“The desire for gold is the most universal and deeply rooted instinct of the human race.” — Gerald Loeb (Maxims of Wall Street, p. 151)
“The impact of the rate of inflation on the price of gold is like tracking the footprints of an animal.” — Julian M. Snyder (p. 152)
Today, I address the New Orleans Investment Conference on its 50th anniversary. In 1974, the same year I started writing and editing “The Inflation Survival Letter,” Jim Blanchard invited the gold bugs of the world to come together at the Fairmont Hotel in downtown New Orleans.
It’s been going ever since, with an incredible array of celebrity speakers, including Ayn Rand, Milton Friedman, Margaret Thatcher, Charlton Heston, Congressman Ron Paul, Louis Rukeyser and William F. Buckley, Jr. — all shown in this 11-minute series of clips: New Orleans Conference – 50th Anniversary Highlight Video on Vimeo.
Be sure to watch the clip around the 7:30 mark, where “General Patton” challenges G. Gordon Liddy to a push-up contest!
The Inflationary 1970s witnessed the birth of the hard-money movement, a counterculture that supported the return to the gold standard and recommended alternative investments.
The American Dream Becomes a Nightmare
It was a time when the American dream was threatened by runaway inflation, banking and energy crises, price-wage controls, the Vietnam War, the Watergate scandal and the falling dollar.
Americans had lost faith in politics. Speechwriter Karl Hess had written a famous essay, “The Death of Politics.”
After going off the gold standard, Jerome Smith warned, “The dollar will be worthless by 1980!”
As chart below shows, the Dow Jones Industrial Average was in a 15-year bear market.
Investors were afraid to invest in the traditional stock and bond markets.
As Franz Pick advised, “How many insecurities traded on Wall Street today?” (Maxims, p. 52)
The New Prophets of Doom
This was the age of the new prophets of doom and gloom and the beginning of a financial revolution, where investors were enticed to invest in money market funds, precious metals, penny mining stocks, foreign currencies, “nothing down” real estate and freeze-dried food.
Hard-money books became #1 bestsellers on the New York Times Best Sellers list, written by Harry Browne, Doug Casey and Howard Ruff. My own book on financial privacy sold over 500,000 copies.
Their mentors were the Austrian economists Ludwig von Mises, Friedrich Hayek and Murray Rothbard, and the Austrian theory of the business cycle that predicted that the boom was artificial and would end in a bust or depression.
But there was a silver lining in the new pessimism: You could profit from the madness of bad government. Don’t waste your time writing to your congressman. The financial Titanic was sinking, better to save yourself. As Ayn Rand preached, selfishness was the new virtue!
Their rally cry was “Buy gold, buy silver buy Swiss francs!”
This chart shows the advantage of investing in gold in the Inflationary Seventies. Gold outperformed stocks by a large margin.
Hard-money newsletter writers advocated investing in tax shelters and foreign tax havens to hide your money from the IRS. “Get your money out of the country before the country gets the money out of you!” shouted Harry Browne (Maxims, p. 148).
I was part of this movement. My first investment was not stocks, bonds or mutual funds, but gold and silver coins, Swiss francs and real estate. It was only later (starting in the 1980s) that I invested in the stock market.
1980, the Watershed Year
Then came the election of Ronald Reagan in November, 1980… another watershed year in my career. A week before the New Orleans conference, Reagan was elected by a landslide.
Over 3,000 investors showed up at the Hilton Riverside Hotel, and the theme was “Will Reagan make a difference?” I thought immediately that it was a paradigm shift, not unlike Donald Trump winning this year. Americans were fed up and wanted a change.
What surprised me that that most of the hard-money crowd in New Orleans refused to recognize that the Reagan administration could make a difference in fighting stagflation and restoring the American dream. They were in denial and continued to recommend gold and other inflation hedges.
Here’s what I wrote in my private journal: “The election on Nov. 4 was most gratifying, to say the least. I was most impressed with the new conservative, anti-government movement in Congress… It was interesting seeing at the New Orleans conference the inability of many hard-money speakers to see the impact of this shift. Gold was down sharply, and the dollar was strong. That could last for some time if inflation rates drop under Reagan.”
‘The Financial Shock of 1981’
1980 was also the year I started writing my own investment newsletter called Forecasts & Strategies (now in its 45th year). My publisher Tom Phillips asked me to write the first promotional copy.
The outside of the envelope said. “The Financial Shock of 1981.” You opened the envelop and it said in bold type:
‘REAGANOMICS WILL WORK! SELL YOUR GOLD AND SILVER AND BUY STOCKS AND BONDS!’
My prediction turned out to be correct. Reaganomics was largely successful and lead to a 40-year bull market in stocks and bonds.
The following chart tells the story:
In the early 1980s, the stock and bond markets returned to their glory days, inflation subsided and the economy boomed. Those who stayed investing in gold and silver witnessed a 20-year bear market, while investors who bought stocks and bonds saw their wealth multiply.
