-- Published: Thursday, 30 October 2014 | Print | Disqus
By Guy Christopher
Gold is a touchy subject on Wall Street. It has been ever since FDR drove Americans and their gold apart 80 years ago. Although gold bullion ownership has been legal in the U.S. since 1974, a relentless government campaign to dampen the gold price has left gold trailing in public popularity and perception.
Gold is money. No one knows that better than Wall Street. But it prefers to keep matters of gold to itself. Wall Street doesn't want you owning gold or even thinking about gold, and treats you shabbily if you do.
As an individual investor, you will probably never come face to face with the masterminds on Wall Street. But you might meet a representative on Main Street, your local stockbroker. He adopts Wall Street's disdain for gold, whether consciously or in response to institutional incentives for him to push financial products only.
To understand, we looked at how stockbrokers are trained and managed by their Wall Street employers. We spoke to several brokers and regular clients. The brokers insisted on anonymity, as you'll see.
Stockbrokers Are Steeped in Establishment Thinking
Our hat is off to stockbrokers for the hard work it takes to earn that license. Their basic education revolves around a tough exam called the Series 7, considered by some as difficult as the bar exam. It's a computer-generated, timed test of 250 questions lasting 7 hours, taken under government supervision. One study guide shows 8,000 possible test questions. No two exams are identical, which eliminates cheating.
The material covers regulations, laws and taxation involved in trading common securities like stocks, bonds, and mutual funds.
It also covers government-mandated “ethics” training, supposedly meant to protect clients and their money from unfair practices. That includes understanding diversification, which requires evaluating a client's total assets, tolerance for risk, and ways of spreading risk around among many types of investments. One test for risk tolerance is whether the client can sleep at night with his broker's recommendations.
The ethics rules also mean brokers are heavily regulated in what they can say or put in advertising to influence clients. One told us even the “Christmas cards to clients have to carry a disclaimer.”
Brokerage firms designate “compliance officers” to make sure the rules are followed. Brokers get surprise visits in person, and must open all records to inspection, including personal checkbooks. Even commenting for this article would have required a compliance officer's approval, had we bothered to ask.
Brokers attend annual, mandatory continuing-education classes. But despite covering almost every aspect of investing and wealth known to mankind, nowhere in your stockbroker's training, testing or continuing ed is there discussion of owning physical gold in your possession.
Mainstream Brokers Try to Steer You Away from Gold
Brokers must follow Wall Street's lead. One told us, “I don't like gold, but if I did, I couldn't talk to you about it. I'd lose my license.” He added, “You're not using names for this article, right?”
While they can recommend and sell plenty of paper gold (gold mining shares, mutual funds, etc.), brokers can't sell physical gold. Also, they don't actually know any more about gold than most Americans, which is very little. So, they rely on Wall Street's mantra dismissing gold as a murky investment and will do their level best to talk you out of buying even a single ounce.
Wall Street's vast public relations and advertising empire, known previously as America's free press, gladly backs them up,
The exceptions on Wall Street are the mega-players quoted as owning gold and believing in gold. We firmly believe some local stockbrokers are secretly gold and silver stackers, but could never say so.
We uncovered one brokerage's secret to dealing with physical gold. When a valued client insisted on buying bullion, the brokerage quietly introduced the client to – a bullion dealer! Doing so satisfied the client (who would otherwise have lost confidence in the firm), and it kept the brokerage a long arm's length from any heavily regulated discussions of gold.
Individual investors we spoke to revealed a lot about investing confidence among the public.
Most investors in securities are honest in admitting they don't know exactly what their stock market dollars bought. “My investments are in an IRA” is too often the reply. Stock investors rely heavily on their advisers, telling us they need to believe their advisers have extensive knowledge of securities, which clients admit they themselves don't have. They also express a need to believe their brokers have their best interests at heart, and many are satisfied. Gold and silver investors see confidence differently. They trust self-confidence. Precious metals buyers have no massive financial machinery pared with a complicit media to champion gold and silver, except for free-market forces. Self-reliance emerges as a character trait for metals owners, who just don't get a lot of hand holding.
Which brings us to perhaps the most important reason Wall Street hates gold.
Precious metals in your possession have no counterparties and no continuing fees and commissions, unlike the thousands of investments brokers sell. Once you own gold, that part of your wealth and your future is out of Wall Street's hands.
Decades ago, Wall Street routinely recommended a gold allocation of 5% for any portfolio -- a standard footnote to every financial analysis. Can you imagine the shock waves in markets today if a mere 5% of trillions of investment dollars suddenly went from stocks and bonds into physical gold and silver?
By pretending gold and silver are not legitimate stores of wealth, and by belittling those who own metals, Wall Street does a two-faced kabuki dance around its own ethics code of clear communication and client diversification. Wall Street and its complicit business media go against their own advice to diversify, revealing a fraudulent – dare we say inconvenient – tale of true wealth.
MoneyMetals.com columnist Guy Christopher is a veteran writer living on the Gulf Coast. A retired investigative journalist, published author, and former stockbroker, Christopher has taught college as an adjunct professor and is a veteran of the 101st Airborne in Vietnam.
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