Proof that gold is in a bubble!
Gold. Shiny yellow precious metal. You make me more confused than any other investment in the world.
How do we value you? After all, you don't do anything. Your only real use is that we cant make as much of you as we can dollars, and I can only profit from you if someone else is willing to pay me more than i paid for you.
Do I use the Gold/Dow ratio? The Gold/silver ratio? How about the gold/inflation, or gold/money supply?
Why stop there? Why not the gold/pork belly, gold/world population, or gold/chicken farm ratio (or any other rediculous ratio you can think of).
So far, I've been right/wrong about gold. I've heard robert kyosaki's, peter schiff, jim rogers, and jim cramers stance on gold, and I''m intrigued. Then i hear warren buffet and the motley fool, and my decision and reasons are reversed.
So how can i now have proof that gold is in a bubble? Well, its not scientific. I don't have a chart to show you or an expert to give witness.
So what do I have?
Right now, I've got you. I've got your attention. My guess is your a gold bug, or a gold skeptic (like me). Your confused (like me), or fearful about our money supply. So your reading all you can about gold, looking for "the answer".
Well, i don't think there is one.
Could gold go to 2,000, 5,000, 15,000? Of course it could. But i don't think it will.
See, the reason i think gold is in a bubble is because interest in gold is at an all time high (or at least a 30 year high). CNBC, ABC, NPR, CBS......everyone is talking about gold. Everyone is talking about future inflation. Heck, you are READING a blog post about gold right now.
Now ask yourself, would you be reading this blog if I posted this message in the year 2000 (when you SHOULD have been buying gold). Or would the title "Proof that TECH COMPANIES are in a bubble" grab your attention?
Same question for 2006? Or would the title "Proof that REAL ESTATE is in a bubble" done it for you?
My guess is the latter.
Look, i have NO IDEA where gold is going. $500 or $2000 wouldn't suprise me either way. All's i know is that I can't measure the price, so i can't know if its going up or down with any confidence. I also know that i don't UNDERSTAND gold, and as a rule i don't invest in things i don't understand (sounds like that buffett guy, right?).
So, if i were you, and I had 10-50% of my money in gold right now, here is what i do.
1) Don't own GLD or SLV. Yes, they are good trades, but you can't VALUE them. If i was bullish on gold, I'd own the gold producers, where at least you can get some sense of value. To me, the best "gold bug" out there is the motley fools own TMFSinchiruna. He seems smart, and is bullish on gold/silver. He seems to really like SLW, EXK, CEF & AUY. If i were going long gold/silver,I'd look there first before GLD/SLV.
2) If your worried about inflation, invest in high quality, dividend paying stocks that get revenue in foriegn countries. They also need to have strong pricing power to pass on costs. Think COST, MSFT, INTC, DEO, CHL and the like (my portfolio is full of these guys).
3) If your worried about the demise of the dollar, know this. The USA may be in trouble, but were in the least amount of trouble compared to the other currencies. If the dollar goes to 0, who will take our place? The euro? They are a mess. The pound? Same problem. Australian/canadian dollar? Not big enough. Yen? Nope, same issues. Chinese Yuan? Brazilian Real? Yes, they are in better shape, but a stronger currency would hurt them very, very badly.
To sum up this post, i don't know where gold is going. But i do know that attention in it is at a record high. As buffett said, "be fearful when others are greedy". Look around.
Gold is looking awful greedy right now. That's why I'm fearful.