Is it Too Late to Get into Gold?
What is it with human behavior?
We have a tracking system that can tell us how many of our thousands of readers open their PROFIT CONFIDENTIAL e-mails. Whenever we mention gold or gold investing in our subject line, the open rate for our e-mails plunges.
Our gold stock newsletter is the most difficult one we have to sell. From that, I can gather that investors are simply not interested in gold.
I started writing about gold back in 2002. At that time, gold bullion was selling at under 0.00 per ounce and I was convinced that it would go much higher because of the debt the U.S. government was piling on and because I was never a fan of the euro.
Each time gold bullion hit a new milestone (0.00, 0.00, 0.00 — basically every 0.00 step up), I would write in this column telling my readers to get into gold. And each time gold hit a new record high, the phone calls and e-mails would come in, “Michael, is it too late to get into gold?”
Here are my beliefs on gold:
— The ever-increasing amount of U.S. national debt will eventually place immense pressure on the value of the U.S. dollar. The euro is not an alternative to the greenback; never has been, never will be.
Gold is the only currency that can be viewed as an alternative to the U.S. dollar. The U.S. government has told us that, by the end of this decade, the national debt will hit .0 trillion. It’s just .0 trillion today. What currency holds up when it is backed by so much debt?
— I am very worried about inflation. In American history — let’s forget Japanese history — prolonged periods of interest rates that are extremely low have been followed by rapid inflation. Should inflation rear its ugly head, the value of the U.S. dollar against other world currencies will collapse and gold will boom.
]]>
— The great majority of investors today have no exposure to gold-related investments. Most stockbrokers are not recommending that their clients buy gold stocks (they think gold is overpriced) and most mutual fund families do not offer a gold fund alternative. I would say about 95% to 97% of investors have no gold exposure. But human behavior and greed will set in once again. When gold hits ,000 an ounce, the media will jump on it, investors will take note and they will want to get in “before it’s too late.”
Let’s look at it this way: who owned tech stocks in the beginning of 1999, when the NASDAQ was trading at 2,000? Few investors. Who owned tech stocks in the beginning of the year 2000, when it was trading at 5,000? Plenty of investors. The same thing will happen with gold. It will be the herd mentality all over again.
For newcomers to the gold game, I find that whenever gold hits a new high, like it is doing this morning at ,240 an ounce, the gold market usually backs off in the weeks following, giving investors another chance to get in. As for what to invest in, I’ve been suggesting quality gold-producing stocks for years.
Michael’s Personal Notes:
I did something totally out of character on Monday. I spent .00 on a haircut.
Now, in the past, I never paid more than .00 for a haircut, usually paying .00. This time, I was in Miami, which is becoming quite the fashion city, passed by the most modern-looking hair salon, in the most expensive mall in America — Bal Harbor Shops — and thought, “What the heck?”
When I walked in and asked the receptionist how much for a man’s cut, she said .00, plus .00 tip. Are you ever in the situation that, when someone tells you the price of something, you don’t want to pay it, but at the same time you do not want to be embarrassed in front of the 10 people watching and listening? I guess it was a sheepish day for me.
So the big question: Is the .00 haircut worth it? Well, no one at the office said anything about my haircut, positive or negative. At home, both my wife and daughter loved it, but I think that’s because I told them I couldn’t believe I spent .00 to cut my hair.
But, in spite of the price, I would do it again. The fellow who cut it took his time (I’ve never sat in a salon chair for an hour before), he layered the hair on the back of my head, gave me an espresso and offered me the choice to see any James Bond movie I wanted on a
big flat panel screen (for a guy who doesn’t watch TV, an impressive picture).
Since I only cut my hair every three to four months; I’d certainly do it again.
Where the Market Stands:
The Dow Jones Industrial Average opens this morning 3.1% above where it started 2010. After last week’s thousand-point intraday drop by the Dow Jones, what does the market have the least chance of doing? I would say very few people expect the market to head back
up past 11,000, which makes it likely for me. The bear market rally that started in March 2009, in my opinion, is still alive.
What He Said:
“Many of today’s consumers have purchased properties with very little down payment. They’ve been enticed by nothing-down, interest-only, second and third mortgages. Bottom line: the lower-interest-rate environment sucked consumers into the housing market
big-time. And that will eventually cause us all problems.” Michael Lombardi in PROFIT CONFIDENTIAL, June 22, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me.