If you buy gold now, you are buying at an all-time high. The adage is "Buy low, sell high" not the other way around.

Yes... that's how it feels... but that's how it has felt every week for the past three or four months... and have missed a good bit of "up" by worrying about all time high.

A classic problem, eh?

Gold is making these gains, and the inflation hasn't really set in to our psyche yet.

Adjusting for inflation, gold would have to reach 2,000... I think... to meet its last high in the early 80's.

The big wave of new inflation has not hit yet, either... so 2,000 could just be the start. Then, add in the next wave of people who "discover" gold as an investment and things could really go koo koo. I maintain that gold, as popular as it is, is still of interest to a teeny tiny minority of investors.. so the popularity has yet to surge, too.

It isn't that stocks don't zoom up with inflation, too. This could happen, too.

A better comparison would be commodities vs stocks. There is always money to be made in both, but commodities - not just gold, but platinum, silver, gold, cadmium, oil, natural gas, fertilizer, rice, corn, soybeans, wheat, sugar, etc., and all major currencies - are the more volatile. They can produce higher profits, and greater losses, because of this volatility.

If you do not understand why they go up and down - the entire set of political, economic and emotional factors that affect the wild swings in daily, even hourly, prices - then investing in them is a fool's game. A small investor who is ignorant stands absolutely no chance against professional traders and portfolio managers, or even against those few savvy amateurs who love to trade.

A consistent investment strategy is the only way to get a decent ROI over the long-term. You are not trying to beat the pros; you can't. Heck, 80% of the pros can't even match the 20% that do beat the averages each year!

Amateurs who make emotional, panicked decisions never win. It's been shown in studies that the average investor is better off just sitting tight and sticking to a basic diversified portfolio, than trying to trade in and out without any real understanding of what they're doing.

We have some friends who know just as much about investing as we do. We exchange investing and finance articles all the time through email. He's one of the few people I'll send the more technical investing stuff to, because I know that like me, he actually reads it.

But he's got terrible investing instincts. He 'threw in the towel' in March 2009 and yanked everything out of the market, going to cash way too late. We stayed in, kept to our strategy, and watched the portfolio recover in a big way. Were still down a bit, but who cares? In 25 yrs weÂve had more ups than downs, and our ROI is still a nice average number.

If we had a taxable investment account, IÂd expand into a few commodities ETFs and one or two emerging-market ETFs. But we donÂt, so I work with what we are offered by our funds management, checking every quarter to see what each fundÂs top 10 holdings are, and setting our allocations accordingly.

Chasing last yearÂs, or even last quarter winners, is not the way to invest going forward. There is a lot of money on the sidelines, and when that money comes in, it pushes the market up. If you donÂt think the fundamentals have improved to warrant the current P/E multiples, then sit it out and wait. Who cares if you wait six days or six months? Nobody knows what the absolute bottom and absolute top is, until well after itÂs happened.

An amateur has only one real advantage over a pro: we can be patient. Pro traders have a short-term timeline, because theyÂre judged on THEIR quarterly results. Thus, 3 months is long-term and 1 year is almost a lifetime.

Below is a link to a historical discussion on gold, that you might find interesting. His final paragraphs (written in 2005) on the 1980 spike are very thoughtful and worth the read.

BehaviorKelton if you compare the rate of return for a basket of good dividend paying stocks with the return on gold over the same time period the stocks have greatly outperformed gold much of the time. If you feel a need to put money into metal many other metals such as copper have had greater percentage increases than gold.
I spent a good part of my work career doing lab analysis of gold. While I am no longer involved in assaying gold I can tell you that gold attracts some very strange people not to mention being involved in various frauds. If you lack the means to determine if a piece of metal is authentic I would suggest leaving it to those who do have the means.

Thanks Ian and Jkom,

Yes, commodities vs. stocks would be better suited.

Admittedly, I am letting myself consider some rather paranoid perspectives in my investment decision making process.

So, while I could hold a certificate that represents a business (stocks) or one that represents commodities of different types, I can hold the actual silver/gold myself.

This alone is a unique and possibly feature among the spectrum of investment options.

Now, I am also holding cash (USd), but there is reason to believe that *this* might be the riskiest "investment" of all! Or at least, not nearly the stable thing that it once was.

