Author Topic: Gold - I we still cavemen?  (Read 36910 times)

tooqk4u22

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Gold - I we still cavemen?
« on: May 15, 2012, 11:09:43 AM »
Rant...I was commenting on another post and got to thinking about gold and how the world still holds this asset in such high regard for safety/inflation hedge.  This has nothing to do where the value is or isn't. 

I DON'T GET IT!  A million years ago when our brains were pea sized then maybe it makes sense.....ooooo, a shiny object.  But haven't we come far from that - maybe not we still like our shiny rocks.   Gold is a useless metal - when it is produced it is either placed in vaults around the world for reserves/holdings or it used for jewelry, maybe 10% of all gold produced is used for industrial applications hardly making it useful.  Other metals are better for industrial applications.

To me it is no different than collectibles.  Instead of gold reserves why not Mickey Mantle rookie cards - ridiculous I know but how is it different than gold. 

Clearly over the last few years some have made a lot sitting in gold, clearly I am not one of them given my view - I felt this way when it was $400, $800 $1200, etc., this won't change.  So maybe I win or lose...I JUST DON'T GET IT.

Are any of you in Gold - why or why not, what is your view?

 

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Re: Gold - I we still cavemen?
« Reply #1 on: May 15, 2012, 12:06:31 PM »
I agree with most of your rant. Gold has always seemed like a funny investment to me.

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #2 on: May 15, 2012, 12:33:49 PM »
From Warren Buffett's annual report to Berkshire Hathaway shareholders:

Quote
The major asset in this category is gold, currently a huge favorite of investors who fear almost all other
assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however,
has two significant shortcomings, being neither of much use nor procreative. True, gold has some
industrial and decorative utility, but the demand for these purposes is both limited and incapable of
soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still
own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the
past decade that belief has proved correct. Beyond that, the rising price has on its own generated
additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis.
As “bandwagon” investors join any party, they create their own truth – for a while.
Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses
that can be created by combining an initially sensible thesis with well-publicized rising prices. In these
bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market,
and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles
blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise
man does in the beginning, the fool does in the end.”

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it
would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At
$1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400
million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most
profitable company, one earning more than $40 billion annually). After these purchases, we would
have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying
binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual
production of gold command about $160 billion. Buyers – whether jewelry and industrial users,
frightened individuals, or speculators – must continually absorb this additional supply to merely
maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn,
wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the
currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its
owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The
170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can
fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m
confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at
a rate far inferior to that achieved by pile B.

Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse
drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency
collapse fosters movement to sterile assets such as gold. We heard “cash is king” in late 2008, just
when cash should have been deployed rather than held. Similarly, we heard “cash is trash” in the early
1980s just when fixed-dollar investments were at their most attractive level in memory. On those
occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference – and you knew this was coming – is our third category: investment in productive
assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in
inflationary times to deliver output that will retain its purchasing-power value while requiring a
minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM
and our own See’s Candy meet that double-barreled test. Certain other companies – think of our
regulated utilities, for example – fail it because inflation places heavy capital requirements on them. To
earn more, their owners must invest more. Even so, these investments will remain superior to
nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper
(as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola
or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more
food, and require more living space than it does now. People will forever exchange what they produce
for what others produce.

Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens.
Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk”
to boot. Their value will be determined not by the medium of exchange but rather by their capacity to
deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they
did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as
well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be
to own them in their entirety – but we will also be owners by way of holding sizable amounts of
marketable stocks. I believe that over any extended period of time this category of investing will prove to
be the runaway winner among the three we’ve examined. More important, it will be by far the safest.

Brian Preston has a great podcast covering this letter at money-guy.com and on itunes, although it may be old enough you have to register (for free) to access it.

zweipersona

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Re: Gold - I we still cavemen?
« Reply #3 on: May 15, 2012, 02:40:01 PM »
 You can fondle the cube, but it will not respond.

Fantastic.  I love how serious the topic is, from one of the most respected financial wizards, but a phrase like that still sneaks into his brief.

And of course, everything he says makes sense, but that's to be expected.

