One of the things I like to do in all of my musings is to find some thing or person who is wrong about an investing-related subject, then trying to figure out where they went awry. On occasion, small pearls of wisdom can be derived from this analytical process, as in this discussion on narrative. Other times, the lessons are simply an exercise in snarky fun, as in the “12 Rules of Goldbuggery.”
Regardless, the underlying thesis is, “If only we can develop a set of intellectual tools to analyze investing errors, then we can apply them to ourselves and perhaps avoid making similar errors.” The hope is that some degree of self-awareness avoids the sorts of systematic gaffes we see every day.
That brings me back to the gold-industrial complex. I have criticized this group for their religious fervor, lack of discipline and deficient risk management. Their money-losing approach to investing via the narrative process, while ignoring the data in front of them, continues to bedevil unwise investors. Every possible investment has its own group of cheerleaders, including sales people and other dependents who want to see their particular asset flavor do well. It is in their own financial interest for prices to rise, so naturally they pay no heed to various warning signs.
Gold’s fall below $1,200 an ounce last week is the reason I bring this up again. Reaching its lowest level since early 2010, as other precious metals such as silver and palladium are at or near five-year lows, is a good enough occasion to remind some readers of the errors of their ways.