Posted on 05/15/2010 9:40:18 PM PDT by mlocher
This week gold has moved to new all-time highs. I have mixed feelings about it. On the one hand, it's a great personal vindication, because I've been talking about gold as my "best idea" throughout the entire credit crisis.
It has really turned out to be the best idea, in good times and bad -- at least among risky assets. At the worst of it, gold fell only 28% from its previous highs. But the S&P 500 fell 56.8% -- more than twice as much. Yet from their respective lows through yesterday's close, both have gone up the same amount: 71%.
Gold versus stocks? It's not hard to pick the one you wish you had held through these difficult times. Gold. Went up just as much, but only went down half as much.
And there's one thing you can say about gold that you can't say about anything else. It's at an all-time high. That means that no matter when you bought it, you've got a profit.
Stocks? They've had a heck of a move over the last 15 months, to be sure. But they're still 26% off their all-time highs. And they've barely shown any profit at all over the last decade. Over that long period gold has quadrupled.
Is it time to sell? I must say it's tempting, when gold has come so far while most other assets have struggled so much.
But the time to sell isn't necessarily when an asset is at all-time highs. It's when everyone loves it, and is absolutely convinced it's going higher. That description may fit Apple (AAPL) pretty well, but it sure doesn't fit gold. In the minds of most investors, gold remains a hated asset and those who advocate gold are dismissed as fanatical "gold bugs."
(Excerpt) Read more at news.fidelity.com ...
and Candor7 says?
I remember Peter Schiff posting 6 months ago or so that gold would go to 2-3K per OZ.
Sometimes the bulls win, sometimes the bears win, but the pig never wins. I sold my silver last month; purchased at an average price of $11 per ounce, I made a handsome little profit.
Gold thrives on bad news and there’s been no shortage of that lately.
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But, he's wrong when he writes this:
“And there's one thing you can say about gold that you can't say about anything else. It's at an all-time high. That means that no matter when you bought it, you've got a profit.”
Only if you don't adjust for inflation.
Gold was around $800/oz in the early 1980’s.
In 2010 dollars, adjusted for inflation, gold needs to be $2400/oz just to break even.
If you bought gold 30 years ago, your investment has lost half its value.
If you bought the SP-500 30 years ago, adjusted for inflation, your investment has gained 350%.
Yeah, it’s hard to short a commodity if everyone is selling first.
Cherrypicking windows in time is a favorite persuasion technique of our beloved newsmedia.
The tactic can be turned on it’s ear, however. You chose the two windows that just so happened to most strikingly demonstrate the belief you wished to convey.
Try it again with both beginning in 2000, and a striking demonstration of the opposing belief is demonstrated. Gold was at a very low price per ounce then and has risen ever since, but the S&P 500 has been shall we say less than stellar during that same time.
I’m buying lead.
However, please re-read Luskin’s quote:
“.....[Gold] is at an all-time high. That means that no matter when you bought it, you've got a profit.”
That statement is incorrect.
If you bought in 1980, you have an inflation adjusted loss of 50%.
looking at where the dollar can only go, longer term, it is hard to find an investors’ argument for selling more than a lesser % of gold holdings into dollars (currently monetized by our very own federal reserve!)
I don’t take as a trivial issue, I work daily in dollars and worry continuously about the train wreck not too far ahead for the currency.
Same here, I already have gold and silver. But lead must be quite rare as I can only seem to find it in a brass and copper alloy.
I always try to keep in mind that it’s not the gold that’s becoming more valuable. It’s a metal, and it’s not changing in any way.
It’s the dollars that are becoming worth less.
A bottle of Coke $0.10
Gallon of gas $0.29
Pack of Gum $0.05
Gold $35/oz.
Dow 900 (25.7/1 > Dow/Gold ratio)
2010
A bottle of Coke $1.00
Gallon of gas $2.90
Pack of Gum $0.50
Gold $1,235/oz. (36x increase)
Dow 10900 (12x increase 8.8/1 > Dow/Gold ratio)
Historically, Dow/Gold ratio heading toward parity (1/1) ...I will keep my gold and you keep the Dow.
I remember buying 1,000 round cases of Spanish and Portuguese .308 for $140 or less some 7 or 8 years ago.
Man how I wish I had bought a truck load of that when I had the chance.
308 has to be up about 400-500% from those prices.
I was watching a business show last week which displayed a graph showing the decline of the euro and the rise of gold...they were nearly a mirror image. I am buying gold (and silver, which I think is undervalued) and am thinking that the euro is the key to the peak. Of course, the situation may change the importance of the gold to euro but at this time watching the euro is a good indicator. Yes, buying high is really really risky, but when you have an indicator that is current and easy to measure why not?
The good news...is suspect at best...and filled with half-truths....
That light at the end of the tunnel is speeding locomotive....
Gold, silver, fertile land, firearms, ammunition, food, medical supplies, etc.....should be on the shopping lists of responsbile families.
A very good summary. Thanks.
I’ve always gone to the candy bar standard because I can remember what one cost from the time I was about 3 years old.
A nickel, then a dime, then 20 cents, then a quarter, etc.
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