Gold will go $1,500/oz

[kathaksung]

I think Gold will be pushed up to $2,000/oz, $1,500 at least, before it falls back to $800. Now it's a chance to buy some at the level of $1,300. Of course, before the crazy booming, there will be a blitze short period of falling to below $1,000, that's a technique to kill the small speculator follower. It will be a good chance to buy in.

Don't be too greedy to believe the media that gold will be $3,000/oz. It will be reasonable to Harvest it at between $15,000 to $2,000/oz.

Here is a whole page advertisement in San Jose Mercury News on August 24, 2009:

Cash for Gold comes to Cupertino

With unemployment and foreclosures at a record high in California, ARC Capital Investments will host another fun, safe and lucrative cash for gold purchasing event here in Cupertino to help stimulate the economy. Many people are already very aware of the benefits of such an event due to the many advertisements on television, radio and the Internet.

ARC Capital Investments, a California state-licensed precious metals dealer, has a different approach to the demand and supply of precious metals. Owner of ARC, hosts a 4-day event in the Cypress Hotel, a very well established and reputable hotel, in order to ensure 100% client interaction.
.......

The Gold Evaluation Process
........ "

The price of the gold in August.2009 was around $950/ounce. ARC of course is not a charitable institution. When it pays huge to rent hotels and put advertisement to collect gold from area to area, how much do you think they expect to make in future gold market?

The same whole page ads is continuing until now. When those insiders keep on spend money to collect gold, that means a big gold bubble booming is ready.

[Almo]

I think Gold will be pushed up to $2,000/oz, $1,500 at least, before it falls back to $800. Now it's a chance to buy some at the level of $1,300.

Why not wait till it goes to $800 buy it then and wait for it to hit $1300 again? Instead of buying at what might be a peak?

Or better yet, why not invest in something that is more than just a shiny commodity. I bet that $1000 invested today in Apple will out perform $1000 invested today in gold over the next few years.

I'm betting with real money because I have actual money in Apple. I may predict incorrectly and lose out on your incredible deal on gold. But I'll take that chance. :)

[Francesca R]

Anyone (http://forums.randi.org/showthread.php?t=113394) remember (http://forums.randi.org/showthread.php?t=114031) diggy70 (http://forums.randi.org/showthread.php?t=113163)?

[The Central Scrutinizer]

I think Gold will be pushed up to $2,000/oz, $1,500 at least, before it falls back to $800. Now it's a chance to buy some at the level of $1,300. Of course, before the crazy booming, there will be a blitze short period of falling to below $1,000, that's a technique to kill the small speculator follower. It will be a good chance to buy in.

Don't be too greedy to believe the media that gold will be $3,000/oz. It will be reasonable to Harvest it at between $15,000 to $2,000/oz.

Here is a whole page advertisement in San Jose Mercury News on August 24, 2009:

Cash for Gold comes to Cupertino

With unemployment and foreclosures at a record high in California, ARC Capital Investments will host another fun, safe and lucrative cash for gold purchasing event here in Cupertino to help stimulate the economy. Many people are already very aware of the benefits of such an event due to the many advertisements on television, radio and the Internet.

ARC Capital Investments, a California state-licensed precious metals dealer, has a different approach to the demand and supply of precious metals. Owner of ARC, hosts a 4-day event in the Cypress Hotel, a very well established and reputable hotel, in order to ensure 100% client interaction.
.......

The Gold Evaluation Process
........ "

The price of the gold in August.2009 was around $950/ounce. ARC of course is not a charitable institution. When it pays huge to rent hotels and put advertisement to collect gold from area to area, how much do you think they expect to make in future gold market?

The same whole page ads is continuing until now. When those insiders keep on spend money to collect gold, that means a big gold bubble booming is ready.

I would advise you to put all your money into gold.

Imagine that - a gold dealer recommending you buy gold. Who'd have thunk?

[Dunstan]

I think Gold will be pushed up to $2,000/oz, $1,500 at least, before it falls back to $800. Now it's a chance to buy some at the level of $1,300. Of course, before the crazy booming, there will be a blitze short period of falling to below $1,000, that's a technique to kill the small speculator follower. It will be a good chance to buy in.

Emphasis added.

Amazing that you think that the gold market is rigged, and yet you still want in. Care to play some three-card monte?

[Frank Newgent]

What circumstance(s) would cause gold to fall much in price?

[Puppycow]

What circumstance(s) would cause gold to fall much in price?

A change in supply and/or demand.

[marting]

What circumstance(s) would cause gold to fall much in price?

Increased confidence in the stability of the world's currencies. Gold is at an unusually high price as measured against a value equiv. in goods and services. If world economies stabilize at roughly today's levels, it is entirely possible and even likely that gold prices will be lower ten years from now. Clearly, the current POG partly reflects heightened risk of spiralling deflation which triggers accelerating defaults and declines in investment or it's evil twin, hyperinflation.

[marting]

Emphasis added.

Amazing that you think that the gold market is rigged, and yet you still want in. Care to play some three-card monte?

Sure this seems foolish but did you read the Bill Gross article "Run Turkey, Run" in my thread. He's a big player with PIMCO in what he describes as a Ponzi. Strange.

[pipelineaudio]

The other "investment" you can make in gold right now is finding your own.

At 800/oz, or a street return of about 550/oz you make as much money working at mcdonalds as you would panning, assuming an average of about an ounce and a half per week

When gold went to 1300 I was expecting my already prospector heavy town to go NUTS but an unusually hot and long summer (and when an Arizonan says its hot, its HOT) kept the snowbird panners away till just recently.

