A sure sign that gold isn't in a bubble

Ok, so maybe this should be the "quarterly transfiguration" blog now, since I haven't posted anything since February.

But I do have an excuse: I started a new job then, and it has been very time-consuming. As if that's a surprise to anyone...

Anyway, while reading Barron's this weekend, I came across something so stunningly ridiculous that I thought I should mention it. It's from the manager of the Fidelity Equity-Income Fund, whom you wouldn't think would be interested in a certain topic. He certainly isn't knowledgeable about it!

But you can judge that for yourself. Here's his brilliant analysis:

"Now the extreme expectations that were priced into stocks in 1999 appear priced into bonds and gold, while stocks are widely unloved.
...
Then there's gold, which I think is extremely risky. Its price is up fivefold in anticipation of the greatest inflation the world's ever seen. Hyperinflation is a possibility but I don't think it's probable.

Instead of hyperinflation, consider the price history of gold.
...
For example, after gold's last peak, in the early 1980's, it dropped by about 50% in just over 18 months."

If gold is pricing in hyperinflation, what are bonds pricing in, hyperdeflation? At least one of those must be wrong!
And of course stocks could never drop by 50% in 18 months, right?
 Well...

"US stock market

The US stock market peaked in October 2007, when the Dow Jones Industrial Average index exceeded 14,000 points. It then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600."
(from Wikipedia)

Sounds like a 50% drop in 18 months to me!

Anyway, as long as we keep seeing this type of "analysis" in the mainstream financial news, we will know that there isn't any gold bubble. So keep it up, boys!