SOME QUESTONS FOR YOU

Here's a question for you irrespective of your age: Is the world more screwed up today, more dangerous than any time in your recall?

Now that covers a lot of ground from countries facing unsustainable debt obligations to wars and famine, elections and the like. It's also a question you need to ask and answer for yourself if your considering buying gold.

Gold is like the wayward one in a family; it gets a lot of discussion, not much respect. Is it or does it, for example, provide a store of value and if so against what? If you're a fiat currency fan, you probable have an attitude when it comes to gold.

People who don't like it argue it doesn't pay or yield any return while your holding it. That sounds much like one of my ex-girl friends. If you know how many central banks today around the globe have invoked negative interest rates in an attempt to either avoid or stimulate their economies from a slowdown in growth, does gold return anything in those situation? and what about your check books and savings accounts? Or those COLAs for social security recipients for the next two years?

Are gold bugs, a pejorative term to be sure, just some looney tooney farts, mostly old and out of touch like that term and those who toss it around suggest?  Would you bother to pick it up if you found a piece laying on the ground? Would those who say it's a fraud compared to paper assets the world now reveres bother to pick it up?

We will spare you all the shopworn debates about whether it's a safe haven, yields anything, storage costs and the rest. What we have noticed for some time now, fewer and fewer bother to pick up pennies when they come across them in the street.

Are pennies symbolic of fiat currencies? A fellow named Ben Franklin once thought so much of them, he argued one saved is one earned. Now Ben's been missing for a longtime, but plenty of others who once subscribed to that belief are still around. It goes by another name, purchasing power.

How many nickels and dimes and quarters and fifty cent pieces play an intricate part in your financial world today?  Better yet, when is the last time you even saw a fifty cent piece?  There was a time when they had actual silver in them and they made a distinctive ringing sound when dropped on the table or floor. If you can find one around today drop it and see what sound it makes.That should tell you something about inflation and if there's really any around.

Does the piece of paper you hold called an insurance policy on your abode or your car pay anything year after year you keep buying it unless something you never want to happen happens? We call those insurance policies put options. Also decaying assets. They have a time limit, like you and me. And they usually yield nothing in the way of income and wind up going to zero, something gold in your lifetime or mine or even in its history has never done.

Those policies with few exceptions are pretty illiquid. You might not like the offered price, but we're willing to bet push versus shove time, you could get something for that gold. Not so sure about those policies. So the next time you read some wanna be pundit citing the reasons gold isn't worth holding, doesn't yield anything and never grows in value like fiat assets, think about some of these questions.

And, oh yea, you might want to see if any of those coins we mentioned have returned to their previous glamour and place in your daily financial world. We're willing to bet some gold with you--if you have any--that they haven't.

The stock market topped out in 1929 in August. The real damage didn't start until October of that year. Though there were some rallies along the way off the 1932 nadir, it took 25 years before the market surpassed it August 1929 Dow high.  Back then there was no S&P 500. A lot of cemeteries got filled up during that time.

In the early 1980s when gold hit its high above $800 an ounce, the U.S. Mint as is its wont floated some commemorative one ounce gold coins named after an American Indian lady. Lots of people purchased them for their gold content at $700. $690, $550 $300 right on down to where the price of gold bottomed years later in the $200 range.

It took quite a while before gold started up again, settling into what became a 12 year bull run. We haven't priced what a one ounce set of those coins goes for today based on just their gold value let alone any added collector value they night have. But we're willing to bet if any of those people are still around most of them are more than even given gold's current price just above $1200 an ounce.

In this same 1980s there was something called the Asian Tigers, the most famous of which was the Japanese Nikkei. It just kept rising and though it traded at nearly 40,000 at its top, perceived wisdom frequently said at the time 80,000 was a realistic top. In fact, there was what many bull markets illustrate near their end an air of arrogance and certainty.

  Japan NIKKEI 225 Index decreased 18 points or 0.11% to 15715 on Wednesday April 6 from 15733 in the previous trading session. Japan NIKKEI 225 Index lost 3926 points or 19.99 percent during the last 12 months from 19,640.54 points in April of 2015. Historically, the Japan NIKKEI 225 Stock Market Index reached an all time high of 38915.87 in December of 1989 and a record low of 85.25 in July of 1950.

As you can see the old Nikkei high hasn't been exceeded since, a 25 year period so far. Land is scarce in Japan. But you get the idea about burials along the way of those waiting to get even.

As for that yellow metal, here's a look at it.

 

 

 

Here a preface to the next chart.
If you’re someone who’s skeptical of government-reported numbers, you’ll find the following chart confirms your suspicions. And if you’re someone who’s attracted to value, you’ll love the chart.   

There is a lot of criticism of the government’s CPI number simply because it doesn’t really seem to reflect what the average person experiences. Even with gas prices in decline, other segments of our society have seen prices accelerate. Healthcare and college costs are two biggies, rising far more than the current 0.2% reading. And many food items have scary trajectories—ground beef has more than doubled since 2010.

Meanwhile, the gold price has fallen by roughly a third over the past three-plus years and been flat for the past four to five months. But is it a good value at current prices?
Since 1980, the CPI formula has been modified at least a dozen times. Heck, they even implemented a new “estimation system” this year. Most nongovernment economists (like you and I) think those changes have made the reading less accurate, not more. So I asked John Williams of Shadow Stats to calculate the gold price in March 2015 dollars (the latest data available) based on the CPI-U formula from 1980.
Here’s what he found.

 

Casey is a known bear, but so what. Do you know any known bulls? MSM is full of them. In  reference to the above chart, we will draw the line with his last statement below and let you decide for yourself.

Adjusted for the 1980 inflation measure, the gold price is approaching its bear market low of 2001. In fact, gold is now below the 1975 price when it became legal to own it again! These data clearly show that when measured against a more realistic view of inflation, gold is dramatically undervalued.
And with total worldwide debt levels up by a whopping $57 trillion since the end of 2007, the need to own it is as important as ever. So if you're looking for a helping hand, look no further than the end of your own wrist.  Do your own research if you can. And don't forget to keep asking those questions. The purchasing power you preserve might be your own.