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Re: Gold - I we still cavemen?
« Reply #4 on: May 15, 2012, 02:53:11 PM »
Great quote from Warren Buffet there, and in a way, his own approach validates gold to an extent - hear me out.

What makes gold "valuable" is that it's a finite resource, just like silver, land, airspace, oil, water, you get the idea. What gold investors fail to recognize is that some finite resources outperform other finite resources in their usefulness. You can't grow anything on gold, you can only make things with it... and the problem with making things with that gold is, once it's made and sold, it's gone. Land? You treat it well and keep it fertile, it can product crops. You can mine it for other finite resources. You can add shelter to it. The list goes on and on.

What investors need to look at and consider when investing in finite resources is, is it:
-a finite consumable (is there anything left of it after usage - short term investment)
-a finite recyclable (it may still exist as it's used, but once you sell it, it's gone - moderate term investment)
-a finite producible (can it be used infinitely to make other things without diminishing it - long term investment)

There's positives and negatives to all three types of finite resources investment wise, and it's not a bad idea to dabble in them all, but the secret is to know what sort of financial investment results to expect from each type of item. Gold is a good moderate term inflationary guard for stabilizing wealth, but just as it doesn't lose value, it doesn't increase it, either. It just is.

strider3700

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Re: Gold - I we still cavemen?
« Reply #5 on: May 15, 2012, 03:41:48 PM »
I can put 1 ounce of gold in a safe  forget that it's there and 100 years from now I'll still have 1 ounce of gold.  Maybe it's not worth anything financially but for the last 5000 years or so it has been so I wouldn't bet against it maintaining financial value.

There is nothing else on the planet with that type of track record of maintaining value that doesn't involve working it to generate a profit.   Farm land is great but let it sit for 100 years and you'll have any value in it taxed away.  You need to work it for it to remain valuable.    When you're one of the uber-rich and own most of the planet  you probably don't want to actively be working every penny of it. Instead you sit a nice stache aside. Historically that stache has been in the form of precious metals.

Tyler

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Re: Gold - I we still cavemen?
« Reply #6 on: May 15, 2012, 03:46:30 PM »
Remember, Buffett is the same guy that accumulated 37% of the world's known silver supplies between 1997 and 2006.  So he's not exactly against owning shiny metals.

tooqk4u22

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Re: Gold - I we still cavemen?
« Reply #7 on: May 16, 2012, 09:07:52 AM »
Quote
Remember, Buffett is the same guy that accumulated 37% of the world's known silver supplies between 1997 and 2006.  So he's not exactly against owning shiny metals.

He did but not because it is a shiny metal, silver is more widely used in industrial/productive applications and at the same time mining/production was declining because the ROI was too low so he thought demand would continue to increase while supply would decrease.

Quote
I can put 1 ounce of gold in a safe  forget that it's there and 100 years from now I'll still have 1 ounce of gold.  Maybe it's not worth anything financially but for the last 5000 years or so it has been so I wouldn't bet against it maintaining financial value.

I can't argue with that logic, no matter how foolish it is from a practical standpoint (gold as an investment, not your logic)
« Last Edit: May 16, 2012, 09:11:30 AM by Sparafusile »

velocistar237

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Re: Gold - I we still cavemen?
« Reply #8 on: May 16, 2012, 11:56:54 AM »
Cash has a lot of the same properties as gold, and lots of people have a cash portion in their portfolio.

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #9 on: May 16, 2012, 11:57:32 AM »
There is nothing else on the planet with that type of track record of maintaining value that doesn't involve working it to generate
VTSMX doesn't require that you work it for it to generate wealth. And if you have $100 now, in a century you'll have plenty more than that.

arebelspy

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Re: Gold - I we still cavemen?
« Reply #10 on: May 16, 2012, 12:04:27 PM »
There is nothing else on the planet with that type of track record of maintaining value that doesn't involve working it to generate
VTSMX doesn't require that you work it for it to generate wealth. And if you have $100 now, in a century you'll have plenty more than that.

