Gyroscopic Investing

Morningstar "asked readers in a recent post to our Personal Finance discussion board to share what's on their investment blacklists."  In the article summarizing the results, the blacklisted investment first discussed was...wait for it...gold.  Some readers who replied viewed it as "the ultimate sucker's bet." Morningstar didn't report that any readers defended gold as a sound investment.  Volatility was cited at a significant negative factor, and I was surprised that, even in the comment section of the article, nobody addressed the potential benefit of exploiting volatility through disciplined rebalancing.  Additionally, readers cited the lack of dividends as a detractor, but nobody listed high flying growth stocks that pay no dividends as worthy of the blacklist.

Why does gold seem to be such an "emotional" investment and how can the mainstream be so mistaken?

Gold is just one of those things that inspires extremely strong feelings from people. Outside of this forum it is rare for me to come across people with a neutral or nuanced view of it. In my experience 90% of people who are investment literate, either loathe it or have a near religious faith in it. Trying to rationally discuss gold's merits and shortcomings with most of them is an exercise in futility.

It is because at it's core, gold represents doomsday insurance.  Thinking about an economic crash is scary.  I've even given up talking about prepping to people who aren't already doing it. 

You can take an otherwise perfectly rational person who buys life insurance, fire insurance, health insurance and car insurance... but suggest that they keep a month's worth of food and water as "food insurance" and they look at you like you're crazy.

Gold is the same way.

Coffee wrote: It is because at it's core, gold represents doomsday insurance.  Thinking about an economic crash is scary.  I've even given up talking about prepping to people who aren't already doing it. 

You can take an otherwise perfectly rational person who buys life insurance, fire insurance, health insurance and car insurance... but suggest that they keep a month's worth of food and water as "food insurance" and they look at you like you're crazy.

Gold is the same way.

+1

I drank the boglehead kool-aid for a long time and didn't really get into gold until I learned about the pp.

Only after I started taking gold seriously did I go back and wonder why so many investors feel so strongly about it, and especially against it.
I agree with the doomsday stuff above and I also think the "barbarous relic" cartoon in Craig and Tex's Permanent Portfolio book gets to the heart of it.
Are other commodities on the blacklist, cnh? In the forseeable future, we can still grow coffee and raise hogs but gold, as critics like to say, "just sits there." Mining it is a messy affair and perhaps most of it has been mined.

Now that we have Apple making data devices, Lockheed making jets and McDonald's making burgers, maybe gold just doesn't have the lustre (ugh. sorry) it had before the Industrial Revolution. Like a prom king / jock on the first day after the last day of high school, perhaps its heyday is over. I think that a lot of people see it as something backwards.

dualstow wrote: ." Mining it is a messy affair and perhaps most of it has been mined.

i took tour of a California gold mine and they were talking about starting up again, the mine was one of the gold rush era boom mines and has been inactive (tourist attraction only) for quite a few years..  i believe they said that California still has many times the amount of gold that was pulled out in the gold rush, but the cost of getting to it keeps them from mining.  i suspect there is plenty left just it is not easily or cost effectively accessible

dualstow wrote: Are other commodities on the blacklist, cnh? In the forseeable future, we can still grow coffee and raise hogs but gold, as critics like to say, "just sits there." Mining it is a messy affair and perhaps most of it has been mined.

Commodities didn't appear to figure on any investor's "blacklist"--at least not for the article's writer and any of the investors who commented.  Interestingly, long-term bonds and TIPS made the blacklist, though.  The chief complaint about long-term bonds was too much volatility relative to intermediates without enough extra yield to compensate...essentially, too much risk, not enough reward.  TIPS were viewed as having had a good run, with too much short-term downside potential given the interest rate environment.

I guess I'm not surprised about the long-term treasurys being on the list. I've been reading bogleheads for six years -- of course their forum began at morningstar -- and seldom did I hear praise for LTT. Everyone seems to have been gaga for TIPS a short while ago. I guess the love affair is over for now.