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Learning, Sharing, and Teaching => Investor Alley => Topic started by: MilesTeg on June 14, 2018, 12:43:58 PM

Title: Precious Metals
Post by: MilesTeg on June 14, 2018, 12:43:58 PM
Before I start, know I don't give one hoot about what the MMM perspective is on this question (I don't even know what it is, and don't care to); I am asking this question here only because this is a pretty decent place to find knowledgeable financial/investment folks:

We're looking to convert a small portion of our assets (~5%) into precious metals and to maintain that ratio going forward. We're in the lucky/hard earned position of this being a fairly decent sum. We've looked at dealers like Kitco, et al but really have no idea what the most efficient way to go about doing this is (minimize loss due to fees, shipping, etc.). Lots of marketing department driving advise floating around but hoping for neutral 3rd party advise from someone here with experience (or a pointer to such advise).

Thanks!
Title: Re: Precious Metals
Post by: FIRE@50 on June 14, 2018, 01:45:42 PM
Would you mind sharing how and why you arrived at the decision to put 5% into metals? Thanks.
Title: Re: Precious Metals
Post by: weltschmerz on June 14, 2018, 09:53:33 PM
We're looking to convert a small portion of our assets (~5%) into precious metals and to maintain that ratio going forward.

I don't know what 5% of your stash amounts to, but I would offer that keeping more than $30-50k in physical gold gets difficult.  You can keep some at a bank safety deposit box, some at home, some buried in the back yard, but there is a limit to what you will feel comfortable keeping. I recommend not keeping a set percentage.   Rather, just keep some coins, as an 'insurance policy', and be done with it.  There are a few portfolios, like the Permanent Portfolio, that keep up to 25% gold, but that's crazy.  You can't keep that much physical gold around.

Let's say you have > $2M in assets, and you decided to keep 5% in physical gold.  That's $100k!  Are you just going to keep it at a bank, or some at home?  Don't even think you're going to buy IAU or GLD for the majority and keep just a few coins at home....that's beyond lame.

As far as dealers, APMEX is a good one, check them out.  Don't even worry about selling.  You'll probably just pass the coins on to your heirs.
Title: Re: Precious Metals
Post by: maizeman on June 14, 2018, 10:42:22 PM
Let's say you have > $2M in assets, and you decided to keep 5% in physical gold.  That's $100k!  Are you just going to keep it at a bank, or some at home?

I mean that's only about 5 lbs of gold. That's what, a 2 x 2 x 2 inch cube?

The financial considerations/concerns are still very real and I wouldn't recommend putting so much of your net worth in what is, essentially, a commodity, but logistically I don't think you'd run into any problems keeping that much gold in a safe deposit box.
Title: Re: Precious Metals
Post by: Radagast on June 15, 2018, 12:09:28 AM
Maybe ironically but I thought this was one of the best references
https://www.bogleheads.org/forum/viewtopic.php?t=234480
Also https://www.gyroscopicinvesting.com/forum/index.php will have that somewhere.

Let's say you have > $2M in assets, and you decided to keep 5% in physical gold.  That's $100k!  Are you just going to keep it at a bank, or some at home?

I mean that's only about 5 lbs of gold. That's what, a 2 x 2 x 2 inch cube?

The financial considerations/concerns are still very real and I wouldn't recommend putting so much of your net worth in what is, essentially, a commodity, but logistically I don't think you'd run into any problems keeping that much gold in a safe deposit box.
Yeah, an ounce of gold is like a Sacagawea dollar, or a little bigger than a quarter. $100k would be like 80 of those. Not a very big stack. That's why it was the bitcoin of ancient times.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 15, 2018, 02:32:45 AM
What's the intended purpose of the metals?  I ask mainly to help you determine if you really need to hold the entire amount as physical. Personally I hold metals in my portfolio, but only keep part of it physical to avoid the cost issues discussed in your OP. 
Title: Re: Precious Metals
Post by: SwordGuy on June 15, 2018, 06:18:02 AM
Before I start, know I don't give one hoot about what the MMM perspective is on this question (I don't even know what it is, and don't care to); I am asking this question here only because this is a pretty decent place to find knowledgeable financial/investment folks:

We're looking to convert a small portion of our assets (~5%) into precious metals and to maintain that ratio going forward. We're in the lucky/hard earned position of this being a fairly decent sum. We've looked at dealers like Kitco, et al but really have no idea what the most efficient way to go about doing this is (minimize loss due to fees, shipping, etc.). Lots of marketing department driving advise floating around but hoping for neutral 3rd party advise from someone here with experience (or a pointer to such advise).

Thanks!

Have you ever noticed that when economic times get shaky, the number of advertisements for gold and silver as great investments skyrockets? 
And how they tout what great investments they are to hold in bad economic times?

Now, let's think about this logically.

They ALREADY own gold.

Bad economic times are just around the corner.

They are spending lots of money to buy adverts in order to GET RID OF their gold.

If they believed their own spiel, they would be spending that advert money to BUY MORE GOLD.

But, obviously, they are doing the EXACT OPPOSITE of what they are advising you to do.

Hmmm.

And that would be why the only gold and silver I own is for making jewelry with for my hobby.

Which, incidently, actually does increase its value if I get good at it...

I wouldn't put 5% of my holdings into precious metals. 
Title: Re: Precious Metals
Post by: Car Jack on June 15, 2018, 06:35:12 AM
I have bought/sold silver coins.  I had planned to get into gold but just never pulled the trigger.

Buying:  You absolutely want to buy from a reputable supplier.  Apmex is where I would go.  They are transparent with prices right on the website.  You can see the difference by volume and if you would rather use a credit card (which is silly because of the fee).  They are not consistent at giving buy prices, however and you would have to call for that.

Apmex does, at times offer free shipping on amounts over some set $$.  If you are selling back, of course, you pay shipping.

I have sold both to a local wholesaler and to private people found on Craigslist.  Private sales will bring in more money.  Ask before you meet what they're paying.  Set up an initial small amount and then meet.  This is harder to do with gold than silver as it's tough to have only $300 in gold, where for silver, that's a small bag of quarters.

For storage, I would suggest a few things.  First, don't tell anyone.  Don't tell your wife or your dog or your neighbor that you even have gold.  Buy a fire safe key lock box and leave it where any thief will find it.  Put things that seem valuable in it but have no real value.  Maybe some recent dimes, penny rolls, costume jewelry.  Then buy a small safe that you can both hide and bolt to concrete.  You want this hidden.  As an example, the safe is bolted 3 feet up on a basement wall with shelves in front of it.  Fill the shelves with crap you're storing.  If nothing else, this will make it harder to find for a thief in a hurry.  Any safe can be broken into, so I wouldn't bother with a plutonium grade kryptonite encrusted bank safe.  I mean, guys have chained their truck to an ATM and dragged it away.....

Back to what to buy.  You'll see that what you're buying will be priced based on various things.  The bars...Apmex or Credit Suisse and the like are cheaper than coins.  Part of the reason for that is that they're less desirable than coins.  Things like Krugerands and libtards and mexican gold have different amounts of gold in them.  Know what it is.  I find that US coins tend to be the highest priced, followed by Canadian maple leafs and on from there.  The larger the denomination the cheaper it is.  If you're buying a quarter ounce or a tenth ounce, you're taking a bath on price.  Easy to see on Apmex.

Good luck.  I've been selling off all my silver, which is "junk silver" as I realized that inflation alone is making it a bad investment.  The fact that it's gone down in number $$ value hurts just a bit more.
Title: Re: Precious Metals
Post by: BobTheBuilder on June 15, 2018, 07:17:32 AM
In Germany there is something called Xetra-Gold.

https://www.xetra-gold.com/en/

1 unit correponds to 1 g of gold, which is actually physically stored in a vault. It is so much like having it in hand that the German tax systems treats those two as equal. That means in Germany you can sell it off after 1year or more without paying any taxes at all on your gains. Which is exactly the same for coins/bars.

You can also let it be delivered to you, which of course only makes sense if you have at least the equivalent of a small bar (50g+)

Maybe there is an equivalent to that in the US?

With silver you will run into the problem that you need large amounts of silver to store the wealth. Also, silver is more related to mining of other industrial metals so the price is more dependent on let's say copper mining volume (they often cohabit the same rocks)
Title: Re: Precious Metals
Post by: tralfamadorian on June 15, 2018, 02:42:14 PM
Would you mind sharing how and why you arrived at the decision to put 5% into metals? Thanks.
Seriously...  Whats with the attitude? The guy came asking an honest question. Many of the portfolios analyzed at portfolio charts include an allocation to gold. 

So, back at ya:

Would you, FIRE@50, mind sharing how and why you arrived at the decision not to put 5% into metals?  Thanks!

Actually, I thought they asked the question very politely.

To answer your question though it was not posed to me:
1) Capital gains tax rate of personal income tax rate (25%).
2) Paying sales tax on physical purchase (5.3%).
3) Storage/insurance issues if being held for a zombie apocalypse type event.
4) Spread on purchase. (5%)
5) Spread on sale. (5%)
5) Lack of dividends or appreciation.
(https://goldprice.org/sites/default/files/inflation-adjusted-gold-price.png)

So in summary, if I decided to buy $10k in gold in my state in physical coins, I would pay $11,300. Suppose that I decided to hold for 20 years with half in my basement in a mustachian hidden safe with a secondary dummy safe ($200 one time) and half in a safety deposit box ($60/yr), which gives a storage cost of $1,400. When it was time to sell the coins, they would be worth ~$10k in 2018 dollars. After the sales spread, taxes and subtracting out the storage costs, I would walk away with $5,725.

Wow! What a winner! Where do I sign up?
Title: Re: Precious Metals
Post by: tralfamadorian on June 15, 2018, 03:32:57 PM
...Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold.

And I do think Fire@50's question was fair and polite because there are several reasons that someone may decide to invest in gold. Is it a hobby like yours? Is it an inflation hedge? There are better inflation hedges. Is it a hedge against my snarky zombie apocalypse or another black swan event? In that case it would be better to dig up the birth certificate for dearly departed great-so-and-so to work on getting your Irish passport and investing in some CHF CDs with that 5%.   
Title: Re: Precious Metals
Post by: Eric on June 15, 2018, 03:51:38 PM
As to your chart of gold prices, I agree with you that gold is an inferior investment to stocks.  Although, I think the jury is still out regarding whether gold or bonds are better long term -- some would say that keeping up with inflation while not paying any income is a blessing.  And to believers of MPT, gold is a precious commodity (pun intended) since it offers a volatile uncorrelated asset with which to further diversify a portfolio -- Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Those same people likely also believe that if they get bumped up a tax bracket, that they'll end up with less money.  Because they're bad at math!  This would cause them to believe that not paying taxes on income is better than paying taxes on it.  In other words, they'd rather have $0 and no taxes than $1 for which they have to pay $.25 to the government.  It comes as no shock to me that most gold bugs are also anti-government.  The two go hand in hand, just like bad math and poor investment decisions.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 15, 2018, 03:53:43 PM
Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold. 

What do you mean by "performance"?   It will probably never increase CAGR, but it can reduce overall volatility of portfolio.  Lower CAGR with lower volatility can increase sustainable WR's.  In draw-down phase I would consider sustainable WR "performance", even if my returns are lower.  Someone in accumulation probably wouldn't care about WR, just CAGR.  This is why investing per personal goals, timeframes, phases of life, etc, is so important.
Title: Re: Precious Metals
Post by: Financial.Velociraptor on June 15, 2018, 04:57:02 PM
I have about 2800 in a numismatic gold coin, 50 dollars face in junk silver, and some MS64+ Morgan dollars (20).  I wish I hadn't bought them.  YMMV.

My older supervisor who is a huge gold bug buys primarily gold bullion.  He has a handful of numismatics but prefers the base metal.  He takes physical delivery.  And also a couple of 100oz silver bars that last I heard, he wanted to sell and use the proceeds to buy more gold.  Can't really advise you here except to note what I know others who are heavily invested in metals have personally done.
Title: Re: Precious Metals
Post by: tralfamadorian on June 15, 2018, 05:13:45 PM
Further perhaps someone would like to buy something of value now that could potentially keep up with inflation and intends on never selling it in their lifetime which could still be many decades (but they could sell it if they wanted to).  In such a case the asset could be entitled to a stepped-up basis at their death and their heirs will inherit it income tax free!  It would be a shame if the asset paid tons of taxable income instead of allowing the value to accrue to capital appreciation in such a case.

If the purpose is to give wealth to future generations in a decades long time frame, why in the world would they not invest the money in index funds?

I think this conversation has really condensed my reasoning for why I am not interested in gold. Except from the POV of a hobby, there is no purpose for gold investing that is not better served elsewhere.
Title: Re: Precious Metals
Post by: Bicycle_B on June 15, 2018, 05:29:11 PM
...Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold.

Here's a discussion explaining one calculation of how gold can increase portfolio returns. Gold here is compared to bonds as a complement to stocks, but an example is given where the return using gold is higher than an all-stock portfolio.

https://portfoliocharts.com/2016/01/25/how-to-build-a-portfolio-one-asset-at-a-time/
Title: Re: Precious Metals
Post by: maizeman on June 15, 2018, 05:41:24 PM
The removal of a fixed USD:gold exchange rate in the 1970s (and it's subsequent charge back to free market prices) coincided with a period of stagflation that produced terrible returns for both bonds and stocks. So right now if you include gold as an asset class in historical analyses it reduces failure rates (and/or allows higher withdrawal rates), but it's not clear that there is still a benefit to including it in future portfolios, since the USD cannot go off the gold standard again now that we're already not on it.

I think this conversation has really condensed my reasoning for why I am not interested in gold. Except from the POV of a hobby, there is no purpose for gold investing that is not better served elsewhere.

The one use case I can see for it would be fleeing across international borders in the event of a personal or national catastrophe or war (think getting out of nazi germany before world war II; or perhaps out of Venezuela today). You really could potentially carry several years salary in gold sewn into your clothing, and it'd be enough to help you start a new life when you got someplace safe. The risk of robbery would be non-trivial, but anything you left behind would be lost anyway, so you might as well try.

Short of that type of scenario, I agree with you, gold doesn't serve much purpose as a long term investment from my perspective.
Title: Re: Precious Metals
Post by: CheapScholar on June 15, 2018, 05:59:06 PM
I'll just say that I've purchased silver and gold over the years from APMEX and I've always been very happy.  I don't buy in high volume, I just like having some precious metal on hand.  And a lot of the coins I purchase are truly beautiful works of art.

I could make an argument that investing in coins is not all that bad.  For example, if you purchased a monster box of silver Eagles from APMEX (not much over spot silver) when silver was relatively low ($13-$15) and then hung on to them and watched them increase for the numismatic value, you could sell them off at a nice profit eventually.

I would never invest in coins/precious metals before doing all the tax advantaged things that we all do here at MMM.  But, after that, coin investing is not as foolish as some on here claim it to be if you have knowledge and invest conservatively.
Title: Re: Precious Metals
Post by: tralfamadorian on June 15, 2018, 06:10:36 PM
The one use case I can see for it would be fleeing across international borders in the event of a personal or national catastrophe or war (think getting out of nazi germany before world war II; or perhaps out of Venezuela today). You really could potentially carry several years salary in gold sewn into your clothing, and it'd be enough to help you start a new life when you got someplace safe. The risk of robbery would be non-trivial, but anything you left behind would be lost anyway, so you might as well try.

I actually had almost this exact situation in mind when I wrote one of my posts above but didn't articulate it. My spouse was friends with a lady who fled Havana during the revolution with significant wealth in jewelry sewn into her clothes. I can't imagine how terrifying that must have been.

However, I still think it would be much more effective use of time and funds to explore whether a second passport could be obtained easily (ie: through Irish or Italian heritage) and the purchase of cd's or bonds in euros or CHF.
Title: Re: Precious Metals
Post by: somers515 on June 15, 2018, 06:29:05 PM
We're looking to convert a small portion of our assets (~5%) into precious metals and to maintain that ratio going forward. We're in the lucky/hard earned position of this being a fairly decent sum. We've looked at dealers like Kitco, et al but really have no idea what the most efficient way to go about doing this is (minimize loss due to fees, shipping, etc.). Lots of marketing department driving advise floating around but hoping for neutral 3rd party advise from someone here with experience (or a pointer to such advise).

Thanks!

I've heard Kitco is reliable.  Also you can consider ishares Commodities Select (COMT) that has a .48% expense ratio and/or Vanguard Precious Metals and Mining fund (VGPMX) that has a .36% expense ratio.

Title: Re: Precious Metals
Post by: pecunia on June 16, 2018, 09:10:56 AM
I asked these guys about gold in the past.  I will paraphrase something simple that was explained to me.

It is not passive income.  It is not like an investment in a beat up old house that you can rent out and get your money back.  What's it do?  It just sits in a drawer or a bank vault or something.

The guys explained that maybe, it will allow you to hold your investment against inflation.  That's a maybe.  If people fall a little out of love with gold, it will fall in value.  Let's say one of these sharp tech guys that answer these posts figure out a way to get iit from seawater.  There will be more gold.  It will fall in value.  Let's say there is a big gold strike (finding) in Iceland.  It will be mined.  The supply will increase.  It will fall in value.

What if the economy really takes a dump?  I'm talking catfood city dump.  Nobody has any money.  Old man depression has returned from his journey to other lands.  OK with the old man around, nobody has any money.  Do you think they want to spend their money on gold?  They will spend their money on food.  It will fall in value.

Why put your money on something where the about the best thing it can do is break even?  It was explained to me that putting the money on decent equities such as Index funds will keep the value of that money and maybe make you about 5% per annum extra. 

It was explained that gold has few industrial uses.  It is not like iron, copper or silver.  These other metals have added value because they perform useful tasks for people.  Gold basically just looks pretty.  You don't use it to grow food or for your housing. 

Thanks for the reminder about precious metals.
Title: Re: Precious Metals
Post by: Radagast on June 16, 2018, 10:57:41 PM
I never trust the arguments of people who post charts that use 1980 CPI methodology.

Once I entered a a whole bunch of assets I was curious about (US, international, small, value, long bonds short bonds, municipal bonds etc I entered about 20 things) into Portfolio Visualizer and made efficient frontiers for various dates. The funny thing was that at no point was gold on any of the efficient frontiers even those starting in the late 1990s and the 2000s. Which means there has never been a meaningful length of time where gold was worth investing in in the US in the past 100 years except a handful of years where the government dictated the price at a below market rate and then only in pointless slips of paper, and then suddenly changed their minds.

But, it can reduce volatility. For as long as I have observed it it has been uncorrelated to stocks and bonds and also for the decades before I observed it. Maybe it can serve a purpose that hasn't showed up in the US recently. I don't see much difference between it and a long term bond that is volatile in price but with a return similar to expected inflation.

I see lots of people say "but if I actually need gold to save me I'd be better off with guns beans and toilet paper" but I have also seen this argument about bonds, international stocks, and stocks not in the S&P500. It should be a designated investing fallacy, the "Zombie Apocolypse Fallacy" which is a false argument that diversification is pointless. Apart from speculative price movement, another use might be that gold would not help you if civilization ended forever, but it could help you out of a temporary lapse in civilization either by you moving to a civilized place or civilization rebuilding around you. For example if your nation lost a war and its stocks and bonds became worthless, at the end you could sell your gold to finance rebuilding which would initially help out your home and eventually make you wealthy.

But the most likely result is that gold will make you less wealthy.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 17, 2018, 12:29:54 AM
But, it can reduce volatility. For as long as I have observed it it has been uncorrelated to stocks and bonds and also for the decades before I observed it. Maybe it can serve a purpose that hasn't showed up in the US recently. I don't see much difference between it and a long term bond that is volatile in price but with a return similar to expected inflation.

This is it's value, noncoorlation (or SHTF bribe a border guard).  During withdrawal phase, particularly when sequence risks are peaked, a small allocation of gold can really make a difference in a very bad case scenario.  Your point of owning a closed end treasury is valid, but remember the loss of principle value to inflation.  Gold doesn't pay interest, but tends to overcome inflation.  In theory, each has a place.  Make no mistake, holding gold WILL lower returns, but it's a trade off. I'm looking at 8-10% in my portfolio by the time I start withdrawals.  Only a very small portion will be physical due to the costs associated with that, but it will be enough to bribe a border guard :)

I'm fine with being less wealthy in good situations if that means a decreased risk of running out of money in bad ones.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on June 17, 2018, 04:07:06 AM
@MilesTeg - You might also check out Provident Metals.  I found their costs to be lower than buying from eBay and they also seemed to have well thought out procedures.

You might consider a mix of physical gold and one of the gold ETFs.  That way you have the gold for an emergency, but also in a form that's easier to sell for portfolio rebalancing.

When looking at gold, make sure you look at 1975-2017 rather than including the extraordinary one-time events of 1972-1974.  The returns of gold doubles when you include those extra years, even though those events are unlikely to happen again.
Title: Re: Precious Metals
Post by: Timodeus on June 18, 2018, 01:57:52 PM
I'll add my voice for Provident Metals. I've bought with them for a few years now, their prices are pretty low and tend to be closer to spot than most. I tend to stay away from ETFs due to fees and to the fact that you can only exchange it with one currency. I store most with GoldMoney.com which sounds a lot like the German firm mentioned above. It is physical gold in a vault of your choosing around the world. The gold is legally owned by you (not an ETF) You can also take physical delivery in a variety of sizes if needed. They also offer some interesting function regarding payments, as in you can pay people through GoldMoney (assuming they have an account) or request a debit card with a currency of your choosing which you can deposit cash from gold sales onto.

Regarding the foam on this thread regarding the value of gold as an investment. With such heated and passionate arguments from both sides, it kind of makes the case for me to buy a little. If things go well and gold becomes irrelevant then I'm only down a little. If our fiat currency does eventually do what all fiat currencies in history have done (inflate away) then I'll be glad I kept at least a small stash in the little yellow metal.
Title: Re: Precious Metals
Post by: toganet on June 18, 2018, 06:40:13 PM
Regarding the foam on this thread regarding the value of gold as an investment. With such heated and passionate arguments from both sides, it kind of makes the case for me to buy a little. If things go well and gold becomes irrelevant then I'm only down a little. If our fiat currency does eventually do what all fiat currencies in history have done (inflate away) then I'll be glad I kept at least a small stash in the little yellow metal.

This is sort of why I have a small portion in precious metals as well, in an ETF and in physical metals.  Whether I think they are worth something in an extreme situation isn't the issue -- it's whether someone else does.  And based on my observations here and elsewhere, there will always be a buyer for gold.  I'll take US dollars, bitcoin, or beans & bullets, depending on the circumstances.
Title: Re: Precious Metals
Post by: Xlar on June 19, 2018, 09:39:38 AM
...Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold.

Here's a discussion explaining one calculation of how gold can increase portfolio returns. Gold here is compared to bonds as a complement to stocks, but an example is given where the return using gold is higher than an all-stock portfolio.

https://portfoliocharts.com/2016/01/25/how-to-build-a-portfolio-one-asset-at-a-time/

Note that all of these charts start in 1972. This artificially increases the return of Au making it seem to be better than it is. Here is a really great thread on the hazards of backtesting with Au: https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/ (https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/)

As you can see in the early 70s there is a crossover with stock prices. This seems to be a coincidental timing of stocks decreasing at the same time that the US stopped fixing the price of Au. This gives the impression that Au is anti-correlated with the stock market similar to bonds. BUT this is pretty much the only time that occurs. Due to the short historical length the data leads to missleading conclusions. The event that caused the anti-correlation with the stock market (the US no longer fixing the price of Au) is not a repeatable event that will happen every time that the stock market crashes.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 19, 2018, 04:06:55 PM
...Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold.

Here's a discussion explaining one calculation of how gold can increase portfolio returns. Gold here is compared to bonds as a complement to stocks, but an example is given where the return using gold is higher than an all-stock portfolio.

https://portfoliocharts.com/2016/01/25/how-to-build-a-portfolio-one-asset-at-a-time/

Note that all of these charts start in 1972. This artificially increases the return of Au making it seem to be better than it is. Here is a really great thread on the hazards of backtesting with Au: https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/ (https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/)

As you can see in the early 70s there is a crossover with stock prices. This seems to be a coincidental timing of stocks decreasing at the same time that the US stopped fixing the price of Au. This gives the impression that Au is anti-correlated with the stock market similar to bonds. BUT this is pretty much the only time that occurs. Due to the short historical length the data leads to missleading conclusions. The event that caused the anti-correlation with the stock market (the US no longer fixing the price of Au) is not a repeatable event that will happen every time that the stock market crashes.

This is wrong.  Gold values were horrible starting in the early/mid-1980's (exception of 1987 area, what happened there?) and 1990's.  Then increased valuation again throughout the 2000's.  Go to portfolio charts (https://portfoliocharts.com/) and look at a heat map (https://portfoliocharts.com/portfolio/heat-map/) of 100% gold. 

I'm sick of this argument of the "one off event" coming off the gold standard.  Of course this is true and had an impact.  However, gold is still a non-correlator to equities!  I could make the same argument with bonds.  "Hey, did you know 10 year bond yields spiked to above 13% in the early 1980's!  That means treasuries wont return today what they did back then and that fact artificially changes historical results"  No...Shit...Sherlock...

Yet for some reason people still accept treasuries as a safe haven/non-correlator for a portion of portfolio.
Title: Re: Precious Metals
Post by: Xlar on June 19, 2018, 05:16:04 PM
...Legend has it that this can increase risk (e.g. volatility) adjusted returns for the whole portfolio.

Do you have a source for that? I've seen data that supports the idea that a modest percentage of bonds can increase the overall performance of a 100% stock portfolio but I have not seen the same for gold.

Here's a discussion explaining one calculation of how gold can increase portfolio returns. Gold here is compared to bonds as a complement to stocks, but an example is given where the return using gold is higher than an all-stock portfolio.

https://portfoliocharts.com/2016/01/25/how-to-build-a-portfolio-one-asset-at-a-time/

Note that all of these charts start in 1972. This artificially increases the return of Au making it seem to be better than it is. Here is a really great thread on the hazards of backtesting with Au: https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/ (https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/)

As you can see in the early 70s there is a crossover with stock prices. This seems to be a coincidental timing of stocks decreasing at the same time that the US stopped fixing the price of Au. This gives the impression that Au is anti-correlated with the stock market similar to bonds. BUT this is pretty much the only time that occurs. Due to the short historical length the data leads to missleading conclusions. The event that caused the anti-correlation with the stock market (the US no longer fixing the price of Au) is not a repeatable event that will happen every time that the stock market crashes.

This is wrong.  Gold values were horrible starting in the early/mid-1980's (exception of 1987 area, what happened there?) and 1990's.  Then increased valuation again throughout the 2000's.  Go to portfolio charts (https://portfoliocharts.com/) and look at a heat map (https://portfoliocharts.com/portfolio/heat-map/) of 100% gold. 

I'm sick of this argument of the "one off event" coming off the gold standard.  Of course this is true and had an impact.  However, gold is still a non-correlator to equities!  I could make the same argument with bonds.  "Hey, did you know 10 year bond yields spiked to above 13% in the early 1980's!  That means treasuries wont return today what they did back then and that fact artificially changes historical results"  No...Shit...Sherlock...

Yet for some reason people still accept treasuries as a safe haven/non-correlator for a portion of portfolio.

So Au was terrible until the 2000s? So now we remove 30 years as bad data (1970-2000) but now say that the last 18 are great and support the argument to buy Au? Using 2000 onwards seems like a very small dataset...

But lets look at the heat map for the 2000 onwards. In 2000 the stock market crashes. The value of Au also goes down. Au recovers in 2002 while stocks take until 2003. Bonds are positive in 2000, 2001, 2002, and 2003.

Au then avoids the crash in 2008. This seems to be the only time? Note that bonds are positive in 2008 as well. Is one positive event really worth basing your portfolio off of?

Doesn't this data show that bonds should be what you use to reduce volatility even if we just look at such a small dataset? From 2000-present Au follows stocks for 1 crash and doesn't for the other crash.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 19, 2018, 08:04:49 PM
I didn't remove that data, I simply pointed out it backs up the assumption gold valuation  is uncorrelated to equities.  You stated this wasn't the case, and it is.
This seems to be a coincidental timing of stocks decreasing at the same time that the US stopped fixing the price of Au. This gives the impression that Au is anti-correlated with the stock market similar to bonds. BUT this is pretty much the only time that occurs. Due to the short historical length the data leads to missleading conclusions.

I don't think anyone "should" own gold, simply stating that it is uncorrelated to other asset classes.  This a very good thing when you are drawing down from a stache. Bonds tend to also be uncorrelated to stocks, but the 4% rule close calls and failures in the 1960's are related to the fact there was a period of poor treasury performance(due to high inflationary pressures) at the same time there was also poor equity performance.  This is VERY bad for someone drawing from their stache, particularly if treasuries were supposed to be the safety asset. Right now Treasuries are at near historically low yield and CAPE is very high.  This is the type of scenario we saw in the 1960's, just say'en.  I can't predict the future, but a small hedge of gold helps me sleep at night, so it's a good asset class for me, even though I know it will lower my long term returns.  IOW, I understand why I want to own it. 
Title: Re: Precious Metals
Post by: maizeman on June 19, 2018, 08:48:15 PM
So I think you folks may be talking past each other a little.

Xlar said that if you exclude the use rise in gold prices from coming off of a fixed price during the 1970s stagflation, there isn't good evidence that gold is anti-correlated with the stock market.

Classical_Liberal, you're saying that gold is non-correlated with the stock market.

These two statements are not necessarily contradictory.
Title: Re: Precious Metals
Post by: Classical_Liberal on June 19, 2018, 08:54:34 PM
@maizeman

Thanks for the attempt at mediation :)  I think you are correct for the most part. 
Title: Re: Precious Metals
Post by: vand on January 21, 2019, 09:40:23 AM
Looks like I've finally found the PMs thread..

Just to add that I like PMs as an investment, but more so as a diversification tool and a hedge against paper assets (stocks & bonds). I think they are currently very undervalued by historical standards.

There are lots of myths and half-truths when it comes to discussing precious metals. I know I'm unlikely to be changing anyone's mind who is deeply anti-PM, but there are some good resources on youtube that helped me really learn more about gold. One channel I recommend is belangp's. Even using tools of modern portfolio theory he shows that holding some gold can be used improves a portfolio's risk-adjusted performance:

Here are a couple of his videos which I would like to put forward:

less volatility, superior returns - making the case for 20-25% gold allocation:
https://www.youtube.com/watch?v=K70aQh9ptpU


the only real asset that is negatively correlated with paper assets:
https://www.youtube.com/watch?v=6eUOSh5mxko

(note that myth that stocks & bonds are anti-correlated is only 50% true.. half of the time they move in tandem, half the time they move opposite).
Title: Re: Precious Metals
Post by: evme on January 21, 2019, 03:26:52 PM
I think they are currently very undervalued by historical standards.

What makes you think PMs are currently very undervalued? I'm not anti-PM, just curious why you think this.
Title: Re: Precious Metals
Post by: vand on January 21, 2019, 04:15:22 PM
I think they are currently very undervalued by historical standards.

What makes you think PMs are currently very undervalued? I'm not anti-PM, just curious why you think this.

There are a couple of ways you can value gold:

Dow/Gold ratio if viewing gold as a traditional asset
Gold vs Monetary base for those who still believe gold is a form of money

I tend to favour ratios. Commodities as an asset class have been through a fairly brutal bear market in the last 3-4 years, and PMs did not buck the trend here. I in fact, you can look at other ratios like the CRB/Dow ratio which has never been lower and conclude that commodities are at record low valuations.

