Author Topic: Surprising fact  (Read 11767 times)


2Birds1Stone

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Re: Surprising fact
« Reply #1 on: November 19, 2014, 08:57:11 AM »
This is why diversification is key =)

Bob W

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Re: Surprising fact
« Reply #2 on: November 19, 2014, 09:02:34 AM »
Buffet says never buy gold.

surfhb

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Re: Surprising fact
« Reply #3 on: November 19, 2014, 09:24:22 AM »
It's only a 10 year comparison.    Hardly the time frame to compare which one investment beats another

God or Mammon?

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Re: Surprising fact
« Reply #4 on: November 19, 2014, 10:47:51 AM »
the 10yr period is used because it was the inception of the GLD etf

there aren't many other ways to measure the cost of owning gold (including storage, insurance, etc)

would probably need to go back to 1996 (almost 20yrs) to find the date at which an investor would have come out ahead being long S&P + dividends vs gold; but I'm guessing that won't change your mind either

Poorman

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Re: Surprising fact
« Reply #5 on: November 19, 2014, 12:59:50 PM »
Gold was in a massive bubble that peaked in 2011 and is still slowly deflating after crashing 40%.  If the idea of posting this article is to imply that gold is somehow superior to stocks in the long run, the data just doesn't support that.  In the long run, gold should track inflation, whereas stocks should handily beat inflation.  The fact that gold is showing such out performance over the past 10 years means that it still has a long way to fall before getting back in line with fundamentals based on inflation.  The gold bulls are gradually being shaken out, but they are a stubborn lot, and it could take years before capitulation occurs.

thenextguy

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Re: Surprising fact
« Reply #6 on: November 19, 2014, 01:56:03 PM »
the 10yr period is used because it was the inception of the GLD etf

there aren't many other ways to measure the cost of owning gold (including storage, insurance, etc)

would probably need to go back to 1996 (almost 20yrs) to find the date at which an investor would have come out ahead being long S&P + dividends vs gold; but I'm guessing that won't change your mind either

Five year comparison

It's going to be a lot harder to find a time frame in which gold outperforms stocks.

surfhb

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Re: Surprising fact
« Reply #7 on: November 19, 2014, 01:57:00 PM »
the 10yr period is used because it was the inception of the GLD etf

there aren't many other ways to measure the cost of owning gold (including storage, insurance, etc)

would probably need to go back to 1996 (almost 20yrs) to find the date at which an investor would have come out ahead being long S&P + dividends vs gold; but I'm guessing that won't change your mind either

Change my mind about what?

Regardless, the massive increase  in gold has alot to do with recent fatalist view of world events in my opinion :)   Chicken Little syndrome
« Last Edit: November 19, 2014, 02:02:38 PM by surfhb »

UnleashHell

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Re: Surprising fact
« Reply #8 on: November 19, 2014, 02:21:00 PM »
fact : over a ten year span one type of investment has beaten another.

Surprising? no.

Looks like the sort of headline you see in some of the financials. total guff and a waste of time.

waltworks

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Re: Surprising fact
« Reply #9 on: November 19, 2014, 02:27:11 PM »
Hey, GOM is posting again, so now I can fill up on my quota of doomer financial news!

Rad.

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skyrefuge

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Re: Surprising fact
« Reply #10 on: November 19, 2014, 03:20:27 PM »
You'd have to be pretty ignorant about the price of gold over the last decade to be surprised by that fact.

You'd also have to be pretty ignorant about statistics to find that fact notable (much less actionable!)

According to cFIREsim, of 135 10-year periods, 100% gold appears to have lost money (on an inflation-adjusted basis) in the majority of them, while 100% stocks gained money in the vast majority of them. Unfortunately it doesn't directly spit out those numbers for each of them, so that's just a rough eyeballing. But it does inform us that the median 10-year return for gold was -12%, while the median 10-year return for stocks was +86%. And gold dipped below its initial value in 62% of those 10-year cycles, while stocks only did so in 34%.

In other words, yes, of course there are going to be 10-year periods where gold beats stocks, but good luck finding one of them; the odds are heavily stacked against you!

KC1983

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Re: Surprising fact
« Reply #11 on: November 19, 2014, 07:19:08 PM »
I'm old enough to remember way back when gold last made a big move. It was a loooooong time ago. I was but a precocious youngster in 1980, with no money to invest, but I read on investment newsletter written in an authoritative voice that gold had made it's long expected move. $5000/oz was in the cards by 1981 or 1982, that was dead certain!  I actually advised my older sister to put the couple of thousand she had to invest into gold.

