Remember back when QE started and we saw charts of high powered money going vertical all over the place and everyone who didn’t understand modern banking said that the reserves would flood out into the economy causing high inflation or even hyperinflation? And do you also remember how most of those same people also said that the only way you’d be able to protect yourself from this hyperinflation was by owning hard assets like gold or silver? Well, the inflation never came. The most recent reading of 1.7% pretty much proves that we’re much more Japan than we are Weimar (and yes, even independent gauges confirm the low inflation story). And now the portfolio recommendations are falling apart as well….
It’s one thing to be wrong about the way banking works and the way inflation might spread. But most of these people were explicitly recommending a substantial overweight in gold and silver as well. And they’ve been annihilated in recent years. Gold is down 33% from its 2011 highs. And silver is down a staggering 60% since the time I started referring to it as a bubble. These are massive moves and if you’ve been substantially overweight these metals in your portfolio then you’ve experienced substantial pain based on sheer misunderstandings by people who are posing as experts.
The thing that really drives me crazy about this is that so much of this has come from the ideologically driven groups who were really selling nothing more than fear and hatred of the Fed and the government. Look, I know the government hasn’t done everything right and I am certainly no Federal Reserve apologist, but that doesn’t ever justify bad analysis and specific portfolio recommendations that are simply irresponsible. And that’s all we’ve seen here. People selling an ideology based more on politics than knowledge….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.