Unfortunately I have found that when discussing precious metals they tends to polarize opinions in a way that other assets do not, because your opinion of them is intrinsically linked to notions of freedom, liberty, and belief systems. Some people regard them as ultimate long term store of wealth, others regard them as worthless shiny stuff.
Title: Re: Precious Metals
Post by: NewDay1 on January 21, 2019, 07:22:48 PM
What about buying a few coins at a reputable coin shop?  Are they to be avoided?
Title: Re: Precious Metals
Post by: tralfamadorian on January 21, 2019, 07:33:58 PM
What about buying a few coins at a reputable coin shop?  Are they to be avoided?

https://forum.mrmoneymustache.com/investor-alley/precious-metals/msg2040055/#msg2040055
Title: Re: Precious Metals
Post by: MustacheAndaHalf on January 21, 2019, 08:37:54 PM
There are a couple of ways you can value gold:
Dow/Gold ratio if viewing gold as a traditional asset
Why is that ratio valid?  Why does gold have to grow in proportion to stocks?

Using Portfolio visualizer's inflation adjusted returns for the past 30 years (1989-2018):
U.S. stock market: +7.1% / year (after inflation)
gold: +1.1% / year (after inflation)
Title: Re: Precious Metals
Post by: vand on January 22, 2019, 12:04:16 AM
There are a couple of ways you can value gold:
Dow/Gold ratio if viewing gold as a traditional asset
Why is that ratio valid?  Why does gold have to grow in proportion to stocks?

Using Portfolio visualizer's inflation adjusted returns for the past 30 years (1989-2018):
U.S. stock market: +7.1% / year (after inflation)
gold: +1.1% / year (after inflation)

Many investors use ratios to determine relative prices. We can look and see that gold is currently at the sort of similar valuations that it was in previous periods like 1929, mid-late 1960's, and early 2000s. Holding gold during these times would have seen a very good return in the subsequent 10 years (better than stocks).
Does that mean that the next 10 years will perform similarly? Not necessarily. There are no guarantees. Past performance is no guarantee of future returns. But we are using past performance as a guide for our expected returns. It's an educated guess, that's all.

Using 7% past return of the stocks market as a guide for expected future returns is flawed. Future expected returns are a function of current valuations. you have to determine how expensive stocks are (hint, they aren't cheap) and how that will impact the long term expected return.
 
Title: Re: Precious Metals
Post by: theolympians on January 22, 2019, 01:48:05 AM
OK, I'll jump in......A relative of mine purchased a bunch of gold coins after 2008. He no longer trusted the stock market.

With stocks/mutual funds/etfs you own shares of something. You can daily check the value of your portfolio. If they pay dividends, you can own more shares, increasing value. If you need money, you can sell a portion and transfer the funds into cash.

How do you get money out of gold? It sits there in the safe. I don't see it as money, no store I know of accepts it as currency. As a gold owner, and I need money, how do I turn the gold into US dollars? A coin shop???????

I am not completely against PM, people do seem to pay for them. I am just unclear as to the method.

Title: Re: Precious Metals
Post by: Classical_Liberal on January 22, 2019, 02:39:40 AM
I am just unclear as to the method.

https://www.apmex.com/sell-gold-sell-silver-overview

Edit:  I was being a dick
Title: Re: Precious Metals
Post by: vand on January 22, 2019, 02:41:07 AM
OK, I'll jump in......A relative of mine purchased a bunch of gold coins after 2008. He no longer trusted the stock market.

With stocks/mutual funds/etfs you own shares of something. You can daily check the value of your portfolio. If they pay dividends, you can own more shares, increasing value. If you need money, you can sell a portion and transfer the funds into cash.

How do you get money out of gold? It sits there in the safe. I don't see it as money, no store I know of accepts it as currency. As a gold owner, and I need money, how do I turn the gold into US dollars? A coin shop???????

I am not completely against PM, people do seem to pay for them. I am just unclear as to the method.

There is a presumption in this that your ultimate aim is to acquire more dollar wealth (or whatever your local currency is), but a part of gold's attraction is that it is a store of value outside of traditional currencies and so provides diversification and protection against the very worst case scenario, ie currency destruction like we are currently seeing in Venezuela, Argentina, Russia (are you so sure it can never happen in the US when you have a govt that continues to spend 4 dollars for every 3 dollars it takes it...?) Fiat currencies all die eventually. A 3% loss of purchasing power may be acceptable year on year, but when the currency dies it tends to accelerate towards the abyss. One old line that is often trotted out is "Put 10% in gold and hope it does badly."

OK, so much for doomster scenarios. Physical gold has high transaction cost and liquidity issues associated with it, that is true. Accumulating physical gold with the aim of trading it for more dollars at a later date is really not what gold is about.  However, from a portfolio balancing/investing point of view there are other options. You can buy the GLD etf for example, which is just as liquid as any equity. And/or you can invest in gold miners, which are a leveraged play on gold prices.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on January 22, 2019, 09:08:50 AM
There are a couple of ways you can value gold:
Dow/Gold ratio if viewing gold as a traditional asset
Why is that ratio valid?  Why does gold have to grow in proportion to stocks?

Using Portfolio visualizer's inflation adjusted returns for the past 30 years (1989-2018):
U.S. stock market: +7.1% / year (after inflation)
gold: +1.1% / year (after inflation)
Many investors use ratios to determine relative prices. We can look and see that gold is currently at the sort of similar valuations that it was in previous periods like 1929, mid-late 1960's, and early 2000s. Holding gold during these times would have seen a very good return in the subsequent 10 years (better than stocks).
Does that mean that the next 10 years will perform similarly? Not necessarily. There are no guarantees. Past performance is no guarantee of future returns. But we are using past performance as a guide for our expected returns. It's an educated guess, that's all.
Do you have a specific source for why gold and stocks should have a ratio?

Using 7% past return of the stocks market as a guide for expected future returns is flawed. Future expected returns are a function of current valuations. you have to determine how expensive stocks are (hint, they aren't cheap) and how that will impact the long term expected return.
I didn't say anything about future returns.

But since you bring it up, future stock returns mostly ignore valuations.  According to a Vanguard white paper, there's only a 0.40 correlation between current P/E values and stock values 10-20 years from now.
https://personal.vanguard.com/pdf/s338.pdf
Title: Re: Precious Metals
Post by: vand on January 22, 2019, 03:04:13 PM
There are a couple of ways you can value gold:
Dow/Gold ratio if viewing gold as a traditional asset
Why is that ratio valid?  Why does gold have to grow in proportion to stocks?

Using Portfolio visualizer's inflation adjusted returns for the past 30 years (1989-2018):
U.S. stock market: +7.1% / year (after inflation)
gold: +1.1% / year (after inflation)
Many investors use ratios to determine relative prices. We can look and see that gold is currently at the sort of similar valuations that it was in previous periods like 1929, mid-late 1960's, and early 2000s. Holding gold during these times would have seen a very good return in the subsequent 10 years (better than stocks).
Does that mean that the next 10 years will perform similarly? Not necessarily. There are no guarantees. Past performance is no guarantee of future returns. But we are using past performance as a guide for our expected returns. It's an educated guess, that's all.
Do you have a specific source for why gold and stocks should have a ratio?

Using 7% past return of the stocks market as a guide for expected future returns is flawed. Future expected returns are a function of current valuations. you have to determine how expensive stocks are (hint, they aren't cheap) and how that will impact the long term expected return.
I didn't say anything about future returns.

But since you bring it up, future stock returns mostly ignore valuations.  According to a Vanguard white paper, there's only a 0.40 correlation between current P/E values and stock values 10-20 years from now.
https://personal.vanguard.com/pdf/s338.pdf

Its entirely reasonable to expect a long term relationship. Gold is extremely rare; it takes a certain amount amount of economic energy to even extract it out of the ground.
Title: Re: Precious Metals
Post by: Radagast on January 22, 2019, 08:24:03 PM
I know its already been posted in this thread, but I did an in depth look at the subject here:
https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/
I included a comparison of gold against other real assets (CPI-U), its cost to mine, and a link to a zerohedge article about its real price history since the year 1200. Right now gold is about 5 consumer price indexes, which is well above its average since it was set free on the market. You can't use gold prices before 1974 because the government set their value by force, and thus not indicative of relative gold prices today.

All the gold miners have enough money that they are investing in capital projects that will lower their cost to produce in the future. Of course a global crises could send gold high in spite of that. But I see no reason to think it is an unusually good time to invest in gold.
Title: Re: Precious Metals
Post by: ChpBstrd on January 25, 2019, 01:17:15 PM
I would think TIPS would do better as an inflation hedge and volatility reducer. They are mathematically linked to inflation, pay interest, and are far less volatile than metals. Plus the buying, selling, and holding costs are astronomically lower, while liquidity is better. To me, the odds of a TIPS default are lower than the odds of people in India changing their wedding customs over a 15 year period, or of a new mining technology, or of the replacement of gold with cryptocurrency, or of a meaningless 50% drop in gold's price which is driven by speculation anyway.

In a Venezuela, Syria, or Nazi Germany situation, having a Swiss bank account with a few thousand in foreign currency and a passport would fly you out of the country over the heads of the people having their clothes patted down for coins or their homes ransacked by soldiers/rebels. The coin collector hobby shop will not be open. The "using gold to bribe border guard" scenario makes for good dramatic storytelling, but the many times more common scenario would be people with seed capital outside the failing country quietly using those funds to emigrate - often travelling first class on the way out and leaving behind those people who are attached to physical assets such as real estate or hard-to-safely-transport gold hoards (Also note how loss aversion to wasting physical assets can affect people's decisions to escape in time).

So if these are the goals the OP's question is kinda like what's the best way to make a suboptimal decision. I guess my answer is compare coin prices, negotiate, get a safe off of Craigslist rather than paying retail, and invest the savings in a Swiss bank account CD ladder.
Title: Re: Precious Metals
Post by: tralfamadorian on January 25, 2019, 03:22:08 PM
... invest the savings in a Swiss bank account CD ladder.

Not to jump on your post specifically but it made me think about what I've read concerning the difficulty for Americans to open a foreign bank account. I ran into this in a obtuse way when I was hearing about American slow travelers and thru hikers having issues opening up bank accounts in the countries they were staying in.

Evidently FBAR is a giant PITA for foreign banks and many responded by closing accounts owned by Americans and/or denying new accounts- even Americans working for foreign companies living in those countries and going to the branches in person. If that's happening, what chance do we as relatively small fry (compared to multi-million dollar deposit customers) have of successfully maintaining CD accounts outside the US?

Given the hurdles, I'm tempted to consider the real estate as a bonds equivalent approach given how much more simple it is to purchase.

Mostly a hypothetical concern at the moment but in the future I would like to diversify outside of US real estate and investments in US bank accounts and brokerages.

Thoughts?
Title: Re: Precious Metals
Post by: maizeman on January 25, 2019, 05:10:59 PM
In a Venezuela, Syria, or Nazi Germany situation, having a Swiss bank account with a few thousand in foreign currency and a passport would fly you out of the country over the heads of the people having their clothes patted down for coins or their homes ransacked by soldiers/rebels. The coin collector hobby shop will not be open. The "using gold to bribe border guard" scenario makes for good dramatic storytelling, but the many times more common scenario would be people with seed capital outside the failing country quietly using those funds to emigrate - often travelling first class on the way out and leaving behind those people who are attached to physical assets such as real estate or hard-to-safely-transport gold hoards (Also note how loss aversion to wasting physical assets can affect people's decisions to escape in time).

I agree with this reasoning. At the same time, the issue tralfamadorian points out with the trend towards increased difficulty in opening foreign bank accounts for americans is definitely real.* That's not an argument _for_ buying gold. I'm just not sure what an effective and generally accessible strategy is right now if you're worried about the nation either collapsing (Venezuela), erupting into civil war (Syria), or turning into a totalitarian nightmare (Nazi Germany).

*Although anecdotally it seems to be worse in the EU than most other parts of the world.
Title: Re: Precious Metals
Post by: WhiteTrashCash on January 25, 2019, 05:25:46 PM
If you are going to put money into gold and silver, you may as well just buy some cryptocurrency. It's basically the same thing. The value of it comes from expecting someone else to want to buy it from you. There is no intrinsic value to any of it. Ask a pawn shop owner if you don't believe me.
Title: Re: Precious Metals
Post by: Classical_Liberal on January 25, 2019, 06:34:13 PM
If you are going to put money into gold and silver, you may as well just buy some cryptocurrency. It's basically the same thing. The value of it comes from expecting someone else to want to buy it from you.

Except that precious metals have a 10,000+ year human history as a store of value.  Crypto has a very poor track record as a store of value over only a decade. 

Remember, all stores of value, no matter if we are talking real estate, PM, equities, bonds, etc... They are all merely a social contract between individual humans or human social organizations. Unless, of course, they can DIRECTLY provide for your needs without additional input or trade (ie permaculture garden).  The stronger the social contract, the better chance that it holds value in the future.  There is a reason people still raid the tombs of ancient royalty, their store of value in the form of art and gold still have value today.

For those of us who have some gold in our portfolio, the fact that it does not provide returns is actually a feature of the investment, not a failing of it.
Title: Re: Precious Metals
Post by: Classical_Liberal on January 25, 2019, 11:26:05 PM
The "using gold to bribe border guard" scenario makes for good dramatic storytelling, but the many times more common scenario would be people with seed capital outside the failing country quietly using those funds to emigrate - often travelling first class on the way out and leaving behind those people who are attached to physical assets such as real estate or hard-to-safely-transport gold hoards (Also note how loss aversion to wasting physical assets can affect people's decisions to escape in time).

Since this was based on my comment, I will respond by saying that I mostly agree with what @maizeman and @tralfamadorian wrote.  I'll add, that although it is possible to set up accounts in other countries with less difficulties, they tend to be the countries which are not inherently stable themselves.  Unless someone is very wealthy, placing seed money in multiple countries is not realistic. 

If one was smart enough to get out (this is probably more difficult to realize than we think, look at history) before a "bribe the boarder guard" scenario is  needed and one can just take a flight. Its very easy to hide a small amount of "seed money" gold in a personal item, remember it melts and jewelry is made of it.  No one is suggesting an entire FIRE stash worth.  Just small five digits as a chance for a fresh start in very low probability emergencies. 

I'm going to hold gold in my portfolio no matter what, most of it is in low cost ETF's. Plenty of people are willing to pay thousands a year on health insurance for the 1 in 100 chance they get very sick that year.  I'm willing to pay $20 a year in holding costs and a few hundred in one time transitional costs for the 1 in 1000 chance SHTF in my home country during my lifetime.  Not so unreasonable.
Title: Re: Precious Metals
Post by: vand on January 26, 2019, 03:08:34 AM
I know its already been posted in this thread, but I did an in depth look at the subject here:
https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/
I included a comparison of gold against other real assets (CPI-U), its cost to mine, and a link to a zerohedge article about its real price history since the year 1200. Right now gold is about 5 consumer price indexes, which is well above its average since it was set free on the market. You can't use gold prices before 1974 because the government set their value by force, and thus not indicative of relative gold prices today.

All the gold miners have enough money that they are investing in capital projects that will lower their cost to produce in the future. Of course a global crises could send gold high in spite of that. But I see no reason to think it is an unusually good time to invest in gold.

I disagree with your value gold (and thus your conclusion), but differing opinions are what make a market. 

In any case, I think Platinum and silver are the standout buys in the PM sector right now, much more so than gold.

I totally get why there is little or no enthusiasm for PMs amongst most investors. They have been through a multi-year bear market while paper assets have moved higher since the PM peak in 2011. You would have improved your wealth far more by being in stocks and bonds in this time, that is undeniable.

As I said, I don't really expect to change anyone's mind. But all markets are cyclical. The only thing that is really going to change sentiment is when there is proof in the pudding of what PM investors are saying and PMs actually start to move higher against other asset classes, and then you will find that the casual investor will be tripping over themselves with reasons to be in that sector instead of others.
Title: Re: Precious Metals
Post by: vand on January 26, 2019, 03:15:11 AM
There is no intrinsic value to any of it.

LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist. The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on January 26, 2019, 05:36:37 AM
I'm going to hold gold in my portfolio no matter what, most of it is in low cost ETF's. Plenty of people are willing to pay thousands a year on health insurance for the 1 in 100 chance they get very sick that year.  I'm willing to pay $20 a year in holding costs and a few hundred in one time transitional costs for the 1 in 1000 chance SHTF in my home country during my lifetime.  Not so unreasonable.
It's reasonable if gold is the only choice available in this scenario.  But in what scenario would an equities all world ETF be almost worthless but a gold ETF still be valuable?
Title: Re: Precious Metals
Post by: MustacheAndaHalf on January 26, 2019, 05:41:38 AM
There is no intrinsic value to any of it.
LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist.
Your argument seems to hinge on using CAPITAL LETTERS, rather than logic.  Steel is valuable in making buildings and vehicles.  How does that have any relevance to the value of gold?  You're over generalizing, and haven't established a link between the two except in naming.

The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.
Gold is a soft metal, making it a poor choice for holding up a bridge.  I happen to own rechargeable batteries, which might surprise you.  They are made from RARE earths.
Title: Re: Precious Metals
Post by: maizeman on January 26, 2019, 07:06:28 AM
There is no intrinsic value to any of it.

LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist. The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.

I am certainly a below average economist as I switched majors pretty early on, but even I made it to the lecture where they explain that prices are set by the interaction of supply AND demand.

If you were right and all that mattered was rarity, osmium, which is only 1/2 as common as gold in earth's crust would sell for more than the price of gold, yet osmium currently sells for $400/oz and while gold -- which is only half as rare --  is selling for more than 3x as much as $1,300/oz. But what about tellurium? Only 3% as common as gold (33x rarer). Surely that'll be more valuable than gold, after all it's so much rarer... nope, tellurium sells for about $50 a kilogram right now, or $1.40/oz. 33x smaller supply, but barely more than 1/100th the price.

Okay, maybe pricing is just broken for elements less common than gold, what about palladium? 2x as common as gold in earth's crust. It's a lot less rare so it should be worth a lot less than gold, right? No, the current price I could find for palladium was $1,371/oz, which $65 more per ounce than the, rarer, gold.
Title: Re: Precious Metals
Post by: vand on January 26, 2019, 12:10:55 PM
There is no intrinsic value to any of it.

LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist. The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.

I am certainly a below average economist as I switched majors pretty early on, but even I made it to the lecture where they explain that prices are set by the interaction of supply AND demand.

If you were right and all that mattered was rarity, osmium, which is only 1/2 as common as gold in earth's crust would sell for more than the price of gold, yet osmium currently sells for $400/oz and while gold -- which is only half as rare --  is selling for more than 3x as much as $1,300/oz. But what about tellurium? Only 3% as common as gold (33x rarer). Surely that'll be more valuable than gold, after all it's so much rarer... nope, tellurium sells for about $50 a kilogram right now, or $1.40/oz. 33x smaller supply, but barely more than 1/100th the price.

Okay, maybe pricing is just broken for elements less common than gold, what about palladium? 2x as common as gold in earth's crust. It's a lot less rare so it should be worth a lot less than gold, right? No, the current price I could find for palladium was $1,371/oz, which $65 more per ounce than the, rarer, gold.

Nice straw man you just made there
Title: Re: Precious Metals
Post by: vand on January 26, 2019, 12:12:57 PM
There is no intrinsic value to any of it.
LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist.
Your argument seems to hinge on using CAPITAL LETTERS, rather than logic.  Steel is valuable in making buildings and vehicles.  How does that have any relevance to the value of gold?  You're over generalizing, and haven't established a link between the two except in naming.

The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.
Gold is a soft metal, making it a poor choice for holding up a bridge.  I happen to own rechargeable batteries, which might surprise you.  They are made from RARE earths.

Gold has excellent ductile and malleability, and makes for outstanding electrical wiring. Platinum could easily play a role in bridge construction.  You get the point.
Title: Re: Precious Metals
Post by: maizeman on January 26, 2019, 12:15:31 PM
There is no intrinsic value to any of it.

LOL. The clue is in the name. Precious metals are METALS. They share the common physical characteristics of other metals that are found in the natural world. The whole of modern civilisation has been built upon METALS. Try imagining a world where no metals exist. The clue to why they are not used to build bridges, offices, bus shelters or pogo sticks is in the first part of their name - they are RARE. As any below average economist will tell you, when supply is low price is high.

I am certainly a below average economist as I switched majors pretty early on, but even I made it to the lecture where they explain that prices are set by the interaction of supply AND demand.

If you were right and all that mattered was rarity, osmium, which is only 1/2 as common as gold in earth's crust would sell for more than the price of gold, yet osmium currently sells for $400/oz and while gold -- which is only half as rare --  is selling for more than 3x as much as $1,300/oz. But what about tellurium? Only 3% as common as gold (33x rarer). Surely that'll be more valuable than gold, after all it's so much rarer... nope, tellurium sells for about $50 a kilogram right now, or $1.40/oz. 33x smaller supply, but barely more than 1/100th the price.

Okay, maybe pricing is just broken for elements less common than gold, what about palladium? 2x as common as gold in earth's crust. It's a lot less rare so it should be worth a lot less than gold, right? No, the current price I could find for palladium was $1,371/oz, which $65 more per ounce than the, rarer, gold.

Nice straw man you just made there

Hey, I'm going off the words you wrote. You're always welcome to retract (or revise) your statement if you no longer believe it to be correct or believe it doesn't correctly convey your actual position.
Title: Re: Precious Metals
Post by: Classical_Liberal on January 26, 2019, 03:21:41 PM
I'm going to hold gold in my portfolio no matter what, most of it is in low cost ETF's. Plenty of people are willing to pay thousands a year on health insurance for the 1 in 100 chance they get very sick that year.  I'm willing to pay $20 a year in holding costs and a few hundred in one time transitional costs for the 1 in 1000 chance SHTF in my home country during my lifetime.  Not so unreasonable.
It's reasonable if gold is the only choice available in this scenario.  But in what scenario would an equities all world ETF be almost worthless but a gold ETF still be valuable?

I dont expect the ETF to be available, I expect the physical to significantly add to my chances of leaving "bad place" and hopefully have a little left over to restart at "new place",  while I try to iron out a way to retrieve whatever other valuables (like ETFs) that still hold value.

With ETF's holding gold is about the same cost as a niche index fund (free trades with vanguard too).  So, there is only additional cost in the physical.
Title: Re: Precious Metals
Post by: Radagast on January 29, 2019, 10:08:24 PM
I know its already been posted in this thread, but I did an in depth look at the subject here:
https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/
I included a comparison of gold against other real assets (CPI-U), its cost to mine, and a link to a zerohedge article about its real price history since the year 1200. Right now gold is about 5 consumer price indexes, which is well above its average since it was set free on the market. You can't use gold prices before 1974 because the government set their value by force, and thus not indicative of relative gold prices today.

All the gold miners have enough money that they are investing in capital projects that will lower their cost to produce in the future. Of course a global crises could send gold high in spite of that. But I see no reason to think it is an unusually good time to invest in gold.

I disagree with your value gold (and thus your conclusion), but differing opinions are what make a market. 

In any case, I think Platinum and silver are the standout buys in the PM sector right now, much more so than gold.

I totally get why there is little or no enthusiasm for PMs amongst most investors. They have been through a multi-year bear market while paper assets have moved higher since the PM peak in 2011. You would have improved your wealth far more by being in stocks and bonds in this time, that is undeniable.

As I said, I don't really expect to change anyone's mind. But all markets are cyclical. The only thing that is really going to change sentiment is when there is proof in the pudding of what PM investors are saying and PMs actually start to move higher against other asset classes, and then you will find that the casual investor will be tripping over themselves with reasons to be in that sector instead of others.
Can you be specific on which part you disagree with?
Price of gold right now?
CPI-U?
Publicly reported cost to mine each ounce?
Average price of gold since 1974?
That the real price of gold is well above its post 1974 average right now (which follows from the above)?
The price history of gold in the zerohedge article?
That the price of gold should be indexed against real prices rather than an exponentially growing asset class?
Is BRK.B or GLD a paper asset? Which one, neither, or both?
Title: Re: Precious Metals
Post by: vand on January 30, 2019, 04:47:18 AM
I know its already been posted in this thread, but I did an in depth look at the subject here:
https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/
I included a comparison of gold against other real assets (CPI-U), its cost to mine, and a link to a zerohedge article about its real price history since the year 1200. Right now gold is about 5 consumer price indexes, which is well above its average since it was set free on the market. You can't use gold prices before 1974 because the government set their value by force, and thus not indicative of relative gold prices today.

All the gold miners have enough money that they are investing in capital projects that will lower their cost to produce in the future. Of course a global crises could send gold high in spite of that. But I see no reason to think it is an unusually good time to invest in gold.

I disagree with your value gold (and thus your conclusion), but differing opinions are what make a market. 

In any case, I think Platinum and silver are the standout buys in the PM sector right now, much more so than gold.

I totally get why there is little or no enthusiasm for PMs amongst most investors. They have been through a multi-year bear market while paper assets have moved higher since the PM peak in 2011. You would have improved your wealth far more by being in stocks and bonds in this time, that is undeniable.

As I said, I don't really expect to change anyone's mind. But all markets are cyclical. The only thing that is really going to change sentiment is when there is proof in the pudding of what PM investors are saying and PMs actually start to move higher against other asset classes, and then you will find that the casual investor will be tripping over themselves with reasons to be in that sector instead of others.
Can you be specific on which part you disagree with?
Price of gold right now?
CPI-U?
Publicly reported cost to mine each ounce?
Average price of gold since 1974?
That the real price of gold is well above its post 1974 average right now (which follows from the above)?
The price history of gold in the zerohedge article?
That the price of gold should be indexed against real prices rather than an exponentially growing asset class?
Is BRK.B or GLD a paper asset? Which one, neither, or both?

Price of gold right now?
Nope.

CPI-U?
Yep. Gold is a form of non-dilutable money (some argue the purest form of money). It's not a a yoghurt in your basket of CPI. Measuring it by CPI is to misunderstand gold. Measure it against it currency creation, not consumable goods prices.

Publicly reported cost to mine each ounce?
Yep. If gold is so cheap to mine and all these miners are making a 100%+ margin on each ounce, then why have their share prices lost 90% in the last 6 years?  If getting gold out of the ground and selling it was that easy they should be able to buy back half their shares and instantly deliver spectacular gain to their shareholders.

Average price of gold since 1974?

Yep. Gold has history before 1974, even if it was artificially pegged for many years. Anyway, gold has risen by from $129 to $1315 since 1974, which is 7% nominal growth, well ahead of the overall pace of consumer inflation over 35 years.

That the real price of gold is well above its post 1974 average right now (which follows from the above)?
See above.

The price history of gold in the zerohedge article?
I tend to say away from ZH. Too much perma bear food.

That the price of gold should be indexed against real prices rather than an exponentially growing asset class?

Is BRK.B or GLD a paper asset? Which one, neither, or both?
Is that just rhetorical? actually, don't bother...
Title: Re: Precious Metals
Post by: waltworks on January 30, 2019, 02:30:30 PM
Yep. Gold has history before 1974, even if it was artificially pegged for many years. Anyway, gold has risen by from $129 to $1315 since 1974, which is 7% nominal growth, well ahead of the overall pace of consumer inflation over 35 years.

Actually that is in the ballpark of 4.5%, not 7%. 7% would put gold at about $5300/oz. Inflation over that period was about 3% (with some huge swings) so it did slightly beat inflation.

Stock market returns over the same period were close to 11% nominal (dividends reinvested). Your $129 would be $12,600 or so, or about 10 times what you'd have if you held gold over that time period.

-W
Title: Re: Precious Metals
Post by: vand on January 31, 2019, 12:22:14 AM
Let's both of us get our maths right...  100 / 124 * 1315 = 1060, so a 960% gain, which to the 45th root is  1.054,  ie about 5.4%.
Not as good as stocks over this timeframe (but then again what else has).

And that has been gold’s role; to preserve wealth, more so than to build it. Preserving wealth is a perfectly desirable function of any portfolio constituent, wouldn’t you say?   It has fulfilled this role through 5,000 years of recorded human history and as demonstrated has readily done so since 1974. Stocks have a 200 year history of building wealth in local currency. But those who have studied monetary history know that currencies don’t last forever. That likely means that one day the dollar will not exist, so if you held all your wealth in dollars at that time then you wealth goes to zero also. It might not happen in our lifetimes... but can you really be very sure of that? You are literally staking your life’s earnings on that assumption. The petrodollar system is already very old and not fit for purpose.

BTW, I use USD denomination even though I'm a UK based investor, where the difference in gold vs stock performance is much closer. In fact, of the 200-odd local currencies, gold is pushing new highs in around 70 of them, which strengthens the claim of it being a long term store of value outside of local currencies. This BB is US-based and most investors here look at things through the lense of the USD which itself is a very filtered view of the world. As I say, history suggests that one day the USD will no longer be the currency in that is in the ascendancy.
Title: Re: Precious Metals
Post by: waltworks on January 31, 2019, 07:16:39 AM
Why does owning stocks imply you own dollars? I own very few dollars, but a lot of *shares* in companies that make stuff/transport stuff/sell stuff/invent stuff. I'm no more worried about hyperinflation or the dollar ceasing to exist than I am about a giant meteor or zombies.

Yeah, I goofed and used 1964 in that calculation, thanks for catching that.

-W
Title: Re: Precious Metals
Post by: trollwithamustache on January 31, 2019, 07:43:35 AM
well, OP asked about the transaction details and not if it was a good idea.

Call around to some independent dealers, assume you are paying paper cash, and see what wiggle room there is. Real coin/bullion dealers, not pawn shops and not the "We buy gold" people who just want to low ball offer on your jewelry. Everyone knows they are completing with Kitco and ampex.  One of the things that fascinates me about precious metals is how much it is still a face to face / paper (real!) cash for physical gold. if the dealer wants to get the deal done, you being a real person walking into his store with real cash can be to your advantage. conversely, he may think he has the advantage if he doesn't need to get the deal done.  So, ampex is the fastest. A better deal will take time, but may be a lot of fun because there are a ton of entertaining characters in this gold game.

note if privacy is a goal, you would spread this across a series of purchases all just under 10k. You would not be structuring the transaction of course, just a series of independent decisions to buy separated by weeks or months.
Title: Re: Precious Metals
Post by: maizeman on January 31, 2019, 07:53:12 AM
note if privacy is a goal, you would spread this across a series of purchases all just under 10k. You would not be structuring the transaction of course, just a series of independent decisions to buy separated by weeks or months.

OP, don't do this. It's not worth the risk.

One transaction above 10k triggers reporting requirements and filling out an extra form. Multiple transactions below 10k can end up with your bank account seized via civil asset forfeiture and having to sue the government to get your own money back with the burden of proof being on you to prove that you're innocent, rather than them having to prove that you are guilty.

https://whotv.com/2014/10/29/irs-seizes-iowa-restaurants-money-despite-not-doing-anything-wrong-case-gets-national-attention/
(She ultimately got her money back, but it took months, lots of legal bills, and nationwide press and public opinion pressure.)
Title: Re: Precious Metals
Post by: Car Jack on January 31, 2019, 08:33:08 AM
Is BRK.B or GLD a paper asset? Which one, neither, or both?

What's it cost to sell $100k in BRK/B?  Answer: $4.95 at Schwab.  $100k of physical gold?  A hell of a lot more than $4.95 with a hell of a lot more risk.

Quote
Yep. Gold has history before 1974, even if it was artificially pegged for many years. Anyway, gold has risen by from $129 to $1315 since 1974, which is 7% nominal growth, well ahead of the overall pace of consumer inflation over 35 years.

What about keys of Heroine?  It existed before 1974.  We could probably find a price history.  Why not?  Not legal to own?  Ok, so how's that any different than gold?  Yah,  I'm being factious just to point out the fact that regardless of price, in the US, we couldn't invest in gold before '75.  Heck, if I were to get in my Delorean and set the date back to 1973, when I was working at a Burger Chef and always looking through the change drawer for silver coins....which I found every day....I'd probably get 5 jobs as a cashier or make deals with other cashiers to buy the silver coins.  But my Mr. Fusion is broken and I have to wait until 2034 for the part to be invented to fix it.

I would not discount the risk of buying "fake" gold.  It is not unheard of to find gold plated lead within gold coins.  Heck....this is even done with silver coins.  It's why it's important to buy from a reputable place like Apmex rather than the guy in a craigslist ad.
Title: Re: Precious Metals
Post by: Radagast on January 31, 2019, 11:47:25 AM
Price of gold right now?
Nope.
OK so we agree on the price of gold per dollar, just not per ounce of yoghurt.

