Feb 2014: Finance in Focus

Posted on 7th February 2014 by admin in Finance in Focus


Well a lot has happened in the last month.  The Yen stopped depreciating and guess what the Nikkei lost about 2,000 points and it has seen Foreigners selling the most Japanese stocks last week since 2010 and before that since the credit crisis started to implode…

n 225 feb 2014









So what is next?  As said before whatever happens Japan is unlikely the place to be longer term due to the debt, demographic and political sinkhole that the “powers at be” have placed themselves into. Money invested outside Japan is likely to be more dependable than money invested inside Japan.

General corruption is causing places like Turkey, Thailand and the Ukraine to erupt into protests and riots. It will be interesting to see if these develop in to greater conflicts.  One question concerning the Ukraine is what will Russia do?  As they have been very quiet mainly due to the Sochi winter Olympics, I believe. Once this end (hopefully terror free) will President Putin is more perhaps much more forceful?  Bearing in mind about half of the Ukraine speaks Russian as the Eastern part of Ukraine was historically once Russia. We will have to wait and see what happens here.

Gold; stable but disappointing it has not been able to rise above $1,300 – my worry here is if we do not see a rise above it soon we may very well have to go back and test the lows once again …A month or two will give us the answer here. So far we have a double bottom at 1,140 and wait to see if that holds should gold dip lower.

The Dollar index has been flat but what this is really telling us is  base is being formed and the Dollar is about to show us strength.  The emerging markets are beginning to stress and this could cause more stress on the European banking system as they have over 3 Trillion loaned out to yes you guessed it, Emerging markets….if there is a European liquidity crunch like 2008 that will bring everything down (gold too) in the short term.  Just like in 2008-9 the dollar was the go to place.  One difference this time is the Yen is not so we should see much greater dollar strength going forward.

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Gold as stated earlier will find its bottom in 2014 and we believe it will rally to $3,000 or more in the next 5 years.

US markets — yes they too are falling but I believe they will stop, just have a look the S&P chart and note the channel it has popped out of unless the S&P falls below 1550 this is just a normal correction. We are watching for a sign to enter back into the Major US markets.

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Banner Japan 03 5724 5100

2014 what’s ahead?

Posted on 8th January 2014 by admin in Blog |Finance in Focus

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Our general view is Japan is likely to go higher as the currency weakens, however without any serious reform Japan will hit the wall and stagnate (unlikely the place to be longer term).  Europe will continue to experience deflation and more social unrest as the policies of government continue to drag the economy to its knees.  Emerging markets with will low debt will perform better than others. The US dollar is very oversold and is due for a rally (the world’s core economy has never seen hyperinflation in any period of history)  As interest rates rise this will bring on more fear of government and their ability to pay interest on Debt.  This is when you will see gold rally to new all time highs in the next 3~5 years.

I believe that gold will bottom in 2014. In a Fed tightening cycle, gold tends to go down. Financial players in this cycle have been impatient to kick gold down as hard as possible. They short gold producers first and then gold. The gold stocks are much bigger in value than gold market per se. Hence, the trading strategy of shorting gold stocks and then gold could be lucrative. As more and more people pursue the same trade, the gold is kicked down way beyond its fundamentals.

Gold demand is from emerging economies. The latter have been experiencing high inflation. The demand for gold has been strong despite the weak gold price in 2013. The current gold price is already below the production cost of some of the biggest mines in the world. I suspect that, in 2014, some mines may be shut. The reduction in supply will become a counterforce against the Fed’s tightening.

I want to repeat my long term bullish call on gold. Its price is likely to top US$ 3,000 in five years. The currency market instability and the likely global stagflation will strengthen gold demand for wealth preservation in emerging economies. As supply is unable to grow, the price has to rise to balance the market.

Overall there will be a move from Public to Private assets and this may very surprise everyone with the short term gains we will see in the USA markets, there will be corrections and one should buy when the markets have a downdraft, perhaps this first quarter.


A concise video on the gold price

Posted on 16th December 2013 by admin in Blog |Finance in Focus



Once again we see the Yen bouncing around 100….

