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Dec. 22, 2011, 12:34 p.m. EST

Gold bug still experimenting with stocks

Commentary: Forecasts & Strategies now prefers dividends to gold

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By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) — A gold bug veteran is still experimenting with stocks — and real estate.

I noted Forecasts & Strategies’ Mark Skousen was trying this tack last year.

Read column on Skousen from Nov. 22, 2010.

Skousen is one of those people whose superficial affability conceals an explosive resentment of any suspected criticism. When I described him as a “long-time gold bug” and a “brash, battle-scarred veteran editor” — which I thought were compliments — he angrily sent me a picture of himself, comparing it favorably with the shot of me that appears at the top of this column. Skousen is bald (we’re both at an age when I guess I can no longer say prematurely) and I thought he looked like a rumpled egg. But my wife, who is much younger than either of us and hates my picture anyway, said he had a point.

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Skousen is typical of the veteran bugs who have survived since the gold bull market that peaked in 1980 in that he has immense respect for the stimulative power of the Fed — and the opportunities provided by policies of which they ultimately disapprove.

Read relate column on the Adens’ stock viewpoint.

This flexibility has served Skousen quite well. Over the past 12 months through November, Forecasts & Strategies is up 10.28% by Hulbert Financial Digest count vs. 6.92% vs. 6.92% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

Over the past three years, Forecasts & Strategies is up 18.7% annualized vs. 15.24% annualized for the total return Wilshire 5000. Over the past 10 years, the letter was up an annualized 5.74% vs. 3.89% annualized for the total return Wilshire 5000.

Skousen is also one of those gold bugs who, probably because of their battle scars, took the metal’s recent break very seriously.

He wrote last week: “One of my favorite sayings on Wall Street is this one, ‘Never let a profit turn into a loss.’ ... it is clear in my mind that the bull market in gold has been damaged, and its price may head lower.”

Skousen sold SPDR Gold Trust /zigman2/quotes/200593176/composite GLD +0.92%  .

But he wrote: “I’m recommending that you hold onto your gold and silver coins. In addition, we still have a position in precious metals in the Permanent Pt MFD: /zigman2/quotes/205061618/realtime PRPFX +0.62%  ... I also continue to recommend GAMCO Global Gold, Natural Resources & Income Trust ASE: /zigman2/quotes/202895357/composite GGN +1.25%  .”

Skousen has not totally given up on gold, but he thinks it is “clearly in a correction phase.” Somewhat unusually, he adds: “If the economy recovers, gold also will perform better.”

It’s not that Skousen isn’t worried about the economy. But he seems to see more security in dividend-paying stocks. He wrote recently:

“As we head into Christmas weekend, the markets are still jittery in the face of the never-ending European debt crisis and the inability of Washington to get its fiscal house in order. I expect that trend to continue into 2012, an important election year. I am therefore increasing my position in high-income stocks and funds to 50% of our portfolio, while reducing our growth stocks and funds to 40%.”

The balance (10%) is in natural resources stocks.

By an eerie coincidence, as he was when I looked last year, Skousen is still musing about a possible rebound in domestic real estate. He again quotes real estate speculator and investment writer Jon Schaub:

“Schaub tells me that now is ‘the best time to buy and borrow that I have seen in 40 years.’ The latest Shiller-Case Home Index suggests a bottoming pattern for home prices. ... Schaub specializes in buying, renting with positive cash flow, and selling single-family homes. To do that, you have to buy smart, get a bargain, find long-term tenants and take the in-between slumps in stride.”

But Skousen does acknowledge: “It is not easy.”

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