I'm pretty sure VTSMX doesn't have the same long term track record as physical gold.  ;)

I'm not a big fan of precious metals, but there are some okay arguments for holding a bit of it.
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Re: Gold - I we still cavemen?
« Reply #11 on: May 16, 2012, 12:07:01 PM »
Yeah, that was slightly tongue in cheek. The point being: investing in securities doesn't have to be a whole lot of work, and it certainly doesn't require that I personally make the milk and the Coca-Cola. Holding securities that represent things other than gold in your portfolio isn't any harder than holding securities that represent gold, and it's not much harder than holding physical gold.

Guitarist

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Re: Gold - I we still cavemen?
« Reply #12 on: May 16, 2012, 02:16:59 PM »
Gold has intrinsic value. Whether you want to use gold for it's multitude of possible purposes or let it sit in a vault because you think it will gain in value is up to you.

Personally I think it's current value is inflated.

Tyler

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Re: Gold - I we still cavemen?
« Reply #13 on: May 16, 2012, 02:31:15 PM »
The way I see it, whether the reason people throughout history value gold makes logical sense or not is irrelevant.  The fact of the matter is that gold has a longer track record of having value to people than any company stock, government bond, or fiat currency. No, it's not an investment in the typical income generating sense.  But there are still good reasons to hold it as a portion of your asset allocation as long as you understand what you're getting into.

zweipersona

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Re: Gold - I we still cavemen?
« Reply #14 on: May 16, 2012, 03:53:39 PM »
The way I see it, whether the reason people throughout history value gold makes logical sense or not is irrelevant.  The fact of the matter is that gold has a longer track record of having value to people than any company stock, government bond, or fiat currency. No, it's not an investment in the typical income generating sense.  But there are still good reasons to hold it as a portion of your asset allocation as long as you understand what you're getting into.

I think that might be the problem - DO you know what you're getting into?

You're right in that gold, and many precious metals, have good history, but we can't really discern WHY.  We can come up with various reasons, but ultimately, we can't give any conclusive reason.

Other assets are much easier in this regard.  You can look at a company's cash flow, compare it to competitors, see if their products are superior, analyze the market to see how consumers rate the products, and so on.

I think that's harder with gold.

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Re: Gold - I we still cavemen?
« Reply #15 on: May 16, 2012, 08:42:32 PM »
Cash has a lot of the same properties as gold, and lots of people have a cash portion in their portfolio.

Not meaning to say anything about whether or not its a good investment, but just to expand on what velocistar said - A dollar bill has no intrinsic value.  You can't use it in industrial processes or grow crops on it.  It is just a thick piece of paper.  It has value because we all agree to pretend it does.  Its not even finite - the government prints it pretty much at will, but we all still go along with it.

And sure, why not store some wealth in baseball cards?  It won't generate dividends, but as long as someone else is willing to pay for it it can at least hold its value.  Same with cash.  Same with gold.  If America was hit by economic or natural catastrophe, which is more likely to be accepted as currency - a chunk of pure gold, or a check?  I'm not saying I personally am a prepper, but if you imagine that the economy really could collapse without much warning, its not an unreasonable thing to hoard.  And as long as there are more preppers tomorrow than today, the cost of gold will go up, making it a potentially decent buy for everyone else too.

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Re: Gold - I we still cavemen?
« Reply #16 on: May 17, 2012, 12:54:08 PM »
The way I see it, whether the reason people throughout history value gold makes logical sense or not is irrelevant.  The fact of the matter is that gold has a longer track record of having value to people than any company stock, government bond, or fiat currency. No, it's not an investment in the typical income generating sense.  But there are still good reasons to hold it as a portion of your asset allocation as long as you understand what you're getting into.

What you're getting into is gambling on the greater fool theory. Speculation. Intrinsic value of gold is very low, perhaps US$300-$600/oz.

It hasn't even been a repository of constant value, it is highly volatile, and long term returns are terrible. See link for ratios with other commodities and shares.

http://www.financialsense.com/contributors/ronald-griess/ratio-charts-gold-versus-other-assets

Owning quality productive land (that makes more income rented out than taxes) is a much better safe asset, IMHO. The gold I own is around my neck and ring finger, a nice couple of oz worth I'd guess.  That's enough emergency gold for me. I'll go with Warren Buffett.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #17 on: May 17, 2012, 09:31:50 PM »
Ah the Cult of Buffet followers.

They always miss it.

He benefited from the greatest credit boom in history.
Right place, right time.

