Cluster Family Office Blog

The compound interest of 100 € working financially correctly saved at the age of 25 means more than 800 of saving effort at the age of 50!!! Even deducting inflation, the investment effort not made during our first years of productivity will be so expensive in our maturity and old age that it will be unbearable for most people who start accumulating productive assets in their thirties or forties.

I am not talking about pension plans but about well-advised and diversified investments in optimised fixed income, real estate, real estate and other investments. profitable and with good rallies appreciation; and judicious and very moderate equities. Although of course a pension or savings plan taken out at 40 is better than nothing, it will only palliate the coming famine and, of course, condemn the descendants to follow the rat race by relays.

Your money should be used to lend it to others, and they should work with it. Logically, we should not do this ourselves, but through the purchase of financial products that are carefully tailored to our profile. For this delicate selection, we must be well advised by someone who teaches us how to do it while guiding us, and who does not simply sell us products (this is easy to say and almost impossible to find, but there are some). In return you will get more money (corporate or sovereign bonds, for example). This is the difference between producing in exchange for hours of work and lending your assets so that others can produce. At the beginning of our lives everything we earn we have personally produced, and gradually we must lend a greater proportion of our money so that others can produce. Our focus should be on reversing the initial sequence as soon as possible. Once we have achieved this, it is our own choice whether to continue working or to do what we really want to do. There will be those who prefer not to do it any more, it is a question of calculation and the will to leave the heirs in one situation or another. Freedom in capital letters. Paradoxically often Working without the pressure of remuneration leads to an even higher income if it is done with rigour and honesty, I can assure you.

Only cicadas should be able to live happily depending on an income generated by a work activity that can be truncated at any time. at any time of our lives for all eternity imponderables, In exchange for a progression (or regression!) that only serves us to go on better holidays, have a more expensive car or a house that will take us more years to pay for. Although when we are about to do so, we will exchange it for a bigger one or we will buy a second or third home for the bank.

My advice to those who, because of their working conditions, have a modest income, is to make an effort to save and invest even the smallest amount. The strictly dispensable, non-vital amount that would allow us to live a step higher than last year. This seemingly insignificant amount should invert as soon as possible in a somewhat riskier but well-advised manner. And above all, maintain investment rigour in future years, reducing risk in proportion to the total volume available over time. All of this is done with the help of a good counselor and not from financial advisors or, of course, bankers. The strategy must be tailored to each case like a tailor-made suit, haute couture if possible, even if we have little fabric.

Smoking kills. Drink in moderation. Endéudate with moderation and judgement. It is your responsibility. It should be warned in banking and consumer advertising. Unfortunately there is no other way to live life in the medium and long term. What is the point of bread for today... if we all hope to grow old?

Things are finally falling into place, and we’ve moved on from foolish the last to They're all idiots, every last one of them. As the article, written on 20 April 2007, is quite long, we will be publishing it between today and tomorrow. I’ll leave you with «By the time you’re 30, it’s too late.« Or »Take on debt in moderation. It’s your responsibility.”:

Surely we can almost all agree that during our unpredictable lives we should try to accumulate assets that will allow us to reach the end of our lives with a decent financial stability. Growing old, falling ill and dying are unavoidable stages in our lives. Although, if we think about it, we can avoid old age if we die young, and even illness if we die accidentally. But in view of this, I prefer to cling to the hope of growing old and getting sick before I die.

All this in a scenario of financial comfort is more bearable. Especially because of the way you will be treated by those around you if they are waiting for a more or less substantial inheritance. We all have close cases of people who have come to their decline depending on the charity of others, be they family, friends or the State itself. Although I could not say which of these is less reliable, I would venture to establish Friends as the most stable plank to hold on to if one has maintained an honest and noble life trajectory, which is rare.

