GOLD: STILL A RODNEY DANGERFIELD ASSET

Courtesy of FMX Connect

by Jason DeSena Trennert

“It just can’t be right,” said the 30-something hedge fund manager through a towel after a grueling 45 minutes on the squash courts of the New York Athletic Club.

“I mean, G. Gordon Liddy is trying to selling it to me on Fox News. My orthodontist owns gold -- he wears gold, for crying out loud. It just can’t be right,” he said, shaking his head, his voice trailing.

The case against gold is well-known and, until relatively recently, time-tested. The yellow metal is never ever really consumed, provides no yield, and carries with it storage costs. The polemic surrounding gold, like the inflation vs. deflation debate, is enough to result in bar fights in some sections of this grand city and it’s hard to find too many investors who are agnostic about it. You either see it as the barbarous relic of the retail crowd or a necessary hedge against the cupidity of politicians the world over. Despite the recent run-up in gold, it is, by our lights, too early to fade. There are now, unquestionably, elements of froth in the market that should give investors pause. But if there is one fact that is missed among investment sophisticates, it’s that investing in gold is still considered a hopeless backwater at most large mutual fund companies in this country. It is for this reason, that we believe that it is not yet over-owned.

I find a certain irony in the fact that I have two friends in the investment business who, after enjoying great success and fortune managing other peoples’ money in the 1980s and 1990s, have been, in their retirement, buying physical gold. They are unknown to each other and are different in many ways save for the fact that they were born in foreign lands – one in Armenia, the other in Cuba. They live in America, not by tradition or family ties, but by choice. Despite the fact that they so obviously believe in the great promise of this country, they have both come to the conclusion that they should hedge their hard-earned fortunes with hard assets. For them, their decision to own gold isn’t the result of some ethereal academic exercise, it is based on life experiences most people born in America couldn’t possibly understand.......read on