“Gold is stupid. But selling stocks to buy gold is beyond stupid; it’s historically insane.”

While we would be hard-pressed to call anyone stupid, we do share in the general sentiments of author and speaker, Nick Murray: that the recent gold rush may be over-extended and not the most logical move for investors playing the long game.

Let us share some context to help explain.

Fiscal and monetary policies that were enacted this year as a result of the COVID-19 pandemic have sparked a growing concern with how these large amounts of debt will ultimately be repaid. A rise in tax rates is certainly possible, but a more prominent fear we hear among investors is an uptick in inflationary pressure. This is leaving many to seek a safe haven beyond the traditional stock market.

This year alone gold has seen an increase of 30%, but as recency bias would show us, many seem to have forgotten the dismal performance of the 80s and 90s. During this 20-year stretch gold had returned -2.8% per year while inflation rose at a steady 4%. Not much of an inflation hedge especially when compared to the S&P 500 Index that returned almost 18% per year over the same period. When we look at even longer periods of time we find that by participating in the stock market an investor would have earned almost 3 times as much as gold.* How’s that for an inflation hedge?

Maybe Nick’s words are a little harsh for some, but you can see why we’re not ready to abandon our philosophy for the hot investment du jour.

*From January 1970 – June 2020

This week we celebrated Abby Crimmins’ second year with HIG and Scott Krajacic’s first. Abby, a huge asset to our team, has taken the reins from John Reagan and now leads the Client Service team. Millennials often get a bad rep for being lazy – but Abby continues to disprove that stereotype every day. Her standard of excellence, can-do attitude, and friendly demeanor have quickly earned the trust of our clients and her teammates alike. Scott is the leader of our Investment Policy Committee and by far the most in-shape member of our team! He has helped improve client relationships by providing clarity to complex questions through technical analysis.

In addition to celebrating anniversaries, we also said farewell to our summer intern, William Bartnett. He was a natural fit on the team and a positive energy source. We immerse our interns in important projects, gaining from their fresh perspective and ideas. William described his experience as “being surrounded by positive focus, growth mindset, and relentless agitation towards excellence.” William gifted our team a signed copy of William Danforth’s I Dare You for our HIG book collection. A quote from Danforth’s book: “I dare you, whoever you are, to share with others the fruits of your daring. Catch a passion for helping others, and a richer life will come back to you.” William will be missed.

To learn more about our internship opportunities, email jobs@hillinvestmentgroup.com and visit our Careers page.

Dan Villalon is a true renaissance man, with a deep technical love for, and expertise in, investing, winemaking, and woodworking – specifically surfboards and ukuleles. It’s one thing to understand the basics of a complex and intricate topic, and quite another to be a maker. Not to mention, being able to teach and explain the way Dan does.

During the pandemic, do-it-yourself became almost a cliché. Bread, anyone? Our team was just as guilty of this trend, discovering the liberation that comes from learning how to build on your own. After listening to Dan, we’d argue the source of that liberation comes from deeper understanding and appreciation for how things are made, and for the people who do the making. In this episode, Dan elaborates on how renowned American physicist Richard Feynman changed his life with the quotation “What I cannot create I do not understand.”

More about Dan Villalon

Dan is the Managing Director and Co-Head of Portfolio Solutions Group at AQR Capital Management. In his role, he oversees the team responsible for advising clients on portfolio challenges, developing custom analysis and writing white papers and other research. Dan is also a member of AQR’s Multi-fund Investment Committee, which oversees the design construction and implementation of multi-asset multi-strategy portfolios. Listen below or click here to listen on Apple.