10/05/11 Paris, France – Our first call came in this morning:
“Is this the Battered Goldbug Hotline?”
“Yes…you’ve come to the right place.”
“Thanks…I need help. I’ve been battered by the nasty gold market.”
“You poor thing…go ahead…spill it out…here at BGH, we’re ready to help.”
“Well, I bought gold about 5 years ago. It was at $700. Then, it went up every year…year after year. I made a lot more money than all my friends. My stupid brother-in-law bought the banking sector instead. What an idiot.”
“Go on…”
“Well, the price went up and up…and I thought it was going to hit $2,500. I mean, it would have to get to $2,500 just to equal the rise in the ’70s. And we all know that things are much worse than they were then. But instead…sniff, sniff…it fell! I couldn’t believe it. And when I checked yesterday, it was down to just $1,616. And maybe it will head down now…and keep going down. I feel very battered. What can I do?”
“Wait a minute…haven’t you more than doubled your money, from $700 to $1,600. What’s wrong with a 100% gain?”
“Well, nothing, but I thought it was going to $2,500.”
“What would you have done if it had hit $2,500?”
“Well, I guess I would have waited for it to go up some more. I would have held onto it. I’m a long-term investor.”
“But you’re holding onto to now, right?”
“Well, now I don’t know. It looks like it might be going down.”
“You mean, you would hold at $2,500 but sell at $1,600?”
“Well, yes…”
“Then, do me a favor. Call your brother-in-law. Tell him he’s talking to a moron. You’re supposed to sell high, and buy low…not the other way around. Click.”
And you, dear reader, do you have a question about gold? Would you like some advice? Do you feel battered? Just call our Battered Goldbug Hotline. Another helpful service brought to you by The Daily Reckoning. (Calls will be billed at $1 a second…and we will put you on hold while we read the newspaper. Check your personal horoscope. And have a glass of wine.)
Regards,
Bill Bonner,
for The Daily Reckoning
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 The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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BB, this is all fine but the article might not make much sense to 99.9% of the world’s population. It does make some sense to me, because I can understand what you might be saying based on your previous articles and some of your books that I’ve read.
Simply, there are more things to be considered: what about those that bought at $1800, what about those that would want to buy now (is $1600 a good price?), how long should those that bought at $700 hold?; you said that you’d still advise people to buy even at $1800 which is the “fair” price. “Fair” using what measure? Buying at $350 was easily justifiable, because you could say that in 5-10 years it will be worth much more than that in dollars. What are the reasons why one should buy at $1800 or at $1600, or at $1100 if it ever gets that low?
Bottom line: I think it’s always better to simply state what’s on your mind, including the unescapable doubts and uncertainties. This would make much more sense for both informed and less informed readers.
Your use of logic and reasoning astounds me!! Wish more people in power had that. Thanks for using a dialog format to point out the fallacy in reasoning that even clever people can easily make. Keep up the great work. I am a big fan
Ah, the best part was left completely out of this story! The part where the guy decides to liquidate his 401-k at an enormous loss, then gets a tax penalty in spite of the loss. And when this isn’t enough, he borrows as much as he can, all those teaser checks from Chase and Citi, –he cashes every single one of them to buy more gold at $1915. And when even that isn’t enough, he sells off his wife’s late model BMW and replaces it with a 2002 Chrysler Sebring and plows that into silver at $43, then he pulls his kids out of private school and send them to the public institute of illiteracy in order to free up more cash for gold…,, And when even that’s not enough, he heads to the blood bank to sell of his plasma, then gets the great idea to sell off his plasma TV while he’s at it…,, And and and.. and then the market falls! We’ll know the interim bottom is in when someone jumps off a building in despair.
@Bruce Walker:
What you’re describing would be a very rare case. Gold is underowned (by some estimates, 0.75% of assets are in gold) and most developed-world people are looking for ways to get rid of their gold (usually inherited in the form of rusty trinkets) to pay their debts, or buy new gadgets. Also, putting all of your assets in gold is extremely irrational and the sign of the final stages of a bull run. Since we’re not there (few want to own it), the person you’re describing must be mad. Then again, depending on where you live, you might be tempted (advised) to put more than Mauldin’s “insurance” target of 5% in gold.
