Thursday, February 19, 2009

The Dow and Gold and a Parable

Today Dow has hit it's lowest low of 7,569.81 of the last 6 month. On November 20 it hit 7,552.45. The S&P500 dropped beneath 800 today, as well. Oct. 2002 the low was at 7,286.27. I don't think we really have it bottom. If we don't turn it around very soon, I think we will reach lows we have not seen in decades. The Dow/Gold ratio has hit a new low, as well. In other words, Gold is expensive and the Dow is bad. Fear is driving the price of gold higher and higher.

I have a tremendous urge to buy gold today. It's really not the time to do so, or so my intellect tells me, but my emotional urge is to buy gold and put it in a (not quite literal) hole in the ground.

I suppose this is because in the doctor's office yesterday I read an amusing essay in a very old Newsweek about "Gold Parties." Then on TV, I saw those spots about selling your gold jewelry and getting quick cash. Finally, I watched Law and Order last night where one of the characters had hidden 200 gold coins in his desk for his heirs to find.

I made the mistake to look at my portfolio again -- it has lost tremendous value in the last few months, hitting an all time low today. So much so that I get sick to my stomach looking at it. Intellectually, I know that I haven't "lost" anything until I sell -- but that's not how it feels. Intellectually, I know that you shouldn't really buy gold in a bear market. Intellectually, I know that I need to consider the Dow/Gold ratio and buy only when I believe that it is at its peak.

I feel a huge urge to go buy gold and stick it in a nice hole in the ground. But wait! Isn't there a parable about that? Something about sticking a talent of gold into a hold in the ground? You know, a talent is 75 pounds of gold. That's not a little bit of money -- 75 pounds of Gold today would be around $900,000. Yikes! Why do we stick it in the ground? From fear. "The man who had received the one talent went off, dug a hole in the ground and hid his master's money." Should we allow fear to dictate our actions? I don't think we will be rewarded for that.

"He also who had received the one talent came forward, saying, Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you did not winnow; so I was afraid, and I went and hid your talent in the ground. Here you have what is yours.' But his master answered him, You wicked and slothful servant! You knew ...."

What to do? I think I will stick with it, not fear the future and pray for wisdom. "If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him" (James 1:5). Continue to reduce debt, earn all that I can, save all that I can and give all that I can.

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