Author Topic: Metal Investing: Silver years 2000s vs now  (Read 6044 times)

antonir

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Metal Investing: Silver years 2000s vs now
« on: July 03, 2019, 07:21:56 AM »
Hi all,

Currently I am investing in silver coins mostly maple leaf and Australian kangaroo.
Silver coin price vs spot price is around 120% witch is not bad in my opinion.
this year (2019) price for 1oz coin is around 18$ I like to compare today's price with one from before 2006 year.
Is anyone here who was buying silver bullion coins in years 2000, 01, 02 till 06 when prices rapidly increased?
I wonder what is actual ROI in this time line.

thanks
« Last Edit: July 03, 2019, 07:23:35 AM by antonir »

RWD

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Re: Metal Investing: Silver years 2000s vs now
« Reply #1 on: July 03, 2019, 07:33:13 AM »
Silver is the same value it was roughly ten years ago. What makes you think it has any long term investment value? Precious metals are not a productive asset. If you're talking about specific years then it sounds like speculation to me.

antonir

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Re: Metal Investing: Silver years 2000s vs now
« Reply #2 on: July 03, 2019, 07:37:56 AM »
Basically I like to know what were bullion prices back in 2004.


RWD

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Re: Metal Investing: Silver years 2000s vs now
« Reply #3 on: July 03, 2019, 07:48:18 AM »
Basically I like to know what were bullion prices back in 2004.
It's not hard to Google. Average silver price per ounce in 2004 was $6.66. Twenty years before that (1984) it was $8.15.

Starting from 1969 silver has grown by an average of a whopping 0.15% annually over inflation.

antonir

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Re: Metal Investing: Silver years 2000s vs now
« Reply #4 on: July 03, 2019, 08:18:44 AM »
It's not hard to Google. Average silver price per ounce in 2004 was $6.66. Twenty years before that (1984) it was $8.15.

Starting from 1969 silver has grown by an average of a whopping 0.15% annually over inflation.
Yeah that's spot price I like to know real bullion/coin price back then

RWD

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Re: Metal Investing: Silver years 2000s vs now
« Reply #5 on: July 03, 2019, 08:46:23 AM »
I'm not sure anyone collected that data because it would have varied too much based on where you purchased the bullion/coin (and what specific coins). Though in general bullion prices have tracked very close to spot price.

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Re: Metal Investing: Silver years 2000s vs now
« Reply #6 on: July 03, 2019, 08:47:23 AM »
It's not hard to Google. Average silver price per ounce in 2004 was $6.66. Twenty years before that (1984) it was $8.15.

Starting from 1969 silver has grown by an average of a whopping 0.15% annually over inflation.
Yeah that's spot price I like to know real bullion/coin price back then

?? That's what spot price is. What you can get for the metal right then. Compare it to a future.


GuitarStv

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Re: Metal Investing: Silver years 2000s vs now
« Reply #7 on: July 03, 2019, 08:47:48 AM »
Why do you believe that buying silver coins is a form of 'investing'?  It sounds more like 'collecting' to me.

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #8 on: July 03, 2019, 09:01:07 AM »
Metals are only a decent investment if you can reliably predict the future.

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #9 on: July 03, 2019, 12:32:34 PM »
There is already a PMs thread here:
https://forum.mrmoneymustache.com/investor-alley/precious-metals/

tldr; You'll have a hard time convincing most on this forum that PMs have a place in their portfolio, never mind convincing them to pay 20% premium when their lovely VTSAX is 0.06% or whatever it is.

I personally think silver and platinum are well placed to outperform over the next 10 years.

MustacheAndaHalf

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Re: Metal Investing: Silver years 2000s vs now
« Reply #10 on: July 05, 2019, 12:09:44 AM »
I've noticed that people who dislike index investing also tend to dislike data.  Above, I see people showing that silver is a poor investment because it went nowhere for 10 years.  And above, the contrasting view is based on a feeling, without data.

The oldest silver ETF I found was iShares Silver Trust (SLV) with a 0.50% expense ratio.  It's 10-year performance is 0.85%/year, compared to Vanguard Total Stock Market (VTI) performing 15.14%/year.
http://performance.morningstar.com/funds/etf/total-returns.action?t=SLV
http://performance.morningstar.com/funds/etf/total-returns.action?t=VTI

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #11 on: July 05, 2019, 02:41:05 AM »
I've noticed that people who dislike index investing also tend to dislike data.  Above, I see people showing that silver is a poor investment because it went nowhere for 10 years.  And above, the contrasting view is based on a feeling, without data.

