muses of the moment

March 6, 2013

Truth 101

Fiat currency and inflation distorts real investment gains.

As everyone is hailing the new high in the DOW, here is the truth. Gold has been the better investment (as long as you don’t need regular income returns), even with a 28% tax on physical gains. The inflation-adjusted DOW doesn’t look much better than the above-linked DOW-gold chart.

These are the little nuances that you must understand when you are deciding on an investment. If you need regular income, stocks, bonds, and commercial real estate are some options. GG always recommends some investments in gold and silver and some in other types of investments.

groovygirl is interested in keeping the purchasing power of at least some of her money. The DOW may or may not be at investment. And it always depends on the individual stocks chosen. The DOW in this long winter cycle, is not necessarily the place to dump money and forget about it.

Addition: just to clarify. During a winter cycle or a debt contraction/collapse, there are two things to consider: retaining purchasing power and liquidity. This chart shows the liquidity angle. It is best to have investments divided into different categories of liquidity. Because money you can not get to or borrow against (because of too much debt attached to the asset), doesn’t do you much good. Each investment groups has its own pros and cons, but each can have a purpose to get you thru a winter cycle.

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