If you start with a thousand dollars and you invested it in a 6040 portfolio for the last 23 years, okay, starting starting when the Vanguard uh BTLX bond fund was um incepted. If you start back then, you turn $1,000 into 5,800, which isn't terrible. I mean, it's not bad. A lot of people would be happy with that. However, if you skipped the stocks and bonds entirely and made a 60/40 portfolio of gold and silver, you'd have over $10,000 today. So, that that to me, it's just obviously


better. Hi, it's the Gold Silver Show with Mike and Allen once again. Allan, you've got a presentation for me. What is it? Yes, thanks Mike. Uh, good to be with you again. Uh yeah, I want to look at the 6040 portfolio. And Goldman Sachs has released some research suggesting that if you add gold to a normal portfolio of stocks and bonds, your portfolio is going to do better. And it's going to do better at pretty much all times throughout history, including today. And so I want to share some of


that research with our audience. Okay. Yeah, let's do it. All right. So, first of all, here is the uh research from Goldman Sachs, the strategic case for gold and oil actually uh in long run portfolios. We're not going to focus too much on oil, mostly on the gold, but here's what they say. Following the recent failure of US bonds to protect against equity downside and the rapid rise in US borrowing costs, investors seek protection for equity bond portfolios, those traditional 6040 portfolios. We reach two conclusions on


the strategic case for gold and oil in portfolios with a long horizon that we define as five or more years. So, this is for long-term investors, not the day traders. First of all, their first conclusion out of two history suggests that positive long-run allocations to gold and enhanced oil futures are optimal for investors seeking to minimize risk or tail losses for a given return. The key reason is that gold and oil are critical hedges against two major inflation shocks that can hit equity bond


portfolio returns. Gold hedges against losses in central bank and fiscal credibility and we are dealing with that right now while oil often protects against negative supply shocks. So yeah. Did you want to weigh in here, Mike? Well, it's just interesting they're coming to the party here about uh what 24 years late. uh uh they they came to this conclusion and they say that history suggests so they just discovered this history like just now uh you know uh I started investing in gold in uh


2002 when it was $315 was the spot price on the day that I bought. But you know um history the history was already there and uh you know we had Allan Greenspan reacting to the uh crash of the NASDAQ and taking interest rates down uh and holding them down too long and accidentally creating a real estate bubble. Uh you know he it just was something he didn't see in his peripheral vision. The central bank caused that. And so all of the conditions they're talking about have existed for more than 20 years. And


Goldman Sachs is just discovering this now. Welcome to the party, Goldman. I know it. It is funny. And it's funny you mentioned when you started investing because I started investing. Next month it'll be my 10-y year anniversary of investing. And and around that time, I uh I actually used to be a portfolio manager for institutional money. And so we had over a billion dollars under management. And at one point I went to Goldman Sachs and said,"What about gold? You know, what what about adding gold to


our portfolio?" And they laughed. They actually laughed out loud like they hadn't heard a joke that funny in weeks. And uh so they were absolutely not into it. So I guess better late than never, you know. So back in the bull market of the 70s, uh it was the same way. Nobody was recommending gold until gold already peaked once it had done its big performance. All of the real pros like Goldman Sachs I don't know if Goldman was uh recommending but then they would say uh to you know they would they would


go heavy in gold once gold had already peaked and edited its bare market and you know they're always doing yesterday's news. they're uh so conservative uh that they just uh chase after whatever uh people are going to acknowledge as right under current conditions. You know, people are now starting to pay attention to gold now that it's already gone from uh 250 to 3500 bucks. Uh people, you know, the public is accepting that well maybe gold is a good idea. Yeah. So, so that's the


reason Baldman is writing this because the public is already in that frame of mind and they're just pandering to whatever the public is set up for. Yeah. All right. Well, let's look at their second conclusion here and then we'll get into some charts and some data. Second, we recommend a higher than usual allocation to go. What's usual? 0%. I mean, you know, okay, that's their usual is 0%. Right. Yeah. We we recommend a higher than usual allocation to gold and a lower than usual allocation to oil in


long-term portfolios. So some of the things we read just just so the viewers are aware, it might seem contradictory. They might say higher than usual oil or lower than usual oil or oil puts versus um oil call options or just any long position. Um, and that's because Goldman is is recommending that over the short term they're bearish on oil and then over the long term they're bullish. So, we're not going to focus too much on oil, but if you do see or hear any of that, I don't want you guys to be


