Bear Stearns Crumbles and What's up with Gold?

Posted by Michael Sexton on 3/18/2008 at 6:53 AM
Posted in Personal Finance

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As of the close of business on Friday last week, the price of gold had risen to a record high $1015 per ounce! A look at the chart of this commodities 5 year history and you might wish you bought some bullion bricks for yourself back then. Gold has more than tripled in value in the past 60 months and it may be all by accident.

It seems that since banks quit using gold to back up their monetary supply, the uses and demand for gold has greatly diminished. It’s not used all that much for jewelry either as other metals such as silver and platinum have pushed their way to the front of the line in terms of demand. One reason for this “run” on gold has less to do with a demand for it’s use and more to do with investor’s fears of the financial markets and the difficulties of our economy.

Investors are shifting their attentions to more tangible and fungible commodities so that as the “Bear Stearns” of Wall Street stumble and fumble, they can feel a little safer in the fact that their investments are more secure than paper stocks. They have a true asset that won’t “tarnish” their portfolios as our nation continues to inch closer to recession. After all the government may not always step in and bail our companies like Bear Stearns with 30 Billion Dollars.

Demand for this precious metal is on the rise, but seemingly only to give investors piece of mind and something to store under their mattress and not for any great plan or use. I am not sure how long this run will continue and personally feel that profit taking will occur as soon as prices begin to level off or drop.

What do you think about the current market turmoil and gold in general? Does it have a solid place in your financial planning? What about the Bear Stearns bail out, should our government be in that business?

Michael Sexton is President of Trump University.

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8 Comments Post a comment

Posted by William Yang on 03/18/2008 7:30 AM

It's normal,

It's all because the mortgage crisis that forced the stock market into crash, that turns investor into panic (that make a things worst), then the panic investor take their money and put it all into commodities. that's why oil & gold are skyrocketing.

ps : government must find a way to make those commodities looks suck.

Posted by Larry Gessner on 03/18/2008 9:43 AM

Michael, I think you bring up a good point. I have always believed that our monetary system was solid and that it had seen many times of trouble and that weathering the storm has provided tests that only strengthened our economy.

It is a hard concept to grasp that gold is no longer used to back up paper money. So how does the Federal Government back up it's monetary system? I have been posting in the wealth forum under currency and I am not seeing many answers to my question. Perhaps this might be another area that Trump University could comment on. What substantiates the value placed on a piece of paper that represents worth. You could call it Money 101.

Posted by Cayla on 03/18/2008 12:20 PM

Gold at this price is a house of cards as are many of the stocks on Wall Street. Stick your money in Proctor & Gamble, Coca-Cola & Anhueser Busch and go play golf. Life is too short. If you want to gamble, go have a great time at one of The Donald's beautiful casinos. I'm sure he'll put that money to very good use.

Posted by Business 2000 Foundation on 03/18/2008 3:44 PM

Despite the fact that Gold is not backing up the banking system any longer, does not dimish its real value in our view.

Will gold, like other bad investments, depreciate a significant value when the market crashes?
Yes to a point. However, Bear Stearns leveraged their portfolios like a bad deck of cards in the morgage industry. What backs up their investment?

Gold...We would take a an old gold bar any day. Maybe more.

Posted by member1696811 on 03/18/2008 4:40 PM

30 Billion Dollars? The government can do that for Bear Stearns but they can't re-build New Orleans, or, improve our health care system? Our government sucks! I thought our govt. was supposed to be for "the people." Right. Pie-in-the-sky dreaming is what I do. That's what they tell me. We, in the low-level jobs are just slaves. We hope and pray for justice... and it is on the rise, these days. I guess I just have to continue to be patient... and keep praying.

Posted by Cheryle on 03/19/2008 5:23 AM

Wow! Michael,

You really hit a nerve. The comments by Larry Gessner, Cayla, and
member1696811 were very passionate.

If more people would talk about current events that can deeply
affect the economy of our country (and others), less scams
could change gold into stability.

Wouldn't that be nice for a change?

I agree with member1696811 about giving away taxpayers hard
earned money to bail out corporations that should have fully
qualified and intelligent people in their company working to
prevent the kind of crisis our country is facing presently.

So, today it's gold... for Russia it might be diamonds, vodka
and delicious cavier... for others it may be oil.

The bottom line for most people is, "will it put food on our tables?"

Posted by Mary Rose's Garden on 03/19/2008 6:14 AM

Cayla is 100% correct. In the late 70's, my ex-husband and I opened a stamp and coin store. He was one of the biggest experts in the country on German counterfeit stamps and incredibly knowledgeable in classic US Stamps. He could just leave his German and US Classics in a vault and see a 20% return on his money because he knew what to pick. That store was his dream since childhood. At the time of our divorce he was doing great. He even had investors who wanted to back opening a second store- but he wanted just one.

The gold dealor in town, told me that to invest in gold, you needed deep pockets. The gold market is so unstable that you can never invest what you can't afford to lose. Whenever my ex asked my advice and wanted to invest heavily in gold- my question was- can we afford to lose it- and when the answer was no- I talked him into putting the money in stamps- because that was a sure thing for us.

After our divorce, the gold market climbed to unbelievable heights. He couldn't bear to follow the rule anymore- so he used money that he needed to back the store to speculate in gold. Shortly after Reagan took office, the demand for gold plummetted- and he lost the store- he lost his dream.

Donald Trump always says- invest in what you know. Gold is no different. And when someone who knows about gold says only spend what you can lose- it is a good rule.

Posted by member1766787 on 03/26/2008 8:51 PM

I want to know if Donald Trump's mother is still alive and what is the secret of surviving a son that is driven to heights that only rockets are supposed to go? Is there ever an end or will he always have to play king of the mountain and fear that if he slows down, he will lose it all? Does the adrenaline take the place of sleep, as I am fearful that his heart is going to explode if he does not slow down and he is tking me with him!

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