The oldest silver ETF I found was iShares Silver Trust (SLV) with a 0.50% expense ratio.  It's 10-year performance is 0.85%/year, compared to Vanguard Total Stock Market (VTI) performing 15.14%/year.
http://performance.morningstar.com/funds/etf/total-returns.action?t=SLV
http://performance.morningstar.com/funds/etf/total-returns.action?t=VTI

I don't hate data, I love data.

Hindsight is always 20/20, and silver has not been good place to have your money over most of the last 10 years (much worse if you FOMO-bought at the 2011 peak).

But every dog has his day, and Silver has been shown to at least hold its purchasing power over a very long timeframe. It's wildly inconsistent distribution of returns which is what puts most people off, but ironically this is also what creates a compelling argument for why it should be included as part of a balanced portfolio, because it will behave differently when paper assets are in meltdown.

Distribution of returns is why you should not make the mistake, as I see some people doing, of ignoring or stripping out certain periods when gold & silver have massively increased as some sort of "freak" event. That's their nature.

The volatility also more naturally lends itself to a cost-averaging strategy that helps you accumulate more units over a longer time period.

https://www.mauldineconomics.com/editorial/silver-plays-a-small-but-vital-role-in-every-portfolio/mec

« Last Edit: July 05, 2019, 03:55:27 AM by vand »

js82

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Re: Metal Investing: Silver years 2000s vs now
« Reply #12 on: July 05, 2019, 06:58:41 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.
« Last Edit: July 05, 2019, 07:04:08 AM by js82 »

harvestbook

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Re: Metal Investing: Silver years 2000s vs now
« Reply #13 on: July 05, 2019, 07:16:48 AM »
I hoard just enough in silver coins to hopefully get me to the Canadian border in a true crisis (i.e., that theoretical "perfect doomsday window" when cash is worthless and before people realize food and ammo are the most valuable commodities.) I'd never consider it an investment. And even thinking about buying my survival across the country is ludicrous.

JAYSLOL

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Re: Metal Investing: Silver years 2000s vs now
« Reply #14 on: July 05, 2019, 10:00:51 AM »
Why would it matter what a coins price over spot was?  If you sold a one ounce coin in 2006, youíd get spot for it.  And for the record 120% of spot sucks.  If you feel you must buy silver for investment purposes, buy generic bars large enough to pay less than 5% premium, otherwise your kidding yourself that itís a serious investment (by investment, I mean speculation).  Personally i have 4% of NW in silver, almost all of it was bought below spot price at time of purchase from buying small private collections.  Iím still 85% equities FYI. 

Car Jack

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Re: Metal Investing: Silver years 2000s vs now
« Reply #15 on: July 05, 2019, 01:42:41 PM »
Around 1982, I had some bullion (junk silver) from my days of pulling silver out of the cash register (and replacing with dollar bills) and was paying my way through college.  I sold a bunch off a few at a time at right around $10 per face dollar.  I bought some junk silver, thinking it was a good idea around 2013 near $30 an ounce.  It oscillated a bit and has dropped ever since.  I've since sold most of this horrible investment at great loss and only have a few 1800's dollars left.

Buying anything over bullion value is looking for even higher losses.

Radagast

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Re: Metal Investing: Silver years 2000s vs now
« Reply #16 on: July 05, 2019, 02:33:30 PM »
Even if you want something like PM in your portfolio, silver bullion seems like one of the poorer choices. For one thing, it is largely used for industrial purposes, and is thus more correlated with the broader economy than a metal like gold which doesn't have many real uses. For another, it takes a huge volume of silver to be worthwhile, to the point that storing it is not practical. Right now, to store $50,000, you would need 3,500 1-oz coins. But if you were to do it, precious metals and especially silver are the perfect asset for dollar cost averaging, with low expected return and extreme volatility.

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #17 on: July 06, 2019, 12:20:11 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.



« Last Edit: July 06, 2019, 12:35:32 AM by vand »

RWD

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Re: Metal Investing: Silver years 2000s vs now
« Reply #18 on: July 06, 2019, 07:23:22 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.

Being able to rent housing makes it a productive asset: https://www.fool.com/retirement/2018/01/18/what-are-productive-assets.aspx

But since you're being pedantic I'll point out that js82 dd not specifically say "housing", they said "real estate". On real estate you can plant crops which makes the land quite literally a productive asset.

JAYSLOL

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Re: Metal Investing: Silver years 2000s vs now
« Reply #19 on: July 06, 2019, 07:59:01 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.

Thatís got to be the worst argument Iíve heard on this forum.  So you are saying that an incoming cash flow from an asset doesnít make it a productive asset?  Housing produces an income, the same way a piece of farmland produces a crop which has value.  I get that it doesnít do it without upkeep, and it doesnít multiply itself and produce little baby houses, but if it can RENT itself then itís a productive asset to own. 

