A folly of fortune

ECCLESHALL, STAFFORDSHIRE – “Boaz, I don’t believe you, you’re not that stupid, it’s bullsh*t.

Would you mind telling me how you really feel, please?

I must say, I’ve had a great time reading the responses to Monday’s note (see: Have I made a grave error?).

Had I known my decision in 2019 to dump my entire company pension into the gold mining sector would cause such a stir, I would have published it much earlier.

The reader above not only believes it a stupid thing to do… but that I would be incapable of doing it as a result! Oh my dear reader, my sweet child, have I some bad news for you..!

Rarely has an email from a reader stirred such laughter in me – this job really does have its perks. And I should take it as a compliment. But to this reader I confess with all sincerity: I have indeed done it, and I shall continue to do so.

Each pension contribution I make, month after month, paycheque after paycheque, is being gambled away, frittered into the shares of gold mining companies…

Is it really so hard to believe? That a jaded male twenty-something – a gold-nut no less – would apply a risky investment strategy to a pension pot he will only be able to access several decades into the future?

I admit, it is a folly, and not an example I would advise any to follow. But it is a folly I believe shall lead to fortune – and in the words of Henry Every, “I am a man of fortune, and must seek my fortune”.

I’ve received a wide range of responses to Monday’s letter. Most have been positive. But there’s been plenty of criticism in there too – at my lack of diversification (all eggs in one basket), the fund itself (BlackRock Gold & General isn’t everyone’s favourite), or my investment thesis (I don’t believe you, you’re not that stupid, it’s bullsh*t etc).

Some readers were very specific, looking at the political instability of some gold-producing nations:

Normally, I hate funds. I think they are almost a scam. There are 14,000 of them, and most of them underperform the market and most pension schemes are indeed ‘cookie cutter’ deals.

However, bearing in mind you have chosen gold, and you have the employer’s contribution, and the tax advantages of a pension scheme, I should say this is potentially satisfactory, except for two things you may not have considered.

The first is the possible criminal mismanagement of the particular fund you have chosen and the second is the political risk of the gold mining countries in which it is invested. There is also the slowly declining productivity of gold mines in general worldwide to consider (i.e. to less than 10grams per tonne), so you may need to move out of gold long before you retire. But gold is certainly the best place to be for the next 7 to 10 years or so until we get coming inflation under control. So, is your particular gold fund invested in places with high political risk?

I should have preferred it if you had split your pension contributions across multiple gold funds with investments based mostly in Canada, the US and Aussie. You should also plan to build up other investments, apart from your pension; even if it means less beer! (That’ll come hard I know). So buy your own home; no matter how humble. And get Sam’s advice on building up a portfolio of crypto. May you have good luck throughout your future career.

Thank you! I do have plenty of other investments outside my company pension – that’s partly why I’m willing to risk as much as I have on this one play. And I do speak to Sam Volkering about investing often, especially on our weekly podcast.

Regarding political risk – the fund I’ve selected, BlackRock Gold & General, has allocated most of its capital to Canadian, American, and Australian companies, with Canada home to some 45% of the fund. However, that’s just where the companies are based – some of their operations are often far afield in much more exotic climes. And should the gold price increase as I expect, then the risk of such mines becoming targets of their governments or organised criminals for additional revenue must be considered.

But I can tolerate that risk. The fund owns mostly “blue chip” mining stocks, so I’m not going all-in on the wilder, “cowboy” gold companies like the small exploration companies. Though I’m sure they’ll have their time in the sun in the coming years…

Thank you all for your responses to Monday’s note. The readership of Capital & Conflict remains as engaging as ever, and it’s been a great joy to hear your thoughts on my decision to stuff my pension pot with gold miners.

I’ll be sharing several more of the emails I’ve received on the topic in future letters. Feel free to chime in and send me your thoughts here.

All the best,

Boaz Shoshan
Editor, Capital & Conflict

Category: Investing in Gold

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