Ainslie Bullion - Daily news, Weekly Radio and Discussions

[AinslieBullion]

Is the Crash Imminent?

The US sharemarket, and indeed most around the world, is solidly down this year. After last night it is now 9.4% down in just 5 weeks. Our own All Ords is down 8.3% (whereas gold is up 15.7% and silver 13.5% as we write). That's a fair correction and has some suggesting now is a good buy 'buy the dip' as they say. But let's step back a little for some perspective. The chart (albeit a few days old) below is the S&P500 in the US encompassing the last 2 crashes of 2000/1 and the GFC. In terms of the technical set up it's just smashed through both the 200 and 320 day moving averages. That is a precarious situation at a time when there are the looming issues of Chinese currency devaluation, Euro bank impairments, and 'energy sub prime' defaults to name a few. What the perspective allows too is that -9.4% may seem bad now, but it may merely be the beginning of potentially the biggest crash in history. Unless of course 'this time is different'

French banking giant Societe Generale's Albert Edwards had this to say about the chart below (initially referring to his formative time at Bank of America):

"I remember the head of fixed income explaining to me it was far better not to try and pick market tops or bottoms but to wait and observe the market turn, making the trade late rather than prematurely trying to pick the bottom or top.

So the chart below is notable, showing that key 200d and 320d moving averages for the S&P have just been breached to the downside. If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear.

A renminbi [Chinese yuan] devaluation will only sever an already badly frayed safety rope."

For contrast, here is the (more zoomed in) technical chart for gold. So in summary, one is looking like breaking down and one breaking up.

 

[AinslieBullion]

Share Bear v Bullion Bounce

In technical terms a bear market occurs when the price declines 20% from its recent high. You probably saw on the news last night that this happened on the Australian sharemarket yesterday. But we are not alone. The first chart below shows the MSCI World Index (a basket of all substantial sharemarkets) is also now in bear territory, down 20% on the April 2015 high. Just as the S&P500 chart presented yesterday shows, whilst that might feel like 'enough' it is still minor compared to where crashes historically end up. The takeaway? Thoughts of it being too late to bail out may well be unfounded. There can be a lot more pain to come. Now where to put that liquidated cash? Read on below the first chart

A key technical trading rule is that a market is not considered to have 'turned' until it makes a higher high to the last spike. The chart below shows clearly that each cycle high was lower than the prior one for the last (painful) 4 years. until this one! The one number sceptical analysts are still watching like a hawk is the USD1200 spot price. At the time of writing it was just $2.20 off that.

 

[AinslieBullion]

WGC Gold Demand Trends 2015

Before we get into today's news, if you missed it, gold last night smashed through the key technical ceiling of US$1200, right up to US$1260. This is a very bullish sign as we discussed yesterday. Most commentary is around the markets losing faith in the central banks' ability to reflate the system a system in a bubble from that very same central bank stimulus since the GFC. Make sure you check out today's podcast for more https://www.ainsliebullion.com.au/g...ie-radio-podcast/tabid/88/a/1164/default.aspx.

Yesterday the World Gold Council released their annual full year Demand Trends report for 2015. We summarise are follows:

Jewellery Demand It was a tale of 2 halves. Whilst H1 was weak, H2 saw the strongest half since 2004 increasing 2% to 1300t taking the total year to 2415t, down 3% on 2014.

Investment Demand Investment demand increased 8% to 878t driven by bar and coin bullion demand with ETF's seeing a year of outflows, down 133t. Needless to say 2016 is already looking very different

Central Banks Ironically amongst the economic uncertainty they themselves engineered, central banks continued to add gold to their reserves at a prodigious rate, up another 588t.

Technology Industrial uses continued to fall, down 5% as substitution for the expensive metal continues. Industrial use however remains a small component of demand and reinforces our view gold is money not a commodity.

Supply, as predicted, appears to be the year of 'peak gold' with the slowest growth in mine production (at just 1%) in several years. When combined with recycling falling to multi year lows there was a total supply fall of 4% over 2014 to a total supply of 4,258t.

