Steadfast FinancesInvesting in Gold? Don't Forget About Women & Sheep!

Investing in Gold? Don’t Forget About Women & Sheep!

Filed in Advertising , Humor , Investing 101 9 comments

Leave it to Colbert’s crack team of writers and producers to catch weeks of targeted advertisements and distill them into an easily observable trend. This time, it’s gold coin and bullion distributors (e.g. resellers) advertising on conservative news sources cleverly designed to make more money off the retail investor by pounding the fear trade.

I don’t watch Fox News (or MSNBC for that matter), but like Colbert, I think it’s highly suspect that gold coin distributors are targeting the more conservative crowd since they are more likely to buy the hard sell, doom and gloom story the gold bugs are pitching.

If history is any indicator (and it is), such advertisements for the general public are usually one of the warnings signs of an investment bubble ready to pop instead of the no-brainer investment the advertiser suggests.

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Prescott Financial Sells Gold, Women & Sheep

[RSS and email readers please click to site for video]

For the record, I fully believe that gold is in bubble territory and there are multiple reasons why you should think twice before rushing out and buying as many gold coins as you can afford.

Of course, these hard sell ads fail to mention (unless it’s in the fine print) that gold distributors like these routinely mark up the price of their gold coins around 35 percent. With that sort of retail markup, you better hope that the gold story continues to gain momentum and hits the $1500 range just so you can break even. (Gold is trading at $1104/ounce at the time of publication.)

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Disclosure: I am neither long or short gold at the time of publication.

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Posted by CJ   @   17 December 2009 9 comments
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Dec 17, 2009
3:38 pm
#1 SJ :

This was pretty funny… it makes me feel like I should watch colbert show too haha…

Dec 17, 2009
8:17 pm
#2 Matt SF :

Colbert is pretty awesome. I’m not sure I always agree with poking fun or creating real issues into satire, but I suppose that’s one way of reaching his demographic.

Truth be told, I don’t watch his stuff that often but I do try to catch the opening monologue. That’s where most of the wiseacre stuff has been written in.

Dec 17, 2009
6:37 pm
#3 Tracy :

I love Colbert! This also highlights a question that has been burning for me for a long time. What the heck is with the buying of gold? It’s a soft metal you can’t even eat or make much out of so is it valuable due to some ancient tradition or because it is shiny or something?

Dec 17, 2009
8:36 pm
#4 Matt SF :

Well, the short version is that gold is the first investment choice for investors to run if they fear inflation. Since the Federal Reserve printed money without boosting gold reserves, inflation will be a factor in years to come.

The problem is the speculators, smelling a quick profit, moved into gold as well. That usually spells the formation of an investment bubble since everyone is bidding up the new “in thing”. The end result is a very crowded trade with lots of speculators sitting with their button on the sell button to make sure their paper profits become real money. For example, take a look at the oil bubble in 2008 or the US Treasury bubble at the end of 2008. Scary stuff!

Of course, this is pure guess work on my part since I don’t have a crystal ball, but if history is a good guide, traders will likely overreact and bid up gold far beyond what it should be. What that value will be in the end is still a mystery.

(sorry for the long answer!)

Dec 18, 2009
2:08 am
#5 Tracy :

Thank You for the long answer. It was concise and helped clarify things a bit. It is just amazing to me how money is made and lost in speculative investing. I imagine for the players it becomes rather addictive. Too nerve racking for me.

Dec 18, 2009
2:39 am
#6 Matt SF :

Hey you’re talking to a speculator! :)

I’m not nearly as bad as I used to be considering I’ve adapted my trading style to a “buy on the dips” methodology, but I occasionally like to jump on a nice momentum play now and again.

It’s rather like catching the right wave… if you catch it at the right time, you can ride it all the way to shore.

I think the older I get, or the greater tolerance to the adrenaline, I find myself wanting to stop trading more and more and move into something more steady and dividend based.

Probably why I like P2P Lending so much.

Dec 21, 2009
8:10 am
#7 Kidgas :

Personally, I don’t feel like gold will be in a bubble until I start hearing my co-workers telling me about all their wise investments in gold. A few commercials here and there only suggests stage 2 of the bull market and not stage 3.

I feel that gold has several more years of positive returns prior to a blow-off top. I agree that the run to $1200 was a little pre-mature and quick. Gold may very well see another year or two of consolidation between $900 and $1100. But, I doubt that $1200 will be the generational top.
.-= Kidgas´s last blog ..Promoted at Life123 =-.

Dec 23, 2009
10:29 pm
#8 Matt SF :

If coworkers bragging about their trading savvy by buying gold is the “stage 3” warning sign, I’m afraid we might have already blown through that stage several months ago. Even my UPS delivery guy was bragging about buying 50 shares of the GLD at $1000. Kinda reminds me of my IT guy bragging about buying Cisco Systems during the tech bubble back in 2001 as a value play.

Of course, I could be 100% wrong since I’m not a commodities expert by any means.

I’m looking for more the $1500 range longer term, but I’m thinking that’s more of a 2015 price target. From what I’ve read and the “expert” interviews on CNBC and Bloomberg, gold would have to appreciate fairly significantly to match the funny money we printed in 2008 and 2009.

Then again, with all the talk around the U.S. Dollar making a comeback, I’m curious if what will happen globally when the Federal Reserve raises interest rates and eliminates the carry trade. Could get messy with everyone simultaneously piling out and looking for momentum stocks to short.

Dec 25, 2009
12:32 pm
#9 Kidgas :

Interesting that you are hearing from co-workers. I have yet to hear anything. I have written a rebuttal to your “10 Reasons Investing in Gold is a Bad Idea” article and posted it on Xomba.

It represents my opinion and analysis of the facts as I see them. Of course I could be wrong. Everyone has to be able to sleep at night with their investments.

I like your blog and though I disagree with your assessment on gold, I agree with many of your thoughts.
.-= Kidgas´s last blog ..In the Top 1 Million!! =-.

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