Devastating Losses Are Coming: What Is Your Advisor Doing About It?

I hold financial professionals who recommend monetary gold to their clients in the highest esteem. It is their sage advice that will protect investors from the unprecedented dangers they face today in the markets. However, many advisors are no longer permitted to recommend physical gold or precious metals in client portfolios as a result of the new rules defining risk in mutual funds. Many clients who had been holding gold for years were forced to reduce their positions last year by their investment advisor’s dealer. The timing for this couldn’t have been worse, as the resulting rise in their gold holdings would have reduced the losses in their portfolios from the market carnage we have witnessed since late September.

The equity selloff that began in October is intensifying and threatens advisors, MFDA dealers and investors with a high probability of a 50-70% loss of capital and a corresponding loss of income in 2019. A decline of this magnitude will have devastating effects on retirement portfolios. Many investors will not recover in their lifetimes. This could snowball into advisors and investment dealers no longer being viable. The Everything Bubble appears to be bursting and, as history has shown, investors’ fears can easily grow into a panic.

The final quarter in 2018 is a textbook display of why investors must own gold. There is no liquid asset more negatively correlated to the financial markets. Investors who do not own monetary gold may find themselves dangerously exposed to market volatility without the much-needed diversification/portfolio insurance that gold offers. If the current downturn in the market continues, as the world’s leading financial experts predict this asset may be the only form of wealth preservation that works

Experienced financial professionals understand that gold bullion is an alternative to cash. Ray Dalio, chairman of the largest hedge fund in the world (Bridgewater & Associates), once stated that, “If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it.”

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Performance of Gold S&P500 NASDAQ DOW & TSX | Devastating Losses Are Coming

Referencing the above metrics, securities regulators have made a grave mistake in re-rating monetary gold to a medium-high risk relative to ‘Know Your Client’ (KYC) forms. These regulators, fund dealers and, by extension, their various compliance enforcement departments have ignored the fact that the Bank for International Settlements (BIS) that sets the rules for central banks and commercial banks has stated that “monetary gold is a risk-free asset on par with US Treasuries and US dollars.” They have also hamstrung investment professionals and their clients from protecting themselves with an asset that has done just that for over 3,000 years. In spite of nothing having changed in BMG funds, the new rules mandated by the provincial regulators across the country raised our official risk rating, making BMG funds unsuitable to many clients who have held these funds for years. An investor in a typical balanced portfolio should be concerned with not being properly diversified. For example, an equity portfolio can be diversified by style, capitalization and sector – but all equities are categorized as the same asset class. Gold, however, is an asset class unto itself with no substitute, no counterparty risk, no management risk and no default risk. Therefore, concentration limits in the traditional sense do not apply to monetary gold. 

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Mark Borkowski 3 months ago Contributor's comment

I have followed Mr. Barisheff for many years. I agree with his recommendations on gold. Own more gold and sleep better.