I am seriously considering flying back and sluicing. I miss the wide open space, all the animals, and the lack of people

[Frank Newgent]

What circumstance(s) would cause gold to fall much in price?

A change in supply and/or demand.


I asked what circumstance(s) would cause gold to fall much in price not what would cause the price to go up :D

[Frank Newgent]

What circumstance(s) would cause gold to fall much in price?

Increased confidence in the stability of the world's currencies.


My bad. I meant in USD :scared:

[Gord_in_Toronto]

My wife and I attended the Toronto 2010 MoneyShow ( www.moneyshow.com/toms/toms09_bos.asp ) last week and listened and spoke to dozens of financial experts. Even though their graphical runes all predicted various bullish directions, key market segments and investments, they all agreed that GOLD WAS THE PLACE TO BE as it was heading for $2,000 and beyond. This was confirmed by the lone bear -- it was the only place he was going after dumping everything else.

We both looked at each other and hurried home to liquidate our gold assets (two UK gold sovereigns and a commemorative Jamaican gold dollar coin) in the expectation that we would never see better prices in our lifetimes. :( So far we have not been proved wrong. :blush:

[Frank Newgent]

If you've some more nice (fractional) gold coins to sell at spot PM me please :D

[Puppycow]

I asked what circumstance(s) would cause gold to fall much in price not what would cause the price to go up :D

See pipelineaudio's post above. People who never have considered prospecting for gold at lower prices may jump into the business. Naturally, professional miners will too. This will increase supply. The higher the price goes, the more people will start mining the stuff.

On the demand side, there is no reason why demand can't go down.

Unlike a company or a piece of real estate, there really is no objective way to value gold. Its value is whatever the market says it is at any given time.

[Frank Newgent]

See pipelineaudio's post above. People who never have considered prospecting for gold at lower prices may jump into the business. Naturally, professional miners will too. This will increase supply. The higher the price goes, the more people will start mining the stuff.

No argument from me whatsoever PC. Basic stuff.

On the demand side, there is no reason why demand can't go down.

I wish it would. Realistically speaking that seems unlikely to me for the forseeable future.

Unlike a company or a piece of real estate, there really is no objective way to value gold. Its value is whatever the market says it is at any given time.

We're back to my original question :D

[pipelineaudio]

Naturally, professional miners will too.

They never stopped, there are a large number of active gold mines in jeeping distance of my old town. When the price goes up, they hire more vehicles and more expert labor. When the price goes down they let them go. Either way, the mines are still up there and the arrastras are always turning.

I need to start a new thread in the humor section on the extreme terror that being an ametuer herpetologist on a prospectors' trail can be when gold prices go up

[drkitten]

I wish it would. Realistically speaking that seems unlikely to me for the forseeable future.


Why not? Gold is a lousy investment; it generates no income or returns.

It doesn't exactly take an MBA to recognize that $1500 in a CD pays you something like $50 a year, while gold pays you exactly zero.

[NewtonTrino]

I do agree with one thing, gold is currently a bubble. I do think it will go higher before it goes back down. It could easily have seen it's peak though if the economy can get chugging a bit more.

[Mister Earl]

I wouldn't invest in gold if you put a gun to my head. I prefer to avoid obvious ambuscade.

[Gord_in_Toronto]

Why not? Gold is a lousy investment; it generates no income or returns.

It doesn't exactly take an MBA to recognize that $1500 in a CD pays you something like $50 a year, while gold pays you exactly zero.

Oh come on DrK, you are neglecting the effects of inflation not to say a complete collapse of the financial system. Your wheelbarrow full of deflated dollars may buy you a loaf of bread but your gold coins can be used as bribes to let you escape to another country. Vide lots of history.

[drkitten]

Oh come on DrK, you are neglecting the effects of inflation not to say a complete collapse of the financial system. Your wheelbarrow full of deflated dollars may buy you a loaf of bread but your gold coins can be used as bribes to let you escape to another country. Vide lots of history.

Um,.... yes. Yes, I am.

(Actually, gold is a lousy inflation hedge. If you're really worried about inflation, hedge by buying TIPS bonds. Or farmland. And then you can grow your own food if things really go to hell.)

[NewtonTrino]

If you have piles of cash to invest real estate is on sale right now too.

[WildCat]

I think all Ron Paul fans should sell everything they have and buy gold with their worthless federal reserve notes.

[NewtonTrino]

Better yet they should leverage everything they've got into gold. Put all of your money into GLD options that are a year out if you really have faith ;)

[timhau]

I think all Ron Paul fans should sell everything they have and buy gold with their worthless federal reserve notes.

Well, in the words of a goldbug on a Finnish-language investing forum: gold is cheap as long as you can buy it with fiat money. :rolleyes:

[Weak Kitten]

I'm betting with real money because I have actual money in Apple. I may predict incorrectly and lose out on your incredible deal on gold. But I'll take that chance. :)

Wait a little while, Apple is too high right now. Given the typical pattern Apple follows there will be a nice long downward trend after the appeal of the iPhone wears off. When that downtrend starts you wait about a year and then buy low. It's a gamble, like most stock, but likely Apple will come up with some new gadget to fill their coffers before they go belly up.

Personally, I'm waiting to see a few big name companies get their stock shaken up over the whole "Cloud Computing" thing. Microsoft already had a big letdown with that one but they didn't have enough invested in it for it to cause real damage.