Quote
CPI-U?
Yep. Gold is a form of non-dilutable money (some argue the purest form of money). It's not a a yoghurt in your basket of CPI. Measuring it by CPI is to misunderstand gold. Measure it against it currency creation, not consumable goods prices.
Interesting that you see meaning in comparing two abstract numbers against each other. Personally I value investments, currencies, and gold against the price of yoghurt. I view yoghurt as a non dilutable form of money, because I can eat it.

Quote
Publicly reported cost to mine each ounce?
Yep. If gold is so cheap to mine and all these miners are making a 100%+ margin on each ounce, then why have their share prices lost 90% in the last 6 years?  If getting gold out of the ground and selling it was that easy they should be able to buy back half their shares and instantly deliver spectacular gain to their shareholders.
In 2007-2009 many investment banks went bankrupt because they owned home mortgages, which 90% of all homeowners who had mortgages paid every month without fail. If receiving a check in the mail is so easy, why did they lose 100% of their value? They could have just bought back their shares using the income stream and given their shareholders spectacular gains. Following your logic, it follows that my $810 monthly mortgage payment cannot be assigned a value in either dollars or yoghurts because some investment banks went bankrupt as a result of mortgages.

Quote
Average price of gold since 1974?
Yep. Gold has history before 1974, even if it was artificially pegged for many years. Anyway, gold has risen by from $129 to $1315 since 1974, which is 7% nominal growth, well ahead of the overall pace of consumer inflation over 35 years.

Oh, so if you pick a year where the price was below average and then draw a line to a year where the price was above average you find the line went up. Mind blown.

Quote
That the real price of gold is well above its post 1974 average right now (which follows from the above)?
See above.

The price history of gold in the zerohedge article?
I tend to say away from ZH. Too much perma bear food.
I had fun writing it though. If you didn't look at my gold price chart from the 13th century but you want to talk about gold prices before 1974, please post your own so we can be on the same page.

Quote
That the price of gold should be indexed against real prices rather than an exponentially growing asset class?

Is BRK.B or GLD a paper asset? Which one, neither, or both?
Is that just rhetorical? actually, don't bother...
Based on comments you made earlier in the thread, I had the impression you thought gold was a real asset but Burlington Northern Santa Fe Railroad was a paper asset. I wanted to clarify.

BTW, I use USD denomination even though I'm a UK based investor, where the difference in gold vs stock performance is much closer. In fact, of the 200-odd local currencies, gold is pushing new highs in around 70 of them, which strengthens the claim of it being a long term store of value outside of local currencies. This BB is US-based and most investors here look at things through the lense of the USD which itself is a very filtered view of the world. As I say, history suggests that one day the USD will no longer be the currency in that is in the ascendancy.
I don't always value gold in yoghurts, but when I don't, I value it in SkyMiles.
Title: Re: Precious Metals
Post by: GuitarBrian on January 31, 2019, 07:46:51 PM
The OP asked about the best way to buy gold. Here is what I've found to work best.

APMEX or other large dealers (Silvertown, Bay Precious Metals, JM, etc) on eBay stacking eBay Bucks and cashback from credit card.

1. Sign up for eBay Bucks.
2. Wait for a bonus bucks day. 8 or 10%.
3. Find a listing that qualifies. You can find tips on goldismoney2 under the thread "eBay heads up, sales, deals and offers" or by searching for 1 oz gold coin in catagories other than "bullion". (US coins and Paper money, Coins:Canada, etc)

Basically you buy 1oz coins and get $100 in rewards buy more coins/anything on eBay. Plus you use a credit card to get at least 2% cash back. You can get a higher percentage churning credit cards, during the minimum spend, it can be 10% or more. Even without this, just the $100+%2 you should find coins under spot.

Now, you can buy 5 coins ($500 in eBay Bucks) every 3 months, for each eBay Bucks account. Each person can have one eBay Bucks account, and it doesn't matter who's PayPal account you pay with. So everyone in the family can have one...
Title: Re: Precious Metals
Post by: MustacheAndaHalf on January 31, 2019, 08:48:01 PM
In just about every gold topic I've seen, someone can't resist bringing gold's performance from 1972-1974 (inclusive) into the conversation - as if the events of those years will repeat.  Here's data from portfolio visualizer on gold's performance for two different time periods: 

https://www.portfoliovisualizer.com/backtest-asset-class-allocation
1972 - 2018: 7.32% / year (after inflation, +3.27%)
1975 - 2018: 4.33% / year (after inflation, +0.66%)

And that's why those years are always used by those encouraging others to buy gold - it's a dramatic difference.  But the U.S. is no longer on the gold standard, so we can't leave the gold standard again.  Many events of that time won't repeat, so counting on gold's performance during those 3 specific years is not a reasonable way to predict it's returns.
Title: Re: Precious Metals
Post by: Classical_Liberal on January 31, 2019, 08:50:50 PM
Sorry to interrupt the dialog...
I view yoghurt as a non dilutable form of money, because I can eat it.

This gets back to the point of value stores only being a social contract, unless it can provide for your needs directly.  If I could effectively store and move 50 years worth of food, without spoilage, then I would buy it tomorrow.  It'd be the ultimate inflation hedge.  The problem is I can't, that's why humans developed social contract stores of value to begin with.

Continue on :)
Title: Re: Precious Metals
Post by: Classical_Liberal on January 31, 2019, 08:59:02 PM
In just about every gold topic I've seen, someone can't resist bringing gold's performance from 1972-1974 (inclusive) into the conversation - as if the events of those years will repeat.  Here's data from portfolio visualizer on gold's performance for two different time periods: 

Right, antigold folks always say this, and my response is always the same.

"Hey, did you know 10 year bond yields spiked to above 13% in the early 1980's!  That means treasuries wont return today what they did back then and that fact artificially changes historical results"  No...Shit...Sherlock...

Weird events ALWAYS influence certain asset class performances.  One could even argue the high rates in my previous quote were also a direct result of going off the gold standard (ie the inflation). 

So, are you going to automatically exclude investment in bonds because of a few year anomaly that artificially increased their returns?  How about the tech run up in the late 90's, that probably wont happen again, no tech stocks either?
Title: Re: Precious Metals
Post by: waltworks on January 31, 2019, 09:06:03 PM
No, I think the bond case is different, because there was at least *a market* in existence. Bond rates could go into double digits again in the future, under many non-crazy scenarios.

Gold was just illegal to own, so there wasn't any effective market for it. That inherently can't happen again (unless it becomes illegal again first, of course).

The tech stock went nuts, and then they crashed back to earth (or, often, zero). So the actual effect on your returns calculation *now* is negligible.

So neither of those cases is comparable, IMO.

Regardless, even if you include those couple of years where the market was finally able to set a price, the returns still suck.

-W
Title: Re: Precious Metals
Post by: Classical_Liberal on January 31, 2019, 09:18:14 PM
No, I think the bond case is different, because there was at least *a market* in existence. Bond rates could go into double digits again in the future, under many non-crazy scenarios.

Gold was just illegal to own, so there wasn't any effective market for it. That inherently can't happen again (unless it becomes illegal again first, of course).

Gold prices were impacted by government control, no doubt.  Just because you "think" that can't inherently happen again doesn't mean it won't.   Bond yields were also impacted by government control (CB policy), you "think" this could happen again, but it doesn't mean it will.   I think its a very fair comparison, we just have differing opinions on what may or may not happen.  I hedge my bet either way.

The tech stock went nuts, and then they crashed back to earth (or, often, zero). So the actual effect on your returns calculation *now* is negligible.
Didn't the same thing happen to gold once the new monetary system proved effective and inflation came under control?
 
Regardless, even if you include those couple of years where the market was finally able to set a price, the returns still suck.

This is the last time I'm going to repeat myself on this.  "Sucky" return is a feature of gold as an investment for those of us who choose to invest in it. EDIT: Perhaps better wording would be to store value with it?
Title: Re: Precious Metals
Post by: Radagast on January 31, 2019, 11:35:09 PM
Sorry to interrupt the dialog...
I view yoghurt as a non dilutable form of money, because I can eat it.

This gets back to the point of value stores only being a social contract, unless it can provide for your needs directly.  If I could effectively store and move 50 years worth of food, without spoilage, then I would buy it tomorrow.  It'd be the ultimate inflation hedge.  The problem is I can't, that's why humans developed social contract stores of value to begin with.

Continue on :)
As I wrote that, I actually thought of a lot of ways to dilute yoghurt.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 01, 2019, 09:19:30 AM
My earlier post was actually directed at someone else quoting 1974 performance.  But since you jumped in...

In just about every gold topic I've seen, someone can't resist bringing gold's performance from 1972-1974 (inclusive) into the conversation - as if the events of those years will repeat.  Here's data from portfolio visualizer on gold's performance for two different time periods: 

Right, antigold folks always say this, and my response is always the same.

"Hey, did you know 10 year bond yields spiked to above 13% in the early 1980's!  That means treasuries wont return today what they did back then and that fact artificially changes historical results"  No...Shit...Sherlock...

Weird events ALWAYS influence certain asset class performances.  One could even argue the high rates in my previous quote were also a direct result of going off the gold standard (ie the inflation). 

So, are you going to automatically exclude investment in bonds because of a few year anomaly that artificially increased their returns?  How about the tech run up in the late 90's, that probably wont happen again, no tech stocks either?
Do you expect +66% annual returns from gold?  That's gold's performance in 1973-1974.  Do you know of any asset that's expected to have +66% annual returns?  That's worth excluding.

Nixon caused the U.S. to leave the gold standard on Aug 21, 1971.  That one day is an event.  "the 90s" is not an event.

And yes, you should exclude bond performance in the 1980s.  Bond performance isn't just about yield, but about changes in yield.  In the 1980s inflation was incredibly high, interest rates were high, and bonds rose to match.  But once inflation dropped and yields dropped, anyone holding an older bond experienced a great increase in value.  It's much better to have a 12% bond than a 10% bond, and an 8% bond is better than a 6% bond... now we have 3% US treasuries.  Bond yields have been on a slide from the 1980s until now, with our current rather low yields.  If yields go up, existing bonds will drop in value.  But bonds don't have much room to go down, so you can't expect the 1980s to repeat (bonds wouldn't have many buyers if they started yielding negative 5%).  So no, the yield plus capital gains of the 1980s can't repeat right now, until we're looking at the same circumstances as the 1980s.
Title: Re: Precious Metals
Post by: waltworks on February 01, 2019, 09:37:58 AM
I guess I would think of it this way - in the early 1970s, the government was basically giving away gold. Most of the gains from gold are from that event.

If you expect someone to give away gold again, then you can expect that sort of event to repeat and you can count it in your future expectations for the performance of gold. Otherwise, not so much.

-W
Title: Re: Precious Metals
Post by: maizeman on February 01, 2019, 11:18:18 AM
Another way to look at it: If one thinks it is a good idea to incorporate the years right after the US went off the gold standard into determine the return of gold going forward, why not also look at the years before that?

The price of gold in dollars was completely flat at $35/oz from 1934 until the shift off the gold standard (which produced the sudden run up in prices in the 1970s). Calculating back from today's price of $1319/oz to $35/oz in 1934, we get a CAGR of 4.36% nominal and 0.8% real (after inflation), which is quite similar to the numbers you get for gold if you exclude the run up right after going off the gold standard, and is incidentally how the price of most commodities is going to behave over the long term.

Essentially having a fixed price for gold from 1934 to ~1970 shifted a couple of decades of gold price increase until it all came at once in the 1970s. So you can either include the flat price for decades, or exclude the years where everything was shifting back into equilibrium again. But including one without the other is necessarily going to give you a skewed picture of what the future is likely to hold.
Title: Re: Precious Metals
Post by: waltworks on February 01, 2019, 02:10:53 PM
As usual, Maizeman says what I was trying to say, but much more lucidly.

Curse you, Maizeman!

-W
Title: Re: Precious Metals
Post by: tralfamadorian on February 01, 2019, 02:27:16 PM
Maizeman really is the most eloquent one of us all, isn't he?
Title: Re: Precious Metals
Post by: GuitarBrian on February 01, 2019, 03:28:16 PM
I also wanted to mention the stock CEF. CentralFund.com is there website, $3.4b invested in physical gold and silver in a vault in Calgary. Currently trading at a 3% discount. If you don't mind the exposure to silver, this is an alternative to the mainstream ETFs.
 
I have owned stock off and on since 2004.
Title: Re: Precious Metals
Post by: Classical_Liberal on February 01, 2019, 03:32:01 PM
@maizeman
You comment is US centric, believe it or not there are capital markets outside the US.  However, If you want to look at it as pent up demand/value increase that all exploded at once, that seems fair enough.  I think it's a bit more complex than that.

@Everyone else
Trying to have a conversation wrt to gold on this forum is like speaking to toddlers who continually repeat themselves...literally. I've already addressed every point you made in all the new comments today, most of them yesterday, because you said the same thing then.  Repeating the same arguments to me over and over does not make them more valid. 

Look, if you don't want to invest in gold, don't.  But that fact none of you can even comprehend the concept of why someone might want to, shows that you have a weak understanding of macroeconomic interplays and capital markets.  It seems to me if you are going to spend decades living off your investments, you should at least have a basic understanding of the markets. 

Honestly (really, truly, honestly), I  don't care what you do, it's your money.  So, I'm checking out of this conversation. 
Title: Re: Precious Metals
Post by: maizeman on February 01, 2019, 03:49:40 PM
@maizeman
You comment is US centric, believe it or not there are capital markets outside the US.  However, If you want to look at it as pent up demand/value increase that all exploded at once, that seems fair enough.  I think it's a bit more complex than that.

I would dispute that I was indeed US centric. From 1945 to the end of the gold standard (where ever you'd place that line in the late 1960s early 1970s), a substantial majority of world's economy was in countries* which were maintaining a dollar pegged exchange rate, and from that tied to the same $35/oz gold pricing provided by the US federal government. 

Belgium, Bolivia, Canada, China, Colombia, Czechoslovakia, Egypt, Ethiopia, France, Greece, Honduras, Iceland. India, Iraq, Luxembourg, the Netherlands, Norway, the Philippines, South Africa, the UK, Yugoslavia the Dominican Republic, Ecuador, Guatemala, Paraguay, Iran, Chile, Mexico, & Peru from the start in 1945.
Costa, Brazil, Uruguay, El Salvador, Nicaragua, Panama, Denmark, Venezuela joined the dollar peg club in 1946.
Turkey, Italy, SyriaLebanon, Australia in 1947.
Japan and (West) Germany didn't come in until 1952 until they regained sovereignty.

Which non-US capital markets would you prefer to look at for gold between 1935 and 1971?

Edit to add: I think I actually can understand why someone would want to own (some) gold. I don't have any desire to do so myself but I don't try to pick fights with people who want some to steady out their portfolio. My criticisms are directly solely at those who try to portray gold as something that provides a positive return on investment, or a magical wonder substance that has value solely because it is rare and rare things are by definition worth a lot. While both ideas have shown up in this thread, I don't recall you @Classical_Liberal advocating for either. Is that correct?
Title: Re: Precious Metals
Post by: vand on February 02, 2019, 02:15:11 AM
If you want more evidence of the flaw of holding all your wealth in local currency, then consider there are 170 currencies in the world, and as they are continually debased gold is pushing new highs in about over 70 of them.  Your own micro economy may work on the assumption that you'll always be able to get your hands on your fair share of those additional currency units to preserve your share of the pie each year, but on an aggregated basis this will fall apart in the next downturn when unemployment spikes and workers can't find jobs with the same level of pay (or purchasing power).

As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good, and it is because of the relative price both stood at 20 years ago.. which shows you that valuations matter. Regression of relative valuations vs 10 year performance suggest that gold will outperform stocks and bonds over the next decade.   You can ask why there should be a relationship, but that is besides the point. Statistical analysis tell you that there IS a relationship. That's as much as you need to know. 

Everything is cyclical, and just because stocks have the best long very term performance doesn't mean that it is always the best place to park your money. 10 years is a long time when you consider the holding time of the average stock is typically a fraction of that. My own thesis is that the next 50 years will not be anywhere near as kind to stocks as the last 50 years have been for 3 reasons:
- Stocks have been the benefactor of an unprecendented bond super bull market since 1981. That trend cannot continue, indeed it may already have begun to reverse.
- The demographics of the baby boomers generation has acted as a huge tailwind for stocks through 3 cyclical bull markets, but that will start to turn into a headwind as this generation leaves the workforce and the remaining workers must support them. The ratio of workers to retirees is due to shift dramatically over the coming decade.
- Current valuations imply below historic returns for at least the next 10 years

Ultimately the only force that will continue to drive stocks up is the progress of technology which over time raises productivity, but this is a gradual process. Western stock markets otherwise face a much harder task for aspiring generations of investors.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 02, 2019, 07:41:47 AM
@Everyone else
Trying to have a conversation wrt to gold on this forum is like speaking to toddlers who continually repeat themselves...So, I'm checking out of this conversation.
So your last comment is to insult everyone as being "toddlers"?
You're saying previously someone gave you the exact same response about bonds as I did?  I find that hard to believe.

But I think what you're doing is labeling people instead of understanding them.... "antigold" or "toddlers" do not require proof that what you're saying is correct.  I actually refuted the points you made, and you just swept me into your "toddlers" insult.  I think that says more about you than me.
Title: Re: Precious Metals
Post by: waltworks on February 02, 2019, 07:52:32 AM
Gold has beaten the pants off the stock market over the last 20 years now.

You definitely win the data point cherrypicking prize for that one.

-W
Title: Re: Precious Metals
Post by: maizeman on February 02, 2019, 09:02:03 AM
If you want more evidence of the flaw of holding all your wealth in local currency, then consider there are 170 currencies in the world, and as they are continually debased gold is pushing new highs in about over 70 of them.

Now who is building up a straw man to argue with? At any point has anyone in this thread argued that the way to invest is to keep your money sitting around in dollars (or euros or RMB or yen or swiss francs or what have you)?

Also, only 70 out of 170? Because yes, that's how commodities and inflationary currencies work. At any given time I would imagine nominal prices for commodities ranging from coal to lumber to zinc to gold are likely to be exploring new non-inflation adjusted high prices in a whole range of currencies.

Investments have a positive expected return.
Commodities have an expected return centered on zero.
Inflationary currencies have a negative expected return.

As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good,

As waltworks already pointed out, the numbers for 10 years (0.4% for gold after inflation, 11% for stocks after inflation) and 30 years (0.9% for gold after inflation, 7.3% for stocks after inflation) suggest that, particularly since the rest of your post only mentions 10 and 50 year time frames, you chose 20 years after some careful evaluation of the alternatives. <-- long winded way of saying cherry picking.

10 years is a long time when you consider the holding time of the average stock is typically a fraction of that.

The average holding time for a share of stock may be quite low given the prevalence of high frequency traders. The average holding time for stocks (or any investment) for folks on this forum is likely multiple decades though.

Quote
Ultimately the only force that will continue to drive stocks up is the progress of technology which over time raises productivity, but this is a gradual process.

False.

Even in the middle of the dark/middle ages where population growth, economic growth, and technological progress were infinitesimally slow we have records that indicate returns on capital where in the neighborhood of 4-5%/year. That's certainly lower than the 6.8%/year after inflation rate of return we've seen in the stock market over the past century and a half, which suggests somewhere between 2.8 and 1.8 percentage points of modern era returns are attributable to technological progress and/or population/economic growth, but that between 4 and 5 percentage points is not.
Title: Re: Precious Metals
Post by: waltworks on February 02, 2019, 01:05:45 PM
Maizeman, I also wonder about this. It's as if people believe the alternative to gold is to just hoard physical cash or something.

To be fair, if I were going to just hoard a physical thing, it wouldn't be printed pieces of paper. I'd take gold over that. But that's not saying much.

-W
Title: Re: Precious Metals
Post by: maizeman on February 02, 2019, 01:59:15 PM
Yeah waltworks I agree there is a missing step in the logic:

1) Gold will likely maintain its value over the long term better than cash under your mattress (because the value of cash goes down with inflation)
2) ...
3) Therefore putting your savings into gold is superior investing them income producing investments like shares of companies or real estate (whose value ultimately does up with inflation)
Title: Re: Precious Metals
Post by: Telecaster on February 02, 2019, 08:38:35 PM
Yeah waltworks I agree there is a missing step in the logic:

1) Gold will likely maintain its value over the long term better than cash under your mattress (because the value of cash goes down with inflation)
2) ...
3) Therefore putting your savings into gold is superior investing them income producing investments like shares of companies or real estate (whose value ultimately does up with inflation)

...trying to resist posting in this thread...but the body is too weak!

There is a parallel to what you posted:

1) The USD could vanish in the future like other fiat currencies have done in the past.  Or their could be some cataclysmic event that renders money useless.
2) ...
3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.



Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 02, 2019, 09:17:10 PM
As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good, and it is because of the relative price both stood at 20 years ago.. which shows you that valuations matter.
Your 20 year data excludes the massive bull market of the 1990s, and includes both the dot-com crash and the 2008 crisis.  You might want to mention that.  But on Portfolio Visualizer, their data says stocks still beat gold over the past 20 years:

(Jan 1999 - Dec 2018)
U.S. stocks +6.01% / year
gold +4.10% / year
international stocks +7.34% / year

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=2&startYear=1999&endYear=2018&portfolio1=Custom&portfolio2=Custom&portfolio3=Custom&TotalStockMarket1=100&IntlDeveloped2=100&Gold3=100

And that is also why people should diversify into international: it can beat U.S. over some time frames, and U.S. can come out ahead during other time frames.
Title: Re: Precious Metals
Post by: waltworks on February 02, 2019, 09:30:47 PM
There is a parallel to what you posted:

1) The USD could vanish in the future like other fiat currencies have done in the past.  Or their could be some cataclysmic event that renders money useless.
2) ...
3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.

I actually thing in the full zombie-apocalypse/The Stand scenario gold would be pretty useless. The infrastructure and basic knowledge (very nice balance scales, methods of verifying if the gold is actual gold, etc) needed to use gold as currency aren't really common anymore. If some random dude loitering in the Mad-Max hellscape of the future offered me $10,000 worth of gold coins for my POS Kia that's worth 1/10 of that, I'd probably tell him to get lost because how the heck do I know what he's actually giving me? And how likely am I to be able to get food or medicine or anything useful using said gold?

I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.

-W
Title: Re: Precious Metals
Post by: tralfamadorian on February 03, 2019, 10:46:49 AM
I actually thing in the full zombie-apocalypse/The Stand scenario gold would be pretty useless.

+1 If we're jumping the shark and talking about zombie apocalypse then I vote for investment in useful skills- master gardener, blacksmith, etc.
Title: Re: Precious Metals
Post by: Telecaster on February 03, 2019, 11:12:30 AM

I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.

-W

Or maybe even just skip barter.   Throughout history when there was a shortage of official currency is that people would simply issue their own tokens, or otherwise invent money.    For example, merchants in 17th and 18th century England would issue tokens that would be good for whatever the merchant was selling, and these tokens would circulate in the local village and be used as regular money.  This also occurred in the U.S. civil war when hording gold and silver caused a general shortage of official currency. 

Another form of money was tally sticks.   The debt (in whatever denomination, pounds, francs, whatever) would be carved into a stick of wood, and then the stick would be broken in half.  Since the two halves would only match each other, there was a record of the transaction.   One half was called the foil, and the other half was called the stock.   The stocks would circulate as a form of money, because presumably you could match it up with the owner of the foil and claim the debt, and thus had value.   That's why the stock market is called the stock market. 
Title: Re: Precious Metals
Post by: TomTX on February 03, 2019, 01:56:09 PM
I think they are currently very undervalued by historical standards.

What makes you think PMs are currently very undervalued? I'm not anti-PM, just curious why you think this.

Last time I checked the long-form historical value - gold was still in the right ballpark.

In 562 BCE, 1 oz of gold would buy 350 ~1kg loaves of handmade, whole grain bread. I think that would cost around $4-5 per loaf today at the supermarket. So $1,500-$1,750

You can also do something similar with the pay of a Roman Centurion during the reign of Augustus, compared to a US Army Captain. 38.58 oz of gold is your starting point. An O-3 starting pay is $48,560. The Centurion's pay at today's gold price is around $51,000.
Title: Re: Precious Metals
Post by: vand on February 03, 2019, 05:06:25 PM
As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good, and it is because of the relative price both stood at 20 years ago.. which shows you that valuations matter.
Your 20 year data excludes the massive bull market of the 1990s, and includes both the dot-com crash and the 2008 crisis.  You might want to mention that.  But on Portfolio Visualizer, their data says stocks still beat gold over the past 20 years:

(Jan 1999 - Dec 2018)
U.S. stocks +6.01% / year
gold +4.10% / year
international stocks +7.34% / year

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=2&startYear=1999&endYear=2018&portfolio1=Custom&portfolio2=Custom&portfolio3=Custom&TotalStockMarket1=100&IntlDeveloped2=100&Gold3=100

And that is also why people should diversify into international: it can beat U.S. over some time frames, and U.S. can come out ahead during other time frames.

Gold Jan 1999 $287
Gold Dec 2018 $1280

That's a 345% increase, which is slightly north of 6.3%

Maybe you need a new Portfolio visualiser

if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble. Or point out how Gold has still beaten stocks over 20 years despite being in a bear market for the last 6 of those years while stocks have nearly doubled in the same time.

It's hilarious how how the equity bulls get so offensively defensive whenever someone questions their "don't time the market/all in on indexes trackers" mantra.

Title: Re: Precious Metals
Post by: maizeman on February 03, 2019, 06:02:21 PM
if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble.

The key to good cherry picking is to not make it obvious that you are, in fact, doing that.

But feel free to prove me wrong:

Why do you feel that a 20 year time interval more informative than 5, 10, 15, 25, 30, 35, or 40, vand?

And, assuming you have a convincing argument why a 20 year time interval is so more informative than any of those others intervals, why is January 1999- Dec 2018 more informative '90-'09, '91-'10, .. etc? 
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 03, 2019, 07:33:37 PM
As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good, and it is because of the relative price both stood at 20 years ago.. which shows you that valuations matter.
Your 20 year data excludes the massive bull market of the 1990s, and includes both the dot-com crash and the 2008 crisis.  You might want to mention that.  But on Portfolio Visualizer, their data says stocks still beat gold over the past 20 years:

(Jan 1999 - Dec 2018)
U.S. stocks +6.01% / year
gold +4.10% / year
international stocks +7.34% / year

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=2&startYear=1999&endYear=2018&portfolio1=Custom&portfolio2=Custom&portfolio3=Custom&TotalStockMarket1=100&IntlDeveloped2=100&Gold3=100

And that is also why people should diversify into international: it can beat U.S. over some time frames, and U.S. can come out ahead during other time frames.

Gold Jan 1999 $287
Gold Dec 2018 $1280

That's a 345% increase, which is slightly north of 6.3%

Maybe you need a new Portfolio visualiser

if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble. Or point out how Gold has still beaten stocks over 20 years despite being in a bear market for the last 6 of those years while stocks have nearly doubled in the same time.

It's hilarious how how the equity bulls get so offensively defensive whenever someone questions their "don't time the market/all in on indexes trackers" mantra.
You might be right about portfolio visualizer getting gold's return wrong.

But looking at gold's prices over time, I see gold has several years of low prices at exactly the time you picked to start your comparison.  In 1993 gold was at $392, and in 2003 it was in $417.  So adjust by 5 years and you shave off +100% return.  And yet you didn't point that out - why is that?

That's called cherry picking - you select 1998 instead of 1993 or 2003 because it supports your data.  And that's why you used 1974 in an earlier post: gold went from $106.48 to $183.77 in one year, for a +72.59% return.

You also keep saying "beat stocks", which is again false.  Gold beat U.S. stocks in your cherry picked 20 year sample.  But it did not beat international stocks.  Further, a portfolio of 80% U.S. / 20% international (rebalanced annually) beat gold over the past 20 years.

So gold did not beat international stocks for the past 20 years, a time period which started with gold at a much lower price than 15 or 25 years ago.  And including 1974 in your data is only to re-use a +72% performance year.
Title: Re: Precious Metals
Post by: vand on February 04, 2019, 04:21:02 AM
if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble.

The key to good cherry picking is to not make it obvious that you are, in fact, doing that.

But feel free to prove me wrong:

Why do you feel that a 20 year time interval more informative than 5, 10, 15, 25, 30, 35, or 40, vand?

And, assuming you have a convincing argument why a 20 year time interval is so more informative than any of those others intervals, why is January 1999- Dec 2018 more informative '90-'09, '91-'10, .. etc?

I used 20 years because it's a nice round number. People tend to like round numbers.
Long enough to demonstrate that there there are other assets classes you may wish to consider for such timeframes.

What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks.  How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.

Title: Re: Precious Metals
Post by: Davnasty on February 04, 2019, 07:15:46 AM
if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble.

The key to good cherry picking is to not make it obvious that you are, in fact, doing that.

But feel free to prove me wrong:

Why do you feel that a 20 year time interval more informative than 5, 10, 15, 25, 30, 35, or 40, vand?

And, assuming you have a convincing argument why a 20 year time interval is so more informative than any of those others intervals, why is January 1999- Dec 2018 more informative '90-'09, '91-'10, .. etc?

I used 20 years because it's a nice round number. People tend to like round numbers.
Long enough to demonstrate that there there are other assets classes you may wish to consider for such timeframes.

What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks.  How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.

How about rolling periods of 1, 5, 10, 15, 20, 25, 30, 35, and 40 years? That would be a good place to start.

http://visualizingeconomics.com/blog/2014/5/16/rolling-returns-stocks-gold-2013?rq=gold

Unfortunately this only goes up to 2013 which leaves out the May 2013-present increase in the S&P 500* of ~70% and the slight decline in gold prices over the same period.

*S&P 500 with dividends is what this chart is referring to as "stocks"
Title: Re: Precious Metals
Post by: waltworks on February 04, 2019, 07:19:44 AM
But hasn't the return on gold (and ounce buys a nice toga, buys a nice suit today) been essentially zero for the last several thousand years?

If that's your base assumption, you can forget FIRE, because the whole world has and never will progress... economic growth of all sorts for all of human history is a sham. Am I interpreting you correctly?

-W
Title: Re: Precious Metals
Post by: maizeman on February 04, 2019, 08:28:54 AM
What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks. 

I have provided data for 10 years (even nicer rounder number), 30 years, and 84 years (not a round number, but dictated by the last time the US increased the price of gold through legislation). It's not that any one date is better than 20 years. It is that so many other dates (different intervals AND different start dates) all tell a different story from 20 years starting from 1999. Dabnasty provided even more timepoints and data to support this point.

Ultimately, it is your life and your money and you can choose to roll the dice is you so desire. Unfortunately the odds not in your favor.

Quote
How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.

Actually history shows quite the opposite, vand.

Let's look at one of the most recent currencies to die: Zimbabwe dollars. People who owned stocks and real estate in Zimbabwe before April 12th 2009 still owned them after April 12th, the value of the assets were just denominated in a different currency (US dollars, sometimes South Africa rand) than the day before. Bonds ... not so much, but hyperinflation destroys the value of bonds regardless of whether the currency survives or not.

Same when the Ecuadorian Sucre died on January 9, 2000.

We may get to see yet another example here with the Bolívar soberano in Venezuela here shortly. So far in that country, the local stock market has proved a much more effective store of wealth than leaving your money in currency, but we will have to see what happens when/if the currency actually dies and is replaced by something else.
Title: Re: Precious Metals
Post by: vand on February 05, 2019, 02:41:19 AM
What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks. 

I have provided data for 10 years (even nicer rounder number), 30 years, and 84 years (not a round number, but dictated by the last time the US increased the price of gold through legislation). It's not that any one date is better than 20 years. It is that so many other dates (different intervals AND different start dates) all tell a different story from 20 years starting from 1999. Dabnasty provided even more timepoints and data to support this point.

Ultimately, it is your life and your money and you can choose to roll the dice is you so desire. Unfortunately the odds not in your favor.

