Loading ...Regardless, gold seems to going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.
Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.
Then there are other asset classes. U.S stocks are up 167 percent over the last 5 years. China’s stock market, despite the recent 20 percent drop, is still up almost 10 percent for the year, and it has been on fire the last 2 years.
Each of these is a possible explanation for the lack of response to the Greek crisis. Perhaps a default to the International Monetary Fund is no big deal, and gold has no reason to rally.
What once seemed like a snarky and amusing idea just looks cruel today.
Gold teaches the careful observer many lessons — about narratives, emotion, managing positions, leverage, one-way, can’t miss trades, the efficiency of markets, and story-tellers with product for sale. This is why you should never ever drink the Kool-Aid.
Astute traders ignore these lessons at their own risk.
To contact the author on this story:
Barry L Ritholtz at britholtz3@bloomberg.net