Always Hedge Cash Investments with Gold
In today’s unpredictable and chaotic world, it’s actually a good idea to hold a lot of your net worth in cash. This is just my opinion, though rich guys like Tim Ferriss and really rich guys like Mark Cuban agree with me. At the moment, there are no single, large, mainstream investment sectors that have high odds of rendering a high return. Stocks and bonds are in historic bubbles. Real estate is also in a bubble in most parts of the Western world. Precious metals and commodities are reasonably solid, but aren’t going to burst in value any time soon (most likely anyway; as usual, no one can tell the future). Fiat currencies pretty much suck everywhere.
There will always be speculations like cryptocurrencies and Forex trading, but I’m not talking about speculations, only investments.
My biggest position right now is in cash, meaning American dollars, in some form or fashion. This means that while I’m not making any money in this particular investment, I’m pretty damn safe in that it’s very unlikely I’ll lose it, since not losing money is my primary investment goal. More importantly, if something does crash, I can use my cash to hop right in and buy it cheap, so I can make a killing later. This is how many millionaires were made during the Great Depression and other sharp historical recessions; some guys just held onto their cash while everyone else was getting boners about stocks, bonds, real estate, or whatever, then when everything crashed, they bought up everything in sight at massive discounts. When the economy recovered, and it always does, they made a mountain of money. I plan on doing something similar in the next crash (we’ll see if I can pull it off).
However! There’s one significant problem with owning a lot of cash. That is that the US Dollar is a horrible currency. It’s artificially debased, and based on pure debt and a lot of bullshit. I have said before that the most likely scenario for USA to collapse is a currency crisis where the dollar hyperinflates and becomes worthless. That means if you have a lot of dollars, they could suddenly become worth zero or close to it.
I don’t plan on this happening, or happening any time soon, but I do think it’s a possibility.
This is why if you hold a lot of your investments in cash, you must hedge that investment with gold. Gold is not an investment; gold is an insurance policy. If the dollar (or whatever currency your country uses) suddenly collapses, most likely, the price of gold will skyrocket. Gold tends to move in value inverse of the dollar. When the dollar crashes, gold does great. When the dollar rises, gold tends to drop in value or just sit there. This doesn’t always happen, since the price of gold is heavily manipulated by the elites, but it usually happens, at least eventually.
This means that if you have a lot of money in cash, particularly in US Dollars, I strongly suggest you take 30% – 50% of that cash and buy gold with it. This way, if the price of the dollar ever collapses, your gold will spike, covering that loss (if not actually making you a profit). Gold actually protects your dollars, in a weird sort of way.
I have a personal rule that at least 30% of all long-term US Dollars I own must be in gold. Sometimes this is a pain in the ass, but I think it’s worth it. Owning mountains of dollars with no gold is just too dangerous these days. The Federal Reserve has printed up trillions of dollars in new currency, and if Tantrum Trump gets his way, he’ll do a “George W. Bush” in that he’ll cut taxes without cutting any government spending, which means higher inflation, higher interest rates, or both. All of this is very bad for the long-term future of the US Dollar.
So yes, investing in a lot of cash is prudent… but make sure you hedge that cash with gold.