Quote
How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.

Actually history shows quite the opposite, vand.

Let's look at one of the most recent currencies to die: Zimbabwe dollars. People who owned stocks and real estate in Zimbabwe before April 12th 2009 still owned them after April 12th, the value of the assets were just denominated in a different currency (US dollars, sometimes South Africa rand) than the day before. Bonds ... not so much, but hyperinflation destroys the value of bonds regardless of whether the currency survives or not.

Same when the Ecuadorian Sucre died on January 9, 2000.

We may get to see yet another example here with the Bolívar soberano in Venezuela here shortly. So far in that country, the local stock market has proved a much more effective store of wealth than leaving your money in currency, but we will have to see what happens when/if the currency actually dies and is replaced by something else.


The wealth of those assets remains (for now), it is the *claims* on that wealth that eventually die. And that is exactly what paper assets represent - claims on wealth, not wealth itself. The problem with the monetary system it has created more claims on wealth than the amount of real wealth that actually exists. Nobody really knows how this will play out, but I think 2008-9 gave us a hint.


And over the long run, even those forms of real wealth rarely survive.. how many houses built or companies set up 200 or 300 years ago are still around? PMs are elemental, and aside for a small amount that is lost at the bottom of the ocean or used in industrial processes, what is mined is still in existence.
Title: Re: Precious Metals
Post by: Car Jack on February 05, 2019, 06:44:53 AM
To recap for physical gold.

Expensive costs to buy.
Expensive costs to sell.
Risk you are buying something other than gold and get ripped off.
Risk that you get robbed when trying to sell.
If you get through all that and make money, bad tax situation.

Sounds great.
Title: Re: Precious Metals
Post by: maizeman on February 05, 2019, 08:14:25 AM
The wealth of those assets remains (for now), it is the *claims* on that wealth that eventually die. And that is exactly what paper assets represent - claims on wealth, not wealth itself. The problem with the monetary system it has created more claims on wealth than the amount of real wealth that actually exists. Nobody really knows how this will play out, but I think 2008-9 gave us a hint.

It would seem that you're shifting the goalposts a bit now. Before you were saying the death of a currency meant the death of assets denominated in that currency. Specifically "when the currency dies, all paper assets denominated in that currency will all die with it." Do you wish to retract your original statement?

Quote
And over the long run, even those forms of real wealth rarely survive.. how many houses built or companies set up 200 or 300 years ago are still around? PMs are elemental, and aside for a small amount that is lost at the bottom of the ocean or used in industrial processes, what is mined is still in existence.

Actually a lot of houses built 200 to 300 years ago are still around. We build lots of new houses, sure, but in the big east cost cities, most houses are either the first property on their lot, or exist because the previous owner bought another perfectly viable building and tore it down to build something bigger. If you're out on the west coast or pretty much anywhere west of the Mississippi in the USA, sure there aren't a lot of 200 year old houses, but that's because most of the CITIES are less than 200 years old. Heck, even Chicago only dates back to 1833.

In addition, the fact that gold itself is generally not created or destroyed isn't much consolation given that it can certainly be appropriated, stolen, or confiscated. To be clear this is equally a feature of real estate and ownership of companies, but the point here is that, if your claim on assets is what is important. If the asset survives, but you lose your claim on it, that's as big a problem for you, as an individual, as if the asset vanished or was destroyed.
Title: Re: Precious Metals
Post by: trollwithamustache on February 05, 2019, 08:17:23 AM

If you get through all that and make money, bad tax situation.

Sounds great.

Many would disagree  on the tax situation.  If its a cash transaction under the 10k threshold, a lot of gold bugs may not be reporting the gainz.  Assuming of course there are huuuge gainz.
Title: Re: Precious Metals
Post by: Telecaster on February 05, 2019, 10:21:08 AM

And over the long run, even those forms of real wealth rarely survive.. how many houses built or companies set up 200 or 300 years ago are still around? PMs are elemental, and aside for a small amount that is lost at the bottom of the ocean or used in industrial processes, what is mined is still in existence.

How many people are still around after 200 or 300 years? 
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 06, 2019, 08:23:45 AM
if I really wanted to "cherry pick data" as claimed I would have picked the top of the dotcom bubble.

The key to good cherry picking is to not make it obvious that you are, in fact, doing that.

But feel free to prove me wrong:

Why do you feel that a 20 year time interval more informative than 5, 10, 15, 25, 30, 35, or 40, vand?

And, assuming you have a convincing argument why a 20 year time interval is so more informative than any of those others intervals, why is January 1999- Dec 2018 more informative '90-'09, '91-'10, .. etc?

I used 20 years because it's a nice round number. People tend to like round numbers.
Long enough to demonstrate that there there are other assets classes you may wish to consider for such timeframes.

What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks.  How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.
You're making another straw man argument.  You suggest "50 years" and then call the words you're putting in someone else's mouth "cherry picked".  Well, then why did you "cherry pick" "50 years" since you brought it up?

Speaking of putting words in other people's mouths, you're also the one bringing up the S&P 500, not me.  I've said it's best to have a diversified mix of international and U.S. stocks.  I've corrected you and mentioned international repeatedly, but I'm guessing that destroys your whole argument, so you refuse to repeat it.  After all, when did all assets in the world die at the same time?  What event would turn worldwide stocks worthless?  Using a diversified portfolio really boxes you into a very narrow argument, which could explain why I've mentioned it twice, and both times you respond by putting words in my mouth.

Finally, "20 years is a round number" is not an explanation.  So is 10 years, or 30 years.  To me it still seems like you picked a time frame with the dot-com crash (but without the 1990s stock market) and the 2008 crisis.  But here's some other periods using "a round number" of 10 and 30 years.

For 10 years in gold, 2009 open 869.75 ... 2018 close 1281.65 = about 4% / yr
For 10 years in stocks, US market earned 13% / yr, international 6% / yr
(This period was immediately after the 2008 crisis)

For 30 years in gold, 1989 open 413.60 ... 2018 close 1281.65 = just under 4% / yr
For 30 years in stocks, US market earned 10% / yr, international just under 4% / yr
(This period started with very high interest rates)
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 06, 2019, 08:27:41 AM
As an aside, what source of gold prices do people use?  I picked 5 sources of gold performance / prices, and only 2 of them agree.  Take 2002 for example.

Portfolio Visualizer  +25.57%
macrotrends.net  +23.96%
onlygold.com  +23.96%
usagold.com  +25.11%
measuringworth.com  +14.37%
Title: Re: Precious Metals
Post by: Radagast on February 06, 2019, 09:31:00 PM
As for gold's sucky performance.. Gold has beaten the pants off the stock market over the last 20 years now, even if its *very* long term performance is not as good, and it is because of the relative price both stood at 20 years ago.. which shows you that valuations matter. Regression of relative valuations vs 10 year performance suggest that gold will outperform stocks and bonds over the next decade.   You can ask why there should be a relationship, but that is besides the point. Statistical analysis tell you that there IS a relationship. That's as much as you need to know. 
Numbers for December     2018   1998
Gold Price / CPI-U                  5.1      1.8
Gold Price / Cost to Mine       1.9      0.7    (2016 cost, vague and hand wavy, changeable, maybe "elastic" or something)
S&P500 Dividend / Price        48      73.5
S&P500 Earnings10 / Price   28.4    40.5

Funny you mention valuations over that period... looks to me like stock valuations have improved considerably over that time, while valuations for gold got a lot worse. Might be explanatory. If valuations are what you are after then they are saying gold is a worse investment now than it used to be.
Title: Re: Precious Metals
Post by: Radagast on February 06, 2019, 10:07:59 PM
What's your preferred timeframe? 50 years? that seems to be very "cherry picked" for stocks.  How about 2000 years? I can guarantee you that gold has outperformed stocks over 2000 years, and will outperform the S&P500 over the next 2000 years, because when the currency dies, all paper assets denominated in that currency will all die with it. History has shown this to be the case.
Wow, thank you for that quote. I just finished reading "Big Debt Crises" by Dalio so I had this on my head.

Lets look at some German companies. Bayer, Siemens, Mercedes, Audi, and Allianz were all publicly traded companies prior to World War 1. Let's especially look at Allianz, first because they have a nice history of their company on their website https://www.allianz.com/en/about-us/who-we-are/history.html, and second because as an insurance company and (recently) owner of Pimco their business is literally paper assets which makes this especially fun.

In 1895 Allianz issued an IPO for 250 Marks. Then WW1 starts like 20 years later. Germany loses. There is a hyperinflation that causes all the marks in 1913 to be equal to the price of a sad loaf of bread in 1923 (or some year, not looking right now). The Mark dies, and is replaced with the Reichsmark. There is some deflation and Hitler. Germany goes on to lose WW2. It is divided and occupied by the US and the USSR. The Reichsmark dies, and is replaced by the Deutsche Mark. Germany nearly becomes Ground 0 for WW3 on a few occasions. Today Yahoo Finance reports that Allianz is worth $91,000,000,000 and pays 4.5% dividends, which you could totally trade for gold if you wanted to.

So, a company whose entire business is trading paper assets survived two currency deaths, billion-percent-grade hyperinflation, Hitler, loss of two world wars, communist occupation, and right now is one of the largest companies in the world paying a sweet, sweet dividend. Imagine if it was a company that owned real assets (actually maybe not, as I said that I thought that a company with real assets would have been very expensive to recapitalize after complete destruction, so maybe the paper asset company owner would have come out better, just goes to show that it is really hard to know how things will work out).
Title: Re: Precious Metals
Post by: Radagast on February 06, 2019, 10:59:16 PM
3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.
I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.
I'm basically switching teams now. The "bullets" fallacy has always bugged me, because as waltworks says gold obviously requires civilized society to be of any use. All of the cases in Big Debt Crises involved continuously functioning societies or nearly so, so let's assume functioning societies are the norm for humans. In a functioning society bullets are not especially useful. Take the German examples above. Gold could have actually preserved purchasing power if you lived (most people did) and it stayed hidden and safe (not so sure) while bullets would have made little difference that I can see regarding your life or death and would have not functioned as a store of wealth at all. If bullets are to be useful in a failed society, you had also better count on having at least a million highly organized best buds with the best tech available (basically a functioning society). Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well. I can see possible financial uses for gold, both imaginary and historical. I'm not really against somebody deciding to keep up to 10% of their investable assets in gold if it makes them feel good, more against making that decision in ignorance. I am always surprised that the reasons people come up with almost always seem to be terrible. For example, based on US data beginning in 1970, or since 1998, or by imagining that companies are made of paper, or dozens of other things.
Title: Re: Precious Metals
Post by: JAYSLOL on February 07, 2019, 12:34:16 AM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments
Title: Re: Precious Metals
Post by: vand on February 07, 2019, 04:07:29 AM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on February 07, 2019, 11:21:30 AM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.
Are you saying historical data is resistance?  You quote 20 year, I show a diversified US/international portfolio beats gold.  I mention 20 years contains the 2 biggest crashes of the century, and you say you use round numbers.  So I quote other round numbers of 10 and 30 years showing that again a diversified portfolio of US and international stocks beats gold.  At every turn, historical data is presented that shows gold doesn't perform better, and you call that "resistance".  I call that historical data, not resistance.  It's easier to learn from historical data than to resist it.

You are no Warren Buffet, which is why you don't have his credentials or track record.  Why would you compare yourself to someone when you have nothing in common with that person?  I'd also like to point out after trying to get to you admit international + U.S. stocks beat gold, you're now trying to change the rules and say "stocks and bonds".  That's not what you claimed earlier - you claimed gold beats stocks.
Title: Re: Precious Metals
Post by: JAYSLOL on February 07, 2019, 12:06:26 PM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.

Skepticism isn't "shunning", I'm very skeptical of what people who buy PMs tell me the reasons are that it's going to be a better investment that stocks or whatever the claim is.  That doesn't mean I shun the idea of PMs, in fact one of my hobbies/side-hustles is buying/collecting/re-selling old coins and currency.  Currently about 6% of my NW is in PM.  That said, I'm not willing to bet that PMs will outperform stocks over the next 10 years, or any other time period, even though there may be the occasional year where they do outperform stocks, that's not a reason to go all-in.  Own it for the stability, not the performance.  See you in Feb, 2029. 
Title: Re: Precious Metals
Post by: Telecaster on February 07, 2019, 03:29:32 PM
3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.
I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.
I'm basically switching teams now. The "bullets" fallacy has always bugged me, because as waltworks says gold obviously requires civilized society to be of any use. All of the cases in Big Debt Crises involved continuously functioning societies or nearly so, so let's assume functioning societies are the norm for humans. In a functioning society bullets are not especially useful. Take the German examples above. Gold could have actually preserved purchasing power if you lived (most people did) and it stayed hidden and safe (not so sure) while bullets would have made little difference that I can see regarding your life or death and would have not functioned as a store of wealth at all. If bullets are to be useful in a failed society, you had also better count on having at least a million highly organized best buds with the best tech available (basically a functioning society). Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well. I can see possible financial uses for gold, both imaginary and historical. I'm not really against somebody deciding to keep up to 10% of their investable assets in gold if it makes them feel good, more against making that decision in ignorance. I am always surprised that the reasons people come up with almost always seem to be terrible. For example, based on US data beginning in 1970, or since 1998, or by imagining that companies are made of paper, or dozens of other things.

That's what why was no Step 2 before getting to stocking up on bullets in Step 3.  People sometimes suggest that a potential societal collapse is a reason to own gold without explaining why that would likely be the case.     

Since Wiemar Germany came up again, it is instructive to look at what stocks did during that period of hyperinflation, and subsequent collapse of the mark.  IIRC, there at least two other versions of the mark that also collapsed before hyperinflation was tamed and the government issued the stable Deutchmark.   During that period German stocks did extremely well, better than U.S. stocks in fact.    Big industrial German companies like Siemens, Krupps, Bayer, BMW, Allianz, etc. all survived and their shareholders did fine.   The notion that stocks are necessarily rendered valueless in a currency collapse is false. 

Title: Re: Precious Metals
Post by: flipboard on February 07, 2019, 11:03:02 PM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.

Skepticism isn't "shunning", I'm very skeptical of what people who buy PMs tell me the reasons are that it's going to be a better investment that stocks or whatever the claim is.  That doesn't mean I shun the idea of PMs, in fact one of my hobbies/side-hustles is buying/collecting/re-selling old coins and currency.  Currently about 6% of my NW is in PM.  That said, I'm not willing to bet that PMs will outperform stocks over the next 10 years, or any other time period, even though there may be the occasional year where they do outperform stocks, that's not a reason to go all-in.  Own it for the stability, not the performance.  See you in Feb, 2029.
This is also my approach (although I haven't gone into gold yet because my NW seems too low - I'll start in a year or two maybe, and at most 5%. With a split between an ETF for rebalancing, and physical in a vault for safety for the portion that is highly unlikely to be needed for rebalancing.)

I found this following page to be quite relevant to this thread:
http://www.efficientfrontier.com/ef/adhoc/gold.htm
Title: Re: Precious Metals
Post by: vand on February 08, 2019, 01:47:49 AM
3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.
I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.
I'm basically switching teams now. The "bullets" fallacy has always bugged me, because as waltworks says gold obviously requires civilized society to be of any use. All of the cases in Big Debt Crises involved continuously functioning societies or nearly so, so let's assume functioning societies are the norm for humans. In a functioning society bullets are not especially useful. Take the German examples above. Gold could have actually preserved purchasing power if you lived (most people did) and it stayed hidden and safe (not so sure) while bullets would have made little difference that I can see regarding your life or death and would have not functioned as a store of wealth at all. If bullets are to be useful in a failed society, you had also better count on having at least a million highly organized best buds with the best tech available (basically a functioning society). Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well. I can see possible financial uses for gold, both imaginary and historical. I'm not really against somebody deciding to keep up to 10% of their investable assets in gold if it makes them feel good, more against making that decision in ignorance. I am always surprised that the reasons people come up with almost always seem to be terrible. For example, based on US data beginning in 1970, or since 1998, or by imagining that companies are made of paper, or dozens of other things.

That's what why was no Step 2 before getting to stocking up on bullets in Step 3.  People sometimes suggest that a potential societal collapse is a reason to own gold without explaining why that would likely be the case.     

Since Wiemar Germany came up again, it is instructive to look at what stocks did during that period of hyperinflation, and subsequent collapse of the mark.  IIRC, there at least two other versions of the mark that also collapsed before hyperinflation was tamed and the government issued the stable Deutchmark.   During that period German stocks did extremely well, better than U.S. stocks in fact.    Big industrial German companies like Siemens, Krupps, Bayer, BMW, Allianz, etc. all survived and their shareholders did fine.   The notion that stocks are necessarily rendered valueless in a currency collapse is false.


hahaha. You're nuts.
You know what other stock market has done spectacularly well in recent years? Venezuela' stock market is "up" by many hundreds of % in recent years.
Well done Venezeulan equity investors. Maybe you'll be able to buy enough real wealth with your profits to fill the one shelf of your fridge.
Title: Re: Precious Metals
Post by: Syonyk on February 08, 2019, 10:17:58 AM
Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well.

Ok... sorry, I have to ask, where are you buying a shipping container full of bullets for a few gold coins (presumably 1oz, since that's a common size)?

A 40' high top (9.5') shipping container alone is ~$4500, which is around 3.5oz gold.  You could get a regular height for about 3oz, or a 20' for about 1.5oz.

But ammo to fill it?  I can find .223 for $0.33/round easily, so call it $0.20/round in serious bulk.

An ounce of gold ($1300) is only 6500 rounds, which fits (physically, if not weight-wise) in a medium UPS shipping box or so.

It's going to take an awful lot of those to fill a shipping container.

Shipping containers are big.  This is from maybe 10' into mine...

(https://4.bp.blogspot.com/-g_y8ciFwXL0/XC6ang3Z5RI/AAAAAAAAyI0/X5D2g0b3EKU-ulnElo1V0jPW3mw9IPaWACLcBGAs/s640/P1030243.jpeg)
Title: Re: Precious Metals
Post by: waltworks on February 08, 2019, 11:24:31 AM
I'd actually bet that holders of stock in Venezuelan companies (I include myself in that, since I'm guessing my Vanguard int'l fund has at least some exposure) will be just fine. Now, I'd certainly only *sell* such stock for dollars, but the fate of the bolivar is pretty irrelevant to me.

Even if all of my Venezuelan holdings go to zero, it's a rounding error in terms of the whole world, so just as I'm not worried about a company or two in the S&P500 going under, I'm not worried about Venezuela.

So if your point is that you'd rather have gold than bolivars (a very low hurdle), I'll concede. Just as I'll concede that gold is a better idea than hoarding large sums of cash of any kind at all.

-W
Title: Re: Precious Metals
Post by: RWD on February 08, 2019, 11:46:59 AM

If you get through all that and make money, bad tax situation.

Sounds great.

Many would disagree  on the tax situation.  If its a cash transaction under the 10k threshold, a lot of gold bugs may not be reporting the gainz.  Assuming of course there are huuuge gainz.

Add IRS audits, structuring (https://en.wikipedia.org/wiki/Structuring), and civil forfeiture (https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United_States) to the list of risks...
Title: Re: Precious Metals
Post by: Radagast on February 08, 2019, 09:04:14 PM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments
Thanks :) I was able to read the thread's posts more than a day before I was able to reply, which probably helped improve the info-tainment properties.

@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.

Skepticism isn't "shunning", I'm very skeptical of what people who buy PMs tell me the reasons are that it's going to be a better investment that stocks or whatever the claim is.  That doesn't mean I shun the idea of PMs, in fact one of my hobbies/side-hustles is buying/collecting/re-selling old coins and currency.  Currently about 6% of my NW is in PM.  That said, I'm not willing to bet that PMs will outperform stocks over the next 10 years, or any other time period, even though there may be the occasional year where they do outperform stocks, that's not a reason to go all-in.  Own it for the stability, not the performance.  See you in Feb, 2029.
Right. Likewise, far from shunning gold, I have more exposure to its price than probably anybody here even though I don't own any outside of miscellaneous electronics (DW and I even have silver and base metal rings). That leads me to view it from a very pragmatic viewpoint of "how will this help me pay rent over the next year?" and not "what price will shiny pretty speculative metal increase to in the happy imaginary unicorn future?." There are solid arguments for having a small exposure to the price of gold, but none of them involve knowing gold will increase in price by more than the total return of global stocks or bonds, starting-today-go.

Along those lines, it is funny that gold miners, both people and companies, don't seem eager to keep their gold right now. They trade it for cash ASAP with no regrets except that it took so friggin long to get the cash from it. They must believe it is pretty useless in the real world. I can personally attest that, as a person with both a mortgage and a rent, I am contractually obliged to not pay either of them with gold. The local grocer takes paper, plastic, and radio waves only.
Title: Re: Precious Metals
Post by: Radagast on February 08, 2019, 09:22:44 PM
@Radagast I just want to say I'm thoroughly enjoying this thread and discussion, and these are some truly outstanding comments

TBH the degree of skepticism and resistance shown to the idea of owning gold is not surprising to me and reaffirms my view that PMs are so well shunned they remain a terrific contrarian buy. I don't expect public sentiment to begin changing until gold prices have taken out the old 2011 high and only then will the bull market shift into the long "public awareness" stage.

I may not have his credentials or his track record, but much like Mr Buffett, I'm willing to put on a bet that over a 10 year period PMs will outperform stocks and bonds, and look forward to bumping this in 2029 to remind everyone.
No, contrarian timing would have been when gold was at its lowest real price in more than 25 years since the world's governments ceased their conspiracy to depress it, technetcoms were known to be the future, and The Bank of England sold most of its remaining reserves of the useless archaic metal (https://en.wikipedia.org/wiki/Sale_of_UK_gold_reserves,_1999%E2%80%932002), around 1999 or so. Here in 2019, gold prices are well above their historical real market averages, everyone is expecting an imminent decline in stocks and bonds, mining companies invested in lots of new things in a recent price run up and then delevered so they are able to continue producing at low prices for well into the future, and the entire world just observed Russia try to load gold bullion, the last valuable asset in Venezuela, onto planes to Moscow. You are not buying the bubble anymore, but neither are you a contrarian. Now stocks, long term bonds, and gold all have annualized standard deviations of around 15% plus the odd freak event so things could very well go your way in the short term, but in the long term (US) bonds are priced to return 1maybe%, stocks 5%, and gold 0% (all post-inflation) and that is the prevailing wind direction. Contrarian moves are probably back in England's court. Or maybe Russia's. Or Venezuela's.
Title: Re: Precious Metals
Post by: Radagast on February 08, 2019, 10:17:56 PM
Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well.

Ok... sorry, I have to ask, where are you buying a shipping container full of bullets for a few gold coins (presumably 1oz, since that's a common size)?

A 40' high top (9.5') shipping container alone is ~$4500, which is around 3.5oz gold.  You could get a regular height for about 3oz, or a 20' for about 1.5oz.

But ammo to fill it?  I can find .223 for $0.33/round easily, so call it $0.20/round in serious bulk.

An ounce of gold ($1300) is only 6500 rounds, which fits (physically, if not weight-wise) in a medium UPS shipping box or so.

It's going to take an awful lot of those to fill a shipping container.

Shipping containers are big.  This is from maybe 10' into mine...
So, I would say that a shipping container is the standard 20'X8'X8.5' unless otherwise noted. Would you believe I was going to do the numbers but couldn't find the dimensions on a retail box of ammo within a few minutes, so I just said "a few"? You probably would. In my head though I imagined that a box of 500ct .22LR bullets was a $20, and I had a nice imaginary youtube clip of a person carting in 10 of those boxes to pay for groceries, and the cashier counting out the change. Which was a good start.

Lets use your numbers though, but I will spare uninterested people the math. It looks like an ounce of gold is worth roughly 1 cubic foot of of 0.223 ammo. Let's call it 5,200 shells, and say gold is $1300 an ounce, so they can be $0.25 each. A shipping container can fit about 1,200 cubic feet inside. I will agree that most people would call 1,000 or 1,500 gold coins more than a few. The point is still valid though. A standard issue official coin box from the Treasury Dept. would fit 500 1-oz gold coins in 14.75" x 8.5" x 4.5" (but 42 lbs!). Three of them are a cubic foot. So that is about 1,500 times more compact than the equivalent value in 0.223 rounds and also a lot less volatile. In fact quite inert.

3) Therefore putting your savings into gold is superior buying solar panels, stocking up on bullets and dried beans, drilling your own water well, raising chickens, owning a blacksmith forge, etc.
I'd bet on straight barter. Gold requires a lot of actual civil infrastructure to be usable as currency.
I'm basically switching teams now. The "bullets" fallacy has always bugged me, because as waltworks says gold obviously requires civilized society to be of any use. All of the cases in Big Debt Crises involved continuously functioning societies or nearly so, so let's assume functioning societies are the norm for humans. In a functioning society bullets are not especially useful. Take the German examples above. Gold could have actually preserved purchasing power if you lived (most people did) and it stayed hidden and safe (not so sure) while bullets would have made little difference that I can see regarding your life or death and would have not functioned as a store of wealth at all. If bullets are to be useful in a failed society, you had also better count on having at least a million highly organized best buds with the best tech available (basically a functioning society). Further, it would take a shipping container of bullets to equal the value of a few gold coins so that rules out bullets in currency failures as well. I can see possible financial uses for gold, both imaginary and historical. I'm not really against somebody deciding to keep up to 10% of their investable assets in gold if it makes them feel good, more against making that decision in ignorance. I am always surprised that the reasons people come up with almost always seem to be terrible. For example, based on US data beginning in 1970, or since 1998, or by imagining that companies are made of paper, or dozens of other things.

That's what why was no Step 2 before getting to stocking up on bullets in Step 3.  People sometimes suggest that a potential societal collapse is a reason to own gold without explaining why that would likely be the case.     

Since Wiemar Germany came up again, it is instructive to look at what stocks did during that period of hyperinflation, and subsequent collapse of the mark.  IIRC, there at least two other versions of the mark that also collapsed before hyperinflation was tamed and the government issued the stable Deutchmark.   During that period German stocks did extremely well, better than U.S. stocks in fact.    Big industrial German companies like Siemens, Krupps, Bayer, BMW, Allianz, etc. all survived and their shareholders did fine.   The notion that stocks are necessarily rendered valueless in a currency collapse is false. 
Right, but in practice I have only seen that argument used by people trying to discredit gold, never by people who put their money in it. People I have seen putting money in gold are speculators/ignorants (ahem), hedgers, modern portfolio theorists, or in some cases people on the internet who think they will be able to get on a plane and use it somewhere safe. They all seem to assume there is a stable society involved. But then, I am probably limited in the types of gold proponents I have knowledge of.

There was a Rentenmark involved, but it was transitory.
Title: Re: Precious Metals
Post by: clumlee on February 14, 2019, 07:10:29 PM
I buy my stuff from JM Bullion. Their selection isn't HUGE as far as miners and sizes but they have the standard stuff and I have had no complaints. Cheers!
Title: Re: Precious Metals
Post by: Syonyk on February 14, 2019, 07:29:51 PM
A shipping container can fit about 1,200 cubic feet inside. I will agree that most people would call 1,000 or 1,500 gold coins more than a few.

Find me one person who would call 1000-1500 gold coins "a few."
Title: Re: Precious Metals
Post by: Telecaster on February 14, 2019, 08:21:51 PM
That's what why was no Step 2 before getting to stocking up on bullets in Step 3.  People sometimes suggest that a potential societal collapse is a reason to own gold without explaining why that would likely be the case.     

Since Wiemar Germany came up again, it is instructive to look at what stocks did during that period of hyperinflation, and subsequent collapse of the mark.  IIRC, there at least two other versions of the mark that also collapsed before hyperinflation was tamed and the government issued the stable Deutchmark.   During that period German stocks did extremely well, better than U.S. stocks in fact.    Big industrial German companies like Siemens, Krupps, Bayer, BMW, Allianz, etc. all survived and their shareholders did fine.   The notion that stocks are necessarily rendered valueless in a currency collapse is false. 
Right, but in practice I have only seen that argument used by people trying to discredit gold, never by people who put their money in it. People I have seen putting money in gold are speculators/ignorants (ahem), hedgers, modern portfolio theorists, or in some cases people on the internet who think they will be able to get on a plane and use it somewhere safe. They all seem to assume there is a stable society involved. But then, I am probably limited in the types of gold proponents I have knowledge of.

There was a Rentenmark involved, but it was transitory.
[/quote]

I might not be making myself clear.  In the event of a currency collapse and a functioning society still exists, owning gold is definitely preferable to owning cash, but in the past people who owned productive asserts like stocks or incoming producing real estate have generally still done okay.  As I mentioned earlier, in times past people have even created their own currencies like leather tokens issued by inn keepers or farmers that circulate like regular money.   So you don't really need a central currency to do business, and history tells us you might not even need to do much barter.   In other words, the notion that gold is a necessary backstop to protect against a currency collapse isn't completely true.  You won't need gold to be able to trade and there are other, better stores of value.  So what's the point of owning gold? 

In the event of currency collapse and there is no functioning society, then you definitely want bullets and dried beans--not gold.  Because being unable to conveniently trade for stuff will be the least of your problems.  So what's the point of owning gold? 
Title: Re: Precious Metals
Post by: JAYSLOL on February 14, 2019, 09:28:47 PM
I buy my stuff from JM Bullion. Their selection isn't HUGE as far as miners and sizes but they have the standard stuff and I have had no complaints. Cheers!

I like to buy mine from garage sales, availability is very sporadic, but the prices can't be beat!
Title: Re: Precious Metals
Post by: Radagast on February 14, 2019, 11:13:53 PM
I might not be making myself clear.  In the event of a currency collapse and a functioning society still exists, owning gold is definitely preferable to owning cash, but in the past people who owned productive asserts like stocks or incoming producing real estate have generally still done okay.  As I mentioned earlier, in times past people have even created their own currencies like leather tokens issued by inn keepers or farmers that circulate like regular money.   So you don't really need a central currency to do business, and history tells us you might not even need to do much barter.   In other words, the notion that gold is a necessary backstop to protect against a currency collapse isn't completely true.  You won't need gold to be able to trade and there are other, better stores of value.  So what's the point of owning gold? 
Only locals are likely to find value in your leather coinage, so that would be of limited use. Real estate is great for preserving real wealth while receiving cashflow (depending on the type and circumstances), and I am a proponent, in fact I own 1 cashflow property versus 0 gold coins. I think we covered stocks enough earlier. But as usual, it is hard to transport real estate or exchange small parts. The idea is to have something that is valuable and easily transportable, which also has value to people who are far away. I see it like this: stocks give 6% real returns each year plus a go on the roulette wheel (you lose a percentage equal to red numbers, gain a percentage equal to black numbers). Long term government bonds give you 3% real return (well not right now) plus a spin of an independent roulette wheel. Gold gives you 0% real returns in exchange for a spin of a third entirely independent roulette wheel each year, for people who want that. Even if your currency and bonds are approaching 0 while stocks are down 95%, gold will still give you the same ol' 0% return plus a spin of the wheel.

So there you have it. Gold combines a transportable exchangeable inert 0% return asset with the variability of a roulette wheel. If that doesn't make you want to run out and buy it / turn you away from ever buying it, then I don't know what will. Though I expect its value to rarely fall outside of the range of 1-10 consumer price indexes, I guess it will be constrained by the cost of mining more. But who can say.

Excel formula for the "roulette wheel" model of financial returns: =(1+(RANDBETWEEN(-36,36)+?)/100)*A1 where ? is the placeholder for real expected return. Drag it through 50 cells, make a graph, and refresh a few times.
Quote
In the event of currency collapse and there is no functioning society, then you definitely want bullets and dried beans--not gold.  Because being unable to conveniently trade for stuff will be the least of your problems.  So what's the point of owning gold?
Right, and like I said I think that is a fallacy, a product of watching too many TV shows. I can't think of any examples of that in history, but I am happy to be informed. The closest I can come is... Somalia?, but I bet gold has value there.
Title: Re: Precious Metals
Post by: flipboard on February 14, 2019, 11:47:42 PM
Quote
I might not be making myself clear.  In the event of a currency collapse and a functioning society still exists, owning gold is definitely preferable to owning cash, but in the past people who owned productive asserts like stocks or incoming producing real estate have generally still done okay.  As I mentioned earlier, in times past people have even created their own currencies like leather tokens issued by inn keepers or farmers that circulate like regular money.   So you don't really need a central currency to do business, and history tells us you might not even need to do much barter.   In other words, the notion that gold is a necessary backstop to protect against a currency collapse isn't completely true.  You won't need gold to be able to trade and there are other, better stores of value.  So what's the point of owning gold? 

