THE GREAT PAPER PONZI: Global Mutual Fund Inflows vs Physical Gold Investment

As the highly leveraged global financial system moves closer towards an epic collapse, investors unwittingly continue to pour money into the Mutual Fund Market.  According to the ICI – Investment Company Institute’s Q3 2014 Report, net inflows into Mutual Funds Worldwide during the third quarter reached $320 billion, up from $285 billion in Q2 2014.

Furthermore, bond funds took first place as investors parked $104 billion of the total $320 during Q3 in assorted mutual bond fund paper garbage.  The table below from the ICI Q3 2014 Worldwide Mutual Fund Report shows the net flows into the global mutual fund market:

Mutual Fund Flows Breakdown Table

As we can see from the table above, during Q3 2014, investors purchased $104 billion of bond funds, $95 billion in balanced/mixed funds (bond-equity-money market), $89 billion in money market funds, $31 billion in equity funds and $1 billion in the other category.

You will notice a change in the last two quarters as investors flocked into bond funds (Q2 = $155 billion, Q3 = $104 billion), compared to the previous two quarters when equity funds (Q4 2013 = $145 billion, Q1 2014 = $127 billion) were more in fashion.

Deluded Investors Continue To Choose Paper 97% More Over Physical Gold

If we add up the total amount of net inflows for Q1-Q3 2014, investors dumped $962 billion into the worldwide mutual fund black hole market.  Now, compare that to the paltry $33 billion invested in physical gold… according to the World Gold Council figures (note: I realize the WGC gold investment figures may be understated, especially in China):

World Mutual Fund Net Inflows vs  Gold Investment Q1-Q3 2014

The majority of investor money went into bond funds at $355 billion, followed by balanced/mixed funds $304 billion, equity funds $223 billion, money market funds $50 billion and other funds at $30 billion.  The World Gold Council stated global physical gold demand was $11.7 billion Q1, $11 billion Q2 and $10.1 billion in Q3 for a total of $33 billion.

Thus, total global physical gold investment of $33 billion was 3% in the first nine months of 2014 compared to the $962 of worldwide mutual fund net inflows.  And of course, that 3% of physical gold investment is heavily skewed towards the Eastern Countries that comprise the lowest percentage of mutual fund investment.

Here is the breakdown of total Global Mutual Fund Assets as of Q3 2014:

Americas = 57%

Europe = 31%

Asia = 12%

Of the total outstanding worldwide mutual fund assets, the top award goes to the Americas at 57%, followed by Europe at 31% and Asia at 12%.  Now compare this to the countries and regions that purchased physical gold in the first nine months of 2014:

Total Global Physical Gold Investment NEW

Of the reported $33 billion in global physical gold investment during Q1-Q3, India & Asia came in first with $17.2 billion (52%), followed by Europe & USA at $8.1 billion (24%), Other at $5.2 billion (16%) and the Middle East & Turkey last at $2.8 billion (8%).

Now, the America’s and Europe consisted of 88% of the total worldwide mutual fund investment pie, while Asia consisted of only 12%.  On the other hand, Asia and India purchased 52% of global physical gold investment during Q1-Q3 2014 compared to Europe and the U.S. investing in 24% of the total.

Please understand, I am comparing the total worldwide mutual fund asset value as of Q3 2014 to the global physical gold investment purchases over the past nine months.  I just wanted to give a frame of reference between the investment activities of the West and East.

Of course, some of that “other category” of 16% of the global physical gold investment pie may include Mexican and Canadian gold investment, but I doubt it would change the European and United States percentage all that much.

So, the take away is this…. smart Asians and Indians continue to trade in fiat money to purchase REAL ASSETS while Europeans and Americans forge blindly ahead into the GREAT MUTUAL FUND PAPER BLACK HOLE.

Mutual Fund Net Inflows Explode Over Past Three Years

It doesn’t take much to delude “Western Investors” these days.  The evidence is shown by the massive increase of mutual fund inflows over the past three years.  However, you wouldn’t know this was the case if we looked at the data for 2011.  In 2011, worldwide mutual fund net inflows were a measly $103 billion, compared to the $320 billion invested in just Q3 2014.

