September 2nd, 2011

Goldbugs v FT

For years the FT has portrayed investing in gold as akin to flat-earthism, Alan Beattie at the FT is perhaps the most prominent, if not sole, media supporter of Gordon Brown’s sell-off of gold a decade ago. Guido has long lamented the FT’s tendency to follow the latest intellectual fashions and it is no surprise the FT approved of the Balls/Brown sell-off of gold reserves. It was the newspaper that was the biggest cheerleader for the euro and all things EU, of which it is less effusive about nowadays. The FT’s comment pages are full of wishy-washy, centrist, establishment, hand-wringing of the limousine liberal kind – no surprise given they are overseen by a former editor of Prospect, the monthly journal of wishy-washy limousine liberals. FT readers from the City who don’t simmer with self-loathing know it is best to skip the comment pages and read the market reports and the surprisingly good arts pages.

So how would you have done if you had invested in the stock market instead of gold? Take a look at the charts below, gold out performed the stock market by 17% last month, that is not relative out performance, that is gold was up 12% and the stock market was down 5%. Over the year gold is up some 40%, over 5 years and 10 years gold is more than 100% ahead of stocks.

Stocks of course pay dividends but likewise gold can be leased out to short sellers for an income. Alan Beattie insists gold is speculative, Guido would say, on the contrary, it is an insurance against a collapse of paper assets. So far Guido has been right for a decade and Beattie has been wrong. He now reckons the gold bubble is really about to pop this time. Guido reckons the West’s government debt crisis is about to take off big time and would rather own hard assets like gold and farmland than paper assets. You pays your money and you takes your choice.

UPDATE: Alan Beattie tweets to complain that he never recommended stocks as an alternative to gold, above amended accordingly. Nevertheless gold is up nearly 600% since the Balls/Brown sell-off, which he supported. Beattie is emphasising that his injunctions against gold purchases applied to central banks not investors. But not the central banks of India and China apparently…


68 Comments

  1. 1
    keddaw says:

    Farmland has a use, as does property and the means of production, what use gold?

    Like

    • 2
      keddaw says:

      Shotguns and canned goods is what you want.

      Like

    • 4

      People seem willing to swap lots for it.

      Like

      • 11
        Albert Hall says:

        and silver too.

        Like

      • 12
        keddaw says:

        Agreed, but they did the same with Tulips a while back.

        The idiocy of the masses is reason to take advantage of them, not to join in.

        Like

        • 25
          Engineer says:

          Tulips, dot-com shares – there’s a long history of bubbles. They all burst. Gold, however, is tangible, lasting, limited in supply and valued. Silver and palladium might fall in the same category.

          At some point, the Western economies will recover, and gold will drop in value relative to paper assets. Doesn’t look like that’ll happen for a while, though.

          Like

          • AC1 says:

            Gold’s value is because it’s hard to forge.

            The value of something rises when the drag on it falls away. Such as lowering/stopping taxation, however there are also private taxes (rentiers) that have the same effects as state taxation. Often there’s a zero sum between rentiers and bureaucrats at our expense.

            Like

      • 39
        AC1 says:

        I’d say it was more that Government controlled Money has fallen, rather than Gold has risen.

        Like

        • 55
          Major Eyeswater says:

          +1

          Like

          • East India Company wallah says:

            That was always Labours M.O.-spend big and inflate away the debt by trashing the standard of living from every angle through inflation and devaluing of paper currency-it started in america!

            Like

        • 66
          Ironside says:

          Agree AC1.
          As fiat money becomes less and less valuable via (deliberate) inflation it is inevitable that gold will rise.
          It will probably get to 5,000.
          That is the catastrophic state the fiat money system (in conjunction with socialist politicians) has achieved.

          Like

    • 8
      Up sh1t creek says:

      You can use your £5, £10, £20, £50 and Euros as toilet paper, because that’s all they are good for.

      Like

    • 24
      Dom says:

      When did the FT last break a story?

