01 December 2011

The Y-T-D Performance of Various Assets: Gold, Silver, US Stocks, Bonds, and AAPL

Doing Nothing Is Still Making a Choice
And the winner is gold, at least for now with one month left in the year.

I included AAPL because it is the poster child for the stock rally and is often touted by shills for Wall Street and the hedge funds as a superior investment amongst stocks on chat boards and 'news programs.'

It should be noted that recently the US 30 Year Bond has greatly outperformed the US 10 Year Note because of the Fed's 'Operation Twist.' It has still underperformed gold in the short term at about 19% unless you wish to compare some derivative of the bond like zero coupons or a fund rather than the bond plus accrued interest. The discrepancy there between the bond and the derivatives is most likely an indication of speculation based on the Fed's actions.

Remember the charts below do not include any interest payments received on the notes so the overall return is a little higher.

Also, Silver is notoriously volatile, and it is perfectly capable of 'catching up' with gold rather quickly. And I do think the silver market is being massively manipulated for some reason by one or two of the money center banks. When that manipulation breaks down, the resultant rally could be memorable.  But as you know I do think that silver is more 'speculative' than the safer haven of gold.

But for now the comparisons are what they are. If you have held gold through thick and thin you have done well.

And if you think of all the money you could have made if you had traded in and out of it cynically, be warned that those gains are illusory.

Thanks to notorious lapses and the ideology of deregulation this is one of the most corrupt and treacherous markets I can remember in thirty years, or even read about except perhaps for a few of the pre-crash bubble markets.

I think Ian McAvity has summarized this quite well:

The big change has been the utter corruption of Wall Street and that nearly 80% of the trading on the New York Stock Exchange now is being done by high-velocity computers. When an investor puts in an order, it's basically one computer versus another computer operating in nanoseconds. That's why all of a sudden the volume is up or down 10 to 1 and you get a couple of hundred points added on or taken off the Dow in minutes. To me that's a corruption of the process. "Ethics" and "Wall Street" are words you never use in the same sentence.

The trading mechanism is broken down. Leveraged exchange-traded funds (ETFs) are designed to consume the client's capital in leveraging and rebalancing premiums. The high velocity traders literally get the opportunity to "front-run" public orders as the order flow to "the market" is available to them for a fee. It's outrageous in the sense that they've legalized front running for those who pay up for the high-speed data feed. And then there's the initial public offering (IPO) business. Anytime the public can get shares in an IPO, they don't want it. If they can get some, it's only because it's not going to be that good a deal...

It's the culture of greed coming out of the banking system. The Street always wanted to make money. That's never gone away. But there was a time when good clients were actually respected by a firm. A firm wanted to do well for a good client because it wanted to keep the family assets in the firm. These days a client is considered to be a mark. The system is designed to convert the client's capital into their fees and income as quickly as possible. The public is being chased out. There have been persistent outflows from domestic equity mutual funds since 2007. A lot of people justifiably don't trust it...

As you know my personal preference is to hold gold and silver bullion in a fully owned and secure situation, and to keep the rest of your wealth in specific income producing investments which you closely control and manage preferably in an area in which you are experienced and knowledgable.

And as you must, find the safest banks available and store your necessary cash holdings there. Canadian and Swiss banks come to mind. US Treasury Direct in short term maturities is acceptable for those who must hold Dollars, but keep in mind that at some point those funds too may be subjected to the same seignorage by Wall Street that all other paper assets and savings are now enduring.

The mispricing of risk always involves the inevitable loss for some and gains for others. And as a rule of thumb, the further your money is away from the Wall Street and global money center banks, the better off it may be. As desperation sets in, the cheating and theft will become increasingly brazen and blatant, until the system breaks down and then is hopefully reformed.

Something like MF Global was unthinkable just a few years ago, for those who have forgotten the lessons of history. And it will get worse before it gets better.    Do what you can to support change and reform, even if it is to passively support those who speak out, or to stop encouraging the worst by continually fall for their tricks and  mindlessly repeating their false arguments and propaganda.

But at the very least protect yourself.  A few things may be relatively safer, but nothing will be easy.  It is going to be a rough year ahead.

And for those who have a mind to it, you may wish to consider how foolish it is to endlessly worry about how to protect your money, while giving so little care about not losing the only thing  that you really possess and may take from this world, which is yourself, your very being.  "For what does it profit a man...."