Author Topic: Is Gold Anti-Mustachian?  (Read 133276 times)

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #350 on: August 04, 2015, 04:37:25 PM »
That is a wildly cherry-picked time frame. If you move the start date to a few years later - 1976, the next low in gold prices, you'll see that gold can reduce volatility but doesn't enhance returns.  Any analysis in which the ENTIRE effect is because of the first 10% of the sample suggests you're just looking at an artifact. Otherwise known as cherry picking.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #351 on: August 04, 2015, 06:16:42 PM »
As I said, there are many time frames where gold would have reduced volatility bu returns, too.

As for the data I'm presenting, I didn't not cherrypick the starting and ending dates. I just took the biggest timeframe I could consider, i.e. from start of floating dollar (*) up until now. It's a 42-year timeframe. It can be an aberration, though. But if you run monte-carlo simulations with the same tool, using historical returns, for 30-year periods, a 4% withdrawal rate succeeds 85% of the time with 100% equities, 88% with gold. For 25 years, it is 89% vs 92%. For 35 years, 82% vs 86%. No matter the timeframe, a portfolio seems to provide a higher rate of success with 5% gold than without.

People seem to have almost religious issues with gold. Either they consider it's the only worth asset, or they consider it's a piece of cr*p. I don't care about the small stash of gold I own, I just like how it enhances my portfolio's returns and reduces its volatility.

(*) Considering gold returns before 1972 is error prone because
1) gold was a synonymous for cash, so you better held STT, you would have had gold plus a return
2) well, it was almost impossible to own gold, anyway.

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #352 on: August 04, 2015, 06:38:36 PM »
That may all be true, but the fact that all of the benefit comes from the first few years of your data set suggests that your result isn't generalizable.  For Monte Carlo simulations, it's garbage in, garbage out - again, if you take out the first few years, the effect completely disappears.  You're over interpreting an artifact.
 

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #353 on: August 04, 2015, 07:09:06 PM »
How do you define anti-Mustachian such that gold is anti-Mustachian (in the same way mindless consumerism, polluting, etc. is)?

You could argue that mining gold is massively resource intensive and environmentally destructive. These assets would be better deployed building wind turbines or developing more efficient battery technology.


I don't suppose you have ever considered the resources that are consumed by the construction & maintaince of tens of thousands of bank branch buildings, have you?

Snarky comments aside, gold is simply a commodity that acts like a currency relative to national fiat currencies.  It works well as a diversifying investment, because it's price movements don't really corrolate with more typical investments such as stocks or bonds, and it is typically inverse corrolated with national fiat currencies.  But if you don't like it, there are other ways to achieve the same end.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #354 on: August 05, 2015, 05:23:50 AM »
That may all be true, but the fact that all of the benefit comes from the first few years of your data set suggests that your result isn't generalizable.  For Monte Carlo simulations, it's garbage in, garbage out - again, if you take out the first few years, the effect completely disappears.  You're over interpreting an artifact.

I'm not sure why you want to remove these years specifically, and not, for instance, the 1995-1999 period, that is a statistical aberration too.

tomsang

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Re: Is Gold Anti-Mustachian?
« Reply #355 on: August 05, 2015, 10:17:34 AM »
I don't suppose you have ever considered the resources that are consumed by the construction & maintaince of tens of thousands of bank branch buildings, have you?

I think with progress and technology, the bank branch will go away or be severely diminished in the next 20 years.  I think it may track gold in adapting to a new economy and a new mindset of what is valuable or useful where brick and mortar branches are looked at as a thing of the past.  I think that Gold and other shiny trinkets will also be viewed that way.  Gold, Silver and other precious metals will drift to their commercial value vs. their fiat value.  With commercial value being significantly lower than today's values of these metals.

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #356 on: August 05, 2015, 10:24:42 AM »
That may all be true, but the fact that all of the benefit comes from the first few years of your data set suggests that your result isn't generalizable.  For Monte Carlo simulations, it's garbage in, garbage out - again, if you take out the first few years, the effect completely disappears.  You're over interpreting an artifact.

I'm not sure why you want to remove these years specifically, and not, for instance, the 1995-1999 period, that is a statistical aberration too.

Would taking out that period eliminate the effect that you're observing?  I'm not arguing that there's something weird about the first few years of your data.  I'm arguing that if the effect that you're arguing is a benefit of gold only occurs because of those first few years, then it probably isn't an effect you should rely on.

