When I was in high school, I was really into Led Zeppelin. I always had one of their albums playing, and I even bought a guitar and fumbled my way through "Stairway to Heaven" and "Ramble On."
Don't ask me to play for you now... My days of calluses and picks are done.
One of my favorite tunes was "The Rain Song," from Houses of the Holy. It's more than 7 1/2 minutes long, and full of guitar and sweeping lyrics.
This is the springtime of my loving- the second season I am to know. You are the sunlight in my growing- so little warmth I've felt before.
But Robert Plant was wrong. It's not springtime, though to look at the markets these days, you'd think we're in full bloom.
The Dow is only 8.5% below its October 2007 high, and fewer than 370 points away from a cool double off its March 2009 low.
There are going to be a lot of investors hurt once this house of cards collapses.
Consider this a personal wealth warning... We are not in the springtime of our investments.
No one knows this better than Ian Gordon, founder of The Longwave Group. His Longwave Principle studies economic cycles -- or lifetime cycles, as Ian calls them. These cycles are broken down into four seasons.
By all measurements, we are in winter.
I had a chance to speak with him last month about just how bad the economy is and why investors might get caught holding the short end of the stick.
The one thing he told me that the vast majority of investors don't know is that the whole purpose of an economic winter is to cleanse the system of debt.
That means, so long as governments keep interfering with the unwinding of debt (re: the Fed's QE programs and the EU's bailouts), we're never going to have real growth. Look at this:
I think you'll agree that our economy right now ticks most of these boxes. But the problem is governments are keeping interest rates artificially low and pumping the system full of cheap cash.
They are prolonging our economic winter.
And that means every investment you make in the stock market is tainted with this interference. It's like the guy at your local market putting his thumb on the scale – making you pay more for your tomatoes than they're worth.
This debt weighs down the whole economic system – including the investments you're making today.
There is something you can do about it, though.
Look at the chart above again.
The fifth circle shows you what you should be investing in: gold and cash, and bonds (after credit crunch).
Gold is obviously our favorite choice, and there are more ways to invest in gold now more than ever before. Now, in my interview, Ian said he's done really well with junior gold mining companies. In fact, he was the top broker for Canaccord by investing in gold and gold stocks.
He has seen a compounded rate of return better than 50% since 1999 by investing in junior gold mining companies.
Ian also says physical gold is a great asset to have as a financial system collapses.
That's why I like the Sprott Physical Gold Trust ETV (PHYS:NASDAQ). This investment is very different from the traditional SPDR Gold Shares ETF (GLD:NYSE) for one very important reason.
The GLD backs its value with gold. In essence you're buying one-tenth of an ounce of gold when you buy one share of GLD.
But PHYS takes this idea a step further. With the Sprott Physical Gold Trust, you can actually take delivery of gold, should you choose. The gold is held in a secure location in Canada, so you've got the added security of this gold being outside of the US.
Why is that important? Consider this. On the Winter chart above, you'll note the line "International Monetary Crisis a la 1931-1933."
There's one important thing that happened with gold here in the US. President Roosevelt made it illegal to own gold.
The US government confiscated all private holdings of gold, and threatened huge fines and jail time for any gold "hoarders." Why? Because the government wanted to print more money, and our money was backed by gold at the time. That means if the government has more gold in its coffers, it could print more dollars.
Scary stuff, and reason enough to be able to buy and keep your gold offshore.
If you're not already invested in gold – and you should be, if you've been reading Inside Investing Daily for the past couple of years – then the Sprott Physical Gold Trust is one of the smartest ways to get gold into your portfolio, and out of our government's reach.
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