Wednesday, February 24, 2010

Is gold in a bubble?

"Tex Norton" writing for Whiskey and Gunpowder has some interesting thoughts on that subject.
Is gold in a bubble? Possibly, but if so, it still has a long way to go before the top is reached. The top will make itself known if you simply watch the market actions. In the meantime, what else can you do, if not invest in gold, to help protect your accumulated wealth?

Indeed, what else can you do?  Shorting stocks might be one reasonable possibility.   It just makes me very nervous.  How high can stocks go when the money supply is potentially unlimited?

Another idea that I'm currently considering is the purchase of 2 or 3 leveraged inverse ETFs.  The idea is appealing.  These ETFs are designed to achieve a return of 2 or 3 times the opposite of the benchmark they are based on.  (FYI, I'm considering small investments in EUO, SRTY, and TBT.)

I really don't like the idea of leverage.  Truth be told, I think these leveraged ETFs are built on the house of cards that is our financial system.  I wonder though, if a person whose investments are largely weighted towards precious metals might be well served to have a small (maybe 10%?) investment in one or more of these.

If you decide to, please be sure to research thoroughly before you invest.  Even the people at Proshares include this warning, among others:
ProShares ETFs may be appropriate if you intend to invest in them as a portion of a portfolio, not as an entire portfolio.




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