ARBOR OUTLOOK: Pricing Power, Inflation Hedges and Hank Williams

Margaret R. McDowell
Margaret R. McDowell

“What good is gold and silver, too…

If your heart’s not pure and true.”

“House of Gold” written by Hank Williams

Recently I watched a television commercial featuring Pat Boone. The singer-celebrity was discouraging Americans from making deposits into banks. Fascinated, I called the 1-800 number. Their marketing campaign urges viewers to purchase gold and silver.

Their website says putting your money in a bank is dangerous because of issues like identity theft and cyber terrorism. The salesman, though, did not focus on banking problems; instead, he talked about the volatility of the stock market. “I recommend you put at least 20-25 percent of your assets into gold and silver,” he said.

Some investors and advisors will place a small percentage of portfolio assets in gold, considering it a hedge against inflation. But many companies in which you can invest have pricing power, and their stocks are probably a better hedge against inflation. Equities and bonds can also provide income while gold is a non-producing asset.

When you purchase gold in the market, you buy it as a gold future or in a gold mutual fund or ETF. Or you can buy the actual metal and have it shipped to your door and then be responsible for its safe keeping.

Singular bank deposits are insured up to $250,000. And while identify theft is a real issue, at least cash withdrawn from such an account is a negotiable instrument: you hand it to people and they accept it as payment. You can buy groceries and appliances and fuel or use it to pay for services rendered. It’s difficult to hand the cashier at your local market a hunk of gold in exchange for butter, fruit and milk. Power and gas companies won’t accept gold as payment for your monthly bill, either. Jason Zweig of the Wall Street Journal recently went so far as to call gold a “pet rock.”

Will gold be worth more in 15 years than it is today? Possibly. Proponents of large commodity collections often say that if the end of the world comes, gold will then be worth, well, its weight in gold. Perhaps this is true. Not sure I want to be around for that anyway, though. Meanwhile, those who have purchased publicly traded commodities, like a proportional share of a piece of gold that is stored in a vault in Switzerland, will face the problematic issue of traveling there and retrieving their chunk of it. If it’s the end of the world, that may prove a tad challenging.

Meanwhile, will the stock of companies that make products that people need repeatedly be worth even more down the road than they are today? They may not sparkle, but they’ll probably have plenty of substance.

Margaret R. McDowell, ChFC®, AIF®, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (, a Fee-Only Registered Investment Advisory Firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.