Nothing special. So how has he done for the last decade???????

Sadly the proof is in the pudding.
Gold smashed his wrinkle behind.

Over the last 10 years
Gold up 240%
BRK.A up 60%

And that is using today's prices.

Not bad for just sitting there doing nothing.........

arebelspy

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Re: Gold - I we still cavemen?
« Reply #18 on: May 18, 2012, 07:54:26 AM »
Do we really want to start cherry picking dates Adrian?  Cause I can attach some cute graphs of Buffet vs. gold as well that won't look so pretty for gold...
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tooqk4u22

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Re: Gold - I we still cavemen?
« Reply #19 on: May 18, 2012, 09:38:36 AM »
If America was hit by economic or natural catastrophe, which is more likely to be accepted as currency - a chunk of pure gold, or a check?

Given history gold would be the choice...but the most valuable commodities would be land for farming/raising animals and skills for creating/fixing/defending, and with those things people will give you their gold or whatever else is of value in that environment.  The ability and resources to be productive are the only true value propositions.  Makes me want to buy 50 acres of farmland.

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Re: Gold - I we still cavemen?
« Reply #20 on: May 18, 2012, 09:46:00 AM »
His company is up 60% over the last decade and you think that's nothing special?

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Re: Gold - I we still cavemen?
« Reply #21 on: May 18, 2012, 01:23:55 PM »
If America was hit by economic or natural catastrophe, which is more likely to be accepted as currency - a chunk of pure gold, or a check?

Given history gold would be the choice...but the most valuable commodities would be land for farming/raising animals and skills for creating/fixing/defending, and with those things people will give you their gold or whatever else is of value in that environment.  The ability and resources to be productive are the only true value propositions.  Makes me want to buy 50 acres of farmland.

Agree.

I like Michigan! Lots of water, & close to Canada too.

In a gold rush, the ones getting rich are whoever's selling beer, food, picks and shovels.

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Re: Gold - I we still cavemen?
« Reply #22 on: May 18, 2012, 02:05:34 PM »
Do we really want to start cherry picking dates Adrian?  Cause I can attach some cute graphs of Buffet vs. gold as well that won't look so pretty for gold...

Not cherry picked just used the last decade, as of 18/05/2012

But feel free to show me a chart of the last decade where buffet out performed gold.


« Last Edit: May 18, 2012, 02:10:10 PM by AdrianM »

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Re: Gold - I we still cavemen?
« Reply #23 on: May 18, 2012, 02:16:10 PM »
Do we really want to start cherry picking dates Adrian?  Cause I can attach some cute graphs of Buffet vs. gold as well that won't look so pretty for gold...

Not cherry picked just used the last decade, as of 18/05/2012

But feel free to show me a chart of the last decade where buffet out performed gold.

lol.

I generally feel that it's better to ignore trolls than respond, and these last two posts are clearly trolling.

You got me, well done.
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Re: Gold - I we still cavemen?
« Reply #24 on: May 18, 2012, 02:34:24 PM »
Do we really want to start cherry picking dates Adrian?  Cause I can attach some cute graphs of Buffet vs. gold as well that won't look so pretty for gold...

Not cherry picked just used the last decade, as of 18/05/2012

But feel free to show me a chart of the last decade where buffet out performed gold.

lol.

I generally feel that it's better to ignore trolls than respond, and these last two posts are clearly trolling.

You got me, well done.

Too true, but I always rise to the bait when I hear people parroting Buffet.




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Re: Gold - I we still cavemen?
« Reply #25 on: May 19, 2012, 08:31:00 AM »
Too true, but I always rise to the bait when I hear people parroting Buffet.

Hah.  At least you admitted it, good man.

Parroting anyone is risky.  To be fair though, he's not a bad one to parrot.  I - like you - have some doubts going forward (and even more uncertain about BRK post-Buffet/Munger).
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Re: Gold - I we still cavemen?
« Reply #26 on: May 19, 2012, 10:19:51 AM »

I'd be interested to see some research into the impact of various % additions of gold in a balanced portfolio. I personally think gold's a mugs game right now, and way over-valued*, but as there are - and always have been - a lot of people who want gold at some price, the volatility could be useful if it has a different correlation to your other asset classes.

