Financial Doom: Is This Time Different?

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"I'm only rich because I know when I'm wrong — I basically have survived by recognizing my mistakes." George Soros

Strebler's Perspective:

I think of the 1980s and 1990s as sort of the “bounce around” decades. During those 20 years, I lived in San Diego, then southern Oregon, then San Diego, then northern Idaho, then San Diego. I was, in order: a broker and market analyst, a college professor, a broker, an investment adviser, a high-school teacher.

Gold had two similarly bounce-around decades, but they were twenty more frustrating, less productive years than mine. Shown on this chart from USAGold.com, we see the two decades framed within the goalpost-shaped black lines. Starting off around $850, down to $300, up to $500, down to $300, up to $500, down to the low $300s up to $400, down to $255 – THAT is the sad, mostly downward history of gold prices between the great bull markets on either side of those two decades.

gold price 1970 to 2008

The ’80s and '90s were extremely frustrating and unprofitable times for the yellow metal’s True Believers, yours truly included. I had witnessed and benefitted from the great 1970's gold bull market and thus, expected more to come! Time after time, year after year, we thought gold was finally getting something going on the upside. The non-stop series of budget deficits, we believed, meant that the dollar, real estate, and the stock market were all finished. True redemption, in the form of crashing stock and real estate markets, were just around the corner, we heard over and over again. The precious metals would soar, making us wealthy and leaving the vast majority - the poor, ignorant masses - wondering what hit them.

Instead, the US and the world moved forward and huge fortunes were made in stocks and in real estate. It was our voices of doom that were out of step with reality, not the other way around. Those decades are burned into my long-term memory, much as the hardships of the Depression were burned into the minds of people who lived through the 1930s. So with some signs that the long bull market in gold that started in 2000 may now be over, forgive me for fearing the possibility now of years of sideways to lower prices. And forgive me for questioning the inevitability – right around the corner! – of the dollar’s collapse and the ascendancy of gold to its rightful place many times higher than current prices. I understand the rationale behind that narrative, but choose to look for confirmation in the markets themselves, rather than blindly accepting the latest promises of financial doom.

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