Thursday, September 29, 2011

Stocks Versus Gold: Which Would I Choose Now?

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G&G Associates
Tax & Financial Consulting Services
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Stocks Versus Gold: Which Would I Choose Now?

Karibu (Welcome) G&G Readers,

About 10 years ago, all investors wanted were stocks.

Gold was for losers… or so it seemed.

Based on the returns of the preceding 20 years, the stocks-versus-gold debate was open-and-shut:

Stocks vs. Gold

Over 20 years: 12/31/79 to 12/31/99
Stocks Up - 2,460%
Gold - Down 44%

Back then…after the dramatic run up, stocks were overpriced. Gold was cheap.

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But … "NOBODY" was interested in gold at the time.

For the masses to pile into gold, they need to believe that… our nation is at risk… that the dollar is going to fall… and that inflation is going to appear. And most important, they need to believe that the men at the controls are no longer in control…

It will be hard to convince investors of these things. Investors haven't worried about any of these things for many years now – if they've ever worried about them.
Now, all those things are true. But what happened?

Since then, gold has not had a losing year. It's up from $288 on December 31, 1999 to $1,650 today, for a gain of nearly 500%. Meanwhile, stocks around the world have done nothing.

Take a look:

Stocks vs. Gold

Since Then: 12/31/99 to 9/23/11

 Greece (Athex Composite) Down 80.7%
 Italy (MIB) Down 57.0%
 Japan (Nikkei 225) Down 39.5%
 France (CAC Index) Down 36.8%
 England (FTSE 100) Down 30.2%
 United States (S&P 500) Down 22.8%
 Gold Up 472.9%

But today… after gold is up nearly 500% and stocks are down over the last 12 years (roughly)… all investors want is gold.

When asked, "Which of the following do you think is the best long-term investment?" 34% of Americans answered "gold" in a recent Gallup poll. (Real estate was in second at 19%, followed by stocks/mutual funds at 17%.)

I was amazed by this answer… Gold is up nearly 500% and stocks are down. Which do you think is closer to the beginning of a new great bull market… stocks or gold? Which do you think has hundreds of percent upside from current levels… stocks or gold?

If gold doubled, it'd be $3,300 an ounce. If the Nasdaq doubled, it would still be below its highs from over 11 years ago.

While most Americans now overwhelmingly believe gold is the best long-term investment, I think we're seeing once-in-a-lifetime values in the stock market. This is the first time in my investment lifetime I've seen values like this in stocks.

I personally think what we're seeing is a major correction in the gold bull market – a bull market that is already a decade old.

Meanwhile, I think once stocks finally bottom, which they haven't, we could have one of the greatest buying opportunities in the history of the stock market. The values we're seeing right now in stocks around the world may be the best values you will ever see in your lifetime.

Stocks? Or gold? Which to choose?

I say "BOTH"… Gold has had a major correction. And stocks are literally as cheap as they get. When the uptrend returns in both, I will buy.

The key will be what to buy. Ahh kimosabe … that's where the problem lies for most people. The average American has no clue how to take advantage of these opportunity.

Quote: "Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning."
J. Carter

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Metta (Wishing You the Best)

Asar Maat Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
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"Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning."
J. Carter

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LEGAL NOTICE: This work is based on what I've learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice.

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