Wednesday, December 2, 2009

Is Gold Overcrowded?

"We'll know gold is overcrowded when . . .
For the long-gold trade to really become too crowded, certain events will need to occur:

* Goldman Sachs (GS, news, msgs) will have had "bus tours" to a bunch of mines, like the tours it and other companies have arranged for different industries, particularly technology.

* The public will have to be involved in a major way, and we'll see ads on Bubblevision encouraging people to buy gold instead of prodding them to sell their jewelry, as is the case these days.

* Banks will need to find a way to put money into gold -- because no modern mania has ever ended without the banks finding a way to lose money in it.

* We will most likely need to see a frenzy of mergers and acquisitions, and a leveraged buyout or two.

* Last, BusinessWeek will have to put gold on the cover, telling us how it's the wave of the future, or some variation of that theme.

I put this list together somewhat tongue-in-cheek, but over the past couple of decades, most of these events have occurred before a big mania has ended -- be it energy in the late 1970s and early '80s, stocks in the late 1990s or real estate in the middle of this decade."

- Bill Fleckenstein