In the event of currency collapse and there is no functioning society, then you definitely want bullets and dried beans--not gold.  Because being unable to conveniently trade for stuff will be the least of your problems.  So what's the point of owning gold?
People in some countries with stocks or real-estate _didn't_ do OK. Russian stocks 1918 anyone? Or even property in a country that disposses you? Similar things could happen in any country (perhaps not immediately, but no one expected Russia to do what it did at the time either).

The likelihood of society worldwide collapsing isn't that great. The likelihood of a single country falling apart however is much greater, and this happens somewhat regularly.

If one happens to have gold in multiple countries, that's probably a good backup if you manage to get yourself out of the place you live. Diversifying stocks acros the world meanwhile has the failure point of the country where your funds are domiciled falling apart (which is why you'd probably want to own funds in multiple domiciles).
Title: Re: Precious Metals
Post by: ChpBstrd on February 15, 2019, 01:05:42 PM
The oft-stated reason for owning PMs instead of more efficient hedges like TIPS, options, or a broadly diversified portfolio is that all these other hedges might fail in a societal/currency collapse scenario like Russia 1918, Zimbabwe, Venezuela, Somalia, Yemen, Haiti, or the Weimar Republic.

In the event of a societal breakdown, rules about property ownership and crime usually cease to be enforced. Without a functioning government to punish rule breakers or award damages, ownership amounts to possession and the only consequence of crime is the potential for retaliation by survivors of the victim's clan or tribe. This is the way of life in slums around the world, including neighborhoods in the U.S. where the police cannot be trusted and justice is not effectively administered.

The dream of being the rich person in a collapsed society can be tested to ensure it is a workable plan. March into a slum and buy food, shelter, or clothing with a piece of gold in Rio de Janero, Baltimore, Caracas, Port Au Prince, south Chicago, or Harare.

Did you become a crime victim - i.e. robbed of your gold on the spot?
Was the transaction successful?
At the exchange rate offered, how long would the supplies you obtained last?
Title: Re: Precious Metals
Post by: flipboard on February 15, 2019, 01:12:43 PM
The oft-stated reason for owning PMs instead of more efficient hedges like TIPS, options, or a broadly diversified portfolio is that all these other hedges might fail in a societal/currency collapse scenario like Russia 1918, Zimbabwe, Venezuela, Somalia, Yemen, Haiti, or the Weimar Republic.

In the event of a societal breakdown, rules about property ownership and crime usually cease to be enforced. Without a functioning government to punish rule breakers or award damages, ownership amounts to possession and the only consequence of crime is the potential for retaliation by survivors of the victim's clan or tribe. This is the way of life in slums around the world, including neighborhoods in the U.S. where the police cannot be trusted and justice is not effectively administered.

The dream of being the rich person in a collapsed society can be tested to ensure it is a workable plan. March into a slum and buy food, shelter, or clothing with a piece of gold in Rio de Janero, Baltimore, Caracas, Port Au Prince, south Chicago, or Harare.

Did you become a crime victim - i.e. robbed of your gold on the spot?
Was the transaction successful?
At the exchange rate offered, how long would the supplies you obtained last?
False comparison. People of sufficient means didn't go use gold in their own society, they went and used it in a stable society elsewhere in the world. (Most likely, they already had wealth stored outside of their current country.)
Title: Re: Precious Metals
Post by: Telecaster on February 15, 2019, 03:07:47 PM

People in some countries with stocks or real-estate _didn't_ do OK. Russian stocks 1918 anyone? Or even property in a country that disposses you? Similar things could happen in any country (perhaps not immediately, but no one expected Russia to do what it did at the time either).

Right.  That's why I said in that scenario you want bullets and beans.  In the case of something like the Russian Revolution where an angry mob of peasants is coming for you a big pile of gold isn't an asset, it is a liability.  The Romanovs didn't escape by being rich.  They didn't escape because they were rich. 

I mention that because many gold proponents point to the collapse of society as a reason to own gold.  In that event, it probably isn't a bad thing to own gold, but there is other stuff you will want to own a lot more.   Like guns. 

The angry mob of peasants scenario isn't what happened in Wiemar Germany.   In that scenario, owning gold wouldn't have been a bad thing, but owning stocks would have been better.  In fact, part of the reason why German stocks did well in that period is because of inflation.  It made German exports cheaper, so big industrial companies did well. 

I mention that because many gold proponents point to the collapse of currency as a reason to own gold because it is both a store of value and a medium of exchange.   Which it is!  Again, probably not a bad thing to own gold in that event, but there were better stores of value, and people will simply move to other media of exchange.  I gave several examples previously, but another would be from Wiemar Germany (since we're on the topic), where some cities simply issued their own currency and the local people used that as a medium of exchange. 

I knocked around Ecuador for a bit not long before the collapse of the Sucre.  At that time, anything above about the equivalent of $30 was quoted and paid for in US Dollars.  It was automatic.  They didn't even tell you the price in sucres.   I never saw or heard of anyone using gold to make transactions.   As an aside, there is a raging debate about whether or not to pay off your mortgage early.   I'm firmly in the "not" category.   If the USD collapses, having debt denominated in dollars would be the best thing you could possibly have.  I don't think that's likely, but it would be way better than owning gold. 

If you want to own gold, knock yourself out.  More power to you.  Seriously.   However, I find the reasons most people give as to the benefits of owning gold to be paper thin.  And most gold proponents don't seem to have a clear understanding of what actually happens during a currency collapse.    Hence their logic isn't very compelling. 
Title: Re: Precious Metals
Post by: vand on March 21, 2019, 03:39:13 AM
Don't shoot the messenger yeah
(https://i.imgur.com/FdiqqeU.jpg)
Title: Re: Precious Metals
Post by: vand on March 21, 2019, 03:44:14 AM
Gold also plays a 25% component in the Permanent Portfolio, which is a strategy that gives a risk-adjusted return that would put 100% of professional money managers to shame.
Title: Re: Precious Metals
Post by: TomTX on March 21, 2019, 06:55:44 AM
Gold also plays a 25% component in the Permanent Portfolio, which is a strategy that gives a risk-adjusted return that would put 100% of professional money managers to shame.

Unless you remove the initial runup from when gold was unpegged from the dollar.

Once you do that, the benefit is decidedly meh.
Title: Re: Precious Metals
Post by: MustacheAndaHalf on March 21, 2019, 09:55:43 AM
As I already pointed out in this thread earlier, people who like gold always include 1972-1974 in gold's performance.  Earlier I said:

When looking at gold, make sure you look at 1975-2017 rather than including the extraordinary one-time events of 1972-1974.  The returns of gold doubles when you include those extra years, even though those events are unlikely to happen again.

From 1972-1974 gold gained +62% / year - it quadrupled in price.  Here's what happens when you start to shed those years:
1972 - 2018: gold averaged a gain of +7.3% / year
1975 - 2018: gold averaged a gain of +4.4% / year
1980 - 2018: gold averaged a gain of +2.2% / year

That last number, +2.2%/year, ignores inflation.  Investing in gold in 1980 until now actually lost money once you include inflation.  So whenever you see someone argue for gold, make sure you check what happens if you skip the 1970s (which was also the decade when the U.S. moved off the gold standard - good luck repeating that event!)
Title: Re: Precious Metals
Post by: JAYSLOL on March 21, 2019, 11:52:58 AM
Bang.  Bang.  Bang. 
Title: Re: Precious Metals
Post by: OurTown on March 21, 2019, 03:26:17 PM
Silver bullets?
Title: Re: Precious Metals
Post by: JAYSLOL on March 21, 2019, 05:26:54 PM
Silver bullets?

Apparently that's actually a thing

Title: Re: Precious Metals
Post by: MStangRacer on March 21, 2019, 05:55:07 PM
Regarding the foam on this thread regarding the value of gold as an investment. With such heated and passionate arguments from both sides, it kind of makes the case for me to buy a little. If things go well and gold becomes irrelevant then I'm only down a little. If our fiat currency does eventually do what all fiat currencies in history have done (inflate away) then I'll be glad I kept at least a small stash in the little yellow metal.

This is sort of why I have a small portion in precious metals as well, in an ETF and in physical metals.  Whether I think they are worth something in an extreme situation isn't the issue -- it's whether someone else does.  And based on my observations here and elsewhere, there will always be a buyer for gold.  I'll take US dollars, bitcoin, or beans & bullets, depending on the circumstances.

I fell the same way, Gold/Silver is like insurance dollar collapse/shtf
Title: Re: Precious Metals
Post by: waltworks on March 21, 2019, 06:04:47 PM
I fell the same way, Gold/Silver is like insurance dollar collapse/shtf

No, diversified stocks or real estate are dollar collapse insurance par excellence. SHTF insurance is bullets and beans, because basically nobody is going to be buying or selling stuff (with gold or otherwise) after the zombie apocalypse.

-W
Title: Re: Precious Metals
Post by: TomTX on March 21, 2019, 06:28:04 PM
Silver bullets?

Apparently that's actually a thing

PFFT. That's silver made to look like a cartridge.

You can actually get functional cartridges with a silver bullet.
Title: Re: Precious Metals
Post by: vand on August 05, 2019, 09:00:52 AM
Precious metals are doing their traditional job and going zig when other assets go zag.

For UK investors like myself gold has just set all time highs in the local currency and beaten the FTSE Acc over multiple significant timeframes... during one of the greatest stock bull markets in history.

Gold vs FTSE Acc over 5 yrs:
https://stockcharts.com/h-sc/ui?s=%24GOLD%3A%24GBPUSD&p=D&yr=5&mn=0&dy=0&id=p11467062996

Title: Re: Precious Metals
Post by: Radagast on August 05, 2019, 09:01:07 PM
Along those lines I unloaded rebalanced a big part of my 5% gold miner ETF allocation this morning as it blew past both my rebalance band and then the limit order I set after it crossed the rebalance band. Up about 68% from November lows, but maybe only 30% above my cost basis since I last rebalanced in 2016. In fact, checking Portfolio Visualizer, it looks like it was pretty much perfectly tied with Vanguard Total World Stock Index over the past 3 years, depending on exactly what assumptions are made for dates and cash flows (mine are hard to model because they are lumpy and increasing, and I don't care enough to track with any precision).

I would characterize gold and gold miners as "zig" over the past few months, but I would not characterize world stock markets as "zag". More like "vaguely flat-ish" over the last 3 or even 24 months.

So, I am "meh" as a result of this blip. I would have done similarly well with VT and not bothered with the extra slice, even though it was exciting selling the limit orders.
Title: Re: Precious Metals
Post by: Paul990 on August 09, 2019, 11:50:59 PM
For UK investors like myself gold has just set all time highs in the local currency
Not only for UK investors

Gold Hits Record Highs
British pound – £1,209.55
Indian rupee – Rs 103,837.75
Canadian dollar – CAD $1,938
Australian dollar – AUD $2,180
Japanese yen – ¥155,550
South African rand – ZAR R21,929

(https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/bfm77EA.jpg?itok=PlEhQkie)

https://www.zerohedge.com/news/2019-08-06/gold-hits-record-highs
Title: Re: Precious Metals
Post by: vand on August 15, 2019, 02:24:19 AM
I think this is a very well-reasoned article makign the case for PMs in an investment portfolio:

https://seekingalpha.com/article/4242410-buying-gold-silver-reason-think

couple of snips:

"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."


"Gold historically gives good risk-adjusted returns when bought at cheap or moderate prices during times when equities are highly valued.

Moreover, I view gold mostly as competing for a spot in a portfolio against cash and bonds, rather than necessarily competing against stocks. And, on that front, it has done quite well"
Title: Re: Precious Metals
Post by: robartsd on August 15, 2019, 09:40:51 AM
"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."
I basically take this as gold should roughly match inflation (as most commodities should). I agree that gold is a great alternative to cash in a portfolio (money market and insured bank accounts usually lose real value to inflation).
Title: Re: Precious Metals
Post by: ChpBstrd on August 15, 2019, 12:21:31 PM

"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."

In the snip above, replace “gold” with any of the following to see if the premises sill lead to the conclusion.

Confederate money
Working typewriters
Aspirin
Rain water
Land
Beanie babies (sorry if this one is just being spiteful)
Iron
Roads
Lead
The praline supply
1984 Chevrolet Citation hatchbacks in VG condition
Publicly traded companies
Shares outstanding in a company that does buybacks
Timber
Toilet paper
Title: Re: Precious Metals
Post by: vand on August 15, 2019, 12:48:40 PM
"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."
I basically take this as gold should roughly match inflation (as most commodities should). I agree that gold is a great alternative to cash in a portfolio (money market and insured bank accounts usually lose real value to inflation).

Yes, Gold is a form of money, therefore its should match the classic definition of inflation which is growth of the money supply, not the modern definition of inflation which is changes in consumer prices.
Title: Re: Precious Metals
Post by: Telecaster on August 19, 2019, 05:48:28 AM
"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."
I basically take this as gold should roughly match inflation (as most commodities should). I agree that gold is a great alternative to cash in a portfolio (money market and insured bank accounts usually lose real value to inflation).

That should be amended to "gold should roughly match inflation...over sufficiently long time periods and if one enters at a price close to the long term average gold price."

For example, if you bought gold at the peak price in 1980, you have lost to inflation.   And it is entirely possible that after accounting for inflation you will never have a chance to recoup your investment.   In other words, you may never see that price again.  You might, but you would still be under water 39 years later.  If you were buying bonds back then on the other hand, you made a bundle.   Rules of the thumb are great, but be very careful applying them. 

Gold is like any other commodity.   It is fine to trade it, if you like.  But it has no magical properties.  The entrance price determines your profit.   Buy low, sell high, right?   I wouldn't buy gold unless I thought the price was low.  It doesn't seem to be low at the moment.  I could be wrong. 
Title: Re: Precious Metals
Post by: ChpBstrd on August 19, 2019, 09:17:08 AM
What if instead of “precious metals” we called them “expensive metals”? Would element 79 have the same investor interest? How much of the hype is industry generated? When someone buys expensive metal, are they the investor or the customer?
Title: Re: Precious Metals
Post by: Car Jack on August 19, 2019, 09:25:50 AM
I think you all know that when the stock market takes a sudden downturn......even 0.1%.....some investors "escape to gold", raising the price of gold.  I see it when checking the market on marketwatch.  Right now would be an absolutely horrible time to buy gold as it's at "an all time high".  Boy, where have we heard that phrase.  With the market up as of now (1%), today, gold is down (0.8%).  So y'all missed the buying opportunity back when the market was up. 
Title: Re: Precious Metals
Post by: Paul990 on August 29, 2019, 10:13:59 AM
I basically take this as gold should roughly match inflation (as most commodities should). I agree that gold is a great alternative to cash in a portfolio (money market and insured bank accounts usually lose real value to inflation).
It's true, commodities too are an hedge against fiat money depreciation, but in general they are more volatile than gold.
Plus their price tend to be a function of the economic cycles.
Commodities are not monetary metals. That's why, unlike gold, they are not traded on the Forex Market.

Gold hedges against inflation
https://www.goldmoney.com/precious-metals-guide-for-new-investors

(https://www.goldmoney.com/site/images/chart-housing-priced-in-gold.png)

(https://www.goldmoney.com/site/images/chart-food-priced-in-gold.png)                                     (https://www.goldmoney.com/site/images/chart-oil-priced-in-gold.png)
Title: Re: Precious Metals
Post by: ChpBstrd on August 29, 2019, 10:43:57 AM
The bond market is betting everything on deflation.

The gold market is betting everything on inflation.

If the exponentially larger bond market is wrong and inflation rises, a massive global multi-trillion dollar bubble will burst, draining liquidity from all economies as banks fail and businesses sell everything in a struggle for liquidity, which is a deflationary event that will wipe out the earlier blip in inflation as this century’s Great Depression starts. All assets will lose value as cash becomes king.

If the gold market is wrong and inflation does not rise, a volatile commodity will drop in price again, just another blip, and that’s about it.
Title: Re: Precious Metals
Post by: ChpBstrd on August 29, 2019, 10:52:05 AM
I basically take this as gold should roughly match inflation (as most commodities should). I agree that gold is a great alternative to cash in a portfolio (money market and insured bank accounts usually lose real value to inflation).
It's true, commodities too are an hedge against fiat money depreciation, but in general they are more volatile than gold.
Plus their price tend to be a function of the economic cycles.
Commodities are not monetary metals. That's why, unlike gold, they are not traded on the Forex Market.

Gold hedges against inflation
https://www.goldmoney.com/precious-metals-guide-for-new-investors

(https://www.goldmoney.com/site/images/chart-housing-priced-in-gold.png)

(https://www.goldmoney.com/site/images/chart-food-priced-in-gold.png)                                     (https://www.goldmoney.com/site/images/chart-oil-priced-in-gold.png)

So the moral of the story is if you’re going to stuff something under the mattress for a decade, make it gold.

I don’t suppose a site like goldmoney.com factors in the risk-free interest that can be earned in treasuries, savings bonds, or even bank CDs - but only on cash. I really bet they don’t model, say, a 70/30 portfolio over that time. I guarantee they don’t factor in the sky-high bid-ask spread for physical metal at your local coin shop or the insurance and security measures required to safely keep physical PMs at home.
Title: Re: Precious Metals
Post by: EvenSteven on August 29, 2019, 11:18:15 AM
Quote
So the moral of the story is if you’re going to stuff something under the mattress for a decade, make it gold.

Probably more comfortable than cattle.
Title: Re: Precious Metals
Post by: Davnasty on August 29, 2019, 12:05:43 PM
Quote
So the moral of the story is if you’re going to stuff something under the mattress for a decade, make it gold.

Probably more comfortable than cattle.

Maybe beef jerky? Probably a hefty processing fee to turn cattle into jerky though...
Title: Re: Precious Metals
Post by: vand on August 30, 2019, 03:59:43 AM
Gold is a hedge against inflation of the supply of money and tends to do well when real interest rates go negative. That means it can do great if nominal rates are zero and inflation is 2%, or it can do terrible if nominal rates are 15% and inflation is 10%.

Bonds and gold are absolutely not in contradiction. They are both are flashing warnings about as clearly as they are able to to anyone who can pick their head out of their equity-overloaded ar$e for 30 seconds that the economic headwinds have changed and loser monetary policy is ahead.
Title: Re: Precious Metals
Post by: Car Jack on August 30, 2019, 09:13:45 AM
So as a warning....if you're buying physical gold from someone that's not a business like Apmex.....bring a magnet.  This is even more important for silver.  You don't want to be checking your stash in 10 years and find that you've got 18 micrograms of pure gold over a steel slug.  This has become a very big problem in the silver market for coin buyers.
Title: Re: Precious Metals
Post by: PDXTabs on August 30, 2019, 10:00:13 AM
So the moral of the story is if you’re going to stuff something under the mattress for a decade, make it gold.

I would add that farm land (another hard asset and inflation hedge) did much better: https://www.ers.usda.gov/topics/farm-economy/land-use-land-value-tenure/farmland-value/ (https://www.ers.usda.gov/topics/farm-economy/land-use-land-value-tenure/farmland-value/)

Of course buying farmland and renting it out to get enough money to cover the taxes is a pain in the rear, and it isn't very liquid.
Title: Re: Precious Metals
Post by: Telecaster on August 30, 2019, 10:22:27 AM
Gold is a hedge against inflation of the supply of money and tends to do well when real interest rates go negative. That means it can do great if nominal rates are zero and inflation is 2%, or it can do terrible if nominal rates are 15% and inflation is 10%.

Bonds and gold are absolutely not in contradiction. They are both are flashing warnings about as clearly as they are able to to anyone who can pick their head out of their equity-overloaded ar$e for 30 seconds that the economic headwinds have changed and loser monetary policy is ahead.

Could be, but a snip from your article up above (emphasis mine):

Gold historically gives good risk-adjusted returns when bought at cheap or moderate prices during times when equities are highly valued.

At the moment, equities are highly valued, but by no measure is the price of gold cheap or moderate.   Historically, when you buy gold at something like today's prices, you take it in the shorts.   
Title: Re: Precious Metals
Post by: flipboard on August 30, 2019, 11:33:23 PM
At the moment, equities are highly valued, but by no measure is the price of gold cheap or moderate.   Historically, when you buy gold at something like today's prices, you take it in the shorts.
What? Inflation Adjusted, Gold is cheap.
Title: Re: Precious Metals
Post by: Paul990 on September 01, 2019, 06:57:20 AM
So the moral of the story is if you’re going to stuff something under the mattress for a decade, make it gold.

I don’t suppose a site like goldmoney.com factors in the risk-free interest that can be earned in treasuries, savings bonds, or even bank CDs - but only on cash. I really bet they don’t model, say, a 70/30 portfolio over that time. I guarantee they don’t factor in the sky-high bid-ask spread for physical metal at your local coin shop or the insurance and security measures required to safely keep physical PMs at home.
I don’t share your conviction that treasuries, saving bonds and bank CDs are completely risk-free, but let's leave it for another day.
If Goldmoney had factored in the negative interest that was "earned" in 3-Months treasuries in the last years, they had made their point even better.

(https://specials-images.forbesimg.com/imageserve/5d6ac5ab673aa300083cade2/960x0.jpg?fit=scale)

https://www.forbes.com/sites/johntobey/2019/08/31/worried-about-negative-interest-rates-coming-they-are-already-here-and-that-is-a-serious-problem/#780f7d745cc1


If Goldmoney had considered the inflation rate calculated according to the criteria used pre-1980, they had scored a home run.

(http://www.shadowstats.com/imgs/sgs-cpi.gif?hl=ad&t=1565704714)

http://www.shadowstats.com/alternate_data/inflation-charts



With those charts, they (Goldmoney) didn't mean that a 100% gold portfolio offers the best performance. I think you misunderstood the meaning of those charts.
A 70/30 could have been better over that time, or could have been worse over that time. It’s doesn’t matter because those charts weren't portfolio-advising.
All those charts are showing is just gold's efficacy in protecting against the depreciation of the US dollar (or of every other fiat currency).

(https://www.goldbroker.com/media/image/cms/media/images/gold-only-money%20that-tells-truth/major_currencies_vs_gold.png)

https://www.goldbroker.com/news/gold-is-the-only-money-that-tells-the-truth-1271


As gold investing, in your comment you consider only precious metals home keeping.
Keep in mind that this is only one way of investing in them.
You can buy and let them store through companies like Goldmoney, Bullionstar, Bullionvault etc.
Essential is allocated storage, regular third party audits of the metals, LMBA quality, ownership title of the metals, insurance etc.
(ETFs don’t offer ownership title of the metals represented by the ETF shares, so I consider them gold derivatives.)
Another, new way to invest in precious metals is offered by blockchain, which offers some benefits, among others enhanced transparency and records manipulation prevention.
Ownership title and all other guarantees are there, low bid-ask spread, and insurance and security are taken care of for free.
Title: Re: Precious Metals
Post by: maizeman on September 01, 2019, 08:01:34 AM
If Goldmoney had considered the inflation rate calculated according to the criteria used pre-1980, they had scored a home run.

(http://www.shadowstats.com/imgs/sgs-cpi.gif?hl=ad&t=1565704714)

http://www.shadowstats.com/alternate_data/inflation-charts

Be careful about using the ShadowStats #s shown in the graph you inserted here. Over a few years it can be hard to distinguish between 2-3% inflation and 5-7% inflation so it's easy to tell oneself that the reported numbers are way off. However over longer time periods, it's easy to sanity check. If the shadowstats inflation numbers from 1980-2010 are correct (prices increased 8.5x vs 2.5x for the reported CPI numbers), it means that a house in 2010 costs less than half as much as in 1980 in real (inflation adjusted) terms.

(http://4.bp.blogspot.com/-07uPKO21tvc/TYX4izgd1NI/AAAAAAAADqg/xX1L8xwM85s/s400/shadow%2Bstats%2Breal%2Bhousing%2Bprices.png)

People have done similar comparisons using grocery ads from the early 1980s and more recently, comparing how accurately the ShadowStats inflation numbers and government reported inflation numbers predict the change in prices over 30+ years.

(https://s3-us-west-2.amazonaws.com/maven-user-photos/economonitor/emerging-markets/2waTRiClfEK6xXAhSPc8Dg/8tYiL81jRk--pB3WrzC0Sg)

Here's a fascinating breakdown of the differences between government reported inflation and ShadowStats, including an explanation of some of the most controversial adjustments in the government inflation data and some sanity checks of the two inflation #s using price changes across multiple decades.

https://moneymaven.io/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists-DWhA0PwhhkOHkzTLLeCvpQ/
Title: Re: Precious Metals
Post by: PDXTabs on September 01, 2019, 10:30:58 AM
https://moneymaven.io/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists-DWhA0PwhhkOHkzTLLeCvpQ/

That is fascinating. Thanks for posting.
Title: Re: Precious Metals
Post by: Paul990 on September 02, 2019, 12:10:34 PM
@maizeman,
I lack the knowledge needed to check ShadowStats's figures, so maybe you are right.
As I don't live in the USA, I lack even an overall experience of what the real US dollar depreciation has been in the last 40 years.

I was just making the point that the classic argument Bonds give a yield, Gold doesn't, isn't that good during NIRP times.
That said, the main point of my message was actually the second part: bullion home storage isn't the only solution for investing in physical gold.

(Trying to understand how I can reduce the images' size when inserting them into a post)
Title: Re: Precious Metals
Post by: maizeman on September 02, 2019, 12:22:12 PM
(Trying to understand how I can reduce the images' size when inserting them into a post)

This, at least, I can help with. You can add a "width" tag to images which limits the number of pixels the image will occupy in that dimension in your post. Here is an example:

Code: [Select]
[img width=600]https://img.freepik.com/free-photo/fluffy-sad-puppy-samoyed-dog_89378-171.jpg[/img]
Title: Re: Precious Metals
Post by: Telecaster on September 02, 2019, 09:17:03 PM
Here's easy way to debunk Shadowstats, the Billion Prices Project:

http://www.thebillionpricesproject.com/

The BPP tracks, as the name suggests, the prices of a billion items.  Unlike the CPI, BPP does not include substitutions, which is one of Shadowstats major beefs with CPI.

But the result is inflation as calculated by BPP is very similar to CPI.

Another easy way it just to use the common sense test.  If inflation had been raging along at 10% for the last 20 years as Shadowstats claims, then prices should be up by 600%.   That's clearly not the case. 
Title: Re: Precious Metals
Post by: Paul990 on September 03, 2019, 02:32:42 AM
So, does your daily experience confirm that since August 2018
food increased 1,8%,
energy decreased 2%
all items in general increased 1,8%
?

https://www.bls.gov/cpi/



CPI 12-months June 2019
(https://www.macrobusiness.com.au/wp-content/uploads/2019/07/Capture1-3.png)
You are a lovely man maizeman
Title: Re: Precious Metals
Post by: maizeman on September 03, 2019, 06:15:50 AM
So, does your daily experience confirm that since August 2018
food increased 1,8%,
energy decreased 2%
all items in general increased 1,8%
?

It's hard to say. Different kinds of food and energy bounce around enough in price that I'm not sure I would notice the difference between an overall an 1.8% increase (or decrease) from a 5-6% increase year to year. But on a decadal scale it gets a lot easier to make the call. While what I pay for groceries has increased since 2009, it'd definitely increased much less than 70% (what 5.5% inflation compounded annually for a decade would predict).

On the energy side, the price I pay for gasoline today is about the same as what I paid in 2009 and significantly less than I paid in 2008. I pay a bit more for natural gas and a bit less for electricity than I did in 2009, but I moved to a new state and from an apartment to a house in that time frame so those comparisons are less informative.
Title: Re: Precious Metals
Post by: MilesTeg on September 03, 2019, 10:55:53 AM
Thanks to all those that answered my questions; it's appreciated!
Title: Re: Precious Metals
Post by: Paul990 on September 05, 2019, 04:17:06 AM
Another easy way it just to use the common sense test.  If inflation had been raging along at 10% for the last 20 years as Shadowstats claims, then prices should be up by 600%.   That's clearly not the case.

But on a decadal scale it gets a lot easier to make the call. While what I pay for groceries has increased since 2009, it'd definitely increased much less than 70% (what 5.5% inflation compounded annually for a decade would predict).

Yes, I understand that considering long term, Shadowstats' figures look exaggerated.
But let's not forget, Shadowstats doesn't make up their own criteria in order to criticise the official CPI (there are other critics who do just that).
Shadowstats applies what until 1980 were the official criteria to do that.

Nobody seems to put in question that Shadowstats applies the 1980 CPI criteria correctly, so, I assume that that's the case.
So, it seems that until 1980 those criteria delivered a reasonable picture of what was the effective US dollar depreciation rate, while applying the same criteria today doesn't.
I guess, maybe because behaviour and market conditions have changed, but that's a very general assertion, platitudelike, and is just guessing.
Title: Re: Precious Metals
Post by: waltworks on September 05, 2019, 06:59:09 AM
Yes, I understand that considering long term, Shadowstats' figures look exaggerated.

They just look/are hilariously wrong by any reasonable measure.

Did you read the two articles? There's nothing defensible about the way Shadowstats is producing these numbers. You can disagree with how the government reports inflation and unemployment while still recognizing that Shadowstats is just some guy's nutty ranting, basically. It's not even vaguely a useful substitute for the official numbers.

-W
Title: Re: Precious Metals
Post by: maizeman on September 05, 2019, 01:42:28 PM
Quote from: Paul990 link=topic=92969.msg2453687#msg2453687
Nobody seems to put in question that Shadowstats applies the 1980 CPI criteria correctly, so, I assume that that's the case.

Yes, lots of people, myself included, are calling into question whether the numbers on shadowstats reflect that the 1980 inflation formula would measure today.

Keep in mind the author isn’t calculating inflation using the old formula, nor does he claim to. He doesn’t have the raw data he would need. He is taking the new numbers reported by the government and then adding in various amounts of additional inflation he says he thinks will correct for the changes made to the formula.

Very different from just continuing to calculate inflation from the same data using the old formula.
Title: Re: Precious Metals
Post by: Paul990 on September 07, 2019, 02:49:15 AM
When Blackrock speaks, you better listen...

What ammunition central banks have yet to deploy

There are two ways inflation is created: one is to actually raise the prices of goods and services organically, but the other is to debase the currency in which those goods and services are sold (think helicopter money). Because the former method relies on traditional aggregate demand stimulus (lower interest rates), which has not been working, since the natural rate of aggregate demand growth is now so low (and in some places is contracting) and the supply curve is so flat; the endgame may well be monetary debasement.

Under the gold standard this would not have been possible, as every new dollar would have to be backed by physical gold mined from the earth (a very slow and expensive process, and likely without the requisite volumes), but today money is created by printing presses, or even a few computer keystrokes.

In order to debase a currency, money needs to be created at a faster pace than goods and services are (essentially, liquidity growth needs to exceed world GDP growth).

How should one position for such an endgame?

As is probably evident, any nominal instrument will be devalued in real terms, so the solution is to hold an asset that maintains its real value – an asset that cannot be printed.
We would include stocks (dividend yields are set on payout ratios, companies have some degree of pricing power, and shares outstanding are limited in number), real estate (it is difficult and expensive to expand the stock of real estate), and even commodity currencies, like gold (again, limited supply and expensive to extract).

https://www.blackrockblog.com/2019/09/05/monetary-policy-endgame/?utm_source=BlackRock+Blog&utm_campaign=64d5638776-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_7beec13d69-64d5638776-305445649

Rick Rieder, Managing Director, is BlackRock’s Chief Investment Officer of Global Fixed Income and Head of the Global Allocation Investment Team.
Russell Brownback, Managing Director, Head of Global Macro positioning for Fixed Income.
Navin Saigal, Vice President, analyst and portfolio manager on BlackRock’s Global Macro Strategies Team.


