Author Topic: Precious Metals  (Read 20174 times)

ChpBstrd

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Re: Precious Metals
« Reply #150 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 ďgoldĒ 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

vand

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Re: Precious Metals
« Reply #151 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.

Telecaster

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Re: Precious Metals
« Reply #152 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. 

ChpBstrd

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Re: Precious Metals
« Reply #153 on: August 19, 2019, 09:17:08 AM »
What if instead of ďprecious metalsĒ we called them ďexpensive metalsĒ? 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?

Car Jack

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Re: Precious Metals
« Reply #154 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. 

Paul990

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Re: Precious Metals
« Reply #155 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



                                     

ChpBstrd

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Re: Precious Metals
« Reply #156 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 centuryís 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 thatís about it.

ChpBstrd

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Re: Precious Metals
« Reply #157 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



                                     

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

I donít 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 donít model, say, a 70/30 portfolio over that time. I guarantee they donít 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.

EvenSteven

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Re: Precious Metals
« Reply #158 on: August 29, 2019, 11:18:15 AM »
Quote
So the moral of the story is if youíre going to stuff something under the mattress for a decade, make it gold.

Probably more comfortable than cattle.

Davnasty

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Re: Precious Metals
« Reply #159 on: August 29, 2019, 12:05:43 PM »
Quote
So the moral of the story is if youíre 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...

vand

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Re: Precious Metals
« Reply #160 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.

Car Jack

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Re: Precious Metals
« Reply #161 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.

PDXTabs

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Re: Precious Metals
« Reply #162 on: August 30, 2019, 10:00:13 AM »
So the moral of the story is if youíre 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/

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.

Telecaster

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Re: Precious Metals
« Reply #163 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.   

flipboard

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Re: Precious Metals
« Reply #164 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.

Paul990

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Re: Precious Metals
« Reply #165 on: September 01, 2019, 06:57:20 AM »
So the moral of the story is if youíre going to stuff something under the mattress for a decade, make it gold.

I donít 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 donít model, say, a 70/30 portfolio over that time. I guarantee they donít 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 donít 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://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/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. Itís doesnít 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/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 donít 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.
« Last Edit: September 03, 2019, 11:50:36 AM by Paul990 »

maizeman

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Re: Precious Metals
« Reply #166 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/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.



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.



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/

PDXTabs

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Paul990

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Re: Precious Metals
« Reply #168 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)

maizeman

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Re: Precious Metals
« Reply #169 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]

Telecaster

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Re: Precious Metals
« Reply #170 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. 

Paul990

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Re: Precious Metals
« Reply #171 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

You are a lovely man maizeman

maizeman

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Re: Precious Metals
« Reply #172 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.

MilesTeg

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Re: Precious Metals
« Reply #173 on: September 03, 2019, 10:55:53 AM »
Thanks to all those that answered my questions; it's appreciated!

Paul990

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Re: Precious Metals
« Reply #174 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.
« Last Edit: September 06, 2019, 01:20:31 AM by Paul990 »

waltworks

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Re: Precious Metals
« Reply #175 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

maizeman

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Re: Precious Metals
« Reply #176 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 isnít calculating inflation using the old formula, nor does he claim to. He doesnít 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.

Paul990

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Re: Precious Metals
« Reply #177 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 Ė 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 BlackRockís 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 BlackRockís 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.

TomTX

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Re: Precious Metals
« Reply #178 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.

Radagast

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Re: Precious Metals
« Reply #179 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)

flipboard

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Re: Precious Metals
« Reply #180 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.

Radagast

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Re: Precious Metals
« Reply #181 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.
« Last Edit: September 07, 2019, 09:21:09 AM by Radagast »

Buffalo Chip

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Re: Precious Metals
« Reply #182 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.       

flipboard

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Re: Precious Metals
« Reply #183 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 ďgoldĒ 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.

Buffalo Chip

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Re: Precious Metals
« Reply #184 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.


 Weíre talking investment strategies, not religious dogma. That seems to be forgotten at times.

Speaking for myself, a barbaric relic or two in moderation isnít going to significantly hurt your portfolio. So why not have some to smooth out those results?

Paul990

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Re: Precious Metals
« Reply #185 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 canít 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 donít 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 goldís value is much more widespread than that of any fiat currency.
If they should tell me, Iíll get lost somewhere around the world, without knowing where, and they give me the chance of choosing a currency to take with me, Iíll 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).


Paul990

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Re: Precious Metals
« Reply #186 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?

TomTX

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Re: Precious Metals
« Reply #187 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.

maizeman

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Re: Precious Metals
« Reply #188 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%.

SwordGuy

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Re: Precious Metals
« Reply #189 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?


TomTX

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Re: Precious Metals
« Reply #190 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.

SwordGuy

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Re: Precious Metals
« Reply #191 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.

maizeman

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Re: Precious Metals
« Reply #192 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.

JAYSLOL

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Re: Precious Metals
« Reply #193 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, youíre 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 someoneís elseís dime.
« Last Edit: September 14, 2019, 01:56:25 PM by JAYSLOL »

SwordGuy

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Re: Precious Metals
« Reply #194 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, youíre 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 someoneís elseís 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.

JAYSLOL

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Re: Precious Metals
« Reply #195 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, youíre 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 someoneís elseís 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 doesnít 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 wouldnít 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 arenít around to speculate, they just want the fast nickel. 

Telecaster

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Re: Precious Metals
« Reply #196 on: September 14, 2019, 05:12:58 PM »
I wouldn't say that.
The recognition of goldís value is much more widespread than that of any fiat currency.
If they should tell me, Iíll get lost somewhere around the world, without knowing where, and they give me the chance of choosing a currency to take with me, Iíll 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. 


Paul990

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Re: Precious Metals
« Reply #197 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 Bankís 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.


Paul990

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Re: Precious Metals
« Reply #198 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 didnít 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 ĄIs x money or notď but ĄHow good/bad is x as money in such and such circumstancesď.
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 donít 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."
Iím 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. Iím talking about title of ownership of gold bars.
It doesnít have to be in-hand. I donít belong to the ĄIf you donít touch it, you donít own itď camp.
In my view, BullionVault, GoldMoney, BullionStar (just examples) are as much gold as tangible in-my-hand gold.
ETF shares donít 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 Ö
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?
« Last Edit: September 21, 2019, 11:38:50 AM by Paul990 »

maizeman

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Re: Precious Metals
« Reply #199 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.



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.