[Almo]

Better yet they should leverage everything they've got into gold. Put all of your money into GLD options that are a year out if you really have faith ;)

Hahaha!!! I'd like to see what would happen if someone did that.

[Gord_in_Toronto]

If you have piles of cash to invest real estate is on sale right now too.


Ah yes. "No one ever lost money by investing in Real Estate." ;)

:th:

[UWdude]

Gold is weak. big market in India, that's about it.
Silver, baby. Electronics are wanted everywhere, not just India.

[Verde]

I am seriously considering flying back and sluicing.

Sorry, since you have been gone, Arizona has run out of water. No more sluicing.

I miss the wide open space,

Lots of that left.

all the animals,

We ate them all.

and the lack of people

See above.

V.

[Verde]

See pipelineaudio's post above. People who never have considered prospecting for gold at lower prices may jump into the business. Naturally, professional miners will too. This will increase supply. The higher the price goes, the more people will start mining the stuff.


Yep, but the amateur miners are a very small part of the business. The big mines take a long while to bring into service. Even a mothballed mine can take a couple of years to get restarted. It's definitely a gamble for the big lads.


On the demand side, there is no reason why demand can't go down.


The bulk of gold usage is in the semiconductor related industries. That shows no sign of slowing, as of yet.


V.

[drkitten]

Ah yes. "No one ever lost money by investing in Real Estate."

I don't think that's what he was saying. He was saying Real Estate is on sale now, so you should buy it while it's cheap.

You know, "be greedy when others are fearful, be fearful when others are greedy"? If "everyone knows" that real estate is a lousy investment, now's exactly the time to buy, because you can get it for a shy smile....

[Hawk one]

I think we should all adapt the golem standard.

[Kevin_Lowe]

I think Gold will be pushed up to $2,000/oz, $1,500 at least, before it falls back to $800. Now it's a chance to buy some at the level of $1,300. Of course, before the crazy booming, there will be a blitze short period of falling to below $1,000, that's a technique to kill the small speculator follower. It will be a good chance to buy in.


So rich people, with lots of money to pay off celebrities and foot the bill for guerilla marketing campaigns, want me to buy their gold?

I think I'll pass. I think they know better than I do whether it's a good investment, and they're trying to get rid of it as fast as they can.

[daenku32]

Don't forget to stock up on weapons and ammo, month's supply of water and canned food.

It's going to be a rough ride over the next couple years.

[stevea]

I'm betting with real money because I have actual money in Apple. I may predict incorrectly and lose out on your incredible deal on gold. But I'll take that chance. :)

How do you think Apple will do when Jobs kicks off ? My guess is that they tank badly. Remember the Scully years ? That company is mostly a personality cult. Sad to say but Apple is a one-trick pony act and the pony has metastasized cancer. Best wished to SJ, but no thanks on that stock.

What circumstance(s) would cause gold to fall much in price?

Ignoring supply changes which are quite unlikely, the issue is demand.

Gold has some industrial use, but the price is greatly driven by fearful consumers trying to hedge inflation and currency volatility. The likely reason for a fall in price is that the consumers fears will be alleviated, or they will experience even greater fears about continuing to holding gold as the price declines. Like many bubbles, once the concept that price can only increase is breached, then the fall may be precipitous.

Silver, palladium, platinum, rare-earth metals are all far better investments as they have real industrial and productive demands and are consumed and "lost" at a good pace. Their price is based on similarly constrained supply as gold, but also on a real, non-psychological demand.

[Frank Newgent]

I think all Ron Paul fans should sell everything they have and buy gold with their worthless federal reserve notes.


Personally I'm more of a Thom Hartmann guy. Don't know why it seems controversial here that gold is going up for the foreseeable future... ie until the US Fed thinks it's in a position to raise interest rates.

[drkitten]

Don't know why it seems controversial here that gold is going up for the foreseeable future... ie until the US Fed thinks it's in a position to raise interest rates.

Because gold doesn't do anything. Gold will stop going up when people realize they can do something with their money that will actually earn them more money.

[The Central Scrutinizer]

How do you think Apple will do when Jobs kicks off ? My guess is that they tank badly. Remember the Scully years ? That company is mostly a personality cult. Sad to say but Apple is a one-trick pony act and the pony has metastasized cancer. Best wished to SJ, but no thanks on that stock.

I wouldn't be so sure of that. While I have no opinion of the stock at current prices (I haven't really looked at it), Tim Cook and others ran the company quite well when Jobs was out of commission. Fortune and the WSj have written extensively about him and some of the other top people at Apple lately. Some impressive folks.

I have no doubt that the stock will drop when/if Jobs croaks. No doubt whatsoever. How much? 20%? 30%? 50%? Whatever the figure is, it might be a great buying opportunity.

Same for Berkshire. I'm loaded up, ready to buy when Buffett goes.

[NewtonTrino]

I don't think that's what he was saying. He was saying Real Estate is on sale now, so you should buy it while it's cheap.

You know, "be greedy when others are fearful, be fearful when others are greedy"? If "everyone knows" that real estate is a lousy investment, now's exactly the time to buy, because you can get it for a shy smile....

It's really simple. We've had a large dip in prices and if you pick your property carefully I think you can do really well. Real estate was on a tear around here and this is the first time prices have dipped in a long time. Mortgage rates are also retarded low right now. A lot of my employees are buying new places or upgrading right now while everything is on sale.

DrKitten, if you were sitting on a pile of cash what would you invest it in right now?

