Dow 10,000: Show Me the (Real) Money

And you thought you had broken even. If investors had bought gold when the Dow first closed above 10,000 in March 1999, they'd be up almost 280%. Put another way, Dow 10,000 a decade ago “cost” 36 ounces of gold, treating each Dow point as $1. When the Dow revisited that level Wednesday, it was worth only 9.276 ounces of gold. In oil terms, the Dow has gone from 609 barrels to 133.

- The Wall Street Journal on "Dow 10,000."

There were somewhat half-hearted celebrations last week when an antediluvian stock index representing 30 companies selected by the editors of the Wall Street Journal crossed the 10,000 level. Again. This stock index, which is most affected by the change in the share price of an 85-year-old computer company, because it's a price-based and not value-weighted index, has been here before – as the graph below shows:

The Dow Jones breaks 10,000... again...

(Source: Bloomberg LLP)

There are some things that, the first time you do them, are memorable. But after the sixteenth or seventeenth time, a degree of familiarity (and in this case, boredom) sets in. Breaking through 10,000 for the first time in 1999 was all well and good, even if it meant you were paying all-time highs to own this crude and narrow measure of the US stock market. Breaking through 10,000 ten years later – well, who really cares, other than a narrow coterie of self-obsessed dealers en route to being replaced by machines?

Over-followed indices aside, equities are not exactly money as such. But what is? Traditional economics defines money by the following characteristics:

• A medium of exchange;
• A unit of account;
• A store of value.

As a medium of exchange, money facilitates trade on common ground without resorting to barter. As a unit of account, money can be used to assess the value of disparate goods and services. As a store of value, money can act as a medium for longer term savings, not requiring immediate use. But as the western economies struggle to finance gargantuan deficits incurred to support the banking system, there have to be real concerns that an oversupply of fiat currencies – notably the Pound Sterling and the US dollar – will be gradually (or perhaps not so gradually) passed over for use in favour either of harder currencies backed by superior economic fundamentals, or of real assets that have superior prospects of acting as a store of value. This may be just one reason why gold is now trading comfortably above $1,000 an ounce. Paper currencies, particularly the Anglo-Saxon currencies, are in danger of losing at least one or possibly two of their three core monetary characteristics. Their credentials as a "store of value" are already impaired; with the rise of China and the Asian Tiger economies, the US dollar's hegemony as the pre-eminent unit of account is also called into question. Note, for example, the recent suggestion, subsequently denied, that China, France, Japan, Russia and the Gulf states were planning to replace the US dollar as the currency in which commodity sales would be denominated.

No less a personage than former Federal Reserve chairman Alan Greenspan has spoken of gold's qualities as the ultimate in currency. Speaking to Congress in 1999 he remarked:

Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is accepted by nobody. Gold is always accepted.

And Greenspan's previous writings may surprise in their endorsement of the yellow metal.

Goldless investors may be wondering if they have missed the boat. While it is surely better to own a rising asset below $1000 than above, it is also worth asking whether the macro-economic fundamentals are really much better than during the height of the crisis. Particularly in the UK. Take, for example, former FSA chief Sir Howard Davies‟ comments last week during a London meeting with clients of HSBC:

The next six months are going to be extremely delicate in the UK. It is very clear that something dramatic has to happen to control spending, but is the economy robust enough to survive fiscal tightening?

And in the foreign exchange markets, conditions can turn ugly very quickly:

The pound never stops where you want it to.

So it is probably not a question of whether Sterling continues to depreciate against other currencies, merely to what extent, and with what velocity.

Nor is the problem uniquely British. Hedge fund manager Julian Robertson, when asked last week by the Financial Times what he made of the economic outlook, replied:

I prefer to run scared through here. I think that if the Chinese stop buying our debt, it is virtually the end of the financial world as we know it. The conventional thinking is that they will continue buying. But I don‟t think it's logical to assume somebody will continue to buy our paper which declines in value. Our dollar is declining in value, and it's been pretty shocking over the last four or five months. The politicians who are so tough on businessmen and so critical – they and the Federal Reserve caused us to be in this predicament. What really caused me to predict the problems we had in 2007 and 2008 was that we were spending so much and no one was balancing the budget. No family can keep doing that forever, no corporation can keep doing that forever and no nation can continue doing that forever. We did it on all three fronts – and it blew up in our face.