Most realise this need for financial foresight when it is too late. They rely solely on their ability to produce an income. via The banks kindly see to it that an individual can greedily consume goods far in excess of his or her productive capacity. The banks kindly see to it that an individual can greedily consume goods far in excess of his or her productive capacity. Even beyond what could The state would be able to produce healthy working people until the age of 65 and then be supported by the state. Even in these ideal circumstances, it would never be able to generate as much as the banks can. are The limit of indebtedness should be set by ourselves, not by the companies that live by mortgaging all our time and productivity two times over. The limit of indebtedness should be set by ourselves, not by the companies that live by mortgaging all our time and productivity multiplied by 2. And even so, moderate indebtedness should only be assumed as a depreciable investment and not for the purchase of leisure consumables. You will find some amusing situations in the novel «El vendedor de tiempo» by F. Trías De Bes (http://www.empresaactiva.com), which refer to the aberration of mortgaging one's entire life time for an asset, even if it is one's own home.

It is true that most people never manage to break out of the vicious circle of living at the same rate at which they are able to progress. This condemns them to depend on the income generated by their work throughout their productive lives, and only live off the state in old age, something that is increasingly evident that is not going to happen. succeed them to our generation of 40-somethings and, of course, to future generations. It doesn't matter if we are talking about an office worker with a salary of 25.000 eur/year or a high-earning professional earning over 100,000 eur/year. If they live life to the full and don’t Prevent an accumulation of productive assets over the years, they will always depend on their jobs. And unforeseen events such as work-related problems, marital problems, illnesses, etc., are always will sinkn in hardships from which not everyone will be able to recover. Robert Kiyosaki christened this phenomenon of a «rat race» from which it is not easy to get out of, in his popular book «Rich Dad, Poor Dad». You can find out more about Kiyosaki at http://richdadclub.es But it’s not just a matter of getting out of this rat race but what is truly essential for achieving success is Do it as soon as possible! That’s why I’ve titled this post ‘It’s too late at 30’: (to be continued tomorrow)

Un caso más de la dilapidación de la fortuna súbita en pocos años. Esta vez en tan sólo un par y apuntillada por la caída de los mercados de RV, de los que habría abusado inconscientemente, llevado en volandas por banqueros y amigos listillos. Carne de cañón…

Ahí va The Resilient Investor, escrito el 29 de Julio de 2007:

Let me start by saying that the observations I am about to make refer to an average investor with average capabilities and little preparation for the financial world – in other words, the majority of the population who have sufficient purchasing power to consider investing beyond simply making ends meet. Naturally, many readers will stand out from this average profile and should not feel that this applies to them. However, based on our experience with consultations of all kinds, we can confirm that what happens to the investors we are about to discuss is, unfortunately, all too common. We believe that by helping to identify the problems, we are taking steps towards resolving them or avoiding them in some way. Just as there is companies specialising in helping other companies become more resilient, it is also vital from the point of view of Counsellors that we can make the investor more resilient.

This seemingly brilliant plan solves many problems at a stroke: firstly, families facing repossession could maintain some stability in their lives. Without the trauma of losing their jobs and the money paid for a home that is no longer theirs, not even in the slightest (which is no small matter). The banks, for their part, having been suitably bailed out as is already happening through the state’s purchase of subprime mortgage-backed securities, would find themselves with market-rate rental income from the properties they once financed and which now become their property. Consequently, we would no longer see that flood of properties being dumped onto the market, with millions of homes being offloaded at any price. This would prevent a fall in property prices, which would plug the holes in the balance sheets of the financial institutions in question within a matter of months. It would also prevent the acts of vandalism the common practice among those facing repossession of vandalising their homes before leaving them, in a final act of defiance against the banks – in other words, what has come to be known as the destructive syndrome of the on the verge of being seized (as we can see in the second half of the following video):

A solution, then, that appears to benefit everyone. But just as is the case, for example, in molecular biology or genetics, any seemingly positive change can have unpredictable and undesirable consequences. In economics or macroeconomics, the unknowns are endless, not least because, ultimately, it is people who are involved, with their corruption and greed, chance… and unthinkable butterfly effects such as changes of government in a remote country, religions and unspeakable affinities, wars, pandemics, conflicts, and a million unknown causes that can distort the expected and anticipated effects. And intervention in the markets should only take place when necessary, whilst attempting to violate as few universal laws as possible and, moreover, keeping our fingers crossed. Having said that, let us try to anticipate some of the consequences which, a priori, could worsen the future scenario.