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #357 on: August 05, 2015, 11:46:27 AM »
I don't suppose you have ever considered the resources that are consumed by the construction & maintaince of tens of thousands of bank branch buildings, have you?

I think with progress and technology, the bank branch will go away or be severely diminished in the next 20 years.  I think it may track gold in adapting to a new economy and a new mindset of what is valuable or useful where brick and mortar branches are looked at as a thing of the past.
While I would agree with this statement, and would add that cryptocurrencies are likely to be a major driving factor, only time will tell.

Quote
  I think that Gold and other shiny trinkets will also be viewed that way.  Gold, Silver and other precious metals will drift to their commercial value vs. their fiat value.  With commercial value being significantly lower than today's values of these metals.

Again, perhaps.  But gold has been denigrated as an "ancient relic" for over a century, and has held it's monetary value premium quite well over that same century, while national currencies have not.  It is an obvious fact of history that gold, and to a lesser extent, silver have held their buying power well during the age of national currencies.  While it's also true that past performance is not a certainty of future successes, it remains a pretty good indicator.  We would be doing an injustice to denigrate the investment value of gold, if we were not also mentioning it's historical success as a store of value & and general diversification asset.  No, gold does not make a dividend.  Yes, gold only really does well compared to national currencies that are doing poorly; but then that has also happened enough times in the past century to give holding gold, if only as a hedge against inflation or national bankruptcy, it's own niche.  This might not mean much to someone who lives in the US or Canada, but it likely does for someone who lives in Argentina, India or China.  Beware of normalcy bias.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #358 on: August 05, 2015, 03:23:38 PM »
That may all be true, but the fact that all of the benefit comes from the first few years of your data set suggests that your result isn't generalizable.  For Monte Carlo simulations, it's garbage in, garbage out - again, if you take out the first few years, the effect completely disappears.  You're over interpreting an artifact.

I'm not sure why you want to remove these years specifically, and not, for instance, the 1995-1999 period, that is a statistical aberration too.

Would taking out that period eliminate the effect that you're observing?  I'm not arguing that there's something weird about the first few years of your data.  I'm arguing that if the effect that you're arguing is a benefit of gold only occurs because of those first few years, then it probably isn't an effect you should rely on.
I can't test that with the tool I have, but removing the three best years from the dataset certainly reduces the positive effect.

devan 11

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Re: Is Gold Anti-Mustachian?
« Reply #359 on: August 10, 2015, 12:03:20 AM »
  The only reason to buy gold is if you are a jeweler.  (Unless you invested it like I did, as a wedding ring.  That paid off better than all my investing.  A man is poor if he is only rich with money).

As an investment, it is costly to store, and doesn't compound.  It is gambling, not investing.  What happens when China realizes that it is dumb and dumps the stockpiles..

prestojx

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Re: Is Gold Anti-Mustachian?
« Reply #360 on: August 20, 2015, 08:06:08 PM »
Swedroe: Debunking Gold Mythology/ ETF.com

"In their June 2012 study, “The Golden Dilemma,” Claude Erb and Campbell Harvey examined these issues. In terms of being a currency hedge, they found that the change in the real price of gold seems to be largely independent of the change in currency values. In other words, gold is not a good hedge of currency risk."

Full article
http://www.etf.com/sections/index-investor-corner/swedroe-debunking-gold-mythology?nopaging=1

YoungInvestor

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Re: Is Gold Anti-Mustachian?
« Reply #361 on: August 20, 2015, 08:26:44 PM »
I have no interest in trying to plan how I would act in apocalyptic scenarios and choose to ignore the odds.

Frankly, now that I think about it, storing gold at my place seems like a great plan to get mugged in that scenario.


k9

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Re: Is Gold Anti-Mustachian?
« Reply #362 on: August 23, 2015, 02:09:12 PM »
Okay guys. Keep denying actual data and all modern portfolio theory.

(fun fact : gold bugs react the same way when I talk to them about stocks :  they say "stock investing is like gambling", that "it is doomed to fail", that "your broker can leave with your money", that "it will fail because of China", etc. and they just ignore the facts when you show them.)

Tyler

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Re: Is Gold Anti-Mustachian?
« Reply #363 on: August 23, 2015, 03:25:42 PM »
Would taking out that period eliminate the effect that you're observing?  I'm not arguing that there's something weird about the first few years of your data.  I'm arguing that if the effect that you're arguing is a benefit of gold only occurs because of those first few years, then it probably isn't an effect you should rely on.
I can't test that with the tool I have, but removing the three best years from the dataset certainly reduces the positive effect.



