Gold used to be the Rodney Dangerfield of the investment world. When paper assets flourished the shiny metal got little respect from mainstream “experts.” If you were a financial analyst, and you spoke positively in public about gold, you’d better have something going for you besides a few winning predictions.
But recently, I’ve written in this blog about two contrarian proponents of gold: David Einhorn, the controversial hedge fund manager who had the audacity to suggest central banks don’t have a clue about money; and Duquesne Capital Management founder and manager, Stanley Druckenmiller, who advised an audience of stock moguls to sell all their paper and buy gold.
Of course, both Einhorn and Druckenmiller have garnered support for their views by being able to point to years of central bank blunders and recent weakness in the U.S. dollar. Still, with their strong advocacy of gold as the asset of choice against paper, the two mega-successful investors chose a path that requires the courage of even rationally-based convictions.
We can now add to their ranks another billionaire hedge-fund manager, Paul Singer. Though some have characterized him as a “vulture capitalist,” Fortune Magazine branded him as one of the “smartest and toughest money managers” in the hedge-fund industry. It’s also worth noting that while you might not want to play poker with a vulture capitalist, there can be no doubt that if he’s making a choice, it’s got to be what he sees as the sharpest move for his bottom line. There’s no harm in our learning from where the smart money’s going. Of course, with the interest-rate fumbles of our Fed, and forehead-slappers like negative interest rates in Europe and Japan, you don’t need billionaire credentials to feel serious skepticism (not to say panic) about the recent actions of central banks.
As Singer sees it, the principal achievement of central banks in the last several years has amounted to the debasement of currency. As reported in Newsmax Wednesday, Singer told his clients in an April 28 letter, “It makes a great deal of sense to own gold. Other investors may be finally starting to agree…”.
Other forecasters are also beginning to come around. The international bank and financial service firm, BNP Paribas SA, sees gold moving to fourteen hundred dollars in the next year. Since gold’s already briefly punctured the $1,300 resistance point this year, this seems not only a logical, but positively conservative forecast, particularly with the discouraging first-quarter GDP figures. As whispers of impending (or already-here) recession grow louder, it’s likely Singer, Einhorn and Druckenmiller will have to shove over to make room for more and more billionaires sheepishly taking their place on the gold bandwagon.
By now it should be perfectly clear you’ll be in respectable and informed company if you make your stand in gold. Perhaps even more crucially, you need to take a hard look at rolling over at least some of your IRA paper assets to the stable hard asset protection of gold. If we are sliding into a recession, you’re not going to have time to turn it around. Even in the best-case scenario, your paper and dollar-denominated assets will remain overly dependent on central bank fumbles and misjudgment if you insist on holding them at all costs. Remember too, by being a buyer of gold, you’ll be doing what central banks do for their own survival, rather than what they recommend you ought to do.