Ground zero for potentially vulnerable financial assets is the bond market – where deteriorating fundamentals in credit outlook and currency collide. Having seen cash deposit rates and Gilt yields sink to the floor, retail investors have flooded over recent months into corporate bonds; there is now evidence that the flood tides are receding:

That corporate bond inflows are now subsiding is probably no bad thing, given the paucity of yields currently on offer. There is a bigger problem for UK corporate bonds looming, in the form of the FSA's new reforms to bank liquidity rules. The FSA claims that UK banks have just £280 billion of qualifying “liquid assets” versus a shortfall of as much as £620 billion. These rules are likely to trigger substantial sales of (non-qualifying) corporate bonds matched by comparably significant purchases of (qualifying) Gilts over the coming months and years. The best days for the corporate bond market, in other words, may soon be over; while already expensive Gilts may well enjoy another temporary manipulated surge until the market suffocates with supply. Market revulsion at the level of the national debt could conceivably come well before quantitative easing is finally wound down, which makes the investment case for Gilts fraught with issues of a) fundamental attractiveness, b) market timing and c) the potential for ultimate catastrophe.

Happily, there is a compelling alternative. Non-G7 sovereign investment grade debt, exclusively in investment grade terms, and primarily short-dated, addresses each of the visible demerits of Gilts and corporate bonds. There are still opportunities within the credit markets, then – the New Capital Wealthy Nations Bond Fund, for example, which is invested precisely in the type of credit instruments just described, currently yields around 8% in GBP. That compares with just 2.2% for four year Gilts or around 4.7% for a predominantly investment-grade GBP corporate bond fund. The other attractive dimension to non-G7 credit is currency. UK investors will likely be well served by diversifying away from their local market and avoiding the ongoing rolling disaster which is Sterling.

To conclude, a comment in response to UK journalist Ambrose Evans-Pritchard's recent blog post on the perils of cheap money:

I have... bought several thousand pounds worth of gold and silver (coins) in the past 12 months. I store and rotate 100 litres of diesel at all times. I am storing and rotating grain and tinned foods and other stuff on the list of “100 things that disappear first in a crisis”. I own two rifles, a pistol, a crossbow, and ammunition for all of them. I'm turning over my garden to an allotment. I now keep hens and will shortly keep bees.

I am not a survivalist nutter... My point is that I have lost all faith in our political elite and have profound misgivings about where we're headed in socio-economic terms.

The global economy is far from fixed; indeed, I believe that the worst is still ahead of us and that most commentators are under-estimating the challenges ahead. As for the UK economy and the outlook for our society, there are some days when I could weep... I'm simply contingency planning.

That may strike many readers as extreme. But the events of 2008 were pretty extreme, and the stock market recovery to date is not automatically consistent with the recovery of the banking system, less still a recovery in the financing outlook for the global debt mountains. Contingency planning in portfolio terms alone looks like nothing more than simple common sense.

Comments

[Dave Wrixon:]

I think the Chinese have already written off much of the their US investments. It would seem that it is more now about damage limitation. In other words they are getting out as much as they can by a variety of strategies whilst not blowing the gaff on the pending doom of the dollar.

Shame the market in Sterling was moving against your predictions as you were going to print. I think perversely the UK will be a main beneficiary of the impending chaos. If anyone is going to earn a bucket full of commission for redistributing global wealth to reflect the New World Order then it will be London.

Oct 18 05:28 AM

[damienhaas:]

Both US dollars and UK Pounds in the long term will become weaker and that impact on their respective bond prices are now irreversible.

If the US and UK Government rise interest, they will cause a meltdown in the Bond market and maybe sink the economy again.

If they keep interest low, the dollar and UK pound will continue to fall and standard of living will fall. That will in turn reduce the consumer spending power for both nation. In this case, China will also in big trouble(who shall they export to with EU themselves have their consumer problem?).

So damn if you do, damn if you don't do

Look like this time we really need a serious Contingency planning!

Oct 18 06:28 AM

[Michael Clark:]

Damned if we do, damned if we don't. If we are damned either way, then let's raise rates, take away the punchbowl, sober up, and deal with the mess we've made so we can try to build our way out of it and not leave the mess for our grandchildren.

The piper is playing. Ben is pretending to be deaf.


