Skip to main content

Tocqueville's John Hathaway on gold

Earlier in the week, Dow Theory Letters writer Richard Russell reprinted some interesting remarks from John Hathaway of Tocqueville Asset Management on gold. I'd like to include some of those comments here.

From Hathaway's 2006 essay, "Trivial Pusuit?":

The idea that all “hard” assets provide a safe haven from depreciating currencies is a dangerous one. It might seem valid for a while based upon the power of common belief to generate capital flows, but it will inevitably fall apart during periods of severe economic distortion caused by monetary imbalances.

Efforts to trivialize gold’s monetary significance are a key to the present day money illusion, that more paper equals more prosperity. It is far more palatable to the political and economic establishment to explain away the strength in the price of gold as a consequence of growing Asian prosperity or the reflection of an extreme fringe of investment thought (as suggested by Greenspan) than to read it as a reflection of flawed economic policies, archaic conventions, and corrupt institutions.

A rise in the price of gold is equivalent to a fall in the value of financial assets. The strength in the metal is a sign of distrust in the ability of present day financial instruments, including paper currencies, to preserve capital over time. The global bid for physical gold is potentially immense. It will be generated not by ephemeral and flaky speculative interests seeking instant gratification, but rather by the considered actions of capital interests with a long term perspective driven primarily by the desire to convey present day wealth to future generations.

Russell capped off this discussion in his "daily remarks" letter by confirming his belief in the value of gold and precious metals as a time-honored store of value. When it came to deciding what to pass down to his children and grandchildren, he said he would not hand them a portfolio of stocks or a house, but gold coins.

Food for thought.

Popular posts from this blog

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

Here's what a bubble *really* looks like. InfoSpace in 1999-2001. $QQQ$BCORpic.twitter.com/xjsMk433H7
— David Shvartsman (@FinanceTrends) February 24, 2015
For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a…

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL! 

Please bookmark our new web address at Financetrendsletter.com

Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner.  



Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead!

As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter. You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter). 

Stay up to date with our real-time insights and updates on Twitter.

Moneyball: How the Red Sox Win Championships

Welcome, readers. To get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter.

The Boston Red Sox won their fourth World Series titleof the 21st century this week.

Having won their first Series in 86 years back in 2004, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it?

Quick background: in late 2002, team owner and hedge fund manager,John W. Henry(with his partners)bought the Boston Red Sox and its historic Fenway Park for a reported sum of $695 million.

Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship.

This brings us to one of my favorite scenes from the 2011 film, Moneyball, in which John W. Henry (played by Arliss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pitt) over to Boston with an excellent job off…