Don’t Buy Gold Says Jamie Dlugosch. Here Are His 5 Reasons (need a laugh?)
Occasionally the world delivers to me a real gem of a story. This is just such an item. I don’t personally know the gentleman who wrote these jewels of wisdom and I’ve never been to his domain before today, but quite simply put this is the funniest and absolute worst investment advice I’ve ever seen in my lifetime. His professional advice is so darn funny and I thought it was a satire or a spoof about buying gold. I thought… this could be a reprint of something found on the Onion.
Anyway, let me introduce Jamie Dlugosch who is a contributor to something called InvestorPlace.com. Try to follow his reasoning, you’ll get a good laugh just like me. How anyone could perceive this logic as accurate is beyond my comprehension. It should be noted that if you follow these links and read each short article, at the end of each piece are links to his professional low priced stock picks.
(these are his articles NOT mine, these were written by Jamie Dlugosch)
Five reasons why gold is a BAD idea
I will be very blunt: I despise gold and everything it stands for. It’s an abhorrent example of materialism and serves no real purpose. Lust for gold is over the top excess, and despite the protestations of the goldbugs, there is no real basis for the metal serving the currency needs of the world.
Reason No. 1 to avoid gold: There is no inflation
….Today, the numbers do not support an inflationary environment and fear over current spending and stimulus of the government creating inflation is misplaced.
Reason No. 2 to avoid gold: Gold prices are easily manipulated
…One thing I am very afraid of with gold is manipulation. Unlike paper currency that is impossible to manipulate in any way, gold can be accumulated by a group of connected buyers for the sole purpose of eliminating supply from the market.
Reason No. 3 to avoid gold: Gold is in limited supply
…Related to manipulation, the simple fact is that there is a limited supply of gold. In addition to fighting inflation, the Federal Reserve is also charged with promoting a stable currency. With gold, prices can be far from stable.
Reason No. 4 to avoid gold: Gold was dead for 20 years
…The trouble is that the gold rush is not likely to last. In fact, there has been tremendous resistance for gold at $1,000 per ounce. Do you really want to buy at the top? I don’t think so. Once the economy stabilizes and we get a return to normalcy with respect to the business cycle (in other words an ending of the boom/bust period), gold will go back into hibernation. Demand for jewelry cannot absorb the current supply. As such, a strong dollar is likely to absolutely destroy the price of gold.
Reason No. 5 to avoid gold: The dollar is the global currency
…Recently, Treasury Secretary Timothy Geithner emphatically declared his belief in a strong dollar policy. Buying gold is like spitting into the wind then. If you can remove the clouds of crisis, the clear skies ahead provide comfort to me that gold has seen its best days. Those worried about massive deficits need to recall that our country was founded with debt, debt that was ultimately paid back.
Comments are invited and welcome. I encourage you to visit the links above and read each of these jewels of wisdom.
Comment by Mark on 19 April 2009:
Gold Is Still a Good Choice
http://www.financial24.org/commodities/gold-is-still-a-good-choice/
I find it difficult to believe that, despite the utter corruption that has become increasingly apparent as a result of this economic crisis inherent in the banking and Federal Reserve systems and the contempt of these institutions for the long-term value of the US dollar, there still seem to be many supporters of fiat-based monetary regimes. Perhaps even more difficult to believe is the vitriol with which some proponents of this system criticize those who choose to invest in gold, let alone advocate a return to the gold standard. And yet, the gold bugs have it right. They have always had it right. Why? Because throughout history, gold has always maintained fundamental value.
The anti-gold crowd will say: “wait a minute, gold is just a bunch of shiny metal, with no intrinsic value. If you were stuck on a deserted island with a pile of gold it would be worthless.” This example, in the extreme sense is true. In such a case gold would be worthless, but so would paper fiat money, promissory notes, stocks, bonds, credit default swaps (these seem pretty much worthless anywhere these days) or more or less any other store of value except commodities that are fundamentally necessary to human existence such as food, water, clothing and shelter. (Actually Federal Reserve notes might be useful for cooking fires.) The point is “value” as a concept derives from supply and demand, which itself derives from human want and need and therefore human existence and competition within human society itself. (To some extent this phenomenon also exists for other forms of life.) Without life, value does not exist. And likewise without human society currency or mediums of exchange have no value. Therefore in some existential sense we could argue that nothing has fundamental value. But similar to the way mathematicians will tell you there are different types of infinity, there are different types of worthlessness. And paper money is far more worthless than gold could ever be.
