Gold Bubble?

[chinaco]

Everybody has an opinion about soaring gold prices.

The "Crawl in the Bunker" crowd is trying to shield themselves from world destruction.

The "Green Eyed Greed" crowd can't get enough.

This seems so predictable...

Looks a lot like.... internet bubble, housing bubble, pick your bubble.

Gold fever: A dispatch from the zone of contagion - Dec. 9, 2010


It will be interesting to see how many people took their money and how many greater fools hang on!


If I owned it... I would be exit and count myself lucky... which is all I would be (LUCKY) because the good lord knows I am not super speculator!

IMO - Many people lose site of why they bought it in the first place and fall into the greed trap. Hedgers that bought it as an inflation hedge... and have had it for a while... they have the value.... capturing the money is the realization of the hedge... not holding on until it pops! Investors that bought it for a gain... if you don't take the gain... you are likely to not have a gain!

If you own it, you should ask yourself 3 questions:

1. Am I going to be the saavy investor [-]speculator[/-] that is going to beat all the other investors [-]speculators[/-] at their game (get out just before it pops cause I know how to read it)?
2. Am I the greater fool that lost money or lost most or all of my gain before I freaked out and ran for the exit after it plummeted?
3. Am I the lucky guy or gal that wiped the greed from my eyes got out to preserve my gains?

Which are you?


I would advise every gold owner to look at the hockey stick chart pattern for gold prices in the 70's (and what happened) and look at the chart now!


Didn't you learn your lesson from the last two massive bubbles over 10 years? One of them just 2 years ago! Are you are one of those house flippers that borrowed from your 401k to Flip...

This will not end well for many people!

 

[FUEGO]

I am getting quotes on selling my small amount (~$1000) of physical gold and silver bullion right now.

I'm really tempted to buy some out of the money puts on GLD right now as a little gamble on the price crashing precipitously. I thought the same thing this time last year when gold was around $1100/oz, so I was wrong in my thinking then (didn't actually execute on the idea though). I think gold will do fine, until it doesn't.

 

[braumeister]

In my very humble opinion, the price of gold is not rising.
The value of the dollar is sinking.
Until I see that start to reverse, I'll hold onto my gold.

 

[calmloki]

In my very humble opinion, the price of gold is not rising.
The value of the dollar is sinking.
Until I see that start to reverse, I'll hold onto my gold.

+1

and looking seriously at buying more real estate.

may just flip one or two. hard assets. I like 'em.

 

[John Galt III]

A coworker bought silver coins about 4 or 5 months ago, before silver skyrocketed. He had heard one of those "buy silver before it's too late" ads on the radio. So he's doing well. He is actually a "store cans of food, prepare for civil unrest" guy. I would buy silver, even now, if I had a direct route to it in an etf like SLV or SLW, in my 401k, but I would have to open a brokerage link account with Fidelity. And I'd be worried about it plummeting.

 

[e86s54]

Chinaco,

This has been discussed in a recent previous thread.

Gold may become a bubble, but it isn't even close, yet. Gold is the perfect currency. It doesn't change much, but the world around it does. So the real question here is not the price of gold, but the state of markets and governments of the west. I'm not a doomsday type, but it is a fact that the US government (along with many others) cannot repay their debt EVER. We just can't roll on like this and we are too big to bailout.

Gold is simply a hedge against this.

 

[Texas Proud]

A coworker bought silver coins about 4 or 5 months ago, before silver skyrocketed. He had heard one of those "buy silver before it's too late" ads on the radio. So he's doing well. He is actually a "store cans of food, prepare for civil unrest" guy. I would buy silver, even now, if I had a direct route to it in an etf like SLV or SLW, in my 401k, but I would have to open a brokerage link account with Fidelity. And I'd be worried about it plummeting.

I always wonder about those guns and bullets kind of guys who think that we will have civil unrest... and then hoard silver or gold...

Think about it.... if we really had the gvmt collapese and had no order of law (anarchy).... how much do you think gold and silver will be worth What will be more important then is either being able to grow food or having enough weapons to go get it from someone else... and this would mean that the whole world went down since you could move to a country that does not have this problem (maybe that is what the gold and silver is for)...

What percent do you put on that happening To me, it is way to small to worry about... I have a lot higher chance of getting hit by a meteor... (let's hope I didn't jinx myself and get hit when I go out to lunch )

 

[Animorph]

I always wonder about those guns and bullets kind of guys who think that we will have civil unrest... and then hoard silver or gold...

Think about it.... if we really had the gvmt collapese and had no order of law (anarchy).... how much do you think gold and silver will be worth

+1

Gold is great as long as everyone agrees it has value. Kind of like condos.

