2010-05-09

save my portfolio

Will somebody please tell me why this guy is wrong?



Whenever I hear him talk about the fiat monetary system heading for the tubes, I get this incredibly strong urge to go buy more gold. I think I could use some balance in my perspective! What's the best fundamental, rational argument for why we're not headed for rampant hyperinflation?

1 comment:

  1. I don't really think he's wrong, but:

    1. Hyperinflation is only one of many things to worry about. What about the risk that we find a plentiful gold mine?

    2. You are clearly exposed to inflation risk if you hold cash, but if you hold mostly a mixture of a domestic and foreign stocks the story is much less clear. If you owe money on a house, inflation is probably good for you.

    3. Gold isn't the only inflation hedge. Other candidates are other commodities (some of which derive their value from more intrinsic properties), foreign currencies (especially those of commodity-exporting countries whose banks hold gold, like Canada and Australia), and of course TIPS.

    I think the main reason to hold gold isn't as an inflation hedge, but more to avoid investment risk. But then, if the financial system falls apart to the point that only the gold in your closet has value, it's probably more important to have canned food and a gun.

    I personally can't stomach buying a gun, so I haven't bothered to keep any gold at home either. The dog would probably eat it anyway.

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