[drkitten]

It's really simple. We've had a large dip in prices and if you pick your property carefully I think you can do really well. Real estate was on a tear around here and this is the first time prices have dipped in a long time. Mortgage rates are also retarded low right now. A lot of my employees are buying new places or upgrading right now while everything is on sale.

DrKitten, if you were sitting on a pile of cash what would you invest it in right now?

Probably multinational corporate equities. "Never invest in anything that eats or needs repairs." I'd have to do too much homework and re-learn how to play the real estate game.

Basically, it's the same song, but a different key. Stocks are on sale, too and I think they're likely to rebound faster than real estate. But beyond that, I personally know more about how to value stocks than I do about how to value real estate.

Alternatively, I'm considering buying GLD LEAPS puts. If I can lock in a two-year option to sell gold at $1000/oz at a reasonable price,.... hell, that's not investment, that's 'fleecing the suckers.'

Anyone got a suggestion for a good data source and broker for LEAPS?

[The Don]

It's really simple. We've had a large dip in prices and if you pick your property carefully I think you can do really well. Real estate was on a tear around here and this is the first time prices have dipped in a long time. Mortgage rates are also retarded low right now. A lot of my employees are buying new places or upgrading right now while everything is on sale.

DrKitten, if you were sitting on a pile of cash what would you invest it in right now?

My bolding.

It's pretty easy to make money in any field of investment if you pick the investments carefully. Sadly, careful picking only becomes 100% apparent in retrospect.

[NewtonTrino]

Probably multinational corporate equities. "Never invest in anything that eats or needs repairs." I'd have to do too much homework and re-learn how to play the real estate game.

Basically, it's the same song, but a different key. Stocks are on sale, too and I think they're likely to rebound faster than real estate. But beyond that, I personally know more about how to value stocks than I do about how to value real estate.

Alternatively, I'm considering buying GLD LEAPS puts. If I can lock in a two-year option to sell gold at $1000/oz at a reasonable price,.... hell, that's not investment, that's 'fleecing the suckers.'

Anyone got a suggestion for a good data source and broker for LEAPS?

So would you dump your money into stocks quickly or dca? ETFs, funds or specific companies?

For options trading I've heard http://www.optionsxpress.com/ is good but I haven't used it personally.

[drkitten]

So would you dump your money into stocks quickly or dca? ETFs, funds or specific companies?

The answer to all of those is "yes." Depending upon the circumstances. (Duh. How am I supposed to know what I'm going to order before I've even looked at the menu?) If I can find a specific stock that looks good, I'd buy it. If I can find a specific ETF that looks good, I'd buy it. By hypothesis, I'm sitting on a pile of cash, so I might as well pour most of it in quickly (otherwise I'm sitting on too much cash), but there's nothing wrong with DCA if it looks like a particularly volatile investment.


For options trading I've heard http://www.optionsxpress.com/ is good but I haven't used it personally.

Thanks.

[NewtonTrino]

The answer to all of those is "yes." Depending upon the circumstances. (Duh. How am I supposed to know what I'm going to order before I've even looked at the menu?) If I can find a specific stock that looks good, I'd buy it. If I can find a specific ETF that looks good, I'd buy it. By hypothesis, I'm sitting on a pile of cash, so I might as well pour most of it in quickly (otherwise I'm sitting on too much cash), but there's nothing wrong with DCA if it looks like a particularly volatile investment.


Well what kind of strategy do you follow with your personal portfolio?

Currently I'm sitting with 63% of my portfolio in cash, a few individual stocks (like berk) and a few different ETF's that cover a fairly large portion of the market. I'm kind of heading in the direction of buying some more ETF's but I'm definitely interested in acquiring a few individual companies (I really like the philosophy over at CY (Cypress Semi) ).

[drkitten]

Well what kind of strategy do you follow with your personal portfolio?

The bulk of it is in a 403(b) plan, which -- like far too many 403(b) plans -- has a pretty pathetic set of allowed choices for investments. I'm in equity mutual funds there because I have more or less no other choice.

My "play money" is currently split between an S&P 500 ETF and a handful of individual stocks that I picked using my sooper sekrit analysis method and are currently up about 30% for the year. Given that the S&P is up about 7% YTD, I feel comfortable that I have a very good set of dart-throwing monkeys.

Yes, that puts me 100% in equities. I'm a tenured professor with a high-paying job contractually guaranteed until they carry me out of the office in a box -- I can afford to be aggressive in my investments.

[NewtonTrino]

The bulk of it is in a 403(b) plan, which -- like far too many 403(b) plans -- has a pretty pathetic set of allowed choices for investments. I'm in equity mutual funds there because I have more or less no other choice.

Ah, yes I have the same problem with my 401k money. I have it split between S&P index, an international, a value and a growth. About 50% in the S&P though. I consider that to be ultra long term money so it's a buy and hold keep the costs down strategy.


My "play money" is currently split between an S&P 500 ETF and a handful of individual stocks that I picked using my sooper sekrit analysis method and are currently up about 30% for the year. Given that the S&P is up about 7% YTD, I feel comfortable that I have a very good set of dart-throwing monkeys.


This sounds fairly similar to what I do. Ride a good index fund and then pick a few winners.


Yes, that puts me 100% in equities. I'm a tenured professor with a high-paying job contractually guaranteed until they carry me out of the office in a box -- I can afford to be aggressive in my investments.

I don't see a problem being 100% in equities unless you are really close to retirement. I'm still in my thirties so I have a long time horizon for "retirement" funds.

