Some good reads from around the Web.
One thing that has put me off investing in gold over the years is people who invest in gold.
At the height of the property boom, smug landlords who’d come to own 5-10 properties and told you that house prices never went down – ignoring any evidence presented that they did – were infuriating.
But they had the good grace not to bring global conspiracies, canned foods and shotguns, or the Mayans and Egyptians into the conversation. They also rarely told you that you were an idiot, or that you were being paid to lie.
At their worst, ‘gold bugs’ do that and more. The lunatic fringe of these investors recite a gabbled litany of sacred truths, acronyms and concatenations to rival a religious order. Non-believers are invariably stoned.
Take the article Cash out of gold and send kids to college by Peter Tasker in the FT [1] this week1 [2]. Tasker points out the gold price has softened, despite European meltdown fears, low interest rates, and imminent monetary easing. He suggests that might be because after rising nearly seven-fold to its peak of $1,900 in just 10 years before falling to around $1,600, the current price might be high enough:
In inflation-adjusted terms, gold remains within spitting distance of the all-time high it reached in 1981. After that it embarked on a 20-year bear market, which delivered a loss of 80 per cent in real terms and a far greater opportunity cost as other financial assets soared in price.
Even now the total market value of all the gold in existence – which, remember, generates a return of precisely zero – exceeds the combined capitalisation of the German, Chinese and Japanese stock markets, with all the productive capacity they represent.
I think those are pretty interesting statistics, at least worthy of consideration.
Here are some quotes from the comments this article received:
- “Wow! This guy has got to be a paid writer for the international banking cartel. What he is spewing out is exactly why they’ve been forcing the price of gold into line with risk assets like stocks. They want people to think this BS. The lack of insight is amazing”
- “This author, Peter Tasker, is 5 cans short of a six-pack when it comes to understanding the Gold market. I would advise the editor of FT that you are known by the company you keep. And if you allow ignorance and incompetence to be passed along for knowledge, you’ll make FT synonymous with stupidity.”
- “This argument is quite silly and does not understand the nature of gold.”
- “Since when has the ‘quoted price’ been a good indicator for anything? Not since Liborgate anyways…”
- “The Dep Premier of China is on record as ‘we are at war with the USD and our weapon of choice is gold’ China is winning this war – with a lot of help from the misguided and uninformed West.”
And so on. A few sensible voices make some good points in favour of gold, but they are drowned out by the noise. It is always thus when anyone questions the cult.
It’s very hard to imagine this kind of hysteria greeting anyone who said that shares were too expensive, that bonds were over-priced, that property had further to fall, or that cash was a poor store of wealth. Gold bugs see themselves as hardened contrarians – odd given so many sing from a facsimiled hymn sheet.
Some of the charges are ridiculous, such as the FT being on a quest to lower the gold price, or hellbent on publishing anti-gold propaganda. The FT has of course run plenty of articles over the years highlighting the case for gold – just this morning it recaps both sides of the argument [3], including what it terms “strong arguments in favour of holding the precious metal”.
I’ve come to believe that there is a case for an allocation for gold, and I’d like to add to my very small horde stored at Bullion Vault [4]. Every time the price approaches $1,500, I consider buying some more. If I do so, I hope to discover that subscribing to conspiracy websites and inquiring about a Panamanian passport are purely optional.
Hopefully the fact I own a tiny amount of gold – and that Monevator is too titchy to be worth bullying – will keep the more rabid gold supporters from commenting on this article, but anyway if you feel the need, please be warned I’ll delete anything I judge to be either rude or extremist.
Sorry, I mean I’ll be “censoring” it.
From the investing and money blogs
- Index funds win again – Rick Ferri [5]
- What target-date funds can’t do – Vanguard blog [6]
- Unrealistic optimism and the impoverished investor – The Psy-Fi blog [7]
- Vanguard index fund lost $25 million on Facebook – The Finance Buff [8]
- The cheapest low-cost SIPP – Retirement Investing Today [9]
- Is there a bubble in dividend growth shares? – UK Value Investor [10]
- Practical home-buying advice for beginners – Totally Money [11]
- Rise of the trading robots [animation] – Nanex [12] & Fool [13] [related: Psy-Fi blog [14])
- Trade-offs between inequality, productivity, and employment – Interfluidity [15]
Book of the week: Strangely enough, while we all expect websites like Monevator to be free (much to the disappointment of my accountant) we’re happy enough to spend money on ebooks. In fact, explains Kate Harper in How to Publish and Sell Your Article on the Kindle [16], there’s even a growing market for short articles on the device. If you’ve got wisdom to share but it won’t stretch to a book – or a blog – then give it a go.
Mainstream media money
- Standard Chartered: My dollar, my rules – The Economist [17]
- More evidence that the Earth really is hotting up – The Economist [18]
- Obama presidency one of the best for stocks since WW2 – Yahoo [19]
- Buy and hold is alive and well – Motley Fool US [20]
- A silly economist thinks overpopulation is the answer – Business Insider [21]
- Swedroe: Bill Gross isn’t entirely wrong about stocks – MoneyWatch [22]
- No plans to reissue NS&I index-linked certs [week old] – ThisIsMoney [23]
- US drought threatens food price surge – FT [24]
- Kriss Akabusi: My first million – FT [25]
- Man successfully deposits $95,000 junk mail cheque – FT [26]
- Are absolute funds an absolute waste of time? – Telegraph [27]
- Many investors abandon their ‘baffling’ SIPPs – Telegraph [28]
- First time buyers shut out from best mortgage deals – Telegraph [29]
- How I cut my grocery bill by avoiding supermarkets – Guardian [30]
Product of the week: Engensa is offering cheapish loans [31] to install a solar panel system, which it claims can return you 10% in terms of savings over the years. The Guardian has a summary [32]. I like the idea but I’ve no idea if it’s cost-effective (and I’m no financial adviser [33]) so please do your sums carefully.
Like these links? Get them emailed [34] to you every weekend.
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