Only two years ago, I had started thinking that I am saving enough to be happy just keeping 90% cash, eating the 3-4% inflation, and just "settling" for the modest interest rates available in money market, savings, or CDs.

So great. NOW we actually have to worry about the value of frig'n money itself!!! I would have never dreamed of this as an issue just 24 months ago. The stability of our banks is even a question. oh man

Even during the much discussed late 70's, I don't think those circumstances compare to today's events. That stuff was little league compared to what we see today.

At almost any angle you look, there are very clear problems (deficits, money printing, etc.) that are record breaking events...and not by a small margin.

Are our economic systems and our not-so-free markets robust enough to endure and thrive under today's conditions?

Do modern day politicians have the visceral strength to make difficult decisions that might cost them votes?..to think long term instead of politically expediency at all costs?

Man, I hate to drop pessimism, but I have almost entirely lost faith. And I would say that I represent only a small fraction of the population... which is why I am guessing that we have not even begun to witness the buying frenzy (of metals) once the idea becomes common among Wal-Mart shoppers and such...and the world.

I do have some retirement money in commodities. At this point, they have been doing great, but only as great as stocks...so no big advantage over stock so far. Also, I am in possession of some metal..but not a life-changing amount...trivial really. The psychology, though, of actually holding the actual *thing* that I bought is nice.

Psychology, I understand, is what can get us into financial trouble. I do get that...and I might be a victim of my own B.S. I have in the past! (but with stocks)

After owning representations of things (stocks, dollars, CDs), the notion of holding some *thing* is refreshing. I'm wondering about other options...such as real estate, too.

Man, I wish classic cars or motorcycles were sound investments... I do like those... they'd be fun to hold! Even a mint condition 60's Volkwagen Van!

Boy, I bet coin collectors are dancing in the streets these days.

my view is this..If you think the Dollar will continue to fall, then commodities and gold,even more so, will see more gains...I personally think the dollar will mount at least a short term rally,and commodities and gold,more so, will decline...JMHO

Coin collectors would only be dancing in the streets if they had bought at $800 or less, and were willing to sell now. Most of them, by the very definition, are probably sitting on their stashes, too scared or too anticipatory to sell out.

The dollar is going down due to a number of factors, the biggest of which is the lowering of risk in the credit markets. This is actually a GOOD sign. You do not want to see solid corporations like GE, Caterpillar, etc., being unable to raise money for their ongoing operations.

Thus, the money is flowing to other places, including commodities. If you are willing to view gold the way you view RE, then a modest 3-5% appreciation over 20-30 years could be acceptable. But if you really fear inflation, then illiquid assets have serious downsides. Over 60% of the time during inflationary periods, stocks/markets do exceedingly well.

Of course things are different from the 1970's. There were doomsayers then, and there are doomsayers now. What I see is that upswings AND downswings are both overreacting. But when you look at the long term trends of the market, it has shown a definite rise over the decades.

Whether you think the S&P500 is fairly valued at 1100 or not, the fact remains it was at 300 at YE 1980. The question is not what is the 'right' level for the market, but what will the trendline look like when we view it backwards in the year 2015, then 2020, et. al. If you have taxable investment accounts, then you should make an effort to understand option calls, especially on those days when the volatility in the VIX declines and such protection is cheap.

To be afraid of holding 'paper' assets is no different a mentality than the people who went through the Great Depression and thereafter never trusted banks. Computers are a wonderful technology but they have increased volatility in the markets, no question about it. As Ive said in another thread, its like a cat jumping on a hot stove. The cat will never do it again but it will never jump on a cold stove either. I love my cats, but I refuse to believe I'm stupider than my four-legged friends.

As a small investor you can learn to use this riskier market to your advantage if you are willing to invest more time and research. Or you can choose to ignore it entirely and stick to the buy/hold strategy with regular diversification and rebalancing. Both strategies can work successfully over time - time being at least a 20-yr period - as long as inflation is factored in.

We are heavily in bonds at the moment, with a 19% return averaged between two bond funds. Equities are split between big-cap growth and international. These allocations may very well change in the next six months, depending on how 2010 develops. Should inflation start to pick up, we will begin moving out of our bond positions.

