Yellow Metal Stinks!

[haha]

I rode some gold stock holdings out of the 2002 bottom to some good gains. I have no trust at all in gold, any more than I have in lots of other investments that have anemic cash flows. Still I figured that there would be a chapter 2 and chapter 3, based on the theory that serial bubbles cannot be blown in the old burst balloon, hence a fresh new one will be needed. Gold seemed to be a good candidate for a new bubble.

But this morning's action has me doubting this thesis. European and US central banks inject considerable liquidity, inflation is creeping up in China, we all know what inflation is doing here- yet the price of gold falls as do the stocks.

Not a very strong testimonial.

I would like to get my current gains into 2008, but if things don't at least stabilize I am going to sell way down, taxes or no taxes.

Of course, as soon as my last sale is made gold will jump $100.

Ha

 

[Nords]

I have no trust at all in gold, any more than I have in lots of other investments that have anemic cash flows. Still I figured that there would be a chapter 2 and chapter 3, based on the theory that serial bubbles cannot be blown in the old burst balloon, hence a fresh new one will be needed. Gold seemed to be a good candidate for new bubble.

Nothing screws up a good investment like the other investors remaining blissfully ignorant that the world is going to hell.

I keep vowing to never underestimate the stupidy, incompetence, and laziness of the other American consumers-- but I just can't seem to set my sights low enough.

I gave up on gold when it stopped being a disaster investment and reverted to a dollar hedge.

 

[hayekcapitalist]

Gold as diversifier

Inflation is running much higher than the official numbers report. What will gold do tomorrow, or next year? Nobody knows. But, it is uncorrelated to other more traditional investments and probably has its place, albeit a small one, as a hedge in a diversified portfolio. I have about 1% of my portfolio in AIM Precious Metals and Fidelity Select Gold, I will go to 2-3% if gold drops to below $650/oz.. The former has returned to me about 4% in the six months I have owned it, the latter about 31% in the year I have owned it. I wouldn't buy individual mining companies and don't care for bullion with its hassles and expenses nor coins for other reasons.

 

[haha]

But, it is uncorrelated to other more traditional investments and probably has its place, albeit a small one, as a hedge in a diversified portfolio.

Well, it is definitely reputed to be uncorrelated to other investments, but over the past year or so this has not been true. And during the pronounced weakness of the past few weeks, if anything gold has been weaker than the S&P.

I think this correlation stuff is overrated-unless the bets are truly uncorrelated- like tax liens in different cities, bets on different football games, etc. These market "correlations" are really just statistical aberrations that come and go. Especially they are likely to go whenever there is stress.

Gold bugs say that gold is real money, not that bad credit dependent stuff we carry around in our wallets. If so, the last few weeks should be the exact time that gold would shine- instead it falls on its face.

IMO, a truly S&P uncorrelated asset might be a Maalox distributorship in lower Manhattan. If you can’t find one of those, cash should work.

Ha

 

[teachme]

haha, not completely clear as to your expectations of gold are I'd say you're getting frustrated a little too soon in the game. Start reading some Jim Sinclair and make sure to read his history and then, maybe, you'll be a little more motivated. Jim is a wise man and knows what he's talking about, keep your eyes peeled.

It should be expected that gold would drop at the beginning of this type of cycle and if you read the archives at Jim's site you'll get an idea as to why. You're already a little contrarian for investing in gold so don't pull the plug now or you might live long enough to wonder why you sold when the pickings were just getting good.

 

[teachme]

Inflation is running much higher than the official numbers report.

[SIZE=-1]Shadowing Reality - Economist Keeps Tabs On Government’s“Creative” Statistical Reports[/SIZE]