A few weeks ago, I wrote about gold and since then, it has continued to go up and there continues to be a lot of hype about gold for many different reasons. There are economists, such as Peter Schiff, who have been very vocal about his beliefs that gold will skyrocket. And given he was right in many regards about the recession and the housing collapse, his views are getting a lot of attention. As well, right wing media (i.e. Fox) has been very active in associating the current economic crisis with the depression era and putting up the message that gold will be the best (and sometimes only way) to espcae personal financial collapse.I see these right wing scare tactics as very suspect and it does not help seeing those Gold vendors who are Fox sponsors. There are a lot of conflicts in this “Gold story”. And so seeing all this gold bulls go mainstream is certainly worrying for anyone considering diving in.

Why gold could go up

With that being said, I do still think there are many reasons to like gold as an investment for a few reasons:

-There continues to be a lot of speculation and evidence of foreign governments diversifying away from the US dollar as there continues to be a lot of worry about its medium to long term direction. As that happens, governments are buying foreign currencies such as the Euro but also gold. A few of the emerging economies (India being one of the more public ones) have been stacking up on gold. This has contributed to increasing gold demand.

-Inflation Hedge: There is a lot of debate over this but gold still remains to this day one of the more efficient inflation hedges. And with the money that continues to be issued by the US and foreign governments to fund their deficits, inflation worries do remain and if that happens, TIPS bonds and gold would be the two logical safe heavens.

-And finally, another debate is about the possible major drop of the economy/stock market. There continues to be many analysts who believe that the markets went up too fast compared to the economy and that a major decline is still a possibility. Not sure I would say I’m a big believer in those theories, but if you are, gold would be a good investment option.

Physical gold or not?

Going along the line of a collapse, many believe that owning physical gold is the only way to go. Their arguments are generally that in case of a complete collapse, the system could break down and even those ETF’s that replicated gold returns or who are supposed to own physical gold, might not be able to fulfill their obligations and so owning gold is the best way to keep your “hedge” for this “End of world” type scenario. I’m not a big believer in this theory as I generally do believe in the financial system as well as the fact that it will be saved if hell breaks loose. As well, you generally end up paying a lot of fees when buying physical gold.

One such place is Goldline where you can buy actual gold coins. You will end up paying a lot more but if that is what you are looking for, go ahead:)

For others, gold investments can be done in many ways, but the two easiest ones are:

Gold ETF’s

Here is a list of the Best Gold ETF’s as well as their descriptions, fees, etc.

Miner stocks

And finally, if you wish to invest in a miner stocks, the main ones are Canadian companies, I have a list that includes only the non-penny stocks that have revenues for the past year and a large enough market cap. Most of these are also listed on US exchanges.

Let me know if you have any questions regarding these stocks!

I am one of those who has always been fascinated by airplanes and I can’t imagine ever getting tired of getting onboard of one. But investing in a commercial airline is a whole other story. There are so many reasons to avoid getting involved and yet hope always remains. These companies struggle to remain profitable but there are always believers that now is the right time and that eventually they will get a break.

The problem of course is that airline stocks depend on many factors that are outside of their control, namely:

-Terrorism: Attacks like September 11 or even smaller ones such as the Detroit Christmas scare are enough to scare away some consumers which has a direct impact on prices

-Economy: As the economy goes, so do airlines. Why? Yes sure people travel more and further away for vacations when they have more money and confidence but what is even more true is that business class passengers (those who bring up the big bucks right?) tend to pay a lot more attention to money spent when things are tougher. That 8,000$ last minute flight to Paris will likely just not happen if things are going badly and shareholders are breathing down the board’s neck!

-Oil prices: On the expense side, we’ve already seen the impact that oil prices can have on airlines. The decision to hedge prices or not can be a killer in one sense or another. Lock in a 100$/barrell oil when prices go up to 150$ and you will be laughing as competitors struggle to keep up with your prices. But if you do that and prices dip down to 50$.. You might want to get ready for Chapter 11.

And so yes, it is an unprofitable industry (in general, there are exceptions) and one that could raplidly find itself in need of a bailout if things went badly (i.e. another September 11). But there are some smaller and younger companies that have been doing very well in recent years. Take a look below at the graph of Southwest Airlines, one of the more efficient companies around.

And so here you have it, the table of the US airlines, and you can quickly notice that the majority do not even have a P/E ratio. That is of course because they are not making profits! But find the right airline and you might just make a great investment.

Which one would you consider owning?