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Re: We're still too exuberant
Old 12-19-2005, 01:06 PM   #41
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Re: We're still too exuberant

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Originally Posted by ex-Jarhead

P.S.* We are now into our 4th. day of raining like dogs and cats.* (No Golf).
At this point, it is an endurance contest, to see if my wife or I end up in the "Funny Farm"
There are other games!

Here in Texas, we'd kill for that rain.* You must be getting ours.* We're in a drought, and I suspect it won't be remedied until Spring.* It's ironic that I had a houseful of Katrina refugees this summer, running to evade that storm, and I had to ask them to help me water my yard.*
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Re: We're still too exuberant
Old 12-19-2005, 01:11 PM   #42
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Re: We're still too exuberant

Quote:
Originally Posted by ex-Jarhead
P.S. We are now into our 4th. day of raining like dogs and cats. (No Golf).
At this point, it is an endurance contest, to see if my wife or I end up in the "Funny Farm"
I can see it now...
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File Type: gif Jarhead_.gif (27.0 KB, 73 views)
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Re: We're still too exuberant
Old 12-19-2005, 08:21 PM   #43
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Re: We're still too exuberant

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Originally Posted by . . . Yrs to Go

3) Point '2' is specifically relevant considering how much gold has outperformed CPI over the past several years. Is 'mean reversion' also a concern for gold, or just stocks?
4) In view of gold's recent price appreciation I don't see why you are not worried about a bubble in gold prices . . . you seem to think every other asset class is a bubble . . . why not gold?
5) You say "when everything else seems over valued" but would you know if gold is overvalued? Are you sure its not? By what measure do you evaluate golds relative attractiveness to other investments?

Are you sure gold isn't looking a bit bubbly??

One way to compare relative value of gold to the stock market is the Dow:Gold ratio. Run a Google search on it. Gold would definitely be overvalued at somewhere less than 5:1
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Re: We're still too exuberant
Old 12-19-2005, 09:00 PM   #44
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Re: We're still too exuberant

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One way to compare relative value of gold to the stock market is the Dow:Gold ratio.* Run a Google search on it.* Gold would definitely be overvalued at somewhere less than 5:1
*
Any idea why the Dow should trade at any specific ratio to gold?

Let's say that in 1970 I bought an ounce of gold and an equivalent dollar amount of GE stock and stuck them in a safety deposit box for the last 35 years. When I open that box today my ounce of gold is still just one ounce of gold. But my GE stock is a completely different and much larger company. Why should the ratio between these two things have any correlation whatsoever?
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Re: We're still too exuberant
Old 12-19-2005, 10:42 PM   #45
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Re: We're still too exuberant

Putting 10% in gold/PM seems prudent to me. Make it gold/PM equities if you want to "gear" the return a bit and do not see armageddon just around the corner.
I hold VGPMX and PCRIX up 40% and 22% ytd respectively so they have certainly added to my christmas happiness this year!
Cheers!
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Re: We're still too exuberant
Old 12-19-2005, 10:57 PM   #46
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Re: We're still too exuberant

tiredofwork,

Years ago, there was a guy on the radio with a monicker like the Street-wise Economist or something. He insisted that there was a magic ratio of the price of gold to the price of oil. It always seemed daft to me. Their uses are no way connected. The major use of gold is in class rings. The major use of oil is fuel to run the world. I forget what the magic number was. It would be interesting to back-test it from today--just for fun.

Unc2: Harry Browne, eh? For 10 points, how many out there know who Harry Browne is? How many put your money in Mexican bank accounts?

Cheers,

Ed
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Re: We're still too exuberant
Old 12-19-2005, 11:13 PM   #47
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Re: We're still too exuberant

The permanent portfolio is based on the Harry Brown stuff: PRPFX. not a bad performer/fund.
(but yeah - he had some bad calls too!). Cheers!
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Re: We're still too exuberant
Old 12-20-2005, 12:06 AM   #48
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Re: We're still too exuberant

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Originally Posted by Ed_The_Gypsy
For 10 points, how many out there know who Harry Browne is?* How many put your money in Mexican bank accounts?

Cheers,
Ed
I know who Harry Browne is, but I had and have no interest in Mexican banks. I do like Mexican food however.

Now a question for those who got Harry Browne- who was Franz Pick, and what was his famous quote?

Ha

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Re: We're still too exuberant
Old 12-20-2005, 02:20 AM   #49
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Re: We're still too exuberant

He was a gold bug - and recommended to "buy gold and sit on it". Not bad advise I think - for SOME of a well diversified portfolio. (I prefer a Lazyboy though ). Cheers!
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Re: We're still too exuberant
Old 12-20-2005, 11:12 AM   #50
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Re: We're still too exuberant

He may have said this- but the one I remember is "US Government Bonds, certificates of guaranteed confiscation!"

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Re: We're still too exuberant
Old 12-20-2005, 04:22 PM   #51
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Re: We're still too exuberant

Quote:
Originally Posted by . . . Yrs to Go
Any idea why the Dow should trade at any specific ratio to gold?

Let's say that in 1970 I bought an ounce of gold and an equivalent dollar amount of GE stock and stuck them in a safety deposit box for the last 35 years. When I open that box today my ounce of gold is still just one ounce of gold. But my GE stock is a completely different and much larger company. Why should the ratio between these two things have any correlation whatsoever?
One can calculate a ratio between any two quantifiable items, as long as the denominator is not zero. As to why the ratio has historically swung between approximately 2 to 42 (peaking in year 2000), I leave that to the Gold Bugs to answer. However, it appears to me that, at the lower ratio levels, gold is overvalued relative to the stock market and, at the higher levels, the opposite is true. The ratio has been trending down since the year 2000 peak and is currently at about 22. Does the Dow have room to fall and/or the price of gold room to rise based on history? Looks that way to me. Can we safely say there is a "bubble" in gold at this point? I wouldn't want to make that bet.
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Re: We're still too exuberant
Old 12-21-2005, 02:39 AM   #52
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Re: We're still too exuberant

Well, when I saw that gold would make a breakout in late 1999 or 2000 I had long and interesting discussions with the guy who runs this site and one of the exchange we had is reported in http://www.goldensextant.com/commentary8.html
complete site at
http://www.goldensextant.com/

There is much more to gold than its supposed value. This maket is strongly manipulated by many players including bullion banks, central banks, producers and hedgers, speculators etc.
Hope you'll find the site interesting.
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Re: We're still too exuberant
Old 12-21-2005, 06:56 AM   #53
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Re: We're still too exuberant

Here is a speech from the site referenced above which goes to the heart of the gold discussion here-"Is gold money, or just another commodity?"

http://www.goldensextant.com/

Click on "Gold Is Money, Deal With It"

It seems that most hear feel it is just another commodity, albeit one which seems to trade unpredictably.

I really don't know myself, but I know that I do not have any desire to make big gold bets. Several years ago when it was very cheap compared to today, there were even better commodity investments- most obviously oil and especially natural gas.

Itís hard to not be interested though in a substance as interesting as gold. Remember your nursery rhymes?

I do believe that gold could temporarily outperform oil and many industrial commodities if the world enters a slowdown.

Ha
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