When you look at the big picture, the diversification benefit of gold is not limited to the early 70's.  It definitely had the biggest effect then, but it can help smooth out returns over other timeframes as well.  Note that the median 10-year returns with and without gold are virtually identical, but the down periods along the way are shorter and less severe with some gold in the mix.

You can play with the percentages to determine how much gold (if any) is appropriate for your own portfolio, but to argue that gold has no value in a portfolio or is somehow "anti-mustachian" is silly IMHO.  It's just another tool for portfolio diversification, and the fact that it is uncorrelated to both stocks and bonds is a nice feature.
« Last Edit: August 23, 2015, 03:45:22 PM by Tyler »

k9

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Re: Is Gold Anti-Mustachian?
« Reply #364 on: August 31, 2015, 07:48:52 AM »
That portfoliocharts tool is amazing (beside visually showing what I meant above ;) ). Are you its author, Tyler ?

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #365 on: August 31, 2015, 08:05:47 AM »
Would taking out that period eliminate the effect that you're observing?  I'm not arguing that there's something weird about the first few years of your data.  I'm arguing that if the effect that you're arguing is a benefit of gold only occurs because of those first few years, then it probably isn't an effect you should rely on.
I can't test that with the tool I have, but removing the three best years from the dataset certainly reduces the positive effect.



When you look at the big picture, the diversification benefit of gold is not limited to the early 70's.  It definitely had the biggest effect then, but it can help smooth out returns over other timeframes as well.  Note that the median 10-year returns with and without gold are virtually identical, but the down periods along the way are shorter and less severe with some gold in the mix.

You can play with the percentages to determine how much gold (if any) is appropriate for your own portfolio, but to argue that gold has no value in a portfolio or is somehow "anti-mustachian" is silly IMHO.  It's just another tool for portfolio diversification, and the fact that it is uncorrelated to both stocks and bonds is a nice feature.

It's hard to tell for sure, but those figures still appear to support my point.  Gold can serve as a diversification purpose, but in the data I've seen, holding gold doesn't improve returns, which was the original point I was criticizing.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #366 on: August 31, 2015, 08:15:23 AM »
Well, Tyler, after exploring the website, you apparently are the author of these amazing tools. Excellent work, and thanks for that.

I especially like the Hurricane calculator. Here is what you get when you compare how a 100% stocks portfolio behaves vs a 80% stocks, 10% gold, 10% cash one, when you use a 5% WR. Remember we are talking about drawing cash from our portfolio, so the interesting part isn't the max result, or even the median one, but the min column (i.e, how badly things could have gone, had you implemented this strategy).

(I can't make screen captures, but the interested reader can run simulations on http://portfoliocharts.com/portfolio/hurricane/)

100% stocks -> 1000k leaves you broke after less than 20 years.
80/10/10 -> 1000k become 66k after 30 years.

In other words : while a 100% stocks portfolio after FIRE would only sustain a 4% SWR, you can enjoy a 5% SWR with just a bunch of gold and short term bonds. You would have to work for the beast for 20 years only, rather than 25 (YMMV, of cours, but that's 20% less). I think that is pretty "mustachian", no matter what that precisely means.

However, I have to agree, Beltim, on the fact that during growth of capital, until you are FIREd, the 100% stocks produces more wealth on average (although with more risk, too).

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #367 on: August 31, 2015, 08:40:26 AM »
However, I have to agree, Beltim, on the fact that during growth of capital, until you are FIREd, the 100% stocks produces more wealth on average (although with more risk, too).

No argument there.  Risk and reward are usually related, and it makes sense for stocks to be higher risk and higher reward.

Tyler

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Re: Is Gold Anti-Mustachian?
« Reply #368 on: August 31, 2015, 11:21:32 AM »
Well, Tyler, after exploring the website, you apparently are the author of these amazing tools. Excellent work, and thanks for that.

Yep -- same Tyler.  ;)  I'm glad you find it helpful! 

I also like the Hurricane for comparing retirement portfolios and exploring the positive effects of diversification.  That's really a bigger issue than gold, and probably deserves its own discussion.

It's hard to tell for sure, but those figures still appear to support my point.  Gold can serve as a diversification purpose, but in the data I've seen, holding gold doesn't improve returns, which was the original point I was criticizing.

