Wednesday, December 10, 2008


A typical investor's time horizon is not infinite. We want our money to grow for a certain period of time and then we want to do something with it. The buy and hold forever mantra pushed by traditional financial planners and managers and columnists like Ben Stein is perfect, but only if we are in a long-term/secular bull market for stocks. We're not and haven't been since the year 2000. Having 5 or 10 year returns that are near zero or negative can be devastating to portfolios when it happens at the wrong time.

Let's take a look at the scoreboard of recent financial history, using today's closing prices. The effects of dividends, inflation and yields on cash were all ignored, so this table is not 100% accurate (what do you expect for free?):

The important thing to realize from this table is that these long-term/10 year trends are set to continue for a while longer. There is no reason to "suffer" through a long term general stock bear market when there are viable alternatives. Cash will continue to outperform stocks for a while, but I'm not interested in generating zero to slightly negative returns on my money. The yield on short-term cash is now well under 1%, so why not hold physical gold as a cash equivalent with a greater likelihood of substantial appreciation over the next few years?

Gold stocks roared today and I wanted to show you a one year chart of a mid-sized gold miner that I follow and own a little of as a long term investment, Kinross Gold (ticker: KGC):

The current first mini-leg of this gold stock cyclical bull market should be over before the end of the month and those not in the game yet should wait for the subsequent 1-2 month correction to buy into the sector.

Wikinvest Wire