A chap rang up to buy some gold stocks. It was 1999, gold was on the nose, trading beneath $US300 an ounce. An ounce of gold now fetches $US1466 and speculators are punting the yellow stuff might break through $US2000. In fact, in the writing of this column, the price has jumped $US8. It looks overdone, at least from a trading perspective, but it’s not good strategy to jump in front of a runaway train.

Back then, your diarist was the nation’s most impoverished and unaccomplished stockbroker and keenly filled the order. The client only wanted gold stocks. Four of your best, he said. He wasn’t interested in hearing about the emerging, exciting opportunities in the dotcom sector. Not on your nelly.

For a retail investor, he ploughed plenty of money into those four stocks. One of them was Sons of Gwalia, which subsequently fell into the warm embrace of liquidators. That was really an exposure to derivatives rather than gold, and a regrettable recommendation.

The others did well. We never heard from the client again. He must have been pleased with his good judgment. At the time though, this was a curious order. The prevailing wisdom was that gold was finished. Even central banks were foolishly selling their reserves. The US dollar was deemed the supreme store of value. Just as speculators are ”shorting” the dollar now, gold was the big short then.

In retrospect, it is clear the client made a terrific call. The prevailing wisdom is often wrong. Patience and clarity of thought are preferable to tuning into the noise of daily investment recommendations.

Gold, silver and jewels have been the currency of choice ever since the shekel was coined. The gold market has clearly been manipulated in the recent past to benefit the US dollar – by central bank intervention and by misinformation. It’s an opaque market – nobody knows exactly how much gold is in central bank coffers and just as importantly who might show up with a ”derivative” letter from their lawyers saying it is theirs.

The US has the largest reserves by a long shot, assuming Fort Knox actually has the $US137 billion in gold bricks it purports to have.

It would be hard to get in and take a look, as one would have to get past helicopter gunships, a row of tanks, and a 22-tonne steel door set in granite walls to reach the world’s most impregnable vault. And just as hard to get a look at the books.

The renegade Republican senator Ron Paul has been trying to drum up support for a congressional bill to find out what is really there. No independent auditor has had access to Fort Knox in 50 years.

”It has been several decades since the gold in Fort Knox was properly accounted for,” said Ron Paul, the Texas congressman and former Republican presidential candidate. ”The American people deserve to know the truth.”

This coincides with a push to recognise gold and silver as legal tender, at a time when faith in the greenback as a paper fiat currency is under threat.

Utah’s state legislature recently passed the Utah Sound Money Act, which would recognise federally minted gold and silver coins as legal currency. There are similar moves in Virginia, South Carolina and Tennessee.

Gold usually moves well ahead of inflation. And inflationary pressures are most definitely building. In parts of China the price of fuel rose 5 per cent this week as the regime tightened monetary policy again.

Since the financial crisis, even the bootlickers of the business press – and there are many – have failed to stick up for investment bankers despite continuing to peddle their wares. It is perhaps timely to ride to the defence of this peculiar species, for there are two sides to every story.

For those who don’t know what they do, investment bankers are essentially vendors of fine snake oil. They operate in a market where there is glut of fine snake oil and it is a testament to their dedication and brilliance, at least in this country, that they have continued to prosper. Deal flow is down, yet the revenue still flows despite a wary market for corporate transactions.

They operate with little more than a phone, a computer and some research. The rest is smarts, mostly cold-calling executives to part with tens of millions for advice on how to do their job. Barriers to entry are low. Risk is high.

This risk was noted by the veteran Macbanker Michael Carapiet, who announced his departure this week noting, ”As a banker it is a great privilege to be able to decide the timing of your own leaving.” Indeed.

He also told another newspaper that investment banking as an industry ”had been tarnished by the financial crisis”. We quote the piece: he said the domestic industry had escaped the worst of the fallout. ”I don’t think there’s any question that in other time zones people certainly understand investment banking, but that is in other time zones.”

Que?

The weight of research shows most big deals fail. That is, more than half of corporate transactions have a negative effect on company earnings, more than 50 per cent of mergers and acquisitions end up costing shareholders rather than benefiting them. And so, although executives know the numbers are against them they pound on.

Demergers are the exception. The numbers show they mostly succeed.