I find interesting that they call gold a commodity currency.
Beside gold and silver, I can't think of other commodities that can be defined as currencies.
The implication here is that precious metals are not just a way, together with stocks and real estate, to hedge against fiat currency depreciation.
Unlike stocks and real estate, precious metals are also currencies. Money.

Stocks are not money. Real estate is not money. Precious metals are money.
I'm sure these three BlockRock's big calibers see the implication of what they write: when choosing which inflation hedge to invest in, the fact that gold is also money while stocks and real estate are not, could/should play a decisive role, as being money is no negligible advantage of gold vs. stocks and real estate.
Title: Re: Precious Metals
Post by: TomTX on September 07, 2019, 06:16:57 AM
MMkay. I'm thinking Paul here isn't really interested in being a community member, just pushing a really blatant agenda.

Judging by posts, there's no real interaction with the community, just shilling for gold and "stablecoins" backed by gold, etc.
Title: Re: Precious Metals
Post by: Radagast on September 07, 2019, 07:58:12 AM
Stocks are not money. Real estate is not money. Precious metals are money.
My longstanding definition of money is "payments which are accepted by Walmart." By my definition, precious metals are not money. <(large period for emphasis)
Title: Re: Precious Metals
Post by: flipboard on September 07, 2019, 09:00:11 AM
Stocks are not money. Real estate is not money. Precious metals are money.
My longstanding definition of money is "payments which are accepted by Walmart." By my definition, precious metals are not money. <(large period for emphasis)
So Euros, CHF, Renminbi, CAD, GBP all aren't money.
Title: Re: Precious Metals
Post by: Radagast on September 07, 2019, 09:12:33 AM
Stocks are not money. Real estate is not money. Precious metals are money.
My longstanding definition of money is "payments which are accepted by Walmart." By my definition, precious metals are not money. <(large period for emphasis)
So Euros, CHF, Renminbi, CAD, GBP all aren't money.
Well I can vouch that RMB at least is money. Not to me right now, but I have used them at Walmart in the past. Have not had experience with the others.

How does that feel to you? The People's Republic of China issues something that is money, but gold is not presently money anywhere on the entire planet.
Title: Re: Precious Metals
Post by: Buffalo Chip on September 07, 2019, 09:30:07 AM
Gold is a hedge against inflation of the supply of money and tends to do well when real interest rates go negative. That means it can do great if nominal rates are zero and inflation is 2%, or it can do terrible if nominal rates are 15% and inflation is 10%.

Bonds and gold are absolutely not in contradiction. They are both are flashing warnings about as clearly as they are able to to anyone who can pick their head out of their equity-overloaded ar$e for 30 seconds that the economic headwinds have changed and loser monetary policy is ahead.

The choices in investing seem to be; you can be wealthier, or more popular. Pick one

Equity-overloading is the Achilles heel of the FI movement.       
Title: Re: Precious Metals
Post by: flipboard on September 08, 2019, 01:34:00 PM

"The U.S. broad money supply is growing quickly per capita, while the amount of gold per capita is relatively fixed. Thus, gold should gradually appreciate in price over time at a rate roughly equal to the growth of money supply per capita, which has averaged over 5% per year for nearly five decades now."

In the snip above, replace “gold” with any of the following to see if the premises sill lead to the conclusion.

Confederate money
Working typewriters
Aspirin
Rain water
Land
Beanie babies (sorry if this one is just being spiteful)
Iron
Roads
Lead
The praline supply
1984 Chevrolet Citation hatchbacks in VG condition
Publicly traded companies
Shares outstanding in a company that does buybacks
Timber
Toilet paper
I realise most people in this thread are firmly in their camp and never going to leave. Nevertheless, here we go.

Iron, Lead, Timber, and Land are the only ones in that list that have been used by humans for 5000 or more years. Land is an asset that is limited in supply, and is something that is often treated as an investment and important good - and in fact its record isn't terrible - and it doesn't have 1:1 correlation with stocks during the shorter timeframe in which stocks have existed (which is what you want when diversifying). Timber meanwhile literally grows in trees, and isn't particularly valuable - and can rot if you treat it wrong - no wonder that's no a good investment.

That leaves Iron and Lead. Also metals. Those two are in much more abundant supply than Gold, and have much less amazing properties (not shiny, not as useful for high-tech electronics, etc.). That explains why they weren't treated as anywhere near as valuable in societies thousands of years ago, and why they continue to not be treated as special today.

That's far from saying that you should only invest in Land and Gold. You shouldn't. And no one on this thread is suggesting that. But with a small allocation as a less-correlated diversifier in a portfolio? Could be something to consider. Apparently I'm not the only one to think so (http://www.efficientfrontier.com/ef/adhoc/gold.htm).
Title: Re: Precious Metals
Post by: Buffalo Chip on September 08, 2019, 03:26:31 PM

I realise most people in this thread are firmly in their camp and never going to leave. Nevertheless, here we go.


 We’re talking investment strategies, not religious dogma. That seems to be forgotten at times.

Speaking for myself, a barbaric relic or two in moderation isn’t going to significantly hurt your portfolio. So why not have some to smooth out those results?
Title: Re: Precious Metals
Post by: Paul990 on September 14, 2019, 10:18:16 AM
My longstanding definition of money is "payments which are accepted by Walmart." By my definition, precious metals are not money. <(large period for emphasis)
I partly agree.
(There is this conceptual distinction floating around, particularly within the goldbugs sphere, between currency and money, but let's leave it aside.)

Money has two functions: medium of exchange and store of value.
Something which you can’t be use to buy things, is not money. Agree.
American Eagles are not accepted at checkpoint at Walmart. That means, they are bad money.
But it's not that with them you cannot buy altogether.
As a rough medium of exchange (you can call it barter. It doesn't matter), precious metals are widespread accepted around the world.
So I wouldn't say that precious metals aren't money altogether. They are just bad money, at least in their physical form.

On the other hand, you don’t consider the second function of money.
The more a currency loses purchasing power over time, the worse it is as money.
It is because precious metals accomplish this function better than fiat currencies that some people say, PM are better money than fiat currencies.

The People's Republic of China issues something that is money, but gold is not presently money anywhere on the entire planet.
I wouldn't say that.
The recognition of gold’s value is much more widespread than that of any fiat currency.
If they should tell me, I’ll get lost somewhere around the world, without knowing where, and they give me the chance of choosing a currency to take with me, I’ll choose gold.

It's not a question of yes or no, it's a question of what is better and what is worse money (while considering both money's functions).

Title: Re: Precious Metals
Post by: Paul990 on September 14, 2019, 10:25:58 AM
MMkay. I'm thinking Paul here isn't really interested in being a community member, just pushing a really blatant agenda.

Judging by posts, there's no real interaction with the community, just shilling for gold and "stablecoins" backed by gold, etc.
Well, I'm sorry for not really interacting with the community TomTX.
From now on, I'll try to do my best.
And I'm going to start with you.
What do you think about what I just posted?
Title: Re: Precious Metals
Post by: TomTX on September 14, 2019, 10:32:24 AM
MMkay. I'm thinking Paul here isn't really interested in being a community member, just pushing a really blatant agenda.

Judging by posts, there's no real interaction with the community, just shilling for gold and "stablecoins" backed by gold, etc.
Well, I'm sorry for not really interacting with the community TomTX.
From now on, I'll try to do my best.
And I'm going to start with you.
What do you think about what I just posted?
LOL

I think you're sticking hard to your single-topic agenda pushing.
Title: Re: Precious Metals
Post by: maizeman on September 14, 2019, 11:32:32 AM
Stocks are not money. Real estate is not money. Precious metals are money.
... when choosing which inflation hedge to invest in, the fact that gold is also money while stocks and real estate are not, could/should play a decisive role, as being money is no negligible advantage of gold vs. stocks and real estate.

One can argue back and forth about whether or not gold is money. The arguments have a lot more to do with how one defines money than the strengths or weaknesses of gold itself.* Depends about what different definitions of words should be both bore and tire me, particularly when people are trying to change the definitions to score points in an argument about actual concepts and facts.**

So let's set that aside. Paul, can you explain what the specific non-negligible advantages you see of hedging against inflation with gold rather than in real estate or stocks and how those fit in to gold being money? Also could you clarify whether you are talking about hedging with gold funds or tangible in-your-hands gold?

The former (gold ETFs) of course suffer from higher carrying costs that stock ETFs (0.4% vs 0.04% ER) and poorer tax treatment (28% of gains in dollar terms vs 20% for stocks***).

The latter (physical gold) incurs high transaction costs. I can sell $10,000 in stocks from my computer for $7 or 0.07%. To convert physical gold into money I'm either mailing it in, waiting days and hoping nothing goes wrong, or selling it to a local store and receiving 90-95% of spot prices (the equivalent of having to pay a $500-$1,000 fee to sell $10,000 in stocks).****

Now as Buffalo Chip points out, in small to moderate doses neither a bit of in-the-hand gold or a few percent of ones portfolio in GLD is going to do terrible things to ones overall portfolio. I'm not trying to convince anyone that it's a disaster to buy or own gold. I just genuinely don't see how how one ends up thinking it provides superior long term inflation edge relative to stocks and real estate.***** And that's before we've even touched on the wonderful inflation hedging properties of long term fixed rate mortgages.

* My own view is that gold is every bit as much and every bit as little a currency as bitcoin is. Bitcoin is better at the medium of exchange bit, gold is better at the store of value bit, and

** See also people's attempts to redefine the word "racism." Anyway that's extremely off-topic.

*** Both of these numbers can be lower if your income is lower, but the stock tax rate will always be the lower of the two at any income threshold. And in high inflation scenarios where hedging against it would pay off, a large proportion of the total value of any money you need to pull out of gold/stocks to support your day to day life is going to be "gains" in nominal dollar terms.

**** I also did the same calculation using current buy/sell prices for 1 oz gold bars online. Buying $10,000 in 1 oz gold bars would cost $171 (1.7%) in price paid over spot. And selling $10,000 would cost $92 in price paid under spot. So call it between 13-24x the transaction costs of stocks if you can tolerate much longer wait times to convert your inflation hedge into locally accepted currency.

***** For any level of inflation seen in the history of the dollar. In societal breakdown levels of inflation, gold is definitely going to be more useful to ensuring ones survival than a well funded stock portfolio and a rented out 4-plex. But in a societal breakdown a stash of food, antibiotics, and cigarettes is likely to outperform gold by those same metrics.

Fun comparison: Over my lifetime to date, a dollar invested in the stock market increased to $33.7 (10.9% CAGR), a dollar invested in gold grew to $4.88 (4.8% CAGR), and (in NYC), and a pack of cigarettes that cost $1.05 back then now goes for $13 (7.7% CAGR). Outside of NYC the CAGR of cigarettes is closer to 4.9%.
Title: Re: Precious Metals
Post by: SwordGuy on September 14, 2019, 12:20:16 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

Title: Re: Precious Metals
Post by: TomTX on September 14, 2019, 01:23:55 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.
Title: Re: Precious Metals
Post by: SwordGuy on September 14, 2019, 01:28:16 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.

If it was such a good investment to hold, they would be advertising to BUY gold, not SELL gold.   That's my point.
Title: Re: Precious Metals
Post by: maizeman on September 14, 2019, 01:36:07 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.

If it was such a good investment to hold, they would be advertising to BUY gold, not SELL gold.   That's my point.

Well there are all those cash-for-gold places spending money advertising to do exactly that (buy your gold).

They'll just offer people a lot less money to buy the gold than they'll charge when they turn around and sell that gold to someone else.
Title: Re: Precious Metals
Post by: JAYSLOL on September 14, 2019, 01:54:27 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.

If it was such a good investment to hold, they would be advertising to BUY gold, not SELL gold.   That's my point.

Well, you’re not wrong, but you could certainly say the same about anyone selling anything as an investment including exchanges and wealth management companies that sell stocks or funds full of stocks in a bull market.  The answer of course has nothing to do with a product being a good long term investment because as they say a fast nickel is better than a slow dime.  Or in the case of a fund manager, part of a penny/year in perpetuity off someone’s else’s dime.
Title: Re: Precious Metals
Post by: SwordGuy on September 14, 2019, 02:33:56 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.

If it was such a good investment to hold, they would be advertising to BUY gold, not SELL gold.   That's my point.

Well, you’re not wrong, but you could certainly say the same about anyone selling anything as an investment including exchanges and wealth management companies that sell stocks or funds full of stocks in a bull market.  The answer of course has nothing to do with a product being a good long term investment because as they say a fast nickel is better than a slow dime.  Or in the case of a fund manager, part of a penny/year in perpetuity off someone’s else’s dime.

No, not really. 

Exchanges don't own the product (i.e., stocks or other commodities).  They just provide a marketplace.   The companies selling the old own the gold.

As for wealth management companies, aren't they holding the underlying stocks you buy in trust for you?   If they get a bunch of new customers I think they are buying more stock to support those customers, not selling off the stock they own.
Title: Re: Precious Metals
Post by: JAYSLOL on September 14, 2019, 03:57:28 PM
I've noted that when the economy sours, scores of businesses start advertising how wise it is to own gold "at times like this".

Seems plausible.

Then I realize they have voluntarily chosen to SPEND THEIR CASH to convince me to GIVE THEM MORE CASH as their way to UNLOAD THEIR GOLD.

If "times like these" are the best possible time to own gold, why are the people who own that gold going to so much trouble to sell it?

So that they can sell it to you at 5% above spot, while buying it from others at 5% below spot.

If it was such a good investment to hold, they would be advertising to BUY gold, not SELL gold.   That's my point.

Well, you’re not wrong, but you could certainly say the same about anyone selling anything as an investment including exchanges and wealth management companies that sell stocks or funds full of stocks in a bull market.  The answer of course has nothing to do with a product being a good long term investment because as they say a fast nickel is better than a slow dime.  Or in the case of a fund manager, part of a penny/year in perpetuity off someone’s else’s dime.

No, not really. 

Exchanges don't own the product (i.e., stocks or other commodities).  They just provide a marketplace.   The companies selling the old own the gold.

As for wealth management companies, aren't they holding the underlying stocks you buy in trust for you?   If they get a bunch of new customers I think they are buying more stock to support those customers, not selling off the stock they own.

Well, an exchange may be a poor comparison, but a company selling gold doesn’t typically have a massive stockpile.  Like a typical retail business they have just enough stock to supply an expected demand for a relatively short period and then order more stock from various mints/suppliers as needed, but they wouldn’t just endlessly stockpile wether or not it was selling.  So I think the overall idea still stands wether or not they already own or just facilitate buying it for you, why sell it to you if they believe they could buy it instead and make more?  Because they aren’t around to speculate, they just want the fast nickel. 
Title: Re: Precious Metals
Post by: Telecaster on September 14, 2019, 05:12:58 PM
I wouldn't say that.
The recognition of gold’s value is much more widespread than that of any fiat currency.
If they should tell me, I’ll get lost somewhere around the world, without knowing where, and they give me the chance of choosing a currency to take with me, I’ll choose gold.

You have to admit that that possibility happening is sufficiently remote you can safely disregard that as a reason for owning gold. 

There is some logic to owning gold in case of some catastrophe like complete collapse of the banking system, meteor strike, zombie apocalypse, etc.  Beyond that, I can't think of many reason reasons. 

RE:  store of value.  Gold is a store of value!  Just not a very good one.   For example, if you bought gold in the last 1970s or early 1980s, the value of your gold declined for decades.  And adjusted for inflation, it still hasn't recovered its value. 

Title: Re: Precious Metals
Post by: Paul990 on September 21, 2019, 04:44:31 AM
There is some logic to owning gold in case of some catastrophe like complete collapse of the banking system, meteor strike, zombie apocalypse, etc.  Beyond that, I can't think of many reasons.
The value (the purchasing power) of the Central Bank’s money depends on the Central Bank. They decide about the value of their money.
I feel comfortable owning some money whose value is not decided by some institution.


RE:  store of value.  Gold is a store of value!  Just not a very good one.   For example, if you bought gold in the last 1970s or early 1980s, the value of your gold declined for decades.  And adjusted for inflation, it still hasn't recovered its value.

(https://www.goldbroker.com/media/image/cms/media/images/gold-only-money%20that-tells-truth/major_currencies_vs_gold.png)
Title: Re: Precious Metals
Post by: Paul990 on September 21, 2019, 05:34:31 AM
One can argue back and forth about whether or not gold is money. The arguments have a lot more to do with how one defines money than the strengths or weaknesses of gold itself.
Depends about what different definitions of words should be both bore and tire me, particularly when people are trying to change the definitions to score points in an argument about actual concepts and facts.
I think Radagast's pragmatism is a good starting point: Money is what you can buy goods with.
His definition was in my view limited, as it didn’t factor in time. Money is what you can buy goods with over time, i.e. money keeps its purchasing power.
Another limitation was spatial: Money is what you can buy goods with globally, not only in the USA.

In my view, there are grades of goodness in being money. The perfect form of money is an abstraction.
Probably the best way to formulate the question is not „Is x money or not“ but „How good/bad is x as money in such and such circumstances“.
X can be better money than Y compared to criterion a), or under certain circumstances, and at the same time worse than Y compared to criterion b), or under other circumstances.

My point is, answering the question "Is gold money?" is not just a matter of definitory arbitrariness, as you seem to suggest. In defining the meaning of the word Money there is also some place for empirical evidence, so to speak.

Paul, can you explain what the specific non-negligible advantages you see of hedging against inflation with gold rather than in real estate or stocks and how those fit in to gold being money?
I don’t know Maizeman. I'll rectify it and convert it into a supposition: "as being money should be no negligible advantage of gold vs. stocks and real estate."
I’m wondering, what are the specific, non-negligible reasons why the Central Banks buy/hold gold instead of real estate or stocks?*
And how does it fit in to gold being money?
I guess, it has something to do with liquidity and absence of counterparty risk.
One thing is certain: it has nothing to do with performance (transaction costs, tax treatment, bid-offer spreads etc.).

*I know CBs hold stocks too, but I it seems to me that their reason for holding stocks is at least partly different from the reasons for holding gold, "gold reserves" and "stocks reserves" answer, at least partly, different purposes.

Also could you clarify whether you are talking about hedging with gold funds or tangible in-your-hands gold?
Sure. I’m talking about title of ownership of gold bars.
It doesn’t have to be in-hand. I don’t belong to the „If you don’t touch it, you don’t own it“ camp.
In my view, BullionVault, GoldMoney, BullionStar (just examples) are as much gold as tangible in-my-hand gold.
ETF shares don’t represent title of ownership of gold. They are IOUs.
When I talk about gold I don't mean gold derivatives like futures, ETFs, unallocated gold accounts etc.

* My own view is that gold is every bit as much and every bit as little a currency as bitcoin is. Bitcoin is better at the medium of exchange bit, gold is better at the store of value bit
I couldn't agree more Maizeman

In societal breakdown levels of inflation, gold is definitely going to be more useful to ensuring ones survival than a well funded stock portfolio and a rented out 4-plex.
How about currencies crises like those in Argentina, Russia, South-East Asia, Zimbabwe, Ecuador, Mexico, Venezuela …
Was gold in those countries more useful that stocks or real estate?
If you had lived in those countries at that time, what would you had converted your fiat into?
Title: Re: Precious Metals
Post by: maizeman on September 21, 2019, 05:48:06 AM
RE:  store of value.  Gold is a store of value!  Just not a very good one.   For example, if you bought gold in the last 1970s or early 1980s, the value of your gold declined for decades.  And adjusted for inflation, it still hasn't recovered its value.

(https://www.goldbroker.com/media/image/cms/media/images/gold-only-money%20that-tells-truth/major_currencies_vs_gold.png)

Neither gold nor currency are particularly good stores of value over the long term. Fortunately they aren't our only options, as you yourself pointed out back when you were quoting blackrock people: stocks, bonds, real estate, other commodities.

And really, Paul? A graph of currencies over the last hundred years with the Mark (presumably the Papiermark 1914-1924, as the gold mark, for obvious reasons, did not experience any inflation when using gold as a reference), the Reichmark (1924-1948), and the Deutchmark (1948-2002) shown as three separate currencies?

And then the Euro (2002-Present) is shown starting out at only 15% of its value of in gold rather than starting at 100 like the Reichmark and Deutchmark. One could argue: well since the Euro isn't 100 years old we pegged it to the value of one of its predecessor currencies (D-mark). But if you did that you should apply the same rule consistently for the D-mark which replaced the Reichmark at (10 RM to 1 DM) and the Reichmark (which replaced the Papiermark at 1 trillion Papiermarks to the Reichmark) instead listed each as a completely separate currency.
Title: Re: Precious Metals
Post by: Paul990 on September 21, 2019, 06:51:17 AM
Fun comparison: Over my lifetime to date, a dollar invested in the stock market increased to $33.7 (10.9% CAGR), a dollar invested in gold grew to $4.88 (4.8% CAGR), and (in NYC), and a pack of cigarettes that cost $1.05 back then now goes for $13 (7.7% CAGR). Outside of NYC the CAGR of cigarettes is closer to 4.9%.
I don’t know what do you mean with stock market.  The Dow Jones?
If that’s the case, you are comparing an index whose composition changes, with gold bars.
I’m not sure the performance of this index represents the performance of US stocks, as - roughly speaking - companies having trouble get out of the index and companies being successful get in.

I’m not criticising the composition changes per se.
I’m not suggesting some evil manipulation in order to make the index performance look good.
I’m just questioning the identification of the DJ performance with the overall US stock market performance.
At the beginning of your lifetime, which companies were represented in the DJ?
To be fair to gold, I think we should compare the performance of those companies with that of gold.

If, on the other hand, we consider the performance of an index whose composition changes, then let’s consider some gold futures strategy. That should be allowed, as investing in gold futures is considered one form of investing in gold. The strategy must be followed consistently though.

Let’s take for example the so-called Overnight Strategy.
„Starting in 1970 when the price of gold was $35 per ounce, if every day you bought at the price of the afternoon Gold Fixing and sold 19.5 hours later at the price of the next day’s morning Gold Fixing price, your $35 would now be worth $15,843.
That’s the cumulative value of the Overnight strategy.“

(https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/LBMAcfixAMPMEOD00L.png?itok=IscYs_Iq)

https://www.zerohedge.com/commodities/rothschild-emerges-shadows-centenary-london-gold-fixing

So, over your lifetime to date, while a dollar invested in the stock market increased to $33, a dollar invested in gold futures following consistently the Overnight Strategy grew to ...
Title: Re: Precious Metals
Post by: waltworks on September 21, 2019, 11:20:30 AM
Companies washing out of (or into) the market is already accounted for in the results Maizeman describes.

-W
Title: Re: Precious Metals
Post by: vand on September 22, 2019, 02:31:23 AM
You can win any "X is a better investment than Y" position by selecting an appropriate timeframe to support your own argument.

It gets monotnous and tedious. Stock have beaten gold over 60 years. Gold has beaten stocks over 20 years. Stock have beaten gold over 5 years. Gold has beaten stocks over 5 months.

All of which goes to show that, above and beyond simply selecting "the best performing asset", holding a bit of everything and being able to understand the driving forces behind each macro cycle is much more important than simply putting all your eggs in a single basket.

As one of my favourite bloggers wrote, if everything in your portfolio is doing well then chances are you're not well-enough diversified.
Title: Re: Precious Metals
Post by: waltworks on September 22, 2019, 08:52:11 AM
If people who buy gold actually used gold the way it's described here (ie, as a hedge against a market crash) that would be one thing.

The problem is that every gold person I know *doubles down* on gold when stocks dive, instead of selling their gold to buy cheap stocks. I've watched it happen twice now, and known people who were big into gold, and those folks are WAY behind where they would be if they had (ideally) sold their gold when it was expensive to buy cheap stocks or (still pretty good) just invested in stocks, stayed invested through those downturns (maybe not possible for their mindset, though) and not had any gold at all.

-W
Title: Re: Precious Metals
Post by: maizeman on September 22, 2019, 09:26:02 AM
Fun comparison: Over my lifetime to date, a dollar invested in the stock market increased to $33.7 (10.9% CAGR), a dollar invested in gold grew to $4.88 (4.8% CAGR), and (in NYC), and a pack of cigarettes that cost $1.05 back then now goes for $13 (7.7% CAGR). Outside of NYC the CAGR of cigarettes is closer to 4.9%.
I don’t know what do you mean with stock market.  The Dow Jones?
If that’s the case, you are comparing an index whose composition changes, with gold bars.

No I don't mean the Dow Jones Industrial Average. That's a misleading index of a very small number of companies using price weighted math. To take a toy example, a small company with 1,000 shares each selling at $500/share ($500,000 market cap) in the DJIA would have a bigger effect on its overall movement then a big company with 1 million shares selling at $50/share ($50M market cap).

The numbers I used are from the S&P 500 with the dividends reinvested, but I'm happy to accept numbers for any basket of at least 200 companies, ideally one where it is possible to buy a single low cost index fund which invests in all of them at once. It is true that stocks drop out of the S&P 500 or are added from time to time, but I'm talking about the actual returns a person invested in an S&P 500 index fund would receive over my lifetime, including turn over of companies, a process that wouldn't require any effort on their part.

Quote
„Starting in 1970 when the price of gold was $35 per ounce, if every day you bought at the price of the afternoon Gold Fixing and sold 19.5 hours later at the price of the next day’s morning Gold Fixing price, your $35 would now be worth $15,843.
That’s the cumulative value of the Overnight strategy.“

(https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/LBMAcfixAMPMEOD00L.png?itok=IscYs_Iq)

https://www.zerohedge.com/commodities/rothschild-emerges-shadows-centenary-london-gold-fixing

However, you posted above that your personal strategy is to buy and hold gold that is stored non-locally. If you feel the argument from this zerohedge article is accurate, why not adopt this strategy? If you won't want to adopt this strategy yourself, I don't see how it is connected to the conversation we were having.

Unfortunately, the logic is a little like having argument with ones sibling about whether dogs or cats are better pets and saying "unicorns are better pets than dogs, therefore a cat is the best pet."
1) There isn't compelling evidence that unicorns exist.
2) Of course it is possible that unicorns exist, and if they exist they would indeed make better pets than dogs.
3) However the relationship between dogs and unicorns as pets tells us nothing about the relative desirability of cats vs dogs as pets.
4) Different people will have different preferences and different needs in a pet, so it might be a more constructive discussion for us to focus on the specific relative strengths and weaknesses of dogs and cats rather than arguing that one is simply best for all people in all circumstances.
Title: Re: Precious Metals
Post by: TomTX on September 22, 2019, 10:42:23 AM
So, over your lifetime to date, while a dollar invested in the stock market increased to $33, a dollar invested in gold futures following consistently the Overnight Strategy grew to ...

Nothing, because you appear to have ignored transactional costs and spread. As an individual who isn't already super wealthy, when you buy you will be paying over spot, and when you sell you will be selling for less than spot.

Try running your calculation again with your buy costing 2% above spot and your sell netting 2% below spot.
Title: Re: Precious Metals
Post by: vand on September 23, 2019, 01:12:36 AM
If people who buy gold actually used gold the way it's described here (ie, as a hedge against a market crash) that would be one thing.

The problem is that every gold person I know *doubles down* on gold when stocks dive, instead of selling their gold to buy cheap stocks. I've watched it happen twice now, and known people who were big into gold, and those folks are WAY behind where they would be if they had (ideally) sold their gold when it was expensive to buy cheap stocks or (still pretty good) just invested in stocks, stayed invested through those downturns (maybe not possible for their mindset, though) and not had any gold at all.

-W

Gold is no different to anything else in this regard. People always double up on whatever has gone up, and quitely discard what has gone down. That's the psychology at play that moves the trends in those ways.

The dow/gold ratio has fluctuated between 40:1 and 7:1 over the last 20 years. That's a pretty wide range. How many people have had the discipline to take advantage of that volatility to mechanically rebalancing - or even actively position - their portfolio over that time? Very few, I would guess. They would rather just jump onboard what feels most comfortable and go along with the herd.

Title: Re: Precious Metals
Post by: Paul990 on October 05, 2019, 12:07:45 PM
(https://www.goldbroker.com/media/image/cms/media/images/gold-only-money%20that-tells-truth/major_currencies_vs_gold.png)

Neither gold nor currency are particularly good stores of value over the long term.
I disagree. I think, Paul investing $100 into gold while Peter keeping those $100 as a banknote in his pocket, over the long term Paul is better off.
Replace $ with any other fiat currency.



You can win any "X is a better investment than Y" position by selecting an appropriate timeframe to support your own argument.
It gets monotonous and tedious. Stock have beaten gold over 60 years. Gold has beaten stocks over 20 years. Stock have beaten gold over 5 years. Gold has beaten stocks over 5 months.
That's true vand.
The point is, comparing gold with, e.g., stocks, it is unfair to gold if we consider it just as an asset, so that we limit ourselves to compare its performance with that of other assets, e.g. stocks.
Gold is money. Stocks are not.
Gold is designated by Basel III as risk-free. Stocks are not.
Performance comparisons don't take these aspects of gold into consideration.



„Starting in 1970 when the price of gold was $35 per ounce, if every day you bought at the price of the afternoon Gold Fixing and sold 19.5 hours later at the price of the next day’s morning Gold Fixing price, your $35 would now be worth $15,843.
That’s the cumulative value of the Overnight strategy.“

(https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/LBMAcfixAMPMEOD00L.png?itok=IscYs_Iq)

https://www.zerohedge.com/commodities/rothschild-emerges-shadows-centenary-london-gold-fixing

However, you posted above that your personal strategy is to buy and hold gold that is stored non-locally.
If you feel the argument from this zerohedge article is accurate, why not adopt this strategy?
If you won't want to adopt this strategy yourself, I don't see how it is connected to the conversation we were having.

It is connected to the conversation we were having because we were comparing the performance of US stocks with that of gold.

My point was, if as gold you mean a group of gold bars, without changing it, then it would be fair to compare its performance to a particular group of US stocks, without changing it.

If, on the other hand, the US stock basis of comparison changes (changing the composition of the Index. Roughly speaking, good performing stocks get in, bad performing stocks get out), than it would be fair allow changes of the gold basis of comparison too (replacing the gold bars with gold futures).

(Where did I post that my personal strategy is to buy and hold gold that is stored non-locally?)
Title: Re: Precious Metals
Post by: maizeman on October 05, 2019, 12:45:09 PM
Neither gold nor currency are particularly good stores of value over the long term.
I disagree. I think, Paul investing $100 into gold while Peter keeping those $100 as a banknote in his pocket, over the long term Paul is better off.

Michael eats nothing but cheetos. Mitch eats nothing but pizza. Over the long term Mitch will probably be less unhealthy than Micheal, yet that comparison doesn't go anything to convince me that pizza is a healthy basis on which to construct a long term diet.

Quote
If you feel the argument from this zerohedge article is accurate, why not adopt this strategy?
If you won't want to adopt this strategy yourself, I don't see how it is connected to the conversation we were having.

It is connected to the conversation we were having because we were comparing the performance of US stocks with that of gold.

My point was, if as gold you mean a group of gold bars, without changing it, then it would be fair to compare its performance to a particular group of US stocks, without changing it.

I think we are having a fundamental disagreement about what we are in disagreement over. I'm trying to understand the investment strategy you are advocating, and how it compares to the one I currently follow (investing primarily in large baskets of stocks). See below for the quote from yourself in which you define the strategy you are talking about when you use the word "gold" as physical gold (local or nonlocal) and neither gold ETFs nor gold futures.

I’m talking about title of ownership of gold bars.
It doesn’t have to be in-hand. I don’t belong to the „If you don’t touch it, you don’t own it“ camp.
In my view, BullionVault, GoldMoney, BullionStar (just examples) are as much gold as tangible in-my-hand gold.
ETF shares don’t represent title of ownership of gold. They are IOUs.
When I talk about gold I don't mean gold derivatives like futures, ETFs, unallocated gold accounts etc.

