Long-Term Investing: Gold Versus Stocks

Whew…what a week….! We had a bad cold last week, but we had to keep going.

Half the world’s work is done by people who don’t feel very good, so we soldiered on… We were very busy.

We don’t approve of busy-ness. People who are very busy are usually wasting their time. Or, they are wasting your time. Politicians, for example. They’re on the go day and night – especially at election time. Shaking hands. Appearing at rallies and town hall meetings. Giving interviews. Meeting the voters. Meeting with their staff. Go…go…go… gone!

We would all be better off if they stopped…and thought. A little reflection might help us all.

That’s true of people in business too. Busy-ness feels productive. It feels effective. It looks dynamic and hard-working. But without solid thinking behind it, it is as empty as a whirlwind.

But what are we talking about? What’s this got to do with money?

Well, not much. So let’s move on.

What happened on Friday? Not much. Nothing worth comment.

Gold and stocks both up a little. But so what?

Should you buy stocks? Definitely not. Well, not definitely not. Maybe not. US stocks are likely to underperform over the next 10 years. As we keep saying, they still haven’t yet fulfilled their rendezvous with bear market destiny. When that happens, stock market investors will wish they had their money somewhere else.

Probably the only exceptions are those who take a very, very long-term outlook. Right now, there are some good US companies available at reasonable prices. Altria. Johnson & Johnson. Diamond Offshore Drilling. Today’s price is probably NOT the best price you will ever get. But maybe you don’t care. If you take a long enough perspective, you could be very happy with the kind of returns these companies are likely to deliver. They pay good dividends – and they’re growing. Many US companies are not only US companies. They’re world leaders. With brands that are known all over the globe. Many of these companies are enjoying spectacular growth in their foreign sales.

So, if you’re willing to look far enough into the future…maybe some of these US brand-name companies are worth buying.

Well, what about gold? While US stocks have gone nowhere since 1998, gold has gone up every year. This year it’s up again – 15%. And last week, gold hit record highs on three days.

So, should you buy gold? Again, it depends on what you’re trying to do. Here at Markets and Money, we don’t encourage speculation. So if you buy gold in the hope of making a lot of money, you’re on your own. We don’t recommend it. Gold could go up…or down.

But gold is money. It’s the world’s more reliable money. You could use it to buy stuff during the reign of Caesar Augustus. You can use it to buy stuff now (after converting to paper currency). What’s more, you get about as much stuff per ounce (relatively) now as you did 2,000 years ago.

If you want to save money, save gold. It might go up. It might go down. But it won’t go away.

And more thoughts…

Want to meet a dope? Meet Voltaire.

A week ago, a minister in Florida was going to burn the Koran, making a point of some sort.

Meanwhile, Moslems were threatening to kill the man if he burned their holy book.

Which is where Voltaire entered the discussion.

“I disapprove of what you say, but will defend to the death your right to say it,” said the French philosopher.

Which just goes to show that philosophy is a fraud and Voltaire was an idiot. Philosophy is supposed to make you think. But what thinking person would defend the Florida Bible thumper with his life? If he wants to do some jackass thing, causing other jackasses to want to kill him, what sensible person would step between them? No one.

*** What’s going on in Cuba? Is it abandoning Fidel’s communist model, or not? Here’s the latest news:

HAVANA (AP) – The big economic changes Cuba’s communist leaders have been promising for years appear finally to be happening in earnest – and they will be hard. Cuba on Monday said it is laying off nearly half a million workers, an eye-popping figure in any country, but especially in a nation where the government so totally dominates the economy.

The shift would mean that one-tenth of the island’s 5.1 million-strong work force will be looking for jobs in the private sector by April 2011, a drastic change that could mean a radically altered economic outlook, especially for Cubans in their 20s and 30s who have known nothing but a paternalistic communist system ushered in by Fidel Castro in his 1959 revolution.

The changes are the most dramatic yet in a reform program that began when Raul Castro permanently took over the presidency from his brother in 2008 – but which have sputtered in fits and starts since then.

But they were not entirely surprising. Raul Castro has warned for years that the state could no longer afford to subsidize every part of Cuban life, nor pay workers who contribute little. In April, he floated the idea that up to 1 million workers were superfluous and must go.

While Castro has insisted his reforms are in keeping with socialist ideals, he has sternly told Cubans that they must stop expecting too much from the government, which provides free education and health care and heavily subsidizes housing, transportation and basic food.

Monday’s announcement also said Cuba will overhaul its labor structure and salary systems to emphasize productivity so that workers are “paid according to results.” The labor overhaul comes less than a week after Fidel Castro caused a stir around the globe when he was quoted by visiting American magazine writer Jeffrey Goldberg as saying Cuba’s communist economy no longer works.

Castro later said that while he was not misquoted, his words were misinterpreted – and that he meant to say capitalist reforms could never work in Cuba.

Goldberg said Monday he was surprised by Fidel Castro’s claim, since he has made similar statements in the past. He said economic reforms such as the one announced Monday prove the Cuban government realizes the need for change.

“Not only has he said things like this before, but the on-the-ground reality is that it is a truism that the Cuban model is not working, and that is why they are starting this large-scale experiment with privatization,” Goldberg told reporters.


Bill Bonner,
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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“[P]hilosophy is a fraud….Philosophy is supposed to make you think.” So what about this statement? Is it supposed to make me think or defraud me? Methinks there is a fraud somewhere on this page. If Voltaire actually said the quote you attribute to him, and I am doubtful, he must have meant it rhetorically, because there is no evidence I am aware of that he gave up his life in defense of the freedom of speech. But what are we talking about? What’s this got to do with money? Why is it that the strongest statement on a post ostensibly… Read more »
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