 

[John Galt III]

I always wonder about those guns and bullets kind of guys who think that we will have civil unrest... and then hoard silver or gold...

Think about it.... if we really had the gvmt collapese and had no order of law (anarchy).... how much do you think gold and silver will be worth What will be more important then is either being able to grow food or having enough weapons to go get it from someone else... and this would mean that the whole world went down since you could move to a country that does not have this problem (maybe that is what the gold and silver is for)...
)

TexasProud,

I hear you. This guy is interesting. He was telling me precious metals would not be worth much, in the doomsday scenario he is preparing for. So why he bought the silver coins, I don't know. Maybe he changed his mind. Maybe he just wants to speculate. I haven't talked to him for a while.

JG III

 

[Pete]

We never really know if something is a bubble or not till it pops. If you wake up tomorrow and see gold at 250 an ounce, I guess it was.

 

[Nodak]

TexasProud,

I hear you. This guy is interesting. He was telling me precious metals would not be worth much, in the doomsday scenario he is preparing for. So why he bought the silver coins, I don't know. Maybe he changed his mind. Maybe he just wants to speculate. I haven't talked to him for a while.

JG III

If civilization were to collapse having a bunch of gold would just make one a target for those that would like to take it away. The logical thing to do would be to buy land so you could be self sufficient. It would mean living the way people did 100 years ago but it could be done.

 

[Gone4Good]

In my very humble opinion, the price of gold is not rising.
The value of the dollar is sinking.
Until I see that start to reverse, I'll hold onto my gold.

By what measure are you monitoring this? How will you tell when it reverses?

 

[Gone4Good]

We never really know if something is a bubble or not till it pops.

I don't think that is entirely true. The tech bubble was pretty obvious, even at the time (e.g. Palm minority float trading at a higher market cap than it's majority owner). The real estate bubble was pretty obvious too (e.g. Firemen in CA with $75K salaries buying $1MM properties).

Gold will be a harder bubble to spot, because unlike tech and real estate, it's value isn't tied to anything real. I can say for certainty that Palm stock was overvalued and certain real estate markets too, but gold? Who knows . . . which makes it a perfect bubble candidate.

The "nice" thing about a gold bubble is that the downside to those of us who aren't playing in the silliness is small, unlike in the previous two bubbles where collateral damage was extreme. The only ones who get burned in this one are the "greater fools." I'm OK with that.

 

[brewer12345]

I am liking the idea of gold etf puts as a speculation. May have to look into that.

 

[dex]

deleted

 

[dex]

If you own it, you should ask yourself 3 questions:

1. Am I going to be the saavy investor [-]speculator[/-] that is going to beat all the other investors [-]speculators[/-] at their game (get out just before it pops cause I know how to read it)?
2. Am I the greater fool that lost money or lost most or all of my gain before I freaked out and ran for the exit after it plummeted?
3. Am I the lucky guy or gal that wiped the greed from my eyes got out to preserve my gains?

Why do you ask these questions specifically about gold?

Also, take a look at other commodities.
http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=gld&time=&freq=
Take a look at Apple or Netflix.

BigCharts - QuickCharts __________________

 

[Koolau]

Made a relatively small "investment" in the yellow metal back when it was in the $250 to $270 range. The rest of my port contains only about 25% equities, so take this FWIW. All my gold, which I can easily carry in one hand, more than covered my equity paper losses during the recent unpleasantness. It's also the only "investment" I've made in this decade which went up roughly 5X (heck, it's the only one that ever did than any ANY decade of my investing life).

Still, I'd never recommend it to anyone else. It's a very personal thing, colored by the rest of life. My dad showed me where he had buried junk silver in his basement long before he passed on. I later retrieved it and was able to help my mom cover her NH bills with the proceeds. Dad lived through the very worst of the depression as a teen head-of-household (his dad had died and left 3 sisters and a baby brother) so his world was colored by his experiences. I guess a bit of that rubbed off on me.

I sincerely wish that I could have the confidence that many of you have in the overall state of our (and the world's) economy. I don't spend hours worrying about it (like my dad did). But, I figure a very small portion of the port committed to a "ridiculous" yellow metal is my nod to my dad's financial advice. As I look back on a very smart but uneducated man's advice over his lifetime, I've found much more of it to be sound than otherwise. Call it sentiment, fear, stupidity or what you will. A hand full of yellow coins in the SD box just seems right. I think we humans depend more on instinct than anyone cares to admit. Sometimes those instincts are wrong, but as I get older, I trust them more - whether that is wise or not. Only time will tell.