Posted on 6th September 2013 by admin in Finance in Focus |Uncategorized

There is still a lot of complacency worldwide. For example, car sales have been outstanding and our guess has been that a surge of better economic reports would be part of the final surge in the stock markets.

In early July, things started to deteriorate as regions from Turkey to Brazil to China and Indonesia were “getting hit by a brutal combination of events, as economies slow, investors pull out cash, commodity prices tumble and protesters take to the streets”. That’s how the Wall Street Journal wrote it up on July 2nd.

The news reminded of early July 1997 when the “Asian Crisis” roiled the Thai baht. It denied establishment boasts that the problem could be “isolated”. After traveling around Asia, eventually it fetched up in New York in that fateful September when the corporate bond market suffered its worst month in a decade.

This time around, the “Asian” problem started in early-July and on August 29th Bloomberg reported “Stocks in Southeast Asia are tumbling at the fastest pace in 12 years relative to global equities”.

A chart of the Indonesian Stock Market


This has been accompanied by continued weakness in Emerging Market bonds (EMB), which makes sense. US Munis (MUB) also continue to decline and the Spanish Ten-Year yield is turning up. At the close it was up to 4.62%. Rising above 4.48% is a breakout. Lower-grade corporates (HYG and JNK) became oversold a couple of weeks ago and have rallied to resistance.

In Japan, the government has indebted itself to the tune of 230% of GDP… a total exceeding ONE QUADRILLION yen.

That’s a “1 with 15 zer000000000000000‘s after it.  1,000,000,000,000,000

And according to the Japanese government’s own figures, they spent a mind-boggling 24.3% of their entire national tax revenue just to pay interest on the debt last year!


Remember this adds a minimum 25 trillion more debt each year just on interest!  Not to mention the other (again at minimum) 30 trillion in deficit spending to keep the wheels on Japan. The net minimum increase in annual debt is about 55 Trillion! At least!

Slowly, somewhere between this untenable fiscal position and the radiation leak at Fukushima, a few Japanese people realized that their confidence in the system was misguided.

We are helping an increasing number Japanese residents send some funds offshore.

Why? If the government defaults on its debts or ignites a currency crisis (both likely scenarios given the raw numbers), then those folks will at least preserve a portion of their savings intact. But if nothing happens and Japan limps along, they won’t be worse off for having some cash in a strong, stable, well-capitalized offshore banking jurisdiction. Where their funds are allocated and separated from bank assets, with no liens or encumbrances.

For Japan, the smart people who see the writing on the wall just want to be prepared with a sensible solution. They’re taking action before anything financially disastrous happens.

So what can you do?

  • Open accounts in various jurisdictions and currencies.
  • Invest in some physical assets outside your home country.
  • Make sure gold / silver funds are fully backed by allocated bullion with no liens or encumbrances.

Don’t be complacent, be prepared.

US Investing with the World’s Original Hedge Fund

Posted on 31st July 2013 by admin in Blog |Finance in Focus

As an investor, do you worry about the QE-laced stock rally continuing, given the threat of QE withdrawal? And as an expatriate American investor, with restrictions on investing at home, are you wary of investing offshore, particularly with the real prospect of FATCA implementation?

A.W. Jones is a fund that addresses both dilemmas. It’s an onshore US fund with onshore US tax reporting that will accept US nationals who are resident abroad. And it’s equity long/short: positioned to benefit from up moves in the markets but with downside protection of, on average, 50 percent through shorts. The fund has returned close on 2,000 percent since its inception as a fund of funds in June 1984.

Additionally, there’s a non-US version for non-Americans.

The firm was founded by Alfred Winslow Jones in 1949 and is generally regarded as the world’s first hedge fund. It gradually evolved into one of the first fund of funds, which is its structure today. A.W. Jones has remained family controlled since inception (Portfolio Manager Robert L Burch, IV is Alfred Jones’ grandson) and has operated under the same proven long/short equity investment philosophy throughout its history.

Now in its seventh decade, the firm remains focused on achieving superior returns for its investors with the lower market risk inherent in the Jones-model strategy of hedged equity investments.

The fund is currently invested in 20 managers and has more than $330 million under management. It often invests early in new emerging managers and grows with them over time, so that at any point in time the portfolio consists of a mix of smaller, emerging managers and larger, more established ones.