The fair comparison is the strategy I follow to the one you follow and/or advocate for, not my strategy to a hypothetical one that you neither follow nor advocate for.

Gold is designated by Basel III as risk-free. Stocks are not.

Under Basel III, Greek, Spanish, Portuguese, and Taiwanese government debt (among that of many other nations) is also designated at risk free.
Title: Re: Precious Metals
Post by: TomTX on October 05, 2019, 03:57:50 PM
Gold is designated by Basel III as risk-free. Stocks are not.
Performance comparisons don't take these aspects of gold into consideration.

That there are authoritative-sounding yet totally worthless claims about it being risk-free?

I do take it into consideration. Claims like this are a good notification that the investment claims being pushed are fundamentally irrational.
Title: Re: Precious Metals
Post by: Telecaster on October 05, 2019, 04:59:23 PM
Neither gold nor currency are particularly good stores of value over the long term.
I disagree. I think, Paul investing $100 into gold while Peter keeping those $100 as a banknote in his pocket, over the long term Paul is better off.
Replace $ with any other fiat currency.
[/quote]

I agree that is likely true over some very long time period.  Question: who keeps a $100 bill in their pocket for decades?  If you simply put the $100 bill in the bank and collect interest the calculus changes a lot. 

If you put the $100 in a diversified basket of stocks then there is no question who comes out ahead. 
Title: Re: Precious Metals
Post by: waltworks on October 05, 2019, 05:35:24 PM
It always ends up here - with the (correct) claim that hoarding physical currency is worse than hoarding gold.

But here's the thing - I have, at any given time, at most $1000 in physical cash, and no more than 5% of my NW in virtual/electronic cash in bank accounts. I really don't want or need cash except when I'm buying things, so I'm indifferent to what the cash is or it's long term value so long as I can rely on the price of the item staying stable over, say, 24 hour periods.

Cash is just a tool. It's not an investment, and it's not useful or interesting to talk about the value of gold vs the value of fiat currency unless you're literally stuffing your mattress with $5 bills.

-W
Title: Re: Precious Metals
Post by: TomTX on October 05, 2019, 05:37:29 PM
It always ends up here - with the (correct) claim that hoarding physical currency is worse than hoarding gold.

But here's the thing - I have, at any given time, at most $1000 in physical cash, and no more than 5% of my NW in virtual/electronic cash in bank accounts. I really don't want or need cash except when I'm buying things, so I'm indifferent to what the cash is or it's long term value so long as I can rely on the price of the item staying stable over, say, 24 hour periods.
My returns on electronic "cash" are pretty decent using it to fund bank account churning.
Title: Re: Precious Metals
Post by: Paul990 on October 09, 2019, 07:07:18 AM
I'm trying to understand the investment strategy you are advocating
Me too Maizeman, as I wasn’t aware that I was advocating some investing strategy.

30% gold, 30% real estate, 30% stocks, 10% cash.
Is it compatible with the investing strategy I have advocated until now?

However, you posted above that your personal strategy is ...
I'd like so much to know my personal strategy Maizeman. Could you please formulate it?

See below for the quote from yourself in which you define the strategy you are talking about when you use the word "gold" as physical gold (local or nonlocal) and neither gold ETFs nor gold futures.
Yes Maizeman, when I use the word gold I don’t mean derivatives but physical.
So, which is my personal strategy?




Neither gold nor currency are particularly good stores of value over the long term.
I disagree. I think, Paul investing $100 into gold while Peter keeping those $100 as a banknote in his pocket, over the long term Paul is better off.

Michael eats nothing but cheetos. Mitch eats nothing but pizza. Over the long term Mitch will probably be less unhealthy than Micheal, yet that comparison doesn't go anything to convince me that pizza is a healthy basis on which to construct a long term diet.

Maizeman, I think Michael investing $100 into gold while Mitch keeping those $100 as a banknote in his pocket, over the long term Michael is better off.

(https://cdn2.hubspot.net/hubfs/3453012/Imported_Blog_Media/currencies-depreciated-relative-to-gold.jpg)                                  (http://www.economicreason.com/wp-content/uploads/2013/01/global-reserve-currencies2.png)

In my view - feel free to disagree - gold is - by far - a better store of value than fiat currencies.
Found this quote of Thomas Jefferson (https://www.zerohedge.com/economics/founders-warned-us-about-central-banking) today: „Paper is poverty. It is only the ghost of money, and not money itself”, and I wonder, which investing strategy was T. Jefferson advocating?
Title: Re: Precious Metals
Post by: maizeman on October 09, 2019, 07:32:02 AM
Neither gold nor currency are particularly good stores of value over the long term.
I disagree. I think, Paul investing $100 into gold while Peter keeping those $100 as a banknote in his pocket, over the long term Paul is better off.

Michael eats nothing but cheetos. Mitch eats nothing but pizza. Over the long term Mitch will probably be less unhealthy than Micheal, yet that comparison doesn't go anything to convince me that pizza is a healthy basis on which to construct a long term diet.

Maizeman, I think Michael investing $100 into gold while Mitch keeping those $100 as a banknote in his pocket, over the long term Michael is better off.

You just changed the names and reposted the same comment. What is your end goal here?

In my view - feel free to disagree - gold is - by far - a better store of value than fiat currencies.

I think this may be why we're having so little progress here.

You seem to really want me to be advocating that people should be stuffing dollars under a mattress and I'm genuinely not doing that. I completely agree that over the long term "investing" in cash in the mattress (or in a bank) is a losing strategy due to inflation.

The fact that gold (or copper or two by fours or pork bellies or bushels of corn or cigarettes) is a better investment than cash over the long term is not the same as saying any of those are a good investment. Just like the fact that a pizza-only diet is a healthier diet than a cheetos-only diet isn't evidence that pizza a health food.
Title: Re: Precious Metals
Post by: Paul990 on October 09, 2019, 07:33:59 AM
The numbers I used are from the S&P 500 with the dividends reinvested, but I'm happy to accept numbers for any basket of at least 200 companies, ideally one where it is possible to buy a single low cost index fund which invests in all of them at once.

It is true that stocks drop out of the S&P 500 or are added from time to time, but I'm talking about the actual returns a person invested in an S&P 500 index fund would receive over my lifetime, including turn over of companies, a process that wouldn't require any effort on their part.
The Overnight Strategy doesn’t require a lot of efforts either. You can write an app and let the computer to do the work.
But that’s not the point.

The question I’m addressing is what constitutes a fair comparison when we compare gold’s with stock’s performance.
Good performing/getting big gets in, bad performing/getting small gets out: as long as this mechanism is in place, it doesn’t matter if we are talking about a 30, a 300 or a 3,000 stocks basket.
(The dividends aspect is also irrelevant.)

Let’s consider the S&P 500.
Out of the 500 originals, only 60 companies are still in the Index.
So, in my view, if we are going to compare the performance of that gold bar with the performance of the S&P 500 since inception (1957), I would consider to be fair to compare the performance of that gold bar vs. the performance of those initial 500 stocks.
On the other hand, if - stocksside - the basis of comparison is allowed to change (good performing/getting big gets in, bad performing/getting small gets out), then - goldside - the basis of comparison should be allowed to change too.

I mentioned the so called Overnight Strategy not because I wanted to advise to invest according to it.
It was just an example of what, in my view, could constitute the goldside basis of comparison when comparing „gold“ with „stocks“, if with „stocks“ one means Indices whose composition changes more or less regularly according to the rule: good performing stocks come in, bad performing stocks get out.

If you feel the argument from this zerohedge article is accurate, why not adopt this strategy?
Maizeman, really?


Speaking about fairness: The USA has been the economic superpower for a century now.
I have seen that more than once when people compare gold’s with stocks’ performance, with „stocks“ they mean US stocks.
That happens also in forums based outside of the USA.
So, now I'm wondering, is it fair to compare gold’s performance with the performance of the stocks of the best performing economy worldwide?
After all, not everybody lives in the USA, isn't it.
In the last century, not everybody could buy US stocks, even if he wanted to.
Even today, in some countries there are hindrances at it.
So, for example, for Mexicans, wouldn’t make more sense to compare gold's performance with Mexican stocks? For Russians, wouldn’t be more interesting to compare gold's performance with Russian stocks? For Filipinos, wouldn’t be…



Gold is designated by Basel III as risk-free. Stocks are not.

Under Basel III, Greek, Spanish, Portuguese, and Taiwanese government debt (among that of many other nations) is also designated at risk free.

That doesn’t matter Maizeman.
My point is, gold is designated as risk free, stocks aren’t.
My point is, comparing gold’s with stock’s performance, the fact that gold is less risky, or even risk free, doesn’t get factored in.
Gold holders have a benefit which stocks holders don’t have, but this benefit doesn’t get factored in when comparing gold's vs. stocks' performance.
I find it unfair to gold.

Also, as I said, gold is money, a currency.
Stocks are not.
Gold holders have not only an asset. They have money too. Stocks holders don’t.
This advantage of the gold holders doesn’t get factored in when comparing gold’s with stocks’ performance.
This too, I find unfair.

My point is, comparing gold and (e.g.) stocks, shouldn’t be reduced to comparing performances.
Comparing gold and stocks only under the point of view of their performance, is reductive, because it leaves out aspects which are important when assessing investment strategies.
If we consider the performance as the only, or the principal way to compare gold with stocks, in my view it's unfair to gold.
Title: Re: Precious Metals
Post by: maizeman on October 09, 2019, 08:13:46 AM
Let’s consider the S&P 500.
Out of the 500 originals, only 60 companies are still in the Index.
So, in my view, if we are going to compare the performance of that gold bar with the performance of the S&P 500 since inception (1957), I would consider to be fair to compare the performance of that gold bar vs. the performance of those initial 500 stocks.

It is certainly fair to compare conventional stock index funds to gold* since those both among the options folks are choosing between when deciding were to invest savings.

However, the comparison you describe above also sounds fascinating. Could you post this comparison (cap weighted investment in the S&P as of 1957 run forward to the present day) vs gold 1957 to present, please?

*As you defined gold which includes both gold bars under the mattress and off-site gold storage, but neither gold ETFs nor gold futures.
Quote
If you feel the argument from this zerohedge article is accurate, why not adopt this strategy?
Maizeman, really?

That's not actually an answer to the question.

Quote
Speaking about fairness: The USA has been the economic superpower for a century now.
I have seen that more than once when people compare gold’s with stocks’ performance, with „stocks“ they mean US stocks.
That happens also in forums based outside of the USA.
So, now I'm wondering, is it fair to compare gold’s performance with the performance of the stocks of the best performing economy worldwide?

Stock performance in the USA in the 20th and 21st centuries isn't all that exceptional (with one caveat). You still similar or modestly lower estimates of safe withdrawal rates in countries like Australia, Canada, Sweden, South Africa, and the UK.

The concept that US stock performance was exceptional comes mostly from people analyzing the Dimson, Marsh, Staunton dataset which includes about a century worth of stock market data from ~20 countries. More than half of those countries are European ones where a potential investor experienced World Wars I or II being fought right outside their door, killing millions of people and destroying decades if not centuries of built up infrastructure. And the bad years to get into those stock markets are clustered in the late 1910s and 1930s.

I will happily concede that if a world war or equivalent is fought on the ground in the USA (or whatever country an individual happens to be located in), savings in stocks (or bonds) are unlikely to be enough to allow them to continue on with their regular life uninterrupted. In that situation, assuming one could avoid having ones gold-physically-in-hand or gold-owned-but-off-site confiscated (as happened here in the USA in the 1930s) and tends to happen during invasions and occupations as well, I agree there would be value to having a portion of ones net worth in gold.

Is that the use case you are arguing for?

Quote
Gold is designated by Basel III as risk-free. Stocks are not.

Under Basel III, Greek, Spanish, Portuguese, and Taiwanese government debt (among that of many other nations) is also designated at risk free.

That doesn’t matter Maizeman.
My point is, gold is designated as risk free, stocks aren’t.

My point is that the risk free designation in Basel III doesn't agree with my own understanding of the word "risk." My guess is that it doesn't agree with yours either, but I could be wrong.

Do you feel greek government debt is a risk free investment?

If not, I think we can put aside the Basel III designations some information that is not informative for these discussions.

Quote
My point is, comparing gold’s with stock’s performance, the fact that gold is less risky, or even risk free, doesn’t get factored in.
Gold holders have a benefit which stocks holders don’t have, but this benefit doesn’t get factored in when comparing gold's vs. stocks' performance.
I find it unfair to gold.

Okay, this is a fair point. I agree that the price of gold is less volatile that stocks (although it seems to be more volatile than bonds). How would you like to quantify this?

Quote
Also, as I said, gold is money, a currency.
Stocks are not.
Gold holders have not only an asset. They have money too. Stocks holders don’t.
This advantage of the gold holders doesn’t get factored in when comparing gold’s with stocks’ performance.
This too, I find unfair.

This is not a fair point, because while you have said repeatedly that "gold is money" it's not clear what this means to you or who this actually translates into a benefit for a person who owns a bar of gold.

Rai stones are money, but I don't think that's a good argument for me to put any of my savings into those.

Quote
My point is, comparing gold and (e.g.) stocks, shouldn’t be reduced to comparing performances.
Comparing gold and stocks only under the point of view of their performance, is reductive, because it leaves out aspects which are important when assessing investment strategies.
If we consider the performance as the only, or the principal way to compare gold with stocks, in my view it's unfair to gold.

I completely agree that there are other aspects we could be discussing. However, I think we can establish with a great deal of confidence that stocks DO provide significantly better return over the long term than gold. It seemed you disagree with me about that? But if you agree gold under performs stocks as an investment we can certainly move on to discuss what other redeeming factors gold has that might or might not make up for that in some situations.
Title: Re: Precious Metals
Post by: maizeman on October 09, 2019, 08:38:55 AM
However, the comparison you describe above also sounds fascinating. Could you post this comparison (cap weighted investment in the S&P as of 1957 run forward to the present day) vs gold 1957 to present, please?

So far I've only found data for 1957-2003, but over that time period it looks like a buy and hold strategy of the original S&P 500 companies significantly outperformed the S&P index itself except for right before the crash of the tech bubble. (With dividends reinvested in both cases.)

(https://imgpile.com/images/1S2rEk.png) (https://imgpile.com/i/1S2rEk)

By investing in 1957 S&P companies and their direct descendents/spinouts an investor ended up significantly more invested in energy and consumer staples than the S&P index of 2003 and significantly less invested in Tech and Finance than the S&P index as of 2003. Which makes sense when one thinks about it.

So buy and hold investing in the 500 companies included in the S&P 500 index in 1957 outperformed investing in the S&P 500 itself (the composition of which changes over time) (A > B). And since the S&P 500 outperformed gold (B > C), it looks like a simply buy and hold strategy of stocks does, in fact, outperform a simply buy and hold strategy of gold (A > C).

But that's just logical reasoning, let's run the numbers. An investment in the original 1957 S&P 500 companies had a CAGR of 11.4% from 1957 to 2003, an investment in the actual S&P 500 companies had a CAGR of 10.8% and gold was $35/oz in 1957 and $417/oz in 2003 for a CAGR of 5.5% (edit: to clarify, all three values not adjusted for inflation).

Thank you for that, Paul! Never would have thought to dig into this question if you hadn't brought it up and the paper was fascinating.

Source: Siegel, J. J., & Schwartz, J. D. (2006). Long-term returns on the original S&P 500 companies. Financial Analysts Journal, 62(1), 18-31.
Title: Re: Precious Metals
Post by: waltworks on October 09, 2019, 09:27:47 AM
Maizeman: "Holding onto cash is an even shittier strategy than holding onto gold but they're both shitty." (many charts/graphs)
Paul990: "<insert name here> is holding gold, <insert name here> is filling their mattress with $2 bills. Who's better off!?!111!?"

It's like watching a basketball game where one team is up by 50 points in the 4th quarter and you're only hanging around to see if they get the lead to 75, even though you feel embarrassed for the losing team.

-W
Title: Re: Precious Metals
Post by: Dago on October 10, 2019, 07:04:28 AM
In a Venezuela, Syria, or Nazi Germany situation, having a Swiss bank account with a few thousand in foreign currency and a passport would fly you out of the country over the heads of the people having their clothes patted down for coins or their homes ransacked by soldiers/rebels. The coin collector hobby shop will not be open. The "using gold to bribe border guard" scenario makes for good dramatic storytelling, but the many times more common scenario would be people with seed capital outside the failing country quietly using those funds to emigrate - often travelling first class on the way out and leaving behind those people who are attached to physical assets such as real estate or hard-to-safely-transport gold hoards

I would like to offer a counter story to this. My father's family is jewish. During the war some lived in Germany, some in Switzerland.

Jews in Germany were only allowed to emigrate after a very long process during which  they had to forfeit all their wealth and goods (bank accounts, stocks, art pieces, house etc). This is true whether they could afford a first class ticket or not. Any money in a foreign bank account would be of no use as they could not reach it physically nor get a money transfer that would not be seized by the German bank.

On the other hand, having some valuables that could be hidden from the state (jewelry is a typical example, but gold coins would work as well) helped manage the emigration process (read: corruption of civil servants and citizens ). It might also be embarked secretly during the journey as to have something afterwards.
My family in Switzerland had bought per instance the most expensive diamond they could afford for the case Germany would finally invade Switzerland. This was the highest density of wealth they could think of and it could have been transported secretly pretty easily.

All in all, I believe that any situation is different and planning for it is complicated if not impossible and this is why having diversification (gold AND currencies in a safe AND stocks, ...) is the key.
Title: Re: Precious Metals
Post by: Car Jack on October 11, 2019, 12:03:12 PM
(https://www.goldbroker.com/media/image/cms/media/images/gold-only-money%20that-tells-truth/major_currencies_vs_gold.png)

What this says to me is 2 things.

1) How goes the US, so goes the world...

2) When gold bullion became LEGAL for US residents to own (January 1975), it's value dramatically rose, plateaued, then did nothing.
Title: Re: Precious Metals
Post by: TomTX on October 11, 2019, 05:50:55 PM
The Overnight Strategy doesn’t require a lot of efforts either. You can write an app and let the computer to do the work.
But that’s not the point.

For how long have you been employing the Overnight Strategy, and how did you handle the losses from actual buy/sell spread on physical bullion vs theoretical spot price you used for the example?
Title: Re: Precious Metals
Post by: Paul990 on October 20, 2019, 11:50:03 AM
At the moment, equities are highly valued, but by no measure is the price of gold cheap or moderate.
@Telecaster,
the problem of measuring the gold price.
How can you measure a unit of measure.
It almost gets philosophical, isn't it.

Chartists will consider only past price movements.
Fundamentalists will look at demand and supply trends. Plus, considering that gold is not just a commodity but also a monetary metal, i.e. a currency, they will factor in monetary data.

Related to the US debt, gold is cheap

(https://www.ainsliebullion.com.au/Portals/0/contentimages/gold-too-low-1.jpg) (https://www.ainsliebullion.com.au/Portals/0/contentimages/gold-too-low-1.jpg)


Related to US stocks, gold is cheap

(http://www.gold-eagle.com/sites/default/files/images/obyrne012716-3.jpg) (http://www.gold-eagle.com/sites/default/files/images/obyrne012716-3.jpg)


Inflation adjusted gold is cheap

(https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png) (https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png)


Using 1980 CPI formula, gold is super cheap

(https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1498846969883-chart1.png) (https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1498846969883-chart1.png)


Related to US money supply, gold is cheap

(https://www.sunshineprofits.com/media/cms_page_media/2016/2/4/gold-money-supply.png) (https://www.sunshineprofits.com/media/cms_page_media/2016/2/4/gold-money-supply.png)

Title: Re: Precious Metals
Post by: maizeman on October 20, 2019, 12:02:59 PM
Inflation adjusted gold is cheap

(https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png) (https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png)

This chart shows that gold is its most expensive (in inflation adjusted terms) it has been since the early 1980s. How is that cheap?

Although one should also note that the chart appears to be a decade old, since it only goes through 2009.

Quote
Using 1980 CPI formula, gold is super cheap

(https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1498846969883-chart1.png) (https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1498846969883-chart1.png)

This is a graph of the price of silver....
Title: Re: Precious Metals
Post by: TomTX on October 20, 2019, 12:13:43 PM
c'mon! You can't expect gold bugs to actually have proper documentation? Their schtick is all flim-flam anyway.
Title: Re: Precious Metals
Post by: Telecaster on October 20, 2019, 06:27:53 PM
At the moment, equities are highly valued, but by no measure is the price of gold cheap or moderate.
@Telecaster,
the problem of measuring the gold price.
How can you measure a unit of measure.
It almost gets philosophical, isn't it.

Inflation adjusted gold is cheap

(https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png) (https://www.bullionvault.com/gold-news/files/gold_inflation_adjusted_1.png)

Maizeman beat me to it, but I'll expand on his thoughts.  CPI by definition the cost of a basket of a goods and services, right?    Your chart shows that it takes a LOT MORE goods and services right to buy an ounce of gold now than at almost any time in the past.   That means, by definition, gold is expensive.

Title: Re: Precious Metals
Post by: robartsd on October 21, 2019, 08:46:32 AM
Related to the US debt, gold is cheap

(https://www.ainsliebullion.com.au/Portals/0/contentimages/gold-too-low-1.jpg)
I do read this chart the way you do, national debt is high relative to the price of gold (though I think it says more about national debt than gold).

Also your wrapping the images in links is annoying when combined with the forum software's default handling of clicking on images. I do appreciate that you provided links to the images to view outside the forum, but next time link the text instead.
Title: Re: Precious Metals
Post by: js82 on October 21, 2019, 06:20:21 PM
Let's make this simple:

1. Gold works as an inflation hedge.  So do other commodities.  Over the long run, so does just about anything with intrinsic value.

2. That doesn't make gold a good long-term investment for a large chunk of your portfolio.  There are lots of things that do not only track well with inflation, but also yield a return on investment.  You don't want to own wood, you want to own timberland.  You don't want to own gold, you want to own gold mines.  You don't want to own tankers full of fossil fuel, you want to own the land on which that fuel resides.  Assets that track with inflation *AND* offer a return on investment independent of inflation are superior investments to vehicles merely designed to track inflation.

3. Although Stocks are high-risk over short time horizons, over longer time horizons(decades) a diversified stock portfolio is really not that risky.  Stocks and real estate also happen to track with inflation quite well over the long haul.  And you don't need a stock market with amazing performance to beat an asset that more or less tracks inflation - something that tracks with inflation over the long run and pays dividends will be more than enough to beat gold.
Title: Re: Precious Metals
Post by: TomTX on October 23, 2019, 07:28:35 PM
Well, I'd rather own the land with wind turbine leases than oil wells. Not gonna run out of wind, or have it pollute my land.
Title: Re: Precious Metals
Post by: Orthodox Investor on October 27, 2019, 10:16:29 PM
I've owned plenty of stocks, bonds, and real estate in my life, but I never owned precious metals until recently. A significant factor that finally changed my mind about the topic was Bitcoin. It was just astonishing to see people chase after an endless number of alternative cryptocurrencies when there is a finite number of alternative elements in the periodic table they could be chasing after instead.

While central bankers are trying to maintain trust in fiat currencies by limiting CPI to no more than 2-3% annually, we are long past the point where it makes sense to trust anyone or anything in our society.

The market cap of the cryptocurrency space is in the hundreds of billions. The combined value of all silver bullion and coins is not even a hundred billion.

Similarly each of the major tech stocks has a market cap approaching a trillion, including Amazon, Google, and Microsoft. These companies are powerful because have quasi-monopolies and are making money by making consumers pay a kind of tax. I'm not sure about the probability that these companies will continue to be nearly as influential in another 20 years.

Then there's the trillions worth of corporate bonds and real estate. You can potentially create unlimited amounts of both.

Excluding gold, the market cap of precious metals is essentially nothing compared to the market cap of other asset classes.
Title: Re: Precious Metals
Post by: ChpBstrd on October 28, 2019, 07:58:55 AM
I've owned plenty of stocks, bonds, and real estate in my life, but I never owned precious metals until recently. A significant factor that finally changed my mind about the topic was Bitcoin. It was just astonishing to see people chase after an endless number of alternative cryptocurrencies when there is a finite number of alternative elements in the periodic table they could be chasing after instead.

While central bankers are trying to maintain trust in fiat currencies by limiting CPI to no more than 2-3% annually, we are long past the point where it makes sense to trust anyone or anything in our society.

The market cap of the cryptocurrency space is in the hundreds of billions. The combined value of all silver bullion and coins is not even a hundred billion.

Similarly each of the major tech stocks has a market cap approaching a trillion, including Amazon, Google, and Microsoft. These companies are powerful because have quasi-monopolies and are making money by making consumers pay a kind of tax. I'm not sure about the probability that these companies will continue to be nearly as influential in another 20 years.

Then there's the trillions worth of corporate bonds and real estate. You can potentially create unlimited amounts of both.

Excluding gold, the market cap of precious metals is essentially nothing compared to the market cap of other asset classes.

If scarcity = value, then we should assume antiques, fossils, and meteorites also deserve a place in our asset allocations.
Title: Re: Precious Metals
Post by: Orthodox Investor on October 28, 2019, 11:53:02 AM
If scarcity = value, then we should assume antiques, fossils, and meteorites also deserve a place in our asset allocations.

It cannot be emphasized enough how crucial scarcity is to creating value. Every investor should think long and hard about scarcity of every investment they make. The key reason cryptos have been so successful compared to pet rocks and beanie babies is that within a single currency, the supply is strictly limited. The fatal flaws lie in the numerous forks that are created and the potentially infinite number of alternative currencies that can be created.

The key reason stocks have done so well is that buybacks have reduced the number of shares outstanding year after year. Real estate in California is so expensive because it's hard to bring new supply on the market and despite emigration, the overall population is not yet declining. These are two of the most important things to keep an eye on when investing in California real estate.

There is an equally important trait of a good investment that has to do with the ability to distinguish between something valuable and a fake item. This is an area that cryptos address using cryptography. It seems to be extremely effective in preventing counterfeits. With stocks and bonds, we have trusted brokerages that are known to sell you the real deal and you can look up financial information online that has been audited (not foolproof as we saw with Enron, but much better than having no audits).

With precious metals, you can scan items in seconds with X-ray spectrometers to determine what metals are really contained in an item. For individuals who don't want to spend thousands, Sigma Metalytics sells a scanner that compares the electrical conductivity of metals compared to what's expected for a given type of metal. As a result, it's fairly easy even for a novice to become good at detecting counterfeits.  There is a much much steeper learning curve involved in valuing antiques and fossils and there is the open question of why replicas should be valued any less. If I can create excellent replicas at a low price, and the replicas look and feel just like the original and are made up of the same kind of mix of atoms and molecules, the idea that the "original" should be valued highly while the rest are worthless fakes is an entirely subjective one.

To summarize, precious metals are truly rare and it's truly expensive to obtain more of them. The same cannot be said for other rare items in the universe.
Title: Re: Precious Metals
Post by: js82 on October 28, 2019, 05:38:15 PM
If scarcity = value, then we should assume antiques, fossils, and meteorites also deserve a place in our asset allocations.

It cannot be emphasized enough how crucial scarcity is to creating value. Every investor should think long and hard about scarcity of every investment they make. The key reason cryptos have been so successful compared to pet rocks and beanie babies is that within a single currency, the supply is strictly limited. The fatal flaws lie in the numerous forks that are created and the potentially infinite number of alternative currencies that can be created.

The key reason stocks have done so well is that buybacks have reduced the number of shares outstanding year after year. Real estate in California is so expensive because it's hard to bring new supply on the market and despite emigration, the overall population is not yet declining. These are two of the most important things to keep an eye on when investing in California real estate.

There is an equally important trait of a good investment that has to do with the ability to distinguish between something valuable and a fake item. This is an area that cryptos address using cryptography. It seems to be extremely effective in preventing counterfeits. With stocks and bonds, we have trusted brokerages that are known to sell you the real deal and you can look up financial information online that has been audited (not foolproof as we saw with Enron, but much better than having no audits).

With precious metals, you can scan items in seconds with X-ray spectrometers to determine what metals are really contained in an item. For individuals who don't want to spend thousands, Sigma Metalytics sells a scanner that compares the electrical conductivity of metals compared to what's expected for a given type of metal. As a result, it's fairly easy even for a novice to become good at detecting counterfeits.  There is a much much steeper learning curve involved in valuing antiques and fossils and there is the open question of why replicas should be valued any less. If I can create excellent replicas at a low price, and the replicas look and feel just like the original and are made up of the same kind of mix of atoms and molecules, the idea that the "original" should be valued highly while the rest are worthless fakes is an entirely subjective one.

To summarize, precious metals are truly rare and it's truly expensive to obtain more of them. The same cannot be said for other rare items in the universe.

The problem is that scarcity alone isn't not enough to create reliably sustainable value without some form of intrinsic value/usefulness.  This value has to be of a sort that it can't just be replaced.  (incidentally, this is as much a problem with fiat currencies as cryptos).    While there's a finite amount of bitcoin itself, there's nothing that prevents another cryptocurrency from being used to conduct transactions.  Without some form of intrinsic usefulness or irreplacability there's nothing to create a floor on the value of a currency.  Bitcoin could become worthless at the drop of a hat if someone creates a scarce cryptocurrency architecture that is capable of higher transaction speeds and doesn't consume an obscene amount of energy per transaction.

Precious metals do have a leg up on cryptocurrencies in this regard - consider the usefulness(and not just as jewelry) of silver or platinum, for example - they have industrial uses that provide demand and a basis for their price, unless/until alternatives are discovered(and even then, the relative price of the alternative will mean that these metals will still have some value).

That said, metals are still essentially an inflation hedge.  And I still maintain that there are better long-term guards against inflation out there.
Title: Re: Precious Metals
Post by: Orthodox Investor on October 29, 2019, 08:39:22 AM
Bitcoin could become worthless at the drop of a hat if someone creates a scarce cryptocurrency architecture that is capable of higher transaction speeds and doesn't consume an obscene amount of energy per transaction.
This point seems so obvious to me that I find it hard to understand how Bitcoin became as popular as it has.

The problem is that scarcity alone isn't not enough to create reliably sustainable value without some form of intrinsic value/usefulness. 

A few days ago, I never would have thought of proposing that scarcity equals value, and I believe that in my previous two posts I said nothing that suggests that scarcity alone is sufficient to create value, only that scarcity is an extremely important thing to consider. But when confronted by two other posters explicitly denying that it is true, stating that scarcity is not equal to value, it forces me to consider to what extent it's true or false.

Look, I understand that on an abstract, theoretical level, the idea that scarcity alone creates value seems silly. But come to think of it, I can't really think of any specific examples of scarce things that aren't valuable. The more scarce, the more valuable, it's that simple. Why introduce an unnecessary concept of intrinsic value (it's all ultimately based on fickle human preferences anyways), when you can explain everything using the concept of scarcity alone?

I've commented on why I think fossils, antiques, and meteorites aren't really rare. Now you suggest that fiat currencies and cryptos have no sustainable value because they lack truly intrinsic value. Correct, but everything kinda lacks true intrinsic value if you dig deep enough. Yeah, there's massive industrial demand for palladium and platinum because of their use in catalytic converters, but if the internal combustion engine gets superseded by some other technology, 90% of the industrial demand could disappear. Value created by a government using its police force to impose its will is not necessarily any less reliable or sustainable than any form of intrinsic value.

If you look at the prices at the Rare World Metals Mint (https://www.rwmmint.com), the value of a metal correlates pretty well to how rare it is in the universe.
Title: Re: Precious Metals
Post by: freya on October 29, 2019, 10:06:41 AM
Just had to post in this thread, as an investor in the Golden Butterfly (a variant of the Permanent Portfolio).  Those of you who are rabidly anti-gold, please don't bother to read this.  I'm posting for the benefit of anyone with an open mind interested in gold investing.