The first question that springs to mind is why help unemployed homeowners but not all homeowners in financial difficulty. Or why not help those who are already renting and become unemployed. In short, why this discriminatory double standard based on the impact and damage that the mass bankruptcy of these families causes to financial institutions? The injection of state money in exchange for worthless mortgage paper helps the banks. But it provides no help, at least not directly or indirectly, to the unemployed homeowner.

Another consequence with potentially dire effects is that the banking sector would dominate the property market and, consequently, market prices—both for purchases and, to a large extent, for rentals. The prices set by financial institutions (even those not in danger) would be higher than market rates, for their own accounting convenience, making the property market even more illiquid and yet more expensive. That is the result of intervening in the market in a perverse and concerted manner.

Anyone interested in buying a house currently rented to its former owner (who would be «encouraged» to vacate it voluntarily) would be granted a mortgage with favourable terms, even if they were not creditworthy, since, in the worst-case scenario, the bank could repeat the process, reducing the cost of the property to the bank with each transaction (of course, obtaining a mortgage to buy a house sold by a private individual would be impossible). Besides, what the hell, all the banks would do the same and the distinction between buyer and tenant would blur. It would also have deflationary consequences that would affect CPI figures in ways that would be difficult to manage. And many others that emerge as we spend time imagining this hypothetical scenario.

If one were to be cynical, it might be a concerted strategy to prop up US property prices (Spanish prices still have a long way to fall before anything like that could be hatched). The reality is that most of the property market would be under the absolute control of the banks, and that smacks of abuses even more unjust than the relentless laws of supply and demand. At the end of the day, we would be intervening in the market, but not through the State, as we proposed at the start of the year in Mortgage socialisation and Bad Owners, but from the bench. Extremely dangerous.

G – I = ΔM + ΔD

Where G is public spending, I taxes, M the money supply and D debt. It will be clear to everyone that the left-hand side of the equation determines the deficit, and the right-hand side determines how it is financed. Obviously, if G be overtaken by I, we would be facing a scenario of a surplus, and the increases would result in a reduction in debt or even in the money supply.

The deficit must therefore be covered by an increase in the money supply and/or by the issuance of public debt. But what happens when a state has complete budgetary freedom but no monetary freedom? Let us consider the example of California, the equation for which is simply: G – I = ΔD An equation that must be balanced in every annual budget. This leads us to a scenario where a constraint on borrowing capacity causes the state to go bankrupt, for which there is only one sustainable solution: bringing G and I into balance. In other words, in a crisis environment where revenue is falling, the only solution is a drastic cut in public spending, which in turn will cause the crisis to deepen.

There is, of course, a limit to borrowing capacity. And to a large extent, this will be determined by the market, since the lower the creditworthiness perceived by the investor,, the higher the interest rate the State will have to offer to attract money into its debt. A debt that is becoming increasingly waterlogged. The other limit will be set by the legislation that regulates – or attempts to regulate – solvency, defining what is known as «country risk». However, in the case of California (an economy which, on its own, would rank among the top eight in the world), there is no escape via increased debt due to the already excessive ‘wetness’ (insolvency) of its paper, nor does it have the capacity to print banknotes. Both possibilities are a matter of decisions foreign, that is to say, the market and the US as a whole. When the deficit is spiralling out of control and tax revenues are falling, the issuance of debt It ceases to be difficult and becomes an impossible task. Attracting funding when investors« confidence has been lost is like trying to stop a house of cards from collapsing with your bare hands. And at present, it seems unthinkable that California could issue and print its own banknotes in its own currency. It therefore seems plausible that the US as a whole will »bail out’ California’s debt so that it can continue to be placed with investors with the backing of the US Treasury. This will have to be accompanied by rigorous austerity in public spending, something Schwarzenegger is already implementing in line with his neoliberal playbook.

