I am a nonstop student of investing and investments.
Almost every day I read both the Wall Street Journal and Investor’s Business Daily. I’m also a fan of Porter Stansberry, Dr. Steven Sjuggerud, Dr. David Eifrig Jr. and their investment newsletters. I regularly check the interplay of various currencies compared to the U.S. dollar.
It has recently become apparent to me that commodity investments are highly correlated to stock market performance. For years, many investment advisors have advised that you should invest in real assets as a hedge (insurance) against a downturn in the stock market.
But during the last few years it has become obvious that, just as the S&P 500 moves up when investors are optimistic about the U.S. economy, so do the economy-related commodities of oil, natural gas and silver. When investors become pessimistic about the economy, then both the stock market and the value of oil, natural gas and silver fall.
In my experience with retirees who wished to pursue active investments, many of them had a misplaced faith that they could “beat the market.” In most cases, the market beat them.
Is gold the answer?
With the recent economic downturn, it seems that there has been a real push for people to purchase gold. It has been touted as being able to beat inflation and that it can forever hold its value.
Yet gold may not be all it’s cracked up to be as far as an investment. There a several reasons for this. First, unlike paper currency, whose value is impossible to manipulate, the same cannot be said about gold. In fact, by virtue of the fact that a group of connected buyers can accumulate the asset – essentially eliminating a large amount of its supply – a cornering of the market can essentially take place, resulting in an upswing in price. After which, however, these same buyers can soon sell the asset back out into the market again, replenishing supply and resulting in a huge drop in price. In this vein, it is important to remember that there is a limited supply of gold. And because of this, prices can be quite unstable.
A similar situation occurred in the silver market in the 1980s. Although the likelihood of this happening again is slim, investors should still proceed with caution when considering purchasing gold as an investment.
In addition, for over two decades, the price of gold hardly moved at all. Investors who had invested in the commodity essentially wasted their time and their dollars, waiting for the value to rise. And although the price of gold has recently risen due to the instability
of the other financial markets, this gold rush is not likely to last. When the economy does stabilize, it’s likely that the price of gold may stagnate again. A strong dollar could essentially destroy the price of gold, making it a poor investment – especially for those in or near retirement.
If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free. We’ll let you know what steps you need to take, right now, to protect yourself and your family. Call now.
Rick L. Law, Attorney, Estate Planner for Retirees.
Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future. Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care. Appointments available in Chicago, Aurora, Oak Brook, Schaumburg, and Joliet. Call 800-310-3100 for your free consultation now!