If we take a look at the chart below, we can see the huge increase of mutual fund net flows since 2011:

Global Mutual Fund Net Inflows vs Physical Gold Investment

Not only did inflows into mutual funds worldwide pick up in 2012 over 2011, they did so in glorious style… a staggering 781% annual increase.  Investors dumped $908 billion into mutual funds in 2011 compared to the $103 billion in 2011.  Then net inflows in 2013 continued to be strong even though they were down a bit to $888 billion.

However, 2014 is turning out to be one hell of a year for Wall Street and the other Brokerage and Banking Crooks in Europe as total net mutual fund inflows for Q1-Q3 2014 are already $962 billion, more than 2012 and 2013 already…. and we still have Q4 remaining.

What is interesting about the chart above is the comparison of global physical gold investment to worldwide mutual fund flows.  In 2010, total global physical gold investment was $44 billion compared to $205 billion in worldwide mutual funds.  Thus, global gold investment was 19% of these two asset classes.

Then as gold hit a new high of $1,900 in 2011, total global physical gold investment reached $77 billion compared to $103 billion in net worldwide mutual fund flows.  2011 was a record year for the gold market as it represented 43% of the total investment in these two asset classes.

Unfortunately for precious metal investors, the Fed’s QE policy greatly impacted paper assets more favorable than gold in 2012, 2013 and 2014.  As I stated above, the worldwide mutual fund market swindled 97% of investors fiat money in the first nine months of 2014.

The real question is this… how long will the Global Mutual Fund Black Hole continue to suck in the world’s wealth?  Well, that’s hard to tell, but the nifty chart below might offer us a clue:

Worldwide Mutual Fund Assets

In less than three years, worldwide mutual fund assets increased 34% from $23.8 billion in Q4 2011, to a peak of $32 billion in Q2 2014.  The reason for the decline in total mutual fund assets in Q3 ($31.3 billion) was due to the rapid appreciation of the Dollar.  This had a negative impact on the value of mutual funds stated in various foreign currencies.

I highly doubt the 34% increase in worldwide mutual fund asset value since the end of 2011 is sustainable.  At some point, the forces of gravity will overtake the highly leverage financial market with surprising speed.  Regardless, this will impact Western investors a great deal more than the fundamentally grounded investors in the East.

The two important factors to highlight from this data:

1) Asia has the smallest percentage invested in the Mutual Fund Black Hole.

2) Asia & India continue to invest more than half of global physical gold investment pie.

North Americans and Europeans continue to overwhelmingly favor PAPER IOU’s compared to their Asian and Indian counterparts who enjoy buying and holding physical assets such as GOLD.  While the West believes it has the UPPER HAND in the great game of FINANCE… the EAST will most definitely have the LAST LAUGH.

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23 Comments on "THE GREAT PAPER PONZI: Global Mutual Fund Inflows vs Physical Gold Investment"

  1. About those derivatives and dollar ‘value’, the latest Fofoa is a good read.

  2. t”hen as gold hit a new high of $1,900 in 2011, total global physical gold investment reached $77 billion compared to $103 billion in net worldwide mutual fund flows. 2011 was a record year for the gold market as it represented 43% of the total investment in these two asset classes.”

    This is why Ted is right. Western idiots only buy assets as the rise. JP Morgan IS and WAS the huge buyer of silver since 2011 and this proves it.

    • frank,

      You funny… however, I totally disagree. That’s okay, nothing wrong with respecting that we can agree to disagree. I gather if JP Morgan was buying half the Silver Eagles, they must have been buying half the Canadian Silver Maples and Philharmonics… as all their total sales moved in tandem since 2011.


      • I can assure you Steve that from our research most Americans have stopped buying silver since 2013. I have vast data that our firm collected from big wigs at the largest dealers in the country. It is pretty much unanimous: Americans don’t buy assets as they fall. Silver was no different.

        JP Morgan was the per-dominant buyer. And I have almost zero doubt about it. I definitely agree to disagree and think you couldn’t be more wrong.

        What do you think of the vast potential with the off-shore drillers over the next decade? With all the new off share tech, it looks like that is where the excess oil comes from in the next decade.

