Pet Rock

Ever heard of the phrase, “dumb as a box of rocks”? Some rocks are pretty valuable these days. Especially the yellow, shiny ones.

Gold has been on a tear. Since the equity market topped out in the summer of 2000, the mystical metal has been the investment of choice, rising three and a half times, or 17% per year and outpacing 85% of the stocks in the S&P.

Gold’s recent performance has many questioning the wisdom of “fiat” money, which is created by the banking system. The current inflation and unemployment scare is reminiscent of the ‘70s, when the US suffered the consequences of closing the gold window.

Now many “gold bugs” are arguing that we should base our money on the shiny stuff again. They look back with longing at the low-inflation 50s and 60s, forgetting about industrial malaise, an overvalued dollar, and capital controls. The gold standard led to financial instability as the economy grew but the money supply didn’t.

Gold may be a dumb rock, but basing a modern economy on it would be even dumber.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T20:13:50+00:00 July 17th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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