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Re: Gold as Safety
Old 12-14-2005, 12:29 PM   #21
 
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Re: Gold as Safety

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Originally Posted by brewer12345
Just a suggestion: you might want to regard gold as a trading vehicle, not a default choice/parking place.
Concur.* It trades like a stock now.* Heck it is an ETF.

Silver ETF starts March 2006 (I believe).

It is basically a piece of paper now.* *
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Re: Gold as Safety
Old 12-14-2005, 12:36 PM   #22
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Re: Gold as Safety

IMO gold is likely no more speculative right now than 95% of US stocks.

For sure gold is a better speculation than it is an invesment. It has to be bought an sold. Whereas, bought right, a basket of high ROI companies can probably fairly safely be held for a long time.

That said, it is hard for me anyway to imagine the circumstances that would send gold back to $250. I don't think any of us who are alive today will ever see that price again.

Gold trades on emotion. IMO, we aren't at a long term top yet, but that is always hard to be sure about.

Ha

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Re: Gold as Safety
Old 12-14-2005, 12:41 PM   #23
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Re: Gold as Safety

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Originally Posted by brewer12345
I guess it all depends on how you define safety. I am a lot happier with diversified commodity exposure rather than trying to pick one, regardless of what that commodity is (oil, gold, live cattle, corn, etc.). Why? First, a single commodity is a LOT more volatile than a basket. Check out the whipsaw correction gold is going through vs. the more restrained moves of something like PCRIX. Second, how much gold do you consume in a year, Greg? I use a lot more heating oil, gasoline, corn, soy, aluminum, etc. I suspect that a basket of commodities is likely to track inflation more closely than gold, although over very long periods of time the difference probably starts to wash out.

You want safety, look at TIPS or I bonds.
Brewer: I see deeper problems. I see a devaluing US$--if not soon then later. TIPs and I-bonds--at best--offer whatever the gov't says they are at that point (remember some of the arguments about whether the CPI is a correct reflection of "true" consumer inflation?). Gold transcends national borders and gov't manipulation more than other commodities. Some, in fact many, commodities are manipulated by their governments, not necessarily in a bad way (we subsidize our own agricultural industry, as do other countries). Right now Bush is shipping large quantities of gasoline from Europe in order to keep prices reasonable for consumers. I think interference may get worse over time. But whose paranoid?
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Re: Gold as Safety
Old 12-14-2005, 12:43 PM   #24
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Re: Gold as Safety

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Originally Posted by Marketneutral
Gold is not keeping up with inflation anymore.

There I said it.
Not today!
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Re: Gold as Safety
Old 12-14-2005, 12:48 PM   #25
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Re: Gold as Safety

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Originally Posted by Marketneutral
Only good thing about gold is it probably will never go to $0.

However as an investment through time it has been a major dog.

Think of it this way. As an investement it has been around thousands of years.

Perfect example: Silver.

Silver is currently 8.48 an ounce. Your great great great great great great great great great great great great grandfather gives you an ounce of silver. He says hold this, protect it, pay insurance for it, safe guard it, worry about it and 3000 from years from now you can buy a 12 inch Subway sandwich and a medium drink. What would you would of said? I would of said, just keep the damn thing.

When gasoline was first refined its cost was about one oz of silver/four gallons. So which is more important to you Subways or gas?
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Re: Gold as Safety
Old 12-14-2005, 12:53 PM   #26
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Re: Gold as Safety

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Originally Posted by Marketneutral
and no currency is backed by gold anymore.

It is basically a worthless element.

It is like a shiny object to a bird. Has looks value but no true value.
I never said it had true value. I said it had relative value such as one oz is relative to a suit of clothes. You're twisting my argument to fit your methodology. I love being a contrarian.
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Re: Gold as Safety
Old 12-14-2005, 12:57 PM   #27
 
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
When gasoline was first refined its cost was about one oz of silver/four gallons.* ** So which is more important to you Subways or gas?
I believe gasoline was first refined around 1900. At that time silver was around 90 an ounce in 1998 USDs.

That would mean 4 gallons of gas costs $90.

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Re: Gold as Safety
Old 12-14-2005, 12:58 PM   #28
 
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
I never said it had true value.* I said it had relative value such as one oz is relative to a suit of clothes.* You're twisting my argument to fit your methodology.* I love being a contrarian.
The problem is - you are not the contrarian here.

The contrarian now is the one that is saying gold is overpriced. Sort of like in 1999 the contrarian was the one saying tech stocks were overpriced.