The fund has allocations to Lone Pine, Viking, Pershing Square, Tiger Global, Bridger Capital (Swiftcurrent Fund), Greenlight, Samlyn, Wellington (Bay Pond) and others. With the likes of Lone Pine, Tiger Global, Pershing Square and Samlyn, A.W. Jones was a day-one investor. As a day-one or early investor, the fund often enjoys beneficial fee terms and continued access, even where the funds are closed to new investors.

Here’s a comparison with the S&P 500 index since June 1984, the fund’s inception in its current fund-of-funds structure:


A.W. Jones

Total performance 1985–2012



Bull performance  1987–1999



Bear performance 2000–2012




(Reasons for the choice of bull years: the last bull market started in 1982, agreed, but the number of completed bear years from 2000 on are 13 in total, so for a fair comparison, the last 13 years of the prior bull market have been chosen.)


What emerges from these statistics is that the downside protection does not hamper the fund’s capacity to make money. Not only has the fund trounced the indices outright, while offering downside protection and lower volatility, it has also outperformed by far in a decade and counting that has been essentially sideways.


Looking at the bad years—those years that can wreck an investor’s portfolio, as well as their nerve—we can see the diminution of risk:


A.W. Jones











The years 2002 and 2008 were not pleasant, but the damage was greatly ameliorated by the fund. As you can see from the chart, 2008 was not good, but it was considerably better in comparison. The 84.77 percent return between 2000 and 2012 shows a sheer outperformance of flat-lining indices.

An 11.2% compound annual return since inception as a fund of funds puts A.W. Jones among the top performing global long/short equity funds of funds. With its proven defensive capability, it limits your risk, without limiting your returns. And as it’s an onshore US entity, you won’t be stumped on how to file when tax season comes along.

For the non-US clone, of course, non-US investors are not required to file a US tax return on the investment.


Summer thoughts on the markets and gold

Posted on 24th July 2013 by admin in Blog |Finance in Focus

We see two possible economic scenarios that could unfold going forward.

Goldilocks Scenario 1: Good economic news continues to come in, the stock markets’ recent rally continues. Talk of a double-dip recession recedes, the U.S. economy begins to recover further. Even Europe starts to look better. Abenomics works and Japan starts to grow.

All looks great. The Federal Reserve’s efforts to save the U.S. economy and financial system succeed.

So what happens next under this, albeit the least likely, scenario? The banks start lending more money … credit flows through the pipelines … and the trillions of paper dollars the Federal Reserve has created begin to work their way through the system.  Normal credit creation fully resumes. So all the money created starts to be lent out and inflation begins to take hold in the USA and the rest of the world . . . Obviously, gold would soon bottom and start moving up again as it would be inflation and interest rate driven.  (Remember gold rose in the 70’s with rising rates)

Now consider …

Scenario 2 (most likely): More bad economic news starts to come in … the U.S. economy goes from OK to so-so and it becomes painfully clear that governments’ and central banks’ rescue efforts have yet to work.

In Europe and Japan economies slump further, and sovereign-debt defaults proceed across the globe.  The interesting thing here is money will very likely flow into the USA markets as fear comes across Europe and Japan.  Giving the illusion that the US is actually doing well — as it must be right, the US markets are going higher! You will see the US$ and gold rise at the same time. The US market will rise higher than many predict as it will be the last game in town.

The Fed and other central banks pump trillions more dollars into their economies. But to no avail, because it also becomes painfully clear to almost everyone that countries are BANKRUPT. And so are their central banks.

What happens under this scenario? All currencies dramatically lose purchasing power and the entire world plunges into a “greater” depression. The world’s monetary system is under huge pressure but, the sun still rises and life carries on.

Physical gold and gold shares will protect those who have them.

