Gold and Silver are often equated with anniversaries but the current fortnight has, and will hold, an usually high number of anniversaries; some tragic, some celebratory, and all thought-provoking. Many are financial and economic, some are also historical, whilst others are cyclical.
Last Friday marked the 14th anniversary and memorial of that terrible day on September 11th. Yesterday was the seven year anniversary of the Lehman brothers collapse, beginning the Stock Market Crash of 2008 and from which the world’s economies are still trying to normalise. As Caroline Peers, our C.E.O. mentioned, last Wednesday was the day Her Majesty Queen Elizabeth II became our longest reigning monarch. And looking forward, tomorrow is the day the U.S. Federal Reserve may raise interest rates for the first time in nine years.
It is a basic tenet of Gold and Silver that they react to sudden change and, sadly but historically, to sudden acts of crisis: “During times of turmoil, commodities tend to act as safe havens for investors. These investors view certain commodities, such as gold and silver, as reliable stores of value, so they flock to these assets when times aren’t good. When currencies slide, nations go to war, or global pandemics break out, you can rely on gold, silver, and other commodities to provide you with financial safety. For example, after the horrible acts of September 11, 2001, the price of gold jumped as investors sought safety in the metal. You can see a clear spike in the price of gold right after September 11. (Why Commodities Do Well in Times of Economic Uncertainty)
It is therefore “a good idea to have part of your portfolio in gold and other precious metals so that you can protect your assets during times of turmoil.”
The anniversary, which although very different in nature to 9/11, slowly destroyed a great deal of many families livelihoods and spread around the globe, was the collapse of the Lehman Brothers Bank. That event happened seven years ago yesterday. Britain’s Northern Rock would follow. We remember the scenes of retired couples and British savers queuing around the block to access a life time of prudent savings, disappearing before their eyes.
And looking forward, by the end of this week, the U.S. “may have raised interest rates for the first time since June 2006, marking the moment when a version of financial normality is restored. Federal Reserve policymakers meet on Thursday for the most keenly anticipated financial event of the year. Should the FED – finally – take the plunge and raise rates? The answer is yes. Deutsche Bank’s Chief economist David Folkerts-Landau puts it well: There’s never a good time to go to the dentist, but you know delaying it can have consequences.” (THE GUARDIAN) One of those consequences would be the perception that US policymakers can be blown off course by a modest upset in financial markets. The slowdown in China has meant stock markets have had a rough couple of months. Now, although we are across the pond in Great Britain, here is our dilemma. We know that one market affects another. We only have to look at how China’s market affected the world stock market this last month to know that it is important to watch what happens across the pond this week. “A US rate hike now could turn China-related tensions in emerging markets into a full-blown crisis. That’s clearly a worry but, again, there are risks in the Fed standing still if inaction just creates another dollar-borrowing binge outside the U.S.” (Nils Pratley)
Although the collapse of Lehman Brothers was such a cataclysmic event, in resultant economic terms, its anniversary is the one that has been kept very, very quiet. I think that is because focusing on our inability to predict these financial shocks is by nature uncomfortable. I found the sheer logic and facts of the following article this week eye-opening: Market Watch: “Ignore this stock market anniversary at your peril; Financial disasters like Lehman Brothers’ collapse can occur at any time by Mark Hulbert:
“The most crucial investment lesson to draw from Lehman Brothers’ bankruptcy — which shocked the market seven years ago — is that you can’t completely immunize your portfolio from disasters. You instead need to learn how to endure them. No wonder that Wall Street is choosing to commemorate the event by ignoring it. They would much rather have to you think that a good financial adviser can sidestep financial earthquakes like Lehman Brothers’ collapse. Don’t believe it.Of the nearly 200 investment advisers whose performance is tracked by the Hulbert Financial Digest, just 5% of them made money in September 2008. So only one out of 20 can even begin to lay claim to have anticipated what was about to happen in that fateful month. But even that’s doubtful. These 5% who made money that month have, on the whole, been mediocre performers since then. This creates the strong suspicion that luck played a big role in these advisers’ making money in September 2008.In fact, as you can see from the accompanying table, the market timers who had the best track records going into September 2008 had far higher average equity exposure levels than those with the worst records. In other words, your best bets that month would have been those with the worst track records up until that point. Good luck with that if you seriously want to pick your advisers that way. The proper investment lesson to draw from all this? Disasters like Lehman Brothers’ collapse can occur at any time, without warning, and when they do the market will plummet. While these cataclysms fortunately are not frequent, they are nevertheless inevitable. If such drops would be intolerable to you, then you should reduce your equity exposure now to whatever your comfort level would be during such a disaster. The worst thing to do is to wait until disaster strikes and sell into the panic that immediately ensues in its wake. As I discussed last week, that far more often than not gets you out at the worst possible prices.”
