The Blue Roof

I listened to the radio this morning and heard about the gold price being at record levels.  It is something to consider.

 Gold is not an investment, since gold does not pay interest, rent or dividends.  Gold is a protector of wealth, value or purchasing power.

 The first question we should ask is WHO is buying gold to the extend that the price is at record levels?  The answer is:  people with money who can afford to do it.  This will include reserve banks or central banks of the world.  In other words, it is people who have made money and who know about money.  People we can take note of and learn from.  They are not a bunch of “palookas.”

 The next question would be:  why would very knowledgable and experienced people be prepared to buy gold up to record levels?

 The answer is simply:  because they see their wealth, their value, their purchasing power threatened!  All through history gold was always considered a safe-haven in times of turmoil and threat.  Gold may not give an income, but it does protect currency against inflation and devaluation.

 The next question is:  can we identify the threat?  I think I can see at least some of it.  Governements across the world has solved the “so-called” debt crisis with MORE debt.  What is the implication?  Well, what happens if you (I mean you, real honest to goodness real life human being) have more debt than you can service?  Bad things happen.  And now to solve the problem and to save yourself from the bad things, you borrow more money!  Is the hole deeper or shallower?

 In terms of countries, what does more debt imply about the currency?  There are more currency.  I don’t know if you really read my series on earning what you are worth?  It boils down to this:  you can only increase your worth by producing more or better.  The same applies to countries (which is why entrepreneurs are so important).  So the question is:  I have more currency, but do I produce more or better?  If the answer is not:  “YES”, then it means the currency is loosing value hand-over-fist!  Which means that paper money is slowly, but surely, losing its value and soon will not be worth the paper it is printed on.

 The people in the know understand this and buys gold.

 For you and me, let me speak for myself, for me it means the following:  I should have as little cash as possible.  I must have as much tangible assets as possible.  I have to be wary of the stock markets, because they react negatively to a situation like this.  In the long run they catch up, but short-term we can expect volatility.  I must consider buying Kruger Rands – very tangible and very tradeble gold coins.

 In this scenario debt (as long as I can service it!!!!) is not such a bad thing, if I use it to buy productive assets – that increases in value and renders a cash flow.

 BUT ABOVE ALL – don’t act on this, or just any other advice or information, see that you get the best advisors.  I would like to have investment advice from somebody who buys gold!

 If you do what the masses do, you will end up with the masses!