Thankfully, she didn't. Anyone who thought gold was an investment in 1980 lived to deeply regret it. For the next 25 years.

Cut to about 3 years ago. A couple of youngsters I worked with, each with $10k to invest, loudly announced they'd figured out a sure fire investment that would let them retire early. Yes, they each had decided to drop $10000 into gold bullion, bury in a safe place, and know they could retire in a decade or so. Gold was at $1800/oz, and headed for $5000 within a couple of years. The stock market was broken. They'd read it on the internet. I told them the above story. They looked at me like an old fool. Now each of them have $7000 worth of gold buried in their parent's back yards.

Warren Buffet is to be defied at your own risk.

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Re: Surprising fact
« Reply #12 on: November 20, 2014, 04:13:27 AM »
You'd have to be pretty ignorant about the price of gold over the last decade to be surprised by that fact.

You'd also have to be pretty ignorant about statistics to find that fact notable (much less actionable!)

According to cFIREsim, of 135 10-year periods, 100% gold appears to have lost money (on an inflation-adjusted basis) in the majority of them, while 100% stocks gained money in the vast majority of them. Unfortunately it doesn't directly spit out those numbers for each of them, so that's just a rough eyeballing. But it does inform us that the median 10-year return for gold was -12%, while the median 10-year return for stocks was +86%. And gold dipped below its initial value in 62% of those 10-year cycles, while stocks only did so in 34%.

In other words, yes, of course there are going to be 10-year periods where gold beats stocks, but good luck finding one of them; the odds are heavily stacked against you!

Your stats are what make it a surprising fact, no?

God or Mammon?

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Re: Surprising fact
« Reply #13 on: November 20, 2014, 04:18:17 AM »
I'm old enough to remember way back when gold last made a big move. It was a loooooong time ago. I was but a precocious youngster in 1980, with no money to invest, but I read on investment newsletter written in an authoritative voice that gold had made it's long expected move. $5000/oz was in the cards by 1981 or 1982, that was dead certain!  I actually advised my older sister to put the couple of thousand she had to invest into gold.

Thankfully, she didn't. Anyone who thought gold was an investment in 1980 lived to deeply regret it. For the next 25 years.

Cut to about 3 years ago. A couple of youngsters I worked with, each with $10k to invest, loudly announced they'd figured out a sure fire investment that would let them retire early. Yes, they each had decided to drop $10000 into gold bullion, bury in a safe place, and know they could retire in a decade or so. Gold was at $1800/oz, and headed for $5000 within a couple of years. The stock market was broken. They'd read it on the internet. I told them the above story. They looked at me like an old fool. Now each of them have $7000 worth of gold buried in their parent's back yards.

Warren Buffet is to be defied at your own risk.

Fascinating story

Physical gold is one of the few stores of wealth that keeps up with inflation and is a great estate tax hedge (for those who will actually have an estate to pass on) where tax never has to be paid - simply hand the gold bars to your heirs on your death bed, Uncle Sam never ever takes a cut

matchewed

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Re: Surprising fact
« Reply #14 on: November 20, 2014, 07:44:24 AM »
I'm old enough to remember way back when gold last made a big move. It was a loooooong time ago. I was but a precocious youngster in 1980, with no money to invest, but I read on investment newsletter written in an authoritative voice that gold had made it's long expected move. $5000/oz was in the cards by 1981 or 1982, that was dead certain!  I actually advised my older sister to put the couple of thousand she had to invest into gold.

Thankfully, she didn't. Anyone who thought gold was an investment in 1980 lived to deeply regret it. For the next 25 years.

Cut to about 3 years ago. A couple of youngsters I worked with, each with $10k to invest, loudly announced they'd figured out a sure fire investment that would let them retire early. Yes, they each had decided to drop $10000 into gold bullion, bury in a safe place, and know they could retire in a decade or so. Gold was at $1800/oz, and headed for $5000 within a couple of years. The stock market was broken. They'd read it on the internet. I told them the above story. They looked at me like an old fool. Now each of them have $7000 worth of gold buried in their parent's back yards.

Warren Buffet is to be defied at your own risk.

Fascinating story

Physical gold is one of the few stores of wealth that keeps up with inflation and is a great estate tax hedge (for those who will actually have an estate to pass on) where tax never has to be paid - simply hand the gold bars to your heirs on your death bed, Uncle Sam never ever takes a cut

Semi-useful for estate planning. Less useful for FIRE, wealth building, and wealth preservation in the long run given -

You'd have to be pretty ignorant about the price of gold over the last decade to be surprised by that fact.

You'd also have to be pretty ignorant about statistics to find that fact notable (much less actionable!)

