It gets tiring to hear comments of how gold is nothing other than a shiny yellow metal to look at and admire…to invest in gold is synonymous to wasting your time. It appears that the majority of investors at this crucial moment in time only restrain from gold to criticize it just as Mr. Warren Buffet did in his most recent shareholder correspondence. It was actually a rather routine assumption that gold does not and will never have the ability to generate anything other than fear-driven investors. I still can not discern as to why Buffet would communicate these absurdities, but I am analytical and must look beyond the shallowness of some to find what lies beneath. And, I believe it could be related to Benjamin Graham, the man who guided Buffet and to whom Buffet will be eternally grateful for all the wise pedagogy he received.

I must be fair in saying that Benjamin Graham is a much revered investor. He is the person behind Security Analysis (1934) and The Intelligent Investor (1949). During his career, which lasted from 1915 to 1956, he developed his investment ideology turning into the person most would look for when defining investments and their values. What we understand today as modern portfolio theory we can thank Graham for. He is known to have understood best the reason for overvalued or undervalued stocks and bonds and why they would stray. Even Graham believed in varying portfolio allocations so they best suit one’s needs as well as yield pertinent profits. So what did he have to say when both stocks and bonds idled or simply dropped altogether? If we take into account what occurred four decades ago as well as what happened from 2011 up until now, it is very clear that portfolios which included only stocks and bonds have somewhat desperately tried to come out even or simply plunged. Any smart investor would have realized this and done something about it immediately.

What could have been done? The addition of gold to these portfolios would have turned their profits around. The overvaluing of stocks and bonds is best fought with the precious metal. But then, why is gold not included in Graham’s allocation design? There is a simple answer to this and it lies in the fact that while Graham was an adult and was in the prime of his career, it was not possible to own a lot of gold. Remember that in 1933 it was prohibited to own gold personally. Then in 1974, it was legalized anew. Unfortunately, Benjamin Graham passed away in 1976 and was never able to benefit from a life where gold was considered superior to stocks or bonds. And this is why in today’s investment forums, gold is belittled. Consequently, this is also why Warren Buffet gets his signaled crossed when referring to gold. In this day and age, the best strategy to use is recognizing that a profitable portfolio distribution is destined to be comprised of three large investment classifications which are stocks, bonds, and gold. Relative valuation should guide one in the distribution to each class. Those who heed this wise advice will advance across the board.

Don’t get agitated when the media puts gold down; just remember that you are living in the present and according to existing circumstances. Presently, one must invest in gold and be protected with the comprehension that it meets a vital and particular intention in a portfolio. At this moment it can be best expressed as real money that safeguards your wealth during times that are characterized by unreasonable government obligations and currency devaluation such as we are now enduring.

We lost so much when gold was cut off from our currency. And that goes for every country which has made this act in self greed. Gold investments in every form have proved worthy especially within the economy. Just remember what happened in Japan in 1949. Its economy was in total and absolute disarray four years after the end of World War II. The rebuilding of major cities had not yet taken effect and transportation was dependent upon the two trains that ran on the chief rail line between Tokyo and Osaka. With hyperinflation in full swing, regular trade was unfeasible. The invading armies hauled any left over industrial assets out of the country. The preceding government was broken up, and a new constitution and government were instituted. Famine took over. And this is how one of the most transcendent economies arose.

If we compare Japan’s truly catastrophic with the situation in Greece, they really are not equipotential. Analytically speaking, the Greek economic self-inflicted predicament is insignificant. The banking institutions are bankrupt but that is a matter of balancing their books. In Japan, the essential cities were blasted to pieces and an entire generation of young men massacred. Greece’s government is in default…true, but no one is dead over it. They are no where near hyperinflation, famine, or on anybody’s list to be wiped off the map. So, why can’t they get it together and make a comeback?

These consequences of somewhat trifling developments are mostly acknowledged by many as a generation of inactivity as well as deterioration. It is actually common practice to see once-promising countries stagger and plunge and never recuperate. It happened to Argentina which used to be one of the wealthiest countries in the world but, at present, is contending to be recognized as a market on the rise.

