Reply To: Investment Ideas- use at own risk

GLD- the devil’s etf. (not that I believe in devils chas veshalom- the satan is a malach of Hashem who is just doing his job -but that’s a discussion for another thread.) GLD is an etf (stock-like creation) where buying it is supposed to be the equivalent of buying gold, except you don’t have the really high storage fees of buying physical gold. Gold is a commodity, which is supposed to serve as a hedge against inflation. GLD is supposed to be the equivalent of gold. The problems:

1. Gold has underperformed silver and oil as hedges against inflation. It has also severely underperformed long-term as an asset class compared to stocks and bonds. It did well between 1999 and 2009, but otherwise it’s not so hot. Oil and silver are much more volatile than gold and are more sensitive to market movements and dollar weakening. Finally, the launch of etf’s mean that commodities are more closely correlated to stocks than they were historically. This means that you can’t count on commodities to zig if stocks are zagging. Diversification is not the same strategy it once was.

2. GLD itself is theoretically holding massive amounts of gold to correspond to its outstanding shares. The problem is that nobody ever verified that it is, in fact, holding the ginormous amount of gold that it is required to do. I heard one estimate that there are 3 paper ounces of gold per one genuine ounce of physical gold. GLD could implode even if gold stays high. There is a very low risk of that happening, but it is a risk.

I would recommend a small portion of your portfolio wide-range commodity etf like DBC. However, you do get nailed with short-term capital gains fees as it has to sell futures contracts regularly.