Submitted by Mark J. Grant, author of Out of the Box,
“I did not know that mankind was suffering for the want of gold. I have seen a little of it. I know that it is very malleable, but not so malleable as wit. A grain of gold will gild a great surface, but not so much as a grain of wisdom.”
-Henry David Thoreau, Life Without Principle
I spend most of my time warning people about not where to go. It is a useful exercise and a rather singular affair as money is lost far quicker than it is made. "Preservation of Capital" is much more important than any other strategy in the marketplace and this has been demonstrated time and time again over the centuries. The luck of a quick money making trade is often more than off-set by the stupidity that follows. One hit wonders litter the landscape and the momentary publicity and grandeur most often fade with the passage of time. Consequently the key is to remain in the Great Game and not have the umpires of the marketplace toss you out.
“It was not curiosity that killed the goose who laid the golden egg, but an insatiable greed that devoured common sense.”
-E.A. Bucchianeri, Brushstrokes of a Gadfly
Having said that though, there are moments when I stumble across something of interest. I approach the world from my vantage point as an investor. I do not like to speculate and striving for appreciation alone is a much riskier game that the receipt of income. I have often stated that the ownership of a vacant piece of property on Park Avenue is a speculation while the ownership of a different piece of property with rents is an investment. As a matter of being Mark Grant I prefer investments.
Therefore the ownership of gold is a speculation as there is no income. The owner is placing a bet and he may win or lose but it is still nothing more than a bet.
Gold, since ancient times, has served four functions. The first is for jewelry and this is a subject for lunch at the Four Seasons. This is not where we are dining today.
The three other functions of gold are a replacement for a currency, an asset that rises in value in times of inflation and an asset that becomes more valuable when Fear is hard upon the market place. The substitution for a monetary system is a matter of a loss of faith. Inflation is what each and every government on Earth promulgates as long as there is not too much of it. Fear is either brought upon us by an event or when the entire fiscal system begins to break down.
It is then a matter of viewpoint where you think we are now but given the sell-off in gold, the possibility of a dark horse or two beginning to trot after the German elections or the fantasy numbers pumped out of China becoming unmasked; gold is an interesting option these days.
Still I prefer not to bet.
Yet we are at a moment in time where we might invest in gold and let human nature run her course. I speak here of the bonds of the gold mining companies. Homework must be done, preparation and running the numbers accurately must be performed, but with yields where they are now; it may be a golden opportunity. More inflation; you win. The return of Fear; you win. The loss of faith in some currency; you win. In the meantime you can ferret out some nice coupons and yields and invest in gold and not speculate on appreciation.
"You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."
Tell a Friend-George Bernard Shaw