There is also talk of the possibility that the fifty US states might be given the power to issue currency (or at least those that are unable to balance their books), but it seems, in the case of the US, that it would be less traumatic for the federal government to underwrite the guarantees needed by the spendthrift Schwarzenegger to continue inflating California’s public debt.

Interestingly, every day I see more and more parallels between Schwarzenegger and Spain’s Zapatero, even though their strategies for tackling the crisis are radically opposed (neoliberal versus socialist). Both are leading countries facing serious insolvency problems and an inability to balance the books. It seems unthinkable that the US would allow California to collapse, but I do not find it so implausible that the EU would leave to their own devices those countries with a large gap between G e I. The PIIGS equation It could be balanced by injecting I from the wealthy countries of Europe, of course, but it is clear that patriotism within the EU does not reach the same levels as in the US. Of course, the idea of allowing an independent monetary policy within the EU is difficult to imagine, but it would bring many pieces of the puzzles and would balance the equation. However, it is even harder to imagine that the wealthy EU countries would pay up and bail out, without so much as a murmur, states that only a few years ago abandoned their flexible exchange rates and joined the monetary union with virtual pride.

Krugman He had already warned Zapatero four months ago that It’s as if the European Union didn’t exist. In other words, warns that no help should be expected from it because, in fact, it is a sham organisation when it comes to coordinating exceptional measures. This, combined with the inability to devalue the currency, due to membership of the monetary union, means that (as he said on his blog) to be in the eurozone It does not guarantee that the crisis will be overcome or that the outlook will improve; quite the contrary. The situation is likely to be even more difficult for Spain, Italy, Portugal, Ireland and Greece.

For the time being, Schwarzenegger has written a letter to the Three Kings (Obama) begging for a bailout from the US government. Zapatero has copied his letter, but the real drama – for Spain and the rest of the PIIGS – is that there’s nowhere to send it. Meanwhile, the equation is becoming deeply ingrained in our macroeconomic figures. And mathematical equations are truths that know nothing of politics or social upheavals.

http://s.wsj.net/media/swf/main.swf

Después de ver este video del WSJ tan simple y naif, creo que estamos más próximos a encontrar una respuesta al dilema: Los datos pasados son simplemente insuficientes para determinar con rigor y certeza qué estrategia nos va a dar mayor éxito financiero en el futuro. Sería demasiado fácil. Pero hay algo que este video y la mayoría de discusiones acerca de la inversión en RF y RV olvidan cuando hablan de plazos, y es algo tan obvio y sin embargo tan vital como nuestra vida inversora, de la que ya hablamos allá por el primer trimestrte del 2008 en Kaizen: El control de calidad de nuestras inversiones. De nada nos va a servir la estadística (suponiendo que fuera fiable y suficiente, que no lo es), más allá de nuestra vida inversora. Y ésta puede ser tan breve como el medio, el corto o el cortísimo plazo.

Creo que la frase que expresa mejor este concepto es la que escribimos en nuestro artículo titulado RF vs RV: «La vida inversora no es más que pequeños segmentos de gráficos a muy largo plazo.» Y ahí cabe todo, incluso arruinar dicha vida inversora en la dirección correcta. No hay segundas oportunidades, tenemos un único tren inversor en nuestra vida. Y nadie sabe cuánto va a durar su segmento en un gráfico de 150 años de dudoso rigor. A partir de aquí que siga la discusión vehemente de quién bate a quién. Aunque seguramente todos seamos batidos por nuestra propia prepotente ignorancia, que nos hará buscar fórmulas para evitar el esfuerzo de realizar el balance vital de nuestra vida inversora.

«Son los momentos de incertidumbre económica donde vuelve a aparecer el recuerdo del oro. La estabilidad monetaria que dio el patrón oro clásico está muy presente en los inversores y ahorradores de medio mundo que ven como las autoridades monetarias hacen juegos de magia con su dinero. Desde que se abandonó la Bretton Woods -lo poco que quedaba de patrón oro- los inversores y ahorradores han creído o han sentido que la mejor cobertura frente a los desaguisados de sus autoridades era el metal amarillo.