FYI another 3+ tonnes was removed Friday (19thJuly) from the Comex “eligible” bin. This time for HSBC’s eligible inventory. Total gold on the Comex is now down to 6.8 million ounces. Note that this is “reported” gold stocks, for which the CME now uses a disclaimer in reporting the numbers. The total amount of gold futures open interest is now 47 times more than the registered gold (available for delivery gold) on the Comex. Those who are savvy are buying a lot of gold and taking possession. You have to buy physical gold and  gold shares  and take possession of it or else you don’t own gold.The Bottom Line

The reason we have seen such a big sell off in gold:

  • that inflation expectations are currently in check due to China’s slowdown
  • at the same time the US’s industrial production is trending lower
  • Governments worldwide still have a massive debt overhang
  • deflationary forces are still acting on us


Medium to Long-term, with all the central banks printing full steam, gold will move higher. It is just a matter of time. So short term gold may still move lower, but in the medium to long-term we think you will see gold go a lot higher.  The real bull market in gold will only begin once we have passed the 1980 inflation adjusted high: our guess is this will start to happen in 2015~ 2018.

In either scenario gold will bottom soon (if not already) and head higher, for the simple reason that gold is insurance against a global economy that really has only two future scenarios right now, as laid out above.

Our advice would be to hold and continue buying gold and gold miners, as gold starts a path higher toward a minimum target of $2,300 an ounce, the inflation-adjusted high that would be equivalent to what $850 gold was in February 1980.

Investors all over the world are soon going to start loving gold, all over again. There will be shocks along the way:  we may not have seen the low in this cycle yet but, the downside is now at worst around $1,000 for gold while the upside is beyond $3,000.

Call us to discuss the differences in Gold ETFs and various mining shares and funds.

The benefit of wisdom

Posted on 19th June 2013 by admin in Blog |Finance in Focus

Starting early is so important especially in Financial planning.  So I wanted to share a story of one family who have done just that.

Their first child was born in 1995 and the parents took out a modest savings account putting away $250 a month — today the account is worth over just over $100,000 achieving only a 6.2% return.   Their daughter now has a great start and will have no university debt.

At the same time they also did this for themselves as one of the many things they added to over time, houses, shares and their business, always remembering to pay themselves first as their income grew.


Now that their daughter is 18 they sat down and explained the magic of compound interest and together decided to take out another savings plan jointly with their daughter. She would contribute 20% and the parents would contribute 80% to ensure that she would be financially fit and would soon see the benefit and magic of compound interest.  Together they will contribute a $1,000 a month.  So what could this become in 25 years when the daughter would be only 43 years old?

At a modest 6.2% it will be about $720,000.  If it achieved 10% it would become just about $1,300,000.

Remember this is just a $1,000 a month for 25 years, a total contribution of $300,000.  Started when their daughter was 18 and now that she is turning 44 she has options — you as a parent have the benefit of wisdom and this is a wonderful gift to pass on to your children. This also fits under the gift tax allowance here in Japan.

Talk to us at Banner and we can help make this happen.


Posted on 22nd May 2013 by admin in Finance in Focus

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Make time to watch this video it explains the things Banner has been telling you  . . .  As the BoJ prepares to thrill us with even more in its latest policy meeting (or not) and with Amari-san now jawboning JPY to some extent to try control the soon to be out-of-control chaos in JGBs, it is worth taking 20 minutes to comprehend just what all this extreme policy action means. The following brief presentation covers it all in a Kyle-Bass-ian facts-and-fallacies manner, Christine Hughes sums it all up perfectly, for Japan, “The Math Is Stacked Against Japan – It’s Not ‘If’, It’s When.”


As we have been saying if you have borrowed in Yen and don’t rush pay it back (yet) — take whatever cash you have and buy dollars and US blue chips, Energy, Agriculture and gold.  (wait on gold with large lump sum additions until the dollar takes off).

Why will the dollar will soar to new highs? First, Japan above and second, stop and look at Europe. The smart Europeans will move their cash to the USA before they can’t get out or go to Asia, maybe better. But the bottom line – it is the dollar that is becoming the ONLY game in town. Gold will be held back initially as DEFLATION continues my guess is 2014-5 gold will start take off again so my advice is to accumulate now on dips, even start a savings plan buying a set amount of gold and gold equities each month. Then ramp up on lows.

The banking crisis in Europe is worse that the US ever was. The US was a trading loss, Europe is a systemic failure that is more than $1 trillion in bad loans when the USA was $700 billion.



An efficient service with the best international foreign exchange rates.

