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The Daily Reckoning

U.S. stocks vs. gold prices: Which is the better investment?

US stocks are a better place to put your money than gold, according to Warren Buffett. But gold prices are only going up, and gold is a far less risky investment than US stocks.

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Maybe Buffet will be right. Maybe the next 47 years will be like the last. But it seems like a bad bet to us. All the key circumstances are completely different — even opposite.

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Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (

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You remember the years from ’65 to 2012. They weren’t perfect. But they weren’t bad. The US was on top of the world…and headed higher. It was owed more money by more people than any nation ever had been. It was the leading energy exporter. It was the world’s leading capital investor. Its people were earning more and more money — in real terms. Total consumer and government debt, as a percentage of GDP, was barely a fifth of today’s level.

Of course, it wasn’t all good. The US was getting deeper and deeper into a costly and losing war. This would lead to some big bills to pay in the ’70s…and to some tough times. But, overall, America’s best days were still ahead.

And today?

Now, the emerging markets are growing much faster…taking more and more market share from the US. America is deep in debt…and adding more debt every day. Major industries have been zombified. More than half the voters depend on money from the government. America’s degenerate capitalism…and its geriatric democracy cannot adapt to the challenges it faces. And the typical working man hasn’t had a real increase in wages since the Johnson administration.

In ’65, the US was heady for glory. In ’12, it may be going to Hell.

But who knows? Maybe Buffet will be right.

Still…we’ll stick to our formula.

Buy gold on dips. Sell stocks on rallies.

“Wanna lose some money?”

Easy. Buy Facebook. It’s said to be going public at 150 times earnings.

In order to justify the price, says our colleague, Chris Mayer, Facebook would have to sign up every human being on the planet…and a few extraterrestrials too.

The whole Internet complex is a “bubble that’s about to pop,” he says.

“It’s rumored that Facebook’s IPO will value the company somewhere between $75 and $100 billion — about 150 times 2011 net income, 212 times free cash flow, and just shy of 27 times last year’s sales. Facebook’s sales have grown 77-fold since 2006, and its valuation based on private secondary markets has soared 92-fold during the same time.”

Wow! How do you beat that?

We tried to use Facebook. It just seemed like too much trouble. And what do you get out of it? Another way to keep up with your friends? That is, another way, in addition to phone, mail, SMS, email…and carrier pigeon. Seems like more than enough ways already.

We also tried LinkedIn. We signed up. But we could never figure out what the point is.

So…we apologize to all the many people who offered to make us a ‘friend’ or a ‘contact.’ I’m afraid we had to ignore them all. Not because we don’t want them as friends and contacts. But simply because we can’t keep up with the volume of contacts we have already.

Our advice to Dear Readers: Sell Facebook and LinkedIn…as soon as you get a chance. Turn off Facebook. Unplug yourself from LinkedIn.

Tune out. Turn off. Buy gold. Be happy.


Bill Bonner
for The Daily Reckoning

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on

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