Quiero analizar con detalle este hecho, porque me parece de suma importancia. Primero quiero mencionar muy por encima que propiedades hicieron al oro como mejor dinero de todos los tiempos, y segundo lo que más nos interesa como inversores o gestores patrimoniales, es el concepto de liquidez y como el oro es el bien más líquido en una economía. Por lo tanto, acabaremos diciendo que el oro no es una inversión, si un patrón monetario -el mejor de todos los tiempos- y en última instancia es una garantía de liquidez.

No me extenderé en porque el oro es la mejor forma de dinero posible, porque no es el objetivo del artículo, pero podemos decir que el oro tiene óptimas propiedades para ser dinero: su escasez relativa, su homogeneidad, su maleabilidad, ductibilidad, su enorme divisibilidad, su facilidad de transporte, almacenamiento y conservación. Podemos afirmar rotundamente que cumple estos requisitos para ser un buen patrón monetario.

Ahora llega la que creo, es la parte más interesante del artículo, que es la pregunta de ¿por qué el oro es el bien más líquido de la economía? Este es un tema que la mayoría de economistas de las principales corrientes del pensamiento han olvidado y se han entregado plenamente a matematizar riesgos con variables de difícil estimación. Para saber porque el oro es el bien más liquido, debemos remontarnos a las teorías marginalistas de Carl Menger, Walras o Jevons, que sentaron las bases de la revolución marginalista. Diremos que la utilidad marginal de un bien decrece al aumentar su disponibilidad y crece al reducirse su disponibilidad. Es la demostración de porque los diamantes cuestan más que el agua, a pesar de que el agua sea un bien necesario para la vida y los diamantes no.

Entonces basándonos en este concepto, podemos decir que un bien es más líquido que otro cuando su utilidad marginal disminuya más lentamente. El bien más liquido de la economía sería aquel que tuviera una utilidad marginal constante, cosa que es imposible, pero podemos afirmar que el oro es el bien cuya utilidad marginal disminuye más lentamente. El concepto de liquidez se puede definir en dos dimensiones: una inter espacial, es decir, diremos que un bien es muy líquido cuando su utilidad marginal disminuya poco a poco conforme se incremente su cantidad; y de forma inter temporal, es decir, un bien es muy líquido cuando su utilidad aumenta poco a poco conforme se reduce su cantidad.

Esto debería hacer reflexionar tanto a inversores como a gestores de los riesgos de liquidez que toman en sus pool de activos. La crisis que estamos sufriendo actualmente en parte es debida por el abandono intencionado o no de estos conceptos, tanto por agentes individuales como por los agentes institucionales. La banca debería saber los riesgos que trae invertir a largo y endeudarse a corto, y más aún, sobre activos totalmente ilíquidos que a la hora de liquidación sufren importantes descuentos. La pirámide invertida de John Exter muestra claramente este concepto. Las actuales posturas sobre determinación de riesgos deberían ser meditadas y depuradas.

Entonces, una vez comentado esto, ¿podemos decir que el oro es el mejor refugio ante la inflación? La respuesta a estas alturas debería ser un NO rotundo. Primero porque el proceso de inflación orquestada por los bancos centrales en base a la expansión crediticia, beneficia más a unos que a otros, con lo cual determinados sectores pueden dar perfectamente rentabilidades superiores a la inflación y segundo y el más importante, no hay mejor refugio que tener un pool de activos invertidos en valor. Aquí es donde entra el Value Investment y nuestro amigo Benjamin Graham. No hay mejor refugio que una empresa de maquinillas de afeitar que utiliza más de medio mundo todos los días, no hay mejor refugio que tener una empresa que lleva haciendo el mejor champú para niños toda una vida y que incluso lo utilizan los adultos, no hay mejor refugio que aquel refresco que lo puedes encontrar en donde ni siquiera hay agua.

