In 1923, seven of America’s richest self-made men met at the top of the Edgewater Hotel in Chicago.
Collectively, they controlled more wealth than the entire US Treasury.
They were there to celebrate their collective success and plan for future dominance.
The media held these men up as shining examples of the American dream — the idea that no matter who you were or where you started in life, you could make it to the top.
Indeed, the rise to the top for a few of them was nothing short of remarkable.
You had Charles Schwab, a steel magnate who started out life as the son of poor German immigrants.
There was Jesse Livermore, son of a failed farmer who left home at age 14 with just $5 in his pocket and went on to become the most famous trader of his day.
Wheat speculator Arthur Cutten’s first job was as a bookkeeper on $4 a week.
And you had Albert Fall, a self-educated Kentuckian who first worked at a cotton factory before eventually becoming a member of the President’s cabinet.
As I said, these were all self-made men who rose to the top of the finance game and amassed great personal wealth.
But here’s the thing…
Within two decades of this meeting, two died broke, three committed suicide, and two ended up doing lengthy stints in prison.
It’s a parable of biblical proportions.
It has many lessons, including the most important one, which is that money doesn’t make you happy.
A miserable poor person is likely to be a miserable rich person too!
But as an investor, it has one important lesson for you, especially in today’s world.
And it’s this…
Making money is only one part of the equation.
You also need to know how to keep it!
Many Australians have garnered significant wealth over the past few decades.
And, despite regular bouts of pessimism, we’re actually doing pretty well as a country.
As my colleague Callum Newman put it in a ‘postcard’ from his recent travels in Europe:
‘I was just in Athens. Truth be told, it’s a bit rundown. It’s also blindingly obvious in Spain how high the standard of living is back home. Even so the Spanish football captain got up after the euro cup win and said “we have the best food, best holiday spots, the best culture…we are the greatest country in the world”. All from winning a soccer tournament.
‘All countries create narratives about themselves. Occasionally you pick up from the Brits the frustration that the UK is not what it was. Aussie GDP has left UK GDP per capita in the dust.’
I love Callum’s natural optimism about Australia, and he’s done very well for his subscribers over the past 12 months because of this approach.
[Editor’s Note: Callum’s also been working on a new AI-powered trading methodology which is yielding fantastic results. Find out more here.]
In many ways, we’re still the lucky country. So why should you worry too much about the future?
Well, luck can change and as the story at the start can attest, the history of the world is full of fabled rises and even more infamous declines.
The fact is…
What most are missing
You need to prepare for such moments even if you don’t need to dwell on them — before they hit you across the head with a sledgehammer.
Many Aussies have made good money in property and store most of their wealth in it.
Others have done well with super by investing broadly across the stock market and making regular contributions to it.
The power of time, compounding, regular investing, and, in the case of property, high leverage has created immense wealth.
And in a way that’s investing 101 at work. These are all basic lessons every investor should know.
But there’s one other factor that most seem to miss.
Check out this extraordinary chart:
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| Source: Pricedingold.com |
You’re looking at the Dow Jones index of top US companies as priced in gold terms (not dollars).
What does it show you?
Well, when the blue line is falling, it’s better to store your wealth in gold than stocks, and vice versa when it is rising.
As you can see, this has several clear boom and bust cycles.
But get this…
Amazingly, in gold terms, the stock market is still more than 50% down from its 2,000-year highs!
This means that if you bought gold instead of stocks at the peak of the dot-com boom, you’ve done more than twice as well (not accounting for dividends, which aren’t huge in the US, anyway).
And even though the financial media always bangs on about new record highs, priced in gold, the stock market isn’t actually higher than the peak of the 1960s boom!
But back to today…
Since a temporary COVID-19 pump in favour of stocks over gold in 2021, the price of stocks has fallen and is once again in a down trend when priced in gold.
It’s a similar story for property investors, too…
Sydney property has gone sideways
for a decade
Check out this chart:
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| Source: Refinitiv/Brian Chu |
In gold terms, even Sydney’s insane property has been flat for almost two decades.
And since 2021, prices have fallen relative to gold.
Meaning…
Your house didn’t really increase in value. It’s the dollar that has severely decreased in value.
It’s all a mirage!
Using my preferred hard money asset — Bitcoin [BTC] — these results are even more astounding.
I don’t have the Aussie data, but UK housing is DOWN 92% over 5 years when priced in Bitcoin and US housing is DOWN 85%.
My point is…
Warren Buffet once said ‘Concentration creates wealth but diversification keeps it’.
In my opinion, if you want to hold onto your wealth in real terms — not just its nominal dollar value — you need to consider having some exposure to hard money assets like Bitcoin and gold.
And I know one very important person doing just that — Donald Trump’s new Vice-Presidential pick, JD Vance…
The JD Vance portfolio
Check out his reported portfolio:
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| Source: Samosa Capital |
As you can see, he has a 6% allocation to gold and a 6% allocation to Bitcoin.
If Trump wins and Vance becomes VP, it’s amazing to think we’ll have a Bitcoiner in the White House.
How times change!
Of course, he’s only 39 years old, so you need to consider that allocation in context.
But I’ve always said everyone, regardless of age, needs some allocation to hard money assets like gold and Bitcoin.
Especially in a world running off a never-ending supply of dollars.
Sure, you could continue to ignore this.
But if the current trends in gold and Bitcoin continue, your ‘real wealth’ could decline significantly over time even if it goes up in dollar terms.
Especially if we experience a big currency or debt crisis that the world occasionally throws up.
On that note, my colleague Brian Chu — our resident gold expert but also a crypto fan — thinks a major turning point is underway for gold investors.
A rotation of sorts is taking place on the ASX, and Brian’s got the strategy and track record to find opportunities to take advantage of it.
Check out what he has to say here…
Regards,
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Ryan Dinse,
Editor, Crypto Capital and Alpha Tech Trader
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