Guy Oppenheim Fiddling with the Thermometer by GuyOppenheim


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									Guy Oppenheim Fiddling with the Thermometer

By Guy Oppenheim & Toby Birch

Oppenheim & Co. Limited

As author of The Final Crash; Addictive Debt and the Deformation of the World Economy
(published 2007), one is often asked for further forecasts. The customary response to investors
is to re-read the book with reference to the section ‘2020 Vision’. There was of course a chapter
on precious metals, not along the usual hysterical lines of ‘Become a Bullion Billionaire’ but the
more moderately entitled ‘Antidote’. Some seem disappointed with such conservatism in the
context of gold and silver which have been the best buy of the last decade and likely this one
too. However, they are missing the point. An antidote’s role is a remedy against a poison; not
the cure for the underlying cause of toxicity.
The escalation of gold is simply a measure of the malaise of money, like mercury in a
thermometer. Other than boosting the profitability of mining companies and bullion dealers,
there is little benefit to humankind, let alone the environment, when prices surge. Commodity
appreciation is feeding a frenzy of resource depletion and associated pollution we will later
come to regret. Swathes of capital are being allocated to passive lumps of metal locked
underground. It does not fund industries starved of finance in the wake of counter-productive
bank bail-outs. This is where the Islamic approach is spot-on. The hoarding of wealth (in the
form gold and silver in the time of the Prophet Mohammed) is viewed as communally
destructive. Scholars liken money to water; only useful when flowing, otherwise stagnating if
uncirculated. Muslims must pay a charity tax on liquid assets that are not invested in productive
ventures, acting as a form of negative interest rate; a case of use it or lose it.

Many call for a return to financial discipline by way of a Gold Standard given that fiat currencies
have inflated house prices, food and energy beyond affordability. The evidence favors such an
approach as the greatest debt over-hangs in history (post-Napoleonic and WWII) were
countered by the resumption of gold-backed currencies. These periods brought about
prosperity as a natural by-product of competition and efficiency in a sound money

Nevertheless, it is easy to be rose-tinted when promoting precious metals as money; after all
every Gold Standard has eventually buckled thanks to war-related expenditure. Likewise the
constraints or surplus of mining supply in the Victorian era triggered several boom and bust
episodes. It ultimately comes down to stewardship, a commodity that is sadly lacking in this
modern era. The institutions designed to protect the public are riddled with lobbyists
determined to protect the status quo. This can be seen with recent moves to raise margin
requirements for precious metal futures contracts designed to contain prices. Artificial
manipulation seldom works, especially when trends reflect reality. Rather than curing the
disease, we see how the symptoms are suppressed by fiddling with the thermometer. Only
when gold forms parabolic chart patterns and taxi drivers are telling you to buy, will it be time
to exit.

Guy Oppenheim is the Chairman of the Oppenheim Group with over 25 years experience as a
portfolio manager, investing globally in all asset classes. Guy Oppenheim has managed assets
well in excess of $1 billion for institutional clients, sovereign wealth funds, and private families.
Guy Oppenheim has been registered and authorized by Financial Services Authorities and
served also as Compliance and MLRO Officer.

Guy Oppenheim was educated in Geneva and holds a BA in Business Administration majoring in
Finance from the University of Geneva.

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