I’ve moved on with my battle with financial advisor’s who attack gold as an investment as I didn’t receive a response from the first one. If financial advisor’s are willing to critique gold as an investment, then they should at least respond to my criticism of their understanding of how gold fits into a well diversified portfolio.
While I won’t mention advisor’s names in my critique, at least not at this point in time, I will refer you to their written prose where you can see for yourself what has transpired and whether or not any of these financial advisor’s will defend their point of view as I cross the Rubicon into their understanding of gold.
My latest attempt at dialogue with a financial advisor can be found at Seeking Alpha. Keep in mind that the authors of these articles that bash gold can remove their article at anytime. If they do, I have a copy and will edit this article to include their written word.
Take a look at the article this financial advisor wrote now and below is my reply critiquing the relevant comments made bashing gold.
The Financial Advisor wrote: “In truth, GLD does appear to be a venerable contender for a portion of a well-diversified portfolio. Yet in a “black swan/perfect storm catastrophe” like the 3 month, systemic breakdown of 2008 (September through November), GLD dropped an astonishing -30%. PowerShares DB U.S. Dollar Bullish (UUP) soared 20%.”
Doug wrote: It’s easy to pick a short time-frame and criticize gold’s performance relative to the dollar (they are typically inverse of each other). But why don’t you do your analysis from when G.W. Bush took office to today?
Most people own way too much dollar based assets when compared to the “insurance” that gold offers against it.
The typical recommendation by financial advisor’s (I just did a blog piece on this subject) is 70% stocks (including about 10% – 20% foreign), 25% bonds and 5% cash, depending on whether one is conservative, moderate or aggressive).
What this means is that an investor has 80% to 90% of their portfolio subject to the whims of the U.S. Dollar decline or rise. The trend for the dollar, as you know, has been down for quite sometime (especially since 1971 when the Dollar backing was decoupled from gold). From 1971 to 2000, there wasn’t too much competition to the U.S. Dollar or to the U.S. as a Superpower and innovator. Times have changed. Portfolio’s need to change with it.
So not only has the investor lost the value of their portfolio due to the stock market decline, but they have also lost purchasing power of what’s left due to the dollar decline. It’s the double whammy that no one on Wall Street dares speak about.
The Financial Advisor wrote; “Yet what if you were looking to reduce the risk of owning one versus the other? Could you achieve a better risk-reward outcome by owning both?”
Doug wrote; I would rather have more insurance with gold, which you do admit, “GLD does appear to be a venerable contender for a portion of a well-diversified portfolio,” for my portfolio to counteract the U.S. Dollar centric risk of it.
The volatility of gold means nothing to a long term “gold bug” as most of them are in physical gold, not GLD. The last 8 years one would be hard pressed to find a better performing asset. They care not that gold falls to $700 on its way to $2,000 or higher.
Still, they, meaning CNBC and those who are brainwashed by our financial advisor educational system, laugh at those who dare say be long gold.
Time will tell who gets the last laugh. But they probably won’t be laughing out loud. Gold bugs are quiet about what they do. They don’t want the neighbors to come knocking down their door.
Related posts
About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.