Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Investors Protect Yourself From Gold

Commodities / Gold and Silver 2013 Apr 21, 2013 - 11:09 AM GMT

By: Investment_U

Commodities

Marc Lichtenfeld writes: Gold is supposed to act as a safe haven from crisis and a hedge against inflation. But lately, it hasn’t been either.

You would think with the bombastic manchild leader in North Korea threatening nuclear Armageddon and the usual problems in the Middle East, investors would flock to gold. But gold fell 10% in two days.


Even after the news of the bombing at the Boston Marathon broke, gold continued to slide. That was the most surprising twist in the plot. An attack on American soil should send investors scurrying to gold. Instead they sold it.

This isn’t what’s “supposed” to happen.

Just the Facts, Ma’am
Gold may make investors feel better in times of crisis and financial uncertainty, but it’s hard to argue with the fact that it’s a volatile asset. Since hitting a high in October, the precious metal is down 23%.

That’s why I say if you really want to be sure you’re keeping pace with inflation and own assets that can survive a crisis… forget gold.

You should be looking at Perpetual Dividend Raisers – the stocks that raise their dividends every year.

I’m sure many of you are thinking, stocks safer than gold? That’s ridiculous.

But look at the numbers over the last 40 years, starting right after the U.S. dollar left the gold standard:

Since 1973, long-term investors who went with dividend-paying stocks outperformed the folks piling into gold. An investor who held the S&P 500 for 10 years made an average of 159.3%, while those holding gold earned 86.7%.

What do these numbers tell us? They tell us that over long periods of time, investors are better off holding stocks than gold.

(This doesn’t mean you shouldn’t have any gold in your portfolio. The Oxford Club‘s Investment Director Alexander Green recommends you keep 5% of your portfolio in precious metals. I agree. It’s important to be diversified.)

Best Way to Beat Inflation? Crisis?
Over the past 40 years, inflation has pushed prices higher.

Something that cost $100 in 1973 will cost $524 today. In contrast, $100 worth of gold in 1973 is now worth $1,481. However, $100 worth of the S&P 500 is now worth $1,931 (including dividends received).

So stocks win that battle. They have done a better job outpacing inflation.

As far as which asset is the best hedge against crisis, there are lots of data to test against. We’ve certainly had our share of rough times over the past 40 years.

Think about how many times the spit has hit the fan since the early ’70s – Vietnam, Watergate, high inflation, gas shortages, the Cold War, Iran-Contra, 9/11, the dot-com collapse, the war in Iraq, the financial crisis, etc.

And through it all… stocks have performed better than gold.

The good news for gold bugs is that during the years gold rose in value, the shiny metal was a better performer than stocks. And during gold’s down years, it lost less value. But, as the table shows, gold had almost as many down years as positive years.

That’s a problem, particularly if you’re using it as a hedge.

So what’s an investor to do?

Simple. Buy stocks that raise their dividends every year. These solid companies, such as Johnson & Johnson (NYSE: JNJ) and Kimberly-Clark (NYSE: KMB), not only have been paying dividends every year, but have raised them every year for decades.

Johnson & Johnson, which has boosted its dividend for 50 years in a row, raised it an average of 11.7% per year over the past 10 years. That kind of boost is more than enough to outpace inflation and increase your buying power.

And just as appealing, Kimberly-Clark’s average dividend hike was 9.5% per year over the past 10 years.

These are well-established companies that have been doing their thing for generations. Could they have a bad year or two in the future? Of course.

But I’ll side with history here and assume the companies will continue to grow their businesses over the next decade – and every year deliver more cash back to shareholders than they did the previous year.

And as we’ve seen, these types of stocks more than weather the storm if you have a long-term view.

Gold has made a lot of money for investors over the years. But stocks have made a whole lot more.

Remember that the next time there’s a crisis.

Good investing,

Marc

Editor’s Note: History may not repeat itself, but it rhymes. And many investors forget why gold tanked in the early 1980s – as inflation was rising.

The answer? Interest rates.

As rates were pushed into double-digits by the Fed to fight rising inflation, investors and traders fled en masse into government-backed, double-digit-yielding bonds, CDs and savings accounts. Why hold a ton of gold when you can earn double digits in a liquid savings account?

Sure, gold eventually rebounded – explosively. But that was decades later… Do you have that much time?

The other thing many people are missing is that in our new digital age, any big rate fluctuations are going to transpire much sooner (in a matter of minutes) and faster (as soon as June 12) than most people (and their portfolios) are ready for.

That’s why Marc has spent almost two years researching the best way to handle this game-changing shift in the markets. And he’s convinced it’s going to make or break millions of people’s retirement lives.

The perpetual dividend-raising stocks he mentions above are part of his unique strategy. But there’s another special kind of income investment that Marc predicts will reap rewards as high as 164% when rates begin to tick up. These same “spread banks,” as he calls them, will also pay out thousands of dollars in extra income each month.

To see all of Marc’s work, click here.

Source: http://www.investmentu.com/2013/April/protect-yourself-from-gold.html

http://www.investmentu.com

Copyright © 1999 - 2011 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife