Gold is Now a Contrarian Investment

I hope you're enjoying your holiday. I spent my first Christmas as a father alone here in Vermont, with my wife and our 7 month old son.

We elected NOT to make the trek home to Pennsylvania this year, which is always a hectic and whirlwind visit. But with a 7 month old, it would have just been unenjoyable and logistically challenging occasion.
 

And it's also my first Christmas (and my wife's) away from our families.

So, I've enjoyed lots of time with my son Beckett up here in Vermont, enjoying a very white Christmas.

Since Beckett is 7 months old, I have had some time to squeeze in some work while he naps…

Checking over my usually territory of the AP Newswire, the Financial Times and The Wall Street Journal, I noticed some news about gold I didn't think I'd see this year, let alone the next few years.

"Reduced interest in gold is among the promising signals for stock investors."

That's a caption on a photo from this story in The Wall Street Journal.

Usually, mainstream media outlets either ignore gold altogether, or they write very terse and specific stories about the price of gold going up.

But notice the change of tone. Gold goes down in price, and NOW the price of gold is a strong indicator that it's time to buy stocks.

It's twisted as good news – whereas when the price of gold goes up, there's no such judgment – or any judgment at all. It simply is.

I'm hesitant to say this, but after reading this article, I'm inclined to make The Wall Street Journal my new leading contrarian indicator – dethroning Time Magazine as the front-edge of bad and wrongly timed advice.

I encourage you to read The Journal piece for yourself and to come to your own conclusions, but all I see is a hack job written in order to lull more people into this bear market.

That's apparently the job of The Wall Street Journal now – not to report on financial news, but to encourage people to throw their money into mutual funds.

From the story:

"Worries still abound, but investors who have been waiting for a better time to get back into the stock market should stop waiting.

'By the time the news has turned decisively good, stocks will likely have risen a great deal,' says John Linehan, director of U.S. equities at T. Rowe Price Group, a mutual-fund manager."

Amazing.

T. Rowe Price couldn't write a better advertisement for their products themselves – unless of course they actually did commission this article…

I have yet to see an in-depth piece on mutual fund investing that talks about the very fast and loose relationship these funds have with too-big-to-fail banks, the SEC, Congress and the entire mainstream media.

Of course, for The Wall Street Journal, it's always a great time to be throwing money into a mutual fund. This piece in particular was loaded with actual ads for Wells Fargo, and Genworth Financial in addition to the funds mentioned in the actual body of the article.

There's basically no difference as far as I can tell between the article and the advertising.

But enough about the mutual fund industry and it's lackeys in the media, I'm more interested in the notion put forth in this piece that gold is now unpopular.

As the article says, "Gold, that favorite holding of the deeply worried, has tumbled since September, and cash inflows have withered for ETFs that track the metal."

That's a true statement. It's a bit judgment-laden – assuming that only deeply worried people would own gold. But it's true.

Gold has fallen since September. Somehow, the author of this article omitted the fact that it's still up over 12% year-to-date:
 

Interesting omission.

They also omit the fact that stocks are up huge over the past 3 months – the same exact period that gold fell.

So, right now, if you want to be a true contrarian, you should sell stocks and buy gold. You should always want to buy something after it's fallen quickly in price. Conversely, you should always want to sell something after it's skyrocketed quickly.

And as a final indicator, you should always lean towards doing the opposite of what the mainstream media tells you to do.

Right now, the shills at the Journal are telling you to blindly buy stocks – that we probably have hit a major bottom already and that you'll miss out if you don't buy right now.

At the same time, they're getting paid by the mutual fund industry to run 24 hour ads next to this piece.

You do the math.

Good investing,

Kevin McElroy
Editor
Resource Prospector