 

[AinslieBullion]

3 Wise Men Why You Need Gold

As there is continuing speculation amongst analysts that we are currently witnessing the end of this epic credit cycle that started in the early 70's when we left the gold standard, it worth reviewing 3 quotes that walk one through this journey. The first predates leaving the gold standard (currency backed by gold not government promise Fiat currency) and ominously warns of the consequences, the next 2 from just last week. What makes the first the more extraordinary (and ironic) is that it was penned by ex (1987-2006) US Fed Chairman Alan Greenspan in an essay in 1966.

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

So having done as he warned against and left the gold standard, the next quote is from noted market bubble expert Doug Noland which explains where we've gone since

"A multi-decade experiment in unfettered "money" and Credit has encompassed the world. Unique in history, the global financial "system" has operated with essentially no limitations to either the quantity or quality of Credit instruments issued. Over decades this has nurtured unprecedented Credit excess and attendant economic imbalances on a global [scale]. This historic experiment climaxed with a seven-year period [since the GFC] of massive ($12 TN) global central bank "money" creation and market liquidity injections. It is central to my thesis that this experiment has failedand the unwind has commenced.

The gold card is the only one in the financial deck that has yet to be played by the world's central banksbut the markets are in the process of playing that card for themand there isn't a thing that central banking can do to stop it."

Finally as a specific case study, and whilst most eyes are on the US it is arguably China that has 'gone the hardest' with debt creation to fuel growth, this from hedge fund manager Kyle Bass:

"The unwavering faith that the Chinese will somehow be able to successfully avoid anything more severe than a moderate economic slowdown by continuing to rely on the perpetual expansion of credit reminds us of the belief in 2006 that U.S. home prices would never decline. Similar to the U.S. banking system in its approach to the Global Financial Crisis ("GFC"), China's banking system has increasingly pursued excessive leverage, regulatory arbitrage, and irresponsible risk taking.. What we have come to realize through these discussions is that many have come to their conclusion without fully appreciating the size of the Chinese banking system and the composition of assets at individual banks. More importantly, banking system losses which could exceed 400% of the US banking losses incurred during the subprime crisis are starting to accelerate.

Our research suggests that China does not have the financial arsenal to continue on without restructuring many of its banks and undergoing a large devaluation of its currency. It is normal for economies and markets to experience cycles, and a near-term downturn that works to correct the current economic imbalances does not qualitatively change China's longer-term growth outlook and transition to a service economy. However, credit in China has reached its near-term limit, and the Chinese banking system will experience a loss cycle that will have profound implications for the rest of the world. What we are witnessing is the resetting of the largest macro imbalance the world has ever seen."

Now lets give Mr Greenspan the final word (interview October 2014):

"At some point in the future, the price of gold will trade "materially" higher than it is now---and also by the fact that certain entities are buying massive amounts of physical silver in all forms, which will ensure that someday, silver will certainly become the new gold."

 

[barsenault]

Ainslie, favor please. Can you site the reference of the quote: A video or factual paper would suffice. Thanks.

Now lets give Mr Greenspan the final word (interview October 2014):
"At some point in the future, the price of gold will trade "materially" higher than it is now---and also by the fact that certain entities are buying massive amounts of physical silver in all forms, which will ensure that someday, silver will certainly become the new gold."

 

[AinslieBullion]

The 'Sniff Test'

On the front page of today's AFR we see the headline "Japanese shares soar on weak economy". A misprint you think? Nope. This is so indicative of the 'fundamentals' of our financial markets. Yesterday Japan released its Q4 GDP print and it turned negative for the 6th time in 6 years and not just by a little, but -0.4% for the quarter or 1.4% annualised. So what happens? The market surges the most in years as the poor GDP signals more central bank stimulus to come. Yep, the sharemarket surged because things are so bad

Also yesterday, coming back after a week's NY holiday, China's central bank surprised everyone by strengthening the Yuan fix (in light of the weakening USD over that holiday) plus telling the market it saw no basis for continued devaluation. This despite simply awful January trade figures of exports down 6.6% and imports down 14.4%, albeit that results in a much stronger trade and current account balance given exports were down less The point is, the market reacted arguably more on the 'words' and interim actions than on the fundamentals behind it which has seen all the commentary and public 'bets' on further devaluation. These are words and actions from a regime famously with no accountability. But it's what the market wanted to hear. Down goes gold and silver, up goes the Aussie dollar. It was a nasty day for Aussie gold and silver holders. Arguably though gold and silver needed a little correction after going so hard.