I think that's a reasonable conclusion.  I certainly would not recommend loading up on gold to increase returns.  But adding some as one well-considered component of your asset allocation can help lessen overall portfolio volatility and does not necessarily reduce returns in the process.  That's really modern portfolio theory in a nutshell.
« Last Edit: August 31, 2015, 11:35:54 AM by Tyler »

dragoncar

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Re: Is Gold Anti-Mustachian?
« Reply #369 on: August 31, 2015, 12:12:16 PM »
Well, Tyler, after exploring the website, you apparently are the author of these amazing tools. Excellent work, and thanks for that.

Yep -- same Tyler.  ;)  I'm glad you find it helpful! 

I also like the Hurricane for comparing retirement portfolios and exploring the positive effects of diversification.  That's really a bigger issue than gold, and probably deserves its own discussion.

It's hard to tell for sure, but those figures still appear to support my point.  Gold can serve as a diversification purpose, but in the data I've seen, holding gold doesn't improve returns, which was the original point I was criticizing.

I think that's a reasonable conclusion.  I certainly would not recommend loading up on gold to increase returns.  But adding some as one well-considered component of your asset allocation can help lessen overall portfolio volatility and does not necessarily reduce returns in the process.  That's really modern portfolio theory in a nutshell.

Tyler, can I ask what your total AA is?  I know you run a PP, but not sure how much a VP changes the total allocation

Tyler

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Re: Is Gold Anti-Mustachian?
« Reply #370 on: August 31, 2015, 12:25:20 PM »
I'm currently 100% Permanent Portfolio.  It's not for everyone, but it works very well for me personally.   Everyone should come to their own well-educated decision on how to invest their own life savings. 

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #371 on: August 31, 2015, 12:51:49 PM »
I'm currently 100% Permanent Portfolio.  It's not for everyone, but it works very well for me personally.   Everyone should come to their own well-educated decision on how to invest their own life savings.

The original portfolio mix by Harry Browne?  Or something else.  I am a metals & timber reit advocate, but even I can't fathom a portfolio with more gold & silver than stocks.

Tyler

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Re: Is Gold Anti-Mustachian?
« Reply #372 on: August 31, 2015, 01:31:54 PM »
This version.   Rather than debating the portfolio theory, one can compare actual results directly to other popular portfolios at the link and decide what works best for you personally.

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #373 on: August 31, 2015, 03:14:57 PM »
This version.   Rather than debating the portfolio theory, one can compare actual results directly to other popular portfolios at the link and decide what works best for you personally.

Well, that looks pretty good, but that version doesn't have anything to approximate the real estate and/or natural commodity resources portion.  I, personally, have much less gold & silver, as well as some devoted to real estate/natural resources REITs.  I particularly favor timber REIT's, because timber is one of those unique resources with a very long time horizon, as well as a multi-year harvest window; so if the timber market is down for a few years (because construction drops during a recession), the value of the timber REITs still don't drop that much, because the lumber companies tend to just wait a while longer to harvest, during which time the trees still grow.  Nor can I imagine a future that wood products are no longer a useful manufacturing or construction input; there are many scenarios that wood composites are less expensive than, say, plastics or steel alternatives.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #374 on: September 01, 2015, 05:08:56 AM »
RE doesn't fit in the theory behind PP (not very liquid, not the best investment no matter what the economic situation, not easy to rebalance). REITS are part of the stock portion, like any other kind of business.

But that's a good asset class. I like timber, too. I actually have some physical timber as part of my AA :)

To get back to the original topic (somewhat) I think physical RE (whether rentals, farms, timber, etc.) is a good thing to have when you don't want to own gold. It is a very good diversifier. I think it's important to have non-financial assets and, if it's not gold, then let it be RE.

wienerdog

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Re: Is Gold Anti-Mustachian?
« Reply #375 on: September 01, 2015, 10:03:14 AM »
This version.   Rather than debating the portfolio theory, one can compare actual results directly to other popular portfolios at the link and decide what works best for you personally.

Do you hold gold in an ETF?

Tyler

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Re: Is Gold Anti-Mustachian?
« Reply #376 on: September 01, 2015, 10:37:11 AM »
Do you hold gold in an ETF?

Yes.  There are several good fund options with different benefits, and physical coins are a good choice as well.

