“Gold is saying something,” writes Bloomberg columnist Mark Gilbert.
What’s it saying? Nobody knows. Well, at least nobody who works at The Daily Reckoning. We listen. We hear. But we still don’t know what the hell gold is talking about. The yellow metal is speaking in riddles.
Yesterday, gold spoke again. It rose $4 to a new record high of $1,296. Tomorrow, it will probably hit yet another record – possibly over $1,300.
In the conventional wisdom, gold is telling us to watch out. Inflation is coming. Either the regular kind…the kind that comes with “growth”…or the kind that comes with the “hyper” modifier. Almost everyone likes the regular kind. Almost no one likes the hyper kind.
But being the contrary coots that we are, we’re inclined to think that there will be many a slip between the cup of $1,300 gold and the puckered lips of gently rising inflation levels.
Watch out, dear reader, watch out.
Not that we’re dissing gold or sassing the goldbugs. Not at all. We think it’s going to $1,500…and then to $3,000. But next week?
Don’t know. We have to keep listening…trying to interpret the whispers.
There’s something all together too obvious and too easy about the gold market now. It just goes up. Year after year. Maybe it’s a trap.
In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.
In 2001, the War on Terror began. And guess what? Gold went up again.
And again in 2002. And 2003. And 2004.
By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.
In 2006, the US had a major housing bubble on its hands. Gold went up.
In 2007, the housing bubble started to lose air. Gold went up.
In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending…and gold went up.
In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.
And what’s this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a “depression”)…and go figure. Gold is still going up.
Is there anything that can stop gold from going up?
We don’t know. But many smart people are coming to the conclusion that they can’t lose with gold. If the economy recovers…gold is a cinch to go up along with inflation. If the economy falters…gold will go up when the Fed comes to the rescue with more printing press money.
And then, there are the Chinese. God knows they like gold. And they don’t have much of it. If they’re behind this gold market it could last for another 20 years (see below).
So gold is a “can’t lose” investment.
We like gold. But we don’t like “can’t lose” investments. What to do? More below…
How we wish we had more thoughts!
We’re down here in Florida…overlooking the choppy Atlantic Ocean. The sky is gray. The wind is pushing the palm leaves up against our condo. The waves break …the sea is white…and green… This is not a place for thoughts…
Delray Beach seems a little slow. Then again, it is off-season.
But wherever we go we ask ourselves… what do people do here? What do they think? What do they want?
Along Atlantic Ave. they seem to want to sit in cafes and drink coffee. There are the old people…broken down by time and worry. And there are the young, tanned and toned…from surfing…running on the beach…and lifting weights.
The young probably want a life…but what do the older people want? We see couples sitting together…sometimes walking along, hand in hand. What are they looking for? Some time together…a cozy, soft life after a career of hard work? Do they want to relax? Enjoy life?
Maybe… But what we see is people looking for something to do with their time…with their thoughts…and with their lives.
A man of 55 can reasonably expect to live another 20 years. What is he going to do? Come down here. Get a motorcycle. Ride up Atlantic Ave. and stop for a coke? Or a beer? Go to the sports bar and watch a game? Make plans to get together for a barbecue on the weekend?
There is an air of empty desperation about the place. Of people who don’t quite know what to do with themselves…except decorate their houses…have coffee…talk…talk…talk.
What do they talk about? Their children? Their lawn maintenance crew? Their hairstylists? Kant…and objective correlatives? Or housing prices?
Sociologists and other quacks have probably noticed. They’ve probably written papers on it…on what happens to people after they’ve cut themselves off from work…and the responsibilities of family.
In the extended families of yesteryear, there was always work to do… It never stopped. Gardens needed to be tended. Meals had to be prepared. Animals had to be fed. Children needed to be minded…taught…and prepared for the world. The work provided an easy answer to the eternal question: what am I supposed to do?
But in a life of leisure…what are you supposed to do? What is the purpose of it…only idle entertainment?
Perhaps, people down here cling to the beach the way an old priest clings to the cross. It gives meaning…sense…to their lives. It signals that they are on vacation – permanently. They don’t have to answer the question at all. What am I supposed to do? Nothing. I’m on vacation.
for The Daily Reckoning Australia