But again, give all of the above the 'sniff test'. Does this smell sustainable? Is your gut telling you everything is awesome and you don't need a hedge on it going wrong. Greg Canavan of Daily Reckoning gives his take on it:

"What are the fundamental reasons behind gold's strength?

I don't believe that gold is an inflation hedge. It's a reflection of confidence in the financial system, and confidence in those who manage it. I also see it as a form of financial insurance.

When confidence is high, the need for insurance is low. When confidence is low, as it clearly is now, the desire for insurance increases. Hence the rising gold price.

And then there's this scary statistic doing the rounds right now. According to JP Morgan, there are US$6 trillion worth of government bonds offering negative interest rates. I repeat, $6 trillion.

That's a retardation of the laws of finance on a huge swathe of assets. Gold, often criticised for yielding nothing, suddenly looks good. If the Fed tries to do something as stupid as pushing rates negative, the gold price will explode."

At a time when markets seemed to be losing faith in the central bankers' ability to get us out of this mess, yesterday showed some are still clinging to that hope.

 

[AinslieBullion]

Big Trouble in 'Little' China

Just 7 years after China was the world's (and in particular Australia's) saviour after the GFC it has become one of the biggest economic threats to the world. The sad irony is that this is in large part due to the sheer amount of debt they threw at generating growth post GFC, quadrupling to $28 trillion by mid 2014. Yes they were certainly not alone in doing this but not even the US matched the sheer scale of it.

Whilst some eternal optimists say 'but their GDP is still relatively strong in the high 6%'s', they are missing the dual points that those numbers still represent a massive value drop in an already globally weak economy and importantly too has been 'bought' with 15.2% growth in debt in the last year. So to be clear they are seeing 6.9% GDP growth but 15.2% total debt growth year on year. A grade 1'er can do that math.

We learned yesterday that in January alone they added a simply eye watering and record breaking $520 billion of debt.

A lot of the drag on global growth right now is that of the massive debt burden accumulated. That burden features strongly in most of the themes illustrated in the charts below.

The 2 charts below are Bank Of America Merrill Lynch's global fund manager survey on the question of what represents the biggest tail risks to the economy. You will note the marked changes just from January (1st) to February (2nd) but China features strongly in each.

 

[SpacePete]

^^^ Summarised in two words: "debt bomb".

 

[finicky]

Ainslie, favor please. Can you site the Greenspan quote on silver ..... ?

@barsenault, no reply from op, so I dont believe that Alan Greenspan made that comment about silver. I suspect it is solely attributable to a pro anything metals guy. Ed steer is here citing Greenspan on gold, and then, after a hyphen, giving his own (ed steer's) ordinary opinion on silver. Also note date of the article ...

17 Reasons Why I Trust Silver
Gary Christenson | December 15, 2014 |

11. From Ed Steer: " No amount of money printing will do any good now and I see nothing but very hard times aheadI'm comforted by the fact that Alan Greenspan has gone on record that at some point in the future, the price ofgold will trade 'materially' higher than it is now and also by the fact that certain entities are buying massive amounts of physical silver in all forms, which will ensure that someday, silver will certainly become the new gold. "

http://goldsilverworlds.com/investing/17-reasons-why-i-trust-silver/

 

[barsenault]

Yeah, it appears they want folks to buy from them...hurry, hurry before it goes up to a gazillion dollars. They are clowns, for making a claim, but not backing it up. Borderline disingenuous.

 

[AinslieBullion]

Junk Bonds Early Warning Sign

The zero rate environment engineered by central banks since the GFC was meant to entice old and newly printed money into risk investments to spur along growth. One sector in particular that benefitted from this reckless hunt for yield was high yielding bonds/debt, otherwise known as junk bonds, to the tune of $1.8 trillion! Because these loans had secondary security they yielded well to reflect that risk. It was all going swimmingly until oil tanked and global growth slowed and we started seeing more credit rating downgrades and even outright defaults.

So not surprisingly the investors are realising the debt they are holding is becoming worthless and want out. And oh are they getting out As we've explained with sovereign bonds (US Treasuries etc) there is always the inverse relationship of bond price and yield. So when people rush for the door, the price goes down and the yield goes up (effectively to entice new buyers and keep the 'hopefuls').

