Would You Ever Want To Own Gold?
by Bill Bonner: Did
These Hidden Forces 'Elect' the President?
another 53 points on the Dow yesterday. Gold down another $5.
The Dow is
above its 14,000 peak; gold is below $1,600/oz.
I'll come back
to this in a minute. First...
Even a seasoned
traveler can make remarkably dumb mistakes. That's why we are writing
to you from Baltimore rather than from Beijing. For the second time
in a single week, we got to Dulles International Airport yesterday
and discovered that we lacked the proper visa for travel to China.
We had forgotten that you need a visa at all.
You don't always
go where you intend to go, but you always end up where you ought
to be. Why ought we be in Baltimore?
We don't know. But here we are.
Out of Gold
investors make mistakes too. And now they seem to be selling gold.
Yes, dear reader, our favorite metal is taking a beating. Gold has
dropped below $1,600/oz to trade at $1,594/oz at writing. The best
investors are said to be abandoning their yellow metal for more
"productive" positions. From Bloomberg:
investors George Soros and Louis Moore Bacon cut their stakes
in exchange-traded products backed by gold last quarter as futures
dropped the most in more than eight years. John Paulson maintained
decisions by Soros and Bacon may bolster speculation that gold's
12-year bull run is coming to an end as economic data from the
U.S. to China show signs of recovery, curbing haven demand.
Management LLC reduced its investment in the SPDR Gold Trust,
the biggest fund backed by the metal, by 55% to 600,000 shares
as of Dec. 31 from three months earlier, a U.S. Securities and
Exchange Commission filing showed yesterday. Bacon's Moore Capital
Management LP sold its entire stake in the SPDR fund and lowered
holdings in the Sprott Physical Gold Trust. Paulson & Co.,
the largest investor in SPDR, kept its stake at 21.8 million shares.
And under the
headline "Gold Sinks Through $1,600 on Recovery Hopes,"
the Financial Times adds:
prices tumbled... for the first time in six months as investors
turned to other assets amid hopes of an economic recovery.
U.S., eurozone and Japanese economies are all (according to the
most recent quarterly results) shrinking, not growing. What kind
of a recovery is this?
mainstream opinion believes this is no time to cower in the safety
of cash... or gold. Take chances. Buy stocks! Look at Buffett. He's
teamed up with a Brazilian tycoon; they're paying $28 billion for
a ketchup company.
do you think? Are they right?
Why would you
ever want to hold gold, anyway? It is dumb and lifeless. It issues
no upbeat press releases. It never "beats analysts' estimates."
It doesn't come out with a slick new handheld device... or announce
a major acquisition.
None of the
good news you hope to get from an investment ever comes from gold.
No matter how much you own, it doesn't seem to care about you; it
makes no effort whatever to increase shareholder value.
just sits there... like an old umbrella next to the front door,
only useful when it rains. War? Gold goes up. Market crash? Gold
goes up. Inflation?
Gold goes up.
End of the
world? Who knows, maybe gold would go up too.
So, you decide.
What's ahead? Good news? Or bad news? Will the 100 leading economists
be right... or wrong? Fair weather... or foul?
to say. So, we hedge our bets. We own some real investments
stocks, bonds, real estate and hope the 100 leading economists
know what they are talking about.
And we hold
on to our gold too... in case they turn out to be the numbskulls
they usually are.
bestselling author and founder of Agora, one of the largest independent
financial publishers in the world. If you would like to read more
of Billís essays, sign-up for his free daily e-letter at Bill
Bonnerís Diary of a Rogue Economist.
© 2013 Bill Bonner
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