[Francesca R]

Don't know why it seems controversial here that gold is going up for the foreseeable future... ie until the US Fed thinks it's in a position to raise interest rates.Because the market discounts its expected future, so that good news can well be in the price already, and because extrapolative expectations can also cause the market to over-shoot even a sensible expectation of the future (because people sometimes "[d]on't know why it seems controversial here that gold is going up for the foreseeable future").

[drkitten]

I don't see a problem being 100% in equities unless you are really close to retirement. I'm still in my thirties so I have a long time horizon for "retirement" funds.

Well, the problem is that you may need to tap your money -- especially your non-retirement money -- soon and unexpectedly. The last thing you want is to have your stock portfolio tank at the same time you lose your job.

That's not an issue for me because I effectively can't lose my job. And I've got good insurance so major medical isn't an issue, either. But if I worked for Apple, and the bottom fell out of the iPad market, I might find myself out of a job and needing to live off my stock portfolio; a more balanced portfolio (e.g. including real estate, bonds, and a CD ladder) would cushion the blow.

[Almo]

How do you think Apple will do when Jobs kicks off ? My guess is that they tank badly. Remember the Scully years ? That company is mostly a personality cult. Sad to say but Apple is a one-trick pony act and the pony has metastasized cancer. Best wished to SJ, but no thanks on that stock.

I'm not sure at all if it's a worthwhile buy right now at its high price. But we bought before the iPhone came out, so we're doing well with it. I don't expect it to drop below where we bought it even if Steve were to disappear tomorrow. The revenue stream from iTunes and The App Store won't dry up immediately.

[NewtonTrino]

Well, the problem is that you may need to tap your money -- especially your non-retirement money -- soon and unexpectedly. The last thing you want is to have your stock portfolio tank at the same time you lose your job.


Absolutely but how much money do you need to keep liquid for that? I usually keep 6 months of expenses in an emergency fund. The point stands though, unless the money is long term money make sure you can withstand the risk of losing a bunch of it in the short term if you are forced to sell. I live well below my means so I'm not really concerned about job loss type events anyway.


That's not an issue for me because I effectively can't lose my job. And I've got good insurance so major medical isn't an issue, either. But if I worked for Apple, and the bottom fell out of the iPad market, I might find myself out of a job and needing to live off my stock portfolio; a more balanced portfolio (e.g. including real estate, bonds, and a CD ladder) would cushion the blow.

I can't really lose my job because I own the company. We could go out of business I suppose but due to the nature of my company I could lay everyone off and live off the proceeds of our ongoing revenue stream for years.

I'm actually in prelim talks to sell this company right now. If that happens I'll have a retarded amount of cash that I'll have to invest until I need it to start the next company.

[drkitten]

Absolutely but how much money do you need to keep liquid for that? I usually keep 6 months of expenses in an emergency fund.

Well, that means you're NOT 100% in equity, now, doesn't it. :D

But beyond that,... the median length of time for being without a job is up to about six months right now, which means if you lost your job, you've got a 50/50 chance of burning through all of your savings and being forced to sell stocks at whatever price you can get. So I'd say six months is actually rather risky just now.

I think I've got considerably less than six months squirrelled away,.... but, then, I'm not going to lose my job. Which is why I can do stupid **** like being 100% in equities.

[NewtonTrino]

Well, that means you're NOT 100% in equity, now, doesn't it. :D

You're correct. If I take into account my emergency/slush fund the percentage in cash goes higher.


But beyond that,... the median length of time for being without a job is up to about six months right now, which means if you lost your job, you've got a 50/50 chance of burning through all of your savings and being forced to sell stocks at whatever price you can get. So I'd say six months is actually rather risky just now.


Well again keep in mind I own a company so I'm pretty secure. I'm not getting fired anytime soon. In fact everyone else would get laid off first ;)
If I was out of work and my portfolio tanked to 50% I would still have years of living expenses left in there.


I think I've got considerably less than six months squirrelled away,.... but, then, I'm not going to lose my job. Which is why I can do stupid **** like being 100% in equities.

Like you said you're not losing your job so it doesn't matter.

[Frank Newgent]

Don't know why it seems controversial here that gold is going up for the foreseeable future... ie until the US Fed thinks it's in a position to raise interest rates.Because the market discounts its expected future, so that good news can well be in the price already, and because extrapolative expectations can also cause the market to over-shoot even a sensible expectation of the future (because people sometimes "[d]on't know why it seems controversial here that gold is going up for the foreseeable future").


The Fed is fighting deflation hand over fist, no?

What happened today ($600 Billion QE2)?

Gold will fill the void. Why is this controversial? That it is suggests we are far from bubble-mania.

I've no ox to gore here. Just being practical.

Until US housing (and the US economy) bottoms out the Fed will keep devaluing the USD in order to keep the US financial system solvent.

How can this be anything but bullish for USD-priced gold?

[drkitten]

The Fed is fighting deflation hand over fist, no?

What happened today ($600 Billion QE2)?

Gold will fill the void.

Why gold? Why not other commodities that actually have uses?
Why not equities that represent actual industrial production?

If you've got an ounce of gold, you've got an ounce of gold. But if you've got a sack of potatoes and an acre of fertile land,.... you've got potatoes for the rest of your life.

Why is this controversial?

Because it suggests that gold has magical properties that make it and only it a useful store of value.

Which is wrong at at least two levels. First, gold isn't the only store of value. More to the point, gold isn't even a useful store of value.



Until US housing (and the US economy) bottoms out the Fed will keep devaluing the USD in order to keep the US financial system solvent.