Posted on 17th May 2013 by admin in Finance in Focus

Gold Is Over – Just Like in 1976

Posted on 6th March 2013 by admin in Blog |Finance in Focus

An excellent post from Jeff Clark at Casey research on gold and history.  We strongly agree and as stated earlier feel now is the time to accumulate gold as there will be a significant rise in prices going forward we see all-time highs broken in 2015 or earlier.

Gold Is Over – Just Like in 1976

By Jeff Clark, Senior Precious Metals Analyst

Goldman Sachs has lowered its gold price projections and says the metal is headed to $1,200. Credit Suisse and UBS are bearish. Citigroup says the gold bull market is over.

So I guess it’s time to pack it in, right?

Not so fast. As we’ve written before, these types of analysts have been consistently wrong about gold throughout this bull cycle. Another reason to disagree, however, is history; we’ve seen this movie before. In the middle of one of the greatest gold bull markets in modern history – the one that culminated in the 1980 peak – gold experienced a 20-month, one-way decline. Every time it seemed to stabilize, the bottom would fall out again. From December 30, 1974 to August 25, 1976, gold fell a whopping 47%.

1976 had to be a tough year for gold investors. The price had already been declining for a year – and it just kept on sinking. Since that’s similar to what we’re experiencing today, I wondered, What were the pundits were saying then? I wanted to find out.

I enlisted the help of two local librarians, along with my wife and son, to dig up some quotes from that year. It wasn’t easy, because publications weren’t in digital form yet, and electronic searches had limited success. But we did uncover some nuggets I thought you might find interesting.

The context for that year is that the IMF had three major gold auctions from June to September, dumping a lot of gold onto the market. Both the US and the Soviet Union were also selling gold at the time. It was no secret that the US was trying to remove gold from the monetary system; direct convertibility of the dollar to gold had ended on August 15, 1971.

The public statements below were all made in 1976. You’ll see that they aren’t all necessarily bearish, but I included a range to give a sense of what was happening at the time, especially regarding the mood of the gold market. I think you’ll agree that much of this sounds awfully darn familiar. I couldn’t resist making a few comments of my own, too.

To highlight the timing, I put the comments into a price chart, pinpointing when they were said relative to the market. Keep in mind as you read them that the gold price bottomed on August 25, and then began a three-and-a-half year, 721% climb…

(Click on image to enlarge)

[1] ”For the moment at least, the party seems to be over.” New York Times, March 26.

[2] ”Though happily out of the precious metal, Mr. Heim is no more bullish on the present state of the stock market than any of the unreconstructed gold bugs he’s had so much fun twitting of late. He’s urging his clients to put their money into Treasury bills.” New York Times, March 26.

Me: These comments remind me of those today who poke fun at gold investors. I wonder if Mr. Heim was still “twitting” a couple years later?

[3] ”‘It’s a seller’s market. No one is buying gold,’ a dealer in Zurich said.” New York Times, July 20.

Turns out this would’ve been an incredible buyer’s market – but only for those with the courage to buy more when gold dropped still lower before taking off again.

[4] ”Though the price recovered to $111 by week’s end, that is still a dismal figure for gold bugs, who not long ago were forecasting prices of $300 or more.” Time magazine, August 2.

The “gold bugs” were eventually right; gold hit $300 almost exactly three years later, a 170% rise.

[5] ”Meanwhile, the economic conditions that triggered the gold boom of 1973 through 1974, have largely disappeared. The dollar is steady, world inflation rates have come down, and the general panic set off by the oil crisis has abated. All those trends reduce the distrust of paper money that moves many speculators to put their funds in gold.” Time magazine, August 2.

This view ended up being shortsighted, as these conditions all reversed before the decade was over. Does this sound similar to pundits today claiming the reasons for buying gold have disappeared?

[6] “Our own predictions are that gold will go below $100, with some hesitation possible at the $100 level.” As stated by Mr. Heim in the August 19 New York Times.

Yes, this is the same gentleman as #2 above. I wonder how many of his clients were still with him a few years later?

[7] ”Currently, Mr. LaLoggia has this to say: ‘There is simply nothing in the economic picture today to cause a rush into gold. The technical damage caused by the decline is enormous and it cannot be erased quickly. Avoid gold and gold stocks.’” New York Times, August 19.

