Mauldin Switches Economic Outlook

by Lear Capital EditorialJuly 24, 2017

John Mauldin of Mauldin Economics recently took a jarring about-face on his advice and outlook on the economic picture. The noted investment expert and New York Times best-selling author had been blandly optimistic about current market conditions, saying we were in “muddle through” mode, meaning we would probably struggle through some economic doldrums but not face any serious downturns. After some time away and a fresh look at the economic picture, he has had to admit that he was very very wrong. The central banks’ balance sheets are out of control.

Dollar Cost Averaging Gold

"I do not think of gold as an investment. It is insurance for me.” – John Mauldin

John Mauldin is not known for being a “gold bug” however, that label is not necessary to understand the essential place gold should hold in a balanced and diversified portfolio, especially in the build-up of a bubble. Mauldin's own precious metals strategy is surprisingly simple. To protect your net worth from market turbulence and the chaos of a crash, many experts recommend holding 5-20% of your total assets in physical precious metals – not as an investment, per se, but as insurance or a hedge against market downswings. One way to get there is through dollar cost averaging.

A well-known strategy for evening out the bumps in market prices and steadily building your portfolio is dollar cost averaging. You buy a set amount of an asset at set intervals, regardless of price. You set a schedule and stick to it. That is what John Mauldin admits he does with gold.

"I do not think of gold as an investment. It is insurance for me. I buy a fixed amount of gold nearly every month, no matter the price. I hope the price of gold goes down, because that means I get more coins in the mail to go into the vault. Yes, I take delivery of my gold, and it is near me if I need it."

Why is gold so important to him? He took a look at the central banks’ balance sheets around the world since the last financial crisis and became highly alarmed. These balance sheets directly affect the value of the currencies they control. You cannot print from thin air an infinite amount of money and expect that the currency already in the economy will retain any significant purchasing power in the long term. It’s as simple as that.

Once this bubble of currency seeps out into the market, there will be hell to pay.


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