Why Gold Is Still a Good Investment

Here is an opinion piece from the Daily Reckoning:

by Bill Bonner

Nothing much in yesterday’s market news…so we turn to a remarkable article that appeared in MONEY magazine, proving that MONEY doesn’t know anything about money.
(MONEY Magazine) – Can you tell when a boom has turned into a bubble? One clue: When pop culture starts paying attention. The housing bubble, for example, brought both the TV show Flip This House and a rival on another network, Flip That House.
So if you own a lot of gold, you might regard a recent episode of Saturday Night Live as your first warning. In the opening skit, Bill Hader as China’s President Hu Jintao declares that Glenn Beck was right and that “my government should have bought gold. Unfortunately, all our assets were tied up in US Treasury bills.”
Back in the real world, gold is trading at about $1,400 an ounce, up from less than $500 five years ago. That’s a 23% annualized return, far outstripping the gains on stocks (1.1%) or bonds (6.1%). Fear is driving a lot of the rise.
MONEY has a point. But not a good one. When pop culture gets excited about an asset class – tech stocks in ’99 or housing and finance in ’06 – you know it’s late in a roaring party. It’s just a matter of time before the neighbors get mad and call the cops.
But the MONEY writer missed the point. Pop culture has to take the bubble asset seriously. Not as a joke.