Societe Generale’s Albert Edwards is a bit of a bear, to put it mildly. One asset he absolutely loves, all the time, is gold.
So you might think he’d be a little down, given the precious metal’s recent tumble in value.
But Edwards is sticking firmly to his guns in his latest email — gold is a great investment for the coming crash (it’s always just around the corner).
Here’s what he says:
Many clients ask me about gold. I still like gold despite it being sucked into the general commodity malaise. As Marc Faber said at our January conference, if he could short central banks directly he would do so, but gold is the next best thing.
That logic seemed like a good bet once — between 2007 and 2011 spot gold prices more than doubled, and it seemed like a great bet while interest rates were being cut to rock-bottom levels and QE was in full swing.
But since then, gold prices have fallen from over $US1,900 per ounce to below $US1,100, where they sit now. That hasn’t shaken Edwards’ faith:
I have not one scintilla of doubt that the western central banks have set us up for an even bigger version of the 2008 Great Financial Crisis/Recession – but this time rock bottom interest rates and large fiscal deficits will mean only one thing; QE will be stepped up to such a pace that you will hear the roar of the printing presses from Mars. Gold is a must-have holding in that world.
He also includes this chart:
That chart reminded me very much of a little segment from Matt Levine’s piece this week on a chart of Chinese stocks:
Tom DeMark, the guy who became famous for putting a copy of the 1928-1929 U.S. stock market chart on top of a 2013-2014 U.S. stock market chart, has now put a copy of the 1928-1929 U.S. stock market chart on top of the Shanghai Composite Index chart. That is … what you do when you really like that 1929 stock chart? I imagine him walking around all day with a transparency of that 1929 chart, holding it up to everyone he meets and squinting to see if it fits.
The thing about the 1929 chart is that it always ends in a big crash, so when you overlay it on everything else in sight, you end up predicting big crashes.
If all you’ve got is a hammer, everything starts to look like a nail, and it’s hard to see anything that would derail Edwards’ heartfelt view that gold is a good investment.
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