Gold obsession: What the children's story book teaches us
As I was telling my daughter Diyah fairytales from her storybook, I realised we have a wealth of them that are related to gold- the Midas Touch being the classical one. King Midas thought happiness lies in amassing gold even that he had all the luxuries one could hope for.
Today analysts at Commodity Online are quite upbeat on gold prices despite the fact that Bernanke gave a bearish hit to the yellow metal with his announcement of tapering of QE by 2014. My fellow gold bulls like Jeff Nichols are putting up a brave face while some others as you all are aware have taken a hasty retreat as gold plummeted to below $1200 levels.
Last week when one of the leading South Indian news channel, Asianet News, asked my view on Gold it was quite difficult to comment, but I told them recovery signals are seen in the coming months not in the near future.
The Harvard trained Minister in Indian cabinet who manages the finances of the economy has repeatedly cajoled, persuaded sometimes directed his fellow country men to stop loving Gold. How many countrymen know about CAD?
As I was telling my daughter Diyah fairytales from her storybook, I realised we have a wealth of them that are related to gold- the Midas Touch being the classical one. King Midas thought happiness lies in amassing gold even that he had all the luxuries one could hope for. His only desire expressed to god of celebration, Dionyssus was that anything he touches should turn into gold. Ultimately, the blessing turned into a curse. That ultimately led him to starvation, after all the food also will turn into the yellow metal. �The moral that we learn from this is not to become a slaves of our own desires.
Similarly, there is another story titled, 'Fortune and the Beggar' which tells the tale of a beggar who lamented her fate and compared herself to the rich man staying across the street. Fortune heard her call- she could keep filling her apron with gold coins until she asked it to stop. But she should ensure that no coin drops to the ground, if it happens then the precious metals would turn into dust. When Fortune started filling her apron with coins, the greedy beggar wanted more. The apron became so heavy, it tore and coins fell on the ground turning to dust.
The Cock and the Jewel story is about a cock who finds a jewel while scraching for food on the ground. It was of no use to the cock. He did not find it useful, so he took it to a farmer and exchanged it for some golden grains.
There is indeed lot of greed out there in the futures market when operators go on a bullish mode or a bearish mode-- the intention is to make abnormal profits. The Midas Touch and The Fortune and the Beggar stories have got the answers for them. The beggar's story also tell us something about portfolio management. We should only dedicate a portion of our money into gold-- there are lot of other precious things in life.
In Jack and the Beanstalk, Jack exchanges his cow (which had stopped giving milk) for some beans which when sown grows quickly to touch the sky much to the astonishment of his mother who scolded him for a losing sale. He climbs the beanstalk and finds a tough woman who stays with an ogre who delights in eating animals and children. But he has sufficient gold coins in his chest. Jack manages to steal them and return home climbing down the beanstalk. He and his mother lives happily and as they exhaust the coins, Jack again goes back and this time returns with a hen that lays the golden eggs only to be vigorously followed by the ogre. As Jack races down fearing for his life, he manages to cut the sky-high tree, and ogre fell with a thud. The hen continued to lay eggs and Jack married and lived happily ever after.
I think the most important lesson here is about risk taking. Jack exchanged his cow for some beans which was 'unworthy' for his mother but it turned the course of their life. But if they persisted to hold on to the beanstalk, the ogre would have finished him in no time. So the importance of exit strategy in markets!
Ofcourse, we should not kill the hen that lays the golden eggs. That's too much greed anyway!
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