Risk is part of life. You risk your life every day walking into the bathroom far and away the most dangerous room in the entire house. You risk your life every time you turn on the ignition in your car and drive away - the safest car and auto insurance can only mitigate your risk of death/injury from a drunk driver, not eliminate it. To be afraid of risk is to limit yourself by old fears, rather than finding ways to reduce risk and continue to reach out into the world around you.

Good luck to everyone as we continue our life's pathways through these interesting times!

Historically, buying and holding gold is a worse strategy than investing in american business ie stocks. While gold is tangible and feels "safe" it just doesn't have the possibility of being the next google or GE. I'd say the same thing about land. Unless someone is actively developing a property, you generally don't make a ton of money buying and holding. In the long run, betting on human creativity and drive is a better than betting on a lump of metal or plot of dirt.

In the short term, neither stocks nor gold are particularly safe bets. Stocks obviously go up and down, but the bottom can (and often does) fall out of metals incredibly quickly. It is far from the sure thing that the commercials make it out to be. In fact, based on the "irrational exuberance" of the current rush to gold, I'd say the chances of a collapse are better than average. Lots of people are buying gold that know nothing about it other than it is shiny and expensive. Once it starts dropping, many of those people will bolt.

It may feel "GOOD" to hold your gold in your hand, but the minute you take possession you need to have it assayed again before you can sell it. Coins are the exception but you pay a mighty big premium for that huge printing press .....

Dave,
I figure that it might cost $50 to move gold from one hand to another... at the most.

For me, a gold purchase or any other metal purchase is not like other types of investments. I'm not looking for a 12% yearly gain... instead, I'm thinking that the metal is there for circumstances in which things go very poorly with everything else.

I'm not there yet, but I'd like *at least* 10% of my finances to be in the "things going poorly" catagory.

China and India are expressing concern about the USD and looking at gold and other currencies. India just purchased a boat load of gold. The US gov't is, in fact, is sitting on a giant store of gold.

This stuff must be of some *real* value. Unlike paper money, these governments (among many others) must recognize the special value of gold. Why would they bother if they didn't? They actually maintain the stuff itself, not paper representations of it.

I figure that I should maintain some sort of emergency type reserve myself.

That said, there are excellent reasons to believe that we have not yet seen the "rush to gold". I don't know a single co-worder (or friend) who is expressing concern for the overprinting of USD...and none of them own gold

If my coworkers and friends are any indication of the population, then the gold rush hasn't yet begun.

All of them own stocks though... if this segment of investors start dappling in gold, there won't be nearly enough to go around.

So, if anything like a rush-to-gold *really* happens, it might very well be an excellent investment comparable to any of the best years in stocks.... not that the past decade has been too shabby.

Kelton, if I may, the choice is not just between gold and stocks. They are secondary to paying off the mortgage (a sure bet while the markets are still roiling) and maxing out your IRA/401K, etc.

I actually do believe the price of gold will rise but when it falls, it falls hard. My crystal ball isnt good enough to forecast when foreign governments are going to start selling their gold because of their own economic catastrophes, as when the Soviet Union broke up in 1991 and had to dump its gold reserves, or the 1997 Asian economic crisis that caused those countries to be forced to sell their gold. A government buys in big quantities, such as Indias recent purchase of gold (and China will eventually follow suit, as their gold reserves are only 2% of their surplus). But they also sell in huge quantities, which inevitably depresses the market.

BTW, Gold Bugs might find the following data interesting: the price of gold did NOT rise through the Great Depression years. It averaged $22, even dipping briefly down to $17 in 1931. By 1933 it crept to $34.50, where the price remained for the next 38 years.

jkom,

So you are expecting more economic fallout? (catastrophe?)

Of course, I wouldn't know.

The great depression was more of a depressive feature wasn't it?... so the price of everything dropped... gold, food, real estate, etc.

As I recall, gold was confiscated from private owners during that time, too!

The are plenty of free-market capitalists who can explain quite clearly why government actions caused and even extended the great depression. They also describe how government pressure on banks was a key player in our current debacle.

I am totally hoping that gold makes a HUGE drop in price within the next month of so. Of course, I was told repeatedly that a significant drop was due *soon* for the past 6 months.

Just for grins, I wanted to experiment with a small purchase anyway back in June. I had actually never seen bullion anyway...and had no idea how the ordering experience go. In my case, I used Bullion Direct. It was as easy as ordering anything on the net.

