“You can’t keep a good man down and you can’t destroy gold.”
The wealthy succeed by following economic fundamentals and out-maneuvering the herd. With all financial catastrophes, the majority of investors are caught in the tidal wave of losses. Just look at the sub-prime mortgage crisis and default of Greece, experienced investors were warning the masses before the fall occurred.
Since the dawn of time, investors have been placing their money in gold because they understand that it can weather any storm. The successful make their money “before” the collapse. Call it “insider information” or “wisdom” – the successful always anticipate events based on economic fundamentals.
“Gold is a Safe Haven During Economic Troubles”
The economic depression of 2008 has continued into 2012. The wise investor realizes that the average media pundit is no better than a snake-oil salesman trying to sell his favorite stock. Wealthy people ignore sales pitches and buy financial investments with strong fundamentals. Eric Sprott of Sprott Asset Management has put his money where his mouth is and holds 97% of his fund’s holdings in gold.
Why Gold?
As Mr. Sprott clearly articulates, very little has improved in the world’s economic position between 2008 and 2012. In 2008, Lehman Brothers collapsed under sub-prime mortgages. The stock market declined. The response of bankers and politicians was to “kick the can down the road.”
The Federal Reserve simply sold the “toxic assets,” which destroyed Lehman Brothers, to another bank. Just like a disease, these toxic assets will destroy the bank that acquired them. It is like a doctor allowing a contagious patient to give his ailment to someone else.
In 2012, the remaining banks are sick – J.P. Morgan lost $2 billion. That is more than the Gross Domestic Product (GDP) of Brazil. Mr. Sprott notes that the entire Anglo-American banking system is over-leveraged. Governments are printing money, consumers are spending less, inflation is increasing, economic activity is down and banks are failing. During these stressful economic times, people buy gold.
“Nations Buying Gold”
Nations, like Germany, Switzerland, Venezuela, China and India, are buying gold. As consumer in these countries make more money they will purchase more gold. The fiat dollar currency is losing its buying power. Mr. Sprott knows that gold and silver will increase due to solid economic fundamentals.