Jon Nadler is nuts if he thinks we should be putting 10 percent of our portfolios into gold.
In his recent interview with Olly Ludwig, Nadler lays out all the reasons why gold's bull run is over. The market is terrible in India. Demand for luxury goods in the United States has dried up. We've been riding three years of extraordinary investment demand and 10 years of greater-than-average investment demand, and eventually that has to catch up to you.
And yet, at the close of the interview, he says, "I always say you need to have 10 percent [of your portfolio] in gold "¦"
But why?
I've admitted in the past to not "getting" gold. It's a useless commodity whose relevance is in a 500-year decline.
Gold also has almost all of the hallmarks of a bubble right now:
A new investment innovation that enhances liquidity, making it easier for "the masses" to buy into the bubble: See ETFs, specifically NYSEArca: GLD; Short-lived government stimulus: See the Fed's quantitative easing policy; A ravenous and cultish group of core believers: See here, here and here; An industry group putting out copious research providing an academic justification for higher prices: World Gold Council; Most importantly, prices driven solely by investment demand and not by fundamentals.All we need now is a major article in a popular weekly magazine like Newsweek to seal the deal. Oh wait, we've had that too.
But really, you don't have to go that far. All you have to do is look at this chart.
This is a chart of the S&P 500 (Total Return) vs. gold since Jan. 1, 2000. For the past 10 1/2 years, SPY is down about 6 percent, while spot gold is up 312 percent.
Sometimes investing is easy, and this is one of those cases. This is simply not sustainable. It will either revert to the mean or it's the end of capitalism. I'm betting on the former.
Looking at that chart, you have to believe that 2010-2019 will be better than 2000-2009 for equities. There have been plenty of studies on long-term market performance to back me up on this, the best of which was probably the 2009 Equity Gilt study from Barclays. While not entirely positive, the Gilt study made one particularly relevant point: There have only been four decade-long periods where U.S. equities have delivered negative returns, which were the 10 years ending in 1937, 1938, 1939 and 2008 (2009 was not included in the study). In each case, the subsequent 10-year period was strongly positive, with equities delivering (on average) an 11 percent compound annual
In his recent interview with Olly Ludwig, Nadler lays out all the reasons why gold's bull run is over. The market is terrible in India. Demand for luxury goods in the United States has dried up. We've been riding three years of extraordinary investment demand and 10 years of greater-than-average investment demand, and eventually that has to catch up to you.
And yet, at the close of the interview, he says, "I always say you need to have 10 percent [of your portfolio] in gold "¦"
But why?
I've admitted in the past to not "getting" gold. It's a useless commodity whose relevance is in a 500-year decline.
Gold also has almost all of the hallmarks of a bubble right now:
All we need now is a major article in a popular weekly magazine like Newsweek to seal the deal. Oh wait, we've had that too.
But really, you don't have to go that far. All you have to do is look at this chart.
This is a chart of the S&P 500 (Total Return) vs. gold since Jan. 1, 2000. For the past 10 1/2 years, SPY is down about 6 percent, while spot gold is up 312 percent.
Sometimes investing is easy, and this is one of those cases. This is simply not sustainable. It will either revert to the mean or it's the end of capitalism. I'm betting on the former.
Looking at that chart, you have to believe that 2010-2019 will be better than 2000-2009 for equities. There have been plenty of studies on long-term market performance to back me up on this, the best of which was probably the 2009 Equity Gilt study from Barclays. While not entirely positive, the Gilt study made one particularly relevant point: There have only been four decade-long periods where U.S. equities have delivered negative returns, which were the 10 years ending in 1937, 1938, 1939 and 2008 (2009 was not included in the study). In each case, the subsequent 10-year period was strongly positive, with equities delivering (on average) an 11 percent compound annual return.
Reversion to the mean. It's simple, but it works.
And gold? I'm guessing that gold has had its run. Could it spike higher? Of course. But it has all the hallmarks of a bubble right now. Given that, and given all of Mr. Nadler's bearish concerns, a 10 percent portfolio allocation seems unwise.
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Call me a gold bug, Matt, but you're crazy.
Jon Nadler is nuts if he thinks we should be putting 10 percent of our portfolios into gold.
I don't really disagree with your outrage regarding 12b-1 fees, Matt, but I think you missed a bigger point.
Your article today on 12b-1 fees is way too soft on the Securities and Exchange Commission, Olly.
The "?''XL'' Ticker Lawsuit' is going to be the best theater ETF investors can watch all year.
Sorry, Olly, this time the SEC's on the case.
Matt, I'm all for more disclosure in target-date fund marketing materials, but don't you think the SEC could spend its time more wisely?
If you're going to critique my portfolio, Dave, please come up with sensible suggestions.
Matt's ETF portfolio sure is cheap, but is it actually the best?
U.S. regulators are close to implementing rules for ETF trading designed to prevent the next flash crash, but I wonder if, in their efforts, they're not overlooking something as simple as personal responsibility.
Watching the deluge of filings surrounding MLPs is a little like going to a Rush concert.
A few years ago, I developed a model portfolio composed of the cheapest ETFs on the market.
The IAU price cut is the first major strategic maneuver by BlackRock since acquiring iShares, and it's a very, very good one.
Regular readers may have noticed a new data feature on the site. Here's how to interpret the numbers.
Don Dion of TheStreet.com argues today that Vanguard's decision to launch S&P and Russell ETFs are essentially bad for investors.
Reports that Vanguard will launch Russell- and S&P-linked ETFs is bad news for iShares, State Street and other ETF competitors.
Jim, your earlier blog about market structure sniffed of false nostalgia for the 'good old days' of specialists and human trading.
Maybe the best way to play the Chinese yuan, Matt, is to not play it at all.
Investors in the WisdomTree Dreyfus Chinese Yuan ETF (NYSEArca: CYB) got everything they could have wished for over the weekend, and what did it net them? Bupkis.
What's the world come to when a bastion of academic finance decides to go full-on stock picker? Maybe business as usual.
Olly, if you really believe the title of your blog, 'Flash Crash Was ETF's Debutante Ball,' then it's clearly time for you to put your turtleneck back on and go play more chess in Hahvard Yard.
Don't listen to the "?nattering nabobs of negativism' when they say the ETF is to blame for the flash crash of May 6. The way I see it, it was a raucous coming-out party for the security of the future.
Schwab's decision to cut prices on its ETFs is not about ETFs at all. In fact, Schwab's entire ETF effort isn't really about ETFs.
John Bogle is wrong: Exchange-traded funds are actually the best available tool for long-term investors. Better, by far, than mutual funds.
The ETF industry gets a lot of hype, but if you look at revenues on a firm-by-firm basis, it's clear that most ETF issuers are losing money.
Last month's ETF numbers marked a little changing of the guard in the ETF Inside-Baseball League.
CNBC asked me on air today to discuss how European ETFs have been performing and what looks attractive from here. My short answer was that European ETFs have been getting clobbered.
If you own a traditional, market-cap-weighted index fund, you currently have 50 percent more money in Switzerland than you do in China. Seems crazy, doesn't it?
Let me preface this by saying: I like gold. I believe it has a role in a portfolio and, in fact, I even bet our Research Director Dave Nadig a steak dinner that gold would hit $1,200 before it hit $1,000 again. (Looks like it's time to pony up the filet mignon, Dave.)
On Monday, Jim Lowell, Tom Lydon and I had the honor of launching a series of six ETF portfolios on CNBC.
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