Since we've had the old gold (read "good") vs. stocks (read "bad") debate come up again I thought I would do a little research. What would happen if you bought gold in 1980 or stocks? But what stock to use for a comparison? I wanted one that wasn't a dotcom and was part of the "old" economy so it had a history. It also had to be big enough that the average investor wouldn't consider it speculative or, at least less speculative than other parts of the market :^)

I decided that General Motors fit the bill. In January of 1980, GM was going for $8.39 a share. The average price of gold in 1980 was $613. So, what would have happened if you had bought one ounce of gold and the equivalent number of shares in GM (73) in January of 1980 and held both until February 29, 2000?

73 shares of GM, including dividends and exclusive of any commision, would now be worth $5,589, a 913% simple interest increase in twenty years.

One ounce of gold would now be worth $298, exclusive of any commision or storage charges, a 51% simple interest decrease in twenty years.

If gold goes to $5000 a ounce tomorrow, you'd be just about even with the GM investment.

-- Jim Cooke (JJCooke@yahoo.com), March 20, 2000

Answers

yeah, and if i'd have wrote imagine instead of john lennon, he'd still been shot...

-- that settles it (what@kook.gez), March 20, 2000.

Gold has been dropping for years. Stocks have been rising for years. Granted. But a gold bug could just as easily conjure up a scenario starting in 1972 and ending in 1980 that showed a very different result. An oil broker could do the same. Same with real estate trusts. Or baseball cards.

When all is said and done, this is a backward-looking analysis and says nothing about what is a good investment today. If what you stated here was all there was to it, Warren Buffet would be an unremarkable fellow with a decent income. As would we all!

-- Brian McLaughlin (brianm@ims.com), March 20, 2000.

Brian,

No dispute with your analysis that the past doesn't predict the future. And certainly gold from about 1975 to 1980 was a good investment - I know because I owned a lot of gold and silver then and dumped most of it early 1980. My point is that 20 years is a long time to wait for something to pay off.

-- Jim Cooke (JJCooke@yahoo.com), March 20, 2000.