To help mum and dad investors into this space (subprime MBS's anyone?) there are even ETF's that provide a vehicle in. The graph below shows clearly the recent outflows from HYG (just one of them but indicative of others). You may notice the last time it did this was the GFC.

Source:

More tellingly, the following graph shows the yield spread which likewise is in an exponential rise, ala GFC.

Source:

Whilst these charts alone are instructive from a history repeating perspective, the mechanics of why are actually simple. The debtor corporations who have resorted to these loans (of which the buyers of the bonds are the creditors) quickly become unable to manage the exponential rise in the cost of that debt, especially as their earnings suffer in this near recessionary environment. When you consider nearly 20% of it is energy related and oil is at historic lows and often below the cost of production, you quickly see the problem. It also in part explains why they keep pumping and selling oil at these prices (and exacerbating the supply problem) as they need more cash to service this ever increasingly expensive debt. It's a death spiral. Defaults inevitably jump and those yield spreads follow suit until we see again what happened in the GFC. This time however it is likely to be much much worse.

It explains why many analysts see sky rocketing junk bond yields as the early warning sign of a looming financial crash. They are the canary in the coal mine oil well.

 

[AinslieBullion]

Margin Debt Early Warning Sign

Yesterday we wrote about how history indicates spiking junk bond yields are an early warning sign of a financial crash. Well another early sign is when margin debt on shares comes off new highs.

Just as zero interest rates fed speculation into junk bonds so has it fuelled margin lending into shares. Indeed as can be seen in the graphs below, despite the very apparent lack of fundamentals and various over valued metrics, margin lending into shares is at an all time high.

The next chart shows it as a percentage of GDP and zooms back to show the incredible correlation before every market crash and that time when margin debt falls quickly after peaking to a new high. The chart doesn't capture February but check out the zoom in on February below.

 

[AinslieBullion]

China's Bad Debt Problem Is Ours Too

Last week we wrote about how China's debt issue poses one of the key threats to the world economy right now. That article looked at the total amount of debt they have accumulated but what has some even more concerned is the number of 'at risk' or non-performing loans on the books. The chart blow illustrates how these have swelled to nearly 1.3 trillion yuan, up over 50% on a year ago.

If you include the so called 'special mention' loans (those showing signs of future repayment risk) that total figure is 4.2 trillion yuan. For context that is $645 billion and is the highest its been since June 2006 having blown out 256% in just the last 6 years. Coincidentally in 2006 just prior to the GFC, sub prime mortgages in the US totalled a significantly less $600 billion. De ja vue?
China's response? Lowering the reserve rate required for banks to have to cover such debts to encourage more debt!

 

[AinslieBullion]

Big Bets on a Crash

Strung out markets can be a volatile ol' beast, as we've seen this year. Last week had all the hallmarks of a short covering squeeze with US shares up robustly despite an ordinary end. That appeared to continue last night with the S&P500 up 1.4% v 'most shorted' up 2.4%. Notwithstanding that, the chart below shows there are still a near record number (18 billion!) of shares shorted (bets on a price drop) on the New York Stock Exchange.

Now that of course can go one of two ways, with last week possibly showing the result of just a mini covering rally (and don't forget our story on the amount of margin debt on these shares nothing like a margin call to spur along some action). Or, like last time we were at such heady heights (see graph above), a little thing called the GFC happened and this so-called 'smart money' made a squillion on the ensuing crash (whilst those poor unsuspecting 'mums and dads' on the long side of that trade lost scullions).

One thing that could cause the first option is a big new central bank stimulus injection of some sort. The chart below shows we are at a point where this could be something these desperados could try again

The chart above is courtesy of Bank of America Merrill Lynch's latest Global Investment Strategy. These guys are not very optimistic at the moment and in reference to the chart above are saying that if we don't see stimulus of real substance from central banks very soon, we could see US Shares fall through the resistance line established last 25 August and this 11 February. It could be precipitous from there

They are pointing to the G20 meeting this Saturday in Shanghai as the first potential opportunity.

