Best of the Week
Most Popular
1.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
2.Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - Clive_Maund
3.UK Regional House Prices, Cheapest and Most Expensive Property Markets - Nadeem_Walayat
4.US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - Rambus_Chartology
5.Silver Price, COT, US Dollar Updates and More - Dan_Norcini
6.Will Gold Price Drop Below $1000 Soon? - Brad_Gudgeon
7.UK Regional House Prices Analysis - Video - Nadeem_Walayat
8.Crude Oil Swinging For The Fences - A 20 to 1 Option Play - Bob_Kirtley
9.Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - Bloomberg
10.UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - Nadeem_Walayat
Last 5 days
Why We Won’t See Gold $5,000 - 1st Dec 15
Globalist Lockdown is here to Stay - 1st Dec 15
Bank Regulations Continue To Hinder The U.S. Economic Recovery - 1st Dec 15
Thanksgiving Amid the Terror Threats - 1st Dec 15
Collapsing Global Economic Trade - 1st Dec 15
Gold Demand in China Heading For Record and Reserves - 1st Dec 15
Stock Market Mixed Expectations Ahead Of December, New Economic Data Releases - 30th Nov 15
The First Prophet - The Day God First Spoke to Man - Video - 30th Nov 15
America's Rendezvous With Destiny - The Fourth Turning - 30th Nov 15
Stock Market Consolidation Week - 29th Nov 15
A Black Friday for Gold Prices - 29th Nov 15
Politicians Driving The World Towards War - Fourth Turning - 29th Nov 15
Stock Market Down Monday, Gold Price Bottoming? - 29th Nov 15
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Investors Protect Yourself From Gold

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

By: Investment_U


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,


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.


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:

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

© 2005-2015 - 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

Biggest Debt Bomb in History