Is The Golden Goose About to Lay a Brick?

I am hearing a lot about gold these days and so are my clients.  George Soros is reported to have sold all his U.S. stocks and switched to gold. Glenn Beck says you should own a lot of it.  Even Rachel Beck, normally a well reasoned financial columnist, recently wrote a column that would leave the reader to believe they should abandon stocks and split their portfolio between bonds and gold.

An email from a client today wondered if he should follow Beck’s advise.  I would not recommend it.  Remember the last time the pundits said financial instruments were dead?  It was in the late ’70′s when the rage was to buy gold, silver and real estate and load up on dried food.  Stocks had produced poor returns for a decade or more and were dead, just as useless as a dollar bill.

While that was true in the moment, it wasn’t true for the long run.  It was just a few years later that stocks began their bull run that lasted 17 years.  What happened to gold?  After peaking at over $800 an ounce in the early 80′s it hit the skids for the next 17 years, declining by almost 75%.

While I am no fan of the current U.S. economy or eco-political direction, I am not about to abandon U.S. stocks.  I told someone recently that since almost no one is suggesting a person load up on U.S. stocks, now is probably a great time to buy.  Since U.S. stocks are about the worst performing asset class of the last 10 years, they are probably set to be the number one asset class over the next 10 years.  It may be gold and commodities that take U.S. stocks’ place as the worst performing asset class of the next 10 years.

If you have a diversified portfolio with five or more asset classes (I use 10), stick with it.  If history is any indicator, it will do well in the coming years.