Where was your Money in 2008?

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2008 is now in the rear-view mirror, with virtually every investor shouting “Good riddance!” and praying for a better year to come. Forget about making money, just keeping your head above water was an accomplishment over the past twelve months.

Consider the statistics (12/31/07 vs. 12/31/08):

Housing – down 18% nationally, by the Case Shiller index, and 30% or more in most major metropolitan areas.

Domestic stocks? Nope. The Dow Jones Industrial Average – down 33%; Dow Utilities – down 30%; Dow Transports – down 21%. S&P 500 – down 38%. NASDAQ – down 40%. And if you were unfortunate enough to have invested in a financial-sector ETF, you lost at least 55%.

Foreign stocks? The Vanguard Emerging Markets Fund, a typical example, came in at minus 55%.

Bonds didn’t fare well, either, with the yield on 10-year Treasuries dropping 42%, and 30-year T-Bonds off 38%.

Energy. Uh-oh. Crude oil – down 59%. Natural gas – down 37%.

Industrial metals took a whacking, with copper down 55%, nickel 56%, and aluminum 37%.

Food did a little better than most, which isn’t saying a whole lot. Corn – down 17%; wheat – down 24%; live cattle – down 15%.

Enough. You get the idea. Every asset was mired firmly in the red in 2008, right?

Actually, no. The single exception was gold, which was up 5.6%. A modest gain in most times, but a phenomenal performance for a year where everything else tanked.

And if you managed to invest something other than U.S. dollars in the metal, you did even better. Gold rose 12% in euros, 32% in Canadian or Australian dollars, and a whopping 44% in British pounds.

Nor is this an isolated phenomenon. In 2008, gold posted its eighth straight yearly advance. Since the beginning of 2001, it has averaged a better than 16% annual gain vs. the U.S. dollar, 11% vs. the euro, and 17% vs. sterling.

Your financial advisor likely tells you to invest in the stock market and be patient, because over the long haul stocks will yield an average yearly return of 9-10%. Well, maybe so. But it sure depends on how generous your time frame is.

Over the past eight years, gold has added 215% (in U.S. dollars). During the same period, the S&P 500 lost 22%. The DJIA? Down 11%. In order to show a profit with a simple buy-and-hold strategy (ignoring all rallies and dips), you’d have to go back to early 1999 for the Dow, and 1997 for the S&P!

Where was your money in 2008? Or ’07? Or…?

If you’re a BIG GOLD subscriber, a significant portion of your portfolio was in physical gold and paper proxies tied to the gold price.

Yes, the gold-producing companies that we follow in BIG GOLD did poorly in 2008, as the frenzied stock sell-off spared neither market nor sector, across the globe. But we held on through the storm, and the miners have rebounded sharply in the past month. We expect that they will be stellar performers in 2009, as the coming inflation that’s baked into the American economic cake begins to break out.

And despite the turmoil of ’08, our readers always had something to cushion the blow. Gold. We advised buying it and taking it into their physical possession. When a severe shortage of coins and small bullion bars developed in the second half of the year and premiums skyrocketed, we showed subscribers where to buy at the lowest possible markup. For those with sufficient means, we provided detailed instructions for purchasing 100-oz. gold bars on the New York Comex.

2008 was a rough year, for everyone. But it’s gone, and if you held gold and its proxies, you did better than most.

Doug Hornig
for The Daily Reckoning Australia

Doug Hornig
Doug Hornig is a senior editor for Casey Research, publishers of Doug Casey's International Speculator... for over 27 years providing investors with unbiased and carefully researched recommendations for high-quality gold and other natural resource stocks with the very real opportunity for a 100% or better gain within a 12-month horizon. Hornig also writes the Daily Resource, a daily column that appears on the KitcoCasey and Casey Research web sites.
Doug Hornig

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Brian
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“Bonds didn’t fare well, either, with the yield on 10-year Treasuries dropping 42%, and 30-year T-Bonds off 38%.”

If yields fell, doesn’t that mean prices have risen since yields move inversely to prices? So you would have made money by buying government bonds while yields were high and selling them after they dropped.

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