Friday, January 11, 2008

Putting my money in gold and living to fight another day

There will be some football mentioned in this post, but don't worry. It'll have nothing to do with O.J. Simpson.

"Stocks Covered in Red" proclaims TheStreet.com. Tech stocks are swooning. American Express and Capital One reported a charge and slashed earnings forecasts. Europe and Asia were down. Most market pundits would say it's time to go defensive, meaning buy consumer staples and healthcare.

However, look at Pepsi(PEP). It's off over 2% today. Same with Coke(KO). Pfizer(PFE) is down. Bristol-Myers Squibb is down (BMY). These are not safe havens. Which stocks are working today? Mortgage Investments, insurance, mining, foreign banks, and gold. Of those options, I'm putting my money in the last two industries, mostly in gold. As my position in E*Trade confirms, I am not smart enough to wisely speculate on the various dead cat bounces and potential suitors of the battered financials sector(I'm still holding that position and think that the company and stock will recover, but I'm underwater 40% on the investment). So I am going to park my money in the cash and the streetTracks Gold ETF(GLD). I know, you get the advantage of leverage with the miners or a gold mutual fund, but this is exercise is about defense and not offense.

To use a football analogy, I would love to be a running back that makes incredible, balletic moves, but that won't work in these conditions. I have to make one cut and hit the hole, or just hit the hole full steam and fall forward for any sort of positive yardage that I can gain.

Gold is hovering around $900 an ounce and the market is skittish. I'm looking for safety above all else, and then potential for appreciation second. This is a no-brainer for me.

In other news, Warren Buffett has upped his stake in railroads. Perhaps this is him being greedy when others are fearful.

2 comments:

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