All that glitters is not gold

sdgoldI have used the above title for this article because glitter for me represents the financial press. Not all of the press but certainly as far as I am concerned, a large percentage falls into this category. Too many times one can discern that one article is simply a re-write of other journalist’s efforts and this snowballs until the casual reader believes that if so many writers have this same opinion then it must be true. However as the song goes “It aint necessarily so”. It is important to establish from your own research and reading which journalists and publications can be trusted for their commentaries. This is a matter of time and experience and experience will always be the steady dividend payer in the game of investment.

Experience will show you how to profit from variations from the probable. For example we all know that all funds do not move one way together but that all funds in a certain group will move up together in certain markets and down together in other market conditions. It does not take the might of the financial press to flood us with this information, but yet it does. This is what I call “glitter” and you should learn how to filter this noise out. What we would like to know is when a fund does not perform in the same manner as its group members. Especially if it is an out- performance. An example of that in the last year might be the Legg Mason Japanese equity fund which out-performed even the good performances of the rest of the Japanese Equity fund group. It would have been nice to see a reasoned article, early in this success story, and not in a blizzard of paper after the event.

A person can have great mathematical ability and unusual powers of accurate observation and yet fail with his investments unless he also possesses the experience and the memory. Then, like the physician who keeps up with the advances of medical science, the wise investor never ceases to study general conditions that are likely to affect or influence the course of the markets. Today this condition would be the troubles in the Middle East and in particular Syria. Therefore it is necessary for the investor to build up a portfolio of writers and journalists who do not “glitter” but instead, offer reasoned and researched opinions that you can trust. Good luck with that.

Gold drops below $1400/oz

In the last six months there has been an avalanche of advice from the financial industry telling you, as the private investor, to hold some gold in your investment portfolio. If you are one that has followed this, then today you must be feeling a bit sick. During this time the price of gold bullion has dropped by 25%. The argument for holding gold was good. If the financial world was to collapse again, then gold is an insurance against the destruction of paper currency. Even if there were not to be a collapse then the demand for jewellery from the growing Emerging Market populations should cause the price to rise. I do not have any disagreement with these arguments. The question is, just when should you make your purchase?

Why would you buy when the price is falling? How do you know when it will stop? Why would you try to guess the bottom of the market? Last week an acquaintance of mine said he was going to buy because it had fallen so far, surely it could not fall further. Well in the next three days it has fallen a further 10%!  I would suggest that you simply watch the numbers on a graph and stick it out until the price of gold makes a positive upwards move. Leave prophesy to Gypsy`s, members of the Church and Politicians. Better still why not follow the numbers produced by the Saltydog Investor.image