP goes up 1%

Your investment might go up three same thing happens in Reverse then the hedge fund investors are paying 2% annual fees that's your fee for a hedge fund whether you lose or whether you win you know you lose money you still have to pay them

Two percent plus if you do win they're gonna take 20% of the profits and that's not just a huge multiple of gold storage costs it's a multiple of multiples I mean gold is very inexpensive when you store it properly goldsilver.com there

Are storage fees if you look at them they it's it's an absolute fraction of what these fees are in standard investments the result of a long-term study shows that the gold price has historically risen during periods of

High inflation and the higher the inflation the more gold Rises and here's the chart that shows it and the argument uh number two is that gold is not a reliable hedge against deflation or a downdraft and equities economies fall

Into a recession and so this when they talk about a downdraft in equities since World War two these are the four worst bear markets of equities so 72 to 74 the stock market they've got it here at 49 there was actually a 50% retracement

From peak to peak and then this is the 1987 stock market crash the NASDAQ and and dot-com or dot bomb as I like to call it when that bubble popped the global financial crisis of 2008 and the third the average was 37 percent lost

For the stock market's 10-year bonds gained 11.7 but 3-month Treasuries lost 1.5 so if you had sort of a diversified portfolio of bonds as a percentage of your diversified portfolio that had a bunch of stocks as

Your protection you may have made a 6% gain something between the 1.5% loss in the 11% gain 5 6 percent against forward against Gold's forty percent rise almost 40 and a half percent rise as an average and without exception gold did rise on

All of these and when it was in a bull market the only time that you know here gold was experienced it was in its secular bull market but was in its cyclical bear with in the secular bull so it only went up 16% but here 126

Percent during this market crash that's some spectacular performance I expect that that's more like what gold is going to do this time around and here they've got a chart of how it performs during recessions and in five of the

Seven recessions that have happened since 1965 Gold has offered spectacular performance during these recessions so it's a good protection during those downsides argument number three investments strategies group reports

That some clients have asked why we don't prefer gold instead giving a lingering uncertainty around the virus and they based their prognostication our year-end sp500 price target implying a 20% gain from current levels I don't

Know where they when they wrote this but maybe they're talking about the current levels right now which is possible you know if the Fed just starts injecting currency directly into the markets yeah the markets could go up 20% but watch

Where gold does a journey compared to an advanced an 11% advance for gold based on their forecasts I don't know what gir is but based on their forecasts now I just don't think they're taking into it they're looking at this in a historic

Perspective not in the perspective that the Fed's balance sheet is going to grow with that they're going to print currency it's going to be injected directly into the markets stuff the printing currency scares

People into gold it scares them into safe-haven assets well investment strategies group prediction may come true the historical record has set forth in the chart below informs us that gold has meaningfully outperformed the stock

Market over the past 20 years gold certainly outperformed the stock market since the beginning of 2020 and since March 21st 2020 and since last week so for the century for the year for the beginning of March and the beginning of

The week it has outperformed the stock market is the gold has outperformed equities in the short run in the long run bear markets and bull markets not bad for a fringe asset Thank You Steven this chart

Though is shows four hundred and twenty five percent gain for gold a hundred and forty nine percent for the Dow and for the SP one twenty one so you've got to take more than 25 percent off of the the Dow now I am going to update this chart

Because it's lacking a little bit of information as of today 510 percent for gold and that chart didn't have the market crash in it and so it's barely above a hundred percent for the Dow take something off of that for the S&P and

You've got less than a hundred percent adjusted for inflation and you're barely above water here your purchasing power may have gone up fifty percent for this entire century two decades your your purchasing power being invested in

Taking this rollercoaster ride of stocks you may have increased your purchasing power by 50 percent where with gold you would be up for four and a half times purchasing power so investment strategies group concludes that a

Tactical allocation to the S&P 500 is a far better long-term use of a client's risk budget risk budget you've got it remember this word risk budget because there's going to be a chart later that I'm going to introduce and so they're

Saying your risk budget and plowed into the SP which is also betting that stocks want to go up I just can't believe this and I think Stephen Feldman so much for writing this because this is coming from

A like a wall street you know a mainstream Wall Street guy that was working you know right from Goldman Sachs so but what about a client's non risk budget why wouldn't investment strategies group consider foregoing some

Incremental projected returns for a real downside protection are we are we really having all that much fun on the roller coaster of equities as it lurches toward the next crisis Thank You Steven if not then note that gold has served as

A far superior hedging asset during periods of crisis as shown in the chart below gold provided a stronger hedge than Treasury bonds and nine of the 11 major crises and here is gold versus the SP and Treasuries during crises so

You've got the SP 500 US Treasuries and gold and all of these different crises and if you notice there's only a couple here where gold was – and so the average here you know you've got stocks – almost 20% US Treasuries up almost 4% but gold

