Michael Cuggino, the Portfolio Manager for the 5-star rated Permanent Portfolio Fund (PRPFX) came on Breakout with three reasons he keeps silver and gold in his portfolio and thinks any prudent investor should. Here's why:
1) To guard against inflation
2) To protect your portfolio in the event of a full blown financial meltdown and or 2008 near-miss
3) To act as a hedge in a world of ever-devaluing paper currency
To spare folks the time and effort of countering these three arguments, I'll go ahead and do it for you:
1) Deflation is as likely as inflation. While a nasty wave of stagflation was the result of the economic policies during the Carter administration, there's a decent argument to be made for a deflationary environment. Reducing the deflationary argument as succinctly as possible: In this economy even the rich are reluctant to buy much of anything. No demand = lower prices.
2) A full-blown financial crisis, or least one in which we're not reduced to rubble, is gradually getting priced into the market. We may, may, be reduced to buying things with the same currency used 3,000 years ago but even then silver, as a quasi-base metal, would likely go down as your gold appreciated.
3) Currency is relative. If the dollar rallies against the Euro, and it appears as if the dollar is trying to do just that, all commodities will be beaten senseless. There will be ample time to buy gold and silver then unless we one day wake up to a world where citizens are burning cash in a garbage can to keep warm and cook the rats that will be society's only sustenance. Read More
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