Gold News

How I Became a Gold Bug

And how it became a 20-year mistake...
 
HARDLY a day goes by that we don't thank our lucky stars, writes Bill Bonner in his Diary of a Rogue Economist.
 
We were blessed, you see, by misfortune.
 
As a child, we had no money. We couldn't lose the family fortune; we didn't have one to lose!
 
Which turned out to be a good thing. For if we had had any money, we would have lost it in the Great Bear Market in Gold of 1980 to 1998.
 
President Nixon finally severed the Dollar's connection to gold on August 15, 1971. We'd read enough history to know what that meant. Soon, we would be pushing wheelbarrows full of $100 bills to the liquor store to buy a six-pack.
 
How to protect yourself from the inevitable hyperinflation?
 
Simple: Buy gold.
 
That is how we became a "gold bug".
 
Then the worst possible thing happened: Gold went up. From $41 an ounce in 1971, the yellow metal soared to over $800 an ounce by 1980.
 
We were right! We were smart! We went "all in" on gold...and waited to be rich.
 
Fortunately, our luck changed before we got far. Misfortune smiled on us...setting us at odds with an 18-year secular bear market in gold.
 
Do you know what that is like, dear reader?
 
Every day...every month...every year...losing money...mocked by the market gods...dissed by family and neighbors.
 
Every day proved even more emphatically than the day before that we didn't know what the hell we were doing. Every day, at the sound of the closing bell, Mr. Market pronounced his solemn judgment: We were idiots.
 
For 18 years we endured this punishment. And thank God we did. Because now we know how easy it is to be wrong.
 
You try to make out what is going on. But you see only shadows and hear only echoes. Like a ghost haunting an old house, you will feel a chill breeze brush your face.... you will see things appear in strange places and wonder how they got there. But you will never know how this spectral world works, not as long as you cling onto your mortal coil...
 
As we clung to our losing positions in gold, the smart money went into stocks. Perhaps it understood that we were in a huge credit expansion that would take stocks up to 20 times their value in 1971.
 
From 874 in 1971 to 15,400 yesterday. Wow!
 
But wait. What if you had just stuck with gold?
 
Let's see...from $41 to $1250 an ounce. Holy smokes. That's 30 times your money!
 
Maybe our "crackpot" insight was right all along. And maybe gold and emerging markets will turn out to be stellar investments after all.

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals