Saturday, August 4, 2012
There are a lot of questions plaguing the gold investor at the moment: Why is gold mired at 1600? Why is gold acting as a risk asset? Why is gold not reacting to the massive central bank money printing? When will this correction ever end?
All of these are reasonable questions. At the same time all of these questions are myopic.
In any type of investing big-picture long-term vision is the paramount virtue required for success.
This is why you get old value investing stock guys on the financial networks who are always finding reasons to invest in the stock market. Their attitudes are absolutely correct. The only question is: are they seeing the future, or are they looking for a future that echoes the past?
The most difficult thing to acknowledge in a society built on institutions (every society) is that those institutions are fundamentally unsustainable.
Unfortunately their are several fundamental institutional pillars of the modern politcal economy that are clearly unsustainable.
A) a global banking system that exists to promote growth through debt, sucks capital out of the global economy, and is too big to fail, restructure, or prosecute.
B) a global debt load far too big to allow any possibility of further growth - except illusory growth through inflation.
B) a political system that is far too weak to confront the banking problem - and far too dependent on the debt created by its central bank to care.
C) a population that is rapidly losing faith in the banking and political system, yet also entirely dependent on the debt-funded entitlements.
If this is what you see, all short term considerations for buying, trading, timing gold are irrelevant. Just keep accumulating gold, because currencies issued by unsustainable institutions will fail,
If this is not what you see, don't buy gold at all. Buy stock in the above mentioned institutions.