      I agree with you about the arts sections – weekend FT is a good paper, but as far as the comment pages – forget it.

      Like

      • 45
        Fiscal Gerrymandering says:

        As revealed by circulation figures, hardly anyone buy the FT anymore as the free CityAM delivers news less diluted by personal agenda and wishful thinking.

        I stopped buying the FT three years ago

        Like

      • 67
        Fiat money anyone? No, thanks. says:

        The FT’s slavish anti-gold stance has made it the butt of jokes on nearly all financial blogs. The FT is a highly overrated rag and continues (not for long) to trade on its past reputation for insight and accuracy. Sadly, its editorials have become a laughing stock.

        Like

    • 48
      Ed the Axeman says:

      It can’t be created by governments, and like any from of money (fiat or backed by gold), it depends on the willingness of other people to accept it in exchange for goods.

      The fiat problem is printing. Governments with their backs to the wall will resort to printing (EUR being a current exception). Particularly when they are highly indebted, like the UK.

      One problem with gold is the economic one you raise. It’s not a productive asset.

      However, the solution is for the government to stop debasing the currency (get inflation under control), get the deficit to zero (none of this ‘structural deficit’ bollocks) and leverage, and reduce taxes enabling the productive to be productive.

      It won’t because its up the swannee of debt. It’s more geared than the banks.

      So you can gamble on the nice government giving you some return on your contributions, or minimise that part and self insure.

      Like

      • 57
        East India Company wallah says:

        When the previous government allowed the retail banks to lend 300% of GDP to consumers that is in effect QE,which in effect means the currency has been heavily devalued already only the chickens have yet to come home to roost.
        why woul any sane person invest in government long term gilts or bonds which are effectively paying one percent below inflation with the historic bills to be paid somewhere in the future

        Like

    • 53
      ShortTheEuro says:

      Make sure you own bullion and not paper gold… counterparty risk is going to rise when the double-dip hits… also throw guns and beans into your portfolio mix.

      Like

      • 60
        Ed the Axeman says:

        Relatively minor, so long as its capitalised properly. With a 5% haircut, you win if they go bust.

        Like

    • 58
      M says:

      Do you have any more prediction of how the markets will move in the next 10 years & where would you get the information from ! ?

      Like

    • 59
      The Underdoug says:

      Gold is simply the best electrical/electronic contact surface plating material bar none. Used in silicon chips to bond the internal silicon to the packaging case pins. Put simply, it’s in your iphone and there is no app for that.

      Gold can and does function as money. It is rare (unlike the leaves on trees and paper stocks at the Bank of England printing works) and is partly beyond the control of governments (they can confiscate it at gunpoint, but can’t easily produce more when it suits them).

      Just take a look at: http://geology.com/minerals/gold/uses-of-gold.shtml

      Not even a wikipedia entry…

      Like

    • 68
      Rt Hon Gordon Brown PhD MP says:

      I have been crapping gold turds today. That concludes my statement to my teddy bear

      Like

  2. 3
    Up sh1t creek says:

    If you bought gold at the time idiot Gordon Brown sold half UK taxpayers gold reserves, you are sitting pretty.

    People are dumping the markets for gold, there’s less ability to fiddle a solid asset compared to some made up numbers on a computer screen.

    Like

  3. 5
    Up sh1t creek says:

    $19bn. But that does not take into account the US Dollar beening devalued, as has the UK Pound.

    Like

  4. 6
    Billy Bowden is the greatest umpire ever ! says:

    From what i understand the eurozone and USA are on a path to hell, debt to pay debt instead of being bold , honest and respectful of those that elected you.

    I fear even if we Have a Republican President next the same will carry on, they have already been downgraded by one agency.

    Its going to get messy.

    Like

    • 10
      Billy Bowden is the greatest umpire ever ! says:

      and the proceeds from Gold was to buy Euros and some spending (Think i right).

      As i said before the Tories might sell the family silver but it was Labour that sold the family gold.

