Feb 12th 2013
When you think of Switzerland, What’s the first thing that comes to mind? For me, its wealth, off shore accounts, gold….
If you guessed the same, then you will enjoy todays report from Matterhorn Asset Management in Switzerland. These folks are massive fund managers and they are worth listening to….
Matterhorn Asset Management Switzerland – Key Charts, Propaganda, Gold, Silver & The Ongoing Collapse
“A couple of days ago Swiss banks came out with a major PR campaign offering allocated gold and silver accounts. Well, Eric, that’s nothing new, they have always done that. The banks are worried that more and more investors are taking gold outside of the banking system. So now the banks are telling investors these allocated accounts are safe and would not be included in any bankruptcy. But the bottom line is this gold and silver will be encumbered, and maybe even owned by central banks who will claim it back one day.
We must remember history. Look at Lehman, MF Global, Sentinel. These companies, which all collapsed, had allocated and segregated assets. These assets were used as security for their credit lines. Therefore investors did not get their money back. “Looking at gold and silver short-term, despite the volatility they look extremely strong.
The charts look very constructive. This confirms my view that we will see major rises in 2013. Many of KWN’s interviews have noted that silver looks particularly strong and I agree with that. The gold/silver ratio is ready for a major decline. So silver will outperform gold in the coming rise, but both metals are going to see a massive price increases.”
Here are 2 segments From Matterhorn Asset Management in Switzerland That are Worthy of a Re-Visit….
Wealth Planning and Preservation of Asset Values.
To create wealth requires a combination of skill, timing, risk taking, a bit of luck and a lot of hard work. Once wealth has been created its preservation and enhancement become a priority.
Many fortunes have been wiped out by investors who have not considered historic, economic and geopolitical perspectives when managing risk and protecting wealth.
Wealth Planning must contain the two vital elements of Wealth Preservation and Wealth Enhancement.
The current problems in financial markets require investors to maintain the utmost vigilance against risks that the world has not experienced for many decades. In the USA and Europe, central banks are flooding the market with liquidity in order to prop up a banking system, which is fighting for survival.
Many major as well as smaller banks are virtually bankrupt but are being kept alive by the actions of central banks. In the last few decades, investors have not had to worry about the safety of banks. Today, this is an essential part of Wealth Planning. It is not a question of major banks being too big to fail. Any bank can fail. Also, investors need to understand that risks are not just linked to deposits of funds.
Equally important is the custodial risk. If a bank fails an investor might not get access to his assets such as equities, bonds or precious metals held by the bank for several years if at all. Thus, it is extremely important to have a wealth preservation plan which considers all risks, be they financial, economic, or geopolitical. A precious metals strategy is a vital part of this plan.
The first priority must always be Wealth Preservation and there are times especially during economic downturns when this is the primary objective. But even during downturns in the economy there are many investment sectors that outperform the stock market. During the last ten years, for example, the Dow Jones index has declined 80% against gold. In the next few years’ stock markets are at best going to give a mediocre return and at worst decline substantially in real terms.
On the other hand precious metals as well as certain commodities are likely to gain substantially during the same period. Thus it is essential to understand that the stock and bond markets are not the only investment markets and that when stock markets are in a longer-term downtrend there are other investment areas to enhance one’s wealth.
For many years making money in investment markets has been an easy game. Most assets have appreciated and there have been no major risks to the financial system. This has now changed.
Stock markets and property markets are in a major downtrend likely to last for a considerable time. In addition there are now substantial risks within the banking system, which need to be taken into careful consideration when taking investment decisions. The dilemma for investors is that their bank will not tell them the truth since the bank cannot inform an investor that his funds are unsafe.
Gold is Money
“Paper money eventually returns to its intrinsic value – ZERO”
Gold is genuine Wealth, it is real money.
Throughout history no paper currency has survived in its original form. Paper currencies are normally inflated away until they are worthless. The purchasing power of the US dollar has declined by 90% since 1950. The situation is the same for most currencies. When governments come under financial pressure they can never resist printing money to pay for debts, be they war debts or just excessive spending. Gold is the only currency which has no liability attached to it.
So far no paper currency has survived intact over a longer period whilst gold has represented real money for several thousand years. When paper money fails investors who own gold still have a currency, which holds its value despite the fact that banks may be bankrupt. Iceland is a recent example of how paper money can lose its value over night. With the massive debt levels and money printing in many countries including the USA and the UK the risk of a similar default in other countries is very high.
Gold has at all times represented real wealth as well as being a medium of exchange. “Old money” has always maintained a percentage of its wealth in gold since the specific characteristics of gold make it probably the safest and most attractive investment for storing and preserving wealth.
Gold stored outside the banking system should be the foundation of the wealth pyramid for high net worth individuals. Therefore, physical gold or silver should not be considered as an asset which is valued or traded on a daily basis.
Gold – An Excellent Investment.
Over time gold has represented an excellent investment that holds it value in real terms. In particular, gold appreciates during periods of high inflation and financial instability. As there is limited supply of gold it cannot be printed to finance the deficit spending of governments.
Gold can act as a critical hedge both against inflation and a deflationary financial collapse.
The world is currently facing a crisis of unprecedented proportions. The financial system is fighting for survival and has been temporarily rescued by governments printing unlimited amounts of money.
There are only two possible consequences of these actions:
Either governments succeed in temporarily rescuing the financial system by printing gargantuan amounts of money. This will lead to inflation or hyperinflation making paper money virtually worthless.
Or, if this fails, there will be a deflationary credit collapse which will lead to a systemic failure of the financial system.
Both of these outcomes will be extremely bullish for gold which always benefits from money printing and high inflation. In the Weimar Republic in the early 1920’s, gold went from Dmark 100 per ounce to Dmark 100 trillion.In the case of a deflationary collapse, many or perhaps most banks will fail whilst gold (stored outside the banking system) will be the only safe money.
The total value of all gold produced in 2010 was around $100 billion. Compared to total investment market of over $130 trillion, the gold market is miniscule. A slight reallocation of investments into the gold market would make the gold price soar. Gold production is stagnant and there are no major mines coming on stream. In addition some central banks have buyers rather than sellers, which will further exacerbate the supply shortage and put upward pressure on the gold price.
Like most investments gold moves in cycles. Although the long term trend has been rising strongly, there are times when gold spends long periods correcting previous rises. In the long term gold has been keeping pace with stock markets but at certain times it outperforms substantially. Since the bottom of gold in 1999, the Dow Jones has declined 83% against gold. Other stock markets show a similar substantial underperformance in relation to gold in the last nine years.
 Since 1999 gold has had an outstanding performance with a total returns of 350-600% depending on the base currency of the investor. A US dollar investment in gold in 1999 would have yielded 600% or nearly 18% compound annual return. For a Euro investor the return would have been 380% total since 1999 or 14% compound annual return. These are outstanding returns outperforming most other investments during the same period.
Gold tends to move in cycles of 12-20 years and should therefore continue to increase in value substantially for another few years at least. But gold should not be measured on a daily basis. Instead it should be considered as a long-term core holding representing the foundation of the wealth pyramid.