confused. So, they also say contradictory stuff in here regarding oil, but there isn't any contradiction on gold. They highly recommend gold in a portfolio. Yeah, the the gold part is very clear. I mean, if you read the whole the whole article, um, you you get a sense of of what they're talking about with oil, but obviously I cut a lot of that out for the video here. Um, but they're trying to do fancy stuff and they're trying to use options. Um, I don't know a lot of investors who who


trade oil options, you know, but I know a lot of investors who buy gold. It's it's much simpler. So, that's that's what we're going to stick to. We recommend overweight gold for two reasons. because of one the high risk of shocks to US institutional credibility, fiscal expansion, pressure on the Fed, and number two, the central bank demand boost to gold. So, central banks have been buying gold for 10 years now, really. Net net buyers of gold, and that's accelerating. So, yeah. But with


number two, they're only Goldman Sachs is only 10 years late to the party. Okay, let's let's move on. better late than never. So, the rest of this is about oil, so I'm gonna I'm gonna skip it here. So, here's what they say. Long run investors have historically been able to reduce portfolio risk for a given return by investing in gold and oil futures. So, this is kind of the approach that they're taking in this research. They're basically saying if you target a historical average return,


right, 8.7%. if you want to get 8.7% per year on average, could you add gold to the portfolio and reduce volatility without sacrificing returns? And the answer is yes, absolutely. So that that's the the research that they're showing here. If we look at this column chart on the right, US bonds and equities, that normal 6040 portfolio will give you um uh about 8.7% on average, but the volatility is about 10%. So if you're uncomfortable with those big swings in your portfolio, their solution is add gold to your


portfolio and the volatility will diminish without sacrificing returns. And they the final bar here is they add enhanced oil futures. It's a sophisticated move. It will it will lower volatility further, but maybe that's not for everybody. They don't say how much gold though, right? Correct. They don't say I was very surprised. Uh and I I read it and read it. 10% gold. It would be interesting to see what happens when you go 20% 30% 40% gold. And you presented a chart of that a couple of years ago, but it also


incorporated the 20-year bare market from 1980 to 2000. Uh, and it was suggesting somewhere between 20 and 25% for the best return versus the risk. uh and uh if you if if we uh take just the bull markets, you know, both bull markets had a cyclical correction in the middle. Uh the 70s bull market and the uh 2020 until today bull market. Uh there was a a big cyclical correction right in the middle of uh those bull markets. And so, but even incorporating that, I would bet that the um risk return would be uh skewed way up and


recommending much greater than 50% of your uh portfolio be in gold. um even with that but you know as far as return goes uh you really can't beat just um well you know earlier uh we said that uh I am about um uh my portfolio as far as the cash the dollar value uh I have about uh 75% silver and 25% gold as far as the dollar value goes as far as the ounces I'm $300 to one 300 ounces of silver for each ounce of gold that I own. Uh and I don't really care for the stocks that much. Yeah. Well, we'll see at the end of the


bull market. We can do some math and uh yeah, and see see what your what your return was throughout that period. That's awesome. Well, you're absolutely right about the the risk re risk return riskreward trade-off. Yeah. Um and these and these they're probably doing all this calculation with just 10% gold in this 6040 uh stocks and bonds portfolio. Uh and they they should have also done an analysis without any oil and but with a lot more gold. So anyway, yeah, and I did do that a while ago, a


few years ago as you mentioned. And so for anyone watching this, if you guys want to see an interactive Excel dashboard where I click through and go through all these scenarios, let me know in the comments. And if enough people want to see that, I'll make a video for it. I was a little reluctant to do it here because I know people get scared of Excel and they they click away. But if you guys want to see it, I'd be happy to to do a dedicated Excel tutorial sort of querying all these all these questions.


You know, if we have 100% gold, what happens? Or, you know, 100% silver and different timelines. So So we could do that. So, let me know in the comments. Uh, and what that looks like is actually the left panel of this chart here from Goldman. There's basically a curve here, this blue line, where we're looking at expected return um on the vertical axis and volatility on the horizontal axis. And for different allocations to stocks and bonds, you get different um returns and different levels of volatility. And


that's what forms this whole curve here. And on average, if you if you take a 60/40 portfolio, you're going to end up with about 8.7% return on average with about a 10% volatility. Okay? Now, when you add gold to the mix, you get the gold line, the yellow line, it basically moves to the left or up depending on your perspective. And what that means is if you want to maintain a certain return, right, you don't want to sacrifice portfolio returns. What happens is you get a lower volatility.


