The importance of being in the right place at the right time

Last modified on 2009-10-25 21:22:28 GMT. 0 comments. Top.

I was thinking the other day about being in the right place at the right time and how that can change a person’s life forever—either in a good way or a bad way. What if my parent’s wouldn’t have moved to Colorado from Minnesota in 1982—I would have never met my wife in 1996 on a blind date a year after I graduated from the University of Denver. If my family would have stayed in Minnesota, my relationships would have been different, my career probably would have been different—and I can’t imagine life without my wife, my kids, or living in Colorado. How did this all happen? It was because I was in the right place at the right time.

The decisions we make, in all areas of our life have consequences—both good and bad. This is especially true with our finances. Back in 2002 I started allocating my clients into precious metals because technically they were priced very low, and fundamentally things were starting to happen that would ultimately alter the path that different asset classes would follow. As an economist I am a student of history and a student of the markets. The goal in analyzing markets is to identify the major trends, identify the fundamental factors that make them go up or down, then when those elements are known, take action and act accordingly. Well, 2002 was when my analysis caused me to start this asset rebalancing into precious metals. The results of this asset rebalancing are as follows:

GOLD in 2002 was $312 per ounce. Today it is $1055 per ounce. That is a 238% increase in seven years, or an average increase of 34% per year.

SILVER in 2002 was $4.37 per ounce. Today it is $17.65 per ounce. That is a 303% increase in seven years, or an average of 43% per year.

The DJIA (stock market) was 8896 in 2002. Today the DJIA index is 9972, or an increase of 12.1% or an average increase of 1.7% per year.

What kind of return would you rather have, a gain of around 300% or a gain of about 12%? The answer is obvious—the way that happened is by being in the right place at the right time. Identify the positive trending asset classes and allocate into them. Identify the declining asset classes and get out of them. Stocks, bonds, real estate and currencies are all poised for dramatic downturns for the foreseeable future from a technical and fundamental standpoint. As inflation persists, as taxes are poised to go up, as interest rates must rise, this will cause corporate profits to diminish, people will feel the pinch of higher prices coupled with a higher cost of servicing their debt and they will slow down their spending. As this happens corporate profits come down, unemployment will rise, and taxes will ultimately rise (Congress and the White House have already promised us that this will be the case).

What does this all mean? It means that the trend lines mentioned above will continue for gold and silver as they are flight for quality investments and the worse things get around us the better they will perform. I expect the average yearly returns to actually increase as other asset classes decrease. Bonds will get hammered as interest rates rise, real estate still probably has another 30-40% correction from current prices still left in it (with more houses going on the market, increasing interest rates, increase job losses, and adjustable rate mortgages still needing to be re-indexed, both residential and commercial real estate look bleak), the US Dollar is at the lowest point this year, and only 7% greater than its 1971 low, our currency will continue to deteriorate and ultimately be replaced by a different global reserve currency. This is all very bad news, except there is something you can do to protect yourself from it. Be in the right place at the right time. Just because gold and silver have averages well over 30% per year for the last seven years doesn’t mean that you missed the boat. On the contrary, as I believe the best is yet to come for these markets as the global financial system changes for the worse. Over the next 3 to 5 or maybe even 8 years, I expect gold to ultimately reach $5,000-$10,000 per ounce and silver to reach around $150 per ounce. Of course nobody can guarantee future growth, but the technical and fundamental reasons for these projections are extremely strong and by allocating into these powerful bull markets you can reduce your risk, protect and preserve your retirement assets, and actually grow your portfolio.

Being in the right place at the right time is only half of the equation; the second half is taking action while you are there. There is no better time than the present to take advantage of these systemic global economic conditions that could protect your assets and potentially the assets of future generations.