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

June 27, 2016

The following tables illustrate one of the dilemmas of mainstream money management: The vast majority of financial advisers and portfolio managers are big fans of bank stocks because finance is, in their minds, a crucial if not the crucial form of wealth-creating 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 heck, 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 here: