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The Real Returns Report, May 7 2012

The Real Returns Report, May 7 2012

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Published by: The Real Returns Report on May 07, 2012
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05/09/2012

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The
Real Returns
Report
Non-Consensus, Data-Driven Analysis
 
VOL. 1, No. 16 MAY 7, 2012
Contents Page
This Week 1  Value Map
Contents Page
From the Archives 4  License/ Disclaimer 5 
This Week
Last week, I promised extended coverage across asset classes and,this week, I'm making good on that promise, by adding two SwissFranc-denominated series for gold and two dollar-denominated seriesfor silver (seepage 3
 
). In staying true to our name at The
Real 
 Returns Report, all price and return series are inflation-adjusted.My headline pitch for this week's issue was "Definitive proof gold is abubble." Let's be clear
 –
whenever anyone tells you they havedefinitive proof of anything in the financial markets, your first reactionshould be to put your hand to your pocketbook. This is practicalfinance, not formal logic; there is no such thing as "definitive proof" ofa financial bubble
 –
only judgment and likelihood (even in formallogic, Gödel showed that some statements are undecidable.)
11% real
!Nevertheless, the Swiss Franc-denominated series provide strongconfirmation that gold is a bubble by shattering the notion that gold'sprice ascent in dollars simply reflects the greenback's debasement.The Swiss Franc remains a safe haven and a strong currency
 –
 despite that, gold has produced a 10.9% annualized return on aninflation-adjusted basis in that currency.
That figure is inconsistent with a plain store of value 
. A 'store'
retains 
its value, it does notcompound it at 11%.I remain comfortable asserting that gold is in a bubble now. It'spossible to argue that the series I have put together aren'trepresentative
 –
I admit that
 –
but I don't find those argumentscompelling enough. On the balance of probabilities, I believe that goldis significantly overpriced.Enjoy your week and, as always, I welcome your feedback
 –
you canreach me at the e-mail address above. AD
1
 
Alex Dumortier, CFA
 
 

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