By kind permission, Tony Deden on capital preservation and the present economy:
Despite of what the program says, I do not see myself as an expert. This is why I have added the word «Reflections» to the title. What I will share with you in the next twenty minutes are merely my own ideas on the subject – each of them, in fact, significant enough to demand far more discourse. Finally, I will also try to summarize my own recent practice with respect to gold and the reasoning that it entails.
First, let us define the terms. By the word «gold», I do not mean gold futures contracts, or a structured note, or a warrant, or a gold certificate. I do not mean gold mining stocks or most gold ETFs. By the word «gold» I mean just that – the old-fashioned kind that shines.
Secondly, let us define «investment practice». Forget the dictionary for a moment. In a city like Zurich, you have bankers, private bankers, asset managers, wealth managers, fund managers, portfolio managers, and the assorted variety of investment types. They are all investors. For the purposes of this talk, let us put them into two broad categories:
Those who work with other people’s money, savings, pensions and are obsessed with the idea of achieving results, money and fame on the basis of how markets do, others do or what the expectations of their customers are.
Those who look after money and capital that belongs to people they love (i.e. themselves, a father, an uncle, a grandmother, an old neighbor and so on) and who can not afford to lose it. These people are responsible for irreplaceable money.
On the surface, the jobs sound similar. But this is where the similarities end. If you are in the first category, most of my talk tonight may seem trivial and perhaps even irrelevant. If you are in the second category, welcome home.
To be an investor in our times without an understanding of history, classic economic theory or the common sense of our grandfathers is a recipe for disaster. And there is more disaster to come.
Here is my summary: In pursuing my goals in capital preservation, I am interested in tangible assets – not promises, not claims, not contracts, not confidence and not hope. I will continue to pursue wealth creation by participating in the capital of the few remaining outstanding entrepreneurs. And I will continue holding cash for a while, expecting to find opportunities to use the latter to purchase more of the former. I do not really trust the money issued by governments. And so, I see gold as a tool in the same manner I see common stocks, bonds, or just any other type of asset.
Let me be very blunt: the discovery of value and/or wise speculation becomes extremely difficult, if not impossible, in an irrational and dysfunctional economic system.
And so, at different times, for different reasons, in different amounts and for different purposes, none of which are suited for a simple explanation or a model—I seek to have such a mixture so as to pursue a noble cause in the economic life of those I serve—capital owners and savers—that of seeking to protect their savings from the rent-seekers, the fools, thieves and assorted charlatans that clutter our world.
Read the full speech.