Forum Archive Index - February 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Bill,
 
> 
> Do me a favour and go to:
> 
> http://www.financialsense.com
> 
> and then storm watch past updates 
> then read Bubble Troubles Part 1
>

I read the article.   Apart from reassuring me that the bank shares 
that I own are less risky than I thought because a lot of the dodgy 
lending has been syndicated out, what do you want me to get out of 
it? 

It warns us about buying US and European bonds which I think is good 
advice.

It warns that foreign investors will in future be calling the shots 
on which way the capital is flowing - that's us folks.  It's 
obviously a good thing to be a foreign investor at this time.

It talks about very low interest rates and a credit bubble.  That 
doesn't apply here in New Zealand.  It says people losing their jobs 
may cause the economy to collapse.  Here is NZ we have some of the 
lowest unemployment rates in years, so not relevant.

Then there are phrases in there like:

"Even though credit was more expensive than equity..."

You don't need to have a great understanding of the tax system to 
know that that is a blatently false assumption.  If the assumptions 
are wrong you can hardly expect reliable conclusions.

'mvan' said good to see some well informed debate on gold.  By my 
books name-dropping and trying to pump up your own case doesn't fall 
into that category.  Do you really think Warren Buffett is selling 
all his shares and piling into silver?

The reasons I think this debate on gold is poor are these:

1/ Gold bugs can't construct an argument to say just how high the 
price of gold will go.  So by implication they can't construct a 
rational argument about how high the price of gold shares will go.

2/ No argument has been presented as to how those of us in the south 
pacific can avoid cancelling out our gold gains through US currency 
losses.

3/ Gold bugs have no coherent exit strategy, other than saying they 
will get out at near the top of the market leaving the late coming 
suckers to take the losses.

4/ The main reasons for getting into gold in the first place is that 
they have a series of fear mongering articles published in the US 
which somehow transfers to mean that the New Zealand sharemarket is 
doomed.


Until I see some evidence of more discerning reading of these 
articles rather than just publishing links which , because they are 
printed on the internet, 'must be right', there is only one 
conclusion I can draw.

Those that are piling into gold *are* the suckers.  They are going in 
there principally because someone on the internet said it is good 
thing to do, and they do not understand the fundamentals behind it.  
Give them a slightly more searching question and it becomes clear 
they do not understand the dynamics of the gold market, and how it 
relates to investment from New Zealand.  I'm not suggesting that I 
understand it.  Indeed, I was hoping to be enlightened by some of 
these 'experts'.

But then I am not investing in gold or gold shares.

SNOOPY


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