Here at Markets and Money , we do not really care for the hard work of investing…we are too busy watching what’s going on. So, we try to take the sweat out of investing, by reducing it to one investment decision, one time, every 10 years. We call it the “Trade of the Decade”.
At the beginning of the current decade our “Trade of the Decade” was simply to sell the Dow and buy gold. This trade looked like a good one for the first two years of the decade. Then, as the Dow rose from its 2002 low, it looked less good. Now, it’s looking good again.
If you had held onto the Dow stocks you’d be slightly ahead in nominal terms…and slightly behind in real terms. (We haven’t done the calculation…but generally, the stock market has gone nowhere. Subtract inflation, commissions and taxes…and the average investor is probably down substantially.)
Gold, meanwhile, has risen approximately 170%. We feel pretty good about our “Trade of the Decade”. So far. So good.
But the decade is not over. If Richard Russell and the bulls are right, we may regret sticking with gold for the rest of the decade. But what else can we do? Stocks are still expensive. And we doubt that the underlying trends that have pushed up gold to US$700 have fully expressed themselves. The price of the metal was over US$700 – if we recall correctly – the day Ronald Reagan was first sworn in as president, 27 years ago. Then, the dollar – against which gold is measured – was fundamentally much more solid than it is today. Back then, derivatives, the carry trade, private equity and diamond-encrusted skulls had scarcely even been invented.
No, dear reader…there’s no need to get fancy…no need to pay hedge fund managers 2 and 20…no need to increase risk or decrease sleep. We will stick with our “Trade of the Decade” like we stick with our business and our marriage – we want to see what happens next.
Markets and Money