Message:

<p>[QUOTE=&quot;Cloudsweeper99, post: 1267863, member: 3011&quot;]It isn&#039;t a fallacy.&nbsp; Stock returns are based on the return on capital earned by businesses.&nbsp; Over the long run, this has been something like 10-12% with part returned as dividends and part as growth of capital.&nbsp; Gold also has a return based on the depreciation of currencies.&nbsp; If currencies are depreciating by 10-12% then gold returns will be competitive with equities.&nbsp; Which is best depends on where you are in time.&nbsp; Coming out of the bull market of the 1990s when stock returns were very high and the economy was weakening, stocks got ahead of themselves and their earning power.&nbsp; Gold had been in a 20 year bear market and looked undervalued and due for a catch up.&nbsp; So for the past decade gold outperformed while stocks lagged.&nbsp; But now there are many perfectly sound and growing companies selling at 10-12 times earnings, and gold is selling well above the cost of production.&nbsp; So the probability that stocks will outperform gold over the next decade has increased tremendously compared to a few years ago.</p><p><br /></p><p>Could this turn out to be wrong?&nbsp; Of course.&nbsp; Nothing in investing is definite.&nbsp; Everything is based on probabilities.&nbsp; If regulatory or other conditions prevent corporations from earning a satisfactory return on capital, stocks will continue to languish.&nbsp; This could also happen if the enormous levels of debt cause a deflationary condition similar to Japan [a repeat of the 1930s seems unlikely].&nbsp; If, on the other hand, the Fed inflates the currency at a rate sufficiently high to offset the deflationary impact of the debt, then gold might outperform stocks.&nbsp; I own both gold and stocks, but have been shifting money slowly from the gold side to the stock side because that&#039;s where the probability of gain seems to reside for the next decade.&nbsp; My equity investments are currently about 40% PMs and 60% stocks.&nbsp; I was a big buyer of gold and silver investments when gold was about $400 and silver was in single digits.&nbsp; But as conditions change, so must the analysis.&nbsp; I&#039;d rather own selected large cap stocks with little or no debt and positive cash flow at 10-12X earnings with 4% dividend yields than gold at $1900.</p><p><br /></p><p>That&#039;s how I think about the situation, and what I am doing with my own money.&nbsp; Unlike many people here, I don&#039;t have a permanent love of gold to defend, and I&#039;m not trying to earn bragging rights for selling exactly at the top.&nbsp; I&#039;m just trying to earn a high rate of return on investment.&nbsp; Everyone must decide this for themselves.&nbsp; Keep in mind that stocks are generally the best buy when conditions appear worst.&nbsp; If you want to&nbsp; buy low and sell high, you have to buy when things look bad and sell when everything is going perfectly.&nbsp; This holds true for gold also.</p><p><br /></p><p>If you like gold and expect the collapse of stocks, by all means put all of your money into gold.&nbsp; I won&#039;t be following you.[/QUOTE]</p><p><br /></p>

Your name or email address:

Do you already have an account?

• No, create an account now.
• Yes, my password is:
• Forgot your password?

Stay logged in