Monday, August 8, 2011

Morgan Stanley on gold, 2010 and 2011

Can you spot the difference?

June 2010 (article wrap-up)
Some gold bugs are throwing about very aggressive price targets of $2,000 or $3,000 an ounce, from levels of just over $1,200 an ounce now. ... ...If the yellow metal does reach those levels, it would form a bubble of epic proportions. From an asset allocation standpoint, owning gold at current levels makes sense only if an investor's view of the world is outright bearish. If not, gold is likely to underperform other asset classes from hereon, in line with its long-term performance history. (The author is head of emerging markets at Morgan Stanley Investment Management)

“We continue to strongly recommend exposure to gold, not only as a consequence (of) the events of the past week, but also through next year, which reflects our conviction that heightened demand for safe-haven commodities will be sustained by lingering investor concern over sovereign debt and growth risks in the U.S. and Europe, all occurring amid historically low real interest rates,” Morgan Stanley says. 


"One mustn't look at the abyss, because there is at the bottom an inexpressible charm which attracts us."
However, I'm not the only one in America asking where do these S and P punks get off downgrading US bonds when three years ago they wore out their Triple-A rubber stamps on the cartloads of stinking offal that Angelo Mozillo and other mortgage rustlers were pawning off as bond-fodder on every Frankenstein "investment opportunity" pumped out of the Wall Street CDO mills. Government officials were righteously seething over S and P's chutzpah, but I suppose when they tried to ring-up Eric Holder over at the DOJ they got connected to some call center in Uttar Pradesh where a friendly fellow named "Dale" picked up. China's government-run newspaper virtually spanked the US: "Learn (thwack) to live (thwack) within (thwack) your (thwack) means!"
     I'm not convinced that the US bond rating will even matter that much because nobody knows what anything is worth anymore - especially when governments teeter and the folks in the public square (or the parking lot in America's case), start yelling for blood. Merkel, Sarkozy, Berlusconi, Zapatero, will soon be swept away by that selfsame rolling torrent of dreck-strewn woe - in their case a bouillabaisse - while poor Obama looks like one of those hapless, floating creatures in the second-to-last scene of
O Brother, Where Art Thou. Even the gold bugs are scared the price will collapse in a debt deflation, or that the federal government will slap a giant extra-special punitive capital gains tax on precious metal sales, or will try to confiscate it from the public altogether like Franklin Roosevelt did - though, given the vast arsenals of private firearms across this land, and the martial spirit lingering in many pissed-off factions of the Tea Party ilk, nothing would invite a revolution, or civil war, or civic upheaval as surely as trying to snatch folks' gold. As a capital preservation refuge, I'm sympathetic to gold, of course, though not so much to buggery.