MustacheAndaHalf

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Re: Metal Investing: Silver years 2000s vs now
« Reply #20 on: July 06, 2019, 08:46:42 AM »
I don't hate data, I love data.
You say that, but your post is full of anecdotes - not data.

The editorial you linked to has two graphs: it shows silver and S&P 500 performance separately.  I guess showing silver directly compared to the S&P 500 isn't something the author wants people to see.

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #21 on: July 07, 2019, 08:36:28 AM »
I don't hate data, I love data.
You say that, but your post is full of anecdotes - not data.

The editorial you linked to has two graphs: it shows silver and S&P 500 performance separately.  I guess showing silver directly compared to the S&P 500 isn't something the author wants people to see.

There is quoting data, which anyone with an internet connection can do... and there is actually using the data that you are quoting.

If Silver behaved like a sucky active fund that went up and down with the market but underperformed in general then you do well to avoid it. But it doesn't. If you want to actually use data you need to look beyond top line CAGR figures and use the tools of MPT to find a reason to want to own some even if the long term return is not as good as some other asset classes, but most people don't bother to do this so naturally don't see any reason to want to own any.


If the OP or anyone else wants to buy silver then let them. It's their money, no one cares more about it than they do. And even if it proves a poor choice it is better to let them make it and learn for themselves about what sort of an investor they want to be, which is a conversation that the robotic index drones add absolutely nothing toward.
« Last Edit: July 07, 2019, 08:41:57 AM by vand »

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #22 on: July 07, 2019, 08:57:52 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.

Being able to rent housing makes it a productive asset: https://www.fool.com/retirement/2018/01/18/what-are-productive-assets.aspx

But since you're being pedantic I'll point out that js82 dd not specifically say "housing", they said "real estate". On real estate you can plant crops which makes the land quite literally a productive asset.

And I'd like to point out that precious metals are, as indicated in the name, still metals, and possess the qualities of the metals. Yes you can plant crops of a piece of land which makes it a productive asset. You can also forge a a sickle or hoe out of silver and use it to plant and harvest those crops, or make electrical wire out of gold.. which makes them - quite literally - a productive asset.

JAYSLOL

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Re: Metal Investing: Silver years 2000s vs now
« Reply #23 on: July 07, 2019, 09:48:52 AM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.

Being able to rent housing makes it a productive asset: https://www.fool.com/retirement/2018/01/18/what-are-productive-assets.aspx

But since you're being pedantic I'll point out that js82 dd not specifically say "housing", they said "real estate". On real estate you can plant crops which makes the land quite literally a productive asset.

And I'd like to point out that precious metals are, as indicated in the name, still metals, and possess the qualities of the metals. Yes you can plant crops of a piece of land which makes it a productive asset. You can also forge a a sickle or hoe out of silver and use it to plant and harvest those crops, or make electrical wire out of gold.. which makes them - quite literally - a productive asset.

Ok, you try forging a hoe out of silver and renting it to a farmer.  If it works, and brings you an income, I will gladly consider your new rental businesses inventory of silver hoes as productive assets.  On the other hand, a one time sale of something of potential utility does not make it a productive asset because itís not an asset if you donít own it anymore

Davnasty

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Re: Metal Investing: Silver years 2000s vs now
« Reply #24 on: July 08, 2019, 12:43:46 PM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.

Being able to rent housing makes it a productive asset: https://www.fool.com/retirement/2018/01/18/what-are-productive-assets.aspx

But since you're being pedantic I'll point out that js82 dd not specifically say "housing", they said "real estate". On real estate you can plant crops which makes the land quite literally a productive asset.

And I'd like to point out that precious metals are, as indicated in the name, still metals, and possess the qualities of the metals. Yes you can plant crops of a piece of land which makes it a productive asset. You can also forge a a sickle or hoe out of silver and use it to plant and harvest those crops, or make electrical wire out of gold.. which makes them - quite literally - a productive asset.

This captain is going down with the ship :)

Indexer

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Re: Metal Investing: Silver years 2000s vs now
« Reply #25 on: July 08, 2019, 02:30:22 PM »
Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there. They don't reinvent themselves or improve themselves and require upkeep.  PMs have utility as a form of money and also as commodities from where they derive their value.   If you mean they don't have cashflow.. well that is different.


The house you live in is a "Use Asset". You are using it. If you didn't have it you would have to replace it with another form of housing, like paying rent. A car or a bicycle is another use asset, without it you would need another form of transportation (unless you can walk to everything). The objective of a use asset isn't to produce cash flow itself, but to save you from spending more money on an alternative means of fulfilling that need.

Silver isn't a use asset unless you're a werewolf hunter.

