February 11, 2011 – If there’s a way to lose money investing in gold bullion you can bet the men and women on Main Street will find it. Why? “Humans are just so bad at assessing risk,” say Newsday columnist Daniel Akst. The reason for that is that we “rely heavily on our emotions” when making important decisions, and that makes up predisposed to mob mentality.
Wall Street is well aware of how that works. They start pumping up a bubble, which catches the attention of the investing masses. But rather than jump aboard on the upside they wait and see what everybody else they know is doing. The bubble expands, and now everybody has taken notice. Suddenly a few rush in to buy and the mob reacts in one great surge, bursting the bubble. The cycle is extremely predictable, and they are at it again.
This time Bernanke’s cronies are pumping up equities of the “riskiest, most indebted” companies with all of that stimulus loot intended to shore up the more durable aspects of the economy, according to an AP release. Since January of 2010 stocks of companies most in danger of default outperformed the S & P by nearly 40%. Stocks of companies with the highest PE ratios and those that traders consider most likely to tank both beat the S & P by more than 50%. Now it is time to harvest the crop and surprisingly it looks like there are still enough lemmings out there to let the Street cash in.
When emotions finally do turn in gold’s favor, the masses will stampede that market as well. But by then it will be too late - smart money buys on the upside and cashes in when the mob hits. Gold is notoriously underheld and has plenty of upside left; to win with gold bullion investing all you need to do is break away from the crowd.