I would, therefore, like to bring your attention to a chart, based on fact, of the performance of Gold since 1947 to the last quarter of 2014. This chart simply compares the value of Gold vs. the Consumer Price Index, i.e.: how much a basket of goods will cost you and I over time:
The graph simply speaks for itself.
So, if the worst thing to do is to wait until disaster strikes, can we see disaster coming? It really all depends on how much we are watching the signs. One commentator put it very well, I felt, in concluding that many “Financial Seismographs signal a Monetary Earthquake.” If you have time, the entire article is worth a read. In the middle of the article he drops a telling line, “For the pundits that are cheerfully praising the highs in the stock market, it should be noted that, when put into perspective, stocks remain well below gold’s quadruple rise since 1999” and backs it up with hard facts in the form of chart showing Gold’s return vs. the S&P500 from December 2009 (so just before 9/11) to 1st May 2015.:
But, how is all of this affecting us in the U.K.? Apart from those directly affected by the recent stock market falls and bounces, is it really noticeable to you and I? A few weeks ago, in our blog entitled, “How to Handle Physical Gold and Silver in a Stock Market Crash” we mentioned keeping an eye on oil prices, as a signal for increasing geo-political tensions in the oil producing nations in the gulf and middle east. But this is directly affecting us in the U.K. in another way. The continuing fall of crude oil is causing “no-flation” pressure on the U.K. economy: “Inflation edged down to zero in August amid a renewed fall in fuel costs. Analysts agreed. “Looking ahead, inflation could yet drop back into negative territory before the end of the year.” (The Telegraph, 15 September 2015) So, don’t expect a greater return on your savings in the near future. If that is the case, have you considered putting some of your savings into Physical Gold and Silver at this time? It is very easy to sell back, or you can invest in a few small coins or bars for the family as the ultimate Christmas present?
And if our inflation drops into negative territory, and we don’t rise interest rates, while the U.S. does, what can we expect then?! I found this quote to be a little like listening to the characters down the rabbit hole in Alice in Wonderland: “I’m growing more sympathetic to those arguing that the Fed has now become a source of market instability, and skipping September [to rise rates] will raise the risk of more turmoil all the way through 2016,” said Erik Nielsen, global chief economist at UniCredit in London. “Only in extreme circumstances should the Fed react to markets. Anything else suggests that they have lost control.” (Reuters, 14 September 2015).
This is Alice in Wonderland reasoning, because isn’t it clear that the Federal Reserve and the fiat currency experiment, since its decoupling from the Gold standard, has always been a method towards financial chaos?
I loved the following graphic this week. It shows What the world would look like if countries were the size of their stock markets. I also didn’t know that Russia has a bigger surface area than Pluto! But although for a moment I felt proud of our feisty little island, I also then realised that this means our economy has a larger exposure to the health of the other global stock market players. So it really is worth keeping a watchful eye of international markets and political events that affect those markets. Also, this article in the Business Insider was telling this week on the stock market’s own confidence in itself, or lack thereof: “Now, the idea that 1) the stock market is currently in a bubble and 2) that this bubble is being inflated in part by — or in spite of — our fears is not a new theme for [Shiller, the author]….in multiple interviews this year Shiller has said there is a “bubble element” to what we’re seeing in the stock market while reiterating his call that this stock market rally is… more or less devoid of optimism about the future.” After researching with those who work in the stock market itself, Shilller found that confidence in the stock market is actually as low as it was in 2001. That, incidentally, is the 14th anniversary of the crash of 2001, seven years before the crash of 2008!
