Transcript:
Easan Arulanantham:
Some people talk about, you know, investing in gold and silver when there’s high inflation, you know, what are your thoughts on these trends over time?
Tom Vaughan:
Yeah, actually been asked that a lot, I’ve looked at it a lot, it comes up, you know, there’s a couple of ETFs, that I pretty much constantly follow, you know, GLD, which is for gold and SLV, which is for silver. And I’m constantly putting them in on a back testing basis and trying to see what happens in different scenarios. For me, the key criteria isn’t so much fighting inflation, it is protecting my stock market portfolio. And one of the problems I’ve had with gold, specifically, and even silver for that matter, is that in these big downturns, like in 2008, they came down pretty heavily, you know, versus a treasuries, which came down less or exact for looking at 2020. Here, treasuries went up quite nicely, actually. So I’m a huge believer in the fact that we make money in two areas in our lives, our real estate and our stocks. And so I don’t deal with the real estate much, you know, that would be your own home or rental properties, or what have you. But the stocks I do, and so whatever percentage stocks that you have, that works for you in our portfolio, I want to protect that. And so gold theoretically is a protection. But it has fallen quite heavily several times during some of these big downturns combine that recession, with with a down stock market and end up with negative 36%.
And gold is the best hedge there. It’s working right now. I mean, I just said earlier in my summary, that the total stock market index is essentially flat for the last six months. GLD is up 5.4%. So it’s not a bad piece in this particular environment. And essentially, you know, it’s held up when the market came down. And I do like that, especially in this environment where bonds aren’t holding up either. So I don’t have a problem within a portfolio, I just don’t normally add it because it’s creating a higher level of volatility in that one component. And I’m not getting a big payoff to protect my stock portfolio. This is a downturn, but this isn’t the downturn I’m concerned with. I’m concerned with the ones that are 20, 30, 40, 50%. Those are the ones that I really want to watch out for. Because those are the retirement killers, as we just discussed. So yeah, I think it’s an interesting component. I have no problems with people that want to put it in. I have no problems with people that decide that they like that, and we can add it to their portfolio. I have never actually had it in my portfolio at any point in time. That combination of volatility and the fact that it doesn’t go up consistently in these big stock market downturns is kind of kept me away.
Easan Arulanantham:
Yeah, and like even silver in this like last six months is actually negative. Yeah, like around negative 1%.
Tom Vaughan:
So there’s even a disconnect in other precious metals from each other. So yeah, it’s hard to gauge if they’re, yeah. Consistently in these very big downturns people do run for treasuries. They’re not doing that right now, this isn’t a big downturn. This is an inflation scare, you know, these types of things. But I would say that if we had a recession here and the stock market was down 20, 30, 40%, I bet you would see some pop in treasuries. One of the problems with treasuries is that their rates of return are somewhat limited by the fact that the yield is so low, and I was come back up that 10 year treasuries now 2% And get that back down to half percent like it was before you would see a price increase, and that’s the offsetting thing I’m looking for. So it’s a little bit difficult to find these offsets in this particular environment. I’m just not sure that goal will be the place everybody’s running to maybe maybe this time, it hasn’t been in the past. So that’s that’s one of my concerns. Yeah.