Place Your Bets.
My favorite trade of the new year is gold, gold, gold, not because it is genius sophisticated analysis, but because it is rudimentary Auric Goldfinger thinking. The Obama administration is committed to running the printing presses and pushing cash into the hands of failed banks, mortgage lenders, car companies, and not a few reckless, ill-managed, petulant state assemblies and their cronies in municpalites. As long as the presses run, and for soetime after they stop, the inflation will climb and the prices will skyrocket. The only sure hedge is gold, touching $1150. The gold price has become the new metric on the Obama administration's haplessness. Market maestro John Paulson's new gold fund is a big, nosiy, iconoclastic bet against the White House printing press (and Ben Bernanke's passivity) through 2012. Goldfinger lives in Shanghai, and MI6 has long since folded its Double 0s and pensioned Bond off to the Dalmatian Coast, where he runs a casino.
When the housing bubble was in the process of waxing, I kept watching the value of our house going up and up. All the while, its size and the quarter acre on which it stands remained the same. Nevertheless, we felt good about it and felt ourselves to be inordinately fortunate and well off.
When Argentina experienced serious inflation back in the '70's - when a carton of American cigarettes cost the equivalent of 30 cents - they pegged all their financial transactions on the value of a gallon of gas as defined by the American dollar (which was seen to be the bedrock of fiscal integrity).
Inflation in a currency is a sign of 'value' being sucked out of it. Only the productive sector of an economy produces ‘value’. Government and government-sponsored entitlements (directed to the undeserving) dilute the value of the currency - as does money printed on government printing presses. As you're watching things costing more and more, don't think of it that way. Think of it as the dollar buying less and less. Though it comes out to the same thing, there's a significant distinction in how we look at it. The former engenders visions of greed and corruption - a failure of the private sector; capitalism - whereas the latter points to a failure of government policy.
Excesses in the private sector will always diminish in the course of normally occurring cycles. Government excess can seldom be slowed; never reversed. Once voters decide to abandon their civic duty with regard to voting in elections (or casting their vote lightly), government excess spreads like a cancer unchecked throughout the system - and the system dies.
http://peterkoelliker.blogspot.com/
I've heard it said that in today's dollars gold would have to reach $2500 or so just to equal its past high of around $800 per ounce.
And, it's never been worth nothing---> so, buy gold
A very important insight about gold is this:
Gold doesn't go up. Gold stands still. Gold going up means the dollar going down.
This is not a hundred percent true, but it is true enough that the factors affecting the value of gold amount to quibbling in the ordinary situation. For example, when Rome conquered Jerusalem, they confiscated so much gold that there was a local inflation in Rome. When the Jews were starved during the siege of Jerusalem, or in Nazi Europe, they would trade gold or jewels for food, etc. But those are not normal situations.
This is not a normal situation either, and each day it becomes more abnormal. I believe, once the currency implodes, everything else implodes along with it. Look at property (housing). Property has always been thought of as a safe haven; something tangible; something that will not decrease in real value. Well, we all know different now. It's the same thing with gold. Ultimately, the only thing that's worth a dime is talent, persistence and sweat; i.e. hard work.