And what about our economic pickle? Most experts agree that the best road to achieve economic success is low taxes and stable money and Greece is going the other way. People are demanding and making quite a commotion for the introduction of a new drachma, whose only rationale appears to be devaluation. Should a new currency be acknowledged, it should be more secure and trustworthy than what is in place now. And about keeping taxes low, Greece’s government just continues increasing its tax rates, discovering that the only effect is continuous retrogression and more people escaping tax responsibilities. This decreases tax revenues while obligating even more people to become dependent on state welfare and state employment which, in turn, make slashing expenditures politically unattainable. The only road Greece is on at the present moment is one of twenty years of deterioration. Although we are certain of this, it still makes the hairs on the back of your neck rise.

Despite this ugly truth, it is not etched in stone and can change radically if the politicians and business leaders acted as those in Japan…upon a vision. They believed Japan would surface from the ruins and become again a first-rate and wealthy country. The image of a successful Japan promptly led to a plan of action. They began with basically no resources as the economy was comprised essentially of black-market subsistence. Tax revenues were insignificant and issuing debt was not viable. Since tax revenue was far less than required by the government, it subsisted mainly by printing money, similar to Bernanke’s favorite pastime.

They began their recovery by prohibiting government debt issuance until 1965. Afterwards, they declined any more economic aid and, ultimately, in 1949, they linked the Yen to gold, at once bringing to an end the hyperinflation. They also removed the national sales tax. In 1950, the income tax schedule was amended. The top rate fell to 55% from 85%. But, above all, the income at which that rate applied was elevated significantly. This rate was initially associated with incomes of 500,000 Yen. By 1957, the 55% tax bracket applied to income of 10 million Yen which was twenty times more than when they began.

During the 1950s and 1960s, the government was focused on maintaining tax revenues along with the size of the government, below 20% of GDP. The logic behind this would be best for the fast growth of the private sector. Alas, it worked like clockwork. Affluence flourished everywhere during that time. Again, the logic was that wealthy people would be able to pay more in taxes than poor ones. Tax revenues of the central government increased by sixteen times between 1950 and 1970 and all in non-inflationary gold-linked Yen.

A plan like this is what Greece (and the United States) desperately requires. Who knows? Maybe 2 decades from now everything that we’re anticipating from Greece might make a complete turnaround. Maybe, just maybe, in the year 2032, Greece will have become the most affluent nation in Europe. And this all because they acted upon a dream which includes linking gold to whatever currency they choose.

The following are recommended steps for investors to follow on how to invest in gold:

I) Evaluate your specific needs: Each investor should be keenly aware of their long-term and short-term financial needs and expectations, to determine which type, or types of gold investments would best satisfy those needs.

A) Short-Term Needs: Short-term needs are traditionally met with bullion, as bullion prices tend to stay near the current gold spot price

1) Bullion Bars: Reputable brand names are recommended for purity, such as Johnson Matthey, Credit Suisse, and PAMP Suisse. One and ten-ounce bars are normally used by household investors.
2) Bullion Coins (22 Karat): American Eagles, and South African Krugerrands
3) Bullion Coins (24 Karat): American Buffalos, Canadian Maple Leafs, Australian Kangaroos, Koalas, and Lunar Coins, and Chinese Pandas

B) Long-Term Needs: Long-term needs require investments in rare coins, which contain numismatic value, which generally appreciates over time. Investments in rare, American coins could regularly include any one, or combination of the following types:

1) Double Eagle Coins:$20 Saint Gaudens, and $20 Lady Liberty
2) Eagle Coins: $10 Lady Liberty’s and $10 Indian gold coins
3) Half Eagles: $5 Liberty coins, and $5 Indian gold coins
4) Indian coins: Includes the aforementioned Indian coins, as well as the $2.5 Indian gold coin

II) Research: Investors should conduct as much research as possible on their prospective long-term and short-term investments. I.E. many investors prefer to have the inherent, numismatic value of their rare coin investment certified by either the PCGS (Professional Coin Grading Service), or the NGC (Numismatic Guaranty Corporation). Investors can check www.PCGS.com, or www.ngccoin.com, for retail prices on certified rare coins.

III) Contact: A reputable, large-volume precious metal dealer, as these dealers
regularly offer institutional discounts to household investors like you

Upon completing their personal evaluations, and research, investors are encouraged to contact one of our friendly, gold investment specialists, who offer expert consultation, as well as institutional discounts.

Eric Osborne