How can this be anything but bullish for USD-priced gold?

Well, first, the Fed is not devaluing the US dollar. The Fed is trying to devalue the US dollar and failing miserably, which is the whole point of QE2. You don't get zero inflation when the US dollar is being devalued.

But more importantly, as Francesca pointed out, the market has already taken into account the likely consequences of QE2 and such. If you're buying gold now, you're buying gold on the expectation that the Fed will have to devalue the dollar even more than is already expected.

A company can be doing great and still lose value in the stock price, if it's not doing as insanely great as analysts expected it to do. Similarly, a company can totally tank and the stock price will do well as long as it tanks more slowly than the total train wreck everyone expects. (You see that all the time. "XYZ Corp announced a loss of ($0.02)/share, less than the ($0.15)/share analysts expected. The stock jumped 7.5% on the news.")

The people who are buying gold now are buying it with the expectation that it will continue to deliver insane returns. But the only way it can deliver insane returns is if people continue to bid insane prices for it, since gold in and of itself doesn't make money. As soon as goldbugs run out of pigeons, the returns will automatically drop. Once the returns drop, people will realize that gold won't automatically make insane returns, and people will sell it.

It doesn't particularly matter where the USD is at that point. There will always be better dollar-denominated investments out there, because there will always be something that offers a positive RoI.

[Mister Earl]

So, when gold does crash, how far will it likely drop? I've got half a mind to long term short gold on the ol' Forex.

[NewtonTrino]

For some reason I think the gold hounds think that it's going to do down something like this:
1) Buy gold
2) we get hyperinflation and gold goes to $500,000,000 an ounce.
3) Profit!

Of course there are a lot of idiots out there buying iraqi dinars as well with similar reasoning.

[NewtonTrino]

So, when gold does crash, how far will it likely drop? I've got half a mind to long term short gold on the ol' Forex.

The problem is that you have to guess when the bubble will burst. I don't think it will until the economy picks up more steam and people stop yelling "they terk our jarbs".

[YoPopa]

....
If you've got an ounce of gold, you've got an ounce of gold. But if you've got a sack of potatoes and an acre of fertile land,.... you've got potatoes for the rest of your life.

.......

There's a pretty picture, subsistence farming. Or if you want to live with modern luxuries such as electricity you may need to up the acreage and invest another few tens (or hundreds) of thousands in fertilizer, pest management, harvesting machines and marketing. In the end you get a farm that will be worth enough that inheritance taxes will take 50% of it when you die. Forget about the kids getting the farm, it will have to be sold to pay the taxes. They'll have to buy their own land and seed.

Oh, you say that was just a metaphor? My answer was as well.

I've got an ounce of gold and my son is going to get an ounce of gold to remember me by. That's reason enough for me to have a small percent of my total worth in precious metals.

[drkitten]

There's a pretty picture, subsistence farming.

No, it's not a metaphor. But it's also not subsistence farming, either. It's one investment among many.

Or if you want to live with modern luxuries such as electricity you may need to up the acreage and invest another few tens (or hundreds) of thousands in fertilizer, pest management, harvesting machines and marketing.

.... or put some of the rest of your money into Caterpillar and use the dividend checks to pay for electricity.

Sure, your son can have an ounce of gold to remember you by. Personally, I think that's a lousy remembrance, and I think he'd prefer to remember how much fun you had together playing catch in the field where the potatoes grew. The nice thing about that is that you can leave that to all six of your sons and all four of your daughters. Along with a sack of potatoes each.

[NewtonTrino]

Gold is pretty, it does have that going for it. I don't think there's anything wrong with given an ounce of gold as a keepsake or wearing gold jewelry. I'm partial to gold watches myself but they aren't investments (although my rolex has actually held it's value over the last 10 years).

[timhau]

So, when gold does crash, how far will it likely drop? I've got half a mind to long term short gold on the ol' Forex.

Nobody knows. Nobody knows when, either. J. Maynard Keynes is credited with saying something like "The market can stay irrational for longer than you can stay liquid," which is a fair warning for shorting any bubble. Cheap put options would be good, though, your losses would be limited no matter how long the mania continues.

[YoPopa]

No, it's not a metaphor. But it's also not subsistence farming, either. It's one investment among many.

No big disagreement. Just that I see the precious metals as one investment among many.

....
Sure, your son can have an ounce of gold to remember you by. Personally, I think that's a lousy remembrance, and I think he'd prefer to remember how much fun you had together playing catch in the field where the potatoes grew. The nice thing about that is that you can leave that to all six of your sons and all four of your daughters. Along with a sack of potatoes each.

Both sons will get a share of the small portable assets and both have memories of the things we've enjoyed doing together in the state of yo (http://www.smothersbrothers.com/smobro_bios/yo_bio.html). We've always thought that playing catch was a lousy way to spend time.

I know my sons well enough to know that they will not think of the gold as a lousy remembrance. Even if gold goes down in relative value from todays' market they will appreciate the effort I made to make sure they get the benefit of what I have earned.

Is there any magic in the stuff? Certainly no magic in the way JREF might be concerned. Yet there is some power and mystery in holding, in your hand, something that your father held and valued. That's how it is for us anyway.

More to the point of the OP. Is physical gold a good investment now? I'm not buying any currently but if I had a larger liquid portfolio I probably would.

[marting]

More to the point of the OP. Is physical gold a good investment now? I'm not buying any currently but if I had a larger liquid portfolio I probably would.