There is one very, very simple reason to invest in gold, and you can find it in the site www.portfoliocharts.com.  The top performing portfolios for returns and stability/high perpetual withdrawal rates in retirement all hold gold.  These are exactly the portfolios that people interested in long retirements should be most interested in.  Pinwheel and Golden Butterfly top the list, but there are others worth investigating. 

Gold is not just an inflation hedge; for example during the recent market correction, the price shot up providing a nice rebalancing opportunity.  Its magic comes from functioning as part of an overall multi-asset portfolio, NOT an asset held in isolation.

The mechanics of holding gold are more complicated than buying an index fund, but very doable.  I hold a combination of 1 oz American gold Eagles in a safe deposit box, gold ETFs (current favorite is AAAU) but ONLY in tax-advantaged accounts, and Perth Mint depository online (which is subject to FATCA reporting, but it also gives me some international diversity).

If you do decide to invest in gold, don't fall into the trap of buying gold mining stocks or substituting TIPS.  These do NOT perform like gold.  Also be aware of the collectibles tax, which is different from capital gains.  That's why holding some gold in tax-advantaged accounts is a good idea, for rebalancing purposes. 

You can visit https://www.gyroscopicinvesting.com/forum/index.php for more info on gold investing.
Title: Re: Precious Metals
Post by: maizeman on October 29, 2019, 10:12:22 AM
If you look at the prices at the Rare World Metals Mint (https://www.rwmmint.com), the value of a metal correlates pretty well to how rare it is in the universe.

The link appears to be dead (at least for me).

However, Osmium (1000x rarer than gold yet 1/4 the price) would have to have a word about the risks of extrapolating price from rarity.
Title: Re: Precious Metals
Post by: markbike528CBX on October 29, 2019, 10:21:17 AM
A vacuum similar to the interstellar medium https://en.m.wikipedia.org/wiki/Interstellar_medium would be extremely rare on earth and quite valuable even if it was possible to replicate it.
While it is a poor choice of value storage or exchange, its value is greatly diminished by the fact that it can be substituted in most cases by ordinary vacuums. 
You don't need an interstellar vacuum to siphon gas.

Diamonds "jewelry quality" are artificially scarce and therefore valuable, but easily substituted by fakes or simply having diamond-free jewelry. 
Title: Re: Precious Metals
Post by: waltworks on October 29, 2019, 10:59:32 AM
but everything kinda lacks true intrinsic value if you dig deep enough.

If you truly believe this, then we just can't have a conversation at all. I'm not even sure how to interpret such a statement. Economic nihilism?

If you can use it for something (eat it, make a tool with it, use it for shelter, etc) then it has intrinsic value. If anything, you can make a pretty strong argument that *everything* has some kind of intrinsic value (ie, I can use Pokemon cards to shim up the short leg on my chair).

-W
Title: Re: Precious Metals
Post by: robartsd on October 29, 2019, 01:54:21 PM
Just had to post in this thread, as an investor in the Golden Butterfly (a variant of the Permanent Portfolio).  Those of you who are rabidly anti-gold, please don't bother to read this.  I'm posting for the benefit of anyone with an open mind interested in gold investing.

There is one very, very simple reason to invest in gold, and you can find it in the site www.portfoliocharts.com.  The top performing portfolios for returns and stability/high perpetual withdrawal rates in retirement all hold gold.  These are exactly the portfolios that people interested in long retirements should be most interested in.  Pinwheel and Golden Butterfly top the list, but there are others worth investigating. 
The primary reason gold is so vital to these portfolios is because the back testing period includes the end of Bretton Woods System. This is a very unique event in the gold vs. dollar history that will never happen again and is a big part of gold's overall performance in that data set. Of course the Bretton Woods System could also be considered to be a big part of the dollar's economic environment that made the late 60's a very difficult time to start living off a portfolio. Holding gold (illegal for American investors between 1933 and 1964) at the end of the Bretton Woods System rescues a lot of portfolios. If you exclude the data prior to 1975, gold is mostly just a drag more or less tracks inflation.
Title: Re: Precious Metals
Post by: TomTX on October 29, 2019, 05:59:23 PM

There is one very, very simple reason to invest in gold, and you can find it in the site www.portfoliocharts.com.  The top performing portfolios for returns and stability/high perpetual withdrawal rates in retirement all hold gold.  These are exactly the portfolios that people interested in long retirements should be most interested in.  Pinwheel and Golden Butterfly top the list, but there are others worth investigating. 

Chop off the first few years after private gold ownership was re-legalized and the numbers shift noticeably.
Title: Re: Precious Metals
Post by: Orthodox Investor on October 29, 2019, 11:38:23 PM
The link appears to be dead (at least for me).

However, Osmium (1000x rarer than gold yet 1/4 the price) would have to have a word about the risks of extrapolating price from rarity.
Try a google search on "Rare Metals World Mint" and it should be the first result if the search is done in the United States (or using a proxy server located in the US).

At rwmmint.com, the price quoted for Osmium is $965. Where can you buy it for a quarter the price of gold?

According to the chart on https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust, where Gold and Osmium are listed next to each other, there is no great difference in how rare these metals are. Of course, gold is extremely abundant in the sense that around 150,000 tons have been mined and are being hoarded somewhere.. If there was greater demand for osmium, I believe a lot more could be mined and hoarded. The same is not the case for gold, as most of the low hanging fruit has already been picked in the realm of gold mining.
 
you can make a pretty strong argument that *everything* has some kind of intrinsic value (ie, I can use Pokemon cards to shim up the short leg on my chair).

That's what I meant. I think it's clear when reading the entire conversation rather than just the one sentence where I expressed myself inaccurately.

If you exclude the data prior to 1975, gold is mostly just a drag more or less tracks inflation.

Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age? Interest rates are about to get stuck at zero in all major economies. Your savings will be guaranteed to erode over time. The question now is how do we lose as little money as possible. Maybe if we invest intelligently we can manage to preserve a greater percentage of our savings, but to think you can get a return over and above inflation seems a bit brazen to put it mildly.

I like to think of today's economy and financial system as a gigantic poker table. We are each forced to take a seat and put up the ante in every round. Zero interest rates mean there is no risk-free alternative. We all have to play. Some smart players are going to walk away rich. Think you're one of them? I don't. I know I'm pretty stupid. I know my limitations. If I manage to keep up with inflation, it will be an almost unbelievable achievement for me.
Title: Re: Precious Metals
Post by: Radagast on October 30, 2019, 12:38:27 AM
Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age? Interest rates are about to get stuck at zero in all major economies. Your savings will be guaranteed to erode over time. The question now is how do we lose as little money as possible. Maybe if we invest intelligently we can manage to preserve a greater percentage of our savings, but to think you can get a return over and above inflation seems a bit brazen to put it mildly.

I like to think of today's economy and financial system as a gigantic poker table. We are each forced to take a seat and put up the ante in every round. Zero interest rates mean there is no risk-free alternative. We all have to play. Some smart players are going to walk away rich. Think you're one of them? I don't. I know I'm pretty stupid. I know my limitations. If I manage to keep up with inflation, it will be an almost unbelievable achievement for me.
I think this explains why you are big proponent of gold and also why you will struggle to make your money grow. Real numbers: my house is a duplex for which the monthly rent is 1700, the mortgage is 810, and my share of the utilities and maintenance is 190, for $700/mo profit. I paid $42,000 for this. You do the math, feel free to neglect growth of principal. Well it turns out the entire economy is based on this type of thing. As a bonus, the house is a real and productive asset and as its owner I am not required to exchange its space for dollars. I could barter it for services, or chickens, or silver coins, or Euros, or yoghurts, or whatever I and the tenants agree on. Ownership of publicly traded companies is very similar to my situation, and I can and (outside retirement accounts) do reference actual real estate opportunities to what I think is available in the stock market. Yes the numbers beat inflation! You should not accept and do not need to accept bad returns.
Title: Re: Precious Metals
Post by: maizeman on October 30, 2019, 07:28:44 AM
The link appears to be dead (at least for me).

However, Osmium (1000x rarer than gold yet 1/4 the price) would have to have a word about the risks of extrapolating price from rarity.
Try a google search on "Rare Metals World Mint" and it should be the first result if the search is done in the United States (or using a proxy server located in the US).

At rwmmint.com, the price quoted for Osmium is $965. Where can you buy it for a quarter the price of gold?

According to the chart on https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust, where Gold and Osmium are listed next to each other, there is no great difference in how rare these metals are. Of course, gold is extremely abundant in the sense that around 150,000 tons have been mined and are being hoarded somewhere.. If there was greater demand for osmium, I believe a lot more could be mined and hoarded. The same is not the case for gold, as most of the low hanging fruit has already been picked in the realm of gold mining.

Hmm.

Well so here's a source for the $400/oz price: https://www.metalsdaily.com/live-prices/pgms/ I'm certainly open to learning the value reported there is incorrect but I'm not pulling it out of thin air.

The abundance data, yes there I have to confess to trusting the google, which pulled text from this site (https://blogs.unimelb.edu.au/sciencecommunication/2017/08/11/osmium-76os-a-noble-metal-in-character-but-with-beastly-properties-and-a-heart-of-gold/) in response to the search query "rarity of osmium relative to gold". After doing further research I agree that a more realistic estimate is that osmium is perhaps 2x as rare as gold rather than 1,000x.

Thanks for calling me out!
Title: Re: Precious Metals
Post by: RWD on October 30, 2019, 07:34:28 AM
Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age?
Yes, almost every active user on this forum. The 4% rule is designed around the concept of your investments keeping pace with inflation so you don't run out of money during the withdrawal phase. If you assume your investments will only match inflation you will need ~60x your annual expenses invested instead of 25x to retire early (without pensions/social security/etc.). For Mustachians saving 70% of their income that investment decision is the difference between working 26 years versus 8.5 years. For a mildly financially ambitious person saving 20% that is the difference between working 240 years versus 37 years.

I like to think of today's economy and financial system as a gigantic poker table.
If you are stock picking then yes it is gambling. If you are investing in broad market index funds and not trying to time the market then long term you will beat inflation. Have you read the stock series by JL Collins? It's a series of blog posts that do a very good job of demystifying the stock market.
https://jlcollinsnh.com/stock-series/
Title: Re: Precious Metals
Post by: waltworks on October 30, 2019, 09:05:01 AM
Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age? Interest rates are about to get stuck at zero in all major economies. Your savings will be guaranteed to erode over time. The question now is how do we lose as little money as possible. Maybe if we invest intelligently we can manage to preserve a greater percentage of our savings, but to think you can get a return over and above inflation seems a bit brazen to put it mildly.

This entire site is premised on the idea of saving money, investing it, and then living off the proceeds. It inherently assumes you can and will beat inflation by investing, which in fact basically anyone can with pretty minimal effort.

-W
Title: Re: Precious Metals
Post by: freya on October 30, 2019, 09:07:27 AM

There is one very, very simple reason to invest in gold, and you can find it in the site www.portfoliocharts.com.  The top performing portfolios for returns and stability/high perpetual withdrawal rates in retirement all hold gold.  These are exactly the portfolios that people interested in long retirements should be most interested in.  Pinwheel and Golden Butterfly top the list, but there are others worth investigating. 

Chop off the first few years after private gold ownership was re-legalized and the numbers shift noticeably.

Yes, I've heard that one a lot.  It might apply to 1973-1974 to a degree, but there were genuine macroeconomic reasons for gold to shoot up at that time.  It is also a bit harder to trot that argument out for 1981 and 2008-2009, not to mention last December.  If you actually look at the data on real, year by year returns, you will see that these portfolios are almost unique in that it is extremely rare for them to post real losses (i.e. after inflation) for more than 2 years in a row.  That's not the case for portfolios without gold.  Since they also hold cash, you are highly unlikely to have to sell assets in a down market during the withdrawal phase (and no need to keep a separate emergency fund, which is a way of artificially boosting returns).  This leads to their supporting higher safe withdrawal rates than standard stock/bond portfolios - despite a technically lower CAGR.

The CAGR numbers by themselves are also kinda misleading.  If you take a 100 dollar investment and it loses 30% in year 1, you'll need a 43% gain in Year 2 to get you back to where you started.  This obviously leads you to think you're doing better than you really are if you simply average the two.  I always laugh when I hear headlines about the S&P 500 being at a "record high", because that simply translates to "finally it's recovered from the recent losses."  Portfolio stability counts for a lot.  If you don't believe that, try running some firecalc simulations with random portfolios sized just under what you think you would need, fixing overall return to the same value but varying the standard deviation.  Makes a huge difference in success rates.
Title: Re: Precious Metals
Post by: maizeman on October 30, 2019, 09:41:24 AM
The CAGR numbers by themselves are also kinda misleading.  If you take a 100 dollar investment and it loses 30% in year 1, you'll need a 43% gain in Year 2 to get you back to where you started.  This obviously leads you to think you're doing better than you really are if you simply average the two. 

This effect is, in fact, the exact reason average returns are misleading but CAGRs are not.

Average returns make a 50% loss followed by a 100% gain look like you're making 25% per year. CAGR correctly calculates that your annual return over two years in that 0%.
Title: Re: Precious Metals
Post by: Telecaster on October 30, 2019, 02:07:56 PM
Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age? Interest rates are about to get stuck at zero in all major economies. Your savings will be guaranteed to erode over time. The question now is how do we lose as little money as possible. Maybe if we invest intelligently we can manage to preserve a greater percentage of our savings, but to think you can get a return over and above inflation seems a bit brazen to put it mildly.

I think pretty much everyone is.  In nutshell, the way the economy works is that somebody (somebody could be an individual or a business) borrows money, invests it in something, like real estate, a restaurant, a tech idea, etc. in the hopes of making more money than the loan costs them.  Interest rates are set mostly by inflation, so pretty much by definition most economic activity occurs with the expectation of beating inflation.   
Title: Re: Precious Metals
Post by: Telecaster on October 30, 2019, 02:48:18 PM

There is one very, very simple reason to invest in gold, and you can find it in the site www.portfoliocharts.com.  The top performing portfolios for returns and stability/high perpetual withdrawal rates in retirement all hold gold.  These are exactly the portfolios that people interested in long retirements should be most interested in.  Pinwheel and Golden Butterfly top the list, but there are others worth investigating. 

Chop off the first few years after private gold ownership was re-legalized and the numbers shift noticeably.

What is the best way to backtest this? 
Title: Re: Precious Metals
Post by: Orthodox Investor on November 01, 2019, 12:54:31 AM
I think this explains why you are big proponent of gold and also why you will struggle to make your money grow. Real numbers: my house is a duplex for which the monthly rent is 1700, the mortgage is 810, and my share of the utilities and maintenance is 190, for $700/mo profit. I paid $42,000 for this. You do the math, feel free to neglect growth of principal. Well it turns out the entire economy is based on this type of thing.
As I stated a few days ago (in this thread), I only recently started buying precious metals (as in months ago), and I have years (over two decades by now) of experience with stocks and real estate.

You mention a 810 mortgage payment on a 42000 purchase. That would seem to correspond to a 5 or 6 year mortgage. Do they even have those (15 or 30 year is all I hear about)?

I remember hearing a local real estate professional speak to an investor audience saying that an investment property will cash flow if the monthly rent is at least 2% of the purchase price. People who listened to his advice generally missed the bottom in US housing around 2011 and 2012 because prices didn't go that low. His advice may have been applicable in a high interest era, but times change. In your example, the yearly rent is about half the purchase price of the property. Given that the mortgage number didn't make any sense, either, maybe you mistyped something?

Well so here's a source for the $400/oz price: https://www.metalsdaily.com/live-prices/pgms/ I'm certainly open to learning the value reported there is incorrect but I'm not pulling it out of thin air.
Looking at the link, I'm inclined to believe that $400/oz is correct, and that the Rare World Metals Mint is simply charging a $500 premium because there is no competitor around to push the price lower.

If you assume your investments will only match inflation you will need ~60x your annual expenses invested instead of 25x to retire early (without pensions/social security/etc.). For Mustachians saving 70% of their income that investment decision is the difference between working 26 years versus 8.5 years. For a mildly financially ambitious person saving 20% that is the difference between working 240 years versus 37 years.
The older generation has screwed the younger generation.  They have succeeded in pricing assets so high that future returns will be much lower.

There are alternatives. If you're a female, marry a rich guy. If you're a guy, go to some poor country where you're the rich guy. Or adopt an anti-consumer ideology to minimize the savings requirement. The morally sound choice would be to bank on universal basic income. 40 million Americans are already on food stamps and I'm not sure how long we can hold off on automating many simple jobs such as driving and cashiering.

This entire site is premised on the idea of saving money, investing it, and then living off the proceeds. It inherently assumes you can and will beat inflation by investing, which in fact basically anyone can with pretty minimal effort.
Since there have been many comments in these pages on long-term investment returns spanning multiple decades, I assume many readers here are familiar with the work of John Hussman (see hussmanfunds.com). He publishes a free monthly commentary (they are fairly repetitive, so once you read a few it's like having read them all). He's considered by many in the investment community to be the "smart money".  Based on historical evidence, he is currently projecting negative returns on a 10 year investment horizon, and that's in nominal terms, not real terms.

I tend to think that history won't repeat itself nearly as much as people think, but given how much discussion there has been in this thread about the historical performance of stocks versus gold, I don't understand how to reconcile a historically informed approach to investing with the view that it's feasible to beat inflation when nearly all financial assets are trading at high valuations, most likely limiting further upside.

Title: Re: Precious Metals
Post by: vand on November 01, 2019, 03:35:00 AM
Gold has a very long history of increasing purchasing power, roughly in line with economic expansion.  If you understand the nature of gold as money this makes complete sense; one of the definitions of good money is as a store of wealth. As real productivity and overall wealth increases then money itself becomes more valuable. That is to say for the same amout of real money you can now exchange it for more goods and services.  What other vehicle has there been, historically, to enable to the common man to save and transfer his wealth down through generations in, say feudal times, if not in real money?


Good Money Appreciates:

https://www.youtube.com/watch?v=GnCHmLsV6Ro
https://www.youtube.com/watch?v=l8_wqmsjrsY
https://www.youtube.com/watch?v=Lwnowt6p5O0


However, the fly in the ointment is its long cyclical nature and its volatility. Even the value of real money relative to other assets can change by a factor of multiples over the medium and longer terms.
Title: Re: Precious Metals
Post by: RWD on November 01, 2019, 07:06:18 AM
Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age?
If you assume your investments will only match inflation you will need ~60x your annual expenses invested instead of 25x to retire early (without pensions/social security/etc.). For Mustachians saving 70% of their income that investment decision is the difference between working 26 years versus 8.5 years. For a mildly financially ambitious person saving 20% that is the difference between working 240 years versus 37 years.
The older generation has screwed the younger generation.  They have succeeded in pricing assets so high that future returns will be much lower.
The current PE ratio is 22.61. That corresponds to a 4.4% return. Or if you want to use the Shiller PE it's 30 which corresponds to 3.3%. Even if it isn't as good as the past (6-7%) it's still going to beat inflation which is the whole point we were discussing here. Saying "Are there significant numbers of people who are actually trying to beat inflation in their investments in this day and age?" is very different than "future returns will be much lower." Don't move the goalposts.
Title: Re: Precious Metals
Post by: waltworks on November 01, 2019, 08:20:30 AM
For crap's sake, stop reading Hussman. The prophets of doom have predicted 15 of the last 2 recessions...

In fact, if you're going to read anything, read this:
https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Here's the money quote if you don't want to bother: "If you are going to make investment mistakes, make sure you are biased towards optimism and not pessimism. Long-term thinking has been rewarded in the past and unless you think the world or innovation is coming to an end it should be rewarded in the future. As Winston Churchill once said, “I am an optimist.  It does not seem too much use being anything else.”

-W
Title: Re: Precious Metals
Post by: ChpBstrd on November 01, 2019, 09:50:43 AM
Everyone’s doing their “research” in social media bubbles. In the Boglehead / MMM forums, one is advised to buy an aggressive allocation of index funds. Then you have YouTubers and bloggers promoting gold. Seeking Alpha promotes stock picking / timing. And in the margins of these sites/apps you see people selling annuities.

I wonder if one’s investment allocation is a factor of which forms of social media, and which influencers in particular, one finds entertaining?

It’s a terrifying thought.
Title: Re: Precious Metals
Post by: Classical_Liberal on November 01, 2019, 01:06:02 PM
I wonder if one’s investment allocation is a factor of which forms of social media, and which influencers in particular, one finds entertaining?

Chicken or egg. People look for confirmation bias.
Title: Re: Precious Metals
Post by: waltworks on November 01, 2019, 01:51:28 PM
IMO the bogleheads folks, in general, are just not entertained by money stuff (except by arguing about minutia of tax optimization and such).

In terms of your regular 'merican, assuming they invest at all, it's definitely tied to their age/social status/political leanings and what they are entertained by. Old and grouchy? The Fox anchors are on all those gold commercials! Young and hip? The e-trade baby is hilarious and my co-workers all like bitcoin and tesla! Unsure new parent? An Edward Jones door to door jackoff in a cheap suit will hold your hand and take your money.

Here in UT our preference is for faith and/or nutrition-based ponzi schemes. My blessed essential oils business has really taken off but I need a new round of funding - you and your friends and family can get in now and make a guaranteed 20%!

-W
Title: Re: Precious Metals
Post by: nancyfrank232 on November 01, 2019, 02:42:11 PM
IMO the bogleheads folks, in general, are just not entertained by money stuff (except by arguing about minutia of tax optimization and such).

Soooo true

When I can’t sleep, I visit bogleheads
Title: Re: Precious Metals
Post by: TomTX on November 01, 2019, 07:19:19 PM
I think this explains why you are big proponent of gold and also why you will struggle to make your money grow. Real numbers: my house is a duplex for which the monthly rent is 1700, the mortgage is 810, and my share of the utilities and maintenance is 190, for $700/mo profit. I paid $42,000 for this. You do the math, feel free to neglect growth of principal. Well it turns out the entire economy is based on this type of thing.
As I stated a few days ago (in this thread), I only recently started buying precious metals (as in months ago), and I have years (over two decades by now) of experience with stocks and real estate.

You mention a 810 mortgage payment on a 42000 purchase. That would seem to correspond to a 5 or 6 year mortgage. Do they even have those (15 or 30 year is all I hear about)?

I remember hearing a local real estate professional speak to an investor audience saying that an investment property will cash flow if the monthly rent is at least 2% of the purchase price. People who listened to his advice generally missed the bottom in US housing around 2011 and 2012 because prices didn't go that low. His advice may have been applicable in a high interest era, but times change. In your example, the yearly rent is about half the purchase price of the property. Given that the mortgage number didn't make any sense, either, maybe you mistyped something?

You may have two decades of real estate experience, but it appears to be quite shallow.

Escrow is very common. Rolled into the mortgage payment. Thus the $810 monthly mortgage payment is probably PITI, not just PI. Your calculation appears to be just based on PI.

Monthly @ 2% of purchase price is darn high. Obviously very profitable if you can find it - Old school rule of thumb for likely cash flowing a property was just 1% - in a much higher interest rate time.
Title: Re: Precious Metals
Post by: Radagast on November 01, 2019, 09:42:15 PM
I think this explains why you are big proponent of gold and also why you will struggle to make your money grow. Real numbers: my house is a duplex for which the monthly rent is 1700, the mortgage is 810, and my share of the utilities and maintenance is 190, for $700/mo profit. I paid $42,000 for this. You do the math, feel free to neglect growth of principal. Well it turns out the entire economy is based on this type of thing.
As I stated a few days ago (in this thread), I only recently started buying precious metals (as in months ago), and I have years (over two decades by now) of experience with stocks and real estate.

You mention a 810 mortgage payment on a 42000 purchase. That would seem to correspond to a 5 or 6 year mortgage. Do they even have those (15 or 30 year is all I hear about)?

I remember hearing a local real estate professional speak to an investor audience saying that an investment property will cash flow if the monthly rent is at least 2% of the purchase price. People who listened to his advice generally missed the bottom in US housing around 2011 and 2012 because prices didn't go that low. His advice may have been applicable in a high interest era, but times change. In your example, the yearly rent is about half the purchase price of the property. Given that the mortgage number didn't make any sense, either, maybe you mistyped something?
PITI is $810. $42,000 was the down payment. It is cashflow positive and yet does not meet the 1% rule. However $8400 per year on a $42,000 initial investment is still a decent return that is far ahead of inflation. Although I tend to use $6,000 per year to account for my own time, still way ahead of inflation.

The 1% rule is what is commonly used around here. 2% has at best been rare and only in questionable places, and likely impossible now. You don't need a real estate professional to tell you what cash flow will be. You can use any online real estate site to get your estimated mortgage payment, add some maintenance and management fees, and then look at comparable rents.
Title: Re: Precious Metals
Post by: Telecaster on November 02, 2019, 10:32:39 AM
Since there have been many comments in these pages on long-term investment returns spanning multiple decades, I assume many readers here are familiar with the work of John Hussman (see hussmanfunds.com). He publishes a free monthly commentary (they are fairly repetitive, so once you read a few it's like having read them all). He's considered by many in the investment community to be the "smart money".  Based on historical evidence, he is currently projecting negative returns on a 10 year investment horizon, and that's in nominal terms, not real terms.

If you read Hussman, he certainly sounds like a smart guy.  He doesn't come across as a kook or conspiracy theorist or anything.  That said, he started his flagship
Strategic Growth Fund (HSGFX) right in the dot com melt down, so perfect time to start a bear/defensive portfolio.  We've been through a couple economic cycles since then, and the fund has a CAGR of -0.91% since Jan 2001.

You can play all the defense you want, but you've gotta score some point a long the way.  Had you invested in a nice index fund back then, your investment would have more than tripled.  Had you gone with Hussman, you'd be down 20%. 

Title: Re: Precious Metals
Post by: Orthodox Investor on November 03, 2019, 06:52:32 PM
PITI is $810. $42,000 was the down payment. It is cashflow positive and yet does not meet the 1% rule. However $8400 per year on a $42,000 initial investment is still a decent return that is far ahead of inflation. Although I tend to use $6,000 per year to account for my own time, still way ahead of inflation.
I didn't understand you in my previous reply, thinking the $42,000 was a purchase price. Generally, people who want to buy using a mortgage are forced to live near their job location, which is likely to be in an overpriced big city. If they already own a house with little or no debt, many of these individuals and families could sell their crappy house for a million and buy a large number of rental properties in a cheaper place. There are only very few who could actually pull this off before the  price differential disappears. Arguably, it's already happening, given that home prices have doubled or tripled in many places in a few short years. On the other hand, if you look at Hong Kong, you wonder why people are still hanging on to their million dollar apartments given that China will be able to legally turn the city into an Orweillian nightmare in 2047.

If you live near an Albertson's you can buy a dozen eggs for twelve cents this week and there are numerous other deals where you can buy groceries at extreme discounts. This happens as a result of a variety of factors, including price-insensitive buyers who use your tax money to purchase overpriced food items with their EBT (food stamps) cards (thereby giving supermarkets the flexibility to pursue a high-low pricing strategy, meaning they sell both overpriced and underpriced items). This type of thing has been going on for decades and for frugal shoppers makes it seem like we live in a deflationary world.

What the penny eggs at Albertson's and the $42,000 real estate opportunity have in common is that they seem too good to be true, yet they are real and pop up with enough regularity that it seems like one can rely on it. We get to buy stuff cheap thanks to an abundance of suckers who overpay and are subsidizing us. This takes us right back to the poker table because you only make money if there are enough suckers at the table who keep making dumb mistakes.

Mathematically, it is obvious that the only way you get richer is by making others get poorer. Given that the wealth in the world is mostly controlled by the top 1%, every time the value of conventional asset portfolios goes up for the bottom 95%, they are actually getting poorer. This is because the wealth gap keeps widening as asset values rise. I think the actual inflation rate in the world is the rate by which the combined value of all investment assets in the world increases. Since the ECB, SNB, and the Japanese Central Bank are already in the process of monetizing corporate bonds and stocks, and Yellen has already hinted at the possibility that the Fed may do so in the future, it's not unreasonable to consider all investment assets (other than derivative instruments) to be money good.
Title: Re: Precious Metals
Post by: Radagast on November 03, 2019, 08:48:31 PM
I didn't understand you in my previous reply, thinking the $42,000 was a purchase price.
Sorry I did phrase that poorly.

Quote
Generally, people who want to buy using a mortgage are forced to live near their job location, which is likely to be in an overpriced big city. If they already own a house with little or no debt, many of these individuals and families could sell their crappy house for a million and buy a large number of rental properties in a cheaper place. There are only very few who could actually pull this off before the  price differential disappears.
I do not understand. Nearly no people are both willing and able to do that. What price differential?

Quote
What the penny eggs at Albertson's and the $42,000 real estate opportunity have in common is that they seem too good to be true, yet they are real and pop up with enough regularity that it seems like one can rely on it. We get to buy stuff cheap thanks to an abundance of suckers who overpay and are subsidizing us. This takes us right back to the poker table because you only make money if there are enough suckers at the table who keep making dumb mistakes.
I just checked and that area has several multi family homes which if anything seem to be getting better rates of return than I get (I went by gut when I bought the house, having not discovered personal finance yet). It was not a one off opportunity and those types of deals exist in many parts of the US.

Different people have different objectives and time frames. I'm not a sucker if I pay $100 for a hotel or an Air BnB, I'm just a person who wants a decent place to crash and shower for a night. Now I am renting again, while still owning the house. I observe based on the high rent and overall cheapness that the owner is almost certainly making bank, but I'm not a sucker for choosing to rent here for a year or two. On my time frame it makes the most sense, and I joyously call someone else to fix the dishwasher. My tenants are not getting screwed by paying me, in fact they were pretty happy to be there instead of their previous digs. Eventually (I presume, probably with cause as I noticed one gets Vanguard statements) they will move onto bigger and better things.

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Mathematically, it is obvious that the only way you get richer is by making others get poorer.
False. This is the mistake in your thinking which causes all the others. If this was true then there would be no doubt that precious metals would be as reliable as anything else. But it is wrong. New wealth can be generated without making anybody poorer. As an example, I have done consulting work for the gold mining industry, who produce previously worthless microscopic gold from the ground and turn it into what you call wealth. Well, it turns out things beside gold have value too, in fact collectively the other things have a lot more value. Any time a new thing is created that people find more valuable than before, new wealth is created, and nobody needs to be harmed in the process (although I agree there are often externalities). That is the entire point of this forum.
Title: Re: Precious Metals
Post by: RWD on November 03, 2019, 08:54:20 PM
Mathematically, it is obvious that the only way you get richer is by making others get poorer.

Not only is this not obvious, it is actually wrong. Wealth is not a zero sum game.
Title: Re: Precious Metals
Post by: maizeman on November 03, 2019, 08:54:46 PM
Mathematically, it is obvious that the only way you get richer is by making others get poorer.
False. This is the mistake in your thinking which causes all the others. If this was true then there would be no doubt that precious metals would be as reliable as anything else. But it is wrong. New wealth can be generated without making anybody poorer. As an example, I have done consulting work for the gold mining industry, who produce previously worthless microscopic gold from the ground and turn it into what you call wealth. Well, it turns out things beside gold have value too, in fact collectively the other things have a lot more value. Any time a new thing is created that people find more valuable than before, new wealth is created, and nobody needs to be harmed in the process (although I agree there are often externalities). That is the entire point of this forum.

+1 to this point by Radagast. It's possible to grow the total pie of wealth, not only to take from someone else to give to yourself.

If wealth was constant, people would have have a much higher standard of living 400 years ago than today, as the same amount of wealth would be spread much more thinly across a much larger population.
Title: Re: Precious Metals
Post by: js82 on November 04, 2019, 07:28:29 PM
Mathematically, it is obvious that the only way you get richer is by making others get poorer.

On paper, perhaps.  In practice, nonsense.

Most of the energy we use on our planet comes from the sun, either directly(solar energy) or indirectly(growing plants, hydroelectric power, technically even fossil fuels).  In the end, harnessing that energy to do work, be it by growing crops or generating electricity to do/make useful things, makes someone richer.  If done in the right way, it makes that person richer without generating negative externalities for others.

Furthermore, productivity/efficiency gains are a direct refutation of your assertion.