My next ROTH purchase will be in commodities (I have plenty in stock-mutual funds as it is). If there is this oft repeated "drop in gold", I will be happy to jump in.

I have listened to well respected gold bugs (CNBC, FoxBusiness, YouTube, etc.)...and they have obviously got my ear.

I would love to find similarly well respected anti-gold economists. In particular, I'd like to see an open debate between the two.

>>gold was confiscated from private owners during that time>>
This did not restrict the purchase of gold on the global market. Private, middle-class buyers are never volume purchasers of gold.

Commodities are a standard investment category. But because of their volatility, which is easily seen over the last 50 years, I can't imagine why anyone would put the majority of their eggs into such a basket, especially core retirement $$$. (Yes, I've seen this advice given just recently, on another forum I participate in) As is often said, one should never be willing to risk anything one isn't already prepared to lose.

>>More economic fallout/catastrophe?>>
When is there not some sort of disaster happening somewhere in the world today, LOL. To be ruled by fear and sensationalist media headlines does not appeal to me. I have heard the doomsayers in the 1960's, the 1970's, the 1980's, the 1990's, the millenium, and now recently. Every time they say the same things - "Oh, it's different now - it really IS the end of the world as we know it!", etc. etc.

Yes, it's always different...and always the same overreaction. I evaluate risk and mitigate where I can afford to, or refuse to take it if I can't. There are many paths to success (and many definitions of the latter). I don't believe in trying to eliminate all risk as I consider that an impossible goal - any more than I believe in some 'expert' touting the next "sure thing".

I am not competing against the pros or against anyone here. I'm merely trying for a decent ROI viewed over at least 20 yrs time (the actuarial standard for valid statistical data). I've achieved that, as many others have done. We have all done it slightly different ways, I'm sure. I doubt anyone uses the exact methodology and timing as another individual does.

I consider myself fortunate to be alive at a time when information has finally become easily available. Sifting through reams of data on a regular basis shows me certain trends tend to remain valid over time, even while short-term shifts continue to occur. I don't worry about missing the next hot sector, as long as overall I have more winners than losers in total.

Those are more great points Jkom... especially the point about "this time it's REALLY different!".

The media cries wolf all of the time, but they have gotten much better at it.

It seems like yesterday (mid-90's) that militias were our biggest proglem. Remember that? After the Timothy McVeigh Okalahoma tragedy, the media maintained a "militia fetish" on the news for at least 6 months after it. All sorts of paranoid stories like "is there a militia in YOUR backyard???!! stay tuned to find out!".

This makes it difficult to discriminate between media hype and honest emergencies.

As a kid, I remember the late 70's seeming particularly grim... the adults around me seemed certain that we were going to heck in a handbasket.

I'm thinking things really ARE different, but I recognize that it is almost impossible to see things clearly from the vantage point of the "now". There might be some comparable numbers here and there (deficits, money printing, etc.), but the *times* are different in so many ways.

It's like comparing the overall picture of the eco-system of 1930 to the eco-system of today. It might just be too complex and too big for our current capacity to decipher the important facts from the trivial.

Actually, I apologize for never addressing your original question of "The reasons for the stock rise doesn't seem to be easily explained by analysts."

Virtually all the action since July has been on light volume. Very few days have seen normal trading volumes. When trading volume is light, dips and rises are exacerbated.

Also, the market has risen in the final quarter over the last few years because fund managers know it is their last chance to post decent results (upon which their bonuses hinge). When money comes into the market, even reluctantly, this also pushes equity prices up.

It is estimated that there are still trillions of $$$ sitting on the sidelines. It seems logical that at least some of this is being invested in commodities as well as emerging markets and currency exchanges, contributing to their rise in values.

The '70's WERE grim. I was an office supvr for a major insurer. I had people break down into tears, right on the spot, when I turned them down for a clerk-typist job paying $5K/yr. One guy came in with a Masters degree, who typed faster than I did at the time! Had to turn him down, too. Vietnam was a h**lpit that we thought we would never get out of, inflation was killing the middle-class, money was tight and credit was tighter, deficits looked insurmountable. Over-population warnings were being screamed everywhere, with books published about the soon-to-come global collapse where everyone would be fighting over food and water. Everybody was sure Armageddon was just around the corner, ready to happen.