Efectivamente, queridos lectores, ese es el mayor refugio frente a la inflación que podemos tener. Debo aclarar aquí, que para todos aquellos de vosotros que vayáis a leer a Graham en The Intelligent Investor, tengáis especial cuidado en el capítulo donde habla sobre cómo protegerse de la inflación. Pero su esencia es la correcta, invertir en acciones ordinarias.

El oro como inversión solo tendría su lógica como última garantía de liquidez en un proceso de destrucción monetaria, es decir, ante una hiperinflación, ya que como hemos visto antes, es el bien más liquido de la economía y por ello, sufre menos descuento a la hora de liquidarlo.

La conclusión que el lector debería llevarse después de leer este artículo, es que la mejor forma de protegerse, es la inversión en valor, el oro ha sido y será el mejor patrón monetario de todos los tiempos y los que lo defendemos seguiremos en la brecha para devolver la soberanía al ahorrador y al consumidor de bienes y servicios. Pero debemos tener claro que son dos cosas totalmente diferentes.»

ManuelMad

A todo ello, me permito añadir que mientras mantengamos la esperanza en el Sistema, el componente especulativo del oro debe ser nuestra principal motivación. Si por el contrario perdemos toda esperanza, lo de menos será si el precio del oro sube o baja, ya que será un patrón monetario sin moneda. Y ya se sabe: Donde hay patrón, no manda marinero.

Se ha comparado mucho el oro con las acciones. Aunque puede ser no significativo, hay un ejemplo que se repite mucho. En noviembre de 2005, Rick Munárriz de Motley Fool.com plantea la cuestión de si representa una mejor inversión una acción de Google o una onza de oro. En ese momento, ambas estaban a alrededor de 700 dólares. El 4 de enero de 2008, una onza de oro superó el precio de la acción de Google por un 30,77%. Al final del año, Google cerró 2008 en 307,65 dólares la acción, mientras que el oro cerró el año en 866 dólares la onza.

¿De que depende el valor del oro?. Actualmente, el precio del oro es, en última instancia, determinado, como tantos productos, por la oferta y la demanda. Pero, a diferencia de la mayoría de los demás productos básicos, el acaparamiento y la eliminación juegan un papel mucho mayor en afectar el precio, porque la mayoría de las minas de oro siguen existiendo, y pueden incrementar su producción en función del precio.

Pero dada la enorme cantidad de oro almacenado, en comparación con la producción anual mundial, que es pequeña, el precio del oro está principalmente afectado por los cambios en el sentimiento, más que cambios en la producción anual. La demanda mundial de oro no satisfecha por la producción acaba siendo satisfecha por la venta de los bancos centrales y el Fondo Monetario Internacional, que a finales del 2004 tenían el 19% del oro. El Acuerdo de Washington sobre el Oro (WAG), firmado en septiembre de 1999, limita las ventas de oro por sus miembros (Europa , Estados Unidos, Japón, Australia, el Banco de Pagos Internacionales y el Fondo Monetario Internacional) a menos de 400 toneladas al año.

Otros Bancos Centrales son compradores. Por ejemplo, a principios de 2006, China, que sólo posee el 1,3% de sus reservas en oro, anunció que estaba buscando maneras de mejorar el rendimiento de sus reservas oficiales. Algunos especuladores tienen la esperanza de que esto sea una señal de que China podría convertir algunos de sus reservas en oro, en línea con otros Bancos Centrales.

Los inversores en oro que utilizan el análisis fundamental, generalmente analizan la situación macroeconómica, que incluye los indicadores económicos internacionales, tales como tasas de crecimiento del PIB, la inflación, los tipos de interés, la productividad y los precios de la energía. Asimismo, cabe analizar también la oferta mundial de oro al año frente a su demanda.

La demanda de oro global se disparó un 38% en el primer trimestre de 2009. Hace tres años, la demanda de oro como inversión sólo fue del 10% de la demanda de oro global, y hoy es más del 30%. Eso es un aumento muy significativo en la demanda de inversión.

