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9:00 AM EST, Wednesday, February 18, 2009. As the stockmarket collapses (down 297 yesterday), gold rises.

The Wall Street Journal today explains, "The rising gold price says investors are starting to freak out over governments' response to the credit crunch. Sooner or later, central bankers will have to make a convincing case why all the worry is unwarranted."

My take: They won't be able to. The bailouts and stimuluses are not working. The media is reveling in gloom and doom, hence feeding our collective misery. Gold will continue to rise. It's the only safe haven. Don't believe me? It's not the pound sterling. It's not the Euro. I can't figure (or predict) the Japanese Yen. Let me assure you: it's not the Australian dollar. Moving money there has cost me 30% as the Australian dollar has cratered. And now, horror of horrors, Australian interest rates have plummeted. I used to earn 8% with Westpac, a big sound Aussie bank. Now I earn 4.25%

Here's the rest of the Journal's piece:

Gold is up more than 25% since mid-September. Since then, G7 governments have unleashed an array of policies, using trillions of dollars, to rescue financial sectors and shore up their economies. For instance, the Federal Reserve's balance sheet has doubled to $1.84 trillion as it has ramped up lending to banks and bought debt.

The justification for this unprecedented expansion: It is necessary to avoid protracted deflation and help the economy absorb the shock of global deleveraging.

Goldbugs aren't convinced central banks' flood-the-zone approach will work. They have a point -- calibrating the response looks tough. If the massive monetary response overshoots, it leads to high inflation, benefiting gold. And if it undershoots, deflation remains. While falling prices don't directly help gold, the instability they create potentially does.

While it may seem too early, central bankers could map out how they plan to decrease their balance sheets and normalize interest rates if inflation resurfaces. But this could expose some of the dilemmas stemming from balance-sheet expansion. For instance, asking banks to pay back the large amount of central bank loans could require them to refinance in private markets. But what happens if private investors don't have sufficient appetite at that time?

The Fed and others need to start walking investors through such scenarios. This is one area where silence isn't golden -- except for investors in the metal itself.

You can start a bank with less than $20 million. And you can do it without Wall Street, without an underwriter. Get some friends together. My recent diatribes on "Now is the best time to start a new bank" turned up one yesterday and I visited them. Most impressive. I quote from their prospectus:

The organizers, directors and other founders of XXX Bank (I've been sworn to secrecy) believe that this is an excellent time to start a new bank. First we believe that the banking needs of small businesses and professional firms, and their owners and managers, are not being adequately met by the banks that operate in our service area. We believe that the merger and acquisition activity of the past decade, and the resulting of out-of-market ownership, has resulted in increased customer dissatisfaction and displacement. ... Further many of the banks in our service area -- large and small -- are likely dealing with problems in their loan and investment portfolios arising from the current crisis in the real estate and securities markets. A bank that is facing liquidity, asset quality and capital issues due to declining or broken markets is less able to respond promptly to its customers' credit and other financial needs. We believe that a new bank with a clean balance sheet, plenty of capital, state-of the-art systems and facilities, a focus on timely, personalized service will be well positioned to win business from good customers who have been unable to obtain sufficient credit or have otherwise experienced a decline in service from the existing banks.

For yesterday's column on my four reasons to start a bank now, click here.

What business school does. It takes talented kids and makes them extraordinary by forcing them to solve every conceivable business problem ever encountered in the history of the world. Then it pumps them with heavy self-confidence:"You are lucky to be here. Because you are here, you are destined for greatness, etc."

I went to three classes yesterday. It was exhausting. I only fell asleep twice, embarrassing Michael, who emailed me from across the room, "don't fall asleep." Michael will graduate from business school 40 years after I did. Changes in 40 years include:

1. The breadth of kids. They now come from everywhere. There are very few Americans. I scoured the room. Last names included Dohad, Kozlu, Kalini, Rawat, Tabaee, Kunugimoto, Al-Jabeir, Liao and Condessa. It was the United Nations.

2. There were women. Real ones. Gorgeous ones. Married ones. Pregnant ones. All sorts. It's hard to concentrate in class.

3. They wore jeans and sneakers. We wore suits and ties.

4. The classroom bristles with high-tech. They have computers, projectors, voting buttons in front of every student and computers to instantly tally the votes. We had an overhead projector, often with a blown bulb.

5. We had real lights and heat. They have CFL bulbs and no heating. Everyone wore a sweater. The woman next to me wore a down vest. I had to wrap my down jacket around my legs. Harvard is taking its endowment poverty too seriously for my taste.

6. Class is for young people. 40 years ago I could hear what everyone said, but couldn't understand their accents. Now I can understand their accents, but can't hear them.

How "capitalism" works? GM and Chrysler begged for another $14 billion yesterday. They said they need the money to remain solvent. That $14 billion is $50 from each of us. My question: Would you take $50 out of your pocket and give it to GM and Chrysler, knowing:

1. Ford didn't ask for any money. Nor did Toyota.

2. You don't drive a GM or Chrysler car, and probably never will.

3. It won't stop GM and Chrysler firing anyone. In fact, GM specifically said it would cut an addition 47,000 jobs.

4. GM and Chrysler's chances to survive long-term would probably be higher if they went into Chapter 11 and forced cost cuts.

GM and Chrysler's problems are of their own making. They make uninspiring cars and trucks. They have saddled themselves with huge expenses. GM bought companies it shouldn't have -- like Saab.

How to send large files. I love my Canon G10 camera. It makes fantastic photos. But each photo is a huge file. Outlook won't send large files. I don't know why and I can't fix it. But Google's Gmail will send large files. And it does it very elegantly. Thank you, Michael, for this tip.

How the world has changed: Remember the old saying:

If you owe the bank $100, that's your problem and if you owe the bank $100 million, that's the bank's problem.

Now whatever you owe the bank, it's in trouble.

Sound money advice:
+ Never talk about money with people who have much more or much less than you.

+ How much money do you need?
Just a little bit more. -- Will Rogers

How to become a successful banker:
“What do you think I must do to become a successful banker?” asked a student.

“Follow the three rules: first, don’t lend money to those who don’t have any; second, don’t lend money to those who need it badly; third, don’t lend your own money.”

This photo published without comment.


I'm exhausted from a day at class and then four hours on a slow train.

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.