|
|
WHY FIRST FIDELITY RESERVE
|
|
|
Basic Supply vs. Demand:
The Theory of Intersecting Circles
How the circle theory works:
Inside the largest circle, wealth flows from one sector to another as market
fads change (called “sector rotation”). More cash inflow makes a circle
bigger and vice versa.
Although no one knows for sure just how big it is, we speak of it in terms
of trillions of dollars a day. The size of the circle grows or shrinks as
wealth is created or destroyed, but it always represents the sum of all its
parts. Because it’s so big, it takes big events to show up in the global
economy - big changes in interest rates, money supply, trade deficits, and
oil supply or major geopolitical events like wars or terrorist attacks on
key economic centers.
What the circles represent:
The two smaller circles represent various market segments. The
biggest one is the total of all the wealth in the world – everything
of monetary value.
Stocks & Bonds are the biggest inner circle (it actually includes not
just stocks and bonds but all equity and debt paper wealth as well). This
market is also large enough that it takes something pretty hefty to move it
one way or another over time.
The next to smaller circle is All Precious Metals. This
includes gold, silver, platinum, copper, palladium, etc… And finally, the
smallest circle represents Rare Coins.
As one can see from the diagram, a small percentage of money moving from a
large segment to a small one has big percentage effect on the smaller one.
In reverse, a big slice of a small pie moving to a larger one hardly gets
noticed.
We believe that recommending coins that are high grades, rare, and
continually sought after is a good strategy to help you build security over
the long term by narrowing the supply on an always increasing demand.
The theory explains why rare coins gain value disproportionately when
there’s a surge in general investor interest in gold, as we’re seeing now.
|
|
|
|
|
|
|