Last October’s Surprise Market Shock:
This week saw the beginnings of the “Christmas isle” in my local supermarket and I must admit I spent a couple of minutes mulling over forthcoming stollen cake and chocolate treats. But last year a bombshell hit the Christmas market, the anniversary of which is in just a few weeks time! The bombshell was the shock announcement that Cadbury’s were discontinuing the sale of gold chocolate coins, the traditional stocking filer! Headlines swept the mainstream tabloids and broadsheets, as thousands flocked to buy the cheaper available alternatives: “Poundland chiefs even referred to the chocolate gold rush as ‘mass hysteria'” while “Twitter users were horrified and begged Cadbury’s new and controversial American bosses to reconsider.”
Now, in all seriousness, there is a moment from which, in any real economic crash, one cannot get hold of the safe havens of physical Gold and Silver coins, and bars. So, we at Bleyer suggest, why not save up a little extra and buy the real deal this Christmas?! Silver coins are currently on “sale” in comparison to their historic value.
The timeless classic, the American 1oz Silver Eagle coin is currently selling from just £15.44.
And if you are in the financial position to purchase a fair amount of Gold and Silver we would suggest, rather than buying a pair of gold plated shoe laces for £12,000, that you purchase a stunning 500g Gold Bar, while giving yourself a few hundred pounds change. It is far more practical and much, much easier to liquidate the return on your investment!
Still in the reach of a quite breath-taking stocking filler, or a personal present for your loved ones, would be a choice of our smaller Gold bars. A 1g bar of Gold is currently selling from £35.68. Each come in their own individually sealed packet, mounted on card, for a head-turning and unique gift.
Of course, between now and Christmas, we also recommend frequently visiting our Special Offers page, for Gold and Silver bars and coins on reduced prices.
If you would like to learn more, before the Christmas rush, please do call Bleyer Bullion on 01769 618618 and let one of our professional, friendly team help you learn more of our products.
And while you are doing your Christmas shopping, you will also be increasing the chance of saving yourself some V.A.T. and your family members some Capital Gains Tax. To find out which products offer which Tax advantages, please call us on 01769 618618.
But to conclude, and in all seriousness again, the themes of this week’s anniversaries are interwoven beautifully is this summing up, via The Daily Mail financial section yesterday:
“Willem Buiter, a former Bank of England official and now chief economist at Citigroup, says there is a 55 per cent chance of another global slump in the coming years. Vince Cable, the former Liberal Democrat business secretary in the last Coalition government, insists the world is not heading for ‘a new Lehman moment’. But he warns of ‘unknown unknowns’, adding the global economy is ‘very fragile’ and the eurozone ‘is in a terrible mess’. Lord Turner knows what it is like to be taken by surprise. He was appointed chairman of the now defunct Financial Services Authority, a week after the collapse of Lehman. ‘We faced the biggest financial crisis in 80 years,’ he writes in his new book, Between Debt And The Devil. ‘Seven days before I started, I had had no idea we were on the verge of disaster. Turner warns that ‘excessive’ debt could cause the next crisis. Of course, he was not alone in being taken by surprise by the last crash. The Queen famously asked in spring 2009: ‘Why did no one see this coming?’ The answer, from the British Academy a few months later, was that there had been ‘a failure of the collective imagination of many bright people’. Seven years on, the storm clouds are gathering once again, as the world struggles to bounce back from the collapse of Lehman and its painful aftermath.” (The Gathering Storm by Hugo Duncan, the Daily Mail)
We at Bleyer hope our blogs and news articles spur you, our clients and readers, to prepare for the worst while enjoying everyday life with your family, friends and loved ones. If you would like to discuss storage for your Gold and Silver, or buy a safe to store your own, or to simply take advantage of the excellent prices for physical Gold and Silver, contact us on 01769 618618 or email: firstname.lastname@example.org