How Long is the Long Term?

The classic "Buy-and-Hold" strategy is starting to cost equity investors dear. But gold buyers...?

FORGET ABOUT MAKING MONEY, writes Doug Hornig – co-editor of Big Gold from Casey Research. Just keeping your head above water was an accomplishment over the past twelve months.

Consider the statistics (New Year's Eve 2007 to New Year's Eve 2008):

• US housing – down 18% nationally, by the Case Shiller index, and 30% or more in most major metropolitan areas;
• Domestic stocks? The Dow Jones Industrial Average was down 33%; Dow Utilities fell down 30%; Dow Transports down 21%; the S&P 500 lost 38%; the Nasdaq sank 40%. And if you were unfortunate enough to have invested in a financial-sector ETF, you lost at least 55%;
• Foreign stocks? The Vanguard Emerging Markets Fund, a typical example, came in at minus 55%;
• In the energy sector crude oil was down 59%. Natural gas lost 37%;
• Industrial metals took a whacking, with copper down 55%, nickel down 56%, and aluminum off 37%.
• Food did a little better than most, which isn’t saying a whole lot. Corn was down 17% in 2008; wheat lost 24%; live cattle fell 15%.

Enough. You get the idea. Every asset was mired firmly in the red in 2008, right?

Actually, no. The single exception – outside of US Treasury bonds, now paying next-to-nothing as the yields have tumbled – was Gold Bullion, which was up 5.6%. A modest gain in most times, but a phenomenal performance for a year where everything else tanked.

And if you managed to invest something other than US Dollars in the metal, you did even better. Gold rose 12% in Euros, 32% in Canadian or Australian Dollars, and a whopping 44% in British Pounds.

Nor is this an isolated phenomenon. In 2008, gold posted its eighth straight yearly advance. Since the beginning of 2001, it has averaged a better than 16% annual gain vs. the US Dollar, 11% vs. the Euro, and 17% vs. Sterling.

Your financial advisor likely tells you to invest in the stock market and be patient, because over the long haul stocks will yield an average yearly return of 9-10%. Well, maybe so. But it sure depends on how generous your time frame is.

Over the past eight years, gold has added 215% for US-Dollar investors. During the same period, the S&P 500 lost 22%. The DJIA is down 11%. And in order to show a profit with a simple buy-and-hold strategy (ignoring all rallies and dips), you’d have to go back to early 1999 for the Dow, and 1997 for the S&P!

Where was your money in 2008...? Or 2007...? Or the year before that?

2008 was a rough year, for everyone. But it's gone, and if you'd made a solid Gold Investment, you did better than most.