As we kickoff the third week of trading in the new year, today the man who has become legendary for his predictions on QE, historic moves in currencies, spoke with King World News about the greatest secret of this century and why the price of gold is headed above $6,000.

The Great Secret Of This Century
Egon von Greyerz:  “For most investors, there is only one asset class on the horizon. Whether it is the professional investor or amateurs, when they consider investing, stocks will always be first on their list. And if we exclude all debt instruments, global stock markets are by far the biggest (combined) markets in the world. Global stock markets are capitalized at around $80 trillion currently…
Egon von Greyerz continues:  “Since the creation of the Fed in 1913, investing has been “a stairway to heaven.” But there have been quite a few stumbling blocks on the way. In 1929 the Dow peaked at almost 400 before the crash. The low of the Dow was in July 1932, at 40 – a 90% fall. It then took 25 years, until 1954, for the Dow to get back to 400. This gives an average return of 5% over a 103-year period excluding dividends. This is an excellent return and including dividends the total return approaches 10% annually. 

As I have shown in previous articles, the rise of the stock market is very much linked to the increase in debt. For example, since Reagan came to power in 1981, US debt is up 22X and the Dow up 20X. 

We are now getting to the point when increasing amounts of debt and money printing is required to fuel the stock market. With the Schiller p/e currently at 28.5, the stock market is in bubble territory and approaching the 1929 overvaluation level. But we are not yet in the super-bubble area of 2000. So in theory there is room for this bubble to grow even bigger. 

But even if stock markets can become more overvalued, they are now at levels which represent unacceptable risk, especially when we look at a mean of 16.7of the Schiller index. This makes the overvaluation 70%. This necessitates a very stern “Caveat Emptor” (buyer beware) to any stock market investor. 

Although stocks, bonds and property all represent very high risk, few investors look for opportunities outside these markets. And it is for this reason that most investors have totally missed the best performing asset class in this century, which is of course precious metals. Most investors don’t look at gold as an investment. Gold is regarded as a volatile commodity and does not appear in the average investment portfolio. Less than 0.5% of world financial assets are invested in gold today. This extremely low level of gold investment shows that very few people understand gold and even fewer look at the performance of gold. Most investors don’t have a clue how gold has performed in the 2000s. If they did know, they would realise that they have missed the best investment in the last 16 years by a very big margin. 

The table below shows how gold has done in dollars and pounds compared to the S&P and the FTSE 100.