According to cFIREsim, of 135 10-year periods, 100% gold appears to have lost money (on an inflation-adjusted basis) in the majority of them, while 100% stocks gained money in the vast majority of them. Unfortunately it doesn't directly spit out those numbers for each of them, so that's just a rough eyeballing. But it does inform us that the median 10-year return for gold was -12%, while the median 10-year return for stocks was +86%. And gold dipped below its initial value in 62% of those 10-year cycles, while stocks only did so in 34%.

In other words, yes, of course there are going to be 10-year periods where gold beats stocks, but good luck finding one of them; the odds are heavily stacked against you!

So this surprising fact about your singular 10 year period is meant to convey what exactly? That it is an isolated fact? Is there some takeaway you're expecting out of it? If so, what is it? If not, then what's the point?

dragoncar

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Re: Surprising fact
« Reply #15 on: November 20, 2014, 06:04:58 PM »
You'd have to be pretty ignorant about the price of gold over the last decade to be surprised by that fact.

You'd also have to be pretty ignorant about statistics to find that fact notable (much less actionable!)

According to cFIREsim, of 135 10-year periods, 100% gold appears to have lost money (on an inflation-adjusted basis) in the majority of them, while 100% stocks gained money in the vast majority of them. Unfortunately it doesn't directly spit out those numbers for each of them, so that's just a rough eyeballing. But it does inform us that the median 10-year return for gold was -12%, while the median 10-year return for stocks was +86%. And gold dipped below its initial value in 62% of those 10-year cycles, while stocks only did so in 34%.

In other words, yes, of course there are going to be 10-year periods where gold beats stocks, but good luck finding one of them; the odds are heavily stacked against you!

Well, duh.  Until the early 70's gold was either tied to the dollar or illegal to own (as an investment).

Druid

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Re: Surprising fact
« Reply #16 on: November 20, 2014, 07:48:25 PM »
Its my understanding that gold will be taxed when it passes from the estate to the heirs, assuming the estate is over the exemption amount.

Either way the gold bricks should be valued at their current market value at the time of the distribution. When the heirs sell them they may have to pay capital gain tax depending on their income bracket; assuming they sell them at a gain.

If you were just implying that gold is easier to hide from the IRS I would also argue the fact. Theoretically cash that was kept under a mattress would be easier to distribute tax free since in most cases a person will need to take the gold to a dealer to get close to market value. Obviously the cash under you mattress would not keep up with inflation, but it would be more comfortable than keeping gold there:)
« Last Edit: November 20, 2014, 08:00:22 PM by Druid »

skyrefuge

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Re: Surprising fact
« Reply #17 on: November 20, 2014, 09:58:27 PM »
Well, duh.  Until the early 70's gold was either tied to the dollar or illegal to own (as an investment).

Ah, good point, I had not considered that!

Ok, re-running cFIREsim from 1973 onward, the 10-year odds of beating stocks are even *worse* for gold. This time I could count the cycles: gold lost money in 18 of 33 cycles, while stocks lost money in only 4 of 33. The median 10-year return for gold was, curiously, the same -12% of the larger dataset, while the median 10-year return for stocks increased to +118%.

And now with the smaller dataset, I went ahead and compared each 10-year cycle head-to-head, which is what we really care about. Stocks outperformed gold in 23 of the 33 cycles. Gold won in the cycles starting in 1973, and 1997-2005. The average outperformance of stocks was 70%, and the median outperformance was 127%.

dragoncar

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Re: Surprising fact
« Reply #18 on: November 21, 2014, 12:07:51 AM »
Well, duh.  Until the early 70's gold was either tied to the dollar or illegal to own (as an investment).

Ah, good point, I had not considered that!

Ok, re-running cFIREsim from 1973 onward, the 10-year odds of beating stocks are even *worse* for gold. This time I could count the cycles: gold lost money in 18 of 33 cycles, while stocks lost money in only 4 of 33. The median 10-year return for gold was, curiously, the same -12% of the larger dataset, while the median 10-year return for stocks increased to +118%.

And now with the smaller dataset, I went ahead and compared each 10-year cycle head-to-head, which is what we really care about. Stocks outperformed gold in 23 of the 33 cycles. Gold won in the cycles starting in 1973, and 1997-2005. The average outperformance of stocks was 70%, and the median outperformance was 127%.

Well, duh.  Stocks are a productive asset, while gold is a shiny metal.

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Re: Surprising fact
« Reply #19 on: November 21, 2014, 05:21:06 AM »
Its my understanding that gold will be taxed when it passes from the estate to the heirs, assuming the estate is over the exemption amount.

