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I laid out a pretty compelling case for owning gold in No Worries. Buy the book and read it.

I’ll give you the elevator pitch: It reduces the volatility in your portfolio, and it also goes up occasionally! As I write, gold is pretty much right on the all-time highs of over $2,400 an ounce. I am irresponsibly long gold and have been for a while. Let’s just say that I have more than the 20% that is required for the Awesome Portfolio. At the moment, this seems smart.

Gold is correlated to a bunch of different stuff, like inflation, interest rates, and other economic variables, but the one thing it is most correlated to is budget deficits. Right now, we are running massive budget deficits. And no matter who is elected president in November, the budget deficits will continue.

You have probably heard that interest expense on this debt is rising rapidly. If interest rates rise much more, we could be in a position where the government is effectively insolvent. If that happens, there will be political pressure on the Fed to cap interest rates by buying government bonds with printed money.

And that is the endgame for gold. If we monetize the debt, gold will go parabolic. Gold is the only good way to protect your wealth from this stealth confiscation. Okay, okay, now I am talking like a gold bug, but it is true. There is a kernel of truth in all those gold commercials you hear on the radio. I would add that you should never buy gold from a gold commercial on the radio. There are much better places to get it (e.g., a reputable bullion dealer such as Hard Assets Alliance that doesn’t charge exorbitant markups).

Then, of course, there are the gold ETFs—as I’ve mentioned before, there’s nothing wrong with owning paper gold.

Gold is in a bull market. This is a fact. Act accordingly.

Why Is 20% Gold So Scary?

Most people have nowhere near the 20% exposure that is required for the Awesome Portfolio. When I wrote No Worries, I had no illusions that everyone would go out and add 20% gold to their portfolio. But even if people are getting some exposure—3%, 5%, 10%—it is better than nothing. They are better off than they were before.

For some reason, 20% gold is scary. But people think nothing of having 80% of their portfolio in stocks. Isn’t that weird? Why does everyone think that gold is scary but stocks are safe? They have about the same volatility. Oddly, people would rather own bitcoin than gold, and bitcoin is a heck of a lot more volatile. I have a hunch that in about a year, people will wish they had a lot more.

This is how bull markets are born. People have little exposure to a thing, the thing goes up in price, and they wish they had more exposure to the thing. So, they buy more, and then it goes up even more. This is the reflexivity that Soros talked about. I am the sentiment expert, and I can tell you that even with gold at all-time highs, nobody is talking about it. It is not close to being a bubble. I will also add that in the last few months, Stan Druckenmiller and Michael Burry have been buying gold or gold miners. There are probably others. This bull market is going to continue for a while.

Let me ask you a question: If we were really headed to a place where the government is financially insolvent, where we reach financial Armageddon, wouldn’t you rather be happy than sad? Wouldn’t you rather be positively exposed to things that gain from disorder?

Gold, more than any asset, is a thing that gains from disorder. And I think we will have plenty of disorder in the coming months… and perhaps until 2028.

Fear

Gold is usually marketed or sold through fear. Usually, when you hear those gold commercials, they talk about protecting your wealth. They don’t think of it in terms of an investment. And most of the time, investing from a place of fear is no way to get ahead.

Most of the time, it pays to be an optimist. But sometimes, it doesn’t. There are periods in the capital markets when it pays to be a pessimist. That is why you have the Awesome Portfolio—you have exposure to a little bit of everything. If you simply had stocks and bonds, or even just stocks, you would be adversely exposed when these waves of pessimism roll through.

This newsletter is probably not going to convince anyone to increase their exposure to gold. The only thing that will do that is a rise in price. But then, of course, it will be too late. Buy it when you can, not when you must.

P.S. I’d love it if you’d check out my latest mix, Bliss, recorded in my brand-new studio! It’s outstanding—please CLICK HERE, and give it a try and zone out for an hour.