My gut feel is that ~5% - 10% would be enough, and I also wonder if that should be pure gold, or a mix of gold, platinum, silver, oil, ...?

* I realise this is implicitly market timing, but looking at ratios of value and other issues, gold & silver does seem to be a bubble. It's my money.

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Re: Gold - I we still cavemen?
« Reply #27 on: May 19, 2012, 01:33:21 PM »
My gut feel is that ~5% - 10% would be enough, and I also wonder if that should be pure gold, or a mix of gold, platinum, silver, oil, ...?

Hmm, you can invest in oil?  I never thought of that actually.

I'd think that'd be a worthy investment.  With the overuse of oil in countries around the world, I could only see this climb in value as scarcity increases and the scrambling starts for alternate fuel sources.

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Re: Gold - I we still cavemen?
« Reply #28 on: May 22, 2012, 09:21:46 AM »

You can get oil price exposure via Major Oil companies, like Exxon, but mixed in would be gas and refining. Or there are shares you can buy in an oil producing 'trust', basically you'd buy a small piece of a producing oil field. Even better a share of a collection of oil fields (to reduce risk).

arebelspy

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Re: Gold - I we still cavemen?
« Reply #29 on: May 22, 2012, 01:46:48 PM »
There are Oil ETFs.

You could also directly trade futures on the commodities.
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Re: Gold - I we still cavemen?
« Reply #30 on: May 24, 2012, 01:13:16 PM »
You rant against gold, but you don't come up with a superior alternative.

Coming up with that will illustrate to you the strengths and shortcomings of gold.

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Re: Gold - I we still cavemen?
« Reply #31 on: May 24, 2012, 02:00:00 PM »
What a lazy way to argue. Instead of just saying "here are the reasons investing in gold is a good idea", you want to sit and wait for us to present you with a comprehensive list of the strengths and weaknesses of gold and how it compares to all other investment choices for you to then disagree with?

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Re: Gold - I we still cavemen?
« Reply #32 on: May 24, 2012, 02:06:14 PM »
What a lazy way to argue. Instead of just saying "here are the reasons investing in gold is a good idea", you want to sit and wait for us to present you with a comprehensive list of the strengths and weaknesses of gold and how it compares to all other investment choices for you to then disagree with?

I didn't read it that way, simply because of the last sentence. 

Reminded me a little bit of this quote:
"When you understand why you dismiss all the other possible gods, you will understand why I dismiss yours." - Stephen F Roberts.

I saw it as a way to say: look at other options that are superior, both their strengths and weaknesses, and that will show you (inversely) the strengths and weaknesses of gold.

But I did lol at your first sentence.  "What a lazy way to argue!"  :D

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ErikZ

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Re: Gold - I we still cavemen?
« Reply #33 on: May 25, 2012, 07:05:11 AM »
What a lazy way to argue. Instead of just saying "here are the reasons investing in gold is a good idea", you want to sit and wait for us to present you with a comprehensive list of the strengths and weaknesses of gold and how it compares to all other investment choices for you to then disagree with?

Well, you kind of have to. Value is completely subjective, and the perceived value of gold is what sets the price.

But if you like, I can go into a huge multipage evaluation of what *I* find valuable about gold, which you'd skip since you don't value the same thing.

It's like defining the point before you start arguing over it. Otherwise you get people talking past each other.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #34 on: May 25, 2012, 08:58:32 PM »
Greshams's Law
Bad money drives out good.

So which would you want to hold over the next 10 years?
Fiat currency or precious metals

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Re: Gold - I we still cavemen?
« Reply #35 on: May 25, 2012, 10:21:10 PM »
Greshams's Law
Bad money drives out good.

So which would you want to hold over the next 10 years?
Fiat currency or precious metals

Neither.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #36 on: May 26, 2012, 04:34:57 AM »
Greshams's Law
Bad money drives out good.

So which would you want to hold over the next 10 years?
Fiat currency or precious metals

Neither.
lol

So what form of money do you want to hold?

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #37 on: May 26, 2012, 06:57:04 AM »
Index funds representing two or three different asset classes with exposure to both domestic and international markets.

