What if the following quote from Steve St. Angelo is correct?
For the most part, Americans are completely oblivious of just how close the country is to a total disintegration of its fiat monetary system. As I mentioned in the beginning of the article, the United States financial system died in 2008. It has been kept alive by policy deregulation, monetary printing, and market manipulation (including derivative manufacturing such as interest rate swaps). These collaborative short term machinations have a lifespan that is diminishing every passing day, while investors who have made the wise decision to exchange fiat money for gold and silver keep wondering how long this manipulation can continue.
Do you believe this?
What you or I believe is moot. The most interesting and irrelevant portion of the above paragraph to me is the quantity of people who are “oblivious of just how close the country is to a total disintegration of its fiat monetary system.” From an academic standpoint, knowledge of this quantity might help validate H. L. Mencken’s opinion of the American group IQ (“No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people.”). Other than that it is of no practical import.
The validity of the paragraph is independent of the number of people who expect something to happen. Tsunamis occur when no one expects them to. And so it is with mega events like currency and economic collapses. Because they have never happened before (where before is defined in our lifetime), most people assume they are “impossible.”
I was jolted out of this type of confirmation bias early in my career. As a newly minted, cocky MBA, I was presented an analysis to the Controller of a Fortune 100 company. I was probably 25. He seemed imposing and appeared to be about 100 years old (but was probably only 50). He drilled me on alternative assumptions and how they could effect outcomes. At one point he asked about an event that seemed so far-fetched that I responded that it was impossible. I can still see his stare and hear his words: “Son, the impossible has a 20% probability!” Over the years, this comment has served me well.
His description preceded the popular term today — “black swan” — but its meaning was the same. Black swans do exist and the impossible does not. That is especially so in our times where we have extended and abused
Peter Drucker
economics to its breaking point. As a result, black swans circle the skies. Where they land or choose to defecate is unknown, but it is a certainty that they cannot refrain from either forever. We are entering a period which can be characterized by Peter Drucker’s term “discontinuities.” The late Mr. Drucker used the term to describe breakthroughs in technologies that were impossible to extrapolate. Were he alive and witnessing what is happening today, it is likely he would have applied the term to economics. So many of our economic tools and methodologies are spent via overuse and abuse that we face major breakdowns in what we have taken for granted for our entire lives. Woe be the investor or economist who depends upon extrapolation as a means of projecting the future.
Regarding the recommendation of precious metals in the quoted paragraph above, it, like every other investment class, is a gamble. Good investors are ones who recognize there are no sure things. Great investors do not make money on every trade. But they do on the majority of their trades. They do not fall in love with an asset or asset class. They determine, to the best of their abilities, what the odds are of winning and the payoffs if they are right or wrong. Once they have found an investment with what they consider favorable arithmetic, they invest. So long as their assessments are reasonable and their bets are diversified, the law of large numbers assure they win on balance. Judgment and prudence are all that is necessary. Time and outcomes do the rest.
The probabilities look more favorable for silver and gold than anything else that I have seen in my investing career. In hindsight, that assessment 11 years ago would have produced eleven consecutive years of profits (in the range of 15% per annum) in a period when the stock market declined or failed miserably to keep up with inflation. Will that performance be continued?
To me, the discontinuities ahead suggest that it will. But that is far from certainty and all investments are risky! Go there, if you choose, fully aware of the risks which can only be assessed in terms of your own judgment, needs, personal situation and portfolio. If you choose to do so, make sure that you maintain proper diversification. Never place all your marbles on a “sure thing” where it is “impossible” to lose. It isn’t and you will.
