The Millenial Gold Prophecy

I would remind the reader that this is just a prophecy, a prediction about future events. But also that the significance of the events predicted and that the potential risks associated are so impactful that despite your perception of its low probability, it still warrants attention.

(Probability of Event) x (Potential Risk) = level of importance.

The Millenial Gold Prophecy states that 2020s will see the largest asset devaluation our generation has ever seen and it will be the largest our generation will ever see.

An asset devaluation is a reduction in the price of an asset. It is important here to understand the distinction of price vs value. An asset devaluation occurs when (1) people have a combined belief that the value of an asset is less than it should and/or (2) owners of the asset need cash so bad that they are willing to sell the asset at a price well below than what they think it should be worth.

During a normal recession, the stock market loses about 25-55% of its market capitalization over the entire period of its recession and there have been about 6 of these recessions between 1970-2020. Roughly about 1 every 10 years. If you were invested in the market during this time a 25-50% devaluation of your assets should be a significant deal to you.

What the Millennial Gold Prophecy contends is that, in the coming decade, a 25% recession is a best case scenario and a worst cast scenario is more like 50-80% devaluation like we saw in the Great Depression in 1930 where the market bottomed out losing 89% of its value.

The basis for making this prophecy lies in three arguments that together come as one:

  1. The level of debt in society is untenable: Debt goes through cycles, as a society we move from fiscal conservatism to its opposite, fiscal recklessness. And although as an individual or a company we may be more of one or the other, as a society we average out moving from end to end of the spectrum. The last time America was at the fiscally conservative end of the spectrum was after the 1930s and 1940s during the depression and World War 2, when people learnt that its better to save what you have than spend it. In 2020, I would argue that we are nearing the other end of the spectrum. The only reason we havent reached the end is because the end is unknown as long as there is someone offerring your free money (The FED). This will eventually revert, and when it does happen it will not happen because people just agree to take on less debt but because society will be unable to pay back its debt and hence forced to take on much less dedt and we will have to communaly agree on what can be paid back through an asset devaluation process(similar to what happens in a bankruptcy proceeding). History shows that debt cycles occur in 80-100 year timeframes and unfortunately or fortunately, we are nearing the end of one.
  2. Inequality and Social Unrest: It has been shown that increasing economic inequality eventually leads to violence to break that trend and beget reducing inequality. Given the current levels of inequality and its continually increasing trend (stock market(capital) going up as wages(labor) is disspearing) the Prophecy also contends that this trend will reverse and that the level of social unrest will rise in the 2020s. Being a Millennial, I see the motivation of generation to think of the ‘collective’ more that the ‘individual’. I see the passion with which we organize around missions of social change. I belielve this social unrest is a natural reaction of a generation to bring about a positive change for generations to come. In this process we will see the greatest asset devaluation of our time, because only through devaluing assets, can we bridge the gap of inequality. Only by reducing the value of the assets of the ‘haves’ can the income made by the ‘havenots’, who don’t have capital, be less unequal.
  3. There is no where left to go: A reasonable coutner argument to the prophecy is why now? Why will the greatest devaluation of our generation occur now and not in the next decade? Why can’t we take on more debt at a lower rate and ‘refinance’ the current debt? much like you refinance your house when interests rates go lower. The answer is we cannot go any lower. Because going lower entails you paying to store your money (-ve interest rates)
United States Fed Funds Rate

The above chart shows the interest rate at which that the Fed lends money to the banks. It shows that we have reached the lower bound of 0, meaning that they will lend money to banks for free who inturn could (theoretically) lend it to you for almost free. However, no matter how much free money you give a bank, they will not lend money to a person or entity if they belive that the money will not be returned in its entirety , let alone the additional interest, and im afraid this is where we are, 0 interest rates and falling profitability. A 0 interest rate policy has more impacts to the common consumer and retireee that compound the problem (read here).

So let’s say we agree that the significance of this event is rather consequential despite whether or not we agree on its probability of occurring. The question then arises what do we the Millenials, 59% of whom have about $15,000 in retirement and savins combined, do to protect our wealth.

Answer: The safest asset of all time. Throughout history there has been one only asset that has held it’s value for millennias. An asset, in historic times, often associated with intrinsic worth and an asset still used, in current day, to reward great human achievement.

Gold has been around for ages, is accepted for transactions in almost every country, has been a great storer of value and is never in danger of being inflated.

Millennial Gold present’s an investment portfolio focused on this asset that can not only protect your wealth but can also grow it. An investment which you can allocate a portion of your savings to, a portion exactly equal to the probability you believe this event will happen.

How does a non-performing asset like gold grow? it’s Price!, its not how much dividends Gold pays but how much someone else thinks that Gold is worth that will lead to its appreciation. Millenial Gold maintains that ‘how much’ someone thinks equities is worth will decrease this decade (after a bubble ofcourse) and in search of another asset the masses will flock to safest asset of all time, gold.

Oh and if you think the past 20 years, which has been the greatest bull market in equities, is the reason why you should stick to investing in the market look at the performance of gold a ‘non-performing’ asset in this period. Compare the performance of Gold vs the S&P from January 2000 to January 2020. A little homework for you 🙂 Hint

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