Mr Mark

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Re: Gold - I we still cavemen?
« Reply #38 on: May 26, 2012, 08:21:01 AM »
Index funds representing two or three different asset classes with exposure to both domestic and international markets.

Maybe plus some real estate too. But no tulip bulbs.

johnhenry

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Re: Gold - I we still cavemen?
« Reply #39 on: July 16, 2014, 02:26:04 PM »
Rant...I was commenting on another post and got to thinking about gold and how the world still holds this asset in such high regard for safety/inflation hedge.  This has nothing to do where the value is or isn't. 

I DON'T GET IT!  A million years ago when our brains were pea sized then maybe it makes sense.....ooooo, a shiny object.  But haven't we come far from that - maybe not we still like our shiny rocks.   Gold is a useless metal - when it is produced it is either placed in vaults around the world for reserves/holdings or it used for jewelry, maybe 10% of all gold produced is used for industrial applications hardly making it useful.  Other metals are better for industrial applications.

To me it is no different than collectibles.  Instead of gold reserves why not Mickey Mantle rookie cards - ridiculous I know but how is it different than gold. 

Clearly over the last few years some have made a lot sitting in gold, clearly I am not one of them given my view - I felt this way when it was $400, $800 $1200, etc., this won't change.  So maybe I win or lose...I JUST DON'T GET IT.

Are any of you in Gold - why or why not, what is your view?

Your question, and nearly every question concerning the very nature of money, must be answered two different ways.  As an individual economic actor, what's my best strategy?  And.... As a member of a democratic society, what's my view on what our money should be?

As an individual economic actor: I don't have an strategy that incorporates gold.  Investing in it is speculative and success/failure depends on many different factors, including the speculation and fear of others.

As a member of a democratic society:  I recognize that precious metals are an ineffective way to store value or procure real resources for the common good.  I'm glad that we've moved on from the gold standard, although I'm disappointed to see that many policy makers, politicians, and citizens(including many intelligent ones on this forum) still hold political discourse within a framework that assumes we haven't!

If you want a technical, detailed, modern description.  Start here, http://www.levyinstitute.org/pubs/wp_658.pdf , and then read how modern monetary theory describes fiat money to operate in sovereign, currency issuing nations.

If you want more eloquent description, here are some of Abraham Lincoln's statements on monetary policy, from his speeches and addresses to congress:



    “Money is the creature of law and the creation of the original issue of money should be maintained as an exclusive monopoly of national government.

    “Money possesses no value to the State other than that given to it by circulation.

    “Capital has its proper place and is entitled to every protection.

    “The wages of men should be recognized as the structure of government and in the social order as more important than the wages of money.

    “No duty is more imperative on the government than the duty it owes the people of furnishing them with a sound and uniform currency and of regulating the circulation of the medium of exchange so that labour will be protected from a vicious currency, and commerce will be facilitated by cheap and safe exchanges.

    “The available supply of gold and silver being wholly inadequate to permit the issuance of coins of intrinsic value or paper currency convertible into coin in the volume required to serve the needs of the people, some other basis for the issue of currency must be developed and some means other than that of convertibility into coin must be developed to prevent undue fluctuations in the value of paper currency or any other substitute for money of intrinsic value that may come into use.

    “The monetary needs of increasing numbers of people advancing towards higher standards of living can and should be met by the government. Such needs can be served by the issue of national currency and credit through the operation of a national banking system. The circulation of a medium of exchange issued and backed by the government can be properly regulated, and redundancy of issue avoided by withdrawing from circulation such amounts as may be necessary by taxation, redeposit and otherwise. Government has the power to regulate the currency and credit of the nation.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy.

    “Government possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest as the means of financing governmental work and public enterprise. The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of government and the buying power of consumers. The privilege of creating and issuing of money is not only the supreme prerogative of government, but it is the government's greatest creative opportunity.

    “By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums in interest, discounts and exchanges. The financing of all public enterprise, the maintenance of stable government and ordered progress and the conduct of the treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be master and become the servant of humanity. Democracy will rise superior to Money Power.”

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #40 on: July 16, 2014, 02:30:03 PM »
Holy necropost batman!

