400 oz Gold Bars Now A Million Bucks

McAlvany Weekly Commentary

Who's The Target For The Democrat Tax Increase? 400 oz Gold Bar Was $14,000 In 1971 S&P 500 & Gold Increase The Same Since 1971 "The reality of a democracy is that politicians compete for votes primarily through promises to pay. Sure, you've got other tactics. You can inflame the electorate with a particular issue. But the real traction is gained and the real constituents built through the public purse. Cuts are discussed but rarely made. New spending is introduced and often approved. It's an ugly imbalance we've grown accustomed to. Meanwhile, revenue, if not matched to new spending, just further drives up the national debt. That is, if you look at our debt and deficits, these two are our Achilles heels moving forward." —David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. Dave, my wife and I were watching Ike and Alan Barinholtz win a million dollars on "Who Wants to Be a Millionaire" this week. It was actually very entertaining. But I started thinking about this. John Carpenter, in 1999—Regis Philbin was the host back then, that's when "Who Wants to Be a Millionaire" started—and John Carpenter was the first million dollar winner. At that time, Dave, gold was about 250 bucks an ounce, 252. So he won the equivalent of, if you can imagine, ten 400-ounce bars of gold. He won the equivalent of ten 400-ounce bars of gold. David: And as of today— Kevin: As of today— David: He wins one 400-ounce bar— Kevin: Think of that. Think of the difference between a stack— Okay. So for those who are listening who've never seen a 400-ounce bar of gold, you see it sometimes on the movies like "Ocean's Eleven," things like that. But what they look like, they look like the size of a spice cake. Wouldn't you say it's sort of a spice cake? David: Yeah. That's about right. Kevin: Imagine ten of those, solid gold, in 1999, being handed to the first "Who Wants to Be a Millionaire" winner. Last week, Ike and his father, Alan, winning one of those little tens, basically, the size of a spice cake. What have they done to our money, Dave? David: I know. John Authers was noting in The Financial Times that if you go back to the 1971 period where gold was unhinged from the dollar—this is the Nixon era, the closing of the gold window—the S&P performance from then to now and gold performance from then to now, they're on top of each other. Indistinguishable. Kevin: Really? David: Yep. And— Kevin: Really? After taking all that risk in the stock market and companies coming and going, you could have just owned gold? David: Adjusted for gold, you've not made any progress. It's a really fascinating thing. Kevin: Wow. David: So yeah, we went from a million dollars buying ten of those bars to a million dollars buying one of those bars. This is the first time in history that we've had, in US dollar terms, a 400-ounce Good Delivery bar at a million bucks— Kevin: At a million bucks, it's finally happened. So your thesis on tangible assets, this brings into light why. David: Well, as you know, our interest in hard assets ties to a thesis where the very factors that delivered decades of success for financial assets become impediments, and in turn spur on growth in tangibles. Of course, not all tangibles are equal, and we'll discuss iron ore a little bit later. A lump of iron ore or steel is very different than a lump of gold. We had virtually no inflation, very low inflation. And we have the opposite now. Yes, the inflation growth numbers have come down, but you were talking about growth of the inflation factor. We're not talking about a diminishment or an elimination of inflation. The middle class and lower class household, they're still compounding inflation off of a low base. And a 3% higher number on top of already high levels means that lower inflation numbers are not at all consoling. It's a little bit like the reduction of that pulsing,