Don't think of gold as an investment. It's a scarce commodity that has long been convertable to, and from, currencies du jour at a fairly level value exchange rate.

In 1980 I bought a 5 MB hard drive for about $500. Ten years later I bought a 2 TB (400,000 times more storage) for $200. This happened because people invested in business instead of buying gold to bury in the back yard.

In 1965 I bought a gallon of gas for $0.25. In 2010 It cost $3.00. This is the closest match within these examples to CPI.

In 1965 I could have bought an toz of gold (if in the Au biz) for about $35. In 2010 it would cost me $1300. This is way more than inflation by virtually any measure and never sustains in the very long term. It simply reflects fear - not that there is anything wrong with that.

If I had put $1000 in the matress in 1965 I would have $1000 today. Easily the most liquid "investment" but also the worst thing to do long term. Had I put it in a demand savings account, FDIC insured, it would be worth more but would not have performed as well as petroleum let alone gold.

Gold's big advantage is that it is a form of wealth stable over centuries and empires.

Right now it is, IMO, overpriced. However, if currencies collapse, it is underpriced, possibly by a lot. You pays your money and takes your chances.

[drkitten]

Don't think of gold as an investment. It's a scarce commodity that has long been convertable to, and from, currencies du jour at a fairly level value exchange rate.

In 1980 I bought a 5 MB hard drive for about $500. Ten years later I bought a 2 TB (400,000 times more storage) for $200. This happened because people invested in business instead of buying gold to bury in the back yard.

In 1965 I bought a gallon of gas for $0.25. In 2010 It cost $3.00. This is the closest match within these examples to CPI.

In 1965 I could have bought an toz of gold (if in the Au biz) for about $35. In 2010 it would cost me $1300. This is way more than inflation by virtually any measure and never sustains in the very long term. It simply reflects fear - not that there is anything wrong with that.

Huh? Let's see -- gas goes from $0.25 to $3.00, an increase of about a hundred-fold, and you say that's the match for the CPI.

Gold goes from $35 to $1300, an increase of about forty-fold, and you say that's way more than inflation?

Inflation, historically, has been running about 5%; this means that prices overall double about every fourteen years. In fifty years, that's four doublings, so we'd expect to see prices about 16 times higher now than they were fifty years ago. So gas has actually gone up more than general inflation. So has gold, but most of that is the bubble. As recently as 2004, gold was trading at only about $400, which was actually substantially less than the expected inflation increases.

Of course, there's a very good reason for that. People don't need to buy gold, and when times are good people don't want to buy gold, because it's a lousy investment. When times are bad, people panic and buy gold at vastly inflated prices....

[drkitten]

More to the point of the OP. Is physical gold a good investment now? I'm not buying any currently but if I had a larger liquid portfolio I probably would.

Buying into a well-established bubble is almost never a good investment.

Think of it this way. If gold really were a good investment, who would be selling it to you?

[Giggywig]

Huh? Let's see -- gas goes from $0.25 to $3.00, an increase of about a hundred-fold, and you say that's the match for the CPI.
You might want to check your math there :p

[TraneWreck]

I do agree with one thing, gold is currently a bubble. I do think it will go higher before it goes back down. It could easily have seen it's peak though if the economy can get chugging a bit more.

Therein lies the danger.

If you have piles of cash to invest real estate is on sale right now too.

This would be a significantly wiser thing to do---depending on the location, location, location, of course.

[marting]

Huh? Let's see -- gas goes from $0.25 to $3.00, an increase of about a hundred-fold, and you say that's the match for the CPI.

Gold goes from $35 to $1300, an increase of about forty-fold, and you say that's way more than inflation?


Read what I wrote. I did not write that. I was providing examples of other products to illustrate relative variation and to provide some indication why I think gold is currently overpriced.


.... As recently as 2004, gold was trading at only about $400, which was actually substantially less than the expected inflation increases.

Of course, there's a very good reason for that. People don't need to buy gold, and when times are good people don't want to buy gold, because it's a lousy investment. When times are bad, people panic and buy gold at vastly inflated prices....

Exactly my point. Arguably, gold was worth even less than $400 then. Didn't Tony Blair sell a fairly large amount of the UK's gold at about $200/toz not long before that? Obviously it was thought to be overpriced at the time.

Gold's value is classic supply and demand where the supply is effectively fixed and the demand fluctuates with fear.

[Frank Newgent]

Gold (priced in USD) will continue to go up until the economy rebounds which may be quite a while.

The downside is how any profits are taxed by Uncle Sam.

Normally, when you sell a capital asset you've owned for more than one year, your tax rate is capped at 15%.

But when you sell a collectible, tax law caps your maximum rate on long-term capital gains at 28%, not 15%. In other words, on a $100,000 gain (lucky you!), that means you don't pay $15,000 to Uncle Sam, you pay $28,000 -- an extra $13,000.

If you hold the asset for less than a year, it gets worse. Your gain becomes a short-term gain, and it's taxed at regular income tax rates. That means a rate of as much as 35%. On a $100,000 gain, that's $35,000 you pay to the government.

http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/taxes-can-take-the-shine-off-gold.aspx


Surprised nobody has pointed this out!

[drkitten]

Gold (priced in USD) will continue to go up until the economy rebounds which may be quite a while.

No, it won't.

It will go up until people think that there's better returns to be made from investment in other areas. The stock market, in particular, is a leading indicator and is likely to pick up well before the economy rebounds. But when analysts decide they can make 12% or so RoI on stock price growth, plus whatever dividend yield they can get, some of them will start to pull money out of gold and put it into equities. As soon as this happens, this means that demand for gold will weaken and supply will strengthen, lowering the price of gold. And at this point the house of cards will collapse.