The gold bugs and the doomsayers have struggled under the Reagan-inspired recovery. As J. Paul Getty warned, “Businessmen and investors can profit handsomely if they will disregard the pessimistic auguries of self-appointed prophets of doom.” (Maxims, p. 110)
As Warren Buffett wrote years later, “The magical metal is no match for the American mettle.” When I met him in person, he told me, “Mark, I collect businesses and friends, not gold!” (Maxims, p. 152)
My #1 Lesson After 50 Years of Investing
If I could pick one lesson above all else, what would it be? Never give up on America! The American Dream and American Exceptionalism are still alive.
Even as we have gone through troubled times, I have never lost faith in American ingenuity and achieving the impossible. Despite every effort by Republicans and Democrats to overregulate and overtax us, despite wars and rumors of wars, recessions, inflation, banking crises and natural disasters, Americans have risen to the challenge.
Today, we enjoy a high standard of living and a stock market that is setting records.
‘Bull Markets Climb a Wall of Worry’
I’m not saying that “It’s Getting Better All the Time,” the title of a recent book. I’m not a Pollyanna.
Our country faces serious problems, including crime, inflation, skyrocketing debt, poverty, inequality, environmental degradation, mass shootings, mental illness and drug addition, discrimination, global warming and cultural decline.
The Economic Freedom Index has shown a gradual decline in the United States, but it is in our power to bring back the glory days of liberty.
All I can say is we can do better; we are problem solvers. I’m optimistic that the new Trump administration will do better.
Over this half century, I have debated and argued with the prophets of doom who have written bestsellers — Howard Ruff, Harry Browne, Doug Casey, Peter Schiff and Wayne Allyn Root come to mind — but in the end the optimists seem to triumph. Things are never as bad as they seem.
If you look at my ideal portfolio in Forecasts & Strategies, you will see that the majority of my recommendations are in tech stocks and dividend-paying growth stocks and funds. All have done well recently.
But I also have a significant number of investments in inflation and crisis hedges, including gold, Bitcoin and other hedges against bad times. I have not forgotten my roots. You never know when a “black swan” event will hit us out of the blue, and we need to be prepared.
‘I Liked the ‘Maxims of Wall Street’ Even More the Second Time I Read It!’
You’ll notice that I quoted frequently from “The Maxims of Wall Street” above. I’m happy to announce that the new 11th edition is now out for the holidays.
It includes several new quotes plus another “Rich Man’s Pearl of Wisdom,” this one by Van Simmons, my favorite coin dealer. You’ll love it.
The price is only $21 for the first copy, $11 for all additional copies at www.skousenbooks.com. If you buy an entire box (32 copies) you pay only $327. I autograph all copies and mail it at no additional charge inside the United States. They make ideal gifts for friends, family, colleagues and clients.
Last week, I spoke at the Wisconsin Forum in Milwaukee about the November elections and was hosted by money manager and friend Noaman Sharief. He took me to breakfast at the “Maxim’s Restaurant,” which is famous for its “Maxims” quotes on the wall.
Noaman has a good quote of his own on page 63 of the new 11th edition: “Hindsight may be 20-20, but foresight is still 50-50.” So true!
One of the attendees, Jean Jantzen, came up after my talk and said, “I just want you to know that I love your book ‘The Maxims of Wall Street.’ I read it cover to cover and liked it even better the second time around!”
The next day, I addressed over 100 students, faculty and business leaders at the University of Wisconsin-Milwaukee on gross output (GO), and afterwards, Ryan Moran, a private equity advisor, asked me to sign his copy of the Maxims. He said it’s his favorite financial book and he quotes from it regularly in his letter to his clients.
Rodolfo Milani, executive VP of B. Riley Wealth Management, says, “I find them to be the ideal gifts for my best clients.”
Good investing, AEIOU,
Mark Skousen
You Nailed it!
New Study Shows Minimum Wage Laws Hurt Black Teenagers
By Mark Skousen
“Minimum wage laws are the most anti-black laws in the land.” — Milton Friedman
David Neumark, professor of economics at the University of California at Irvine, is one of the foremost critics of minimum wage laws. In the latest study published by the National Bureau of Economic Research (NBER), he and co-author Jyotsana Kala demonstrate that blacks and other minorities are hurt the most by minimum wage laws.
They conclude, “We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites, and are often large enough to generate adverse effects on earnings.” See Do Minimum Wages Reduce Job Opportunities for Blacks? | NBER.
Sadly, despite studies like these, at least 30 states have passed minimum wage referendums. As a result, unemployment rates among low-skilled groups and teenagers are above the national average. For whites, it’s 8.4%, for Hispanics, it’s 10.7% and for blacks, it’s 18.6%.
In 2021, the Nobel Prize committee in Sweden awarded Berkeley’s David Card its prestigious prize for his work showing that an increase in the minimum wage does not cause unemployment.
It would have been appropriate for Card to share the prize with another David — David Neumark. Alas, they missed a great opportunity to be fair and balanced.
There’s a precedent for this. In 1974, when Gunnar Myrdal the Swedish socialist shared the prize with the free-market Austrian Friedrich Hayek.
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