Gold can be used to conduct electricity, but there are much more affordable metals that conduct electricity, like copper. Unless you make and sell jewelry for a living you don't need supplies of silver or gold.

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #26 on: July 09, 2019, 05:43:21 AM »
You can mock all you like, but the research shows that wealthy families tend to hold that spread across many assets classes because they understand the importance of resilience and diversification.

Here is a very interesting "portfolio manager" whose clients - I'm pretty sure - sleep very well at night:

https://www.youtube.com/watch?v=a4_U6bS-cU4

MustacheAndaHalf

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Re: Metal Investing: Silver years 2000s vs now
« Reply #27 on: July 09, 2019, 05:54:17 AM »
You claimed silver was a productive asset, and others pointed out why you're wrong.  That isn't mocking.  It sounds like you're trying to belittle factual information by reducing it to mere mockery.  But I think it's more of a "You can't handle the truth" situation than mockery.

Investing in equity index funds is the best approach for most people.  But those with tens of millions don't need to grow their wealth.  Suze Orman can hold all her money in tax-exempt bonds, because she has more than she needs.  Just because a wealthy person does it, doesn't make it right for everyone else.

vand

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Re: Metal Investing: Silver years 2000s vs now
« Reply #28 on: July 09, 2019, 06:17:24 AM »
You claimed silver was a productive asset, and others pointed out why you're wrong.  That isn't mocking.  It sounds like you're trying to belittle factual information by reducing it to mere mockery.  But I think it's more of a "You can't handle the truth" situation than mockery.

Investing in equity index funds is the best approach for most people.  But those with tens of millions don't need to grow their wealth.  Suze Orman can hold all her money in tax-exempt bonds, because she has more than she needs.  Just because a wealthy person does it, doesn't make it right for everyone else.

Whatever, man. I'm pretty much done with your factual facts about facts. VTSAX lovers will any chance to knock PM investors on the head, and I understand their stance. I can assure you however that there will come a time where the mainstream consensus will change to "PMs are a poor investment" to "everyone should hold some PMs", but if you wait for that time before you seriously start considering its merits then you have already missed the boat. PMs are insurance, and you hold insurance ahead of time.

GuitarStv

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Re: Metal Investing: Silver years 2000s vs now
« Reply #29 on: July 09, 2019, 07:29:11 AM »
OK, so I queried earlier . . . but why do you believe that buying silver coins is 'investing' and not simply 'collecting'?  I mean, I've got a box of comic books in the basement from when I was a kid.  I know that in the past some people have sold comic books for lots of money (Action Comics #1).  Does that mean that my comic books are both insurance and an investment?

Asking because this appears to be the same argument you're making for stockpiling silver coins.  Some people have wanted them sometimes in the past, they are an asset class different than stocks/bonds therefore they are an investment and insurance.  Comic books are also a 'use asset'.  You can read them.  Some comic books have held their value for a long time.

Davnasty

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Re: Metal Investing: Silver years 2000s vs now
« Reply #30 on: July 09, 2019, 08:11:21 AM »
You claimed silver was a productive asset, and others pointed out why you're wrong.  That isn't mocking.  It sounds like you're trying to belittle factual information by reducing it to mere mockery.  But I think it's more of a "You can't handle the truth" situation than mockery.

Investing in equity index funds is the best approach for most people.  But those with tens of millions don't need to grow their wealth.  Suze Orman can hold all her money in tax-exempt bonds, because she has more than she needs.  Just because a wealthy person does it, doesn't make it right for everyone else.

I was mocking :) but then again, I wasn't really part of the conversation and I wasn't arguing against holding PM's.

And to be fair, I wasn't trying to be mean. I actually thought that this:

You can also forge a sickle or hoe out of silver and use it to plant and harvest those crops

was so silly that you weren't really being serious.

First you said:

If that is you argument you make then you must consider that housing is a non-productive asset also. They just sit there.

Someone pointed out that this is incorrect. Instead of acknowledging your mistake you pivoted to argue that silver is also a productive asset. In theory, anything can be a productive asset, but given the context of the conversation that is not how you intend to use PM's as part of your AA. You intend to buy them and wait for their value to increase. Also given the context of the conversation, when js82 mentioned investing in real estate, they were probably talking about buying something they can rent out or otherwise create an income. Even if they were talking about a primary residence, it's a use asset as Indexer explained. This is still an investment with utility.

So at this point, can we all agree that PM's bought with the intention of holding them as insurance are not a productive asset?


Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #31 on: July 09, 2019, 08:54:08 AM »
So at this point, can we all agree that PM's bought with the intention of holding them as insurance are not a productive asset?

