Ask Stacy: Who the Heck Do You Think You Are?

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In this edition of “Ask Stacy,” we have a viewer who takes violent exception to the recent story called 3 Places NOT to Put Money Now. It’s a video and article we published on Jan. 24. In that story, I suggested gold might be an investment to avoid this year.

Here’s the email, in its entirety. I normally correct spelling and grammatical errors in the emails we reprint, but for reasons that will be obvious, I’m putting this one up the way it was submitted.

Hi there, just want let you know you are so ignorant that is not funny at all. You are misleading people by telling them not to buy gold. Now that I understand your IGNORANCE I am going to ask who the heck do you think you are providing such ignorant message to the masses? Have you heard about the word inflation? It is here and we are all paying for it, at the gas pump and the our daily food. So how dare you tell people not invest in an investment that can help them preserve their savings against inflation? Who do you think you are? what are your credentials? If I had the urge and the drive I would have given your name to FCC for airing misleading propaganda.
Be careful, cause I am one step from that. So retract your BS.

Here’s your response, Bruce!

First, let’s go back and take a look at the part of the above story that references gold. Here’s a cut-and-paste that includes everything I wrote concerning gold.

Investment to Avoid: Gold

In a recent article called Gold is a bubble – resist its charms, CNN/Money makes the case that gold is over-priced and due for a fall. Gold has nearly tripled over the last five years – this is a party that could soon be winding down.

From that article…

“When the economy moves from recession to prosperity, there will be little reason to own gold,” says Mark T. Williams, who teaches risk management at Boston University. “And speculators will learn the hard way that gold in times of financial stability is hazardous to investor health.”

As I suggested in the video above, behind the speculative fever that’s driven gold to historic highs is a fear of runaway inflation, global economic Armageddon and other nightmare scenarios. As an improving world economy helps dissolve some of these fears, the need to own gold will decrease, and perhaps, so will prices.

As you can see, much of what I said was a quote from a teacher at Boston University, so maybe he and the writers at CNN Money should also be afraid of the FCC for spreading “propaganda” – or, as it’s more commonly known, “an opinion.”

But we’re not the only ones who should be afraid of the Federal Communications Commission. The airwaves and Internet are filled with opinions on gold prices, both pro and con. Here’s another recent example from this article in Bloomberg from Feb 2

“No one expects gold to return 30 percent like last year,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “The economy is doing better, and it takes away the bid for gold.”

It’s unclear from Bruce’s email whether all opinions on gold are enough to spark an FCC investigation, or just those that disagree with his. But there are plenty of people who think gold is still a good investment for the exact same reason he does: as an inflation hedge.

And they could be right, at least about the threat of inflation. Many countries around the world are already experiencing increasing inflation, and as the world economy continues to recover, some raw materials prices are heading higher in a hurry. According to a recent article in the Wall Street Journal called How to Profit from Inflation

During the past six months, oil has jumped 9%, copper has gained 36% and silver has shot up 56%. Agricultural products have soared as well: Cotton, wheat and soybeans have risen 100%, 24% and 42%, respectively.

The Journal and Bruce agree that higher prices for raw materials will lead to higher prices for food, as well as manufactured goods: That’s the textbook definition of inflation.

Where the Journal and Bruce don’t see eye-to-eye, however, is how effective gold will be as an inflation hedge. The author of the Journal article suggests gold might not work for the exact reason I gave: It’s already moved too much. More from that article…

Gold is another traditional inflation hedge that might be less effective now. With prices already having more than quadrupled over the past nine years, many strategists see substantial inflation already factored into the price.

But as I said above, there are plenty of people who are on Bruce’s side: They’re convinced gold’s going higher. One of many examples? Respected investment manager Jim Rogers, who said this in a Reuter’s article last May

“I certainly expect gold to go much higher over the next few years. Paper money is going to be debased and the price of real assets will be enhanced.”

So who’s right, me or Bruce?

To be honest, I haven’t the slightest idea. I thought long and hard before naming gold as an investment that might not perform in 2011, because I can see the other side of the argument. But after doing a bit of reading, I formed the opinion that Bruce labeled ingorant propaganda.

Proponents of gold, including Bruce, could be right: Gold may continue to shine. If it does, however, that’s OK, because I still own about $15,000 worth of a gold ETF in my real-money online portfolio. But at the slightest hint that the gold bubble is about to burst, I’m gone.

A few final thoughts:

  • If you’re going to write and call me ignorant, you might want to check your spelling and grammar first.
  • Rather than ask who I think I am, or ask for my credentials, simply read about my background here and find out.
  • If you’re so enamored with an investment that you rabidly defend it without even considering other opinions, sooner or later you’re going to have your hat handed to you.

Got more money questions? Browse lots more Ask Stacy answers here.

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