They were wrong then, as it turned out. After a while, such proclamations begin to sound a lot like 'crying wolf'. Remember, what you can always count upon is that Big Money - by which I mean global corporate, large institutional, and government (all levels and countries) money - all have the strongest vested interest in ensuring that there is stability in the financial marketplace. The reason for this is simple: it takes money to make money, and the money is only of worth when it moves around.

As I've said often, putting money in your mattress (which gold is the equivalent of, actually) gives you nothing more than a lumpy mattress to sleep on. It is worth absolutely nothing until you exchange it for something you need. That's why I thought it was so interesting that the price of gold actually never shot upwards during the Depression years. The very fact of it being forbidden should have increased its worth dramatically - but it did not. Don't forget that there was still a large number of extremely wealthy people at the time who were more than capable of getting around the restrictions on owning gold.

This conversation is morphing into an interesting topic...one that could bleed into all kinds of non-financial life quandaries.... I think about it a lot.

A friend of mine, who is certain of our economic demise, likes to say, "are we smoking a bad batch?".

That is, that the circumstances seem utterly clear. From almost any angle of inspection, our monetary system and overall political system is doomed. Why isn't *everyone* noticing the same things that we are noticing? Can we be THAT wrong???

Peter Schiff famously predicted the housing/mortgage collapse. He was often paraded across CNBC as the freaky perma-bear... and still is... but, of course, gets a bit more respect these days.

I'm trying to think of the responses to the comparisons between the 70's and our current problems. In the late 70's, personal debt was not nearly the same and our economy was based more fully on the actual production of goods. That's the theme, anyway.

I have surfed the web and found some reasonable sounding commentary on topics such as "the dollar isn't going to collapse". I'm paying attention to what has been said in this thread, too. Perhaps that will moderate my enthusiasm and investment in survival-like stuff.

Because something hasn't happened in the past, though, does not mean it won't happen in the future.

Every fiat money system *has* failed in the past, though. Our current system of fiat money has been in place for only 80 years. Since being removed from a gold standard, the dollar of today is worth only pennies compared to the dollar of that time.

We accept yearly inflation as if it were the natural order of things. As a matter of course, investment advisors tell their clients that the most basic objective is to at least keep up with inflation!

Apparently, when gold was the standard, inflation wasn't the norm at all. This was news to me. (I'm trying to remember where I read this)...maybe it was a lecture on YouTube.

As I get older, I am realizing the daunting challenge of stepping out of our own skin... away from our own biases and dogmas... and taking an open eyed look at the world (the cosmos even!). This kind of "mission" isn't new... I know that.

We are all soaking in our own BS. Some more than others. Problem is, it is difficult to discern. We don't have BS meters. We can't easily detect our own BS nor can we reliably detect the BS of others! Even if we are convinced that our opinions deserve scrutiny and suspicion, how can we address this if we can't even find our problematic biases? It's like being told that you have an enemy, but have no information on the nature or location of that enemy!

Science is the best system we have for detecting BS. Economics is not a science, though. It's more like sociology which is also not a science (although some sociologists like to claim that it is).

We have a special word for those kinds of sciences: soft-science... which isn't science at all

That is why we remain somewhat in the wild, wild, west of opinions and philosophy when it comes to economics (and sociology/psychology, etc.). In these areas, we are all vulnerable to charismatics, friends,popularity of ideas, and the things we learn from random books.

Physics, chemistry, biology.. they don't suffer nearly that much confusion or differences of opinion. The ideas of fools are very quickly and efficiently exposed.

It'd be nice to have this same sort of filter in personal finance!

Actually, there is much confusion and argument in the sciences, and always has been. Just bring up the words "dark matter" to a group of physicists! By its very definition science is always evolving - quite a few of the 'facts' grade school teachers relied upon in my youth have been found to be in error. That's why digital textbooks are a huge step forward, because they can be revised more easily.

>>Our current system of fiat money has been in place for only 80 years.>>

People forget, but there was a huge change initiated by President Nixon in 1971 when he refused to allow French President De Gaulle to continue making the US redeem US Trade dollars in gold, which De Gaulle had been forcing the US to do since 1968. It was this refusal to redeem the dollar in gold that led to the 1973 agreement to allow world currencies to 'float' against once another without being backed by gold.

