Written by: Jared Dillian
Don’t you think it’s weird that the government can spend as much money as it wants, but you can’t? That the government gets to play by a different set of rules?
Regardless of how much money the Fed prints and what it does with its balance sheet, you are faced with the harsh reality of having to spend less money than you make. You can temporarily make up a shortfall with debt (just like the government), but after a while, your creditors get sick of you and the party’s over.
It is kind of hard to tell people to mind their personal finances while the government is going bananas. But that is what we do. We tell people to eliminate debt and manage risk, and part of the reason we tell people that is because people have to manage the stupidity of governments.
Throughout history, both ancient and modern civilizations have seen governments unable to resist the lure of borrowing, spending, and tampering with their currency’s value. If you happen to be a resident of one of those countries, then you will get mowed over as an innocent bystander.
Unless you take measures to protect yourself…
Hard Assets
The way you protect yourself is… owning gold. Bottom of Form Other hard assets, too. Base metals, timber, diamonds, stuff like that.
I own a lot of gold, most of it from before the financial crisis. I have never been sorry about my decision (though I was a little stressed out when the drawdown got to 45% or so). You own it specifically for times like these. Crazy town.
Something is wrong. Gold is sniffing something out.
A botched election? A Harris win? A Trump win? Cats and dogs living together? Mass hysteria?
There is no DeMARK 13 strong enough to stop this chart. I mean, yes, China is buying, and it never stopped. But it is more than that. And the crazy thing is—this is barely in the news. Nothing even close to an investment mania.
Think back to the time when nobody wanted gold—the year 2000. It was trading around $265 an ounce. Now, it’s over $2,700 an ounce. This is not a good sign.
Honestly, I am falling back on what I always say about gold—it is an option on debt monetization. Any increase in probability that we will someday have to monetize the debt will result in the price of gold going up.
Should I Own Physical Gold?
Don’t bother if you don’t have any assets to protect in the first place. The point is not to punt it around. I think that’s where people went wrong in the last big bull market—it was a punt, rather than a hedge.
And I don’t mean that it’s a hedge in the portfolio sense, as in gold goes up when other stuff goes down. I mean, physical gold is a hedge on your life: You have a tube of Eagles on your nightstand that you can put in your pocket and run to the airport with if things start getting kinky.
There are a lot of people who buy gold. They do so for a reason.
Some people say that gold doesn’t track inflation very well. But one thing it does well over time is maintaining its purchasing power, with some minor variations along the way.
It’s dumb to have 100% of your portfolio in gold, but it’s also dumb to have 0% of your portfolio in gold.
Act accordingly.
Jared Dillian
Jared Dillian writes The Jared Dillian Letter, a free investment newsletter at JaredDillian Money.com. Subscribe here to receive a new issue in your inbox every Thursday.