El problema es, sin embargo, como se apuntaba antes, que el precio de oro cambia, muchas veces, en función del sentimiento de seguridad en otras monedas y no sobre la situación macroeconómica “per se”. Se podía encontrar libros hace más de un año que predecían el fin del euro y el dólar y la supremacía del oro. O familias que invertían en francos suizos por el respaldo de las reservas en oro del Banco Nacional de Suiza (que, por cierto, ha sido uno de los grandes vendedores de oro) Por ello, si bien la producción de oro es poco probable que cambie a corto o medio plazo, la oferta y la demanda privada son muy líquidas y sujetas a cambios rápidos, a diferencia de casi todas las demás mercancías.

No debemos olvidar que si al oro le quitamos su fuerte componente especulativo, los niveles actuales son, probablemente, ya muy altos. Y la relajación paulatina del riesgo sistémico, que no de la crisis, está en el horizonte. La capitalización de la banca mundial (lenta y dificultosa) es un proceso prioritario y ya iniciado por los más capaces, a pesar de que aún hemos de ver los esqueletos de muchas entidades yaciendo a ambos lados del camino. En un escenario de banca recapitalizada y los Estados más fuertes no quebrados, con inflación y sin ella, el riesgo sistémico desaparecerá. No existe ningún histórico en el que fijarnos con un panorama como el descrito. Pero la relajación o desaparición de los factores que fortalecen el “flight-to-quality” del oro, debería ser determinante para su reversibilidad. Como siempre, el ingrediente secreto consiste en saber cuándo.

Disclosure: Estratégicamente, ni cortos ni largos…

What Summers discovers is not that gold rises when the dollar falls (the correlation of .28 cited by Scott Reamer of Vicis Capital is not really conclusive), nor its role as a store of wealth (if the dollar collapses, gold will recover due to investors seeking a safe haven, regardless of the correlation between gold and the dollar), but its safe-haven value even during periods of deflation.

To reach this conclusion, Summer draws on Roy Jastram’s book *The Golden Constant*. The author conducted a study of the performance of gold over a 416-year period in English history (from 1560 to 1976). His conclusion is not only that, historically, gold has acted as a store of value through wars, plagues and other vicissitudes, but that this precious metal actually increased its purchasing power during periods of deflation. This finding is surprising, as it was commonly accepted that gold rose with inflation but fell during deflation. Yet historically, this has not exactly been the case.

In addition to the fact that doubts about the value of the US dollar are beginning to affect the general public on a widespread basis, the conclusion of Summers’ article is that gold will perform well in any future scenario, regardless of whether it is inflationary or deflationary. If the dollar changes and falls to a low point, gold will benefit greatly from a flight to quality or by taking on the role of a non-regulatory currency.

If our readers will allow us, we would like to explore the merits of investing in gold in a little more detail.

It is true that for centuries, people have used gold as a store of wealth and as a hedge against market fluctuations, the depreciation of fiat currency and other macroeconomic and geopolitical risks. Perhaps no other market in the world has had the universal appeal of the gold market. Through shares in gold mining companies, ETFs and other gold-based financial instruments, anyone can invest in gold. For those who want physical gold, a German company, T G–Gold-Super-Markt, plans to install vending machines at 500 locations. The first vending machine, on a trial basis, has been installed at Frankfurt Airport (photo above). In Switzerland, it is possible to buy gold bars at post offices.

Investment guides repeatedly emphasise that investment success hinges on diversification and risk management. It’s the old adage of “not putting all your eggs in one basket”. It seems clear that a well-balanced portfolio should include a wide range of assets. But what is not so clear is determining what proportion should be allocated to each asset class. Some gold specialists, such as Mark O’Byrne, believe that an investor should allocate 10–15 per cent of their liquid assets to gold-related investments. The fact is, there are so many ways to invest in gold that, in principle, depending on the chosen method, it should suit speculators, investors and savers alike, as well as those with short-, medium- or long-term investment horizons.

Some even argue that, just as the family home should not be regarded as an investment in itself, physical gold (bullion) is not an investment but a kind of insurance policy, and that it should not be traded but rather form the foundation of the family’s wealth. Is that true?

(to be continued…)