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Free Markets at Work
Sunday, January 15, 2006
A sure sign of the times today is the increasing number of advertisements for gold and gold coins. With an entire generation that has virtually no knowledge at all about the yellow metal, look for more print and TV advertisements in the future as the price of gold continues to rise, and ambitious free-marketeers look for ways to profit.
This is a fine example of free markets at work.
The latest spotting was a thirty second spot during the normally drivel-filled weekend business news show Forbes on Fox:Are you aware that the value of the U.S. dollar is shrinking?
It sounds almost un-American to allow commercials like this. On Fox?
Oil prices and energy costs are rising. Our national debt is at an all-time high.
There are other facts Wall Street does not want you to know. Are you confident your money will be there when you need it most?
Do you feel secure with your investment portfolio decisions?
In an ever-changing world, one investment has remained constant. Here is your chance to learn more about precious metals and gold coins.
Did you know over the past thirty years, some forms of gold have outperformed the Dow Jones and the S&P 500?
Add security and confidence to your portfolio by diversifying with gold now. Call the Capital Gold Group...
[Break to promo for upcoming segment]
Coming up, DOW 11K - who cares? The Nasdaq is where it's at, and our Forbes informers say ...
To read what Steve Forbes has said recently on gold and oil, see this interview from last fall. His call for $35 oil in 2006, and his thoughts on $500 gold sound sillier and sillier as the weeks go by.
7 comments:
erk. will gold be the next housing bubble? or will it be after the stock bubble that follows the housing bubble?
eh, I bought some krugerands the other day anyway, mostly to test the waters.
I called for $60+ oil at the beginning of 2006, way back in mid-2005 (before Katrina).
I must be smarter than Forbes.
Now, I need to work on the "richer" part...
I've been long Gold and Gold Miners since 2001. The Fundamentals for Gold suggest much higher prices. Do your DD. It's your money, protect it.
I asked my broker if buying gold bullion was a good idea. He said no, and here are the reasons why, and other reasons I discovered myself:
1) When buying gold coins or ingots (not just the paper GLD stock), if you're going to sell it back, you need to pay assaying fees (to prove that you didn't melt it down and mix it with something else), so you may not even make a profit off the speculation
2) Gold doesn't pay rent, dividents, or interest.
3) Gold is a hedge against inflation used by the "big boys": central banks and billionaires. Those are the ones that either don't care about the assaying fees or can afford it, and have the muscle to keep it from being stolen, which leads to...
4) Gold can be easily stolen, and the US government can confiscate your gold coins at any time they so choose (ahem, I mean in "emergencies"). The first thing that burglars look for is gold, silver, and jewels. They will go for your DVDs last.
5) Precious metals are suceptible to bubbles just like any other asset. Do you remember those idiot billionaires cerca 1980 who tried to corner the silver market by "buying up all the silver in the world"? They thought by buying all the silver, prices would be sky high, and people would be begging to buy silver from them. Well guess what, not only did mines increase their output, but silver just started to come crawling out of the woodwork. People melted down their old coins and silverware. Eventually the market tanked and those two idiots now became paupers.
So what will I do to make money off of gold and silver? Buy stocks in mines. Copper, uranium, silver, gold, you name it. Not only are those stocks going to go up, but they pay significant dividends and still have low P/E ratios.
IANA stock broker.
> I asked my broker if buying gold bullion was a good idea. He said no..
Hmmm. Can you say "vested interest"? Of course your *stock*-broker is going to say, "Don't spend your spare cash on anything other than paper assets that I want to sell you". Perhaps he's just trying to protect his commission stream?
> if you're going to sell it back, you need to pay assaying fees
Not at the reputed coin shop in Boston where *I* buy.. I basically never intend to sell my bullion, unless I absolutely have to. But I've seen people walking in off the street, hand over Krugerrands, sovereigns, maples, whatever - one look at the stuff and he pays them cold, hard cash. Best part, if it's under some limit - I think it's $10K - no reporting to the IRS, either. All legal and above board.
> Gold doesn't pay rent, dividents, or interest.
Yes, because it's real money already, and doesn't have to. Total gold above ground grows by barely 2%, maybe 3% annually. If there's one fiat paper currency growing at such a small rate, tell me about it.
> Gold can be easily stolen..
The first thing that burglars look for is gold, silver, and jewels.
Obviously, you don't helpfully stick your bullion coins in a pretty jewel box in the bedroom closet. Your average single-family home has so many innocuous places in it to stash a little bullion (the stuff costs so much that most people can only afford a little). Many burglars are drug addicts looking for an easy find, not an especially bright bunch. It also helps to live in a location that naturally dissuades burglary and other petty crime - say, near the center of a small town, 30 seconds from the police station.
> the US government can confiscate your gold coins at any time
Yes. Good reason to keep at least a part of your stash safe in a foreign country.
> Precious metals are suceptible to bubbles just like any other asset.
True. But this is nowhere near a bubble yet - heck, the gold price isn't even close to its *last* peak, at $800-plus. And that was nearly 25 years back. When it hits $4000, let's talk bubble!
> So what will I do to make money off of gold and silver? Buy stocks in mines.
OK, suit yourself. Just be aware that you're taking on extra investment risk, relative to owning the metals directly. A mining company can go broke for any number of reasons, leaving you with worthless paper. A gold or silver coin can never go bust; it's real money anywhere on the planet.
And for those who are wondering what's the next bubble, check out this memorable article by MA Nystrom:
http://www.bullnotbull.com/archive/counterfeiting.html
Note, this was originally written in January 2002. The currency of this nation has been steadily debased ever since 1913. The US dollar may, in fact, be the ultimate bubble.
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