Gold

[mathjak107]

ALL i know is with my hunting and fishing skills im going to starve in a mad max scenerio.......

 

[mathjak107]

rather than try to rule out whether things may or may not happen in the future and speculate what various investment classes will be worth or not worth i sleep better planning for uncertainty rather than ruling it out.
i try to match the corrolation in my mix so things respond differently to each economic environment. my worst dip was in the early 2000's down 14%...my best gains were over 40% ...works for me.....

 

[Craig]

Geez, what a long thread.  

Question ... why is it that those who choose to not own gold or gold stocks, often seem driven to belittle those who do as crackpots and "gold bugs"?

What's wrong with allocating a small portion of your portfolio to precious metals, either mutual funds, individual stocks and / or physical bullion?  I'm often left with the feeling it offends some ... perhaps, as noted above, as a strong criticism of the current system.

Whatever the psychological reasons, IMHO gold will always have value for jewelry, as well as a perceived store of value.  That is, until we can truly turn lead into gold.

 

[Cool Dood]

Geez, what a long thread.

Maybe the thread's so long because people keep bringing up the same thing that's already been discussed ten times in this thread?

I don't think anyone is belittling those who own gold, just pointing out that to them there's never a circumstance in which there isn't something better to have than gold. I think some people may be a bit stumped by "gold bugs," but everyone's free to buy what they want to (except health care in some jurisdictions...... ) and I don't think anyone objects to other people buying gold.

 

[cute fuzzy bunny]

charles...i'm not going so far as to call someone a crackpot. I asked why I should consider an asset allocation to gold. Whats the reason.

I heard stuff like it tracks inflation when it doesnt, and it has always kept its purchasing power, which it hasnt.

Beyond that, I think I heard some stuff about the economy going down the tubes (fast or slow), and gold might be a last bastion of salvation for ones portfolio.

I didnt hear why that is, who would buy the gold from you, what I'd take in exchange for it, or any evidence that it'd be useful at all since the reasons why gold has done what its done in the past has a lot to do with it being tied to our paper money to some degree. That hasnt been the case for some time now.

So the uptake I got was that in a long term sinking economy brought about by a confluence of dire economic policies, that owning an ornamental metal might save my bacon, because 35 years ago it yinged when inflation and the economy yanged. And never since.

In my case, while there are things to worry about I think there've always been things to worry about. We might hit a rough patch. People might do the knee jerk 'flock to gold' thing because 'thats what they do'. So I did hold about 3-5% of my portfolio in gold stocks. That holding doubled with no economic stimuli, after gold barely moved for the last 25 years.

Lots of worries and "might"s. If thats your bag, do it. Whether you're a crackpot for holding that bag, not my say.

 

[laurence]

Yeah, when people argue for gold, I replace that word with "real estate" and it makes much more sense to me. No objection to it being a slice in your "slice and dice", but don't diversify that far.

 

[haha]

  i try to match the corrolation in my mix so things respond differently to each economic environment. my worst dip was in the early 2000's down 14%...my best gains were over 40% ...works for me.....

Are you saying that your worst ever drawdown was 14%? Compared with a 40% gain, that is excellent.

Ha

 

[greg]

Beyond that, I think I heard some stuff about the economy going down the tubes (fast or slow), and gold might be a last bastion of salvation for ones portfolio.

I didnt hear why that is, who would buy the gold from you, what I'd take in exchange for it, or any evidence that it'd be useful at all since the reasons why gold has done what its done in the past has a lot to do with it being tied to our paper money to some degree. That hasnt been the case for some time now.

As I understand it for the most part in the context of the last thirty years (and there's lots of material out there explaining this stuff. and, yes, CFB, it is almost never the policy that is the problem but, rather, the corruption behind it): Keynes' idea on how to stimulate the economy was originally good, until it got perverted. Use plenty of money and stimulate demand. But when the economy finally improved you were supposed to "suck up" all that loose M3 and pay down the deficit. Makes sense to me. Greenspan started mucking with the system and started pouring the M3 on during every little , stupid crisis (LTCM?, etc.) He said we'd clean up the mess afterward, but don't ever pop that bubble. So . . . never pop a bubble and never suck up any loose liquidity. One consequence of this thinking and behavior was the incredibly falling interest rates of the past thirty years. Another lubricant added to our current debt mess. 2002 shows up and Greenspan lowers interest rates and pumps up the money supply for the bankers, e.g. oh boy, more debt and a fresh RE bubble. Oh boy, more free and easy spending based on 'no work' (just buy a bigger house for lower payments or buy a new car with your home equity free money) money. I say Greenspan just blew another bubble. But shhh! Don't tell the new home buyer or owner that his rising in value home wasn't due to a smart decision on his/her part--that it was all manipulation by the Fed to keep the ball bouncing.

It's the debt and the increase in money supply that is the problem. It's that everything is focused on consumer spending, rather than patriotically (?) trying to bring some financial balance back into people's lives. We have a gov't that only sees short-term, and a fair proportion of peope that simply can't save. If you haven't noticed, we have alot of debt.

