Following the insiders to gold

By WND Staff

Editor’s note: The following is a guest commentary from one of WND’s sponsors, Kevin DeMeritt, president of Lear Financial. If you would like to learn more about investing in precious metals, take advantage of the free information Lear Financial is making available to WND readers.

The investing majority always seems to get it wrong.

They almost always do. Most investors follow the TV talking heads like puppy dogs, always falling for their same lines, always buying into their eternal optimism. These are the same lines, by the way, that give the “insiders” a really good chuckle.

“Ironically, as the world’s best investors get out of stocks, move out of US bonds, and move heavily into cash and foreign securities, Mr. and Mrs. Mutual Fund are still piling in. But that’s par for the course. Mutual fund buyers tend to have all their money in stocks and bonds at the market top and all their money in cash at the market bottom. They’re right on track once again,” observed financial professor, Jamil Addas.

Mr. Addis is referring to the fact that today’s typical mutual fund investor has 72 percent of his assets in stocks and bonds and only 28 percent in cash. This “irrational exuberance” was exceeded only on the eve of the puncturing of the greatest stock market bubble in history. In 1999, investors had over 76 percent of their investment assets in stocks and bonds and only 23.7 percent in cash.

Once again, the majority seems to be on the wrong side of financial reality.

What is it about investment dynamics that cause so many investors to make unprofitable decisions? Why do they zig when they clearly should have zagged? Shouldn’t investing be as simple as watching what the investment “insiders” are doing…then copy them?

Apparently not.

What the insiders are doing …

Just in case you’d like to know, here’s what some of the biggest insiders are up to.

  • Warren Buffett is now holding $34 billion in cash – with most of it in foreign currencies. In his previous 50 years as an investor, he’d never bought foreign stocks or currencies. Now he owns billions of both,” Professor Addis noted. Buffett has admitted he could find “few if any stocks to buy which fit his valuation criteria.” The Financial Times recently wrote, “The last time Warren Buffett chose to sit on the sidelines with anywhere near this much cash, it was a precursor to the largest stock market bubble in history.” Meanwhile, Buffett recently spoke in Fortune magazine of “building his ark.” He already owns 4,000 tons of silver and, some believe, is adding to this precious metals portfolio.
  • George Soros already has substantial holdings in precious metals. In Kosovo, he has invested in a shrewd attempt to gain control of the Trepca mine complex, where there are vast reserves of gold and silver.
  • “Granted, he isn’t a disinterested party, but Pierre Lassonde, Newmont Mining’s president and owner of almost $100 million of its stock, believes gold is at the beginning of ‘a paradigm shift’ to higher prices, driven primarily by a deteriorating dollar.” – Barron’s, July 5, 2004.

And what they’re saying …

  • “The stock market may go up…for a while. But happy days may not necessarily last – except perhaps for gold,” – Peter Brimelow, CBSMarketWatch.
  • “Gold is the no-brainer investment of our lifetime.” – Rick Ackerman,
  • “If you are not buying gold at these prices, then you are not competent to manage money or make economic commentary.” – Richard Daughty, The Mogambu Guru,
  • “Gold is the buy of a generation. Gold is in the 9th inning of a bottoming process and my conservative price range is $450-$550, with upside potential of $800 plus!” said the Chief International Economist at Merrill Lynch.
  • “Gold has proved itself to be the ultimate contrarian bet against the market over the past three years.” – Stephen Schurr,
  • “Bargains abound in gold coins — from those in adequate supply to true market rarities. The downside is almost non-existent.” – Dr. Steve Sjuggerud,
  • “My instinct all along has been to buy into the ultimate island of safety, real money commonly known as gold. And lately, (although I own both) my instinct has gravitated more to the actual metal than the stocks.” – Analyst, Richard Russell.

What the ‘ultimate insiders’ are thinking

  • “When two such experienced and understated executives as Bob Rubin, former secretary of Treasury, and Paul Volcker, former chairman of the Federal Reserve Board, join the many others who fear these twin deficits, I listen. Bob Rubin says we are confronting ‘a day of serious reckoning.’ Volcker predicts we face a 75 percent chance of a crisis within five years. If confidence in the stability of the dollar is shaken, investors could … switch to gold,” wrote Financial insider and former New York Fed Chairman, Pete Peterson, in his new book, Running on Empty.
  • While Merrill Lynch believes gold will top $500 an ounce this year, Barron’s published a recent prediction that gold’s rise could exceed $800 an ounce.
  • “In their own ways, the world’s best investors and the world’s patsies are telling us it’s time to be cautious in stocks and bonds. Expensive stocks and inflation don’t mix,” said Professor Addis.

The thing is, you may never have heard these “insiders” giving such pro-gold statements before. The mainstream financial media is pretty “selective” about what it reports. But as long as you can sense what lies in store for gold and aren’t fooled by the TV talking heads, you should be all right.

Bottom line? Follow the smart money and diversify, at least a little, into the same gold and silver the insiders seem to be quietly buying up.

Special for WND readers, Lear Financial is making available free information on investing in precious metals.

With more than 20 years of industry experience, Kevin DeMeritt is president of Lear Financial, one of today’s fastest growing and most successful precious metals investment firms.