Not many things made a profit this year, except my old friend gold. Gold started this year priced at $838 an ounce and it closed 2008 at $884. That means that if you’d just bought and held gold all year, it would have gained you 5.53%. That’s an appreciation that is better than money market accounts and government bonds. As I’ve described in these pages many times, gold is the best asset there is for preserving your wealth in these tough economic times. It should also do really well in 2009.
You see, the Fed is trying to reignite inflation and they’ve pumped a lot of money into the system to lower interest rates across the board. When you see thirty year bonds yielding somewhere in the neighborhood of 3-4% you now something weird is going on. I believe that the Fed will be successful in there attempts to blow one last bubble and that we will see consumer spending make a rebound this year, and many Americans will probably breath a sign of relief just to see George Bush leave office. Obama’s probably going to have a celebrated first year and it’s probably going to cause a significant enough rally for people to think that worst of the economic crisis is over.
Of course, all that’s really happening is that the Fed is blowing one more bubble in the bond market. When that one crashes the economy will be even worse than before and we’ll be right back into this same mess, except the Fed will have run out of wiggle room in their interest rate policies. Once you’ve cute rates to zero and lowered the thirty year note down to 3-4%, you’ve started to run out of monetary shenanigans to pull. That’s when things are really going to get interesting.
My regular readers have probably noticing that I haven’t been posting as regularly lately. That’s due to two things: spending time with family during the Christmas holidays and studying for the series 7 exam. I’ve made roughly 20% or more for the last three years and so I’m working to hang up a shingle and start managing money for people. And that’s requiring some study on my part. But fear not. I will be returning to California and my old routine on Monday.
Till then. Happy New Year.