You would be considered a sheeple.
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Re: Gold as Safety
Old 12-14-2005, 12:59 PM   #29
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
Brewer:* I see deeper problems.* I see a devaluing US$--if not soon then later.* TIPs and I-bonds--at best--offer whatever the gov't says they are at that point (remember some of the arguments about whether the CPI is a correct reflection of "true" consumer inflation?).* Gold transcends national borders and gov't manipulation more than other commodities.* Some, in fact many, commodities are manipulated by their governments, not necessarily in a bad way (we subsidize our own agricultural industry, as do other countries).* *Right now Bush is shipping* large quantities of gasoline from Europe in order to keep prices reasonable for consumers.* I think interference may get worse over time.* But whose paranoid?
Different strokes, I suppose. *If the USD becomes as worthless as you fear, Merkins will probably have a lot more to worry about than whether the treasury is fudging the CPI. *Personally, I don't think there is any intentional fudging going on. *I spent enough time in economics classes to learn that the measurement of most economic phenomena is far from cut and dry, so the compromises one must always make when doing this sort of thing are making the best of a world that doesn't neatly fit into your spreadsheet.

I think you are wrong on gasoline. *The administration isn't shipping it in to keep prices low: the market is simply reacting. *If Merkins are willing to pay more than other consumers for a gallon, that gallon gets shipped to the people willing to pay the most. *Simple. *Gummint can interfere on the margin, but their powers are more on the side of the abiity to restrict supply, no increase it. *If they want to restrict the importation of gasoline, etc., I can't complain as an investor in PCRDX.
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Re: Gold as Safety
Old 12-14-2005, 01:01 PM   #30
 
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Re: Gold as Safety

I believe the point is gold trades like a stock.

What is the difference between IBM and GLD - nothing. It all trades the same.
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Re: Gold as Safety
Old 12-14-2005, 02:04 PM   #31
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
I see a devaluing US$--if not soon then later.
Geez, Greg, if you see a depreciating dollar then short the dollar-- don't chase after proxies that might reflect a depreciating currency or whose price might be complicated by a dozen other factors.

Gold hedges against the dollar, true. But in all other aspects, as an appreciating investment over the last couple decades, gold has sucked almost as badly as large-cap growth. I doubt that holders of euros or renminbi are as excited by gold as some dollar holders.

Gold is a great asset for trading. But if you're gonna trade then trade-- don't try to call it an investment.

I look forward to your investment assessment of shotgun shells and MREs...
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Re: Gold as Safety
Old 12-14-2005, 02:56 PM   #32
 
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Re: Gold as Safety

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Originally Posted by Marketneutral
Hey Kool Aide Man!!!!!!

Buy the dip.* I think I remember hearing that saying in 2000 and 2001 with the tech stocks.* *:
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Re: Gold as Safety
Old 12-14-2005, 03:18 PM   #33
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Re: Gold as Safety

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Originally Posted by wildcat
That is the key from my perspective.*
Ditto!

JG
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Re: Gold as Safety
Old 12-14-2005, 05:54 PM   #34
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Re: Gold as Safety

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Originally Posted by HaHa
That said, it is hard for me anyway to imagine the circumstances that would send gold back to $250. I don't think any of us who are alive today will ever see that price again.
This is an interesting statement. Why shouldn't gold trade at $250 / oz? Why should it trade at $500? Why not $1,000 or $10,000 or $50? I guess the question is, what is the fundamental value of an ounce of gold? It doesn't produce an income stream. It's only value is what someone else is willing to pay you for it - like tulip bulbs only non-perishable. Sure it has some industrial uses but not like copper or oil. I know what a bond's value is because I can discount the future cash flows. Same thing with a stock, only with less certainty. How do I know whether $500 per ounce is a good price or not for gold? I guess I just have to hope the next guy thinks its worth $550.
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Re: Gold as Safety
Old 12-14-2005, 06:19 PM   #35
 
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Re: Gold as Safety

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Originally Posted by . . . Yrs to Go
This is an interesting statement.* Why shouldn't gold trade at $250 / oz?* Why should it trade at $500? Why not $1,000 or $10,000 or $50?* I guess the question is, what is the fundamental value of an ounce of gold?* It doesn't produce an income stream.* It's only value is what someone else is willing to pay you for it - like tulip bulbs only non-perishable.* Sure it has some industrial uses but not like copper or oil.* I know what a bond's value is because I can discount the future cash flows.* Same thing with a stock,* only with less certainty.* How do I know whether $500 per ounce is a good price or not for gold?* I guess I just have to hope the next guy thinks its worth $550.
Bigger fool theory. Sign me up, not.

Made sense as an inflation hedge when it backed currencies. Now it backs nothing.

Gold reminds me very much of the beanie baby craze.