I couldn't agree more with the content though. I really like the Abe quotes, I've never seen those before.

johnhenry

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Re: Gold - I we still cavemen?
« Reply #41 on: July 16, 2014, 02:48:07 PM »
Ya, that was a blast from the past!  But I had to drop those Abe quotes.  It's amazing how well he understood it all those years ago, and long before the gold standard was abandoned.

Undecided

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Re: Gold - I we still cavemen?
« Reply #42 on: July 16, 2014, 02:50:43 PM »
Ah the Cult of Buffet followers.

They always miss it.

He benefited from the greatest credit boom in history.
Right place, right time.

Nothing special. So how has he done for the last decade???????

Sadly the proof is in the pudding.
Gold smashed his wrinkle behind.

Over the last 10 years
Gold up 240%
BRK.A up 60%

And that is using today's prices.

Not bad for just sitting there doing nothing.........

That's exactly why it's such an oddity of a long-term investment. It's been doing nothing, and it's way up, and it could just as easily do more nothing and go way down, because the speculative component of the pricing overwhelms the intrinsic value component of the pricing (which, of course, can also change over time, so maybe "intrinsic" isn't quite the right word).

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Re: Gold - I we still cavemen?
« Reply #43 on: July 16, 2014, 04:53:45 PM »
My favorite kind of person is the one that buys gold, because "the world is going down the shitter, and we'll be in full out every man for himself anarchy soon."

A valid fear, if not totally reasonable. But if that's the fear, then I'd say that choosing between gold, and a fortified bunker with buckets of ammo and guns and dried food, the "crazy gun nut" is far more rational and reasonable. Ever known someone who went through really dark times? People traded gold for a sack of potatoes. Worthless metal without a society to value it.

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Re: Gold - I we still cavemen?
« Reply #44 on: July 16, 2014, 05:23:53 PM »
A wise man once told me "I'm never going to shoot somebody over a can of corn".

brewer12345

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Re: Gold - I we still cavemen?
« Reply #45 on: July 16, 2014, 08:00:21 PM »
A wise man once told me "I'm never going to shoot somebody over a can of corn".

I certainly do not plan on doing so.  That is what the food in the basement is for.

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #46 on: July 17, 2014, 12:15:31 AM »
If somebody wants to share your can of corn you'll definitely shoot them though, right?

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Re: Gold - I we still cavemen?
« Reply #47 on: July 17, 2014, 01:53:11 PM »
Rant...I was commenting on another post and got to thinking about gold and how the world still holds this asset in such high regard for safety/inflation hedge.  This has nothing to do where the value is or isn't. 

I DON'T GET IT!  A million years ago when our brains were pea sized then maybe it makes sense.....ooooo, a shiny object.  But haven't we come far from that - maybe not we still like our shiny rocks.   Gold is a useless metal - when it is produced it is either placed in vaults around the world for reserves/holdings or it used for jewelry, maybe 10% of all gold produced is used for industrial applications hardly making it useful.  Other metals are better for industrial applications.

To me it is no different than collectibles.  Instead of gold reserves why not Mickey Mantle rookie cards - ridiculous I know but how is it different than gold. 

Clearly over the last few years some have made a lot sitting in gold, clearly I am not one of them given my view - I felt this way when it was $400, $800 $1200, etc., this won't change.  So maybe I win or lose...I JUST DON'T GET IT.

Are any of you in Gold - why or why not, what is your view?

Your question, and nearly every question concerning the very nature of money, must be answered two different ways.  As an individual economic actor, what's my best strategy?  And.... As a member of a democratic society, what's my view on what our money should be?

As an individual economic actor: I don't have an strategy that incorporates gold.  Investing in it is speculative and success/failure depends on many different factors, including the speculation and fear of others.

As a member of a democratic society:  I recognize that precious metals are an ineffective way to store value or procure real resources for the common good.  I'm glad that we've moved on from the gold standard, although I'm disappointed to see that many policy makers, politicians, and citizens(including many intelligent ones on this forum) still hold political discourse within a framework that assumes we haven't!

If you want a technical, detailed, modern description.  Start here, http://www.levyinstitute.org/pubs/wp_658.pdf , and then read how modern monetary theory describes fiat money to operate in sovereign, currency issuing nations.