On Oct 18 06:28 AM damienhaas wrote:

> Both US dollars and UK Pounds in the long term will become weaker
> and that impact on their respective bond prices are now irreversible.
>
>
> If the US and UK Government rise interest, they will cause a meltdown
> in the Bond market and maybe sink the economy again.
>
> If they keep interest low, the dollar and UK pound will continue
> to fall and standard of living will fall. That will in turn reduce
> the consumer spending power for both nation. In this case, China
> will also in big trouble(who shall they export to with EU themselves
> have their consumer problem?).
>
> So damn if you do, damn if you don't do
>
> Look like this time we really need a serious Contingency planning!

Oct 18 06:36 AM

[Moon Kil Woong:]

The old thinking goes if demand for bonds wane it is probably due to an imbalance of risk and reward (interest rates). Thus the issue is not will China buy but at what interest rate will they buy at. Since the Federal Reserve is playing a let's manipulate interest rates on Treasuries and the wider market as a whole and has pitted it's theoretically endless balance sheet (already over 40/1 capital to asset ratios) agains anyone smart enough to demand an acceptable interest rate for their risk (the dollar is dropping about 10% at least this year and maybe 5% next year) now bond prices and especially long term US Treasuries can not move up to a correct value to cover risk as the market demand.

If the Federal Reserve Refuses to move on this point demand will dry up and the Federal Reserve will either have to fix it either by monetary contraction to lower inflation and devaluation or raise rates which will also result in monetary contraction. There simply is no other choices. Even Fed printing endless amounts of paper to buy up its own bonds will just result in higher inflation and dollar devaluation and less demand. And eventualy it too will also result in contraction in real terms as the economy gos through a hyper-inflationary depression. I don't think anyone wants that.

The Federal Reserve should think twice before trying to play god with the market. That position is a very demanding one and demands foresight and unlimited power. The Fereral Reserve is clearly lacking in both.

Oct 18 08:21 AM

[Michael Clark:]

"The Federal Reserve should think twice before trying to play god with the market. That position is a very demanding one and demands foresight and unlimited power. The Fereral Reserve is clearly lacking in both. "

Amen.

Oct 18 08:25 AM

[JMBishop:]

Goodness gracious Tim: The sky is falling! The sky is falling! I'm not a V shape recovery enthusiast, but neither am I a Chicken Little. We are headed back exactly to were we should have drawn the line a year ago. That is as follows.
1) Allow the too big to fail to fail.
2) Allow commodity speculators to create virtual supply and demand.
3) Allow the "free" market to fail along with the too big to fail and the commodity speculators.
Then the following will happen.
1) The real free market will kick in.
2) China's export economy will shrink.
3) Consumer goods manufacturers will make goods for their own people in their own countries with their own labor.
4) The labor force at all levels in all countries will be back to work.
5) Technologies will become the United States' main export and not jobs.
6) More jobs will then be created for both US citizens and for the countries that purchase our technologies.
7) Real free markets will create a world trade in technologies and wealth distribution.
8) This new economy will be fair, prosperous, and sustainable.
9) Finally, people like Ambrose Evans-Pritchard will be living in caves.

Oct 18 09:19 AM

[Joe Shareho...:]

The worst is ahead of us, you're right. Let's see, FDIC is broke, 11 trillion in debt, 485 banks still on the danger list, foreclosures are mounting still, commercial real estate is about to bust, half a million people per week are filing for first time benefits, we are pinned at 0.25% interest, and we have an inept congress and a President only concerned about paybacks, pet projects, and liberal ideaologies in which the do-nothing's of society will be rewarded. Future ain't pretty. We'll be at DOW 4500 before the end of 2009. Bank holiday's ahead, complete and utter treasury auction failures, and a crashing dollar. Mark it down.

Oct 18 09:53 AM

[sethmcs:]

I strongly feel the dollar is oversold and gold and oil are in a bubble that will burst.

Oct 18 09:57 AM

[Luke L:]

Every once in a while, someone writes something that is stunning in its clarity on an issue that is so obvious we should all know it intuitively. Yet the fact is we don’t see it because we refuse to believe ourselves to be in the position of realizing the consequences of our actions. I think now, though the evidence is ubiquitous, we still deny what stares us in the face, we just can’t believe where we are and what we’ve done. We’re now a very rich third world country by every definition.

