“Sir, With reference to your report “Leading bullion bank declares end to gold’s decade-long rise” (February 2): Oh dear ! Why make it complicated ? If you expect lots of monetary expansion over the coming years, paper money’s value can be expected to decline. If you expect governments to stop trashing their currencies, it probably won’t. That is what the future price of gold will reflect, pure and simple.”
Macleod, Head of Research, GoldMoney, in a letter to the Financial Times.
“The world's central banks last year bought 534.6 tons of gold in 2012, the most since 1964, as global gold demand hit a record value level, the World Gold Council said Thursday in a quarterly report. Purchases by central banks for the full year rose 17% compared with 2011, while fourth-quarter purchases of 145 tons marked a 29% rise from the same period a year earlier.”
- MarketWatch / The Wall Street Journal, 14th February 2013.
“Where is the wisdom we have lost in knowledge ?
Where is the knowledge we have lost in information ?”
- From ‘The Rock’ by T. S. Eliot.
Price is what you pay; value is what you get. Warren Buffett’s
rightly celebrated aphorism carries an especial resonance when, courtesy of near-zero
interest rates and global competitive currency debauchery, it is increasingly
difficult to assess the value of anything, as denominated in units of anything
else. To put it another way, the business of rational investing becomes almost
existentially problematic when a significant number of market players are
pursuing maximum nominal returns without a second thought as to the real value
of those returns. Hedge fund manager Kyle Bass alluded to this problem recently
when he pointed out that the Zimbabwean stock market had been the last decade’s
best performer, but that owning the entire index would only buy you three eggs.
It is not just Zimbabwe. Markets everywhere, in just about everything, have now
decoupled not just from their underlying economies but from reality.
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