Investing | view listings

With economies and markets in turmoil, bullion is the only asset class that can withstand a global financial crisis. People who hold bullion tend to hold it for a long time, as the core of their entire wealth. It’s not sold once you understand its basic characteristics, because you have to have a reason to sell it, you have to use it to buy something better. If you had invested 44 ounces in the Dow in 2000, as at October 31, 2008, you would get back only about 10 ounces today. Precious metals tend to hold their value during periods of inflation, because they are negatively correlated to most other asset classes in general, and to cash, bonds, mortgages, real estate and stocks in particular. In an inflationary environment, allocate at least 10 percent of your portfolio to precious metals in order to preserve its value by offsetting losses in other asset classes.

Money | view listings

Before 1971, the monetary system was governed by the Bretton Woods Agreement. Under that agreement, the US dollar was backed by gold, and other currencies were pegged to the dollar. Other countries could trade their US dollars for gold. Essentially, US gold indirectly backed all other currencies. Then things changed. As the US entered the Vietnam War and President Johnson’s policy of guns and butter, US gold reserves started declining.

Inflation | view listings 

The unrestrained creation of money since 1971 has gradually but significantly eroded the purchasing power of most currencies, and has resulted in a subtle form of indirect taxation. Few investors realize the damage wreaked by inflation. The US dollar has lost a staggering 96 percent of its purchasing power since 1913 according to the US Bureau of Labor Statistics (CPI). The Canadian dollar is just as weak. The Canadian dollar lost more than 94 percent of its value between 1914 and 2005, according to the Bank of Canada. Freed from the discipline imposed by the gold standard, all the world’s other major currencies have lost similar amounts.

The Economy | view listings

Without the fiscal restraints inherent in a gold-backed currency, politicians worldwide are able to promise social programs and expand government bureaucracies that could be delivered through borrowing money created by the central banks rather than through direct taxation. They can embark on military campaigns with borrowed dollars that future generations will have to repay. And borrow they did, particularly in the US. In 1971 the total US federal debt stood at $436 billion. As of year-end 2008, that number exceeds $10 trillion.

The Banking System | view listings

For the first time in history, we have an unlimited ability, by all central banks, to print however much money we want, so to speak. Apart from the US M3 money supply growing at about 20 percent, we also have India and China growing theirs at about the same rate. China is at 18 percent, India is at 20 percent, and Russia is at 45 percent. The numbers for the US are likely to be much higher in 2009. Pledged funds for bailouts have reached a staggering $7.4 trillion as at November 25, 2008.

Annual Outlook | view listings  
Year in Review | view listings

Since 2003, BMG’s Annual Reports have included a “Year in Review� followed by a prediction for the coming year (“Investment Outlook�).

We have provided excerpts from each of the past five years, followed by a link to the complete Annual Report. Our analysis, insights and predictions about the markets and the economy have proven to be rather prescient.