Lots of Permanent Portfolio questions!  Feel free to PM me this kind of stuff.  There's no need to derail the thread with portfolio minutiae. 

dragoncar

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Re: Is Gold Anti-Mustachian?
« Reply #377 on: September 01, 2015, 12:12:35 PM »
Do you hold gold in an ETF?

Yes.  There are several good fund options with different benefits, and physical coins are a good choice as well.

Lots of Permanent Portfolio questions!  Feel free to PM me this kind of stuff.  There's no need to derail the thread with portfolio minutiae.

Or come over to gyroscopicinvesting.com/forum if you can stand the political climate

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #378 on: September 01, 2015, 02:42:13 PM »
Do you hold gold in an ETF?

Yes.  There are several good fund options with different benefits, and physical coins are a good choice as well.

Lots of Permanent Portfolio questions!  Feel free to PM me this kind of stuff.  There's no need to derail the thread with portfolio minutiae.

Or come over to gyroscopicinvesting.com/forum if you can stand the political climate

I really don't have the time for another forum, but I am curious.  What's wrong with the political climate?

dragoncar

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Re: Is Gold Anti-Mustachian?
« Reply #379 on: September 01, 2015, 06:52:19 PM »
Do you hold gold in an ETF?

Yes.  There are several good fund options with different benefits, and physical coins are a good choice as well.

Lots of Permanent Portfolio questions!  Feel free to PM me this kind of stuff.  There's no need to derail the thread with portfolio minutiae.

Or come over to gyroscopicinvesting.com/forum if you can stand the political climate

I really don't have the time for another forum, but I am curious.  What's wrong with the political climate?

Not that bad now, but at some point there was like a new thread every day: Something bad happened due to Obama

Also, some of the gold bugs lean a bit toward doomer

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #380 on: September 01, 2015, 08:13:22 PM »
I wonder if there are other commodities that detractors of gold would consider in it's place.  Would a uranium ETF or copper ETF satisfy?  Neither has a monetary premium, if that is the complaint with a gold ETF, and both has a well established industrial supply chain role.  I'm considering the URA uranium ETF right now, because commodities have taken a pounding for the past several years, so it might be time to buy some....

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #381 on: September 01, 2015, 08:20:26 PM »
I wonder if there are other commodities that detractors of gold would consider in it's place.  Would a uranium ETF or copper ETF satisfy?  Neither has a monetary premium, if that is the complaint with a gold ETF, and both has a well established industrial supply chain role.  I'm considering the URA uranium ETF right now, because commodities have taken a pounding for the past several years, so it might be time to buy some....

Not really, because the chief complaint about gold not being an investment is that it doesn't produce anything - any profits are due to changes in value of the commodity itself.

One exception might be timber land, if you consider that a commodity, because it actually does produce something rather than simply being resold at a higher value.  Any sort of crop land would satisfy this criterion, actually, though I don't think most people consider these commodities.

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #382 on: September 01, 2015, 09:09:08 PM »
I wonder if there are other commodities that detractors of gold would consider in it's place.  Would a uranium ETF or copper ETF satisfy?  Neither has a monetary premium, if that is the complaint with a gold ETF, and both has a well established industrial supply chain role.  I'm considering the URA uranium ETF right now, because commodities have taken a pounding for the past several years, so it might be time to buy some....

Not really, because the chief complaint about gold not being an investment is that it doesn't produce anything - any profits are due to changes in value of the commodity itself.

The last I checked, uranium is only valuable because it produces electricity.

Also, copper is an industrial input for a thousand products.  Gold does share these notable uses.
« Last Edit: September 01, 2015, 09:11:19 PM by MoonShadow »

beltim

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Re: Is Gold Anti-Mustachian?
« Reply #383 on: September 01, 2015, 09:40:54 PM »
I wonder if there are other commodities that detractors of gold would consider in it's place.  Would a uranium ETF or copper ETF satisfy?  Neither has a monetary premium, if that is the complaint with a gold ETF, and both has a well established industrial supply chain role.  I'm considering the URA uranium ETF right now, because commodities have taken a pounding for the past several years, so it might be time to buy some....

Not really, because the chief complaint about gold not being an investment is that it doesn't produce anything - any profits are due to changes in value of the commodity itself.

The last I checked, uranium is only valuable because it produces electricity.

Also, copper is an industrial input for a thousand products.  Gold does share these notable uses.

