The markets are at almost all time highs, the highest since 2007. There is a lot of chatter that we should “do something” especially now that some politicians are threatening the budget process. And that “do something” is to buy gold, commodities or some other alternative investments that thrive through severe financial crashes.
Buying gold or other alternative investments that are outside the mainstream stock and bond asset classes means you are betting that a 2-3 times-a-century financial event is going to happen. That’s a long shot and poor judgment. If you are thinking of buying gold to protect you from a financial collapse, you are practicing market timing and the wager is not in your favor by a long shot.
Look, a major financial collapse is not going to happen any time soon (Even the horrific 2008 crash lasted from September 2008-March 2009). Here’s why: The politicians will not cause it (all parties always agree that they do not want the whatever the next budget or fiscal catastrophe to happen and least of all, they don’t want to be blamed (all of the chatter about the fiscal cliff when people were doing all kinds of crazy things to protect themselves and looked what happened since December 31, 2012. In the first six weeks of 2013, the stock market has been tremendous, six straight weeks of positives, the last time this happened was in 1971). The facts are that the voters want their incumbents, politicians want to get re-elected, the dems want entitlements in place and the reps don’t want taxes raised. The real kicker is that both voters and politicians don’t want to take responsibility. IMO, the market knows this and the reason why it keeps rising even as the next fiscal crisis approaches in DC. The market somehow knows that politicians will not be blamed and will kick the can down the road. Not saying this is right, but they want to get reelected.
We can talk and talk about what-ifs. Some of the scenarios will be correct and many will not or bemoaning the “could ofs,” “would ofs” or “should ofs” of the past missed opportunities. Last I heard, the world’s largest corporations and the people working in them are not going away anytime soon. There will always be a bond market and a stock market. Stick with what has been happening for the last century. Through it all, the stock and bond markets returned about 9% and 5% respectively. Nothing wrong with that.
The world is actually a very boring place. Human beings are quite predictable. My neighbors, community and civilization are going to be in the same place doing the same thing for a long long time and are not going to act any differently. The world is in so much better place than it was several centuries ago when there was no civilization during the 1000 year dark ages.
If you have a diversified portfolio with the major market asset classes (large, mid, small, international and a bond allocation approximately equal to your age or when you need the money) stay the course. If you are still nervous, I have news for you–get use to it. We all wish there were less uncertainty in the world. But that isn’t going to change either. One excellant idea is to hire a fiduciary financial adviser that you pay by the hour to help you stay the course and IGNORE THE BLOODY NOISE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Gold is a speculation: http://articles.marketwatch.com/2010-11-12/finance/30792554_1_prospector-asset-management-leonard-kaplan-exchange-traded