Far more importantly than the change in law that allowed individual investors in the US to buy gold, was the enabling of currency speculation on global exchanges created by allowing this float to happen in response to market pressures rather than rigid government fiat. This is one of the issues many governments, not just the US, have with China - they deliberately undervalue the yuan to make their exports cheaper. A fair valuation on the yuan is estimated to be at least 25% higher than its current exchange rate.

Getting back to the gold/dollar history lesson, gold rose quickly after the float was created, and the dollar lost 25% of its value by 1978 due to US deficits. Federal Reserve head Paul Volker, a hard-liner against inflation, focused on controlling the money supply instead of controlling interest rates (which peaked at 20% Prime in 1981). Gold rose to what was then a record high of $850 in January 1980.

By 1981 gold had retreated to $460 and investors went back into the US dollar. Gold prices remained low until the 9/11 and US War on Terror, when it finally climbed back up to $416 in December 2003.

Just for benchmarks, it was not until Dec 2005 that gold got above $500, and it took until Oct 2007 before it rose past $749.

IOW, the rise in gold has once again been meteoric. And history tells us continually that what goes up, especially when it goes up very fast, eventually crashes and burns. It does not tell us when, and I'm certainly not good enough to predict such. But I've been around investing long enough to be reluctant to buy heavily into anything touted as the next "you have to have it!" item, no matter how bright and shiny and pretty it is.

Ole Joyful, a wonderful contributor to this forum, is a firm believer in Canadian bank stocks. There was an article today that touted them as 'must haves' for one's portfolio - which tells me that like gold, it's yet another "you should have done this last year" tip. Hindsight is always a perfect 20-20, but it's what's in the crystal ball looking forward that's important - and that, of course, is where the many dissenting opinions come in.

Regarding all matters relating to "gold/commodities/stocks", I doubt my own opinions.

Relating to hard science (natural sciences) as compared to the soft sciences, I maintain a rather certain confidence in my view.

If we must resort to the rarified extreme theories such as "dark matter" to find our controversies in a science, that speaks volumes.

Social sciences (economics, sociology, psych, etc.) are controversial from the very first sentence regardless of the text you select. The very fundamentals are in question from the word "go". There are entirely different "schools of thought" which require entirely different textbooks.

Hard sciences don't compare to this level of confusion.

Soft sciences would be beside themselves with joy if their confusions were found only in some fringe "uncertainty principle" of physics.

Here is a clip of Richard Feynman speaking to this issue:
http://www.youtube.com/watch?v=_EZcpTTjjXY

Even though he is casting suspicion on the soft sciences, I think he is far too generous!

I work very closely with psychologists and various mental health experts.

tip: Never confuse these professionals with scientists.

Back to gold:
Our situation is easily argued to be more extreme than that which we saw in 1980. If the price of gold were to react in sync with the conditions of *those* times, we'd be at $2,000 for an ounce. If it were in sync with THESE times, it could go far higher.

So, I don't see how one could argue that potential investors have missed the boat on precious metals. (granted, they have gone up a lot in the past 7 years)

I don't know, though. No one does.

It isn't science.

>>If the price of gold were to react in sync with the conditions of *those* times, we'd be at $2,000 for an ounce. If it were in sync with THESE times, it could go far higher. >>

Exactly. Which in itself tells you something, from a historical context. It's fear that drives small investors into it, whereas government purchases, for example, such as India's, are for specific reasons of diversification.

My diversification into commodities, as a small investor, would not have the same goal and timing as a large investor. Im currently having a similar discussion on another finance forum, with someone who recommended "liquidating everything and buying silver, as its sure to go up with gold."

I certainly agree that commodities can play a part in a diversified portfolio. I dont agree with taking that to the extreme, as some do - not you, bkelton, but some folks do veer off in strange directions, such as the the guy who started the recent thread about putting a lien on his own home!

The trouble with anonymous forums is that the smart folks know to take the advice for what it can be worth sometimes valuable, very often not. But many are not quite so savvy, and when it comes to investing, that is very dangerous.

For example, at yet a third forum I participate in, one person posted the following:
"one client was a mall owner. He told me if I was ever to invest, invest in three things...FOOD..everyone eats...CARS..of the future...(he told me this in the 80's and he said.. only if people knew whats out there)..and CLOTHES..textiles...everyone is wearing something on their back..."

