USAWatchdog.com | Oct. 10, 2012
Since this site went on line three years ago, more than a dozen readers either emailed or commented they cashed out of their IRAs or 401-Ks, paid the tax and penalty, and invested in physical gold and silver. One reader, in particular, told me he did this when gold was at the outrageous “bubble” price of around $800 per ounce. With the latest announcement of “open-ended” QE (unlimited money printing) by the Fed, it sure looks like everyone who did that made the right choice. I am sure there are many more who bought gold at $300 to $400 per ounce and silver at $10 to $15 per ounce, but those were the early birds. You might call them visionaries. What has been going on in the last few years is what I call the “Great Asset Repositioning,” and it is now fully underway.
Farmland, gems, oil wells and rare art are also in the category of hard assets, but it is gold and silver that are at the center of this move out of paper and into real assets. This trend includes everyone from the small investor to central banks. For confirmation, look no further than the big time financial players who have just recently become investors in precious metals. Bill Gross is head of PIMCO with $1.3 trillion under management. The company is so specialized in selling bonds that Mr. Gross is nicknamed “The Bond King.” Just this month, Gross basically calls the Fed money printing “budgetary crystal meth” in the “Investment Outlook” section on the company website. The Federal Reserve is printing around $85 billion a month to buy mortgage and U.S. government debt. This is more than $1 trillion per year of new money, and remember, it is “open-ended” or unlimited. Gross goes on to say if the money printing to fill the “fiscal gap” continues, “Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.” (Click here to read the complete PIMCO post by Gross.) “The Bond King” is a buyer of gold. Gross has publicly stated many times in the past few months that gold, along with other tangible assets, are a good bet. I find it a little scary that a guy who became a billionaire selling bonds is now telling people to buy gold and other hard assets.
Just last month, a man named one of the 100 most influential people by Time Magazine, Ray Dalio, is also on the gold band wagon. Dalio is also Not a long time gold bug. I recently wrote a post about what he is advising that said, “Now, a modern day version of JP Morgan is telling the world, ‘Gold is a currency.’ That’s what $120 billion hedge fund manager Ray Dalio said recently about the yellow metal. Dalio, founder of Bridgewater Associates, doesn’t give many interviews. So, I find it very telling that when he does speak, he says, ‘It’s not sensible not to own gold.’ When asked if he owned gold, he quickly replies, “Oh yeah, I do,” and said people should have ‘10%’ in their portfolios.” (Click here for the complete original post.)
“10%” gold in someone’s portfolio—that’s all? Think again. Tom Cloud of Cloudhardassets.com is an expert in financial planning and tangible assets. He has more than three decades of experience advising high-net-worth clients and institutional investors. Some of the individual high-net-worth clients have more than $20 million to protect. I talked to him on the phone this week, and he told me most of his clients are going to a 45% allocation of physical precious metals. This move is the polar opposite of debt and leverage. This is a pure insurance and protection of wealth play.
Think putting “45%” in precious metals is outrageously high? John Paulson, who made billions betting on the housing bust in 2007, has more than 44% in gold assets or gold shares in his fund. (Click here for more on John Paulson’s gold holdings.) By the way, Paulson recently sold all of his JP Morgan stock.
Central banks are also big buyers of gold. Bloomberg reported last month, “Central banks will increase gold purchases to 493 metric tons this year as they keep expanding reserves to diversify from the dollar and guard against a potential gain in inflation . . . We expect the official sector to remain a significant gold buyer for some time to come,’ GFMS said.” (Click here for the complete Bloomberg story.) China is leading the pack of central banks in gold buying. Zerohedge.com recently reported, “China Imports More Gold In 2012 Than All ECB (European Central bank) Holdings.” That’s more than 500 tons of gold imported for China this year alone! (Click here for the complete Zerohedge.com post.) This does not include China’s mining production of around 275 tons per year that it does not sell!
What is coming is big, very big. At no time in history has the Federal Reserve announced this kind of unlimited money creation along with 0% interest rates. Inflation is a virtual certainty. The Great Asset Repositioning is quietly going on unabated with the wealthy on the planet. Do they see financial calamity, a new world currency, deflation, hyperinflation, global insolvency or all the above coming? Who knows what they fear, but they are taking cover under gold and silver.