For gold it could be interesting either way. No stimulus, shares crash, and markets as they have nearly always done run for gold. If stimulus is enacted we may indeed see the next leg up for shares. But what we are seeing and hearing more and more so far this year is a growing wariness and understanding in the market that this central bank intervention is not 'right'. Indeed it is merely adding to the root debt problem. On that realisation you may well see gold take off together with shares, or indeed shares may not even respond beyond a few days like we saw with Japan's NIRP announcement.

 

[AinslieBullion]

"Biggest Housing Bubble in History"?

Gold and silver are so called 'hard assets', much like property. For the same reason many are piling into precious metals amid financial market turmoil, many are looking at property too (and both can be put in your self managed super fund). If you are one of the latter, you would do well to invest $4 and buy today's AFR (Australian Financial Review), read the front page story "Uncovering the big Aussie short", and remember the investment 101 principle 'buy low, sell high'.

The story outlines how a hedge fund manager and an economist posed as a couple and went 'shopping' in Sydney's west the sort of 'rubber hits the road' analysis all too rare amongst analysts. What they experienced was nothing short of scary and certainly worth the read. It was a combination of oversupply, over-pricing, no deposits and systemic misrepresentation to get mortgages at record low rates that even then are often interest only. They specifically called it a Ponzi scheme and bluntly warn "Australia now has one of the biggest housing bubbles in history" and predict house price falls of up to 50% in Sydney and Melbourne and 80% in mining towns. They note that our real estate value to GDP is 3.8 times (above Japan and Ireland's record 3.5 before their 50-80% property busts), that Australian household debt to GDP is the highest in the world, and most of that (per the crude photo of the chart below) in the form of residential mortgages. Needless to say they (their hedge fund) have gone short residential property and its implications (banks, AUD (which they predict will fall to 40c!), etc).

We are not saying this one piece of research gazumps any other but it has many fundamental elements that strike very true. It also mirrors growing concern in Brisbane particularly with oversupply concerns on apartments. BIS Shrapnel reported 2014-15 saw a record year of dwelling starts nationally and, critically, those starts exceeded underlying demand in all states.

Throw in possible negative gearing changes and it is a time when any new investment property purchase might be considered, well, 'brave'.

The flipside to the 'clay brick' scenario is the gold and silver 'bricks' option. Gold and silver prices have (or are) appear to be coming through the other side of a price bottoming process. Now refer back to that economics 101 rule.

 

[SpacePete]

^^^ The impications go way beyond the AUD falling to 40c and massive falls in banking stocks.

So much of Australia's present day culture and economy is tied to housing. We'll see the government seek to maintain their legitamacy by introducing draconian measures to bailout debtors and prop up banks.

 

[Skyrocket]

^ If we have a housing crash (no outside influence) of 30% or more does that mean the AUD will have to drop sub 50c USD?

Also, if there is a GFC this year which triggers our housing bubble crash, could our AUD stay roughly the same as it is now against the USD or even strengthen further against it if the US economy nosedives again from another GFC?

 

[SpacePete]

^ If we have a housing crash (no outside influence) of 30% or more does that mean the AUD will have to drop sub 50c USD?

Also, if there is a GFC this year which triggers our housing bubble crash, could our AUD stay roughly the same as it is now against the USD or even strengthen further against it if the US economy nosedives again from another GFC?

The AUD drop would be a consequence of the RBA dropping rates to zero as an emergency measure.

 

[AinslieBullion]

Escaping the Oil / Stock Correlation with Gold


It is often difficult to convey news concisely, especially on complex issues such as oil. This week however has seen significant enough related action and commentary to warrant mention.

Yesterday was another good example of how oil pricing impacts the Australian investor as the Australian market clocked up another circa 100 point loss with oil prices falling by as much as 4.5% on Tuesday night. BHP suffered with investors unimpressed by its profit results.

Oil prices are a concern and there are many recent examples to provide context on how this relates to confidence in equity markets. This morning Bloomberg is running an article called "Another Oil Crash Is Coming, and There May Be No Recovery". We recently heard from an Iranian minister offering sentiment damaging views on the latest plans to freeze production at January levels, labelling the idea as "ridiculous".