      Like

  5. 8
    MrAngry61 says:

    I bought my first physical gold last week – already showing profit.

    With the dismal performance of the world (and especially the UK) economy, paper assets seem too risky.

    Like

  6. 13
    FT subscriber says:

    Leave it out Guido.

    The comment pages of the FT have terrific comment. There you will see by far the best analysis of the eurozone crisis from Wolfgang Munchau, John Kay’s pieces on markets and economics are so much better than efforts from that plonker Kaletsky [whom you admire!], Gideon Rachman has been the most insightful on the rise of China and Obama’s prroblems…I could go on.

    Compare the FT comment pages with the posh drivel from Alice Thomson in The Times, that foolish Tory snob Oborne in The Telegraph, and then there is the Guardian.

    Like

  7. 14
    Billy Bowden is the greatest umpire ever ! says:

    I saw a person on the telly last night saying that the USA might go for QE3, so if printing more money and therefore increasing the amount in circulatuon are going to devalue the dollor and increase the debt intrest?

    Also they have muted a second stimulas, saw a piece about a green company loaned 500 million dollors as part of stim 1 , it filed for bankr*ptcy other day, even tho it had personally backed by the anionpted one. (1100) job loses, was called “seladra” or something like that.

    Like

  8. 15
    Gold...money is a social construct says:

    Gold is a store of value. A Picasso is inherently just canvas and paint but it acts as a store of value by those with sufficient wealth. That is why, if there is social agreement, anything that is rare can act as a store of value if a sufficiency of people choose to make it so.

    It is effectively financial UDI in troubled times.

    That’s my answer to those who say “What’s the point”.

    You believe in bits of paper backed by insolvent government, or a store of value you can carry around.

    If cowrie shells were rare, that would do too.

    Value being a social construct. Money is worth what it is allowed to be. Paper and ink. Symbol but not inherently worth anything. Government IOU scrip.

    Like

    • 41
      AC1 says:

      It’s just a means of assessing relative market-productivity. Money is just a means of allowing temporal barter (i.e. trading your time-productivity and waiting till you need someone elses).

      The funny thing is that market productivity is conserved. i.e the relative wages are largely unchanged by falls in income. i.e. Taxing the rich lowers the wages the poorer can earn (because the rich tend to employ them), and at the same time discourages wealth creation.

      Like

  9. 17
    Andrew Efiong says:

    Gold isn’t for me.

    But I’ll well invested in Swiss Francs, Singaporean Dollars, Norwegian Krona, oil and other safe assets, plus I have insurance if the market falls with options.

    Like

  10. 18
    Do not want to share the same air with interfering dogshit in Edinburgh says:

    Brown is a monging arsehole!

    Like

  11. 19
    Deep Froat says:

    All very well but McBroon sold our gold and gave the proceeds to his haggis munchers and the feral underclass.
    Who in turn spent it on Afghan Gold Heroin and Elizabeth Duke Gold from Chavgros, and none of that made any feckin interest at all.

    Thats why I still say we should hang Gordon Broon the Count (delete the extra O please). As for Harriet Harm-Men I say BURN THE WITCH!!!!

    Like

    • 33
      Cruel and Unusal Punishments says:

      Blimey mate – you ill or off your food?

      That’s all for wimps – too quick for a start!

      I’ll come back when you’re more yourself.

      Like

  12. 21
    Marcs Aurelius says:

    no one reads the FT any more. I cancelled my subscription 6 years ago because of its relentless EU cheerleading. City AM is much sounder – and cheaper.

    Like

  13. 22
    Sir William Waad says:

    Surely all investments are speculative?

    Like

  14. 23
    Anonymous says:

    ‘…all things EU, of which it is less enthusiastic about nowadays.’

    Huh?

    Like

  15. 26
    The Pundit Too says:

    Gold is due to hit $2000 per ounce by the end of the year. This will be more if Bernanke and Obama bring in QE3.
    Every man and his dog climbed into the cheaper silver market in June but it peaked at $45, overloaded the market and crashed. Now crept back to just over $40 but earning a premium.