But that is not how you view insurance.   You don't say "gee, I am bummed I didn't get cancer...that $300 a month health insurance policy is going to waste"

For someone who thinks they need to insure against Argentina-like inflation, they are probably glad that the world didn't end and their silver purchase turned out to not be needed.

Having said this, I don't really invest in precious metals because I do not think the cost of the insurance is worth it for the minimal risk.  I think the risk of the USA having hyper inflation is in the fractions of 1%.   For someone who has all the bases covered though, I do not think it is insane for them to at least consider the risk of hyper inflation or war.

Silver saved the life of my wife's Grandparents when they were fleeing occupied Latvia after WWII.  They were able to bribe Russian guards with quite a bit of the silver and gold they were carrying and escaped into western Europe (although her grandfather did get shot in the leg by a guard).
« Last Edit: July 09, 2019, 08:56:29 AM by Roland of Gilead »

EvenSteven

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Re: Metal Investing: Silver years 2000s vs now
« Reply #32 on: July 09, 2019, 09:02:27 AM »
So at this point, can we all agree that PM's bought with the intention of holding them as insurance are not a productive asset?

But that is not how you view insurance.   You don't say "gee, I am bummed I didn't get cancer...that $300 a month health insurance policy is going to waste"

For someone who thinks they need to insure against Argentina-like inflation, they are probably glad that the world didn't end and their silver purchase turned out to not be needed.

Having said this, I don't really invest in precious metals because I do not think the cost of the insurance is worth it for the minimal risk.  I think the risk of the USA having hyper inflation is in the fractions of 1%.   For someone who has all the bases covered though, I do not think it is insane for them to at least consider the risk of hyper inflation or war.

Silver saved the life of my wife's Grandparents when they were fleeing occupied Latvia after WWII.  They were able to bribe Russian guards with quite a bit of the silver and gold they were carrying and escaped into western Europe (although her grandfather did get shot in the leg by a guard).

That doesn't make it a productive asset. I have insurance. It is worth it, and a valuable service that I pay for. It is not a productive asset.


Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #33 on: July 09, 2019, 09:07:07 AM »
That doesn't make it a productive asset. I have insurance. It is worth it, and a valuable service that I pay for. It is not a productive asset.

Ok, what about TIPS, or even bonds that are paying 2% when inflation is 2.5%?  Those are not productive assets either, right?


GuitarStv

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Re: Metal Investing: Silver years 2000s vs now
« Reply #34 on: July 09, 2019, 09:21:55 AM »
That doesn't make it a productive asset. I have insurance. It is worth it, and a valuable service that I pay for. It is not a productive asset.

Ok, what about TIPS, or even bonds that are paying 2% when inflation is 2.5%?  Those are not productive assets either, right?

A bond that's paying a set percentage is a productive asset.  Inflation rate doesn't change that (although it might change the value of holding that asset).

EvenSteven

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Re: Metal Investing: Silver years 2000s vs now
« Reply #35 on: July 09, 2019, 09:25:39 AM »
That doesn't make it a productive asset. I have insurance. It is worth it, and a valuable service that I pay for. It is not a productive asset.

Ok, what about TIPS, or even bonds that are paying 2% when inflation is 2.5%?  Those are not productive assets either, right?

I don't think productive assets are defined by whether or not they produce a positive return, so inflation and rate of return aren't relevant.

I would classify bonds and other debt as a different category from productive assets, whether they have a positive real return or not.

Non-productive assets would be things like commodities and collectibles.

Productive assets would be things like owning companies or real estate (rentals, farmland, primary residence).

"Non-productive" here is not a synonym for "bad," or "money losing." You can make a very nice financial gains from non-productive assets.

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #36 on: July 09, 2019, 09:44:16 AM »

A bond that's paying a set percentage is a productive asset.  Inflation rate doesn't change that (although it might change the value of holding that asset).

Exactly how is the bond producing anything?  At best it is losing you purchasing power each year.

I guess we could call it a "slightly less shitty asset" than cash, but not a productive asset.

GuitarStv

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Re: Metal Investing: Silver years 2000s vs now
« Reply #37 on: July 09, 2019, 09:45:26 AM »

A bond that's paying a set percentage is a productive asset.  Inflation rate doesn't change that (although it might change the value of holding that asset).

Exactly how is the bond producing anything?  At best it is losing you purchasing power each year.

I guess we could call it a "slightly less shitty asset" than cash, but not a productive asset.

It's producing a return.  I agree with you that when the return is less than inflation it's a shitty investment . . . but there's still a return.



