Transcription of Finance News Network Interviewwith Matterhorn Asset Management Founder & Managing Partner Egon von Greyerz Lelde Smits: Hello I’m Lelde Smits for Australia’s Finance News Network and joining me today from Swiss-based Matterhorn Asset Management is Founder and Managing Partner, Egon von Greyerz. Egon, welcome to Australia and to The Gold Investment Symposium here at Luna Park in Sydney.
Egon von Greyerz: It’s a pleasure to be here Lelde.
Lelde Smits: Matterhorn Asset Management focus on gold and silver bullion stored outside the banking system: Could you run us through the main reasons behind your strategy?
Egon von Greyerz: Yes. We started the company about 14 years ago and in 2002 I decided that times were going to get very rough in the world. So, we told our clients to put 50 per cent of their assets in physical gold, stored outside the banking system. Because, I thought that gold would be the best way to preserve their wealth and to protect them against the fall of the value of paper money.
Lelde Smits: Does Matterhorn Asset Management consider itself more focused on wealth generation or preservation?
Egon von Greyerz: Currently, it is all about preserving wealth. We are going to see a total destruction of wealth in the next few years, in my view. And therefore, it is all about preserving what you have rather than generating wealth. But, if you do hold gold I think you will actually relatively do better. But, really you’re holding gold because you want to preserve your purchasing power.
Lelde Smits: So Egon, what do you believe are the biggest risks of investing through the banking system?
Egon von Greyerz: I think today you got to eliminate any counter party risk. And, anything involved the banking system. The banking system is bankrupt, world-wide. Banks are only surviving because they are allowed to value their toxic debt at maturity value rather than market value. If it was valued at the market value no bank would be standing today, no major bank.
Lelde Smits: Which countries do you believe are at the biggest risk of hosting bank failures?
Egon von Greyerz: Sadly the whole banking system is interconnected. So, every bank deals with another bank worldwide. So if somebody puts US dollars into an Australian bank, that bank will put it back in New York. So, I believe every bank in the world is at risk.
Lelde Smits: Is there anything you believe can be done to prevent these scenarios from playing out?
Egon von Greyerz: I think we have gone too far. What government’s are going to do now is, to use the America term, ‘Kick the can down the road’, which means defer the problem by printing more money. That is not a solution. Worthless pieces of paper can never be real money. And therefore all they are doing is deferring the problem. But, the debt situation worldwide; governments are bankrupt, banks are bankrupt, it’s only being sustained by more money printing but that can never be the solution.
Lelde Smits: So Egon what is your response to commentary claiming, ‘Gold is in a bubble, and all bubbles must pop sooner or later?
Egon von Greyerz: Gold is not in a bubble. Only one per cent of world financial assets are in gold. Gold is not going up. You have to turn the chart upside down, it is paper money going down and gold is just reflecting that. Gold is maintaining its purchasing power, which it has done over the last 5,000 years. So, gold is nowhere near a buble.
Lelde Smits: How much of an investor’s portfolio should be weighted to gold?
Egon von Greyerz: Well in 2002 I told our investors to put 50 per cent in physical gold stored outside of the banking system. And, that 50 per cent would have now grown to at least 80-85 per cent. If you ask me personally, I would be happy with such a high percentage in gold, but every investor has to decide for themselves what they think is right.
Lelde Smits: So Egon, what do you believe are the biggest mistakes that investors make when looking to invest in gold and silver bullion?
Egon von Greyerz: I think that people have to consider that anything within the banking system is at risk. Whether you buy an ETF [Exchange Traded Funds] or whether you buy gold through a bank. Now, hopefully the banking system will survive. But the risk is that it won’t. And therefore, you should take all the measures you can to protect your assets by buying outside of the banking system, storing it outside of the banking system, eliminating counter party risk and having direct access personally to the vault where you store your gold.
Lelde Smits: Finally Egon, the price of gold is currently sitting a little above $1,700 an ounce: Where do you predict it will head over the next year and where do you predict it will peak?
Egon von Greyerz: I have been on record saying that gold will go to $US10,000 in today’s money. But, I don’t think we will have today’s money. I think there will be so much money printed in the world therefore, depending on how much money is printed you have to add zeros to the gold price. But, you mustn’t believe that that means gold is going up, it just means gold is maintaining it is purchasing power against constantly falling paper value.
Lelde Smits: Egon von Greyerz, thank you for the insights.
Egon von Greyerz: Thank you.
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