The Law of Long-Term Time Preference and Gold Ownership
The comments below are an edited and abridged synopsis of an article by Michael Kosares
“Those who plan, invest and execute long-term win,” says market analyst R.E. McMaster. “Win-win decisions, looking to the long term with short-term work and sacrifice, are historically the tickets to success in all areas of life—short-term sacrifice for long-term benefits, deferred gratification rather than instant gratification. This is the difference between wealth and poverty, between class and trash. Those who make primarily fear-based, ego-based, selfish, win-lose, lose-lose, emotional and/or short-term decisions as their primary mode of operation in life nearly always end up miserable, often as losers in a comprehensive sense in life. Such people are walking tornadoes to be avoided.”
Successful investors have a philosophy that they rely on no matter what happens in the short-term markets. They are rarely shaken by short-term events and are rarely guilty of short-term thinking. They don’t buy gold (coins and bullion) as a speculative investment, but as an asset accumulated for long-term asset preservation. Thus, when we have a sell-off, experienced gold investors usually view it as a buying opportunity and part of a normal, healthy market process.
Jim Puplava, a 40-year market veteran, says that an investor needs to make only a few investment decisions in their lifetime. The key is to identify a long-term trend as it begins to emerge, invest in that trend, then ride it until it ends and another trend replaces it. For example, US stocks in the 1950s and 1960s, commodities in the 1970s, Japanese stocks in the 1980s, tech stocks in the 1990s, commodities in 2000s, and tech and paper assets in the 2010s. The next emerging trend will favour hard assets. This is what gold is telegraphing now. This trend will be inflationary, driven by resource shortages and a tsunami of money printing.
Up for discussion: Warren Buffett’s timing on gold; an Ohio pension fund buys gold; when the process engages all the hidden forces of economic law on the side of destruction; gold is good, but silver is even better (in fact, it has been the best-performing asset in 2020); and a final thought: gilding the rose.