Advice for Managing your Gold Stock Portfolio

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Advice for Managing your Gold Stock Portfolio

By Kenneth J. Gerbino
September 21, 2004

A recent report on the budget impact of social security and Medicare from the Cleveland Federal Reserve Bank, commissioned by former Treasury Secretary Paul O'Neill states an expected $44 trillion long-term U.S. budget gap to meet these obligations. Even if we cut these figures in half, it would most likely require $1 trillion a year of deficits starting in about five years. U.S. Comptroller of the Currency, David Walker calls it "chilling" and Laurence Kotikoff, Chairman of Boston University's Economic Department states, "The country is absolutely broke". Bush Treasury Undersecretary Peter Fisher and former Clinton Treasury Secretary Robert Rubin are all on record stating strong concern. The IMF and The Brookings Institute back up these numbers, with there own studies, which are even worse. The repercussions of these imbalances for the U.S. are so enormous it is difficult to comprehend.

I have never been a gloom and doomer but the politicians of either party clearly have no way out. France, Germany and Italy are actually in the same boat as the U.S. It stands to reason that a period of massive money creation is most likely in the cards to pay for everything. Inflation will surely follow. Inflation numbers do not look too alarming currently (July and August), but the long-term outlook is very clear and it pays to be prepared in advance.

As more economic stress builds, gold and gold assets should trend higher as a safe haven for money. Gold mining companies building reserves and the mines to extract these reserves should increase their valuations considerably. A good solid gold mining portfolio is the only investment vehicle that allows you a monetary insurance policy, and if you chose wisely and don't speculate too much a growth company portfolio all in one.

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