Wednesday, October 27, 2010

Golden Fleeced?

There’s gold in them there hills!  In the past, when such words became common knowledge, a stampede of fortune seekers, heading for the hills, could almost be guaranteed.  I think that if those words which open this post once again became common knowledge, regarding some remote area of the country, a stampede of fortune seekers would soon overwhelm the hills.

I, myself, do not own much gold, and what I do own is not in traditional asset form, but rather in the form of jewlery.  Now this fact seems to run against current advice to buy, buy, buy gold, in its various forms, but what, exactly, is one purchasing when they purchase gold?

Donald Sensing points to two somewhat contrarian pieces on gold’s alleged luster as an asset, which are worth looking at, if only to enrich your thinking, rather than your pocket.

First is a short PowerPoint like piece at Business Insider titled 9 Ways That Gold Is A Religion Masquerading As An Asset Class.  My personal favorite from this piece ( from slide #7).

Just like Christianity is divided into so many sects, so too is gold: You’ve got the hard bullion people, the people who invest in the miners, the ETFs, and even spinoff precious metals, like silver.

You also have the really out-there, cult-like folks who think Fort Knox is empty, or filled with tungsten.

The second piece Sensing points to, also posted at Business Insider, is a quote from one Jeremy Grantham, which is posted under the heading Jeremy Grantham: Gold Is A “Faith-Based” Investment, And There Are Better Places To Put Your Money.

Everyone asks about gold. This is the irony: just as Jim Grant tells us (correctly) that we all have faith-based paper currencies backed by nothing, it is equally fair to say that gold is a faith-based metal. It pays no dividend, cannot be eaten, and is mostly used for nothing more useful than jewelry. I would say that anything of which 75% sits idly and expensively in bank vaults is, as a measure of value, only one step up from the Polynesian islands that attached value to certain well-known large rocks that were traded. But only one step up. I own some personally, but really more for amusement and speculation than for serious investing. It may well work and it may not. In the longer run, I believe that resources in the ground, forestry, agriculture, common stocks, and even real estate are more certain to resist any inflation or paper currency crisis than is gold.

I think I’ll stick with my personal faith in the Creator, a bit of gold jewelry, my personal abilities, my like minded friends, and keep my gun at close hand.

Posted by John Venlet on 10/27 at 06:43 AM
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