For years I stalked a gold YSL messenger bag. The first sighting was at the YSL boutique on 57th Street in New York. It was perched like a goldfinch on a shelf just out of my reach. The fabulosity of the gold glitter adorning an otherwise utilitarian city bag tickled my Marie Antointette/Madame Bovary genome. “Dare I”, I wondered?
I daren’t. Instead I opted for a perfectly respectable taupe shoulder bag in a kind of pebbled patent leather. Still, occasionally my mind drifted to the gold YSL that got away. I wondered how it was; where it was?
Occasionally it popped up on eBay, spit up like ambergris, on the waves of fashion. But ambergris, (for those readers not into perfumery, it is otherwise known as whale vomit), the ones that came up for auction were all ‘pre-loved’ as the resale lingo goes. In other words, the bags had been around town. And, friends, gold sparkle is not known for its durability.
In other news, gold, that investment stalwart, has fallen on hard times. Often viewed as a hedge against inflation, many investors liked to have at least a smidge in their portfolios—along with the rows of canned beans in their cellars. The rampant, multi-year bond buying program to the South stoked fears of rising inflation but that has not come to pass. If anything, interest rates are drifting lower raising fears of lowflation or deflation.
Still, in tumultuous times humans find emotional comfort in tangible things like gold, real estate, sable coats, and, as Dennis Gartman, a U.S. economist and editor of the widely followed The Gartman Letter, put it thusly, [things] “that if dropped on your foot shall hurt.” He’s also long steel, railroads, aluminum and, yes, even gold.
Some investors are adamantly opposed to owning gold. Warren Buffett makes a compelling case for avoiding this asset class entirely. According to Buffett gold has two significant shortcomings: it’s of no use and it’s not procreative.
Yes, it looks pretty on a wrist or finger but if you purchase an ounce of gold in 2014, in 2020 you will still own exactly one ounce of gold. But, if instead you buy 100 shares of Apple this year, there is high probability that your 100 shares will have earned you substantial dividends, as well as an increase in market value during the ensuing six years. Apple is constantly growing and innovating; the gold bar is not. (By the way, this same reasoning applies to currency-based assets like T-bills etc.)
Over the years I’ve taken small nibbles in gold in both large caps and micro caps. Unlike Buffett, I am agnostic on gold. Sometimes I own it, sometimes I don’t. Currently my only position is in a small gold mining company operating out of Burkina Faso. It doubled recently and I sold off half and now I’m left with the “market’s money”—and just as well given circumstances there which are fully reflected in the today’s share price.
Still, there’s something alluring about tangible things that come out of the ground.
Lately I’ve been flirting with graphite—the unsexy carbon. It could have great commercial applications in batteries for electric cars. There’s also a buzz about aluminum as a replacement for steel in car manufacturing to decrease weight and meet government-mandated fuel efficiency targets.
Graphite? Aluminum? Yes, they very far from the glamourama of 57th Street. But fashion never sleeps and neither does Mr. Market. So, until the next gilded age, try a more somber palette.