I often listen to Charlie Rose on Bloomberg TV. A few nights ago Charlie interviewed Laurence Fink, CEO of the giant Blackstone Group. Fink said he was most worried about the age change in the US. He said that most of the programs in the US were set up on the thesis that Americans were quite old in their 60s, and that after 60 Americans were close to the dying age. But now, said Fink, Americans are very commonly living into their 80s and 90s. And they don't have the money to support themselves as they move into their new age ranges. Even if you have a million and a half dollars now, that's not enough to support yourself into your 80s or 90s -- not with what you can get on interest rates today. What good is a million and a half dollars (which most Americans don't have) at 1% interest? Thus, old age is going to be a terrible problem in coming years in America, Fink warned.
Gold -- I've been thinking more and more about the yellow metal. Price action -- Over the last month gold has had every opportunity to break down below 1500 and undergo a full correction. But it never happened. What the market doesn't do can be as important as what the market does do. Of course, the gold mining stocks underwent a full correction, and many gold "experts" warned that the metal would follow the gold mines down. It never happened, which I took as very bullish for bullion.
In this business, logic and reality usually win out, although sometimes it seems forever before this comes to pass. In the long history of paper fiat money, no fiat currency has ever lasted for long. And this is as it should be. It's illogical, immoral, and against reason that a group of men at a central bank should be able to print or publish wealth at will -- to create wealth out of thin air.
Thus, I am taking it for granted that history will repeat. In due time all of the current fiat money that is being ground out by the various central banks will be footnotes in monetary history. But this won't happen overnight. It may take many months or even years. But while it is happening, intelligent men and women will sense the trend. As the news of the slow death of fiat money becomes accepted, smart investors will be looking for tangible substitutes for the dollars and the euros and the reals that they hold.
Already this is happening; we can see it in the astounding prices certain works of art are selling for. It's happening in many areas. Babe Ruth's 1934 uniform just sold for $4.4 million. Diamond prices are up 35% over the last few years. Classic cars are being auctioned off in the millions of fiat dollars. In dozens of areas, tangible items are being purchased at outrageous prices. Munch's pastel work, "The Scream," just sold at auction for $120 million dollars, a record.
I believe that gold is far behind the game. Gold has been recognized as a medium of purchasing power for five thousand years. Most of Asia understands gold, but decades of anti-gold propaganda has turned Americans against bullion. Proof -- try to pay for your next restaurant dinner with a one-ounce gold krugerrand.
This is starting to change. For ten years running, the price of gold has pushed higher. Even this remarkable record has not changed US sentiment towards gold.
Gold is in a classic bull market. I think gold is in its second psychological phase.The second is the longest phase of a bull market. It's the phase where the public slowly becomes interested in an item.
I believe that the third sentiment phase for gold lies ahead. In the third phase the public finally turns bullish, then more bullish, and finally all-out insanely bullish.
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