Oct 18 10:10 AM

[Douglas T:]

I believe JMBishop comes closest to having it right. Well done...
www.mutualfundwealth.com/

Oct 18 11:41 AM

[r_soles:]

personally, I think rates will have to start going up in 10 to combat what the world will see as rising inflation in the west.Plus the chinese will demand more to finance all this North american debt.. Gold will inch toward 1500 by MArch of 10 and when rates rise I hope everyone who borrowed more to consume stuff ( which did get us in this mess in the first place didn't it?) has a good bankruptcy lawyer

Oct 18 11:44 AM

[change is t...:]

There will be those who predict inflation, and it will occur sometimes. There will be those who predict deflation and it will occur too. There will be those who say stocks must rise because it is the only place for dollar liquidity to go. There will be those who say gold must rise because a fiat currency cannot handle its own relative oversupply. There will be those who say excess capacity and declining demand will keep prices from rising. There will be those who say excess liquidity and loss of buying power will keep prices from falling. And finally, there will be the arbitragers who will not talk.

Beware of the charlatan, who predicts what will happen, the acedemic who can explain the past, and those with influence who know what is good for you.

When you can handle fear, you can manage risk. Chess (at least playing it well) requires thinking further than one move ahead. So does this market.

Oct 18 12:35 PM

[long_on_oil:]

Keep 15% of your portfolio in physical gold (not gld) and then if the bottom does fall out your gold position will be worth more than the other 85%. Very simple strategy.

Oct 18 12:38 PM

[Tim Price:]

I'm not saying the sky is falling, merely that given the fundamentals, the US dollar and Sterling will be. In time, hugely manipulated western market government bond prices will be falling, too. But how long it takes us to get there is the trillion dollar (and pound) question. In the meantime, there are, I believe, simply better risk / rewards out there.


On Oct 18 09:19 AM JMBishop wrote:

> Goodness gracious Tim: The sky is falling! The sky is falling!
> I'm not a V shape recovery enthusiast, but neither am I a Chicken
> Little. We are headed back exactly to were we should have drawn
> the line a year ago. That is as follows.
> 1) Allow the too big to fail to fail.
> 2) Allow commodity speculators to create virtual supply and demand.
>
> 3) Allow the "free" market to fail along with the too big to fail
> and the commodity speculators.
> Then the following will happen.
> 1) The real free market will kick in.
> 2) China's export economy will shrink.
> 3) Consumer goods manufacturers will make goods for their own people
> in their own countries with their own labor.
> 4) The labor force at all levels in all countries will be back to
> work.
> 5) Technologies will become the United States' main export and not
> jobs.
> 6) More jobs will then be created for both US citizens and for the
> countries that purchase our technologies.
> 7) Real free markets will create a world trade in technologies and
> wealth distribution.
> 8) This new economy will be fair, prosperous, and sustainable.<br/>9)
> Finally, people like Ambrose Evans-Pritchard will be living in caves.

Oct 18 12:42 PM

[manuel:]

computers do some index arbitrage(10% of all program trading), most of the times they help dealers and Traders do their job......

Oct 18 12:47 PM

[SDL:]

Your back-checking gold to 1999 for comparison to the Dow, arriving at the 280% gain is silly, and misleading to your audience.

One could also have gone back to 1975 when gold past $800 an ounce and you would arrive at paltry gain over 34 years of 22%. On an inflation based, current value, gold is actually worth less than half today what is was 34 years.

If you study the matter with a more scholarly investigation you will find that almost any stock exchange you choose from around the world has outperformed gold over it's history.

Oct 18 01:00 PM

[Albertarocks:]

On Oct 18 01:00 PM SDL wrote:

> Your back-checking gold to 1999 for comparison to the Dow, arriving
> at the 280% gain is silly, and misleading to your audience.<

Sorry SDL, but the author is bang on. In April, 1999 the Dow was at 10,000 and gold was at $280. Today at $1,053 gold is sitting at 380% (up 280%) of its price in 1999.

> One could also have gone back to 1975 when gold past $800 an ounce
> and you would arrive at paltry gain over 34 years of 22%. On an inflation
> based, current value, gold is actually worth less than half today
> what is was 34 years.<

And do you know why gold shot up to $800 in January 1980? (it wasn't 1975) It shot up because inflation went through the roof and in spite of efforts by the FED to squash it's rise, the effort failed because the peasants caught on to the inflation scam.

> If you study the matter with a more scholarly investigation you will
> find that almost any stock exchange you choose from around the world
> has outperformed gold over it's history.<

And if you study the matter with a more scholarly investigation, you would find that you've got your head up your a$$, because it isn't true. Now go look it up... what year did gold hit $850?