SOME bears and most goldbugs (but not all ) see only one way out of this debt mess: keep the Ms (of 1, 2, and 3 fame) coming hot and heavy. Keep interest rates low and make sure plenty of money sloshes around the system. At least many of them believe it will continue for quite some time. Even I think that we will soon, in the next six months or so, have a slowdown in the economy and the lower interest rates and spigot will be turned on again. The value of the $ will continue its drop and gold will appear to go up in price in response to this flood of new money. But as you know, the real fact is that money is losing respect. Again, Wiermar (sp) Republic? US$ slowly turn into a joke if it continues too long. Would you rather have a joke or something real? Don't answer that, please.

Do you think the last three years happened all by itself, that war (and huge defense spending) didn't play a part in the recovery? Homeland defense dept (or whatever it's called) spending? Lower taxes to boot? All paid for by free, no cost to us, money? All debt/costs pushed into various future intervals. The patriotic goldbugs and most others think the system needs rebalancing, that it can't keep going forever. There, some cause-some effect for you. Now we wait for the consequences. Unless you think the past three or four years has just been a virtuous business cycle. Place your bets.

Gold: you cash in your share of GLD that you paid $50 for. You take the $150 (less taxes) you turned it into and buy the $50/lb steak that was $15/lb a year or two or three before. You take it home and cook it up and eat it. And then say "Dang, that was pretty good steak, and it doesn't bother me that it's now $50/lb. Life is good--for me." Life is aways much better when you worry and then do something about the things that you can do something about.

 

[mathjak107]

Are you saying that your worst ever drawdown was 14%? Compared with a 40% gain, that is excellent.

Ha

yes but i dont deserve all the credit,been following 2 fidelity newsletters now for many many years....so while im smart enough to know who to follow it was their guidance that made the last 15 years excellent...in fact 100,000 invested in 1987 is aver 1,000,000 today.....and while that may be not so high when compared to 100% stock and lots of risk,this was done with far less risk and a worst year of  minus
14%

 

[mathjak107]

as far as i can see gold and oil prices seem to track pretty closely except for a few points in history where one may have lagged behind a year or so but eventually tracked again....of course since 1990 oil is up 500% and gold 100% so its not the same dollar wise but non the less the charts follow.........just an observation........me'id rather have owned the oil

 

[TargaDave]

My dad is a classic conservative investor with requisite dose of depression era "gold bug" in him. One of the few people I know who made money from precious metals in the early 80's. I can still remember about 5 bags of silver stuffed in the basement. We used to play "fun" poker with the quarters. He sold 3 of the 5 bags right at the "Hunt Brothers" peak. We used a red wagon to wheel em into the broker to sell (heavy suckers). When I think back on it, the Hunt Brothers turned it into a pretty nerve racking speculation, but it helped put me and my 3 brothers through college. I still think it is a challenging investment that doesn't win often, but I own some silver bags, gold coins and mining stocks now because DD wouldn't let me sleep if I didn't. They've done quite well. Thanks again Dad

Call it a hunch but I suspect those crazy coins will help put my kids through college as well.

 

[brewer12345]

Geez, what a long thread.  

Question ... why is it that those who choose to not own gold or gold stocks, often seem driven to belittle those who do as crackpots and "gold bugs"?

What's wrong with allocating a small portion of your portfolio to precious metals, either mutual funds, individual stocks and / or physical bullion?  I'm often left with the feeling it offends some ... perhaps, as noted above, as a strong criticism of the current system.

Whatever the psychological reasons, IMHO gold will always have value for jewelry, as well as a perceived store of value.  That is, until we can truly turn lead into gold.

If you are happy buying gold, great, have fun. My dad, the jewelry dealer, will be happy to assist you. But if you want me to give any credence to an allocation to gold, I need to hear A) a better argument for gold than what I have heard thus far, and B) a convincing argument as to why gold by itself is better than a diversified basket of commodities. Ain't heard A or B yet, and I daresay I will not hear it any time soon, although I admittedly have not had time to read the latest issue of the Financial Analysts' Jornal, which has some articles on commodities in a portfolio.

 

[cute fuzzy bunny]

Greg - You think and worry too much about some things. Next time it starts happening, drink a beer. If its still happening, repeat.

Not really disagreeing with anything you said, but I'm still not making the connection between these economic concerns and your last paragraph. I see nothing that would suggest that in any economic condition that I can predict what gold would do. Its like hearing a long conversation about the price of tea in china, then stating that you've decided to paint your house as a result. Both things might be good to talk about and make sense, but I cant see that theres a direct connection.

As far as the liquidity and valuation of gold post economic sad times...still no connection made there either. There isnt any supporting data that says that gold will do much of anything, especially anything predictable. To me, this is just the south park underwear stealing gnomes' business plan, redux.

Lets finish derailing this "corruption" thing as well. I dont doubt some corruption occurs in government. Thats not my problem. Neither are policies. My problem is fat, stupid incompetence. Governments can be good at laying roads, building bridges, preventing invasions, putting out fires and reducing crime. They suck at just about everything else. And they're not doing so well with the core stuff because they're spending too much time and money oin the stuff they suck at.

