Give gold and silver their due
It is January 2021, and I continue to be frustrated that both silver and gold remain without their proper due after almost twenty years of being in this business. What do I mean by this? Let me be specific.
There is no way for me to sugarcoat this. The shortfall here at home, compliments of Ottawa, will be $383 billion or about seven times greater than the worst-ever mess we previously had when Harper spent $56 billion to fight the credit crisis back in 2008/09.
From Pierre Poilievre on Twitter MP for Carleton and Conservative Shadow Minister for Finance January 16th- "1st time in modern history: Stats Canada reports that the total gross debt of Canada's 3 levels of gov is bigger than our entire economy. (debt/gdp=100.3%) Higher than the 92% during the 1990s federal debt crisis. But don't worry. Interest rates never rise. Unless they do."
Per capita, Canada now holds the unsavoury distinction of spending more than any other country in the developed world, and we are far from being finished. These lockdowns and economic wreckage promise escalating jobless rates, fewer government revenues and more expenditures. If it were not for rock-bottom interest rates, we would be permanently screwed. But this can change. Eventually, it will. And the debt will need to be financed.
However, odds are there will be a Federal election this year. The betting is the Liberals will take it, and you already know why. The spending – CERB, enhanced EI, more childcare pogey, wage subsidies, gender-based initiatives, business subsidies, rent subsidies, climate change agenda and maybe a universal basic income – all on the table or already in place. Guess what else is on the table? Much higher taxes.
When Chrystia Freeland, our first woman Minister of Finance, who has no financial training or experience, was appointed, she received a mandate letter. In it, Mr. Trudeau instructed her to "identify additional ways to tax extreme wealth inequality." This point was reinforced in the Speech from the Throne, read by another Trudeau appointee, Julie Payette. (Sarcastic comment withheld.)
I mean, they might have the support. After all, the NDP, which currently holds up the minority federal government, wants a wealth tax. But history tells us that most countries have found this doesn't work out.
Thirty years ago, during the credit crisis of the '90s, many western nations were trying to boost revenues based on taxing overall wealth, but now only three or four continue. It would appear the wealthy are elusive, slippery, mobile beings. They also own significant assets, such as businesses, which cannot be taxed based on capital value. Therefore, it is a lot easier and cheaper for governments to tax salaries and investment returns. Or to raise sales taxes, which are more democratic since they hit consumption rather than income.
Given the fact that Canada now has $1 trillion in debt and escalating deficits, there is little doubt that Ms. Freeland's first full budget, coming down the shoot in a couple of months, will be "taxing." Make no mistake. They will target and try to address the growing concerns of extreme wealth inequality.
Knowing the above and our history, this most likely leads us to some economic event. Maybe recession, depression, blip, quick pullback, whatever you may want to refer to it as. All the more reason, I believe, in my humble opinion and experience, that hard assets, like gold and silver, among others, stand a good chance of being in favour for a more extended period than historically the norm.
We are witnessing a new phase in this precious metals bull market. There was a complete lack of interest and a lull from 2012 to 2018. But overall, both gold and silver have performed very well since 2000 as a whole. Going on 21 years, each has averaged over 10% per year in both CDN and US dollar terms, respectfully!
But, I still get enraged when I realize how many analysts and financial "presstitutes" negatively talk about gold and silver. They call them all sorts of things. They frequently make flawed comparisons and insist that they do not offer any value in a portfolio or as part of a well-diversified wealth plan.
I have heard these same people say such things as gold and silver "do not provide shelter," "they are far too volatile," "they do not pay dividends," "they are cumbersome," or "hard to trade and not easily transportable." But my favourite one is when they imply that silver and gold are "vestiges." The truth is most analysts, financial media types, planners, advisors know nothing about the metals themselves. So here it is. Let's focus on silver for just a minute, my favourite.
Silver's annual average over the past 15 years, which despite a few years of loss, remains 11%-12%+ in USD and CDN dollars since 2005. Yes, this is correct! Yet you can still acquire an ounce for under $30 CDN!
Silver demand is comparatively exponential compared to the bull market of the 1970s when it reached an all-time high of roughly $52 Oz USD in the spot market. (Super Tip: We cannot live without silver.)
If we consider the above usage demands, it is clear to see precisely why NO single stockpile of silver exists in the world today that is meaningful.
This touches only the tip of the iceberg, yet very few in the financial media have grasped the notion that the cycle for the silver and gold bull is repeating; in a sense history, itself is repeating. Did anyone think gold and silver would not come back to favour at some point over the last twenty years?
It could also mean that the greater population of people knows little about the shiny metals and just how exciting an opportunity they represent, not only as speculative assets but also as a form of wealth, diversification, and if push ever came to shove barter.
The world is waking up to the realization that it will be a different place. Histories of repetitive behaviours are now changing, being altered, and it means we need to look at our wealth differently. It is no longer enough to believe that only paper assets such as stocks, cash and bonds truly represent diversification. Diversification must include other hard assets such as gold and silver, land, collectibles and other long-term appreciating assets.
Leave the myths where they belong in the past. When it comes to gold and silver, they are liquid instruments of wealth, transported with relative ease and stored even easier around different places in the world. They can be part of your registered accounts in RSPs and TFSAs. They can be held, allocated and owned in both bar and coin form. Gold and silver are part of an exciting world to discover when it comes to wealth and one we believe should be shared with everyone.
Yours to the penny,
Darren V. Long
Delta Harbour Assets