'Mphm!' - How Cultivating A Little Disdain And A Healthy Gold Diversification Can Help You Cope With The Times

As we move into the annual summer market slowdown, we thought a departure from our usual rendering of charts, tables and numbers would be a refreshing change. "Mphm!" is the result.

“It is related of the illustrious Sandy McHoots that when, on the occasion of winning the British Open Championship, he was interviewed by reporters from the leading daily papers as to his views on Tariff Reform, Bimetallism, the Trial by Jury System, and the Modern Crave for Dancing, all they could extract from him was the single word ‘Mphm!’ Having uttered which he shouldered his bag and went home to tea. A great man. I wish there were more like him.” P.G. Wodehouse

These days opening the morning newspaper or switching on the evening news can be akin to an assault on mind and senses, as the media compete on a daily basis to see who will do the best job of ‘shocking and awing’ us. Quite often, we let that assault get the better of us – the blood pressure rises and the mood sours. Sandy McHoots, as Wodehouse describes him, harbored a healthy, well-cultivated disdain for that sort of thing. My guess is that McHoots was a gold owner. How could it have been otherwise?

Source: The Strand, Novermber, 1921
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"I am not bound over to swear allegiance to any master; where the storm drives me I turn in for shelter.” – Horace, 65-8 B.C

The fact of the matter, though rarely discussed, is that gold ownership has more to do with personal philosophy and how we wish to conduct our lives than it does finance and economics. With that thought in mind, I would like to tell you a story – one that speaks to the peace of mind that comes with gold ownership and the positive impact it can have on your lifestyle.

It begins with the happy occasion of receiving a telephone call from an old client and friend – a physician safely retired near the sea and alongside one of the South's oldest golf clubs, one with whom I have had a long and pleasant business association over the years. It was good to hear from this student of the markets – one of life's steady and thoughtful practitioners. McHoots probably would have counted Doc, as I will call him, a friend, since he thinks much like the character so skillfully described by Mr. Wodehouse.

Doc foresaw at the turn of the century much of what would happen economically in the United States. He purchased what he considered to be enough gold to keep the wolf from the door – a roughly $500,000 transfer of his net worth into gold coins. After we had exchanged the usual pleasantries, the conversation turned once again to the subject of gold and the reason for his call.

"I still have all the gold I purchased from you," he said simply. "Every ounce of it. It's now worth well-over $2,000,000. I want to thank you again for your book and your advice. It made a great difference to me as you may have gathered." (At the interim $1896 top in 2011, Doc's holdings reached a value well over $3,000,000!)

"That," I said, "is the kind of story we enjoy hearing around here, Doc. I'm happy for you. Happy gold could help you like it did."

"We had some very interesting conversations back in the day," he said with a chuckle, "and gold did for me what we thought it would, what you said it would."

The conversation turned to life's other pursuits for both of us and ultimately to the purpose of his telephone call – a fresh gold transaction. We completed our business and I left the conversation with a strong sense of satisfaction. We get a steady stream of phone calls like Doc's, but it is always good to hear another real-life tale about gold's role in preserving a client's wealth.

In many ways, gold ownership, as Doc would likely attest, is a rational portfolio decision that suits the times, but it is also a life-style decision. In an article published in Vanity Fair magazine, the writer Matthew Hart masterfully captured in one short paragraph the essence of gold ownership as a means to coping with the contemporary financial environment:

"An ounce of gold cost $271 in 2001. Ten years later it reached $1,896 – an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature's hard asset."

As Richard Russell, the now-deceased purveyor of the Dow Theory Letters once put it, "I still sleep better at night knowing that I hold some gold. If or when everything else falls apart, gold will still be unquestioned wealth." . . . . And one that will help you spend a quiet summer enjoying family and friends no matter what happens on Wall Street or in Washington D.C.

Epilogue

You should not buy gold because you need to make money, but to protect the money you already have. Don't look at the price at any given point in time as a barrier but as an incentive – especially if it is needed to fill a vacancy in your portfolio. Don't buy the paper pretenders, but the real thing in the form of coins and bullion. To do otherwise is to plug into the financial system you are trying to hedge. Don't fall prey to glitzy television ads or slick websites, do your due diligence instead. It will pay dividends beyond what you might imagine. And last, do not allow the naysayers in your circle of friends and associates divert your interest from the task at hand. Allow yourself instead to pursue your interests as you see fit.

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"GOLF is in its essence a simple game. You laugh in a sharp, bitter, barking manner when I say this, but nevertheless it is true. Where the average man goes wrong is in making the game difficult for himself. Observe the non-player, the man who walks round with you for the sake of the fresh air. He will hole out with a single care-free flick of his umbrella the twenty-foot putt over which you would ponder and hesitate for a full minute before sending it right off the line. Put a driver in his hands, and he pastes the ball into the next county without a thought. It is only when he takes to the game in earnest that he becomes self-conscious and anxious, and tops his shots even as you and I. A man who could retain through his golfing career the almost scornful confidence of the non-player would be unbeatable. Fortunately such an attitude of mind is beyond the scope of human nature." – P.G. Wodehouse, The Heel of Achilles, as published in The Strand, 1921

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