If you want more eloquent description, here are some of Abraham Lincoln's statements on monetary policy, from his speeches and addresses to congress:



    “Money is the creature of law and the creation of the original issue of money should be maintained as an exclusive monopoly of national government.

    “Money possesses no value to the State other than that given to it by circulation.

    “Capital has its proper place and is entitled to every protection.

    “The wages of men should be recognized as the structure of government and in the social order as more important than the wages of money.

    “No duty is more imperative on the government than the duty it owes the people of furnishing them with a sound and uniform currency and of regulating the circulation of the medium of exchange so that labour will be protected from a vicious currency, and commerce will be facilitated by cheap and safe exchanges.

    “The available supply of gold and silver being wholly inadequate to permit the issuance of coins of intrinsic value or paper currency convertible into coin in the volume required to serve the needs of the people, some other basis for the issue of currency must be developed and some means other than that of convertibility into coin must be developed to prevent undue fluctuations in the value of paper currency or any other substitute for money of intrinsic value that may come into use.

    “The monetary needs of increasing numbers of people advancing towards higher standards of living can and should be met by the government. Such needs can be served by the issue of national currency and credit through the operation of a national banking system. The circulation of a medium of exchange issued and backed by the government can be properly regulated, and redundancy of issue avoided by withdrawing from circulation such amounts as may be necessary by taxation, redeposit and otherwise. Government has the power to regulate the currency and credit of the nation.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy.

    “Government possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest as the means of financing governmental work and public enterprise. The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of government and the buying power of consumers. The privilege of creating and issuing of money is not only the supreme prerogative of government, but it is the government's greatest creative opportunity.

    “By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums in interest, discounts and exchanges. The financing of all public enterprise, the maintenance of stable government and ordered progress and the conduct of the treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be master and become the servant of humanity. Democracy will rise superior to Money Power.”

Best. President. Ever.

And quite Keynsian, years before Keynes was even born.

As a progressive I especially love this one;

"   “The wages of men should be recognized as the structure of government and in the social order as more important than the wages of money.  "

It seems he too agreed With the future Warren Buffet, that by any measure of decency, Warren Buffets and Mitt Romneys should be taxed at a higher rates than their secretaries.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #48 on: July 17, 2014, 06:45:24 PM »
Got to love it when people just spam out quotes to justify their point. You would have been better served by publishing the whole speech from which your sound bites are taken.
http://www.businesscycles.biz/docs/lincolnpolicy.htm

I loved this soundbite the most as it actually as it could be interpreted to argue for the opposite of your position. So was surprised to see you let it through.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy. bold was my doing

So was Abe arguing for sound money? or just more government intervention?

While we are quoting dead white men with beards, I will counter your argument with my own dead bearded white men.

Lord Acton said "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
And Amschel Rothchilds said "Give me control of a nations money supply, and I care not who makes it’s laws"

In the end, any monetary system controlled by a small group, is used to specifically benefit that group.
The reason the gold standard is always portrayed as bad, as it robes the insiders of their power and shackles the reckless spending of governments weather it be Bread and Circuses or War.


milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #49 on: July 17, 2014, 08:08:08 PM »

Got to love it when people just spam out quotes to justify their point. You would have been better served by publishing the whole speech from which your sound bites are taken.
http://www.businesscycles.biz/docs/lincolnpolicy.htm

I loved this soundbite the most as it actually as it could be interpreted to argue for the opposite of your position. So was surprised to see you let it through.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy. bold was my doing

So was Abe arguing for sound money? or just more government intervention?

While we are quoting dead white men with beards, I will counter your argument with my own dead bearded white men.

Lord Acton said "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
And Amschel Rothchilds said "Give me control of a nations money supply, and I care not who makes it’s laws"

In the end, any monetary system controlled by a small group, is used to specifically benefit that group.
The reason the gold standard is always portrayed as bad, as it robes the insiders of their power and shackles the reckless spending of governments weather it be Bread and Circuses or War.

And yet in the current time of  aggressive expansion of the American monetary supply,  inflation remains at historic lows.

Thank god everyone laughs at the tinfoil hat wearing goldbugs. Their predictions are worse than random. They are just plain wrong.