Making money off Wall Street’s bull with gold bullion.
January 19, 2011 – Gold bullion has had a bumpy ride so far this year as Wall Street pitchmen trumpet fortunes are to be made in the booming stock market. But hold on, Nellie. We would all do well to heed the advice of Brett Arends, writing for the Wall Street Journal: “Time to take a deep breath. Stay focused. And remind yourself, once again, to stick to your long-term investment discipline.”
The worst possible time to rush into stocks is when the market booms, just as the worst time to sell is when it is going bust. Following that strategy for the past 20 years would have produced an inflation adjusted annual loss of 8.5%.
Arends suggests that we take a closer look at Wall Street’s “sale.” Consider the pitchmen – they are the same ones who sold us Arizona beachfront property in 1999 and 2007. And consider the pitch – quarterly earnings are way up, so stock values must follow. But all of the profits for 10 years would still account for less than 25% of the market value.
On the other hand, Dave Kansas in SmartMoney.com gives us “5 Reasons to Still Like Gold.” His reasons aren’t new, they just underscore that nothing has happened to warrant gold being less attractive.
First and foremost is the threat of inflation, which hasn’t gone away. The Fed and the European Central Bank have both “maintained an array of extraordinary programs” that depend on inflation to move their economies forward. And while western governments vie to gain trade and debt advantages through currency devaluation eastern central banks are beefing up their gold reserves to maintain stability in the global monetary system.
“Stock-market fever is one of your biggest enemies as an investor,” Arends says. Unless, of course, you buy gold bullion when stock-market fever is holding prices down.
