Sunday, July 31, 2011


One of my more spectacularly bad calls over the past year has been my insistence of Gold as a terrible investment idea. Gold has obliged me by increasing by 30%.

But let me be more specific. I "get" the insistence to hold PHYSICAL GOLD as some sort of inflation hedge. I may even understand the "gotterdamerung" notion that gold will hold its value given a massive and sudden decline in Western Civilization. (my objections still hold in these cases...I would rather hold ammunition than gold, as the former will be far more important and valuable given bellum omnium contra omnes, to say nothing about its heavy weight and uselessness for anything but an obvious signal that you hold a wealthy object)

However, what I have trouble understanding is the misguided trust in various financial vehicles (be they futures, ETF's or the bouque of instruments invented by clever non-fiduciaries that tie their "value" to gold prices, and hold some "promise" of delivery of physical gold given certain conditions)

This bubble is going to end in tears for many folks who thought they had some claim to deliverable physical gold. It will only take one large player to squeeze the supply if he/she demands delivery. A delay or failure will occur. Then, dear readers, and it will be a mad scramble for the exits of these financial vehicles.

But then again, I have been wrong about this before...

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