Grant Williams, strategy advisor to Vulpes Investment Management and co-founder of Real Vision Television is always worth the read or listen, and he sat down for an interview during his time at this year’s Mauldin Strategic Investment Conference to discuss his views on gold, and why physical cash is being eliminated.
On the subject of gold, Williams is very quick to point out that he doesn’t buy gold for the price, he owns it for what it does. He goes on to say that once people realize the value of owning physical gold, ETF’s will no longer be what investors want to own.
“I don’t buy gold, I own it. I don’t buy gold at $1,100 because I think it’s going to go to $1,200. I buy it for what it does, not what the price is, the price is the last consideration for me. I think the way the picture has been developing over the last eight years, it’s like when you take a polaroid, you take a picture and you sit there and you watch this thing and it slowly comes into focus, and that’s what it’s been like for me watching gold, we’re watching this picture slowly develop.”
“We’re getting to the point where people are going to be able to see the picture, and at that point gold is the answer. It’s not just an asset anymore it’s the answer to a lot of people’s questions. When that happens, I think the most important stage of this completes itself and that is the resolution between the paper price and the physical asset. I think when we get to that point where people want to own gold, ETF’s won’t suffice anymore. A promise to deliver three months hence is not going to be sufficient anymore, people are going to want to own the asset. At that point you realize that there are multiple hundreds of claims per ounce, and those claims won’t be worth anything anymore it’s going to be the asset, and that’s the end game.”
“The picture is becoming clearer, and everything the central banks are doing is bringing that day forward a little bit.”
When asked the question how to hedge the many risks that investors face today, Williams shifts the conversation to holding cash. As people hoard cash it negates what the central banks are trying to do so they’re discouraging holding cash, but he rightly points out that any time someone is telling you ‘you really shouldn’t do that, we’re going to discourage you from doing that’ often times that’s where people want to (and should) go.
“The thing you’re being discouraged most to own is cash. If people hoard cash it negates what the Fed is trying to do; lower interest rates, get people spending, bring the velocity of money up. You can see, the results are all in the opposite direction. You look at the savings rate which bottomed in 2006, we had the sharp spike in ’08 which is a perfectly natural thing to do in a crisis, it came back a little bit but the trend is now such that the savings rate has tripled. That is not something that you would expect as a Federal Reserve governor to be the outcome of taking rates to zero, the idea is let’s make it unattractive to hold cash.”
“Any time someone is telling you, ‘you really shouldn’t do that, we’re going to discourage you from doing that’, often times that’s where people want to go and so I think holding cash, the optionality that you have inherent in owning cash now has certainly not been higher since going in to 2008.“
On the push to eliminate physical cash, Williams notes that it’s just the logical next step in a plan for the governments to be able to take from those that have money, and give to those who do not. He also accurately points out that the media is helping the government accomplish this task with its constant narrative that only drug dealers and other bad guys use cash.
“Having the ability through digital cash, for a government to reach into your bank account and take 10 percent 20 percent, whatever it may be, is what they need. They can see this coming, at some point they’re going to have to take money from the people who have it to fill the hole of the people who have spent it. This was a perfectly logical next step in that process.“
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