I have a customer who wants to turn $200,000 of diversified investments into silver. He's in his early 40s and thinks silver will go like mad for a time. Mostly, he's in a panic state about the country. He couldn't answer the question as to how he would know when to get out of the metallic stuff, the same thing Lone Ranger used for making bullets, and take a profit. My suspicion is that he, like many, will turn $200,000 — carefully accumulated over years — into $100,000. Then, in desperation, try to recoup his losses and turn $100,000 into $50,000. You know how it goes. I've been doing this stuff for 42 years, and I've seen it happen again and again.
We all know that the key to investment success is a combination of diversity and tactics. I think diversity is more important, but both are significant considerations. If you are one of the analysts at Ivy Asset Strategy or Blackrock Global Allocation, you probably know approximately when to get in and out of gold (or silver), which the fund may temporarily use as a proxy for cash. I'm no slouch at investing, though, and I don't have a clue when to get in and out, which is why I use very tactical managers to manage some of my customer investments.
I hate gold and silver. It does nothing. Oh, there is some use for the glittery junk — electronic stuff and medical equipment, for example — but most of it sits in vaults, dormant. I worked out in the Investment Edge last year that the annualized return through some point in 2010 had been something just over 1% yearly. If Armageddon comes, I don't think the gold in the vaults will be of much value. Guns would probably be better. Besides, how do I hold my precious metal? How do I transport it? Did I mention that I hate gold and silver? Was it Mr. Buffett who said, approximately, that men worked hard to get the gold and silver out of the ground so that they could put it back into the ground?