So that's that's depicted in this curve here. And it's also the same thing we see in this this column chart. Also, we see that if you are comfortable with a certain level of volatility, if you're okay with a certain amount of swing in your portfolio balance, but you just want to maximize the return for that amount of volatility, well, adding gold will increase your returns. It goes up on the chart. So you'd get over 9%. Maybe that's like 9.2, 2 9.3 something like that for the same amount of


volatility. And the red lines here are when you add in oil futures. Maybe that's a bit sophisticated for some people, but the point is when you add gold to that 60 portfolio, it's just better oil futures. That's is that uh historical data or is it projected? It's all historical. Okay. Yeah, it's all historical. Okay. So, yeah. So, when you add gold to your portfolio, it's just better. like whether whether you're trying to reduce volatility or increase returns is better. Like that's that's


it. So, all right. The strategic case to reduce portfolio risk with oil and gold in long run portfolios also holds in more recent samples excluding the 1970s. So, of course, the 1970s was a tremendous bull market for gold. And a lot of people criticize these types of analyses when you're doing um you know portfolio analyses and they say, "Oh, well, you're cherry-picking to include the 1970s. That makes gold look really good. If you take that out, it it stinks. It's it's a terrible thing to


hold." No. What Goldman Sachs is showing is that, okay, yes, if you do include the 1970s, gold is great. And I'll explain this in a second. But if you take out the bull market of the 1970s and just measure from the 1980s until today or the 1990s until today or the year 2000 until today, in all of these cases, gold helps just the same, which is really, really amazing. So, what are they basically saying here? Well, they're measuring the height here is volatility of a portfolio, and they're


fixing the amount of returns you get. So, they're saying if you're trying to get that 8.7% per year return, okay, but you want to minimize your volatility, you're looking for the lowest the lowest bar on the chart here. And so, if you just have uh stocks and bonds, you're going to have more volatility than if you add gold. If you add gold, your volatility goes down. That's a good thing. Same thing basically everywhere. In the 1980s, it's really close. There's not much


difference if you if you started in 1980, but it's it's compelling and pretty significant the difference between the dark blue and the light blue bars for all other time periods. So again, another way of showing that adding gold it just makes your portfolio better across the board. Yep. Yep. Okay. One other thing they say here, we recommend an overweight position in gold because of the elevated risks to US institutional credibility and sustained central bank demand. So first, the US uh the rising US debt


to GDP ratio, okay, which is this chart on the left here. Uh federal debt held by the public, they're going back to World War II. uh you know, we paid off a lot of that debt and then we just started taking it back on and we're we're pretty much at the same levels as World War II right now. It doesn't actually Allan, we didn't pay off the debt. The we grew the economy faster than the politicians could dig us into a hole. That's what happened from World War II until 1980. And then we went on


this deficits don't matter uh thing and and we uh we pumped the uh national debt up to levels that they were during World War II when everybody was fighting for their very survival and we're not in a major world war. And we're starting, you know, when when things go bad, they're going to really go bad. Uh because we're we're starting with this pit of debt that we're just not going to be able to grow our way out of. Yeah, exactly. And we're refinancing at higher and higher interest rates. Uh so


it's a it's a terrible debt snowball and um yeah, you know, this is this is Goldman's projection here that we're going to go off and it could do that. It could be, you know, worse. It could be it could be anything. But uh not good. Not good. So in a case like this, they're saying that gold does well in a portfolio. Secondly, um significant credibility losses in US institutions could trigger a sustained sell-off in both US bonds and equities. So both of them could sell off at the same time and


we briefly witnessed that um with US bonds recent failure to hedge against equity downside during the tariff escalations. Um you just just I guess we're still ongoing um in that in that situation. So what they're saying is, "Oops, we screwed up. Our recommendations were wrong. You should try gold." Yeah. Yeah. Exactly. Yeah. Like we keep saying, better late than never, you know. Yeah. Um the previous recommendations didn't have any gold in it and uh you know, they were using the bonds as security.