  3. Silverwillwin | January 13, 2015 at 3:39 pm |

    I have become a believer that it is all based on fear, regarding American citizens latching on so firmly to paper security.
    Physical gold and silver would indicate accepting the unknown. That’s too scary and dangerous !
    That would mean having to pioneer out somewhere on ones own with no direction told.
    Stay with what you know. After all it has never failed the American people . Sure , there’s been ups and downs but everything eventually comes back to the center ….regarding security.
    It’s going to be all right……or is it ?

    There are generations of Americans who have been securely snug in the cocoon of Red , White and Blue utopia living. They know nothing else.
    2008 was a close call but the grand poobah saved the day , with paper. Paper with nothing to back it. Paper that snows John Q. Public. Paper which someday will rob every American of their hard earned assets.

    Physical gold and silver actually will become your best friend in the future. It may help families to survive during future days which no person will accept a paper currency debt note due to its proven worthlessness.

    Think of physical gold and silver along the same terms as when it was understood as real money (which it really is ). At that time one 1/2 ounce of physical silver paid for a mans compensation for a day !
    Under those terms and conditions it won’t take long to gauge the value of what pure silver is truly worth.

    Physical gold and silver should not be feared and or ignored. It is one of the greatest insurance policies that will be recognized by all of mankind in the not too distant future.

    • I keep reading that gold is money. Not true! In some places seashells were accepted as money.
      In another culture stones with holes in them were accepted as money. Native Americans accepted horses as money. Whatever is commonly and mutually agreed upon as money is money.
      Presently gold is agreed to have value, however, it is not accepted as money, at least in our culture it isn’t.In order for gold to be accepted as money the entire global monetary system would have to be destroyed. God help us all if that should come to pass.
      People point out that the dollar keeps losing value. compared to some other currencies, it does. Compared to some other currencies it doesn’t. Due to total mismanagement it will probably go bust. I can promise you that another currency will scramble up to be king of the hill. Gold will not be money. The best we can hope for is that the new currency will be backed by gold, or some other valuable commodity

      • Wrong dude. GOLD IS MONEY. Money must by definition act as a store of value. FIAT DOESN’T! Aristotle defined money. I suggest you research that. Lol

  4. “Think of physical gold and silver along the same terms as when it was understood as real money (which it really is ). At that time one 1/2 ounce of physical silver paid for a mans compensation for a day !
    Under those terms and conditions it won’t take long to gauge the value of what pure silver is truly worth.”

    In ancient times as little as 1/10 ounce of silver was a day’s wage. If I recall that was approximately what a Roman soldier was paid.

    Before the Federal Reserve and others started destroying the buying power of a dollar, a US 90% silver half dollar bought quite a lot…of food for example.

    Throughout the history of humans creating coins, a coin bought a meal or a larger denomination bought several meals. Now no freely circulating coins can buy a meal anywhere.

    • Silverwillwin | January 13, 2015 at 8:35 pm |

      I’m sure we’re headed back to the value of silver being respected and understood as true value within a reasonable period of time.
      Isn’t it remarkable that the rich back in the day when they were trying to destroy the reputation of physical silver by making claims like :* ” Sucking silver out of China, pushing opium over there;
      Demonetize silver in America, Rothschild’s a billionaire!
      Let all the world’s little people sink into despair!
      We’re the world’s bankers—you’re in our cross hair! ” Sir Ewen Cameron (1841-1908) whose family traced back into
      the 13th century, joined the Caledonian Bank in 1859 and afterwards
      was with the Bank of Hindustan, China and Japan, after which he
      joined the Hong Kong & Shanghai Banking Corporation—Britain’s
      opium bank for China, and a major conduit for looting silver out of
      Chinese hands into the possession of the silver squelchers of The
      Pilgrims Society. HSBC USA in recent years was listed on the roster
      of the Silver Users Association (circa 2006). HSBC, with over 8,000
      offices, appears to remain at the “centre” of silver price suppression. *-* Brought to you by Charles Savoie

      And all the while back in the days when the bankers were trying to destroy physical silver , in their wildest dreams they had no idea what kind of role that it would be playing in the future world of industry , technology , and medicine ! There’s a whole lot less silver hanging around as a result today. Oh stupid bankers . The likes of you can only see as far as your noses.