Former Washington DC lobbyist, Lawyer and blogger Michael Snyder reported on Wednesday that over the last 18 months, oil has fallen close to 75% and with Iran sanctions dropped, more supply is in the pipeline. Last year alone, 67 US oil companies went bankrupt and CNBC is reporting that 35% of all remaining oil companies operating today are in danger of imminent bankruptcy. Also on Wednesday, Royal Dutch Shell announced the shutdown of its shale unit.

RT reported yesterday on the latest downgrades out of S&P. As pictured below, the credit rating agency has reduced the grades of 3 top European oil companies. Total of France, Statoil of Norway and BP of the UK were all downgraded by 1 notch based on belief that the oil market would only partially recover by 2018 and that oil prices would only rebound to about $50 a barrel by then. S&P further commented that the companies would likely struggle to meet the demands of lower investment expenditures while funding shareholder dividends. Earlier this month S&P moved to downgrade other oil giants like Royal Dutch Shell and placed negative forecasts on Chevron and Exxon Mobil.

It's no secret that depressed oil prices and worries regarding banking exposure to the higher cost producers are now a permanent concern for investors and as exemplified yesterday, equity followers could be excused for seeing a correlation between stocks and oil pricing. They wouldn't be alone. RT's Ed Harrison observed a "High degree of correlation between oil futures prices and the S&P 500" in an interview yesterday with Money Strong LLC's president Danielle DiMartino Booth. He specifically mentioned declining oil prices as one of the three main drivers of stock market volatility as pictured below.

The take away here is that the poor fortunes of oil are related to the poor fortunes in the stock market and with shares being the classical DIY investment vehicle, one is motivated to search elsewhere for ways to grow or even simply retain wealth. Readers of yesterday's news may have been suitably alarmed at the prospect of Aussie bricks and mortar investments at this time, further narrowing the options.

In contrast, the performance and commentary around gold overnight is telling in this environment. US spot rallied $30 to exceed $1250 overnight before a pullback as pictured below. The media this morning is attributing this move to further unease around oil pricing with the article "Gold surges more than 1%, amid flight to safety as oil weighs on markets" at Investing.com being one example. USD gold has increased by around 16% for this year alone which is well on the way to being the strongest opening quarter for the metal in nearly three decades.

 

[AinslieBullion]

Venezuela Pays Debt With Real Money


This week Venezuela is in the media again. The troubled South American country is drawing upon its real money reserves (gold) to pay its cash obligations. News just released states that according to the Swiss Federal Customs Administration, $1.3 billion in gold bars was shipped from Venezuela in mid-January which happened to be just weeks before two debts payments fall due. One such payment of $1.5 billion is due today.

The need for this stems from the country's battles on a number of fronts including runaway (triple digit) inflation (the IMF predicts 720% this year in the Bolivar) and the maintenance of its heavy social obligations in the face of the oil price carnage that has damaged its balance sheet. Approximately 95% of Venezuela's revenue is derived from crude. Venezuela is drawing upon its gold reserves to bridge the cash shortfall and just this week, data was released on its total reserves including gold holdings of $10.9B as the chart below from the CBV indicates.

The shipment to Switzerland is a little unusual and follows the repatriation of Venezuela's gold roughly 4 years ago by president, Hugo Chavez. The Swiss involvement is speculated to either be for the purposes of verification and sale or for use as collateral in gold swap deals for the procurement of cash.

This most recent drop in gold reserves occurs within a climate of central bank gold accumulation which speaks to the desperation of the situation in Venezuela. This gold reduction is actually the most recent move in a continuing trend for Venezuela with articles late last year identifying similar behaviour as the country's economy crumbles (see chart below). Predictions of a default by Venezuela are now prolific (possibly in the last quarter of this year when $5 billion in debt is due) if China (one of the popular sources of finance) is unable or unwilling to assist.

Developments in Venezuela's environment of hyper-inflation and financial stress continue to prove gold's relevance as a modern financial tool. Other recent examples are also available and Philip Haslam's post-GFC (2014) book "When money destroys nations" as a study of Zimbabwe's hyper-inflation is one excellent example of the value of hard assets to the investor. One of the numerous anecdotes contained within includes the wide-spread purchasing of motor vehicles (despite the lack of fuel to drive them) in a desperate attempt to acquire anything physical instead of holding cash. Whether talking about the scale of nations or individuals, the principals of sound money remain equally virtuous.