"Produce" meaning that it doesn't get used up.  And see the bolded part for more.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #384 on: September 02, 2015, 04:12:30 AM »
IMHO, gold is interesting because it is not correlated with stocks, i.e with economic prosperity. That's not true of other commodities, especially copper, since it follows very closely (AFAIK) the ups and downs of stock markets.

What makes gold valuable as a diversifier *is* the very fact that it is useless. When the economy crumbles, nobody wants copper anymore because, well... The economy crumbles, so industrial uses tend to disappear. So, your copper ETF doens't limit your loss and doesn't provide an easy rebalancing opportunity. And when the economy flourishes, your stocks are doing great, even better than copper, so why care ?

OTOH, gold usually does not follow stocks in the recession ; quite the opposite, since it it is considered a "safe haven". Now you can sell your expensive gold to buy cheap stocks.

tomsang

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Re: Is Gold Anti-Mustachian?
« Reply #385 on: September 02, 2015, 09:01:52 AM »
But that's a good asset class. I like timber, too. I actually have some physical timber as part of my AA :)

Like a lot of things having too much or not diversifying geographically could hurt you.  Timber looks great until, like the Pacific Northwest, you have a huge fire and lose your timberland.  Not sure what insurance or just buying REITS that are diversified around the world would do to mitigate some of that risk, but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #386 on: September 02, 2015, 12:51:18 PM »
IMHO, gold is interesting because it is not correlated with stocks, i.e with economic prosperity. That's not true of other commodities, especially copper, since it follows very closely (AFAIK) the ups and downs of stock markets.

Copper is not terribly corrolated with the s&p500, but moreso than gold is.  So copper is a bit of a mixed bag as far as a diversification asset goes.  Copper is most corrolated with the housing and construction market, since much more copper is consumed in the manufacture of electrical & plumbing components than consumer product manufacturing.  I asked the question from the perspective that gold is undesired, because the investor in question considers gold to be an "ancient relic".  I really wasn't asking why gold would be a better choice.

MoonShadow

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Re: Is Gold Anti-Mustachian?
« Reply #387 on: September 02, 2015, 12:57:35 PM »
But that's a good asset class. I like timber, too. I actually have some physical timber as part of my AA :)

Like a lot of things having too much or not diversifying geographically could hurt you.  Timber looks great until, like the Pacific Northwest, you have a huge fire and lose your timberland.  Not sure what insurance or just buying REITS that are diversified around the world would do to mitigate some of that risk, but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!

That's a bit of an overstatement.  Also, timber companies have long ago noticed the risks of geocentralization, and are typicly spread quite wide.  There is quite a bit of timberland in the US Southeast these days.

Radagast

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Re: Is Gold Anti-Mustachian?
« Reply #388 on: September 02, 2015, 09:31:00 PM »
... but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!
There may or may not be reasons to own gold, but now you are just being broadly negative.

k9

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Re: Is Gold Anti-Mustachian?
« Reply #389 on: September 04, 2015, 04:50:00 AM »
Like a lot of things having too much or not diversifying geographically could hurt you.  Timber looks great until, like the Pacific Northwest, you have a huge fire and lose your timberland.  Not sure what insurance or just buying REITS that are diversified around the world would do to mitigate some of that risk, but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!
Well, it's not a safe asset, for sure, but such a thing doesn't exist anyway. I have physical timber because I inherited it and because I like massive diversification. But betting on forests as one's main investment seems quite risky, indeed.

Mississippi Mudstache

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Re: Is Gold Anti-Mustachian?
« Reply #390 on: September 04, 2015, 06:39:08 AM »
... but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!
There may or may not be reasons to own gold, but now you are just being broadly negative.

No kidding. I've worked for two of the four big timber REITs. If you look at a map of any of their ownership, and think that a single fire has the capability of wiping out a significant portion of their land holdings, then you must be expecting WWIII, which is going to destroy a lot more than timberland. The biggest risks to timber REITs are an extended downturn in market prices. They can usually weather a year of poor prices without much impact by reducing harvest, and getting creative with marketing, but ultimately, they're like any business with a big payroll and lots of overhead - they need operating income, and lots of it. You can only hold off the harvest for so long. Timber REITs were hugely impacted by the real estate crash, and their fortunes have been and will continue to be tightly linked to housing starts (and, on the West coast, to the Chinese economy, since many of the high-value logs get exported).

tomsang

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Re: Is Gold Anti-Mustachian?
« Reply #391 on: September 04, 2015, 02:11:50 PM »
But that's a good asset class. I like timber, too. I actually have some physical timber as part of my AA :)

Like a lot of things having too much or not diversifying geographically could hurt you.  Timber looks great until, like the Pacific Northwest, you have a huge fire and lose your timberland.  Not sure what insurance or just buying REITS that are diversified around the world would do to mitigate some of that risk, but it seems like every so many years there is a huge fire that wipes out a lot of timberland.  A bit like Roulette!
   