And, hey, YMMV.

 

[braumeister]

By what measure are you monitoring this? How will you tell when it reverses?

Ah, that's the question, isn't it?
Just trying to spot the relevant macroeconomic trends and work out the consequences.
Same as making the decision to buy an individual stock -- you have a reason to think its price will go up, but your reason may not be a good one, or even a valid one. Still, we make our choices and live with them.

 

[chinaco]

Why do you ask these questions specifically about gold?

Also, take a look at other commodities.

Take a look at Apple or Netflix.

BigCharts - QuickCharts __________________

I read that Netflix just moved into the S&P 500 Index today.


I am not picking on Gold.

Back during the meltdown, I thought about buying some gold out of fear. I didn't do it. I wish I had... looking at those gains... they look pretty good.

But I did not know how to play it or judge it. I would have only done it out of fear.

But if I had bought in... I would be taking my profits Now!!!

 

[dex]

But I did not know how to play it or judge it. I would have only done it out of fear.

Here's one way.

http://ttheory.typepad.com/files/goldmega-t-1968-20101128pdf.pdf

Terry Laundry's T Theory

I don't own any gold. There may be large pullbacks but, it looks good in this decade.

 

[Gone4Good]

Ah, that's the question, isn't it?
Just trying to spot the relevant macroeconomic trends and work out the consequences.
Same as making the decision to buy an individual stock -- you have a reason to think its price will go up, but your reason may not be a good one, or even a valid one. Still, we make our choices and live with them.

If you asked the same question "by what measure are you evaluating an individual stock" the answer could be P/E, PEG, P / Book, free cash flow yield, dividend discount model, NPV, etc. etc.

I thought there might be something similar you were looking at for gold.

 

[Gone4Good]

I am liking the idea of gold etf puts as a speculation. May have to look into that.

If there is one thing I've learned about the last two bubbles, is that timing their demise is really hard. I sold out of my REITs two years before the peak. It would have been really painful to buy puts those last two years.

As for gold, I think it is early days for the bubble. The other two bubble ran maybe six years or so, but gold doesn't have the same limitations as the others. The tech bubble could last only as long as people were willing to ignore money losing business models. And the real estate bubble could last only as long as folks were allowed to borrow their mortgage payment. In each of those cases, there were real economic and financial forces pulling the bubble back to ground. Nothing like that exists for gold. Gold will never miss a sales forecast, or have trouble making a loan payment. So the rally can go on until the psychology changes. Good luck forecasting that.

 

[braumeister]

I thought there might be something similar you were looking at for gold.

Alas, no. I just watch what's happening.
Admittedly, I'm a very cautious type (I actually made money on Enron), and normally bail out of good things way too early, but I see no reason to sell gold yet.

 

[Gone4Good]

Alas, no. I just watch what's happening.
Admittedly, I'm a very cautious type (I actually made money on Enron), and normally bail out of good things way too early, but I see no reason to sell gold yet.

I agree that it's probably early in the bull market (see above).

But I'm having trouble understanding what's driving the price move, if not just pure speculative frenzy. If it's really being driven by an increase in the number of dollars in circulation, shouldn't other dollar demomintated products experience a similar rise in price? And I'm thinking specifically of those items not priced on financial exchanges . . . like cars, clothes, haircuts, etc.

If I've increased the number of dollars relative to the supply of gold, haven't I also increased them in the same proportion relative to the supply of haircuts?

 

[brewer12345]

If there is one thing I've learned about the last two bubbles, is that timing their demise is really hard. I sold out of my REITs two years before the peak. It would have been really painful to buy puts those last two years.

As for gold, I think it is early days for the bubble. The other two bubble ran maybe six years or so, but gold doesn't have the same limitations as the others. The tech bubble could last only as long as people were willing to ignore money losing business models. And the real estate bubble could last only as long as folks were allowed to borrow their mortgage payment. In each of those cases, there were real economic and financial forces pulling the bubble back to ground. Nothing like that exists for gold. Gold will never miss a sales forecast, or have trouble making a loan payment. So the rally can go on until the psychology changes. Good luck forecasting that.

This would be speculation, remember? That implies very high risk and a solid chance of losing everything I stake on the bet.

I intentionally keep about 1 to 2% of my portfolio in very high risk, high potential reward speculations. Usually I use longer dated options for this because they offer the combination of limited capital outlay at risk and returns that can be many multiples of the sum invested. I have probably made almost as much on the 1 to 2% of speculative stuff as I have on the rest of my portfolio.

But caveat emptor and I agree that it may be to early to short the gold market.