    Like

  16. 27
    Ed Balls says:

    My policy on gold is to be

    Like

  17. 28
    Throg_lodge says:

    Gold relies on its value for there to be a bigger idiot to buy it off you in the future. It has no instrinsic value.

    Better off with silver – useful as an industrial metal and tends to mimic gold’s price at a ratio of 15:1. Fact that that spread has blown out recently means:

    a) Gold overvalued
    b) Silver undervalued
    c) Ratio is bollocks

    Like

    • 43
      AC1 says:

      Gold is a “brand” for wealth safety and thus commands a premium.

      Like

    • 50
      Ed the Axeman says:

      I’m not sure you are better off with silver.

      Silver is both a store of value (gold like) and an industrial metal. Much more than gold in this respect.

      So if you have a crisis its bad for the industrial users of silver, so it will tend to lag gold that is primarily a value play.

      Like

  18. 29
    A Bystander says:

    um – what does it mean or portend when Guido pulls a thread about, you know, a

    left wing
    female
    arrogant
    upper class
    rich
    workshy
    over accomodated
    italian living
    patronising

    ‘person’

    ?

    Like

  19. 30
    Ed Balls says:

    My policy on gold is to be BLOODY RUDE TO EVERYBODY and SHOUT!

    Like

    • 32
      Evadne says:

      sssshhhh! – you bloody fool – you make them ask if we have any – as if we would! – ha ha ha ha ha ha ha!

      If only they knew the half!

      Like

  20. 31
    The Stilton Eater says:

    The old ones are the best. Watch as Brown tries to blame “the previous government” for his gold sale bungle.

    Like

  21. 35
    blue 34 a big strapping man says:

    Guns and rare watches

    Like

  22. 37
    Lord Stansted says:

    I used to subscribe to the FT (paper+online) but no longer. Their market reports are usually late, and just as good content is available on the Internet for free. Even the great Lex is not what it once was. The paper no longer has a regular science and technology section, possibly becuase their hacks are now as thick as anywhere else on “Fleet Street”.

    Like

  23. 46
    Shylock says:

    All that glisters is not gold. Often have you heard that told. Many a man his life hath sold. But my outside to behold. Gilded tombs do worms enfold.

    Like

  24. 47
    Tommy says:

    Gold will become absolutely worthless once I finish inventing alchemy.

    Like

  25. 49
    Wee burnie says:

    I will make this declaration- ‘We are bought and sold for English gold’-Such a parcel of rogues in a nation.

    Like

  26. 51
    Raving Loon says:

    My investment portfolio:

    A house I own, not one held as a ransom by a thieving bank
    A working farm surrounded by barbed wire and armed guards.
    A few shotguns.
    Enough rice and potatoes to last a year
    Gold as actual currency
    Fiat currency as actual toilet paper/betting slips
    Some bottled water

    Like

  27. 52
    James James says:

    Gold is a currency. Currencies are bubbles that don’t have to pop. (Yes, they go up and down, but they are worth more than they would be if they weren’t useful as currency, i.e. non-zero. Paper money would be worth zero if it wasn’t a currency, gold would be worth very little (jewellery and limited industrial purposes)).

    Like

  28. 61
    Gordon king of Scotland says:

    the nearest I get to gold now is looking for the golden rivet…

    Like

  29. 63
  30. 64
    Leon Brittan says:

    The FT is a fucking rag. One of the head honchos is Sam Brittan, brother of the arsehole who was in Mrs Thatcher’s Cabinet.

    At that time he told the readership that it should vote for Kinnock.

    He is an economic illiterate and fucking Marxist.

    Like

  31. 65
    Socialism is a mental illness says:

    Is Beattie supposed to be intelligent and smart? NEVER trust a financial advisor, they are ALL full of shite.

    Like


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