Every week, I receive an email from Futures magazine titled, “Market Pulse.” The writer, Gary Kamen, usually has a slant on the market that fits right into my own perspective. This week he provided insight that brought a smile to my face, as it lit up reality on two fronts. Here is the first.
Has anybody realized yet that gold is something people really do not need to survive? Gasoline, however, is a different story.
Gary’s perspective on investing/trading gold or oil is one to consider, and consider well. Yes, gold tends to produce strong returns in troubled times, but if you look at the historical pricing of gold, it tends to rise and fall relative to the confidence factor, i.e., faith in economic strength. Gold is not a commodity in great demand, other than its perceived value as a “hedge” against inflation and a “harbor” in troubled times. Perhaps this is the time to be in gold, but keep in mind the second sentence from the quote below.
Oil, on the other hand, is a commodity that has real, not perceived, value. Oil is the lifeblood of the economic engine that runs the world. It is truly subject to the law of supply and demand. Other than periods of high speculation, the price of oil tends to reflect the reality of economic activity. This is apparent in the ebb and flow of oil prices in the last 18 months or so. One should remember that the days of oil are numbered, but at this point, the number is still rather large, so, more than likely as the global economic recovery continues, and the emerging markets gather strength, the price of oil will most certainly rise, whereas gold might very well decline as confidence returns to the global marketplace.
Many of the so-called “experts” were on TV this weekend saying, “I told you so.” The funny thing is we all know what comes up must come down.
The above quote brightens reality in two ways. The first is that our world is filled with “so-called experts,” and, in many ways, they do more harm than good. Keep in mind that just because someone is the CEO of a large investment firm, let’s say, this does not necessarily mean this “expert” is any better equipped to predict market movement, then, let’s say, you or I. The truth is that many times predicting market movement is a coin flip, especially in times such as we are in now.
The second bright light here is the notion that anyone who truly understands the market could actually “crow” about correctly predicting market movement. Again, for the last 14 months, many of the so-called experts have been predicting a big correction in the market. As Gary astutely points out, “what comes up must go down.” Duh …
To be clear, many folks out there do have a reliable finger on the pulse of what is going on, but those folks are usually quietly making money without fanfare or self-promotion. Find these folks and pay attention to what they have to say, if they say anything at all.
Trade in the day; invest in your life …