On the rest of the comments...I really enjoy sold concrete stuff like "x always follows y...except for these times when it didnt".

I really, really enjoy them when theres no predictability of either or both going up (or down) at all, and the periods between stagnation are measured in decades.

Strong, strong arguments for investing.

 

[wabmester]

I really enjoy sold concrete stuff

Whatever happened to the old TH? You know, the master of human behavior and mass psychology? Gold speculators are simply trying to front-run the herd, like any other speculators. It's not a terrible approach -- if you guess correctly. Gold has had some undeniable momentum the past few years. I think there's still enough fear (thanks GWB!) to ensure that the current run has some legs, so goldbugs may end up looking pretty smart for a while.

 

[cute fuzzy bunny]

You havent been reading Wab! I noted that I did hold (originally 5%, then 3% due to lack of rebalancing) in precious metals because I know people run to it (for no good reason that I can think of) when they think they're supposed to. It more than doubled. Thats my cue to sell and I did. Anything I own that doubles for no reason goes on sale...

Whether it continues to have legs, I dont care either way. I made a big bunch of money. Maybe I sold too soon. But then again, isnt that the secret?

 

[haha]

Gold speculators are simply trying to front-run the herd, like any other speculators.   It's not a terrible approach -- if you guess correctly.   Gold has had some undeniable momentum the past few years.   I think there's still enough fear (thanks GWB!) to ensure that the current run has some legs, so goldbugs may end up looking pretty smart for a while.

mWab, this is my philosophy in a nutshell. IMO, gold is no weirder an investment than NASDAQ at any level that it has visited lately. They are both examples of the Keynesian Beauty Contest. You aren't looking for the prettiest girl, you are looking for the girl that you guess others will think is prettiest. Of course this is an infinite regression, which is what makes it so much fun.

Overall, I prefer investments to speculations, when there are any investments available. I am just not sure what a might be a true investment today. Extreme fiscal and monetary and speculative conditions make everything trickier than it otherwise be. JMHU, of course. 

Ha

 

[Cool Dood]

JMHU, of course.

"Jesus Might Hug U"?

 

[greg]

wab: You're absolutely right.

cfb: No argument will satisfy you--unless it's yours . Although, I could have presented mine better. But what's the point, eh?

 

[REWahoo]

cfb: No argument will satisfy you--unless it's yours

Jeeesh, Greg! (And I thought I was the only one who had noticed that... :)

 

[haha]

"Jesus Might Hug U"?

Dood, I think I just scrambled my acronym - but I kind of like your interpretation, so I am sticking with that. I will go around all day in joyous anticipation.

Ha

 

[cute fuzzy bunny]

cfb: No argument will satisfy you--unless it's yours . Although, I could have presented mine better. But what's the point, eh?

You didnt make an argument. Which I wasnt going to bring up until this.

You presented no basis for why gold would be any more or less beneficial to own than beaver cheese. Believe me, I was listening.

 

[sgeeeee]

You didnt make an argument.  Which I wasnt going to bring up until this.

You presented no basis for why gold would be any more or less beneficial to own than beaver cheese.  Believe me, I was listening.

What's the best way to buy beaver cheese? Or is it better to buy manufacturers of beaver cheese making equipment?

 

[laurence]

Oh man, talk about material to run with. It's over the line though even for me...but I hear Monistat can help with...oh never mind.

 

[greg]

cfb:  You're right about the argument, but I also suspect you won't quit or believe until I dredge up ALL the money flows everywhere for the past 35 years.  Then we'll have a statistics argument about the absurd.  Not worth it.  I've got better things to do than lose a "stupid" argument.

But :, I did forget one thing I wanted to mention about gold tracking inflation.  After Paul Volker raised interest rates and sniffed out beaver cheese inflation the last time, gold started going down in price, finally reaching about $250/oz.  My contention, no proof given at all, is that money started moving toward financial stocks and stocks that performed best with larger amounts of leverage.  It moved toward money makers and away from commodities and gold; hence, the price non-correlation with inflation.  People felt secure again with paper money.  But, as you know, the pendulum swings. 

I can't prove it, but I suspect gold will perform in a similar fashion again, like the late 70s-early 80s. 

Time to go, but I have the really important stuff to talk about next--non-gold.

 

[cute fuzzy bunny]

cfb: You're right about the argument, but I also suspect you won't quit or believe until I dredge up ALL the money flows everywhere for the past 35 years. Then we'll have a statistics argument about the absurd. Not worth it. I've got better things to do than lose a "stupid" argument.

Sorry you feel that way. I had done my due dilligence and found no correlations or indicators that said gold was worth more than a nominal holding. But I had an open mind. You feel strongly about this and I wanted to hear why. At best I can say you have a gut feeling. I didnt hear any new information or any data that would cause any change of heart.

Whether you or other people think so, I change my mind about a lot of stuff and form (and have formed) many of my opinions and investment directions based on what other people have said here. Fer chrissakes, about a third of my taxable portfolio is invested in a fund Charlie recommended to me.

I am not, however, wishy-washy about my own opinions. Thats a bad thing?