former partner of mine got
married over the weekend to a former lover from his youth. Separated
by tides of life that kept them apart
for a couple of decades, against
all odds their paths once again crossed, resulting in a beautiful ceremony that took place, most dramatically, in a tent in the middle of a raging storm.
less sentimental among you will be
pleased to know that I'm not planning on waxing lyrically about love and marriage
and all that. Instead, I'll share a couple of stories from the wedding, as they seemed particularly
revealing to me, and maybe
to you too.
first was a conversation with
a mutual friend of the
groom whom I hadn't seen in a number of years. I had heard he'd moved
on from a previous sales
job in the ski business to a position as a broker at
a major brokerage house, but we
hadn't had more than a passing conversation until
we washed up next to each other at the wedding.
Since he knows I am involved
in the research business, he
steered the conversation toward
investment markets, giving me an opening to do a little on-the-ground research. Specifically, I asked him if he or his clients were invested in gold or gold
stocks. "Nope," he
said with a cheerful broker's smile, adding, "You can't eat gold."
"Err, excuse me, can you repeat that?"
I said (or words to that effect).
know, like something of
value, like vegetables
– you can't eat gold," he explained somewhat haltingly.
you must have heard Buffett's quote about gold not being a productive asset,"
I said aloud while thinking maybe he hadn't
paid very close attention
when his branch manager had been trying to brief him on how to answer clients looking to buy gold.
you know the history of Buffett's anti-gold stance?" I asked.
Blank but friendly
"Well, as I figure it," I continued, "Buffett's
mentor was Benjamin Graham, who
only really advocated two asset classes during his career: stocks and bonds.
The idea being that depending on relative valuations, a portfolio should be allocated between stocks and bonds in varying
"Uh-huh," he said, his handsome
smile failing to mask that he
had only the vaguest idea what I was talking
any event, the reason that Graham – who had a huge
affect on how Wall Street views portfolio
allocation – never bothered
with gold was because throughout virtually his entire career, it was illegal
was illegal to own?"
"Yep, Roosevelt banned it, which was
why Graham never included it in his allocations. But since gold
has again been legal to own, there have been two distinct periods when gold was the far better asset class than either stocks or bonds. We are currently in just such a period,
which is why the performance of gold has completely
trashed even that of Buffett over the last decade."
"Get out of town! It's outperformed Buffett? Really?"
"Well, that may
be, but I always tell my customers, you can't eat
gold, and you can't go wrong with a dividend-paying stock."
Seeing that further discourse on the topic was going
to be unproductive, the
talk quickly turned to
the weather and then I drifted away.
Now don't get me wrong, this is an entirely
nice young fellow. But that he has been working for a major
brokerage house – actually
advising his clients on where to put their money
– for over eight years
now and clearly didn't know a thing about gold
or, as far as I could tell, any
aspect of investing other
than parroting the stock
touts his brokerage firm gives him,
was big- time eye-opening.
gold in a bubble? Hardly.
But I'll sure know when it is – and that will be
when this fellow calls me up to ask for a
The mainstream media continue to
bash gold, warning that investors in the yellow metal are in danger of enduring
a nasty correction. Yesterday,
for example, CNBC ran an
article titled "Is Gold on the Edge of a Violent Turndown?"
in which Yoni Jacobs, chief investment strategist at Chart Prophet Capital, said gold could drop to $700 an
Central banks apparently disagree with this assessment,
as they have increased their gold hoards by 400 metric tons in the 12 months through March 31, 2012, up from
156 tons during the prior
year. We strongly believe investors should follow the lead of central banks,
and to help those new to the gold market, we've created a free special report that reveals the three best ways to invest in gold.