Why Gold Enthusiasm Is 'Cool' Again
Source: Seeking Alpha, Andrew Mickey (5/22/09)
"The 'hot money' has found a new friend: gold and gold stocks."
The thing is, though, despite all of the attention gold is getting, 95% of investors will miss the biggest prize of all. Here's why.
A few days ago the world taught that leading hedge fund manager John Paulson has started to place some very big bets on gold, too.
Paulson has become one of the most closely followed hedge fund managers—and justifiably so. He personally pocketed more than $3 billion and made his clients a whole lot more by betting against subprime loans while the housing bubble burst.
So when Paulson makes a move, the entire financial world watches. This time, although he's betting big on "boring" gold and gold stocks, was no different.
Paulson's firm said it had $2.8 billion in SPDR Gold Trust (NYSE:GLD) and $638 million in Market Vectors Gold Miners ETF (NYSE:GDX). It also had taken 2.6%, 4.4%, and 11.3% stakes in gold mining companies Goldfields (NYSE:GFI), Kinross Gold (NYSE:KGC), and AngloGold Ashanti (NYSE:AU), respectively.
With such a big bet, Paulson is almost single-handedly making gold "cool" on Wall Street. And gold stocks have been steadily climbing over the past month.
This run seems inevitable at this point. There is, however, one very big consideration a lot of folks following Paulson's lead are forgetting. And that's time.
You see, Paulson is good—really good. But a lot of investors are good at finding opportunities. The difference with Paulson is he's patient and disciplined enough to maximize an opportunity.
In the end, gold is good. If you don't have any exposure, get some. If you do, just let the rally play out and stick to your plan. Chances are, this time isn't "the big one" for gold, the rally will fizzle out, and there will be another long dry spell where gold is no longer very "cool."
In the end, Paulson didn't get to where he is by running with the herd. He got it by identifying an opportunity, consistently buying into it, and then waiting for the big payday. That's something we can all take away.