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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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Page | 1
Real Returns
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
 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'
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
Alex Dumortier, CFA

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