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A Tale Of Two Asset Classes: Gold Miners Soar, Banks Crash

The following tables illustrate the dilemma of mainstream money management. The vast majority of legitimate financial advisors and portfolio managers are big fans of bank stocks because finance is a crucial, if not dominant, form of economic activity in the modern world. So the big names in the field -- Goldman Sachs, Deutsche Bank, JP Morgan, etc. -- are generally seen as safe places to put client capital.

Gold and silver, in contrast are fringe, primitive, atavistic concepts that are, at best, "insurance" against some kind of 100-year flood that can't be predicted and probably won't happen. But some clients still like such things so what the hell, we'll allocate 1% of the idiots' money to it to shut them up. (1% is literally the proportion of global capital invested in precious metals.)

Unfortunately, that's credit bubble thinking. Banks are dominant forces in an economy only when that economy is creating an unhealthy amount of credit. When the process exhausts itself the banks tank, and terrified capital flows back into "primitive" safe havens. Like today:

Finance Stocks

Precious Metals Miners

 

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