Q/A: Gold and Family Offices

Q/A: Gold and Family Offices

A Q&A with Steven Feldman

OVERVIEW

Q: Is gold money? To the extent that it is, is it mostly a store of value or could it also become a means of exchange and unit of measure? (those are the commonly accepted definitions of money).

Q: Will we go to a gold standard? I might argue that if fiscal and monetary are bad enough, it gets forced, but maybe they improve or maybe all get bad in a coordinated way…keeping paper money and a new paper standard around.

Q: What’s your framework for valuing gold? (if as a currency, for example, so I would come to 5000 to 20000 per ounce). But there are other frameworks like supply/ demand which would never get you there in foreseeable future.

Q: Which central banks are the ones to watch in terms of gold buying? How much is being done secretly?

Q: Why should an SFO own bullion as opposed to more liquid ETF or mutual funds?

Q: If there is a gold price crash, similar to 1981, wouldn’t those who hold physical gold be the stereotypical “last-man-standing” as they would be holding the most illiquid form of the investment that they would be forced to sell into a deteriorating market?

Q: If there is a gold price crash, similar to 1981, wouldn’t those who hold physical gold be the stereotypical “last-man-standing” as they would be holding the most illiquid form of the investment that they would be forced to sell into a deteriorating market?

Q: An ounce of gold would have bought you a good suit in Renaissance Venice and will buy you a good suit today. Is this all we should expect from gold, to just hold pace with inflation and maintain purchasing power?

Q: If an investor put $10k in the S&P in 1970 he would have $140k now, if he put $10k in gold at $35 an ounce in 1970, when in theory Americans could not buy gold,
he would have $450k now. However if an investor bought gold in 1975 at $140 an ounce, when American could buy gold, the investment would have gone up 929%, but the DJI went up 1259% in the same period. How can investor compensate for the obvious timing drag that can make or break this investment? Are investors better off with equities in the very long term.

Q: How much of a $100M SFO’s portfolio, with no liquidity concerns, be in gold? How about a $500M portfolio in the same scenario?

Q: Can you briefly describe what you believe to be the biggest mistake investors make when starting out as gold owners?

Q: What is your view of gold stocks?

Q: What about gold futures contracts?

Q: People say gold is an inflation hedge. But one could argue that so are stocks. If the dollar weakens, then our products abroad will be cheaper and pro ts will shoot straight up. Over 40% of the S&P 500’s revenues come from abroad. That could make stocks a good long-term hedge against inflation. Also, many stocks have dividends. The ”dividend aristocrats” – that is, companies that have increased their dividends for 25 straight years or more, have yields that alone surpass the long-term returns of gold. That’s not even counting capital gains you get when the stocks go up. The dividend aristocrats include Procter & Gamble (PG), McDonalds (MCD), and Walmart (WMT).

Q: Many family offices views the economic situation broadly-both domestically and internationally-and fear that trouble lies ahead. Have we delayed the inevitable because China is a partner in our monetary woes?

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