Time to Buy Gold?

Holding Gold CoinI had a conversation with a friend recently in which he told me he was going to buy some gold as a result of the declining dollar and political unrest.  The chat went further down the path of needing something in the case of collapse of our economy and our currency.  While gold has performed well as an asset class (it’s not an investment) in the past, I cautioned that the time to buy gold was 10-15 years ago when nobody cared about it.  Since then it has been sensationalized in the news and would not be a smart buy.  The “smart money” has already sold out of their gold or has kept some and is looking to add fuel to the irrationality that the market is showing towards some metal that doesn’t really do anything other than sit there.

I have always maintained that it is important to be a good steward of your own personal economy, since that’s the one thing that you yourself can control.  This is why fundamentally, I have a problem with holding gold based on most reasons, including news sensationalism and irrational panic.  Gold does nothing for you.  At least nothing like what true investments such as learning a new skill, buying some real estate or company stock, going to college or trade school, or even taking a vacation.  Our county was not built into the beacon of free markets, and wealth creation based on holding some yellow rocks, but instead on the principles of self improvement, ingenuity, and productivity.

FPO investment concepts

Good Evening FPO Readers,

The information below outlines the FPO investment concept.

1. Our investments should be in asset classes that yield a product, not in items that can only appreciate and do nothing. Examples of this principle include timber land, oil wells, banks, rental property, rental equipment, agriculture, manufacturing, and even music and theatre.  For example, while gold itself does not adhere to our investment concept, owning the production of gold does.  The recommended method for this is direct purchase of stocks, bonds, and convertible securities of well managed mining companies.

2. Our investments, regardless of asset class should minimize middle-man activities. This primarily speaks to commissions.  This means trading an asset as cost effectively possible.  The goal is for us to prosper based on our assets, not for a broker/salesman to prosper on our assets.  We do the research and know what is right for us.  With the dominance of on-line trading, low-cost software can now handle most all of the middle-man tasks.  An example of this would be if we wanted to build a exchange traded fund for the entire gold sector, rather than buy a proportional group of shares of each of the companies, we would aim to build a simple, yet highly representative portfolio.  As long as adequate representation is met, this portfolio may consist of a mix of fewer stocks, gold futures contracts, derivatives, and owning corporate debt for a specific investment capital lending bank to the majority of the mining industry.  If this course of action reduces ownership costs, while meeting the same investment objectives, then it meets the second FPO investment concept.

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