Thursday, April 7, 2011

Aden Sisters Put Case For Gold In Marketwatch Column

The Aden sisters have been around the gold scene for a long time. Back in the early 1980s, they were one of many goldbugs caught up in the exciting bull market of the 1970s and the inflationary psychology of the time. In 1981, back in the days when goldbugs thought that Paul Volcker wasn't for real, the Adens predicted gold would go to $5,000/oz. They weren't the only ones. Howard Ruff, another old goldbug, thought in 1982 that inflation would keep trending up as it had in the 1970s: the later '80s would see more than 20% inflation. Back in 1980, Doug Casey predicted hyperinflation for 1983. Robert Ringer got caught up in the excitement, too: his much-anticipated follow-up to Restoring The Amercican Dream and Looking Out For #1 was How You Can Find Happiness During The Collapse Of Western Civilization (1983.) He too was convinced that hyperinflation was around the corner.

Needless to say, the entire field was chastened at how the 1980s really turned out. The Adens now say they learned a lot from their earlier enthusiasm, and are now more restrained. Their letter, the Aden Forecast, was Peter Brimelow's Market Letter of the Year for 2010.

The case they make for gold, which begins with gold's impressive performance over the last ten years, is based upon: higher inflation due to easy money policy; government spending gone wild; and, demand for gold increasing all over the world. They conclude with their what-to-do:
Protect yourself and buy some gold and silver. But since these markets have already risen strongly over the past couple of years, it would be normal to see some weakness in the months ahead. Your best bet, therefore, would be to average into these markets. Buy a little now, and buy more over the next few months.
In other words, accumulate instead of going all-in.

There's an old investment maxim that says the investment skill that's most valuable is having gray in your hair. The goldbug wildness of thirty years ago was a phase, in large part driven by the fact that gold was stigmatized as its price rose in the 1970s. The otherwise free enterprise Wall Street Journal was fond of taking recurrent potshots at goldbugs all through the '70s. Not having experience with gold going through honest bull and bear markets, goldbugs back then though the bull was perpetual and higher inflation was endemic. Goldbugs around 1980 were about as wild as New Leftists, another formerly outcast group that attained the spotlight, had been in 1970.

Thankfully, most of the same stalwarts are still around and are much more experienced. They're used to gold going down as well as up.

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