To put it another way, if you run a large corporation that makes 10 billion dollars in revenue for the year, that company has produced a return.  Let's say the company took out loans in previous years that cost 11 billion dollars to repay during the same fiscal year.  Even though net profits for the year would be -1 billion, that doesn't change the fact that the company generated a return.
« Last Edit: July 09, 2019, 09:49:25 AM by GuitarStv »

SwordGuy

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Re: Metal Investing: Silver years 2000s vs now
« Reply #38 on: July 09, 2019, 09:46:03 AM »
Here is a basic definition of "productive asset":

"Productive assets are those with the ability to generate profits and cash flow."

So, is a pile of silver coins in the closet a productive asset per that definition.

No, not generally. 

Now, if it's a big pile of silver coins and you can sell tickets for people to come in and see it; or a really big pile you can sell tickets for people to swim in it like Scrooge McDuck, then it becomes a productive pile.  PS -- I suggest gold-plating those coins to get bigger ticket prices...

If you make jewelry out of it and rent out that jewelry, it becomes a productive asset.

In neither case is it a passive productive asset as you're running it as a business.

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #39 on: July 09, 2019, 10:11:21 AM »
I think this argument fails in the same way dividend investors try to get you to believe that dividend stocks are better than non dividend stocks because to realize money from the dividend stocks you don't have to sell any of them.

Most people, at least on early retirement.org seems to feel that this is false and selling a stock to produce usable income is acceptable.

Why then can't you sell one of your pile of silver coins to produce usable income to buy goods, benefiting from the fact that the silver coin has somewhat kept up with inflation and kept your buying power up?

It seems really no different than a bond that matches inflation.  Put both inside a black box and have them spit out a little money at a time.   It doesn't much matter inside the box how they do it.

But you will say "eventually the silver will run out!"   And I will say "eventually the bond principal will be worthless, or so low in purchasing power to be essentially zero".

Black Box A)  $1000 bond paying 2%.   Spits out $20 a year.

Black Box B)  100 silver coins worth $10 each.   Internally box sells 2 coins, spits out $20 a year.

Let us say inflation is 2% and the price of silver sort of keeps up with inflation

End of year one box A has a $1000 bond in it with purchasing power equivalent of $980

Box B has 98 coins in it that are worth $10.20 each, so box B also has $1000 in it with purchasing power equivalent of $980

Eventually you will be left with 1 coin that is worth $1000, the same as the face value of the bond in the other box.

EvenSteven

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Re: Metal Investing: Silver years 2000s vs now
« Reply #40 on: July 09, 2019, 10:30:01 AM »
Quote
Why then can't you sell one of your pile of silver coins to produce usable income to buy goods, benefiting from the fact that the silver coin has somewhat kept up with inflation and kept your buying power up?

You can. But once you sell it you no longer have it. It is an asset that can appreciate in value, and that you can sell for income. It does not produce income without selling it though.

Quote
Put both inside a black box and have them spit out a little money at a time.   It doesn't much matter inside the box how they do it.

How they do it won't change the performance of the asset, but it will change whether that asset is called a "productive asset" or a "non-productive asset."

Quote
Let us say inflation is 2% and the price of silver sort of keeps up with inflation

End of year one box A has a $1000 bond in it with purchasing power equivalent of $980

Box B has 98 coins in it that are worth $10.20 each, so box B also has $1000 in it with purchasing power equivalent of $980

Eventually you will be left with 1 coin that is worth $1000, the same as the face value of the bond in the other box.

OK, but remember, the performance of any particular asset has no bearing on whether that asset is productive or not.

Let's say that silver doesn't just keep up with inflation, it beats it by 15% every year. And lets say you have a stock that pays a 2% dividend, but whose total return is -5% every year. In this situation the stock is still a "productive asset" and the silver is still a "non-productive" asset.

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #41 on: July 09, 2019, 10:34:21 AM »
But you seemed to define productive as something positive or good (by disparaging silver as non-productive, therefore bad)

If silver worked the same way a low yield bond does and you just want to be correct in terminology then fine, but to me it is like saying this bottle of distilled water is better than that bottle of distilled water because I call this one "super water"

EvenSteven

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Re: Metal Investing: Silver years 2000s vs now
« Reply #42 on: July 09, 2019, 10:42:42 AM »
But you seemed to define productive as something positive or good (by disparaging silver as non-productive, therefore bad)

If silver worked the same way a low yield bond does and you just want to be correct in terminology then fine, but to me it is like saying this bottle of distilled water is better than that bottle of distilled water because I call this one "super water"

I did nothing of the sort. I specifically and explicitly said that the performance of an asset is irrelevant to determining whether you call it productive or not.