You can see that these comments were made literally within days of the bottom! Take note, technical analysts.

[8] ”‘Gold was an inflation hedge in the early 1970s,’ the Citibank letter says. ‘But money is now a gold-price hedge.’” New York Times, August 29.

Wow, were they kidding?! This reminds me of those dimwits journalists who said in 2011 to not invest in gold because it isn’t “backed by anything.”

[9] ”Private American purchases of gold, once this was legalized at the end of 1974, never materialized on a large scale. If the gold bugs have indeed been routed, special responsibilities fall on the victorious dollar.” New York Times, August 29.

The USD’s purchasing power has declined by 80% since this article declared the dollar “victorious.”

[10] ”Some experts, with good records in gold trading, declare it is still too early to buy bullion.”New York Times, September 12.

Too bad; they could’ve cleaned up.

[11] ”Wall Street’s biggest brokerage houses, after having scorned gold investments during the bargain days of the late 1960s and early 1970s, made a great display of arriving late at the party.” New York Times, September 12.

No comment necessary.

[12] ”He believes the price of bullion is headed below $100 an ounce. ‘Who wants to put money over there now?’” As stated by Lawrence Helm in the New York Times, September 12.

The price of gold had bottomed two weeks before, making the timing of this advice about the worst it could possibly be.

[13] Author Elliot Janeway, whose book jacket states, “Presidents listen to him,” was asked by a book reviewer about his preferred investments. He writes: “Then, gold and silver? He likes neither. In fact he writes: ‘Any argument against putting your trust in gold, and backing it up with money, goes double for silver: silver is fool’s gold.’” New York Times, November 21.

Mr. Janeway ate his words big-time: from the date of his comments to silver’s peak of $50 on January 21, 1980, silver rose 1,055%!

[14] ”Mr. Holt admits that ‘in 1974, intense speculation caused the gold price to get too far ahead of itself.’” New York Times, December 19.

So, anything sound familiar here? Yes, it was a brutal time for gold investors, but what’s obvious is that those who looked only at the price and ignored the fundamentals ended up eating their words and dispensing horrible advice. Investors who followed the “wisdom of the day” missed out on one of the greatest opportunities for profit in their lifetimes.

I was pleased to learn, though, that not all comments were negative in 1976. In fact, in the middle of the “great selloff,” there were those who remained stanchly bullish. These investors must’ve been viewed as outliers – they, much like some of us now, were the contrarians of the day.

Also from 1976…

  • “Many gold issues, in fact, are down 40 percent or      more from their highs. Investors who overstayed the market are apparently      making their disenchantment known. The current issue of the Lowe      Investment and Financial Letter says, ‘We are showing losses on our gold      mining share recommended list… but keep in mind that these shares are      for the long-term as investments.’” New York Times, March 26.Sounds like what you might read in an issue of BIG GOLD or      the International Speculator.
  • “The time to buy gold shares,” [James Dines]      declares, “is when there is blood in the streets.”New York Times,      September 12.If you glance at the chart above, Jim’s comments were made within two      weeks of the absolute low.
  • “We’re recommending to clients that they hold gold      and gold shares,” [C. Austin Barker, consulting economist] says.      “The low-production-cost mines in South Africa might be interesting      to buy for the longer term because I see further inflation      ahead.” New York      Times, September 12.Investors who listened to Mr. Barker ended up seeing massive gains in      their gold and gold equity holdings.
  • “The probability of runaway inflation by 1980 is      50%… In light of this, the only safe investments are gold, silver, and      Swiss francs,’” said the late Harry Browne on November 21 in      the New York Times.Browne’s Special Reports were edited by our own Terry Coxon for      23 years, along with all his books since 1974.
  • “In the longer run, [Jeffrey Nichols of Argus      Research] believes gold’s price trend ‘is much more likely to be upward      than downward.’” New      York Times, December 19.The “longer run” won.
  • “‘I think the intermediate outlook for gold is a      period of consolidation and a bit of dullness,’ says Mr. Werden. ‘However,      six or nine months from now, we could see renewed interest in gold.’”New York Times, December      19.He was right; within nine months gold had risen 13.5%.
  • “Mr. Holt offers some advice to investors who are      taking tax losses on their South African gold shares – some of which are      selling at just 30 to 35 percent of their peak prices in 1974. ‘If      leverage has worked against you on the way down,’ he reasons, ‘why not      take advantage of it on the way up?’” New York Times, December      19.Solid advice for investors today, too.
  • “What’s his [Thomas J. Holt] prediction for the      future price of gold? ‘A new high, reaching above $200 an ounce, within      the next couple years.’” New      York Times, December 19.His prediction was conservative; gold reached $200 nineteen months later,      by July 1978.