  5. So the Fed stop purchasing US treasuries as of last year. The question was posed at that time, who will buy US debt? So maybe here we are seeing an answer. Bonds are good to hold in a deflationary environment, so in order for the fed to end it’s bond purchasing they engineered a deflation. Take a look at the CRB index and when it started to decline in ernest.

  6. Most people invest for the short term i.e. 5 to 10 years. The best place for that right now is stocks. Silver as it stands, is the real Ponzi scheme. We’ve been told to buy silver in 2010, 2011, 2012,
    2013 and 2014. Following that advice , silver has lost 65% of its value whereas any decent
    mutual fund that averages 10% a year has gained 55%+. . If you invested $100 in 2010 in a mutual fund today you would have $150+ minimum today. If you bought $100 of silver it would be at $32. That is darn near 5 fold!!! We have all the time we need to buy silver for the next 10 years but in the meantime I live off of that lousy stinking fiat money that has been worthless since it was first printed, It sure does take a lot of common sense to figure out what is going on here by you silver gurus. If I jump on silver when it is $25 an ounce, if that ever happens in my lifetime, I’m still way ahead of the game because my cash has risen 50% and I can buy a lot more now that I did in 2010.

    • Joe, you may be on to something IF you look at silver (and Gold) as an investment. Clearly there are periods where silver is a lousy investment. But if you look at silver as real money that can’t just be printed into oblivion or better yet as insurance against all your paper investments that you have, then it shouldn’t matter so much what the price is. In fact those people who don’t yet have any insurance can buy it really cheap right now.

      The problem with most investors in the West is that they think that this paper Ponzi scheme can go on forever. I assure you it can’t and with oil prices plunging, the dollar soaring and many other currencies collapsing against the dollar you just know that there are big banks and hedge funds who are currently sitting on massive losses and may very well be completely insolvent – we just don’t know it yet. This is not fear-mongering – this is reality in a world with well over $1 Quadrillion in derivatives and the mega banks so hopelessly overleveraged that any significant move of any commodity that is hedged by derivatives can completely implode the paper system. And yes, that also means your paper investment, your bank balances, etc. in a worst case scenario.

      People always say this could never happen and yet we were perilously close to that exact scenario in 2008 before the Fed stepped in to print trillions and trillions of dollars (far more than the $700 billion that was approved). Today the system is far more fragile and not much has to go wrong for the entire system to freeze up and break down. With trillions of losses due to collapsing oil prices and massive moves in the currency markets we may already be very close to another financial crisis and this time the Fed may not be able to save the day.

      I hope you realize that when that day comes it will be too late to buy your insurance in form of physical Gold and Silver because by the time everybody realizes what is happening the insurance premiums will have soared and likely won’t be available at all in even modest quantities.

      So instead of ripping the precious metal gurus for being wrong on which way the price is going, you might want to listen to the underlying message and hopefully realize that buying Silver and Gold has nothing to do with getting rich, instead it is a way to diversity your paper assets in case of a paper system collapse in which case it won’t matter if you own stocks, bonds, mutual funds or even cash in the bank – they are all paper assets that can evaporate in an instant and/or get confiscated in a banking system collapse – and oh by the way such confiscations of investor funds to pay off gambling bets are now perfectly legal in this country.

      If you don’t think Silver and Gold is the way to go, diversify by buying other assets outside of the banking system that can’t just be seized in a financial system collapse.

      Good luck.

      • AK: You identified me correctly. I bought all my silver and continue to buy it as a hedge.
        It is an inheritance for my grand daughters. I truly never intended to cash my silver
        in for more dollars.With my cash I have 3 choices to diversify. Stocks, silver or real estate.
        If things keep getting worse, as I see that it has no other course but to get worse,, then I will forgo the real estate because if devaluation of the FIAT buck occurs at a 10 to 20% annual clip for 5 years or so, our government will need to raise more tax dollars. The most vulnerable asset is real estate i.e. 50 acres and up, that is most vulnerable. Taxes will be staggering. All of my hedging these past several years is in physical silver. My writing may be lousy but these silver gurus with their lame predictions are shear guesswork. . Silver is manipulated period. I am not attempting to get rich but I can remember when gasoline was 5 gallons for a buck. That alone taught me that holding dollars is a declining asset. It’s like buying a car. It’s value starts downhill the instant you leave the lot. I do not bash the investor. I bash the men telling me to buy silver when they are selling it. It’s a personal itch that won’t stay

