An excerpt from a report by Joel Bowman

Bowman wonders about the contrarian mindset. Is it inherent? Is it genetic? Why do some folk stray from the herd, while others follow like sheep? There is little doubt that, in the world of investing, it pays to be in the minority. Some commentators divide the crowd into unequal portions: the minority constitutes the “smart” money; the majority represents the “dumb” money, on which the minority happily feeds. As Rick Rule said, when it comes to investing, you are either a contrarian or a victim.

Necessarily, the smart money must be a minority. The moniker is afforded, at various times, to bond traders, short sellers and industry insiders. Whatever their position, they must be ahead of the curve, ready to sell at the point of maximum demand and to buy at the moment of minimum interest. Though not entirely dependent on the status quo, a contrarian’s position is almost always in opposition to it. It is helpful, therefore, to ask what the accepted norm of the day is.

Today, the financial, economic and political systems are built on lies: that people can grow rich by spending more than they earn; that companies can achieve success by producing things people don’t buy; that real estate prices always go higher; that a debt-ridden economy can recover by piling on more debt, debasing its currency and lying to the masses about what it is doing.

In contrast, gold is incorruptibly honest. Fiat money worshippers won’t touch it. Central bankers can’t compromise its virtue. It is nobody else’s liability. That is why, to the majority, it remains a barbarous relic. But for the rest of us, like honesty, it is still the best policy. Read more at Bullion Management Group.