Fighting The Fed Can Be Great For Your Wealth

For decades, investors have lived by the adage that you should not “fight the Fed.”

In simple terms, this meant not investing in a fashion that went against the Fed’s policies. If the Fed was easing, you didn’t want to be short. And if the Fed was tightening, you didn’t want to be long.

However, the fact of the matter is that fighting the Fed has done very well for investors. We don’t mean“fighting the Fed” by buying or selling stocks based on individual Fed policies... We mean, “fighting the Fed” by owning Gold.

The Fed has few real monetary tools at its disposal other than US Dollar devaluation via money printing. The Fed has been and remains primarily involved in papering over debts courtesy of inflation induced by Dollar devaluation.

Indeed, the US Dollar has lost over 90% of its value since the Fed came into being in 1913.

Critics of Gold point out that Gold has not advanced to compensate for this. However, they are comparing Gold to the US Dollar throughout a period in which Gold was pegged to the US Dollar and other global currencies for at least 50%+ of the time.

To really assess how Gold has performed as an investment, you can only look at it once it was floating against all currencies. This means looking at Gold from 1967 onwards when France finally dropped the Franc/Gold peg (France was the last holdout)

Since that time, Gold has not only more than compensated for US Dollar devaluation… it’s ALSO crushed stocks (both the Dow and the S&P 500) by a massive margin.

From 1967 onwards, the Dow has risen roughly 19 fold. Gold, in contrast, has risen over 38 fold, or almost TWICE the same return of stocks.

Indeed, once Gold was no longer pegged to world currencies there was only a single period in which stocks outperformed the precious metal. That period was from 1997-2000 during the height of the Tech Bubble (the single biggest stock market bubble in over 100 years).

Put another way, if an investor had simply bought Gold in 1967, fighting the Fed’s money printing from that day onward, he or she would have grown dramatically wealthier than would have been the case if he or she had bought stocks.

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Phoenix Capital Research