Over two years ago, on the radio program Marketplace, commentator David Frum said that gold was a bubble. When he made that assertion on the October 29, 2009, edition of that program, gold was trading at $1029.90 an ounce.
A pair of years later and gold, as of November 1, closed around $1,730 an ounce.
Had you invested in the yellow metal when Mr. Frum declared that commodity to be a bubble, you would now have a return on your investment of 67.9%.
I’ll finish this post (almost) the same way I finished my last post on Mr. Frum a year ago today…
As I have written before, my main point in highlighting 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 pabulum signifying nothing. Again, any listener who heard Mr. Frum’s advice and sold their stake in gold would be out a gain of
thirtynearly seventy percent.