Up almost 7 almost 7% during the all of these crises there's just no evidence for the this mainstream Wall Street dialogue that gold is this lunatic fringe investment it's one of the best performing assets that there is

Conclusion portfolios are stronger with gold than without it and if you back test this with portfolios it clearly shows that gold out with a portfolio with gold outperforms portfolios without gold 20-year study below takes a 60/40

Split of stocks and bonds in a portfolio with equal amounts by adding increasing percentages of gold and the result shows that a portfolio with 10% waiting to old outperforms those now this 10% this is something in the bull market of the

Seventies after from 1970 to 1980 no Wall Street mainstream advisor nobody was saying I'll put 10% gold in your portfolio nobody was saying that until like 1979 when gold had just blown the doors off of everything and stocks were

Going sideways but losing tremendous value to inflation all throughout the 70s so stocks were going down in value gold exploded best performing asset of the 20th century and silver was been actually better performing but precious

Metals best performing assets and right at the end and then in the 80s they started you know in the 80s during when the bear market started in gold all these professionals started recommending a third of your portfolio 25% 20% and as

Gold kept on going down for 20 years they went down in price it went from 850 down to 250 brutal bear market 20 years long and during that period of time at first they were recommending the these huge allocations and it went down and

Down and down and down and after a while it's just a 10% waiting for gold and then they got to 0% but they weren't recommending any gold when gold finally bought him dat 250 and started increasing they only started

Recommending 10% but no more than that once gold was up close to a thousand bucks or over you know and then Jim Cramer jumps on board and starts recommending buying gold when it was eighteen nineteen hundred dollars an

Ounce and then stops when it goes down you you want to protect yourself during these long term trends by having a greater allocation to what's going to outperform the other things and so this is based on up to a 10 percent so I want

To show you something that Jeff Christian of CPM group now Jeff doesn't like me very much he considers me a lunatic conspiracy theorist nut and I don't I don't deal in any conspiracy theory I

Only deal in conspiracy facts stuff that I can prove and that's pretty much my track record you can go back as long I can support everything with data everything that I have said but what Jeff came up with here is that a

Portfolio with 27 to 30 percent of its assets in gold had the best risk reward ratio in the years from 1968 to 2017 so this covers both the bull and the bear markets and what he discovered so this is how much risk you're introducing and

This is how much return you're getting the reward so it's a chart of risk reward and with no gold as you add gold your risk is reduced and your reward is increased and you know it's it's it it reaches like an equilibrium here but

This is actually the best place to be but that is with the big bear market from 1980 to 2000 within there if you strip that out I'm sure that this curve looks more like this ya know so if you look at my portfolio you know it's I'm

Way up here with gold and silver and and then some crypto currencies and I've added recently just a couple of stocks but it's in my portfolio is probably on the order of 70% precious metals because I know what it does in bear markets and

Bull markets and in a bear market I might reduce it to this if I thought that gold and silver were going to go down I might reduce it to this in a secular bear the the market from 2011 to 2015 was a cyclical bear inside of a

Secular a long-term secular bull market so it's just this short-term correction was a short-term correction the lasted for quite a few years but still it's a correction bottom line gold offers resilience like most Americans I'm an

Optimist and that optimism allows me to hold a healthy allocation toward equities in my portfolio but when it comes to protecting myself from the downside of equity I stand away from many of the worn-out

And overused narratives espoused by some of my former Wall Street colleagues I didn't achieve a 10% allocation of my portfolio all at once I leg din over a decade I accepted less risk in in exchange for

A better night's sleep thank you very much Steven now a decade after my first investment in physical gold I'm better off that I would have been had I used that 10% allocation for stocks hedge funds or private equity

Excellent and and absolutely so true as I have explained above an allocation of physical gold in one port once portfolio provides many benefits but ultimately provides protection and resilience it's time to rethink portfolio allocation and

Discover how gold can both protect and enhance wealth while helping investors to weather inevitable economic crises and they are inevitable they always happen something happens history has been whispering this very thing in our

Ears for thousands of years even if Goldman Sachs's investment strategy group hasn't been listening thank you very much Steve an excellent article chart of the day this is from my coming book the great gold and silver rush of

The 21st century and what I've done here is I had my researcher and chart maker Alan Hibbert take the current bull market and the previous bull market of the 70s and take them from right when they begin and you measure a bull market

When when it hits its ultimate bottom the bear market went from January of 1980 all the way to 1999 and in 1999 gold put in its low 2001 it put in another low that was three dollars higher than this low so that is the

Beginning of this current bull market and in 1970 that was the beginning of when gold left 35 bucks an ounce that was the beginning of that bull market and so you've got the previous bull market on the gold time

Scale and then this green timescale is the current bull market time scale and and amplitude scale and what I've had him do here is compress the time scale by a factor of about two point five and then the amplitude scale is also