Davnasty

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Re: Metal Investing: Silver years 2000s vs now
« Reply #43 on: July 09, 2019, 12:07:26 PM »
But you seemed to define productive as something positive or good (by disparaging silver as non-productive, therefore bad)

If silver worked the same way a low yield bond does and you just want to be correct in terminology then fine, but to me it is like saying this bottle of distilled water is better than that bottle of distilled water because I call this one "super water"

I did nothing of the sort. I specifically and explicitly said that the performance of an asset is irrelevant to determining whether you call it productive or not.

Yep. RWD brought it up and js82 elaborated on it a bit.

Precious metals are not a productive asset.

This can't be emphasized enough.  Non-productive assets are poor long-term investments.  They are at best, useful inflation hedges, or if you think you're smarter than the market, opportunities to exploit short-term mispricings.  Non-productive assets are not what you want to hold long-term.

This goes for silver, gold, bitcoin, and anything else that's intended to be inflation-resistant but is non-productive.

The problem is, there are assets that *are* productive that also track with inflation - for instance, real estate and stock.  Which is the better long-run investment?  Not the metals.

No one really went into the reasoning as to why non-productive assets are poor long term investments (as a general rule) but I do agree with that assessment. To me it seems fundamental so I don't really know how to defend that stance other than the basic reasoning that's already been given. Productive assets create and non-productive assets don't. If I invest in something that doesn't create, I'm fighting for my slice of pie. If I invest in a bakery, they just keep making pies. You get a pie, and you get a pie, everybody gets a pie.
« Last Edit: July 09, 2019, 12:09:38 PM by Dabnasty »

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #44 on: July 09, 2019, 07:35:24 PM »
No one really went into the reasoning as to why non-productive assets are poor long term investments (as a general rule) but I do agree with that assessment. To me it seems fundamental so I don't really know how to defend that stance other than the basic reasoning that's already been given. Productive assets create and non-productive assets don't. If I invest in something that doesn't create, I'm fighting for my slice of pie. If I invest in a bakery, they just keep making pies. You get a pie, and you get a pie, everybody gets a pie.

So to be clear here, you are saying that bonds are non-productive assets, especially when they are at or below inflation?

And thus bonds are poor long term investments.

(I actually kind of agree with this)

Radagast

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Re: Metal Investing: Silver years 2000s vs now
« Reply #45 on: July 09, 2019, 08:37:38 PM »
I think the risk of the USA having hyper inflation is in the fractions of 1%.
I think the chance is about 1% annually, which puts it at about a 50/50 in any given person's lifetime. Although perhaps "currency crisis" or something would be better than strict hyperinflation.

Significant currency events in the US include the Revolutionary War. Of course at the time the economy was much different, but if that happened today it would would create a currency crisis. In the Civil War the Union issued greenbacks, paper currency without PM backing, and let in Nevada, whose only redeeming aspects were a pro-Union stance and loads of silver. The Confederacy issued lots of currency and bonds which became worthless when it was forced back into the US, a true currency crisis. As I recall the highest annual inflation in the US actually happened at the end of WW2, when metals were presumably also in short supply, and bond rates were artificially low. The tail end of the 70's didn't count as hyperinflation, but inflation was high, and silver prices made a nice pointy tippity top. So that is four candidate periods in US history already. The US was very mild compared to the rest of the world, which even did things like actually lose world wars. Expanding the scope to the rest of the world in this period and other empires in history, I think a possible currency crisis in our lifetimes isn't far fetched. Just read history and look at the major events and ask "if something like that happened today, what would happen? How often did things like that happen?"

That doesn't make it a productive asset. I have insurance. It is worth it, and a valuable service that I pay for. It is not a productive asset.

Ok, what about TIPS, or even bonds that are paying 2% when inflation is 2.5%?  Those are not productive assets either, right?
I think precious metals as an investment are a lot like a zero-coupon, zero-interest, inflation adjusted, bearer bond, of infinite duration, issued in a foreign reserve currency, with very high bid/ask spreads, and a fairly large annual expense ratio. The things that make me question PMs are the ongoing expenses, large spreads, zero coupon, and "bearer bond" quality (anybody can take it and it then becomes indisputably theirs). Benefits include inflation adjusted and foreign reserve currency status. Infinite duration cuts both ways.

No one really went into the reasoning as to why non-productive assets are poor long term investments (as a general rule) but I do agree with that assessment. To me it seems fundamental so I don't really know how to defend that stance other than the basic reasoning that's already been given. Productive assets create and non-productive assets don't. If I invest in something that doesn't create, I'm fighting for my slice of pie. If I invest in a bakery, they just keep making pies. You get a pie, and you get a pie, everybody gets a pie.

So to be clear here, you are saying that bonds are non-productive assets, especially when they are at or below inflation?

And thus bonds are poor long term investments.