    • Joe, I’ve been reading your comments for the last month and wonder why you even come in here. Seems as if you got burned or feel the need to bash precious metal investors. I think Steve does a great job providing the fundamental factors. I have been reading his articles for years and haven’t changed my mind on why it’s important to own gold and silver. If you think it’s better to hold paper assets, then why don’t you go blog on CNBC website or somewhere else.

      • Joe wants to go ‘all in’ into physical gold & silver, together with billions of other fiatskies at the same time.

        Good luck wth that.

    • One Person who understand how it works.The PM Lobby was totally misleading.PM are a lousy Investment in bad times.It’s not the crisis Investment.The controverse is true.PM are good in times when we get Inflation.

      What a bad Investment in those times where we see everywhere decay.
      The Story with the currency reset we heared each year.How Long People need to get equal with the Investment who bought PM after 2011?

      The PM Lobby make proftit.They played with the stupidness and fear of the peoples Money.

    • PM has never been sold to me as a money maker investment. So, if you think it is a ponzi scheme then go where you are a better fit like CNBC, MSNBC or other media geniuses.

      PM, are a hedge against a financial implosion and one’s investment percentage may vary accoding to many factors but it is a survival investment as old as mankind has lived. I’ve read about the adulterated coins in Rom as their ‘vote buying’ free social services and perpetual wars drained the state coffers……Geeeee…anyone see history repeat here?
      If not then carry on….elsewhere…. Want to see a ponzi scheme try the SS Admin. as my confiscated dollars are given to illegals for a few extra votes that the Soros owned machines could not get.

      Rant over…have a nice day ….hope we never have to rely on PM to get out of a mess but I’ve read where WWII refugees survived and came here for a new beginning with their PM. Only we have no place to run, this is it……lol..!!!

  7. Question to those much better versed in investments then I.

    Should the FOMC raise interest rates this coming April; what will happen to the Bond Market?

    Will the price drop and the yield go up?
    Will Bond prices go down and yield go down as well?

    Text book teachings of buying a coupon which I have never see does not go deeper then that.

    Anyways I appreciate yah’lls take on. I read both side of propaganda that interest rates will never go up in his lifetime; according to a he/she said meal with Ben B. Yet, I read the opposite on other sites.


  8. Steve, in your opinion when do you think the next financial crisis is going to happen? This year? Next year? Before the end of the decade? I have been buying gold and silver for the last three years from its heights down to where it is now. I have no intention of selling as I believe a financial collapse will happen. However it really seems to be taking a long time to happen. What are your thoughts on the timing?

    • Rob,

      I am glad you look at buying GOLD & SILVER as a long-term investment, rather than a short-term perspective. Many investors who have purchased precious metals over the past three years feel as if they got screwed…. I think the opposite is the case.

      I don’t like to give out analysis on where the price of the metals are heading on a short-term basis, but I would imagine the three years of grinding lower gold and silver prices while the broader markets move higher on leverage upon leverage, this is not something that can continue for many years.

      What took place by the SNB- Swiss National Bank today that caused a HEART-ATTACK in the Forex Markets is just the opening act for more explosive days in the future….. days that will become totally out of control. I actually believe we could see serious dislocations this year.

      However, if the Central Banks are able to PAPER OVER increasing VOLATILITY, I believe the peak of U.S. Shale Oil production (circa 2015-2016) should get the ball rolling. I believe by the end of this decade, the world will be a much different place.


