Stock Investors, Like Alfred, to Lose 98% of Their Investment

The comments below are an edited and abridged synopsis of an article by Egon von Greyerz

The stock market is a slot machine with guaranteed payouts. No skill is required, and relatively little money. You don’t even need to be lucky, since the machine spews out cash with no need for a strategy or dexterity.

Stock Investors, Like Alfred, to Lose 98% of Their Investment | BullionBuzz

Von Greyerz tells the story of Alfred, a stock market winner with zero talent. Alfred is a permabull, in spite of many 40-60% drawdowns. He has outperformed 99% of all investors.

What Alfred doesn’t realize is that the stock market turned down in real terms in 1999. Between 1999 and 2011, the Dow fell 87% against gold. Since then we have seen a correction up in the ratio and the Dow is now down 55% since 1999. This means that since 1999, gold has outperformed stocks by almost 100%.

Alfred, along with most investors, is about to suffer huge losses. Few will understand why this time the market won’t go up as usual. For the first time in his investment life, Alfred could have benefitted from some understanding of risk and wealth preservation but, sadly, it will be too late for him.

And this is how we will see the biggest wealth destruction in history, bursting the asset and debt bubbles of the last 100 years. Most people will not realize what has hit them until it is too late.

To own physical gold and store it safely outside the banking system is the best insurance against the coming calamity in world markets. Short term, gold in US dollars has attacked the Maginot line around the $1,350 level. This line has been broken by gold measured in many other currencies, but not yet in dollars.

The Maginot line is strong, and there may be a few attempts before the price breaks through. There could be a minor correction down from current levels for a while, which will give investors an opportunity to acquire gold and silver at prices that will never be seen again. The real fireworks will start once gold has decisively broken the Maginot line.

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