As a result of this year’s market volatility and the unexpected news of Great Britain leaving the Eurozone, I’ve recently been approached by multiple people regarding the merits of having gold or goldminers as a part of their investment portfolio. I will make this very clear: the answer to this question is very situational and depends drastically on each individual’s goals, risk tolerance and time horizon. I would like to make a few simple observances regarding this decision.
In 2008/2009, the U.S. had a debt crisis and a financial banking crisis. As of January 20, 2009, our national debt was $10.6 trillion dollars, per WashingtonPost.com. At this writing, it is $19.5 trillion and climbing, per NationalDebtClock.org. I don’t claim to be a financial genius; but when we, as individuals, have a debt problem, the natural solution is easy: we have to reign in our spending and earn more income to get ourselves out of trouble. Simple math tells me our government has almost doubled our debt in the last seven years.
The problem is that this is not the only debt that we have as a nation. We also have what are called unfunded pension liabilities – things like Social Security and other social entitlement programs. This quote comes from an article in Forbes magazine, “The federal unfunded liabilities are catastrophic for future taxpayers and economic growth. At UsDebtClock.org, federal unfunded liabilities are estimated at near $127 trillion, which is roughly $1.1 million per taxpayer and nearly double 2012’s total world output.”
Here is where these debt numbers start to make sense to me, and I use this example to help others understand how large these numbers are. If you were to count at one digit per second it would take you the following amount of time to count to: $1 million, $1 billion, and $1 trillion.
$1 million = 11 days (Now, mind you, there is no time for potty breaks or eating).
$1 billion = 31 years (Supposedly, it would take The Donald 465 years to count his money a buck at a time, if he has the $15 billion he claims.)
$1 trillion = 31,000 years (If Moses had started counting when he was young, he’d still have roughly 25,000 years left before he counted to the first trillion.)
31,000 years – and that’s just one trillion dollars! We have about $147 trillion of debt when including unfunded pension liabilities, and yes, I’ve done the math … it would take me roughly 4,557,000 years to count to the number of our full national debt and unfunded pension liabilities.
When people ask me if I think that a long-term investment in gold or gold-mining companies may be appropriate for them, I point them to the numbers. This debt cycle may go on for many years to come. The word “quadrillion” exists for a reason; but please, don’t tell our government about it! If you are one of those investors who wonder about the merits of gold or goldminers, talk with your investment advisor about the positives and negatives that come with owning gold or gold-mining stocks for the long term to see if it makes sense in your current phase of life. ♦
About the Author: Joel P. LaGore, Certified Financial Planner and partner with OLV Investment Group, focuses on money management. Joining the Downtown Flint revitalization effort, his office is located in The Durant at 607 E. Second Ave., Suite 100. Joel and his wife Sonya are raising two daughters in Flushing, where he enjoys philanthropic pursuits in his local community, in Flint at large and in Genesee County.
800.338.4586 olvinvest.com The Durant 607 E. 2nd Ave, Suite 100 Flint, MI 48502 jlagore@olvinvest.com
