What caused recent market ups and downs? In volatile markets, how can you protect your hard-earned cash with gold and other physical precious metals?
Market volatility, which is associated with a higher probability of a declining market, makes it hard for many people to plan ahead. In our latest edition of the Market Report, Will Hart and Jake Kennedy explain how hard assets like gold and other precious metals may provide a hedge against market ups and downs.
Mark Alyn: This is the Market Report from the Birch Gold Group. Hi, I am Mark Alyn. Joining me in studio Will Hart and Jake Kennedy, both from the Birch Gold Group. Gentlemen, thank you for joining us again on the show.
Will Hart: Always good to be here Mark.
Jake Kennedy: Likewise.
Mark Alyn: Let’s talk about the volatility of the market. My understanding is that in recent months the market has been, you know, going a little here [and] a little there, but all of a sudden we’re seeing big ups and big downs, very volatile. Can you respond to that?
Will Hart: Yeah. I’m reading what the experts are saying, and I’m trying to make sense of everything that everybody’s saying, and everybody has different opinion across the board. I think the big thing that people need to kind of pay attention to is Europe. They are having their own problems over there with their economy and they are talking about doing their own form of Quantitative Easing. When you talk about the euro value weakening, well that’s good for the dollar. And then the dollar gets stronger, and then in turn – if we are talking about the market, the stock market – that’s gonna send a lot of shock waves throughout the market. So we’re gonna see big gains and big losses. It’s gonna be a roller coaster in there. And then actually the same thing applies to gold. Gold would do the same – you’ll see that same roller coaster because it’s feeling the impact of the strengthening dollar. I feel like I’m saying a joke when I say that, [regarding the strong dollar], because [if we consider our] $18 trillion debt, [it] is hard to say that our dollar [is] strong. So, I mean America is still a power house economically, but we are in trouble. And it’s not helping that the government’s only answer is: “Let’s just keep printing money.” I think that when you tie in Europe, when you tie in the dollar, when you tie in everything all together, is why we’re seeing these traumatic roller coaster rides.
Jake Kennedy: Plus there is a lot of uncertainty: [There is] uncertainty in the Middle East, there is uncertainty in Japan, there is uncertainty in Europe, there is uncertainty in our country, not just with the markets but financially [and] economically. Then [there is the] Russia and Ukraine situation, but there is a lot of things that are playing on a lot of people’s nerves right now. So that doesn’t help ether.
Mark Alyn: We are also not just talking about the US economy – we are talking about a global economy.
Jake Kennedy: Global economy. Correct.
Mark Alyn: We have a global economy. What happens in Japan affects us here in the United States [and] affects Europe as well. What happens here in the U.S. – as we either end Quantitative Easing or not, whether or not the market goes up or down – it affects people throughout the world. Can you respond to that?
Will Hart: Yeah, well again, people have to pay attention [to] not just what’s going on domestically but internationally. They have to pay attention [to] what’s going on over, you know like Jake was mentioning, in Japan, in Russia, and so forth. And you have to kind of look beyond; you have to look outside the box. And you gotta say, “Well, what’s best and how is this gonna affect my portfolio, and is staying in paper the right move? Is the market – the stock and the bond market – is it strong enough to withstand these repercussions that are happening?” And a lot of experts are saying, “No”. I mean I’m reading article after article about billionaires who are quietly moving out of paper and moving into hard assets like physical gold. And when I was growing up, my dad always said, “Go where the smart money goes.” And when I see Warren Buffet and other billionaires moving into hard assets I kinda gotta agree that that’s probably the smart move.
Mark Alyn: Do we know what kind of percentage of their portfolio they are moving? I mean, it varies person to person, billionaire to billionaire?
Will Hart: I think it probably varies from billionaire to billionaire. I think each person is gonna look at themselves and say, “How much faith do I have in the market? How much faith do I have in the U.S. dollar?” And each person is gonna make their own decision on how much of their portfolio should be in hard assets.
Jake Kennedy: And that’s the thing. People really need to have a real close look at that right now, because what I’m finding is that a lot of people are buying the hype: “Oh, unemployment is coming down, the markets are up, everything’s just great. I’m gonna do nothing and I’m gonna stay where I am because I am doing good right now.” But the people who really get under the skin of the statistics see the truth – that our economy isn’t healthy, more people are unemployed now than they were before, the crush of 2008. And what’s really buoying this market? Is it the fact that American companies are doing really well or is it the fact that a lot of money, printed money, is buoying the stock market giving people a full sense of hope or sort of a false picture at least? So we got a lot of dangers in front of us, and anything can happen at any time quite literary – economically, financially, not just because of what we are doing, but because what’s happening around the world. So people really have to take a close look at that and say, “OK, there’s real danger. If I stay put and we have a shock to the system, maybe another ’08 (and people like Peter Schiff, Marc Faber say the next crash would be worse than ’08), if I stay in paper assets all denominated in the U.S. dollar, stocks, bonds, mutual funds, am I gonna be safe? Or do I need to diversify what I have and maybe buy some hard assets? Or not even buy – convert some of my paper dollars and paper assets into hard assets like gold and silver just in case.” And that’s what we are finding with the smart money right now; clients who really see through the smoke and mirrors are saying, “Geez, this isn’t gonna end well. We can’t keep printing money. This can end badly. So I am gonna take x percent of my portfolio, move it sideways into metals, and, if things get worse, then my gold would really do quite well cause it’s done that in the past, and [gold would] counterbalance loses I see elsewhere.” And the people who don’t see a problem are gonna stay in paper, and people like Marc Faber say, that’s gonna wipe out 50% of America’s wealth if the people haven’t done anything.