Others began to comment how smart that was, and such sound advice that made a lot of sense.

Well, yes, it sounds folksy and wise, but consider what might have happened if youd invested in some of the following:
1) Lucky grocery store stock: at $35 in 2002, it fell to $18 in less than a year. In Sept 2005 when Albertsons (which bought Lucky in a failed attempt to grow larger) broke up the stores into regions and sold the CA stores to SuperValu, the stock price was $21. As of today, 11/16/2009, the stock price of SuperValu languishes at less than $17.

2) GM and Chrysler bondholders well, we know how that turned out!

3) Federated/Macys staggering under LBO debt, theyve closed several chains but the stock price is in the dumps, and their bonds are now rated barely above junk level.

Obviously, these fit those folksy parameters, but wouldnt have made any money unless you were sophisticated enough to short them.

I really try to be careful about what I say in these public forums because so many people are not educated investors. They are looking for the quick and easy, set and forget investing mantra that doesnt exist. I think you and I are having a very interesting and thoughtful discussion, but weve probably lost most of the audience along the way.

And no, I would never confuse soft sciences with hard sciences, LOL. However, I'm not sure why you think 'dark matter' is not a controversial subject, since it's one of the main reasons for the Hadron Collider being built at a cost of 330M Euros and counting. Like string theory, they are fascinating theories that have yet to be confirmed, but that doesnt mean they wont be proven true. The dichotomy between Einsteins theory of relativity and quantum physics has yet to be resolved, and until it is, our understanding of how the universe works remains woefully incomplete.

Gold -- it's heavy so you can't wear a whole lot of it, can't EAT it and it's hard to trade without an infrastructure to enable trading. Hardly my idea of an "end of society as we know it " commodity. Fear drives people into strange choices and I prefer to avoid fads. The very fact that every other advertisement you see on TV and in the papers touts gold as an "investment" raises red flags for me ... call me practical? Stocks can be tricky as well, but with a bit of due diligence a person of average intellect can wade through the available data and come up with an informed choice. You can't eat stock either, but you're effectively betting on the human enterprise and the urge to succeed -- so I trust in that choice.

jkom,

Oh, I agree that "dark matter" might be a contentious topic, but the fact that physicists must resort to such rarefied theories to find their points of departure reveals how very tight their science is.

You don't have to look nearly as far to find difference of opinion...and it's all opinion... in the soft sciences.

Gold took another amazing upward leap... gosh darn it... I have been looking for the predicted "sell off" for a few months now.

I'm mostly out of stocks (unfortunately) and gold (unfortunately!)... darn my market timing!

"one client was a mall owner. He told me if I was ever to invest, invest in three things...FOOD..everyone eats...CARS..of the future...(he told me this in the 80's and he said.. only if people knew whats out there)..and CLOTHES..textiles...everyone is wearing something on their back..."

I like that philosophy. Mine is retirement homes, drugs for seniors, entertainment and gas and oil exploration.

Heck, we've all had 'bad timing' decisions. Like having 'bad hair days', LOL.

Could be worse, you could be a pro and have made a bonehead decision like the guy I heard about. I think he is the head of the investing committee for the University of Chicago endowment fund - a huge, private, expensive university with a gorgeous tree-lined campus smack in the middle of the worst ghetto in Chicago. He panicked and sold the Fund out of equities in March 2009...which we now know was the bottom of the Great Recession market, so far. Wonder if he still has a job or is one of the newly unemployed?!?

As I said in my Nov 10th posting, there are people I know who have all the mental smarts and technical knowledge, yet possess such poor investing instincts that it undoes them, every time. Our friend has a huge blind spot and a lot of stubborn pride that makes him unable to admit he is one of the worst investors I have ever known. He needs an advisor but is too cheap to find one, even one who works hourly. He and his wife continue to make ends meet by cutting down their expenses, yet we know for a fact they could have had a really comfortable life if they had just done three or four things differently.

He gathered up some old gold when it was in the $930 range and sold it for cash. But he'd have made a lot more if he had stayed in equities and then sold in Sept/Oct, the way we did. The basic advice of buy low, sell high, still works in any asset category, but often it requires ignoring what the vast majority is doing, something that is not easy for people.

Sometimes that 'gut' decision is just fear reaction, and not necessarily a smart move.