One year ago, on the October 29, 2009 edition of the radio program Marketplace, political commentator David Frum said that gold was a bubble. When he made that assertion, gold was trading at $1029.90 an ounce.
These posts have been filed under the category of veridiction because it is my category for writing about the verification of predictions.
So, one year on, how does Frum’s predicition that gold is a bubble bear out. Well, gold, as of October 28, 2010 traded at $1342.50 and ounce – an increase of 30.3%. If you had listened to Mr. Frum, you would have missed an excellent opportunity to gain thirty percent in a year.
As I have written before, my main point in highighting Frum’s “gold-is-a-bubble” assertion is not to say he was wrong because at some point the value of gold will fall. My point has always been that anyone can say an asset is a bubble because at some point the value of said asset will fall.
The trick in calling a bubble is in the timing.
Had Mr. Frum predicted that gold was a bubble and it would pop in two years (or one or three or four, etc.), then we, as listeners, would have something to hang our hats on and Mr. Frum would have a real assertion to stand on.
But, instead, we, as listeners, only receive a bland dose of pablum signifying nothing. Again, any listener who heard Mr. Frum’s advice and sold their stake in gold would be out a gain of thirty percent.
Perhaps instead of doling out financial advice, Mr. Frum should stick to pontificating about why the Republicans will win in the midterm elections, why President Obama is bad, and why the Halloween craze is rooted in gay culture.
Of course, he could be wrong about all of that also (and how much would you be out if you listened to him now).