— “Profit Confidential” Column, by Michael Lombardi, CFP, MBA
Not because she is my wife, but my Italian, hot-blooded partner is the type that prefers “six in the hand” as opposed to a “dozen in the bush.” She’s a short-term thinker.
So when I told her in late 2002 and early 2003 that I was going to take her entire retirement savings and put the money into gold-related investments, she didn’t understand my thinking.
These days my wife is a very happy woman. As she drives our children to school and hears on the radio that gold bullion is up $10.00, $15.00, or $20.00 on the day, I quickly get the call. “Gold’s up again today.” Like all investors who are on a winning streak, my wife is suddenly very in-tune with her “gold.”
Not to belittle my wife (we have a great relationship and I see her as a very smart woman), but she has no idea as to why gold is moving up in price. She just likes to get those stock brokerage statements each month in the mail showing her portfolio rising in value. Good for her and good for my other readers who heeded my advice back in 2002 (and ever since) to jump into gold.
But how about those investors who are late to the game? What are they to do? The following are my responses to a few e-mails I recently received from our readers about gold.
“Is it too late to get into the gold bull market?”
My answer is a big NO. I believe that gold prices will defy gravity and move into the $2,000-to-$3,000-per-ounce range quicker than the great majority of analysts could ever expect. We must face the facts: the U.S. dollar is slowly losing its status as the world reserve currency. Gold is the only sensible alternative store of wealth for investors to move their money to.
“Has a gold bubble developed?”
Another big NO. In absolute dollars, gold is up less than 50% today from its 1980’s peak. But the U.S. Consumer Price Index (which measures inflation) is up over 150% during the same 19-year period. I don’t see the bubble. If anything, gold is lagging inflation. A lot of catch-up for gold prices to do here.
“I remember from history the government confiscating gold in 1933 and making it illegal to own. Why would the Fed not do that in these times?”
I do not believe that the government will confiscate gold if it rises sharply in price for the simple reason that investors and U.S citizens are a lot smarter today. The political fallout from any such action would be too much for our government to handle.
Bottom line: it’s not too late to join the gold bull market. I know it may sound crazy, but I’m looking for another 100% to 200% gain in gold bullion prices over the next two to three years.
Michael’s Personal Notes:
The following is an important excerpt from a recent e-mail alert by Bob Appel in his widely popular “The Profit Taker” newsletter. I want you to think very carefully about what Bob is predicting.
“You are unlikely to see $1,000 gold again in your lifetime.”
Think about the ramifications of the above statement should the prediction come to fruition.
Where the Market Stands:
The Dow Jones Industrial Average starts this fine morning 17% higher than it started 2009. Can an investor ask for better than that?
It was very interesting to see world financial markets down sharply on U.S. Thanksgiving when Dubai World said it needed a six-month “reprieve” on the payback of its more than $60.0 billion of debt. I read some many negative new stories on this development over the weekend. But, in the U.S., the markets basically sneezed at the news. If there ever was a market that wanted to defy investor logic and move higher, this is it.
What He Said:
“Investors have been put into an unfair corner. Those that invested in stocks because they got caught in the tech boom (1999) have seen their investments gone. Now, those that have leveraged heavily to play the real estate game, because it is the place to be (2005), could see the same fate as the stock market investors. Thanks again, Mr. Greenspan.” Michael Lombardi in PROFIT CONFIDENTIAL, May 27, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.