A Reliable Contrary Indicator for Gold
"A government big enough to give you everything you need is a government strong enough to take everything you have." ~ Thomas Jefferson
Today, I urge you to read the excellent article contributed to Mountain Vision courtesy of our friend Ronald Stoeferle of Erste Group Research in Austria, "Gold Analysts Remain Bearish: A Reliable Contrary Indicator." Many of you have asked us whether we are still positive about gold. The short answer to your question is "yes." We continue to be very positive on gold, and certainly in the medium- to long-term. In this regard, Roland´s article reflects our position very well.
Some readers have asked me for more guidance on specific jurisdictional diversification. I'll be sure to cover some of that again in the coming weeks and months. In the meantime, let me say this: Jurisdictional diversification in its essence comes down to picking the right team of trusted advisors and contacts overseas. More than anything, you need to select a team of independent advisors who can help you in two dimensions: the dimension of structure (asset protection, inheritance, privacy, institutional and jurisdictional safety etc.) and the dimension of asset allocation (what to invest in).
If you belong to the group of those who accept what the markets might be telling us − that more trouble lays ahead − you should take precautionary steps. If you belong to those who feel that this is only a short-term slip in a continued upward trend, we strongly recommend you reconsider and get on board with those taking precautionary steps.
Let's contemplate this question: What would you do in face of a financial crisis if you were a competent (and honest) manager of a large corporation? Who would you ask for advice? Some might consider McKinsey & Company. Others would not. In any case, here's a summary of the advice McKinsey gives in its latest quarterly review:
"The past is no longer a guide to the future. To meet the challenges of discontinuity, a corporation must learn to change as rapidly as markets do. ~ June 2002, Richard N. Foster.
"Financial crises are becoming a common feature of the economic landscape. Despite this new reality, many companies continue to conduct business as usual, with devastating effects when trouble strikes. Executives who do prepare companies when times are good can increase their odds of weathering a financial crisis when it hits - and even position them to prosper in its wake.
"Preparing for a financial crisis means monitoring key warning indicators, maximizing cash and restructuring debt, identifying key operational risks and conducting scenario analyses, and creating an explicit crisis-management plan. It also requires a continuous commitment from management and a willingness to moderate the usual focus on quarter-to-quarter results. But with crises increasingly common, these steps are well worth the trouble. Companies that operate in dangerous markets must build ships that can weather stormy seas."
This happens to be good advice and is also applicable to your personal finances. We recommend you read the above again. This guidance may save you sleepless nights − and a lot of money.
Whether you expect markets AND economies to improve shortly will ultimately depend on the 'team' you bet on. On the one hand, the Obama-Geithner-Keynes team is doing everything possible to avoid further damage in the markets. On the other hand, the market is telling us that more trouble lies ahead. Pick your team.
Frank Suess is CEO and Chairman of BFI Capital Group. To subscribe to BFI's weekly Mountain Vision Update, in which this column appeared, click here.