That's a bit of an overstatement.  Also, timber companies have long ago noticed the risks of geocentralization, and are typicly spread quite wide.  There is quite a bit of timberland in the US Southeast these days.

I think everyone missed the part where I mentioned diversifying geographically and/or investing in REITS.  If you have 400 acres of timberland that you are banking on using for retirement and a fire comes through and wipes it out you are in trouble.  If you own .oooooo1% of a Timber REIT with assets across the world then you will be fine.
« Last Edit: September 04, 2015, 02:14:10 PM by tomsang »

tomsang

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Re: Is Gold Anti-Mustachian?
« Reply #392 on: August 04, 2017, 10:43:32 AM »
When I started this topic on March 6, 2013, gold was $1580 an ounce.  Today gold is $1,258 or 20% less than 4.5 years ago.  Gold has not tracked inflation, has not kept up stocks, and has been detrimental to the PP.  Where do people stand on Gold today?  Is it still a good investment?  I saw another poster asking if it is time to buy gold.  Gold is still an interesting investment to me.

Thoughts?

effigy98

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Re: Is Gold Anti-Mustachian?
« Reply #393 on: August 04, 2017, 02:46:23 PM »
When I started this topic on March 6, 2013, gold was $1580 an ounce.  Today gold is $1,258 or 20% less than 4.5 years ago.  Gold has not tracked inflation, has not kept up stocks, and has been detrimental to the PP.  Where do people stand on Gold today?  Is it still a good investment?  I saw another poster asking if it is time to buy gold.  Gold is still an interesting investment to me.

Thoughts?

It is still a good chunk of my portfolio, close to the Golden Butterfly on portfolio charts. With re balancing I am buying low/selling high. I know based on the shiller index, we are highly inflated and a crash will probably happen eventually based on previous patterns. I rather pay some potential gains now when times are good so when times get bad I am barely feeling the decrease. Based on the last two major crashes, I have sold due to emotional triggers when I see my portfolio plunge. I most likely will not have to worry about that this time with my asset allocation which includes gold.

dragoncar

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Re: Is Gold Anti-Mustachian?
« Reply #394 on: August 04, 2017, 04:47:03 PM »
When I started this topic on March 6, 2013, gold was $1580 an ounce.  Today gold is $1,258 or 20% less than 4.5 years ago.  Gold has not tracked inflation, has not kept up stocks, and has been detrimental to the PP.  Where do people stand on Gold today?  Is it still a good investment?  I saw another poster asking if it is time to buy gold.  Gold is still an interesting investment to me.

Thoughts?

F'in gold, man.  Every time my PP makes a new high, gold takes a dump the next day (today).  I hate gold but continue to hold it.  I'm hoping some day it is high enough for me to re-balance into a golden butterfly, but I am loathe to sell low.

steveo

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Re: Is Gold Anti-Mustachian?
« Reply #395 on: August 04, 2017, 10:32:00 PM »
When I started this topic on March 6, 2013, gold was $1580 an ounce.  Today gold is $1,258 or 20% less than 4.5 years ago.  Gold has not tracked inflation, has not kept up stocks, and has been detrimental to the PP.  Where do people stand on Gold today?  Is it still a good investment?  I saw another poster asking if it is time to buy gold.  Gold is still an interesting investment to me.

Thoughts?

I think it was a great diversifier over the last 100 odd years. Now I think it could have a place if you have a tonne of money - say a 2% WR and want to take a punt on diversifying your assets. That honestly is a really really poor reason to buy gold.

I think some people are going to get caught out by looking at the historical returns for gold over the last 100 years and realise the performance was specific to that time and place. A typical stocks/bonds portfolio will probably beat any sort of golden butterfly or PP type portfolio over the next 100 years. If you really wanted to diversify I think a better option would be a commodities index but the fees on that are higher than stocks/bonds portfolios.

The more I think about asset allocation the more I think the simplest approach works best.