Why Gold is a Terrible Investment (Unless You Give It to a Lady Friend)

Stop buying gold people. Gold is not the world's hard currency. It is not a permanent store of value, in fact it is one of the most speculative, and crooked markets out there.

The only true world currencies are fossil fuels, fresh water, and trust. Now when I say trust I don't mean it in an ABC family special sort of way. I mean it in a credit rating type of way. For instance, many people do not Trust that Greece will give them back the money they borrow from them, therefore, their trust currency is worth very little and creditors ask for arms, legs and other things to compensate them for the risk of not getting their money back. In places like Argentina a few years ago people did not Trust that the paper money they held would be honored by their grocer and therefore it became worth very little (a la hyper-inflation).

We know that people will need to consume energy, and therefore, there will always be a market for fossil fuels (sorry to people who think we can live in a world of solar powered cars). And there is a growing and alarming limit on the amounts of accessible and potable (read, drinkable) water in the world. Investing in companies that provide this may prove a wise move in the long term...just sayin.

Which brings us back to gold. Gold is used for earrings, necklaces, rings, coins, small amounts in fighter plane windshields, and the big bars you would find in Fort Knox...nothing else. (I am sure that if more people read this I could get challenged on this point by numerous other uses, but they don't so I'm not worried) Other than that it is something pretty that only became popular as a currency because of its malleability. They could make it into bars and coins easier than things like iron and bronze. (That's why you see pirates bite the coins they barter with, to see it leaves a mark.)

Bottom line, gold is a terrible investment. 1) There is no way to determine a fair-value on something that has no practical use. 2) At $1200 an ounce, however, I am almost ready to raid my wife's jewelry box (if the people buying it at the "Gold Stores" weren't all crooks) 3) You can tell when asset has hit the bubble stage when you start seeing EVERYONE trying to get in on it. I dont know about everyone else, but I listen to the radio and hear fifteen commercials about Buy Gold Now! Sell us your Unwanted Gold! Does anyone remember shows like Flip This House, and commercials to buy houses with NO MONEY DOWN. I think we all know how that story ended. I cant say that gold prices will plummet tomorrow, hell, they could double if a state or two in the US start issuing IOU's. What I am saying is that buying gold is like buying Beanie Babies in the 90's. Your kinda rollin' the dice.

Do like my buddy John and put down for a house. That is something with a practical purpose and real demand.

What is the Kraken?

This is my very first blog post. I would like to use this opportunity, much too late at night, to answer a question that I think may be on the minds of anyone who ventures onto my humble site....What is the deal with the Kraken?

To answer that question, allow me to set a quick back drop. The Kraken is a mythical sea-monster originating in Scandanavian folk-lore. This creature was reportedly so massive that it could drag the largest known ships underwater, and it would be mistaken for an island if sighted above the water. Much like the biblical Leviathan, the Kraken was a creature of destruction, and represented nothing good for the sailors of antiquity.

So why am I naming my blog about financial markets after a gigantic sea-creature of ultimate destruction? Good question, and its mainly because of the poem from lord Alfred Tennyson, who describes the Kraken as a sleeping giant with near-infinite tentacles with near-infinite reach. Some more on that after a quick story...

One day I was talking to a colleague about a book I was reading about small business development, and said I was helping a friend who was trying to launch a start-up. She responded by saying "well you just have your tentacles into everything, dont you?"

At first blush I felt a little put-off that I was told I "was getting my Tentacles into everything", and (even though I am very happily married) it added a little extra sting to have that kind of comment come from a female, ("my tentacles? What the heck are you trying to say, Lady?"). However, it didnt take long for me to get over my initial worry of getting slammed, and realize that it was just an expression meaning I had my hands in a lot of pots.

I extended that out to the Kraken as typifying the way I try to approach learning about financial markets: Read everything you can and work on increasing your intellectual and compentency "reach". In investing, everything is relevant, and all data can be considered in making decisions, therefore it stands to reason that you had better at least be literate in as many areas as possible. Just like the foxes and the hedgehogs of Isiah Berlin, who says that some thinkers are hedgehogs and burrow down into a topic and become the resident expert of that particular discipline, while others are foxes and jump around and dig a little in a lot of different areas. The problem with the hedgehog is the same one that faces the carpentar who only holds a hammer. All problems look like a nail!

So in a long winded way, thats why I named this blog Kraken Capital Watch, because I try and spread my tentacles out as far as they can reach to devour as much information as possible.