PERHAPS IT'S TAKEN

the evaporation of trillions of dollars of stock-market wealth and several of the biggest corporate bankruptcies in

to get us thinking, finally, about the risks associated with paper assets.

While some of you might think hard assets like gold bullion are owned only by Montana Militia types, I've found owning gold to be a satisfying, prudent and (lately) profitable endeavor. And with U.S. equities and the dollar in virtual free-fall these days, my interest in the precious metals has become something of a fetish.

Whether we're talking Eagles, Maples, Kruggurands or gold bars, the only way I can describe the experience of holding even a single ounce of gold is to say that it feels like wealth. And these days, wealth feels really, really good.

The best-articulated case for gold I've read was written by no other than Alan Greenspan, more than 35 years ago. In an essay later reprinted in Ayn Rand's Capitalism: The Unknown Ideal, Greenspan outlined how, "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

We first made the case for gold last September, when we suggested that the Bank of England's final gold sale would mark an opportune time to take a position. Ten months later, gold is looking as attractive as ever.

More than the Dow, the Dax or even the dollar, the price of gold is arguably the most important piece of financial data on the planet. Traded in every time zone and coveted on every continent, gold is the most widely quoted investment in the history of the world.

While gold's value might fluctuate, the fact that it has value hasn't changed for 5,000 years. In all practical terms, gold is money. It has no board of directors or debt. It will never rust, decay or file Chapter 11. Gold boasts no Ebitda, nonexpensed stock options, conflicts of interest or accounting tricks. Gold is beholden to no one. Gold is merely a store of wealth. It doesn't do anything...it is simply owned.

If you're looking to preserve your wealth (or perhaps leave something to your children or grandchildren), I strongly believe now is the time to consider gold bullion. While the investment seems obscure and somewhat impractical, history suggests that an ounce of gold will have value long after General Electric, John Bogle and the U.S. greenback are long gone.

Gold's recent strength has been attributed solely to weakness in the U.S. dollar and a skittish stock market. But I'm of the belief that gold is just plain undervalued especially relative to more traditional investments (read: equities).

Tech stocks might be at their cheapest point in years, but if recent action is any guide, the next bull market might be in the physical world, not the virtual one. Gold bullion has climbed more than 20% over the past year, price action that we'd typically use to describe a bull market. Even so, you don't see the public participation or parabolic price action that would normally constitute a market top. Gold still trades at a fraction of its early 1980s highs.

Consider a critically important investing measure known as the Dow/Gold ratio, or the number of ounces of gold it takes to equal the Dow Jones Industrial Average. These days, it's telling me that the Dow is still significantly overvalued relative to gold despite the market's recent free-fall.

Between 1914 and 1925, the Dow/Gold ratio never exceeded six. But as stocks surged in the years leading up to the crash of 1929, the ratio expanded to 18:1, indicating it would take approximately 18 ounces of gold to equal the Dow. After the crash, the ratio narrowed again narrowed to just 2:1. A similar scenario played out during the late 1960s, when the booming Nifty Fifty market pushed the Dow/Gold ratio over 28:1. In the subsequent 1970s bear market, the ratio again narrowed steadily, moving to just 3:1 by 1974. By 1980, the ratio had reached 1:1, with both the Dow and gold trading near 800.

In our current market environment, with the Dow below 8000 and gold at $320 an ounce, the ratio still rests at an exuberant 25:1. This suggests to me that, despite recent narrowing, gold remains greatly undervalued relative to stocks. Every market has volatility and real moves take time. But all things being equal, these days I'd rather be long Kruggurands than the Dow. Although it might feel as though the real move in gold has already been made, I would suggest that the absolute return on boring old bullion could easily outpace stocks for longer than most of us might want to consider.

Jonathan Hoenig is portfolio manager at Capitalistpig Asset Management, a Chicago-based hedge fund.