And The Decade's Winner Is...

In a small vindication for long-suffering gold bugs, Bloomberg's chart of the day brings a decade of false gains, paper pro(phe)ts, and the inflation/deflation debate to a close.

As the chart demonstrates, "A $100 investment in gold would now be more than $380 while the same sum in commodities would have grown to about $357, according to the Standard & Poor's GSCI Enhanced Total Return Index." To the chagrin of stock pumping, Philadelphia majority-owned cable stations, stock investors lost $10 in the decade. But next decade will surely be different, see: The Fed is gone, Chairman Ben is no longer at the helm, money is not being printed as if Cottonelle was going out of style, the US is done raking up trillions in deficits and punting the resolution of the fiscal budget mystery to the next administration, we are no longer reliant on China to finance our ultra-short term day to day existence, Goldman is no longer viceroy of this quadrant of the Milky Way Galaxy... oh wait...


And for all the pomp and circumstance of Private Equity, of Hedge Funds, of fast, loose and easy money, the simplest commodity known to man clearly "out-thought" five business school generations of the smartest men in the room, whose financial weapons of mass destruction brought nothing to the world than the abyss of systemic collapse. It does kinda put things into perspective.

Yet the paradox of this chart is amusing, as investors run to both risk and safety at the same time: the only clear thought in their heads - get rid of the Bernanke Toilet Paper Put (aka, the US Pesito).

"That's fear and greed at the same time," said Toby Nangle, director of asset allocation at Baring Investment Services Ltd. in London. "The fear of inflation is in the gold price. Commodities and oil show emerging markets emerging, and the rest is the developed markets submerging." Holders of U.S. high-grade corporate bonds made a profit of about $90 on their investment, as did Treasury investors, according to Bank of America Merrill Lynch index data. Buyers of crude oil saw their $100 turn into $268 after it rose to more than $500 in 2008, based on the futures contract for West Texas Intermediate.

One sure thing: the risk and fear convergence can not, in theory or practice, continue for much longer. And 2010 will be precisely that - they year in which the [risk/safety] trade collapses with a bang. By implication, at least half the investors out there will be left out to dry. Goldman Sachs would like to extend its condolences to that half (the other half will get an invite to Goldman's 2010 Xmas party - the elves can only be put away for one year before they yearn to come out and play), even as it continues monopolizing the agency market in all product classes. After all, when you are Goldman Sachs, the term Zero Sum does not apply.