Grant Williams believes that the 76 million retiring Baby Boomers will trigger a major pension crisis. He should know, because he’s been studying financial history and telltale crisis patterns for nearly two decades.
Also read:
- Q2/H1 Hedge Fund Letters - Letters, Conferences, Calls, And More
- Baupost Letter Points To Concern Over Risk Parity, Systematic Strategies During Crisis
- AI Hedge Fund Robots Beating Their Human Masters
“With that potentially bad situation we could face,” the seasoned asset manager and co-founder of Real Vision TV said in a recent Metal Masters interview, “holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take.”
His outlook has changed drastically since he started his first job trading Japanese markets in 1986: “What I walked into at that time was one of the greatest bull market bubbles the world had ever seen, in the Japanese equity market and real estate market.”
During this heyday, precious metals weren’t on his radar at all—until a year later, when he witnessed his first stock market crash and started asking some inconvenient questions.
History Does Repeat Itself...Again and Again
“I’ve always been a fan of history,” says Williams, who also writes the wildly popular macroeconomic newsletter, Things That Make You Go Hmmm… “So I read financial history and I just kept reading. And it was clear to me that at this point in time, I needed to buy some gold.”
Until then, the gold price didn’t mean much to him, except as an indicator of other things, so he considers the crashes he witnessed in his career wake-up calls and blessings in disguise.
The 1987 crash, he says, was more like “a bad day at the office; it came and went so fast… The bounce-back was quick, but it was a real shock to the system that that could happen.” When the dotcom bubble burst, he was well prepared. “I recognized the madness for what it was much sooner… and so that taught me that markets can reverse and just go down.”
He remembers reading a story about a boy from Chicago who studied in Weimar Germany, and his parents sent him tuition and rent money every month. At some point, “the Reichsmark was going through the roof—four billion to one, compared to one to one a few months earlier—and this kid, with his one hundred dollars that his parents sent him… ended up buying the entire street he lived on, all the houses, and became a landlord.”
We Might Need Crisis Insurance Soon
Over the years, his study of monetary history and current economic events has convinced him that it would be prudent to hold some gold as crisis insurance.
“I remember I wanted just to buy an ounce of gold… and I very consciously took cash to pay for this thing. I handed over $333 in paper, and [the dealer] gave me this coin.” The experience of holding physical gold in your hand, he says, answers a lot of questions. “People get stuck in this trap of ‘Why does it have value?’ These are the wrong questions to ask, because you’re driving yourself mad. It does. Pure and simple.”
Value Investing with Gold
Williams says gold is still undervalued: “At heart, I’m a value investor, and I think gold offers incredible value now.”
He says he’s followed the gold market ever since that pivotal day and recommends that everyone should have at least some allocation to precious metals: “I think if you don’t own some gold in your portfolio now, you either don’t understand history, or you don’t want to understand history.”
Article by Shannara Johnson, Hard Assets Alliance Blog