When you see Gold Commercials on Fox News it is time to stop and think - will I be the last fool holding the bag of novelty before this explodes?
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Re: Gold as Safety
Old 12-14-2005, 09:16 PM   #36
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Re: Gold as Safety

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Originally Posted by . . . Yrs to Go
This is an interesting statement.* Why shouldn't gold trade at $250 / oz?* Why should it trade at $500? Why not $1,000 or $10,000 or $50?* I guess the question is, what is the fundamental value of an ounce of gold?* It doesn't produce an income stream.* It's only value is what someone else is willing to pay you for it - like tulip bulbs only non-perishable.* Sure it has some industrial uses but not like copper or oil.* I know what a bond's value is because I can discount the future cash flows.* Same thing with a stock,* only with less certainty.* How do I know whether $500 per ounce is a good price or not for gold?* I guess I just have to hope the next guy thinks its worth $550.
Gold is an industrial commodity. The OECD jewelry industry is an industry. Wedding jewelry in India and China is an industry. Granted, there are big differences from oil- gold doesn't go up in smoke. But then neither does copper, platinum or palladium, and no one would say that they aren't industrial.

So it does boil down to price.

Commodities are tricky, and you donít have your Lords Bernstein and Bogle to hold your hands, but at least they are real. They donít go to zero.

IMO, nothing is easy, nothing is sure- but I believe people will be trading gold for a very long time to come.

Personally, I am not making any new gold bets- but I havenít taken all the standing ones down either.

Ha

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Re: Gold as Safety
Old 12-15-2005, 12:17 AM   #37
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Re: Gold as Safety

I just don't think a number of folks understand my original post the way I intended it. And I can't respond correctly on this forum. It would just take way too many posts. Paper money--or whatever--is a creation in people's minds. It represents an agreement shared by all its users as to what it can do and what it represents, just as beans or shells might have been used in some cultures to represent stored work. They had value because it was agreed upon between the two exchangers or among larger groups. Currencies have been run down in all cultures. Romans added base metal to their gold and silver coins, devaluing them. John Law ran the French printing presses full-time, devaluing the currency. And so on and so on. Ultimately, it comes back to gold as the preferred storage medium of work. One oz of gold represents a set of decent clothes or thereabouts--sometimes more, sometimes a less. Gold wins by default. It is also in our Constitution. Maybe there was originally a reason for that; maybe the original framers had a basic wisdom. But apparently nowadays, maybe not. My bet is that the default system returns.
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Re: Gold as Safety
Old 12-15-2005, 01:09 AM   #38
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
. . .* Ultimately, it* comes back to gold as the preferred storage medium of work.* One oz of gold represents a set of decent clothes or thereabouts--sometimes more, sometimes a less.* Gold wins by default.* It is also* in our Constitution.* Maybe there was originally a reason for that; maybe the original framers had a basic wisdom.* But apparently nowadays, maybe not.* ** *My bet is that the default system returns.
Preferred storage medium of work

I don't know what that means. But apply your PE valuation metric that you apply to index funds to gold and tell me what you conclude.

I'm putting my money in tulip bulbs.

Makes as much sense as gold.
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Re: Gold as Safety
Old 12-15-2005, 04:55 AM   #39
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
*My bet is that the default system returns.
Greg
This is real "gloom and doom"! It's gloomy here too (seems to be snowing a lot this winter, and its only half way through December) but I don't see a full system crash that would bring gold back as the base of our monetary system.
Yet, it is a possiblity and cannot be dismissed out of hand.

That's one of the reasons that I like Bernstein's book. He says you have to take into account that the whole system might fail, or at least come under great stress, and that's why you can't really be 100% certain of a portfolio surviving.

If we've got to rely on my hunting, fishing and farming, we're going to be a lot thinner!

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Re: Gold as Safety
Old 12-15-2005, 06:57 AM   #40
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Re: Gold as Safety

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Originally Posted by Apocalypse . . .um . . .SOON
I just don't think a number of folks understand my original post the way I intended it.* And I can't respond correctly on this forum.* It would just take way too many posts.* Paper money--or whatever--is a creation in people's minds.* It represents an agreement shared by all its users as to what it can do and what it represents, just as beans or shells might have been used in some cultures to represent stored work.* *They had value because it was agreed upon between the two exchangers or among larger groups.* Currencies have been run down in all cultures.* Romans added base metal to their gold and silver coins, devaluing them.* John Law ran the French printing presses full-time, devaluing the currency.* And so on and so on.* Ultimately, it* comes back to gold as the preferred storage medium of work.* One oz of gold represents a set of decent clothes or thereabouts--sometimes more, sometimes a less.* Gold wins by default.* It is also* in our Constitution.* Maybe there was originally a reason for that; maybe the original framers had a basic wisdom.* But apparently nowadays, maybe not.* ** *My bet is that the default system returns.
You know, I hear this stuff from the gold bugs (especially the fundie xtian ones) and it still smells like BS. Yes, fiat currency has value because we all agree it does. But gold only has value because people are willing to pay something for it. But for the most part, it is just a shiny yellow metal that isn't as attractive as some others and is less industrially useful than most. 1oz. of gold represents whatever people are willing to pay for it, that's it.
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