I wish I was smart so that I would know just what to do with that gold I got a long time ago ad just let it set there. It went over $1,900 an .oz and I just sat there. Then it started down and I just sat there. I’ll probably just sit here until it reaches another bottom and then I’ll buy some more and just let it set there. Maybe it will go up to $5,000 some day and I might sell it, or I might just let it set there until it goes up to $10,000…or maybe not. Should I have bought silver instead…or maybe oil for its stability? …or maybe a ranch in Argentina and some cows…or grow grapes maybe. What are Elizabeth and the Kids doing now, Bill? Why don’t you let Maria star in commercials for The Daily Reckoning or your Family Investment Fund? She would fit right in with all the pretty young women on TV giving the daily financial reports and investment advice. She would be a natural and probably make a lot of money and be famous and write books on how to get rich in the stock market. Just imagine her saying, “When Bill Bonner speaks, Everybody Listens!” or “We earn our money the old fashioned way. We EARN it!” Frankly, we’re all tired of the gloomy old stock market. We want to hear how we, too, can get a 153% return on our investments starting with only a few dollars and following the secret methods you are willing to share with us if we will only subscribe to your top secret newsletters and a bunch of valuable reports compiled by the most respected research team ever assembled. Bill, if you weren’t so honest, you would probably be rich.
OK, how about this:
1, America should not borrow another dime.
2. Print enough money to pay off all debts.
3. Raise taxes to prevent inflation and bleed off the excess money.
4. Start over with a new economy with more prudent regulations and ethical behavior.
5. Thank Heaven for our economic salvation and start living right.
6. Live Happy ever after.
(This makes as much sense as anything else that is being said today.)
What about the river of debts, increasing borrowing by every second, escalating expenditure. Recent sentiment seems to have wiped all these from the hazy doubtful economy. An electronic engineer has been engaged to fix up the debt clock to run in anti clockwise directon? So that in future everyone may witness morning sun to rise from the west? Genuine
but no counterfeit fallacies!
Laden with mountain of debts, my 3rd channel tells me that is one-way super highway to Bank of Hell when a policy of deflation is pursued. Still, the slim bet will be walking on thin ice to get the printer upgraded. The psychologic strategy remains, to be out of the wood with the slimmest chance instead of being trapped in the great debt predicament, perennially.
Here we go with the crying! When ur “quick on the trigger!”it does’nt matter which way G@S goes but 4 all those in doubt? S looks likes its gonna firm up around 24 give or take a few,an G looks like it’s firmed up round that 1527 area already. U know the metals have had a parabolic move 2 the up-side,for yrs now did anybody here,ever hear of a “natural pull-back?” Hey!I’d like 2c G @1007 4 all yous who came late 2 the party.”But watt do i know? As always,Happy Trails 2 all… *S* P.S. BB i luv that 1$ a 2nd gig, watt a concept! Just give them some”Hip”-notic tunes 2 listen 2 while there waitin. And they’ll b as happy as a “Lark” 2 fork over!!!
Fred
Wouldn’t raising taxes to bleed off the excess money printed be a taxpayer bailout,,, same as their doing now?
You can buy green paper that pays no interest and has fallen in value every year since 1913. You can spend it or you can buy gold as protection against inflation. Cheaper prices means you get more gold.
the dr. laura of gold bugs!
<3
Who is dr. laura?
Bill is one of best writers ever as to economics because he makes you think and presents it in an entertaining way. I love it!
I came here over a decade ago because of that IDIOT Clark Howard. Everyday telling people not to “buy low and sell high” because “you can’t make $ that way”.
I’m not the brightest bulb in the chain, but I know enough to be suspicious.
I had only been in the stock market once pior to hearing Howard’s advice and since, but I bought low and sold high. I made money, not lots, but $.
If you can buy cows for a penny and sell them in 24 hours for a dollar….will you not make money? It would appear the same could be done with stocks?…..despite the taxes.
Oh, that was you I spoke to on the phone Bill? Is my face red. I thought it was a new government sponsored department. I just wanted to test out the advice our tax dollars were paying for.
…”…of course if she didn’t say she “sold” her gold at 1600 and now it’s at 3500, her creditors would be suing her for the funds owed them on her lousy real estate investments etc etc…”…DR KRYSTOL BALLS…
“Who is dr. laura?”
a radio talk show counsellor. people call in with their horrible convoluted moral problems and she berates them at length about how their lack of morality got them into their mess. sort of a jewish right-wing moral dominatrix.
Oh.
Bill- would it be any use my ringing the gold bug line to ask why people are STILL rushing to lose money by buying T-bonds ?
Whenever I’m feeling down, I read Bill’s posts and laugh out loud at our foibles. “Lord, what fools these mortals be.” Heaven knows, I’m one of them.