Mark Alyn: And it could be overnight? And there is like a 180 degrees – if the market goes up, the price of gold goes down. But if the market goes down, gold goes up, which seems to me this is a good time to buy gold and other metals because of that.
Will Hart: Absolutely. And as a matter of fact, Mark, one thing that I don’t think we ever pointed out on any of the episodes that we’ve done: the cost, mining cost. I’ll give you an example, like you just said, “Is it a good time to be buying metals?” Well, let’s put it this way, and I’ve done the research and listeners are welcome to go do the same thing: find out what the average cost a mining company here in the United States pays to dig out an ounce a gold, this little tiny flakes that are in tons and tons of ore of dirt. And the average cost is between $1200-1300 an ounce. And you gotta look at the price of gold, and you say, “Wait a minute. I don’t understand. So basically mining companies are losing money because of where the price of gold is?” And the answer is: “Yeah, a lot of them are riding on fumes hoping that there is gonna be this correction in the price of gold, because it should be higher based upon the cost of goods and services and the cost to actually mine the gold. And a lot of mining companies are shutting down. You have less gold entering the market because less mining companies are digging it out of the ground, and the demand is greater than ever. So you got less gold and demand greater than ever. To me that equals a perfect…yeah…gold going up.
Jake Kennedy: And I read something – advice from one of these investors, from one of these newsletters that says, “Anytime you can buy anything cheaper than it costs to make it, buy it.”
Will Hart: Yeah.
Mark Alyn: Yeah, absolutely. It reminds me, not that I was there, the gold rush. You know in California for example, we should be having…or are we having a gold rush today?
Will Hart: No, we are not. Mark I agree 100%. There should be a gold rush right now, because if everybody is seeing the weakening dollar and the devaluating dollar, you think people would be running out. The problem is the cost. The easy pickings, the gold rush days – those days are gone. Now to get gold, you need massive man power, massive machinery moving thousands and thousands of tons of dirt to find these gold flakes. So, it’s expensive and arduous. So, until the metals start coming back up, then you’ll see that gold rush.
Mark Alyn: I can see the three of us with mules packing into the desert and looking for gold.
Jake Kennedy: Many of my clients are doing that.
Will Hart: So do I.
Jake Kennedy: But to answer your question in a different way…How come we don’t have a gold rush right now? Like figurative gold rush not a literal one. That’s a really interesting question. I think the smart money is rushing to gold. And I think if you listen to people like Jim Rickards who have written books on the death of money and global currency wars, he says things like, when the general populous see that the emperor has no clothes, sees that dollar is backed by nothing and confidence has been lost in the dollar and other assets, [then] the market starts falling as a result. They are gonna go, “OK, where can I go? Inflation is running higher than 2%, real inflation. Bonds aren’t good. Maybe the dollar? – well, that’s not doing me any good right now. Stocks are coming down – so where can I go? Things like land and real estate are very hard to buy, very illiquid…
Will Hart: Hard to buy and hard to sell.
Jake Kennedy: That’s right, exactly. So what is the easiest thing to buy, to sell, that’s gonna protect you from inflation and devaluation of the dollar? And that’s why I think when the emperor has no clothes, people are gonna rush to gold so hard and so fast, kinda like they did in the 80s but it’s gonna be much quicker. Jim Rickards says, at that point you may not even be able to buy the gold, physical gold, because it won’t be available. You know you can buy paper gold all day long, but if you go and try to buy a reasonable amount of gold in those times, it’s gonna go so fast, because it’s already going fast. We are selling probably more gold than we ever sold…
Will Hart: I had a client last week tell me that she was going to a local shop, local coin shop, but the amount of gold that she wants – they don’t have it, they can’t get it. And that’s why people come to us for a larger portfolio protection.
Mark Alyn: Of course. And of course at the Birch Gold Group you guys make it very easy to convert dollars into gold, stocks into gold, whatever people have to convert to buy the gold.
Jake Kennedy: The good thing about us is that we do the heavy lifting for clients, because a lot of people haven’t done this before. But they know gold is the right move, because they are reading about what’s gonna happen to the dollar, what’s happening right now. Gold and silver are great hedges against all those things that we’ve talked about so they are like, “I don’t know, how do I do this?” And that’s where we’ve created our reputation and strength in the market place. People call us up; doesn’t matter their level of experience, we will spend the time with them, we will walk them through how to make a cash transaction.
Will Hart: We hold their hand, we educate them.
Jake Kennedy: But converting an IRA or an old 401K into precious metals takes a little longer, and it’s a little trickier, but we’ve got departments and teams of people who will really help them understand that, help them with the papers, account set up according custodians, and then we take over and do everything behind the scenes and make it very easy for clients.
Mark Alyn: So it’s an easy, easy phone call to do.
Jake Kennedy: Extremely.
Mark Alyn: And to make that phone call, you should call (800) 355-2116. You can talk to a gold specialist. You can get a gold info kit from Birch Gold by going to the www.birchgold.com website. Again call the number (800) 355-2116, and you can also e-mail us at firstname.lastname@example.org. I’m Mark Alyn for Will Hart and Jake Kennedy, thanks gentlemen.
Will Hart: Thank you.
Jake Kennedy: Thank you.
Mark Alyn: This is the Market Report. We’ll see you on the next edition.