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Good Morning Friends,
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today is Monday November 23, 2009
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Have you hugged your gold bar today? Well, I am not going to lie to you. I like gold and I like the idea of owning it. Except, I do not actually own any physical gold, maybe just a tiny bit in one of my rings or something like that. But, I do have some gold in my stock portfolio so that makes things a bit more exciting for me.
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I had a goodly portion of gold in my portfolio last year, but I sold half of it when gold peaked. But, I did keep some like I said for insurances purposes. And, it looks like that was a pretty good move since the price of gold is rising steadily. I think holding a portion of gold in one's portfolio makes a lot of sense. Now, you cannot really do anything with gold since it does not pay dividends or anything like that. But, what it does is it gives your ego a boost. And, anything that can make you feel better cannot be a bad thing at all.
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As of a couple of days ago, gold formed approximately 5.24% of my portfolio. As we speak and looking at the Bloomberg website, gold is currently up just over $ 24.00 on the day. Now, that is certainly a significant move to be sure. And, I notice that Toronto is up as well by over 1%. So, things are looking good ' for the moment. '
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Now, I have been a mutual fund investor for more than 15 years so I know that things go up and things go down. That is just the way markets work. But, I also know that one tends to feel better when things are going up as opposed to when things are going down. And, the experts tell us that when the stock market is in decline it affects our psyche more than when it is going up. So, savour the moment friends because nothing stays the same and there will indeed be the good days and there will also be the inevitable bad days as well. It is just a good thing for me that gold is going up on a Monday, a day which is traditionally a bad day psychologically for me. So, the rising price of gold would be an offsetting event for me on this usually bad day.
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I have not done anything with my portfolio all year long and I have almost fully recovered from the losses of 2008. So, that is a very good thing indeed. I am quite heavy into cash and this component of my portfolio is paying virtually no returns at all. And, I only have a modest weighting in bonds as well. So, all the action for me has to come out the stock component of the portfolio. And, so far it is doing the job that it was expected to do. Now, the main thing about the current economy is its dual risks. The one risk is that of deflation and that is occurring because of lack of consumer demand. Things are tight and there is lots of unemployment. People are not able to buy the things that they were able to buy before and that is because of their loss of wealth through housing, stocks, and even employment. People are becoming savers as opposed to spenders. So, that is a real risk to a vibrant economy and that is cash -related assets which are returning little or nothing. This is the ' cash is trash ' scenario. The other side of the equation is the potential for a great burst of inflation to develop. This is so because of the amount of liquidity pumped into the system from the central bankers and also from government deficits. The U.S. now has literally, trillion dollar deficits, and this is combined with its ten trillion dollar debt. I am mainly talking about the U.S. economy here as you can see. There are huge debts and deficits, and on going wars to contend with and this affects the value of the U.S. dollar as well. Foreigners do not want to hold these dollars anymore because they are becoming more risky to hold. So, this is the case for the rising price in gold. Not only are gold people expecting possible inflation in the system, but they are also concerned about the value of the U.S. dollar. So, it looks for now that there are very good reasons to hold gold and the main one is that nobody knows what is going to happen going forward. All they see is risk everywhere that they look. That means that it is never a bad idea to hold gold under these kinds of conditions. So, if you own a bar of gold now is the time to hug it and tell that pretty thing that you really do love it.
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Talk to you all later and have a nice day.
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