The War on Cash Hates Gold: "Experts" Forget Gold Has Outperformed Stocks For 40+ Years

Phoenix Capital Research's picture

Warren Buffett once noted, Gold doesn’t do anything “but look at you.” It doesn’t pay a dividend or produce cash flow.

 

As someone who’s devoted his life to increasing his wealth, Buffett should know better than to say this because the fact of the matter is that Gold has dramatically outperformed the stock market for the better part of 40 years.

 

I say 40 years because there is no point comparing Gold to stocks during periods in which Gold was pegged to world currencies. Most of the analysis I see comparing the benefits of owning Gold to stocks goes back to the early 20th century.

 

However Gold was pegged to global currencies up until 1967. Stocks weren’t. Comparing the two during this time period is just bad analysis.

 

Indeed, once the Gold peg officially ended with France dropping it in 1967, the precious metal has outperformed both the Dow and the S&P 500 by a massive margin.

 

See for yourself… the below chart is in normalized terms courtesy of Bill King’s The King Report.

 

 

According to King, Gold has risen 37.43 fold since 1967. That is more than twice the performance of the Dow over the same time period (18.45 fold). So much for the claim that stocks are a better investment than Gold long-term.

 

Indeed, once Gold was no longer pegged to world currencies there was only a single period in which stocks outperformed the precious metal. That period was from 1997-2000 during the height of the Tech Bubble (the single biggest stock market bubble in over 100 years).

 

In simple terms, as a long-term investment, Gold has been better than stocks.

 

Talking negatively about Gold is just one of the means the elites have of “trashing cash” or physical money that can be kept outside of the banks.

 

You see, any form of capital that can be kept outside of the financial system is a major problem for the banks. The financial system thrives on the use of digital currency in the form of loans that can be used as collateral on derivatives trades.

 

Consider money market funds.

 

A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).

 

This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.

 

To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.

 

When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.

 

As a result of this, virtually every monetary action taken by the Fed since this time has been devoted to forcing investors away from cash and into risk assets. The most obvious move was to cut interest rates to 0.25%, rendering the return on cash to almost nothing.

 

This is just the start of a much larger strategy of declaring War on Cash.  The goal is to stop people from being able to move their money into physical cash and to keep their wealth in the financial system at all costs.

 

We've uncovered a secret document outlining how the Fed plans to incinerate savings. In it, the Fed detailed three policies it would impose during a major financial crisis. They were:

 

1)   Cut interest rates to zero (check)

 

2)   Launch QE (check)

 

3)   Impose a carry tax on physical cash or ban it outright (coming soon).

 

We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed's sinister plan in our Special Report

Survive the Fed's War on Cash.

 

We are making just 100 copies available for FREE the general public.

 

To pick up a copy…

 

Click Here Now!!!

 

Best Regards

 

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

For more investment insights, swing by our FREE e-letter: www.gainspainscapital.com

 

 

 

 

 

 

 

 

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ramgold2206's picture

It still frustrates me that people choose one vehicle over another in their quest to become wealthy/stay wealthy. Gold bugs beating paper bugs etc... Gold and PM's, stocks, fiat, bonds etc are all just tools to acquire/maintain/hide/show wealth .. you dont use a hammer to cut some wood...same principle here. You use whatever tool is necessary for the job in hand. so if you have a stack of fiat you want to protect against inflation with little risk, you might use gold, if you want high returns, then emerging stock etc... we are not in competition with anyone and you dont stand in one asset class to the exclusion of the other..

I sell gold and I'm a big gold bug and I promote gold ownership.. but I also own real estate, and paper. I used dividends to buy gold, I used gold sales commissions to pay down paper debt.. and guess what... its working for me..the anti competition police haven't arrested me yet.

 

they are all just means to an end...

 

www.teamramgold.com/about-us if you want to join me in karatbars

Jungle Jim's picture

When is the big Shemitah thing going to come riding in on a pale horse to save the day like Mighty Mouse? Tick-tock ...

PoasterToaster's picture
PoasterToaster (not verified) Sep 6, 2015 3:46 PM

Remember last week when all the retail investors couldn't complete their trades at the price they put in with their brokers, and now they are wiped out yet again?

Who could be a paper bug these days?

moneybots's picture

"According to King, Gold has risen 37.43 fold since 1967. That is more than twice the performance of the Dow over the same time period (18.45 fold). So much for the claim that stocks are a better investment than Gold long-term."

 

I notice that the S&P was above the price of gold from 1997 to 2007.  What happens when the next gold bubble bursts?

Duck's picture

As the article say, gold doesn't pay a dividend but stocks do.  Include reinvested dividends and dow is up over 90 TIMES in 1967-2015.

DUMB. dumb. Dumb. Gold bugs.

lordbyroniv's picture

all i know is,..that this chart belies that in 2008,....

 

buying stocks would be a better move than buying gold.

 

 

Tinky's picture

Should you ever resort to farming, I'd recommend growing cherries, as you're already good at picking them.