(I actually kind of agree with this)
I think bonds are a productive asset, but not necessarily a good investment. If I buy local municipal bonds, I lend the city (or local entity) money to expand the airport or refurbish the sewer treatment plant. Those are both productive uses. Almost any bond is productive, even if it later turns out to be a bad investment. It is productive because it pays somebody to go out and do something. That is not any different than stocks really, which individually often turn out to be unproductive and quickly fold, but in aggregate succeed. Silver is only productive if put to use conducting heat or electricity or killing little buggies, in which case it loses its currency/bond aspect. Maybe add "convertible" to the list above :).
« Last Edit: July 09, 2019, 08:42:00 PM by Radagast »

Davnasty

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Re: Metal Investing: Silver years 2000s vs now
« Reply #46 on: July 10, 2019, 06:42:25 AM »
No one really went into the reasoning as to why non-productive assets are poor long term investments (as a general rule) but I do agree with that assessment. To me it seems fundamental so I don't really know how to defend that stance other than the basic reasoning that's already been given. Productive assets create and non-productive assets don't. If I invest in something that doesn't create, I'm fighting for my slice of pie. If I invest in a bakery, they just keep making pies. You get a pie, and you get a pie, everybody gets a pie.

So to be clear here, you are saying that bonds are non-productive assets, especially when they are at or below inflation?

And thus bonds are poor long term investments.

(I actually kind of agree with this)

Bonds are productive because they provide capital to a business which produces something. The rate of return/inflation is irrelevant.

But that doesn't mean bonds are a good long term investment either. When I say that productive assets are better long term investments than non-productive I'm not saying it's a rule without exceptions. It's more of a general guideline based on the nature of the investments that the best long term option will most likely be a productive asset. Lots of productive assets can be poor long term investments as well.

thd7t

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Re: Metal Investing: Silver years 2000s vs now
« Reply #47 on: July 10, 2019, 06:51:54 AM »
I'm almost entirely invested in total stock market indexes (and have about four silver coins I inherited) and I agree that there's data that shows the deficiencies of precious metal investing, but the data that's been shared on this thread for VTI, etc. has been over the last 10 years.  This represents the same sort of cherry picking that is being done by proponents of PM investing.

The reason that index investing beats PM investing isn't that it's been better over a 10 year period of sustained stock market growth.  It's that it's been consistently good over any long term period.  No serious person trying to sell index investing should point to the last 10 years.  It makes it look like speculation.

Roland of Gilead

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Re: Metal Investing: Silver years 2000s vs now
« Reply #48 on: July 10, 2019, 07:35:14 AM »
I think bonds are a productive asset, but not necessarily a good investment. If I buy local municipal bonds, I lend the city (or local entity) money to expand the airport or refurbish the sewer treatment plant. Those are both productive uses. Almost any bond is productive, even if it later turns out to be a bad investment. It is productive because it pays somebody to go out and do something. That is not any different than stocks really, which individually often turn out to be unproductive and quickly fold, but in aggregate succeed. Silver is only productive if put to use conducting heat or electricity or killing little buggies, in which case it loses its currency/bond aspect. Maybe add "convertible" to the list above :).

You are still not understanding what I am trying to say.

You are saying a muni bond is productive because it pays somebody to go out and do something.   When I buy silver it pays for a mining company to go out and mine more.  It pays for CAT to sell them heavy equipment and it pays for the airline to fly employees around.


Radagast

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Re: Metal Investing: Silver years 2000s vs now
« Reply #49 on: July 10, 2019, 09:02:08 AM »
I think bonds are a productive asset, but not necessarily a good investment. If I buy local municipal bonds, I lend the city (or local entity) money to expand the airport or refurbish the sewer treatment plant. Those are both productive uses. Almost any bond is productive, even if it later turns out to be a bad investment. It is productive because it pays somebody to go out and do something. That is not any different than stocks really, which individually often turn out to be unproductive and quickly fold, but in aggregate succeed. Silver is only productive if put to use conducting heat or electricity or killing little buggies, in which case it loses its currency/bond aspect. Maybe add "convertible" to the list above :).

You are still not understanding what I am trying to say.

You are saying a muni bond is productive because it pays somebody to go out and do something.   When I buy silver it pays for a mining company to go out and mine more.  It pays for CAT to sell them heavy equipment and it pays for the airline to fly employees around.
Yes but silver represents a single point of money entering the system. You buy it once and pay the companies to mine it once. Then it lies around, which is like an ordinary consumer good (maybe not quite, typically consumer goods depreciate, while presumably precious metals maintain their real value). The airport or sewage treatment plant provides an ongoing benefit over the next 30 or more years. You make a single injection of money into the system to fund an ongoing benefit.