Enduring Grandparent Gift of Gold

Nearly one month out from Christmas and we will start to see the annual flow of grandparents buying gold and silver for their kids and grandkids in lieu of, let’s say, less ‘enduring’ gifts.

These buyers every year talk of buying gifts for kids that are redundant in days and weeks or almost immediately because the box containing the gift seems to get more play time… Similarly the (grownup) kids don’t need more material possessions and (whilst they generally even don’t know it) they are going to need some real money, some hard assets, in the not too distant future and this is their way of helping.

Many of the ‘grandparent’ era have lived through the inflationary and economic turmoil of the 70’s and saw how gold protected, and indeed amplified, wealth.  Many too have observed (and dare we say enjoyed), if not explicitly than certainly intuitively, the debasement of ‘money’ since we left the gold standard in 1971 and commenced this most epic of all time credit bubbles.  They ‘get it’. 

Their thesis is that whilst their extended offspring YOLO (you only live once) generation is living large on the back of this credit bubble with scant concern for their future wealth and/or with complete faith in the financial assets and system they are ‘all in’ on, the day of reckoning is fast approaching, and that reckoning will be one for the history books.  They can knock back your ‘out of date’ advice but they can’t knock back a gift with the caveat of ‘please don’t just go and sell this, it’s going to be very handy one day in the future’.

Encouragingly this narrative is becoming more and more spoken of in traditional press and by perennially bullish “Wall St types”.   Just last week the 2nd biggest bank, Bank of America Merrill Lynch gave such a stark warning of what’s ahead.   Via ABC News:

“The 2020s are set to be a decade of dramatic economic and social upheaval, reversing many of the trends of the past 40 years, according to one of the world's largest banks.

In what it describes as "the decade of peak", Bank of America Merrill Lynch (BAML) analysts say a range of economic and social challenges are "all heading to a boiling point" next decade.

"We enter the next decade with interest rates at 5,000-year lows, the largest asset bubble in history, a planet that is heating up, and a deflationary profile of debt, disruption and demographics," the report warns.

"We will end it with nearly 1 billion people added to the world, a rapidly ageing population, up to 800 million people facing the threat of job automation and the environment on the brink of catastrophic change."

As these problems mount, the bank's investment strategists say many long-established trends will peak, before reversing.

It is forecasting peak globalisation, as governments seek to reassert sovereignty over trade and investment flows across borders, as already emerging through Donald Trump's trade war with China, the dispute between Korea and Japan and the rise of nationalist politicians in many countries.

"The 1981-2016 era of unchecked flow of goods, people and capital is coming to an end, catalysed by the widespread recognition that while globalisation has meant lower consumer prices, it has also meant slower growth, precarious employment and social disruption," BAML's analysts write.

They note that global trade growth has fallen below world economic growth for only the second time since the global financial crisis and sixth time since 1980.”

No one knows for certain when this credit bubble will end.  All we do know for certain is that it will, because they always have and simple maths and economics says they always will.  The bigger the bubble the bigger the bust.  When that day comes there will be no greater gift ever received than that of gold.

Last night we sponsored and attended the Director’s cut Brisbane launch of Torsten Hoffman’s new film “Cryptopia”  which was an excellent and balanced walk though Bitcoin, the new digital crypto currencies and  the Internet 3.0.  Keep an eye out for it when it hits cinemas.  What it again reinforced is that Bitcoin is not going away and is still in its formative phase with the accompanying price growth potential.  It was nearly a packed house at the beautiful Elizabeth Picture Theatre in the city and thanks for all those who came.