What should investors own when the world wants a currency alternative?
*Barron's, by Sandra Ward with Joseph McNay, February 4, 2008:
"One of the all-time greats of growth investing, McNay is now
pounding the table for, of all things, gold. Attention must be paid.
Barron's: Are we in a recession or are we perhaps talking ourselves
into one?
McNay: We certainly are in an economic slowdown, and my personal
opinion is that we are in the early phases of a recession.
Whether we are in a recession or not is irrelevant because we are
slowing down, and results are becoming more negative. The Federal
Reserve has been very much aware of this and has been acting
consistently in that regard. They've been increasing the money supply
at a much faster rate than people realize, near a 15% annual rate of
increase in M3 [a broad measure of the money supply].
What would be more typical growth in M3?
Five percent, maybe. Increasing the money supply kept the situation
from getting worse faster than it would have otherwise. From one point
of view, that's good. But there is a point of view from which it is not
good, and that is it decreases the value of our currency on a
consistent basis and sometimes at an accelerated rate. In the past four
or five years, the euro has gone from 82 cents to the dollar to $1.48.
That is all lost purchasing power in our currency. We are in a
lose-lose situation. The decline in the value of our currency is
directly inflationary: Lost purchasing power is inflation. The bigger
risk is that, at some point, the large holders of U.S. dollars may
decide they want a lot less of them, if any. This is a very challenging
set of conditions for us.
What does this mean for the market?
We are going to have an even more narrowed and focused market than we
had last year. Something the world is going to want now is a currency
alternative. An investment I have felt positive about but now feel
dramatically more positive about is gold. Gold is probably the single
most important investment that most of us can have a representation in."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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