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Adam Ruskin
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I am an Israeli of American origin. I've spent 25 years of my life in the US, 22 in Israel. Born in Juneau, Alaska, I now live outside of Tel Aviv. I am a licensed attorney in New York and Israel, and an active real estate investor. As far as formal education goes (over-rated!), I have 5 Degrees... More
  • Why I am confident that gold and silver will continue to go up 0 comments
    Nov 7, 2010 9:49 AM | about stocks: GLD, SLV, SIL, GDX, GDXJ

    I don't see myself as a certified "gold bug", but in the past few months I have been won over by the main arguments of the precious metals advocates.  I think I am pretty reasonable, and if I can be persuaded, then then I am confident that others will draw the same conclusions that I have and join the precious metals camp in the years to come. As more investors join the camp than leave it, the prices for gold and silver will continue to rise.  It's that simple. As the intellectual argument for gold wins over more people, the price will go up. This has NOTHING to do with PE's, yield, book value, etc., the price of gold has no conventional financial restraints!

    I predict a continued ongoing and steady decline in the general public's confidence in government issued paper currency, particularly in its current state, when it not being backed up by anything tangible.  Hand in hand with this, I see an ongoing disillusionment financial institutions altogether, whether private sector or governmental.  The past two years have been horrendous for the reputation and integrity of financial institutions and their leaders! This wariness of the conventional global financial system isn't going to change in a quarter, a year, or even a decade. Maybe in a generation, maybe not. The psychological scars of the crash of 2008 are second only to the Great Depression in the public's  mind.

    Gold is the antithesis of modern finance - it is a reversion to the way in which humanity has stored its wealth since the dawn of civilization, hundreds of generations ago. Its appeal is not entirely analytical. The finest financial minds cannot refute the instinctual urges of anthropological instinct! Instead of fighting human nature, I intend to profit from it in the years to come!

    Yes, gold is ridiculous when you really think about it. But is it any more ridiculous than paper money? The bluff of government-issued currency is being called by more and more people every day.  And remember, this is not simply an intellectual debate. It involves the most basic human instincts - economic survival, providing for loved ones, saving for old age.  

    Imagine if American retirees, anxious about their financial situation in their later years, systematically transferred even a slightly higher percentage of their wealth to precious metals. Even after a 528% increase in the price of gold in the past 10 years ($264 to $1394), I still think that gold has not yet gone mainstream. I am usually a late adopter. I am not into fads.  But this time I think that I am relatively ahead of the curve.

    And about that 528% increase in the past decade. Is there a compelling reason why it can't happen in the coming decade? Every time Central Bankers light up the currency printing presses, more and more investors head for the gold camp. 

    I'm not going to venture a guess on high gold can go, because that's not the question.  The question is how mainstream it can go.

    What percentage of Florida retirees have even 3% of their wealth in precious metals? I think that gold is still tainted  with a stigma of being for crazies. Warren Buffett recently ridiculed gold as an investment vehicle in Fortune Magazine (see http://money.cnn.com/2010/10/18/pf/).  
    Buffett would probably say the same thing about Picasso and Rembrandt paintings  -that from a financial perspective they are worth about five dollars in paint supplies.

    In short, gold's rise has been a long time coming, and fortunately for the faint of heart, people like me who have a hard time with sudden and drastic price fluctuations, it will be a long time going, if it goes at all.  The debate over the financial merits of gold is too profound, too timeless, too entrenched, too intertwined with the nature of humanity. I don't expect any blind-side surprises for gold investors in the coming decade! There will always be more and more people waiting for price dips, so they can join the gold camp.

    If anything, gold's rise can be seen as a historic reversion to mean. Gold as a primary repository of wealth, along with land, has been around essentially since we lived in caves.  Given the disaster of mortgage-backed securities, credit swaps, derivatives, Lehman Brothers, etc., I think I'll go with the collected wisdom of the past 250 generations. Keep it simple, wise one. Gold, Silver. Just like your ancestors.














    Disclosure: GLD,SLV,GDXJ, AGQ, DGP
    Stocks: GLD, SLV, SIL, GDX, GDXJ
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