Friday, June 26, 2009

Fuddy Duddy Buys Gold

Bloomberg reported a few weeks ago that Northwestern Mutual bought gold for the first time in its 152-year history as a hedge against asset declines. Click here for the full story.

A colleague passed along the thoughts of John Serrapere, President of Arrow Insights:


Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company's 152-year history to hedge against further asset declines. This is very significant in that this firm is considered one of the most prudent asset managers in the world.

My (his) take away: Institutions invest as a herd. Many more will follow this firm. Retail investors will also begin to follow institutions over the next few years, which is when we will become sellers of gold.

This is big news.

End Quote

Sounds pretty good. Except that this is like Warren Buffett buying into high tech (he is notoriously averse to things he does not understand although he is a lot smarter than he lets on.) When the last holdout capitulates the game is over.

The question is not so much about gold but about asset values. NOW is when they decide to hedge? If they are so good then then should have hedged a year and a half ago.

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