Compressed until the two peaks lined up what I did was I had him line up when a technical trader would call this is the a wave the B wave and the C wave of a Elliot wave analysis and you line those two peaks up before it goes into its

Cyclical bear or short-term correction you know you've got to work off all of this you know getting overbought and so on and it's scary Mark Twain said that history doesn't repeat but it rhymes really well and and this is just scary

How well it rhymes however the bull market of the 70s where gold hit eight hundred and seventy three dollars in January of 1980 on the Chicago Mercantile Exchange in intraday trading and that was not during a full-blown

Currency crisis the dollar did not die or change into a another form of the US dollar it had changed form in 1971 but when we went off of Bretton Woods and it became non gold back that's a different dollar than before that but now we are

Probably going into a currency crisis I don't think this is going to take until 2024 and I actually think that up 36 times or a peak of $9,000 the more you study this the more you come to the conclusion that this could be an

Absurdly low price of gold in the future and I just don't think it's going to take until 2024 anymore so that's the chart of the day moving on I want to welcome the almost eleven hundred new subscribers thank you very much and make

Sure you share these on Facebook and Twitter we greatly appreciate it viewer feedback hi Mike doesn't it make sense to wait until gold and silver are blood in the streets prices if we're going to go into a u-shaped recovery can you

Please help the herd understand why it shouldn't wait for the dip well yes first of all blood in the streets that's the general economy it's going to be blood in the streets the prices for gold

And silver when there's blood in the streets are already going to be astronomical but if you're waiting for gold and silver to drop to blood in the streets prices they're not they're going to do one last pull back I believe but

That's the pull back for the gold and silver io u–'s it's the spot price of fake paper gold and silver IOUs that they write on the commodities exchanges that establishes that spot price it's not going to be real gold and silver

With what's going to happen most likely is that the spot price will will drop but the premiums are just going to expand to absorb all of that and the real physical is going to cost you as much if not more than it does right now

As gold and silver head north when all the billionaires come in and try to buy gold which they can't at these prices if they try to get a healthy allocation toward gold and they will what's going to happen is they're going to be taking

400 ounce bars and stuff off of the commodities exchange and the the but the the price on the commodities exchange might go down but the bars that you can't get a hold of the one ounce bars of gold the one ounce coins the silver

Eagles all of this stuff is going to become unobtainium so they will change from gold and silver to the element unobtainium and that will make them on a for diem once they become unobtainium everybody's going to try to buy them

When they can't get them and they become unaffordable can you please help the herd understand why they shouldn't wait for the dip well that's it the physical probably isn't going to be going through that dip if

You're gonna wait for the dip you're waiting for SLV and GLD and some other derivative of gold and silver you're not waiting for real gold and silver thank you very much Frodo says I go to goldsilver.com

Every day instead of Drudge thank you and your guy my guy is Cameron by the way my best friend for more than 50 years please comment on Harry dents video yesterday about the about falling gold prices he's in your hidden secrets

Videos thanks again well in those videos Harry and I agreed to disagree about gold we both believe were going into deflation and that video was made when everybody all the analysts were screaming inflation nobody was saying

Deflation except for myself and Harry and but we disagreed about gold he thought the deflation was going to be a long grinding deflation or permanent I thought the deflation would be this short-term bounce into a huge inflation

Or potentially hyperinflation and I still believe that and by the way he made a bet with Jeff Clark our senior precious metals analyst at goldsilver.com that gold was going to fall to 750 or something like that I

Can't remember the price that Harry picked and Jeff met him an ounce of gold against that and Harry eventually paid him so the you know Harry has been saying that gold is going to go down for years I think it went when it was four

Or five hundred dollars an ounce he said it was going to back to two hundred and fifty dollars an ounce when it went up to a thousand he said 750 I don't know what he's saying it's going to go down to today but he's been raising his

Downside target as gold keeps on going up I just you know the spot price could fall go and try and get a real outs for that price it's not going to happen the mint at the most important thing to remember is that inflation is not an act

Of God then inflation is not a catastrophe of the elements are a disease that comes like the plague inflation inflation is a policy and he's quoting Litvak von Mises and thank you very much because inflation is a policy

And right now it's the policy of every central bank on the planet and the only way to protect yourself from their policy is to buy something real that means land productive farmland or precious metals or potentially

Cryptocurrencies they may do very well even though they're virtual they are limited and that makes them protected against fiat currencies that are unlimited in quantity finally we got the quote of the day and make sure that

You get my book and share it with everybody you can send it to all your relatives it's a PDF just email it to everybody gold is the money of kings silver is the money of gentlemen barter is the money

Of peasants but debt is the money of slaves thank you very much norm norm Franz he wrote a book called money and wealth in the new millennium and he wrote that was released in 2002 when gold was under 300

Bucks and not a popular asset so thank you very much norm friends we'll see you next time thank you for watching

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