Gold Bugs vs. Stock Bugs

The S&P500 ended the week, and the year, on a down note, losing 0.6% for the week.  Volume was very light, but that’s not surprising for the holiday season. Volatility ticked higher, but not in a substantially meaningful way.

Macro news was mixed.  The Case-Shiller home price index disappointed. Home prices fell more than expected, to all time post-bubble lows. Consumer confidence surprised to the upside, although it’s still near depressed levels. Initial jobless claims came in worse than expectations. And Chicago PMI was better than predicted. Internationally, especially in Europe, macro data was broadly disappointing. Europe is almost certainly entering a recession.

The year-end results for stocks are notable. The S&P500 lost a fraction of a percent to close at 1,257. The Nasdaq finished the year down 1.8%, and the Russell 2000 fell 5.5%.

What makes the losses notable are the year the predictions—from the Wall Street experts—made a year earlier.  Goldman Sachs predicted that the S&P would close between 1,450 and 1,500. Barclays, at 1,420.  Merrill Lynch at 1,400.  And Blackrock at 1,350.

The point is that not only did the “pros” get it wrong, but that they all missed by a wide margin and in one direction—they were all too optimistic, as is typical for Wall Street experts.


Because their job is not to be right.  Their job is to sell.  And it’s almost impossible to “sell” customers, or potential customers, on buying stocks when you issue bearish forecasts, even when you have reasons to be concerned about the chances of a stock market advance.

In short, Wall Street “pros” are paid to lie, to con investors into buying products that may or may not be in their best interest to do so.

And what’s just as odious is the way Wall Street “pros” disparage anyone who promotes investments that they do not sell, even if the investments are blowing away the performance of equities.

Witness gold.

Not only did gold finish the year UP about 10% (vs. a small loss for the S&P), but gold has RISEN for 10 consecutive years, while the S&P has barely gained any ground over the same period AND has gone on massive “roller coaster” rides, up and down, in the interim.

Yet ask any Wall Street “pro” to describe a gold investor, and you’ll hear the term “gold bug”.

The implication is clear—if you decide to buy (and dare to actually hold for an extensive period of time, as opposed to trade) gold, then you must be some sort of nut job, or a bug, who must be psychologically disturbed to want to own such a “barbaric relic”.

But once again, gold has been UP 10 years in a row.

It’s ironic then, that Wall Street “experts” are still pushing a product class—stocks—that have so massively UNDER-performed gold, and at the same time, are mocking gold investors.

If this keeps up, shouldn’t stock investors be the ones who are mocked? Shouldn’t stock investors be called “bugs”, or better yet, stock bugs?

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