It's a famous story but worth retelling:
People watching late night television are no doubt running across advertisements from the likes of Goldline, Monex, and even an ad featuring bankrupt rapper MC Hammer and Ed McMahon pitching his gold hip replacement.
These commercials have prompted TechTicker and others to wonder whether the price of gold is near a top? Are these similar to the late night "get rich through real estate" infomercials and the vintage 2006 "Suzanne Researched This" ad that preceded the housing crash?
A couple observations. First, Cash4Gold wants to purchase your gold, not sell you any gold.
Next, get rich through real estate ads were running for many years (even over a decade in some cases) prior to the housing crash. I personally remember my cousin telling me about Carleton Sheets and his get rich through real estate infomercials in the early 1990s (Carleton's own website says he's been doing it sine 1983). So my point here is not to dispute that the ads evidence the fact that gold is moving further into the general public's consciousness. It's just unclear what timing conclusions we can draw from this development.
Gold has had quite a run during the past decade to its current price level. However -- and I'm working on finding an exact figure here -- a large number of investors do not hold any gold in their portfolios at present.
If the average portfolio simply allocated just 5-10% to gold the upward lift this would provide to the price of gold could be dramatic.
Joseph P. Kennedy, patriarch of the Kennedy dynasty, famously shorted the stock market right before the 1929 crash. He said that it was after receiving a stock tip from a shoe-shine boy that he knew it was time to sell. He took the fact that a shoe-shine boy was actively playing the market as a sign that speculation had become too widespread and that a crash was imminent.
These commercials have prompted TechTicker and others to wonder whether the price of gold is near a top? Are these similar to the late night "get rich through real estate" infomercials and the vintage 2006 "Suzanne Researched This" ad that preceded the housing crash?
A couple observations. First, Cash4Gold wants to purchase your gold, not sell you any gold.
Next, get rich through real estate ads were running for many years (even over a decade in some cases) prior to the housing crash. I personally remember my cousin telling me about Carleton Sheets and his get rich through real estate infomercials in the early 1990s (Carleton's own website says he's been doing it sine 1983). So my point here is not to dispute that the ads evidence the fact that gold is moving further into the general public's consciousness. It's just unclear what timing conclusions we can draw from this development.
Gold has had quite a run during the past decade to its current price level. However -- and I'm working on finding an exact figure here -- a large number of investors do not hold any gold in their portfolios at present.
If the average portfolio simply allocated just 5-10% to gold the upward lift this would provide to the price of gold could be dramatic.
totally agreed. I'm no buyer of gold myself, the stuff irks me because it's yield is negative (storage) and i think there's more attractively valued hard-assets out there (often with positive carry) but i could see this thing really going parabolic.
ReplyDeletePeople always think about their home-country monetary situation when thinking about buying gold, but I think it's interesting to look at it from a global perspective. Forget how many US investors own gold-related assets in their portfolios. How about Indians accumulating bangles, Chinese / Vietnamese buying physical pieces. Central banks accumulating the stuff, etc. Remember how the IMF sold that big chunk of metal to the Indian CB last year? The price rise is clearly not just speculative demand from trend chasers, there's a lot of newly wealthy people in the emerging markets that have been burned by devaluations enough times. No rich person born before 1960 in Mexico hold their wealth in bonds. They've been burned too many times. They buy hard assets (esp. property & metals). I imagine Mexicans aren't alone in that way of thinking.
That said, I will be terrified (and probably buying bear-spreads hand over fist) the day I see people flipping gold on TV or hear a story about someone I know knowing someone that's buying gold coins on their credit card and flipping them before their payment is due.