DaNuts's picture

I think Mr. King forgot to include dividend re-investment, less fees and taxes of course.

GotNuttin'todo's picture

Correct.

And even without dividends - a little backchecking:

DJIA, 1975 -2015 went from 900 to 16,000 = 1,600%

Gold, 1975-2015 went from 160/oz to $1150/oz. = 600%

Even if you take golds high of $1,925 in 2011 you get an increase of 1,100% (from an average of $160/oz. in 1975).

Make gold part of a balanced portfolio, and hope you never have to resort to using it to survive.

PoasterToaster's picture
PoasterToaster (not verified) GotNuttin'todo Sep 6, 2015 3:44 PM

What happens when they rake in your chips and you have nothing, as has happened to "retail investors" 3 times in the last couple decades?

Stock market is a fool's play.

Sek's picture

Or the value of fiat deflated respectively. At least it sits there when the rest gets clubbed.

Bub Ba's picture

Gold just sitting thre? Looks to me like gold is on a downhill slide...

Prober's picture
Prober (not verified) Sep 6, 2015 10:58 AM

More "you must buy gold" hype in the endless stream from the gold peddlers.

Gold has been the biggest scam since the Lehman crash.

Things that will NEVER be:

1. gold as an official currency - it will ALWAYS be just a commodity

2. any gold-back fiat currency, ESPECIALLY no fiat currency REDEEMABLE in gold

If gold was really

o so intrinsically and persistently valuable in spite of everything else going on

o so impervious to the inevitable immanent total collapse that the gold peddlers are always predicting

o so essential as the saviour substance

Then

Why are the gold peddlers selling it to get YOUR fiat instead of keeping it for themselves  ???????

raidh0's picture

Why are the gold peddlers selling it to get YOUR fiat instead of keeping it for themselves  ???????

Because they collect a premium on each sale that helps them realize a profit for their owners and make payroll for their employees. One of the things that the owners do, day after day, week after week, month after year after decade after century, is constantly order more gold and silver inventory.

You seem to model precious metal dealers as people who have large stocks of gold and silver that they want to be rid of, selling it off until it is gone so they can close up shop and move to Florida with their hard-won Fed scrip. Of course, this would be a grotesque misunderstanding of the PM dealing business. APMEX thinks gold is valuable enough to use it as a security deposit, something they would not do if they expected it to be worth significantly less upon its return. JM Bullion recently invested in a new, larger order fulfillment center.

These are not the actions of people who are cashing out of PMs. These are the actions of people investing in a medium-term expansion of the market for PMs. Ultimately, they may turn out to be wrong and you may be right about gold and silver crashing to a price floor supported only by industrial demand. But certainly you should not point to PM dealers as evidence of this, for there is no refuge for your argument in their business activites.

83_vf_1100_c's picture

'Why are the gold peddlers selling it'?

  I am a biker. I used to do it for transportation/fun/stress relief. I retired early and decided I needed more fiat. It has worked out well, I work my own pace, pick up fiat doing something I enjoy, get to meet and correspond with like minded individuals. Maybe these guys are just doing what they do to make a living at something they enjoyed as a hobby/investment. As a side benefit they get lower pricing on the AU/AG they keep. Make an easy profit off what they resell, as they should. Pretty sweet gig if you ask me. 

  Yes, I am certain many are capitalist scumbags making a buck with no love for the shiny. Caveat Emptor and do your research.

overqualified's picture

so how do you earn fiat being a biker?

Bunghole's picture

Those bike seats can be tough on your ass.

Ass massage service?

SSRI Junkie's picture

pm dealers are no different then stock brokers. they are in it for the vig

RaceToTheBottom's picture

I get it, you don't like it as a currency.  Do you like it as a commodity?  Or do you like stocks?

Prober's picture

Ever since the central bankers joined the regime leaders in money madness, all investment assets have become more risky and much lower yielding.

I would not buy any equities, either individual or in any kind of fund.

I went to all cash after earning a once-in-an-era "lottery winning" on the capital gains provided by QE. I will be reinvesting in a self-sufficient highly productive farm, whose products I sell for profit, and treasuries.

Many of the gold wackos are always insisting that treasuries will lose value and many even claim that they will become worthless - pure idiotic stupidity and fantasy - and if treasuries did become worthless, the gold will not save you from starving in the total global collapse - in that case you will need a self-sufficient farm, weapons and lots of ammo, along with extensive survival skills.

btdt's picture

when I click on "Prober"

i get

"Access denied
You are not authorized to access this page. "

never see this before on ZH.

how / why do you do this Prober?

SSRI Junkie's picture

it's one of those special nsa accounts

Bub Ba's picture

Looks like Graham is getting his tits knocked of in gold; this article is bullshit.

aleph0's picture

Coins in Physical Gold .. or  
Plastic Casino Chips  

... take your choice.

The CB Cabal now wants the Perfect Casino. 
One where you can put your money in , but you'll never get it out again.

Funny Money's picture

What if you'd been re-investing dividends since 1967?  Yeah, talk about bad analysis.