“Gold is the hitching post of the monetary universe.” — Jim Dines (quoted in “The Maxims of Wall Street,” p. 151)
Last year, gold hit a six-year low. My decision to sell gold and silver in late 2011 (when gold was $1,900 an ounce and silver hit $30 an ounce) was a good move. Gold, oil and commodities in general were hurt by a strong greenback and threatening higher interest rates. Since then, gold and silver are down 50% or more from their highs, and mining stocks have fallen even further.
But after the Fed raising rates in December and the markets falling sharply along with oil, the Fed is not likely to increase rates for a long time while its leaders seek to promote inflation. The New York Times published a cover story today warning of excessive debts that might require another round of inflationary bailouts. There are also heightened geopolitical tensions in the Middle East.
Gold does best in an environment of rising inflationary pressures, but that’s not what’s driving the yellow metal this time around. Uncertainty about the stability of the monetary system is the cause this time. Gold and T-bonds are the safe-haven investments. Crashing global prices of crude oil, anemic growth in China, loose central bank policies in developed economies such as Japan and Europe and uncertainty about interest rate action by the Federal Reserve is causing investors to rush for cover.
Gold is looking stronger on a technical basis, and is now above $1,150 an ounce. Silver and platinum are also going up. And gold stocks are rising sharply from their deeply undervalued position. I’ve recommended two gold mining positions in the last month in my trading services, Fast Money Alert and Private Equity Trader. Mining stocks are the best leveraged way to speculate in gold. And both stocks are now profitable, although prices of these mining shares have been highly volatile.
I suspect that precious metals and mining stocks will be a good contrarian play this year, while traditional investments in stocks and bonds will struggle.
But don’t go overboard with your gold position. Invest no more a 5% of your portfolio in gold.
Want more great quotes on gold and investing? Get a copy of my “Maxims of Wall Street,” now in its 4th edition. (See below).
You Blew It! Don’t Count on the SEC to Protect You from Fraud or Financial Terrorists?
ABC tonight will air the second two-hour installment of “The Bernie Madoff Story,” showing the biggest fraud in Wall Street history. If you missed the first installment last night, don’t worry. You will still want to see tonight’s climax. I highly recommend it!
The two-hour special does a terrific job of telling the story of how a highly successful money manager could deceive the government and most investors for years. The Securities and Exchange Commission (SEC) comes across as completely incompetent.
Richard Dreyfuss superbly plays Bernie Madoff in the ABC TV special, “The Madoff Story.”
The one person who was not fooled was the private financial investigator Harry Markopolos, who later wrote his own account in “No One Would Listen.” He is portrayed in a positive light in the ABC film. I interviewed him back in 2010. He does not beat around the bush when it comes to government protection of the public against fraud and bad investment advice. He was the only one to uncover the massive, $65-billion Ponzi scheme of Bernie Madoff that destroyed the financial lives of thousands of individuals and foundations around the world. Markopolos repeatedly tried to warn the SEC and the financial press, without success.
Are there any lessons for investors to learn from this famous case?
I asked Markopolos, “Can individual investors depend on the SEC or other government agencies to protect themselves against fraud and bad investment advice?”
He responded bluntly, “No — never! This nation’s financial regulators have proven themselves incompetent and incapable of regulating this nation’s financial system. They need wholesale replacement of their staffs.”
Markopolos asked out loud, “What good is a hunting dog if it doesn’t hunt? It’s only a show dog.”
I interviewed Markopolos right after he released his book, “No One Would Listen,” and I found it absolutely fascinating. It was like a murder mystery thriller — I couldn’t put it down.
Markopolos Offers Five Tips to Keep Investors out of Trouble
Markopolos outlined five recommendations to preserve your hard-earned capital when approached by investment salesmen:
- You should do the choosing. Don’t be talked into an investment product by a broker who calls you.
- Make sure managed money is protected at an independent, third-party custodial bank.
- Avoid most offshore entities.
- Avoid most structured products, such as private equity deals or insurance products — they are too expensive, too illiquid and full of hidden costs.
- Forget about background checks from the SEC or Better Business Bureau. Be your own investigator. Shop around and seek advice from qualified independent advisors.
I’d add a sixth recommendation to Markopolos’s list: always be diversified. Never put all of your funds with one money manager, no matter how good his or her track record might be.
And here’s a seventh tip: Always be suspicious of any managed account that never loses money.
Half Price Book Offer for Subscribers!
“The Maxims of Wall Street” is an ideal gift book that offers a lifetime of sound investment advice with more than 800 sayings and dozens of short stories. As one subscriber said to me recently, “There’s more wisdom in your book than 4 years of college education!” And there’s even quite a bit of humor in the “Maxims” — see for example page 25, “how to make a million.”
You pay only $20 for the first copy, and all additional copies are only $10 each. All will be personally autographed, and I pay the postage! I’m offering “half off” because I know “Maxims” makes a great gift for friends, relatives, business colleagues, investors, your favorite stockbroker and money manager. Many people order a whole box of 32 copies. The price of a box of books is only $300 postpaid. To order your copies at this super discount, call Ensign Publishing toll-free at 1-866-254-2057 or go to www.miracleofamerica.com/maxims.
Your Editor Will Keynote a Wealth Summit in Los Angeles
Attention, California subscribers! I’ll be the keynote speaker at the annual Wealth Summit sponsored by KRLA Radio (AM 870), one of the largest talk radio stations in Los Angeles. My topic will be, “The SWAN (Sleep Well At Night) Strategy: The Prudent Guide to Saving, Investing and Financial Success.” Join me, radio show host Larry Elder and Investors Business Daily’s Amy Smith on Tuesday, Feb. 23, at 5:30 p.m. at the Westin Pasadena Hotel in Pasadena, California. The entrance fee is only $10. To register, go to http://www.am870theanswer.com. See you there!
Special Announcement: Subscribers to the Skousen CAFÉ should be happy to know that for the first time in two years, I am hosting the Global Financial Summit, a special private investment seminar, in The Bahamas. The focus will be on “High Income & Fast Money Investing” — combining my two most successful trading services!
My “All Star High Income & Fast Money” experts for this exclusive private meeting will include Alex Green, investment director of the Oxford Club, and editor of three trading services (Momentum Alert, Insider Trader and True Value Alert). Alex is rated the #5 best investor according to Hulbert Financial Digest. I’ve also confirmed Martin Truax, vice president at Raymond James, whose “income & growth” portfolio has more than tripled during the past 10 years. He and his partner Ron Miller also have developed a highly successful trading system using “red” and “green” signals to determine when to get in and out of markets (they flashed “sell” in May and now are flashing “buy” — good calls!)
Our keynote speaker will be Steve Moore, the chief economist for the Heritage Foundation and the #1 columnist for the Wall Street Journal, who will speak on “Money & Politics 2016: The Inside Story for Private Investors.”
The dates are March 16-19, 2016, at the five-star Atlantis Resort on Paradise Island, Nassau, The Bahamas. This is during high “Spring Break” season, so I urge you to make your flight reservations now.
I want to encourage you to sign up now. The price is only $695 per person/$995 per couple. And hotel rates at the five-star Atlantis Resort start at just $209 per night. We are limiting this private meeting to 200 attendees only. For more information, go to the website, or call Valerie at 1-855-850-3733.
In case you missed it, I encourage you to read my Skousen CAFÉ from last week about the effect of climate alarmism on the energy sector. I also invite you to comment in the space provided below.