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Peter Schiff - The Institutional Gold Rush



May 07, 2011 – Comments (5) | RELATED TICKERS: GLD , AUQ.DL , CEF

I have worked on Wall Street my entire life, and one thing I've learned is that large institutional investors, like pension funds and endowments, rarely veer from the herd. They manage too much of other people's money to stick their necks out alone – if their investments go bad, at least they can point to everyone else who fared just as poorly.

For this reason, these funds are often lagging in their perception of crucial market changes – changes such as a doomed currency. While many of us are buying precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years. Fund managers are taught that gold is a "barbarous relic" – much better to stick with government bonds and blue-chip stocks. That's what everyone else is doing.

But there are early signs that the herd is changing direction.

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5 Comments – Post Your Own

#1) On May 07, 2011 at 1:01 PM, amassafortune (29.06) wrote:

For years, Louis Rukeyser needled goldbugs during his year-end reviews. In those years gold and silver ovners regularly had buyer's remorse.

As usual, the best time to buy an investment is often when the big money won't touch it and the financial media is actively trying to discredit it. 

PMs guard against inflation and protect against currency collapse/devaluation. The recent PM pullback, especially for silver, has more to to with weak economic numbers and Bernanke repeatedly saying commodity inflation is temporary (These aren't the droids you are looking for).

At the core of this debate, and the reason I believe the precious metals trend is not over, is the fact that the top financial decision makers have shown no signs that they are willing to reign in much of anything. They believe in easy money, they believe in lax regulation, and they believe that trickle-down puts capital in the hands of those who will put it to its most productive use. 

As Schiff notes, PMs are likely to become mainstream investments. If just the dollar, or yen, or yuan, or euro, was at risk of devaluation, precious metals would not appreciate.With every major currency being irresponsibly managed, PMs will retain their lustre until at least one large economy regains a conservative balance of payments.

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#2) On May 07, 2011 at 2:15 PM, AvianFlu (< 20) wrote:

amass: I completely agree with you.

I haven't thought about Louis Rukheyser for years. I miss him! I wish someone was start a show with exactly the same format. Jim Cramer is NOT a good substitute for Louis. Watching his show is where I first realized that intelligent and thoughtful experts could come to completely opposite conclusions while looking at the same data.

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#3) On May 08, 2011 at 10:38 AM, skypilot2005 (< 20) wrote:


  May 07, 2011 at 2:15 PM, AvianFlu (89.48) wrote:

"I haven't thought about Louis Rukheyser for years. I miss him!"


Me too.  He had a great dry sense of humor, as well.

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#4) On May 08, 2011 at 11:36 AM, amassafortune (29.06) wrote:

To highlight a point Schiff partially makes, juxtapose The University of Texas Management Co taking posession of its $1 billion of gold bullion with US Treasury Tells Lawmakers It Needs $2 Trillion In Debt Capacity

and 80% of May 3 POMO (Perm Open Market Ops - the Federal Reserve stock market pumping scheme) Came from a 7-yr bond auction done three days earlier.

That which is real is becoming more real, and that which is unreal is getting really unreal - and the two are diverging at an accelerating rate.Bernanke says he can reverse course in 15 minutes and is willing to bet your wealth, future tax receipts from your kids, and the future tax receipts of your grandchildren to prove his theories are correct. The University of Texas just hedged Bernanke's bet. Obama and Geithner are moving to double-down.   

Robert Frost makes Schiff's point more eloquently in The Road Not Taken, 

Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference.

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#5) On May 08, 2011 at 11:59 AM, amassafortune (29.06) wrote:

Years from now, in the final analysis, I think Frost will be recognised as the more insightful economist, knowing his intent to reverse course and return to this point, even if possible, will not be the decision he makes when it comes time to make that decision. I suspect Bernanke is just about as human as Frost.

Yet knowing how way leads on to way,
I doubted if I should ever come back.


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