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Friday, October 24, 2008

Time for Gold?

A friend asked this morning if gold wasn't a good place to be for the next few weeks. Since my response is a conversation I've had a lot lately, it might be of general interest...


You didn't know me then, but I talked the housing bubble to death from 2003 to 2006. I tried to get at least seven different friends to sell their houses and rent - without success. THEY know who I'm talking about.

So you don't think I'm rewriting history, here are the blog posts...


I even went to cash with my IRA just before the 2005 Burn so I wouldn't get caught in the market while out on the playa. But I called it too early. Market timing is not easy.

While I foresaw the housing bubble, I didn't foresee the credit bubble (over-spending), nor the other Wall street hedges used to hid the sin, nor the world-wide scale of the problem.

Plus I obviously missed the timing of the housing market's turn, even though I KNEW it HAD to turn. It got FAR worse for FAR longer before it turned than I ever suspected it would. I underestimated the stupidity of the American public. Didn't someone warn about that? Barnum?

And a few weeks ago, things looked so ugly, I totally went to cash in my IRA again and missed virtually all of the Wall street crash. But then I popped back into the market last week. Is the bear at the bottom yet? Who knows?

My point is, have a care when you try to predict ANY market movement. If there's ANYthing I have confidence in at this point, it's the short term UNpredictability of any of the markets. VOLATILITY is the current state of affairs.

Yes. There are certainly bargains out there in everything from autos to toothpaste - but gold?

Gold is simply the hedge of the dollar's movements. Three hundred years ago an ounce of gold would buy you a good suit. Today it still will. (I think).

This means gold is a good place to be if you think the dollar will lose all it's value - inflation. It WAS a great place to be BEFORE it dropped against all the other currencies over the last few months. But some now think DEflation is now more likely. Or will it be just more volatility?

But INflation? Only if you are VERY pessimistic. When the US gets a cough, the rest of the world catches pneumonia as you can see by looking at all the other exchanges. So if the dollar heads south NOW, you'd better invest in another metal - one that strong enough to hold some riffling.


aka Yum!
aka Bonobo
aka Zen Heretic
aka Sudden Disruption and Burning
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"Art is that which everything else isn't" - Theodore Roethke

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