“A wise investor needed only a percentage of gold to offset losses in other areas of their portfolio. An even wiser investor held additional gold and used it to buy stock desperate people were selling for whatever they could get. In 2008, an ounce of gold could be exchanged for 135 Apple stock – today worth more than $40,000.”
Written by guest author: Michael Chagala
The views and opinions expressed by guest authors do not necessarily reflect the official policy or position of Precious Metals Direct. Any content provided by our guest authors are of their opinion and not intended to be financial advice.
The very wealthy seem to know something we don’t. They do their best to keep it hidden, yet it’s easy to see if you know where to look. They are all doing it. All behind your back.
The first time I became aware that the modern world is still vulnerable to financial turmoil was 2008. It was only a few years prior to 2008 that I had the maturity to begin putting a percentage of my paycheck into a 401k and IRA. Like 78% of Americans, I was living paycheck to paycheck, and the money that went into my retirement fund each month had a direct impact on the amount of groceries or rent I could afford. I worked incredibly hard for a small paycheck and every dollar counted. But I was doing what the experts were telling me to do – I was putting away money and playing by the rules. Someday the money would be there when needed the most.
I remember the prior .com crash of 2000, but it didn’t seem to have an impact on regular people – a few repossessed Ferraris and foreclosed mansions, but people like my father continued to get a paycheck and didn’t seem bothered by any of it. He, and the rest of society, didn’t have sympathy for people who suddenly became rich, then suddenly lost it again. After a few news cycles, talk of the .com crash faded, and those who lost it all seemed to find new footing as senior vice presidents in the next round of technology companies.
But the Crash of 2008 Changed Everything.
I watched helplessly as my own retirement funds evaporated – the crash was happening to me. Same with that of my friends and family, many of whom also had barely been making ends meet for years but still found a way to put a few painful dollars away into a system that promised to support them later in life. How could this happen? We played by the rules and listened to financial advisors. I went to every 401k meeting my employer provided. The funds I chose were managed by people in expensive suits in tall towers. Nonetheless, there I stood – half my life savings gone, or somehow transferred to someone who knows how this game works.
I vowed to never let this happen again.
Watch what the Wealthy Do
The very wealthy didn’t lose half their life savings in 2008, or any other crash in United States history. They seemed to not only avoid losses but come out ahead. Almost as if they simply laid-low while an invisible vacuum sucked money out of the middle class, then used the same money to buy back stocks and real estate at pennies on the dollar.
The secret to their success is to play both sides of the coin. Money doesn’t disappear during an economic crash, is simply moves, and the wealthy position themselves where the money is going. While the rest of us blindly feed our hard-earned money into retirement funds owned, in large part, by these same wealthy people – they are busy using the classic buy low, sell high strategy. Think of it as a scale; at one end of the scale are assets that go up in value during a booming economy and drop during a crash, and assets at the other end that do the inverse. The wealthy invest in both. You do not. By investing across the range of the scale, the wealthy always have assets gaining value at the same rate another is dropping. Buy low, sell high seems like common sense, but those of us in the middle class insist on not applying it to our own situation – we continue to invest on only one side of the scale. Almost without fail in United States history, an economic crash strikes every 8 – 10 years, and during these periods the middle class gifts half their life savings to the wealthy. Perhaps the rich have figured out that 8 – 10 years is just long enough for the middle class to have forgotten about the previous crash.
The Secret Life of Gold
Following the buy low, sell high strategy, rich people can get rock-bottom prices on things like real estate, fine art and foreclosed super-yachts during an economic crash. For example, after 2008, wealthy people bought entire neighborhoods in places like Detroit, sometimes for only a few hundred dollars per home. They know once the economy picks up, this investment will transform into a fortune and they will sell.
When the economy is booming, rich people buy gold. Why gold? Because when times are good the price of gold is dirt cheap, but then almost like magic it skyrockets when the world goes into financial turmoil. In fact, the worse the turmoil, the higher the price. Gold is where the wealthy position themselves. This is where the money goes. Gold isn’t the only thing the rich buy for cheap when the economy is strong, but it’s perhaps the only asset that’s also available to you; you could, right now, have gold sent to your house or moved into your IRA with a few clicks of a mouse.
Because of our current economic boom, the wealthy are acquiring massive amounts of gold as I write this. While you are distracted, deciding what useless disposable consumer goods to buy – gold is selling at historically low prices right under your nose. The rich go to great measures to keep their gold purchases silent as they know that if the middle class knew this was the right time to buy, they would do so in mass and drive up the price. They don’t want the price to go up until they have all of it. You need to do the same.
Still not convinced?
In 2007, the price of gold was $833 per ounce, in the aftermath of the 2008 crash it soared to $1895. Think about that for a moment. Imagine, during a crash, watching the value of your gold more than double as everyone else watched in horror as their investments plummeted. A wise investor needed only a percentage of gold to offset losses in other areas of their portfolio. An even wiser investor held additional gold and used it to buy stock desperate people were selling for whatever they could get. In 2008, an ounce of gold could be exchanged for 135 Apple stock – today worth more than $40,000.
Whether you buy gold or not, wake up to the fact that you need to play a more active role in managing your own money. Doing what everyone else is doing, or what you’ve always done, is not necessarily in your best interest. Educate yourself; understand your options. Don’t rely on financial advisors or your human resources manager to make decisions for you. Watch what successful people do with their money, and see if the same strategies are a fit for your situation.
And perhaps most important, don’t underestimate the power of gold.