Article: "Markets Make Fools of Us All" - you decide!

Last Friday, Eric Fry of Agora Financial wrote an intriguing article for The Daily Reckoning called Markets Make Fools of Us All. I found it to be a great one! He started the article discussing recent moves in both the Dow and the physical gold market. In the third paragraph down, he said this:

“That said, the financial markets could not care less what we say. The financial markets do not even care what Alan Greenspan or Abby Joseph Cohen say. In fact, the financial markets seem to delight in making fools out of sages. For more than a decade, the markets have made a fool out of the conventional “wisdom” that stocks are for buying and holding. During the last eleven and a half years, for example, the S&P 500 Index has delivered a total return of exactly zero.

The markets have also made a fool out of the conventional wisdom that gold is a barbarous relic – a monetary artifact. During the identical eleven and a half-year period when stocks were busy doing nothing, the gold price quadrupled!

Despite these shockingly contrary investment results, the conventional wisdom remains almost as foolish as ever. Gold is still nothing more than a “trading vehicle,” according to Wall Street’s professional sages, and stocks are still the greatest investment asset ever devised by Man. We would not dare to argue with the sages (they are sages after all), but we would point out that economic systems are as susceptible to entropy as natural systems. In other words, economies sometimes breakdown, either partially or completely.

In the natural realm, the Second Law of Thermodynamics asserts that systems tend toward greater entropy, or disorder. In the economic realm, a similar principal pertains, except that the agents of entropy usually go by the title of “Senator,” “Treasury Secretary” or “Federal Reserve Chairman.”

Read the whole article here. Especially Fry’s quote of Rick Rule. Eric Fry calls Rule

a “serially successful investor in gold mining companies”. “I am bullish on gold,I’m bearish on social promises, and as a consequence, bearish on currencies. I suspect that in the near term gold will do well, because it won’t go down. Then gold will start to do well because people will perceive it as going up, rather than merely holding its own in terms of purchasing power.”

I agree with that. Gold would then exhibit what it did in the late ‘70’s – as Rule defined “stereo buying” of safe haven gold. Get yours today at Lear Capital!