Sell gold, buy Apple - and don't pay heed to predictions

I always think it makes sense to look at what everybody else thinks is a dead cert, and do the opposite.

This week I was planning to write a column explaining why Apple shares are overvalued. The news that Apple has more cash than the US government, together with the fact that the trendy tech firm is now worth more than the combined market capitalisation of European banks, was enough to make me think that it was due for a correction.

Cynics often suppose that these pieces are dashed out in the time it takes me to drive from home to the office, but in fact they are carefully crafted to appear effortless, hiding days of toil and a terrific amount of investigation and data-crunching.

For example, in this case I even had an email exchange with an old colleague of mine, a former media editor of The Sunday Times who was once a keen advocate of the PC until he had an epiphany in the Apple shop in London's Regent Street. Now he owns more of the half-bitten Apple products than even my daughters.

He had reminded me that I had often urged him to follow the old stock market adage of "sell in May and go away". What would I suggest now? In such circumstances, I always think it makes sense to look at what everybody else thinks is a dead cert, and do the opposite. Obviously this is best done with other people's money, but as those characters who shorted the US property market know, there is plenty of cash in being contrarian.

"Sell Apple," I told him.

"Don't be a fool," he replied. "The company has barely got a foothold in China and when it gets a grip it will explode."

This did not deter me, so I spent most of my time this week looking at all the disasters that could befall the tech giant, and preparing my argument. And I was just sitting over breakfast thinking of an opening line, when my wife piped up.

"Jobs gone," she said.

"Yours or mine?" I replied.

"No, you fool. Steve Jobs, the head of Apple."

"Damn."

That's the trouble with good ideas these days. They last about as long as it takes to write a Twitter feed. In a similar fashion, everyone has thought for the past few weeks that gold is the only sound investment. If the world is going to hell in a handcart, best to have something portable, must be the thinking. I have never been a fan of gold as an investment. It has no yield and a value much beyond its worth. But it's shiny and it gleams and people are attracted to it like magpies.

George Soros and Nouriel Roubini, those other two tip-top commentators, share my opinion of the stuff, although I would probably rather have it than shares in a dotcom company. Gold may be a better investment than racehorses or sailing boats, but if the slide of the past few days continues - down 9 per cent from $1,913.50 to $1,739.55 - it may never stop.

Those of you who have queued up at the Emirates Palace Hotel to buy your ingot or badgered a jeweller to smelt down the Rolex and sell you a brick, must now be feeling pretty sick. But have no fear: it may probably come back, perhaps any time in the next 25 years, and your children will thank you for it.

What about oil? Surely that's a sound investment and only going one way? I refer you to the wise comments of Ali Naimi, the Saudi oil minister, who whenever he is asked which way the oil price is going by eager reporters, replies: "If I knew that I would be in Las Vegas."

The Saudis are famous for not buying any financial oil hedging products. Even so it must be very reassuring to have wells full of the stuff sitting in the garden.

The moral of this must be that if you think something might happen, act on it immediately before it's too late. These days the world is so full of black swans that you struggle to find a white one. The Indian cricket side were no sooner the best team in the world than they looked like they didn't know one end of the bat from the other, with one honourable exception, the Great Wall of Dravid. We should learn never to take anything for granted. In addition, never trust anyone who makes a prediction, especially about the future.

However, I shall end by suggesting that it is time to sell all your gold bullion, and put it into Apple shares. After all, if a fake Apple shop in a remote part of China can do a roaring trade, how successful would the real thing be, with or without its charismatic leader?

Published: August 26, 2011 04:00 AM

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