Apr 29 2010 2:41PM

Investing in the Age of Obamanomics

You only need to know two things about investments.

  1. Avoid Wall Street’s Recommendations. Most traditional public investments touted by Wall Street are now “no, nos.” Wall Street brokers are paid commissions for selling paper which theoretically represents tangible things. But all the things Wall Street is now touting will diminish in value for years. Stocks, bonds and growth mutual funds will go sideways to down. A small minority of savvy investors who will make it big will ignore “conservative” investments, like bonds. They will learn the big lesson that when interest rates go up (and they will), bond prices go down. In fact, the price of anything yielding a fixed interest rate goes down when interest rates go up. So much for “conservative investing.” Sell almost everything that is a dollar-denominated piece of paper.

  2. Invest in Inflation. Strictly seen as an investment, as the dollar shrinks in value, gold will be worth thousands of dollars an ounce and silver will be worth hundreds of dollars an ounce.

Glenn Beck, one of my favorite talk-show hosts, said he is not buying gold as “an investment, although it will be a good investment, but as insurance.” He doesn’t tell us what he is insuring against, but I’ll tell you. He is insuring against the plummeting loss of purchasing power of all paper currencies.

Precious metals feel so solid. When we were in South Africa, we went ten thousand feet down in a gold mine, and then came up to see where they were producing gold bars. I had a new gold bar in my hands, and I said to myself, “now I know why people killed for this.” It felt like wealth. It was real.

Then we went to the mint that manufactured krugerrands, South African gold coins, and we were permitted to handle and feel these coins. Same feelings. I understand why people killed for these things. It felt like wealth, it was real wealth.

When you go to a coin dealer, you are deliberately avoiding Wall Street. Someday someone on Wall Street will get the bright idea that they need a gold-and-silver sales subsidiary.

Not buying gold or silver is one of the dumbest money decisions you can make in 2009-2010. There are a lot of reasons why this is so -- like these:

  1. Obamanomics – dollars in the trillions are being created. That always causes monetary inflation, which always drives up gold and silver.

  2. Gold and silver are early in an historic bull market (in fact, as this is written, it’s only a Golden Calf), making this a low-risk investment with an awesome upside for the long-term investor.

  3. This bull market will dwarf the last great one in 1973-80, when fortunes were made by relatively small amounts of money invested by amateur investors (many of them my readers).

  4. All of the factors that created the last bull market are here again, only several times greater.

  5. Silver, the real monetary metal, is now also a critical industrial metal with thousands of irreplaceable applications. The needs of industry can no longer be met from shrunken above-ground supplies. The investment community has not yet awakened to silver’s stark supply/demand facts. This has created an incredible, once-in-a-lifetime opportunity. And you can get there before the alleged insiders and industrial users bid up the price.

Those are just a few of the reasons why ignoring gold or silver will cost you a fortune in missed opportunities. Gold is headed towards at least $2,500 an ounce (currently over $900, up from $280 so far), and silver is headed for at least $100 (currently more than $14, up from $4). And the best by far is still ahead! You will regret for the rest of your life ignoring this epic opportunity! And not just because of foregone investment profits, but as protection against inflation and the possible inflationary collapse of the dollar.

Here’s food for thought.

In 1981 the historic ‘70s gold bull market finally topped out at $850. After adjusting for inflation, to merely equal what it did in 1980, gold would have to go (only) to $2,270!

Silver topped out at $50 in 1980. After adjusting for inflation since then, to merely make a new high, silver would have to go over $125!
Why could the metals go much higher than that? Lots of reasons, but the most compelling is the fact that the biggest single factor that drives gold and silver is monetary inflation, and that’s already several times greater now than during the great gold-and-silver bull market of the ‘70s. And the silver supply/demand phenomenon is a plus that means far higher prices, unless they repealed the law of supply and demand when I wasn’t looking.

By Howard Ruff
The Ruff Times


Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times financial newsletter.

The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. (You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world. His updated and revised book, How to Prosper During the Coming Bad Years in the 21st Century.

You can get it free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.


Kitco Contributed Commentaries 2006
Latest Commentaries by
James Turk
Brien Lundin
Eric & David Coffin
Lawrence Roulston
Howard Ruff Howard Ruff
The Aden Sisters
Frank Holmes
Roger Wiegand