Gold, throughout history, across cultures, and during the rise and fall of various nations and empires has always maintained a fundamental value. To be sure, that value has fluctuated, in terms of how many real goods (or fake dollars) it could buy, but humans have always recognized that this shiny, yellow metal was something rare and therefore something special. I could take an ounce of gold today, and go 500 or 1000 years in the past or 1000 years in the future and assuming I could find humans, I am confident I could get something for my gold. Collector’s value aside, how many of you are willing to bet you could do so with the dollar? (Zimbabwe or American.) The point is this: fiat money derives its power from governments and governments fail. Gold on the other hand derives its value from some fundamental aspect of human psychology (it turns out parrots seem to like shiny things too). So as long as there are humans (or parrots) gold will have value. In a sense gold is the monetary equivalent of “I think therefore I am.” “We think therefore gold is valuable.” The same cannot be said for the kindling the treasury prints up.
Now what a lot of you may want to know is: will gold go up or down in the near term? To which I reply: I really don’t care. Call me a Jim Rogers wannabe, but short-term trades really don’t interest me. That’s the province of gamblers, financial engineers, inside traders and people with friends in government. I am interested in fundamentals, and the fundamentals for gold look good: 1) The shortage of credit and investment means there is relatively less exploration and development of mining; 2) India and China are growing (India in population, China in per capita income). Their jewelry markets will grow and a substantial amount of world gold consumption goes to jewelry and 3) Mark my words: there is another storm on the horizon and when it comes, Financial Crisis 2.0 will be even worse. When inflation is factored in we could see multi-thousand dollar (USD) gold. (I don’t even want to think about what it would be in Zimbabwe Dollars.)
At the end of the day, you can write me off as just another gold bug, but I can say something with confidence about gold bugs: if the US economy turns around, our gold will still have value. And if the US economy goes into the tank we will be laughing all the way to the bank. Oh, wait; we won’t need to go to the bank because we will be holding a medium of exchange that has intrinsic value in itself, regardless of who prints the money. Either way, we never, ever have to lose sleep worrying that our beautiful shiny yellow metal will pull a LTCM, an Enron, a Bear, an AIG, a Lehman, a GM, or a Zimbabwe Dollar on us. It may go up, it may go down, but gold will always be gold.
Comment by John on 23 April 2009:
I am really feeling sorry for this guy….for the most part he is on a different planet, but there are a few things he mght be just alittle correct about…just alittle. Gold, from what I have read, has been traded from reserve bank to reserve bank between different countries during times of economic perils to artificially drive the values of currencies. Also, the dollars value can be manipulated by the very people who create it! But other than that, this guy has no chance at concincing me of eliminating gold from my portfolio. True, golds correlation to our dollar is like night and day. Dollar is good, gold is not and vica vera, so it acts as a great tangible hedge, and from what history tells us, has and with high probability will never be valued at zero.
Comment by Mark on 23 April 2009:
You can make a statement like, “the sky is blue” so there is not global warming. Yes, the sky is blue, but that does not support your point. A statement such as ‘gold is manipulated’ don’t buy it, is right along those same lines, the premise has nothing to do with your idea/point.
The dollar gets printed like mad, and loses value because of inflation. Both statements are true and support each other. If you own gold and not dollars, your value will not erode because of excessive government spending, bailouts, TARP etc.
The money supply has increased over 90% since last year. The dollar you have in your pocket today is not worth as much as it was last year.
Gold Cannot be printed the supply is limited, personal value held in gold will not slowly disappear.
Jamie makes some very general statements, which if taken by themselves could be considered accurate, but DO NOT support his idea or his recommendation to not buy gold.
To say Don’t buy gold it’s in short supply has no logic, it’s along the lines of ‘gold is shiny’ don’t buy it. These are ridiculous statements by an obvious ignorant person, or stupid and ignorant I’m not sure yet. Either way it’s very bad advice for a so called “professional” in finance to be giving so like I said, he’s either shilling for some crap stock boiler room or he’s an idiot.
Thanks for your comment.
Mark