It’s clear that there were positive “voices in the wilderness” during that big correction, and as we all know, those who listened profited mightily.

There were other interesting tidbits, too. For example, gold stocks had been performing so poorly for so long that some advisors suggested a strategy we also hear today…

  • “It is probably too late to sell gold shares, the      stock market’s worst-acting group these days, except for one possible      strategy: selling to take a tax loss and switching into a comparable gold      security to retain a position in the group.” New York Times,      September 12.

Even back then, it was widely known that gold often bucks the trend of the broader markets…

  • “You might put a small portion of your money into      gold shares and pray like the dickens that you lose half of it. In that      way, chances are that if gold shares go down, the rest of your stock      portfolio will go up.” New      York Times, September 12.

Gold miners provided critical revenue and jobs, just like today. From the August 2 issue of Timemagazine…

  • “South Africa, the world’s largest gold producer,      is being hurt the most. The price drop will cost it at least $200 million      in potential export earnings this year.”
  • “Layoffs at the gold mines would make it even      worse – the joblessness could intensify South Africa’s explosive racial      unrest.”
  • The Soviet Union, the world’s second-largest gold      producer, is feeling the price drop, too. The Soviets depend on gold sales      to get hard currency needed to buy US grain and other imports.”

Gold was also used as collateral…

  • “The international gold market was also roiled      yesterday by a report by the Commodity News Service that Iran was      negotiating to lend South Africa roughly $600 million, predicated on a      collateral of 6.25 million ounces of gold.”

And just like today, there were plenty of stupid misguided US politicians: From the New York Timeson August 27:

  • “The drop in gold bullion prices from $126, which      was the average at the first IMF auction June 2, provoked the Swiss      National Bank to attack Washington’s attitude toward the metal as      ‘childish.’ Aside from the estimated $4.8 billion of gold reserves held by      Switzerland, bankers there advocate some role for the metal as a form of      discipline against unrestricted printing of paper money.”

That last statement from the Swiss bankers is hauntingly just as true today.

Last, you know how the government in India has been tinkering with the precious-metals market in its country? And how it’s led to smuggling? From the New York Times on August 27:

  • “India announced it was resuming its ban on the      export of silver. India is believed to have the largest silver hoard and      the government there freed exports earlier this year as a means of earning      taxes levied on overseas sales. However, most silver dealers minimized the      significance of India’s move yesterday. As one dealer explained,      ‘Smuggling silver out of India is so ingrained there that the ban will      have no effect on the flow. It never has. Indian silver will continue to      ebb and flow into the world market according to price.’”

So what’s the difference in mood today vs. the mid-1970s? Nothing! This shows that the same concerns, fears, and confusion we have now existed at a similar point in the gold market then. There were also those who saw the big picture and stayed vigilant. Virtually every comment made in 1976 could apply to today. Keep in mind that most of the statements above are from two publications only; there are undoubtedly many more similar comments from that year.

The obvious lesson here is that patience won out in the end. It took the gold price three years and seven months to return to its December 1974 high. It only took another 18 months to soar to $850. Today, that would be the equivalent of gold falling until June this year, and not returning to its $1,921 high until April, 2015. It would also mean we climb to $6,227 and get there in November, 2016. Could you wait that long for a fourfold return?

This review of history gives us the confidence to know that our gold investments are on the right track. I hope you’ll join me and everyone else at Casey Research in accepting this message from history and staying the course.

So, what will your kids or grandkids read in a few decades?

  • “Buy gold. It’s going a lot higher.” Jeff      Clark, Casey Research, March 4, 2013.