Oct 18 01:14 PM

[The Dark Years:]

Mr. Ambrose Evans Pritchard has it right. A contingency plan is wise and prudent, especially in today's uncertain times.

Everyone is fixated on the direction of markets, housing costs, unemployment, and related indicators of depression or a move back to growth and a return to normal times. Generally speaking the giant in the room and under the rug is ignored and that is of course Peak Affordable Oil and Peak Potable Water. Assuming that you are not in denial that these realities are upon us, and given the gravity of the situation we all would be wise to follow this persons example. Think about a world where oil, the driver of our economy jumps to $500 per barrel due to world depletion and inability to replace sufficient oil at an affordable price to meet increasing demand. There is nothing out there that can match the value of oil and it's related products based on "energy in as to energy expended". The prospect for an "oil shock" like Saudi Arabia admitting their store of the product is in terminal decline would be very disruptive for the entire world, and especially so for the US with its profligate use of around twenty percent of of the world's output.

So having some gold in your portfolio, and your pocket make sense as well as holding the tools for a more self sufficient type of life style.

Oct 18 01:31 PM

[Buckoux:]

What constantly perplexes me is why anyone thought that the DOW was ever really "worth" 14,000 in the Summer of 2007 any way. I bugged out then! Things had to be bad at that time, it's just no one had the nerve to say it. GM and Chrysler weren't just hurting in the Fall of 2008, they were hurting, internally, for some time. Denial, river, Egypt, etc.

Oct 18 01:44 PM

[Buckoux:]

What constantly perplexes me is why anyone thought that the DOW was ever really "worth" 14,000 in the Summer of 2007 any way. I bugged out then! Things had to be bad at that time, it's just no one had the nerve to say it. GM and Chrysler weren't just hurting in the Fall of 2008, they were hurting, internally, for some time. Denial, river, Egypt, etc.

Oct 18 01:44 PM

[jarcom:]

I don't think we're dealing with a complicated chess move here. Looking ahead, can you describe a scenario where the current situation just goes away peacefully? Fiat will continue to devalue one way or another as long as ultra liberal political leadership nurtured during the Vietnam anti-war continues to buy votes with Chinese wealth. When unemployment breaks into double digits and the vic starts to rise again, it's time to hide what you can in real stuff.

Oct 18 02:07 PM

[Jimbo:]

I am intrigued by Mr. Evans-Pritchard's plan for Armageddon. Two rifles and a pistol? In Britain? I thought the Enlightened Ones in the UK had banned firearms in private hands. Of course gun related crimes, as well as all robberies and burglaries are supposed to have increased in Britain since the gun banners took over. As a paid up member of the NRA, I have a small bore shotgun that my diminutive wife can handle. Ambrose, they will be coming after your Crossbow next!

Oct 18 02:55 PM

[sunflower 101:]

I like what you wrote JMBishop. I agree with all of your outline. Dandy outline I might add. But I still want to buy those chickens, and some of those top 100 items that disappear during a crisis. Buck the trend and buy a horse if necessary. I tried storing 100 gallons each of diesel and ethanol. It keeps getting stolen. Put on a lock and someone arrives with long arms and a hose to drink it up. Bums! I live in nice and safe Kansas.

On Oct 18 09:19 AM JMBishop wrote:

> Goodness gracious Tim: The sky is falling! The sky is falling! I'm
> not a V shape recovery enthusiast, but neither am I a Chicken Little.
> We are headed back exactly to were we should have drawn the line
> a year ago. That is as follows.
> 1) Allow the too big to fail to fail.
> 2) Allow commodity speculators to create virtual supply and demand.
>
> 3) Allow the "free" market to fail along with the too big to fail
> and the commodity speculators.
> Then the following will happen.
> 1) The real free market will kick in.
> 2) China's export economy will shrink.
> 3) Consumer goods manufacturers will make goods for their own people
> in their own countries with their own labor.
> 4) The labor force at all levels in all countries will be back to
> work.
> 5) Technologies will become the United States' main export and not
> jobs.
> 6) More jobs will then be created for both US citizens and for the
> countries that purchase our technologies.
> 7) Real free markets will create a world trade in technologies and
> wealth distribution.
> 8) This new economy will be fair, prosperous, and sustainable.<br/>9)
> Finally, people like Ambrose Evans-Pritchard will be living in caves.

Oct 18 03:11 PM

[Swashbuckler:]

I share many of your thoughts, bit not your time horizon. I'd say end of 2010 instead of 2009 on the DOW.


