petec

bmichaud, I don't understand your argument fully (more a comment on my capacity for macroeconomics than your explanation!) but I cannot see how the Japanese situation can be susrtainable in the long term. IIRC, Japan's working-age population is falling at 0.6% a year this decade and accelerating to double that in the 2030s. This will make it very hard to grow GDP at a rapid rate. Yet its government debt:GDP is 100% and rising at 10% a year. Surely this has to end either with big tax rises/cuts in government spending, or rapid inflation? Put another way, you're right that governments with control over their currency can "spend-then-print" so long as they control inflation - but that is a key caveat and it is not compatible with building debt for ever. The only bright spot I can see is that total debt (govt+corp+private) has been falling slowly. So perhaps there will come a point where corp/private releveraging can allow the government to delever without sucking money out of the economy. But I don't see it, not when government spending is driven by entitlements (get worse with aging) and interest (which are 25% of tax intake even when rates are 1%).

I hope they sell some. I understand their deflation thesis but the derivatives give them great protection there. There's no need to hold the bonds and you'd have to be out of your mind to say they have a margin of safety (vs. the other reason for holding them, which is a macro bet on deflation). Go to cash and wait for opportunities.

That's how I view my KO :)

Why would we posit that anyone would find it easier to hold gold for 40 years than a truly top class stock like KO?

Moore, you are right that choosing MCD as a comparison is a case of hindsight investing. But so is choosing today's gold price as representative of the value of gold. Gold *might* be in an almighty bubble. The 1999 price *might* be equally representative, and at that point even Kodak had performed better, at least from 1974 which is the furthest back that I have data. (I don't believe 1999 is representative, but you get the point.) My view is that whether it should or not, gold will likely maintain its purchasing power over long periods of time. That's not a bad result. But great businesses, few and far between though they are, have a record of increasing their purchasing power over time. Surely that's a better result? More controversially I'd also argue that disciplined investors can add to the return on stocks by buying below intrinsic value, whereas intrinsic value is hard to calculate for gold and buy/sell decisions have largely to be based on macro analysis, and we all know how hard that is. For me it is a total no-brainer, especially after the run gold has had. But then my father used to say that the term 'no-brainer', logically, ought to refer a decision taken by a person with no brain. Time will tell! ;)