They're supposed to go up when everything else goes down and they didn't. They're saying oops. Yeah. So we can we can definitely talk about that again uh in in a separate video. Um the bonds failure to provide that safety net. Um but but here this is an interesting chart that I haven't seen before. This is the correlation between central bank independence and inflation. So this is kind of interesting. Across the bottom here they have the central bank independence index. And I don't


quite know how they measure that. Um, I didn't get a chance to dive into it, but it's an interesting concept that you can measure central bank independence. And the more independent the bank is, so the further to the right here, the lower the inflation that country tends to experience. Kind of interesting. I'm not not totally sure if it's a causal relationship or not. We're just sort of observing the correlation here. But as a central bank loses its independence and move to the left, inflation goes up. So


you look at Brazil, you know, completely dependent central bank, um, high inflation and of course the US right now losing institutional credibility, central bank independence being called into questions by by Trump. Um, you know, we could could be in for higher inflation. Yeah. Okay. All right. One other piece on credibility here. Uh, exhibit 11 shows that long gold positions sharply improve risk adjusted portfolio returns during periods where US institutional credibility is challenged. So this is because such credibility


shocks could lead to a flight to gold as a neutral collateral similar to the 1970s when fiscal easing and Fed subordination caused runaway inflation and a five-fold increase in gold prices between 1971 and 1978. If these concerns intensify, private investors could drive gold prices well beyond our current forecast of $3,700 per troy ounce by year end and $4,000 per troy ounce by mid2026. So I think those are low estimates. I think uh we're definitely going to clear those thresholds. I do too. It's


interesting that uh they chose uh 1978 and excluded 79 and 80. Uh, so it was a five-fold increase that they're talking about, but if you go all the way to January of 1980, it's a 25fold increase. Uh, so they're still trying to sort of um they're saying, "Yeah, well, maybe you should try some gold instead of they should have been recommending this for the past uh 25 years." Yep. So gold was super undervalued in the year 2000. Yeah, absolutely. So, go on. And we're seeing that play out. So, because the


gold market is still present day small relative to other major asset classes. Okay. So, for example, global gold ETF holdings represent only around 1% of outstanding US treasuries and half a percent of the S&P 500 market cap. Okay. So even a small diversification step out of US fixed income or risk assets could cause the next giant leap for gold prices. So and that absolutely will happen and there will be a giant leap and there estimates of 3700 and 4,000 are ridiculous. Yeah. So let's move on. Just


to just to sort of summarize that point. So even if 1% of the outstanding treasury market moved into like gold ETFs, let's say, that would double the amount of money in gold ETFs. So that would double, you know, demand there. And, you know, only half a percent would have to move out of stocks to do that same thing. So yeah, a small diversification step would start multiplying the gold price. Yeah. And what this chart is showing, um, so it's similar curves to what we saw before. The 6040 portfolio is in


blue. And when you add gold, it's in orange, which is basically over top of it. It's showing no difference. But this is when institutions have high credibility. When institutions actually keep their promises, they do what they say they're going to do. And adding gold isn't really that big of a deal under those circumstances. However, that's not the reality today. The reality today is that there's low institutional credibility. The entire world is full of promises that are broken, right?


defaulting on debt is one one ma major massive way that you would uh break your promises. And you can see that the 6040 stock bond portfolio is dramatically improved when you add gold. Like this is a massive massive difference. You could do uh twice as good, more more than twice as good in these situations by adding gold to your portfolio. So to me it seems like an absolute no-brainer and it's nice it's nice to see Goldman uh putting this together and admitting it quite frankly. Yeah. So their conclusion we recommend


positive optimal allocations to both gold and enhanced oil futures and long run portfolios as strategic hedges. So as a strategic hedge you know five years or more long-term situation gold and you can hedge US institutional credibility risk and so forth. And even in the short term, they say you should have gold because of central bank buying. But either way you slice it, long gold, uh, it's it's it's a no-brainer. And finally, in case all those charts were confusing, you don't understand the


curves, I don't blame you. It can get complicated. So, I made a chart to show all of this in a really simple way that people are used to. If you start with $1,000 and you invested it in a 60/40 portfolio for the last 23 years, okay, starting starting when the Vanguard uh BTLX bond fund was um incepted. If you start back then, you turn $1,000 into 5,800, which isn't terrible. I mean, it's not bad. A lot of people would be happy with that. However, if you skipped the stocks and bonds entirely and made a 6040 portfolio


of gold and silver, you'd have over $10,000 today. So, that that to me, it's just obviously better. It's just obviously better. And by the way, the stocks and bonds here, this is total return. So, it includes all the dividends reinvested, all the bond coupon payments reinvested at 0% tax, which is unrealistic. So, and it also doesn't include management fees. So, this is like the rosiest situation for a 6040 portfolio you could have. And you know, this is just, you know, precious metals is just blowing it out


of the water. Yeah, agreed. So, but once again, u my portfolio is sort of that 6040, but the gold and silver is swapped. So, I want to thank you for this presentation, Alan. And uh so that was wonderful. Uh basically the message is have you got gold? Thanks everyone. We'll see you later.