This is part 11 of a 12 part interview with Dennis Crawford.
Dennis: So basically what I’m saying to people is make sure that your assets are well diversified and well spread around. I’m a big, big proponent of professionally managed money. So if you want to have 100 dollars invested, don’t try to be a guru and you figure out this, this, this and the other thing. If it’s passively invested, pay a manager, it’s like a 2% to have 100 dollars invested. So if you’re paying a large organization to manage that money, now understand if they’re charging 2% on your hundred dollars they have a direct interest in turning that 100 dollars into 200 dollars, because their revenue just doubled on the assets.
So everybody’s in this for the same thing but make sure those eggs are spread around, don’t have all your eggs in one basket. So right now in the face of this difficult medium term environment of massive quantitative easing and abuse of the money system itself, I think people would be well served to expand their horizons a little bit beyond the traditional stocks and bonds and GICs that have dominated financial portfolios for many, many years and think about some real assets as well. Real estate, bullion, some commodities perhaps, these types of things.
That doesn’t mean I think the stock market is going to go away, the stock market is going to correct. You know with the DOW the US market the S&P500 up close to 30% last year, hitting an index of about 10% against very, very weak big picture fundamentals, I think there’s some risk in there. So I still have assets in stocks and bonds of course but I’m tempering some of those investments in my case I’m using bullion as a way to do that, bullion has always been a store of wealth and if you study bullion, you study what it is as money.. it’s a compelling story to find its way into your portfolio.
Not all in, you know I haven’t sold all my stocks and bonds to buy bullion, but I say 10% for a conservative investor, maybe as much as 20% for a more aggressive investor would be sound. It’s a bit of an anti-thesis, you know the bullion is, if you study it, moving backwards. It’s the most negatively correlated asset to the stock market there is, and that’s the whole point of it. If I were to lay a 10% bullion hedge into your stock and bond portfolio today, probably the closing comment I’d leave with you is Andrew, although the fundamentals, the physical fundamentals, the supply and demand fundamentals are extremely strong right now, particularly in the past 12 months it’s been the most hated asset class for the last 12 months, it’s really come down. But I’d say to you, you don’t want your bullion to tumble in the next 24 months because the inverse of that, what that means, that the other assets in your portfolio have taken some stress.
So it’s a bit of an insurance policy if you will, that the pieces are there so we’re in interesting times. We’re in difficult times. A lot of promises that are made in the social net are just not deliverable, they’re physically mathematically not going to work. If you look at this and you have the ability to do some basic math you can see it for yourself. Unfortunately the mainstream media and the talking heads keep doing the same thing and the can keeps getting kicked down the road and we’ve seen recent examples as close as October with the government shut down in the United States in October. If there was a really, really strong political will to deal with these issues and do the right thing, I’d have much more confidence in the system.
But the reality is that doesn’t exist, what really tipped me off to that was a few years back you could recall there was a circumstance that came down where some nutcase came into a theater and shot down a bunch of people in the screening of a batman movie. Shortly after that congress and the United States somebody floated legislation to try and do what you and I as Canadians would think is pretty common sense, background checks, on people before you sell them a gun. We can laugh about that because that just seems common sense to you and me, but the bill failed, it couldn’t get through Congress. Even though as much as 9 out of 10 Americans really want that, they think that makes perfect sense, it still failed.
And to me that’s a glaring example of the lobbying power, the money power in behind the political machine in the United States goes to some degree, we all go. Because they’re the world reserve currency, their dollars have infiltrated into everyone’s balance sheet. Certainly as Canadians as the biggest trading partner to the United States we have a real direct exposure to some of their risks and vulnerabilities.
So to listeners and readers to your blog what that could mean, diversifying your assets. That even applies to diversifying your business interest assets. Like the products that I buy from you for my household, that’s going to happen whether there’s a recession or no recession. I have to do my laundry so to speak and I’m gonna use that to do my laundry, and that’s going to happen either way.
So people looking to develop business revenue and business income even if it’s just a part time thing right now to their main job as a… whatever they are, a teacher or something in the main capacity. I think it’s wise in and of itself.
There’s a lot of teachers in Detroit right now that are looking at 16 cents on the dollar for their hard earned pension savings, and it’s happening already. This isn’t a some day type of prophecy, this is happening around the world. And when we look at circumstances like Greece and the Prauge countries in Europe. It’s not a nice term but Prauge meaning Portugal, Ireland, Greece, Spain, the UK, and we look at municipalities like Detroit that are in similar territory going through various stages of failure because of massive, massive debt overload spending money they don’t have, making promises to get elected that you can’t fiscally responsibly make, some of the weak fringes are starting to fall off. It’s happening right in front of us, I don’t necessarily visualize this thing turning into a Mad Max movie where we’re running around with guns trying to get gasoline.. I don’t think it necessarily has to play itself out that way, but drive yourself through Detroit right now and you’ll get a sense of what it looks like.