  9. Hi!, Patrons Of The SROCCO Report Et. Al.:

    As there seems to be grave disagreements at times here and which may be more easily remedied than discussed at dufferebt times, may it be possible to find a common ground of referral spawning agreements, by which we can reach a better accord regards OUR mutual concerns for OUR US economy’s future direction including the welfare of future generations? My appeal here to everyone is to please contact The American Institute For Economic Research located in Great Barrington, Mass., (888) 528-1216, requesting their CHART BOOK for around US $10. Their 1st chart shows the decline of the purchasing power of OUR US $ having plummeted from 140 pennies when the $ was underpinned by gold to around 2-3 pennies following the August 15th 1971 act known as the closing of the US Gold Window to Foreign $ holders by then President Richard Millhouse Nixon. Attempts were made then to redeem those foreign $ holdings for all of OUR US gold holdings at $35 per troy oz. but OUR President resided over denying that happening. Had these foreigners been able to collect every oz. of gold out of Fort Knox, Kentucky etc., the present day questioning as to whether or not we have good delivery bars of gold in Fort Knox would not be part of OUR present day monetary quests, because Fort Knox etc. would have been gutted of every troy oz. of gold without recourse. Furthermore, Article 1; Section 10 of the Constitution we inherited from OUR Forefathers states that we the people are to only have in OUR possession gold and silver (specie) coins in OUR personal pockets to spend as OUR daily money. These coins should have absorbed every troy ounce of OUR repository Fort Knox etc. gold and thereby produced as gold coins placed into general circulation for FREE and without commissions to every hard working American citizen which use to be somewhat true before OUR President, Lyndon Baines Johnson, removed the 90% silver content from OUR dimes, quarters, half dollars and silver dollars. It should be added here that copper clad coins’ value is based upon the fact that copper in the metals markets is sold by the 16 oz. avoir dupoise lb. while silver is sold by the 12 troy oz. lb. which begs each of us in my opinion to figure out which type of coin will have the greatest intrinsic (internal) value which should be ominously definable by each of us. This process of coin dilution value of one coin against the other, although both have the same face value, invokes Gresham’s Law which basically tells us that, when two units of monetary account are circulated together having the same face value, eventually whichever has the greatest internal value will become hoarded and that’s why today we do not see silver coins being circulated in OUR US markets anymore. Silver coin has an internal value which is worth far more than their face value. Nobody will go to their supermarket and provide the cashier with say 4 silver $’s for a loaf of bread will they? That’s Gresham’s Law at work for them and in their behalf. OUR Forefathers, by their enactment of OUR Constitution, were attempting to help their posterity (we the people of all future generations) to avoid monetary unit depreciation through Article 1; Section 10 of OUR Constitution but OUR Government working with the Federal Reserve have thrown OUR Constitution overboard so to speak and then working together they have attempted having US suffer a state of amnesia forgetting OUR Constitutional order of rights causing them to loose their protected endurance for OUR monetary and psychological/physiological safety. Is it possible that readers here have an in-home copy of OUR Nations’ original Constitution whereby they can look up OUR mutual rights and liberties expressed therein and become more broadly familiar with them or find them using an online internet version? My humble suggestion here is to request everyone reading this post to please consider it their civic duty to know OUR Constitution as best they can, in order to align their thoughts with the demands of OUR Constitution contrasted against the present day harmful realities we are presently undergoing. Perhaps this common ground/sense approach will be OUR best insurance policy for OUR future and help we the people restore OUR actual/real Constitutional rights ASAP? After all everyone, who in this Nation really pays the bills including OUR responsibilities to OUR National Debt etc.? Like Dr. Ron Paul has done, any of OUR Federal elected officials can walk away from their offices leaving the National Debt behind them for we the people to pay over how long after most of OUR present political interests in Washington D. C. have passed away? There is a whole lot more here for me to say but this post is getting much too long as it is for one setting. As many here have already suggested, my suggestion joins them in saying that it won’t hurt to place say 10% to 20% of OUR investable funds into gold and silver as insurance against OUR unsure and uninsured future. The price we paid if events cause us to face monetary life or death will not matter that much then will it? As my old Boy Scout motto use to forewarn: BE PREPARED!!

    RUSS SMITH, CA. (One Of Our Broke, Fiat Money Corrupt States)

  10. Umm…Indians ARE Asians. Not sure why you call them out separately.

    • steve,

      While you are correct, some readers may not associate Asians with Indians and vice-versa. I also separated Turkey from the Middle East, even though its now more associated with the Middle East than Asia or Europe. Furthermore, Turkey’s gold consumption was higher than all the other Middle East countries combined.


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