On Oct 18 09:53 AM Joe Shareholder wrote:

> The worst is ahead of us, you're right. Let's see, FDIC is broke,
> 11 trillion in debt, 485 banks still on the danger list, foreclosures
> are mounting still, commercial real estate is about to bust, half
> a million people per week are filing for first time benefits, we
> are pinned at 0.25% interest, and we have an inept congress and a
> President only concerned about paybacks, pet projects, and liberal
> ideaologies in which the do-nothing's of society will be rewarded.
> Future ain't pretty. We'll be at DOW 4500 before the end of 2009.
> Bank holiday's ahead, complete and utter treasury auction failures,
> and a crashing dollar. Mark it down.

Oct 18 05:18 PM

[Tony Daltorio:]

You are missing the big picture - various asset classes run in cycles. For example:

1966-1981 was great for commodities, horrible for stocks.
1981-2000 was great for stocks, horrible for commodities.

We are roughly still in the mid-point of the current cycle - terrible for stocks, great for commodities like gold.


On Oct 18 01:00 PM SDL wrote:

> Your back-checking gold to 1999 for comparison to the Dow, arriving
> at the 280% gain is silly, and misleading to your audience.
>
> One could also have gone back to 1975 when gold past $800 an ounce
> and you would arrive at paltry gain over 34 years of 22%. On an inflation
> based, current value, gold is actually worth less than half today
> what is was 34 years.
>
> If you study the matter with a more scholarly investigation you will
> find that almost any stock exchange you choose from around the world
> has outperformed gold over it's history.

Oct 18 08:45 PM

[auto44:]

Natrual Gas


On Oct 18 01:31 PM The Dark Years wrote:

> Mr. Ambrose Evans Pritchard has it right. A contingency plan is wise
> and prudent, especially in today's uncertain times.
>
> Everyone is fixated on the direction of markets, housing costs, unemployment,
> and related indicators of depression or a move back to growth and
> a return to normal times. Generally speaking the giant in the room
> and under the rug is ignored and that is of course Peak Affordable
> Oil and Peak Potable Water. Assuming that you are not in denial that
> these realities are upon us, and given the gravity of the situation
> we all would be wise to follow this persons example. Think about
> a world where oil, the driver of our economy jumps to $500 per barrel
> due to world depletion and inability to replace sufficient oil at
> an affordable price to meet increasing demand. There is nothing out
> there that can match the value of oil and it's related products based
> on "energy in as to energy expended". The prospect for an "oil shock"
> like Saudi Arabia admitting their store of the product is in terminal
> decline would be very disruptive for the entire world, and especially
> so for the US with its profligate use of around twenty percent of
> of the world's output.
>
> So having some gold in your portfolio, and your pocket make sense
> as well as holding the tools for a more self sufficient type of life
> style.

Oct 19 12:12 AM

[auto44:]

cycles hell what about profits?


On Oct 18 08:45 PM Tony Daltorio wrote:

> You are missing the big picture - various asset classes run in cycles.
> For example:
>
> 1966-1981 was great for commodities, horrible for stocks.
> 1981-2000 was great for stocks, horrible for commodities.
>
> We are roughly still in the mid-point of the current cycle - terrible
> for stocks, great for commodities like gold.

Oct 19 12:16 AM

[CLH:]

Somehow Tim you see things different then I do. If you bought gold in 1980, you have just broke even. Great investment? No way!!! However, the Dow in 1980 was 1000 and its now 10000. I'll take the Dow anyday.

Oct 19 07:27 AM

[Tim Price:]

Gold is demonstrably higher today than it was in 1980. But my argument is not that it made sense to buy gold 29 years ago; it is that it makes sense to own some gold now. Equities equally made terrific sense in the early 1980s; but they then enjoyed one of the biggest equity bull markets in history. You are looking at the future by way of the rear view mirror. In any event I'm not recommending gold as the entirety of a portfolio, but rather as a holding to hedge against currency devaluation and default risk. And I'm not anti-stocks; but I am anti-western fiat currencies, for reasons that seem eminently straightforward and transparent to me.


On Oct 19 07:27 AM CLH wrote:

> Somehow Tim you see things different then I do. If you bought gold
> in 1980, you have just broke even. Great investment? No way!!! However,
> the Dow in 1980 was 1000 and its now 10000. I'll take the Dow anyday.

Oct 19 09:02 AM