Either way the gold bricks should be valued at their current market value at the time of the distribution. When the heirs sell them they may have to pay capital gain tax depending on their income bracket; assuming they sell them at a gain.

If you were just implying that gold is easier to hide from the IRS I would also argue the fact. Theoretically cash that was kept under a mattress would be easier to distribute tax free since in most cases a person will need to take the gold to a dealer to get close to market value. Obviously the cash under you mattress would not keep up with inflation, but it would be more comfortable than keeping gold there:)

I am not advocating anyone break any laws, but for those who have significant estates it is typically impossible to account for every single family heirloom, piece of furniture, article of clothing, etc in valuing an estate properly (for death tax purposes) - and they almost never are; stocks/bonds/houses/cars are pretty easy to verify and value for such purposes

If someone were to be unscrupulous, they could stockpile a small safe full of gold bars that would be impossible to detect/trace

Given that the price of gold is roughly $1200/troy oz and each bar, measuring approximately 7x4x2 inches, is worth $480k, I think it's obvious that stashing a few of those (which DO keep up with inflation) is a lot easier and financially smarter than having several mattresses full of hundred dollar bills.

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Re: Surprising fact
« Reply #20 on: November 21, 2014, 06:28:56 AM »
Buffet says never buy gold.

Interestingly, Buffett bought lots of silver (over 100mm ounces) in the late 90s.

So I think he's more an opportunist than you may think

mak1277

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Re: Surprising fact
« Reply #21 on: November 21, 2014, 08:43:19 AM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out? 

dragoncar

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Re: Surprising fact
« Reply #22 on: November 21, 2014, 10:09:51 AM »
Buffet says never buy gold.

Interestingly, Buffett bought lots of silver (over 100mm ounces) in the late 90s.

So I think he's more an opportunist than you may think

Buffet is just upset that the gold doesn't respond when he Fondles it (True story)

Poorman

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Re: Surprising fact
« Reply #23 on: November 21, 2014, 02:27:56 PM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out?

The problem is I don't think there are any financial wizard's with multi-decade track records that advise buying gold.  Correct me if I'm wrong.

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Re: Surprising fact
« Reply #24 on: November 21, 2014, 05:24:03 PM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out?

The problem is I don't think there are any financial wizard's with multi-decade track records that advise buying gold.  Correct me if I'm wrong.

There are some financial wizards with multi-decade track records who have publicly recommended buying gold at various times - it is just not considered a buy and hold instrument

Bob W

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Re: Surprising fact
« Reply #25 on: November 24, 2014, 11:36:23 AM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out?

The problem is I don't think there are any financial wizard's with multi-decade track records that advise buying gold.  Correct me if I'm wrong.

There are some financial wizards with multi-decade track records who have publicly recommended buying gold at various times - it is just not considered a buy and hold instrument

Amending my Buffet quote -- He may or may not have said "never buy gold"  but he did in fact give a long list of why company ownership is superior to gold ownership.

Here is one quote --

.“I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils”.

Bill Clay

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Re: Surprising fact
« Reply #26 on: November 24, 2014, 12:40:11 PM »
Buffett also said this about gold:

"“When we took over Berkshire, it was selling at $15 a share and gold was selling at $20 an ounce. Gold is now $1,600 and Berkshire is $120,000."

And the quote is somewhat outdated. Currently, an ounce gold is worth less than $1,200 while a Berkshire share is worth more than $200,000.

http://www.forbes.com/sites/stevedenning/2012/05/09/why-warren-buffett-wont-invest-in-gold/

Scandium

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Re: Surprising fact
« Reply #27 on: November 24, 2014, 01:18:24 PM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out?

The problem is I don't think there are any financial wizard's with multi-decade track records that advise buying gold.  Correct me if I'm wrong.

No. But I bet this guy advise buying gold. So do you trust some pasty rich guy in an office, or the guy who owns his own bunker and hazmat suit?? Pretty obvious if you ask me..


mak1277

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Re: Surprising fact
« Reply #28 on: November 27, 2014, 09:51:35 AM »
Buffet says never buy gold.

So if I find a financial wizard that says you should buy gold, does that balance Buffet out?

The problem is I don't think there are any financial wizard's with multi-decade track records that advise buying gold.  Correct me if I'm wrong.

Does Harry Browne' s permanent portfolio count?  Also I think ray Dalio recommends holding some also.

sirdoug007

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Re: Surprising fact
« Reply #29 on: November 27, 2014, 11:24:59 AM »
Just a clever use of dates...

http://awealthofcommonsense.com/win-argument-market/


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