Did gold break your heart?

Photo: Did gold break your heart?

A friend of mine recently told me that he didn’t understand why he should own gold. He had purchased a one-kilogram bar a while back to diversify his portfolio. Still, He was frustrated that it had “done nothing” compared to his real estate, equities and crypto positions.

I hear this all of the time.

There is a young broker in Vancouver that I hold in very high regard. He has made me a lot of money - but he has an allergic reaction to the gold sector. We recently met for a hike, and he wouldn’t stop ranting about the lacklustre gold market and that it was a fool's game to sit on positions for years while the next big run lies just around the corner

I agree with him on one point, the Achilles heel of gold bugs (and dogmatic lovers of any assets - crypto, real estate) is that they fall in love with their asset class and turn blinders on to everything else. They bury themselves in like-minded Twitter accounts and ignore the bearish arguments to protect their conviction. It is herd behaviour.

I get it. Failing in a crowd has some comfort. Failing by yourself is tough.

Physical gold is a small part of my net worth, but that's all you need when the bet is asymmetric. I’ve acquired my gold through passive long-term dollar cost averaging. I have never invested a disruptively large sum of my net worth at any time.

I learned how to fight in the same way. Combat sports have never been my main focus, but I’ve consistently invested a small amount of energy over a long period. Over the years, the results have compounded.

Through this lens, it has cost me almost nothing to build a significant skill. Possessing this skill has no downside.

Like gold, fighting is an asset of low utility; it’s done nothing for me for years at a time. It has given me far less value than my other skills, like reading and writing.

Throughout a decade, there have been almost zero circumstances where I needed to defend myself physically. Almost. But in that rare Black Swan event where I needed it… the value of the asset skyrocketed.

That is asymmetry. A small investment and no carrying cost, with an outsized return in a rare event.

Looking back through decades of history, there are very few moments when you want to own gold. Still, during those moments (typically after prolonged periods of inflation or war), it is about the only thing you want to own.

I am not a martial artist. But I have it if I need it. I am not a gold bug. But I have it if I need it.

So why own gold? There are almost zero reasons. Almost.

Jay Martin
CEO, Cambridge House