The Phaserl


The Investment Secret Of The 2000s And It Has But Started

by Egon von Greyerz, Gold Switzerland:

For most investors, there is only one asset class on the horizon. Whether it is the professional or private investor, when they consider investing, stocks will always be first on their list. And if we exclude all debt instruments, the stock market is by far the biggest market in the world. Global stock markets are capitalised at around $80 trillion currently.

Stocks – A Stairway to Heaven?

Since the creation of the Fed in 1913, investing has been “a stairway to heaven” (Led Zeppelin). But there have been quite a few stumbling blocks on the way. In 1929 the Dow peaked at almost 400 before the crash. The low of the Dow was in July 1932 at 40 – a 90% fall. It then took 25 years until 1954 for the Dow to get back to 400. This gives an average return of 5% over a 103-year period excluding dividends. This is an excellent return and including dividends the total return approaches 10% annually.

As I have shown in previous articles, the rise of the stock market is very much linked to the increase in debt. Since Reagan came to power in 1981 for example, US debt is up 22X and the Dow up 20X.

We are now getting to the point when increasing amounts of debt and money printing is required to fuel the stock market. With the Shiller p/e currently at 28.5, the stock market is in bubble territory and approaching the 1929 overvaluation level. But we are not yet in the super-bubble area of 2000. So in theory there is room for this bubble to grow yet bigger.

Caveat Emptor

But even if stock markets can become even more overvalued than currently, they are now at levels which represent unacceptable risk especially when we look at a mean of 16.7of the Schiller inde. This makes the overvaluation 70%. This necessitates a very stern “Caveat Emptor” (buyer beware) to any stock market investor.

The investment secret of the century

Although stocks, bonds and property all represent very high risk, few investors look for opportunities outside these markets. And it is for this reason that most investors have totally missed the best performing asset class in this century which is of course precious metals. Most investors don’t look at gold as an investment. Gold is regarded as a volatile commodity and does not appear in the average investment portfolio. Less than 0.5% of world financial assets are invested in gold today. This extremely low level of gold investment shows that very few people understand gold and even fewer look at the performance of gold. Most investors don’t have a clue how gold has performed in the 2000s. If they did know, they would realise that they have missed the best investment in the last 16 years by a very big margin.

The table below shows how gold has done in dollars and pounds compared to the S&P and the FTSE-100.

This little blue and white table above is the secret of this century. Investors in the US would have made $262,000 more by investing in gold than in the S&P. In the UK, an investor would have made £448,000 more by investing in gold instead of the stock market. Very few Brits realise that by buying gold in 2,000 and never trading it they would have made 5.5X their money. The sad thing is that neither the Brits nor the Americans realise that they would make even more money in the next five years by holding gold and silver.

But the average person sadly never buys an unloved and undervalued investment. He waits until the price has gone up substantially and it becomes headline news.

I have shown above what has happened to two major stock markets in relation to gold in this century. But that is just an example. The pattern and gold’s outperformance is consistent in virtually all stock markets in the world.

Stocks to lose 95% against gold

These incremental returns by investing in gold are the secrets of this century. Only a very infinitesimal percentage of investors are aware of this. But even fewer investors are aware of what will happen in the next few years. Gold will continue to outperform stock markets worldwide by an even bigger percentage. As the chart below shows, the Dow has lost hugely against gold in this century. But that is just the beginning. The current correction up of the Gold/Dow Jones ratio has probably finished. This correction is very similar to the one in the mid-1970s. Next target should be sub 1 where it was in 1980. A 1 for 1 Dow vs Gold could be at 10,000 Dow and $10,000 gold or with hyperinflation they could both be at 100,000. At whatever level they meet, it means that the Dow will have fallen by at least 95% against gold. Very few people can envisage such a fall today but it would not be the first time in history.

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7 comments to The Investment Secret Of The 2000s And It Has But Started

  • Craig Escaped Detroit

    Don’t you wish that every “stock market” analysis, doing all those charts and comparisons, ROI, dividends, etc, would REDUCE all those “gains” by the REAL rate of “shopping cart” inflation?

    The honest, true rate of inflation, has been about 10% for a long, long time. The “fiat” currencies losing purchasing power is never calculated honestly.

    So, if the stock market returns, with dividends, is about 10%, then it might, just possibly, maybe, be keeping up with inflation (if you picked the good picks)…but… (there’s always a “but”), if you made a 10% ROI, the IRS will say you made “income” and put a 20-30% “tax” on that income.

    So the “fairy tale” idea of a 10% “return” just got reduced down to 7%… which means you’ve just fallen behind the inflation rate, by about 1/3.

    And, the “market’s 10% ROI”, is calculated on markets where everything is manipulated and bookkeeping is dishonest, etc. So when the SHTF, and the ice-cream falls off of the cone, markets will crash, paper investments and paper money of every category will crash, real estate prices will crash, etc etc…….. and guess what? Gold & silver will do the proverbial “Moon Shot”.

    I don’t see how we can escape the turmoil of a “Venezeula situation” right here in North America. (And the same crap in Europe, Japan, Australia, and just about every other nation on earth.)

    I’m glad that the spring PLANTING season is just around the corner. We may not crash this year, but if we do crash, it would be very wise to have those gardens going at full speed when the crash arrives.

    • JMiller


      Do not forget to reduced the return of gold also by the rate of inflation. The purchasing power of gold is also reduced just like it is with fiat currencies.

    • Ed_B


      “Don’t you wish that every “stock market” analysis, doing all those charts and comparisons, ROI, dividends, etc, would REDUCE all those “gains” by the REAL rate of “shopping cart” inflation?”

      Yes, I do. A dose of honesty goes a long way with me… probably because it is so rare. Problem with this is that there is no “shopping cart” inflation standard, so bringing this up WILL bring in all manner of different views on what it should be but isn’t.

      As to stocks, investing in them has resulted in LOTS of people making LOTS of money. Those who have not continue to complain about the stock market. Most of them are not participants, though, so who cares? It would be like listening to those who own no PMs but complain about them, would it not?

      Fortunately, investing in various assets means that an investor can own more than one type of asset. There is nothing preventing us from owning stocks, bonds, real estate, commodities, or cash and cash equivalents. PMs are part of the commodities portion of this kind of diversified investing. Investing is not an either or situation… at least for those of us who make money via investing.

      This was my goal when planning for retirement… to acquire enough money that it could work hard and I would not need to. 🙂

      Not that I consider my PMs stack as an investment. It’s more of a store of value, inflation hedge, and financial insurance.

  • JMiller

    I like how people such as Egon von Greyerz cherry pick start dates and leave out dividends to make gold returns look much more better than stocks than they really are.

  • AgShaman

    Herd animals are very predictable when they are controlled. This will be just like the Weimar Republic and it’s peoples….

    Told to fuel a casino designed to complete their destruction on an incremental time table. It will be dangerously painful to watch the suckers get fleeced.

  • glitter 1

    Look at this chart,scroll down and see which asset leads since 1999 between the S&P,S&P Bonds and Gold.The facts are the facts,a picture equals a thousand words.You won’t see/hear this coming from CMBC,Bloomberg or MSNBC.

    What we’ve been experiencing for the last 4-5 years is just a blip/interlude on the historical time line.

    • JMiller

      glitter 1,

      While a picture may equal a thousand words, that picture (chart) on KWN is not accurate since the SP500 went up 20% in 1999 but that chart shows it going down in 1999. Plus the SP 500 Bond Index only began in 2015 so how can they have returns for it going back to 1999?

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