And it will happen well before the economy rebounds.


Surprised nobody has pointed this out!

It's not really relevant. The reason gold is a lousy investment is because it doesn't generate wealth, not because of the tax treatment. There are always ways to game the system (hell, buy gold in your IRA), but there aren't often ways to make a money-losing investment show a profit.

[TraneWreck]

For some reason I think the gold hounds think that it's going to do down something like this:
1) Buy gold
2) we get hyperinflation and gold goes to $500,000,000 an ounce.
3) Profit!

Of course there are a lot of idiots out there buying iraqi dinars as well with similar reasoning.

I think it's even stranger than that. I've seen a few clips of Beck trying to sell the stuff, and he's tied it into this whole doomsday scenario. Hyper inflation is certainly part of it, but he thinks all of society will disintegrate. That's why he puts on adds for that doomsday seed garden on right after the gold.

I think there's probably an Apocalyptic foundation to all of this nonsense, but it's so coded and vague (me not being versed enough in doomsday theology to really understand it) that it's hard to tell.

THat's why I find the gold stuff so amusing (in addition to the fact that it's just a trick for the companies selling the gold to take insane commissions off the sale): why would you want a pile of soft, not particularly useful metal when society has deteriorated.

Wouldn't you want a few tons of steel to armor your El Camino?

[drkitten]

I think it's even stranger than that. I've seen a few clips of Beck trying to sell the stuff, and he's tied it into this whole doomsday scenario.

I think that's it.

I think this is basically Survivalism for Dummies. In the sense of "it is morally wrong to allow a sucker to keep his money" (W.C. Fields) "dummies." Lots of people are expecting society to disintegrate; lots of people want society to disintegrate, because society has not been particularly good to them and they feel that they've been unjustly deprived of the wealth and status that is their due.

So, if you think about what made barbarian kings rich,.... it's gold, right? So if you have enough gold, you can become a barbarian king when It All Goes To Hell, right?

Of course, what really made barbarian kings rich is the fact that they were awesome swordsmen who could take the gold from rich schnucks who didn't realize that in the hands of the right person, steel is much more valuable than gold. Conan the Cimmerian was indeed a barbarian king with rooms full of gold, but he got that way by taking over the palace where the rooms were already.

[A Christian Sceptic]

I think it's even stranger than that. I've seen a few clips of Beck trying to sell the stuff, and he's tied it into this whole doomsday scenario. Hyper inflation is certainly part of it, but he thinks all of society will disintegrate. That's why he puts on adds for that doomsday seed garden on right after the gold.

I think there's probably an Apocalyptic foundation to all of this nonsense, but it's so coded and vague (me not being versed enough in doomsday theology to really understand it) that it's hard to tell.

THat's why I find the gold stuff so amusing (in addition to the fact that it's just a trick for the companies selling the gold to take insane commissions off the sale): why would you want a pile of soft, not particularly useful metal when society has deteriorated.

Wouldn't you want a few tons of steel to armor your El Camino?

Do you really think people who may be preparing for various possible future scenarios as you describe are just purchasing gold? Apparently certain advertisers also think they'd be interested in buying seeds ...

[NewtonTrino]

I think that's it.

I think this is basically Survivalism for Dummies. In the sense of "it is morally wrong to allow a sucker to keep his money" (W.C. Fields) "dummies." Lots of people are expecting society to disintegrate; lots of people want society to disintegrate, because society has not been particularly good to them and they feel that they've been unjustly deprived of the wealth and status that is their due.

So, if you think about what made barbarian kings rich,.... it's gold, right? So if you have enough gold, you can become a barbarian king when It All Goes To Hell, right?

Of course, what really made barbarian kings rich is the fact that they were awesome swordsmen who could take the gold from rich schnucks who didn't realize that in the hands of the right person, steel is much more valuable than gold. Conan the Cimmerian was indeed a barbarian king with rooms full of gold, but he got that way by taking over the palace where the rooms were already.

It does seem like it would make more sense to buy guns and ammo than gold in a meltdown type scenario.

However the idea of society completely disintegrating on a global level is pretty silly.

[Frank Newgent]

No, it won't.

It will go up until people think that there's better returns to be made from investment in other areas. The stock market, in particular, is a leading indicator and is likely to pick up well before the economy rebounds. But when analysts decide they can make 12% or so RoI on stock price growth, plus whatever dividend yield they can get, some of them will start to pull money out of gold and put it into equities. As soon as this happens, this means that demand for gold will weaken and supply will strengthen, lowering the price of gold. And at this point the house of cards will collapse.

And it will happen well before the economy rebounds.



It's not really relevant. The reason gold is a lousy investment is because it doesn't generate wealth, not because of the tax treatment. There are always ways to game the system (hell, buy gold in your IRA), but there aren't often ways to make a money-losing investment show a profit.


Hey... call a top, then. I really would like to know.

[drkitten]

Hey... call a top, then. I really would like to know.

Can't be done. There are too many open political questions for economics to give you an answer.

For example, the Fed has been trying to engineer an economic recovery by increasing the money supply to pull us out of the liquidity trap we seem to be in now. The Japanese experience, however, suggests that monetary policy alone can't do that, and there will need to be some active government stimulus as well. When will we see a real jobs bill? That's the sort of thing that could be passed on Monday by the lame-duck legislature, or could be delayed for years by Tea Party obstructionism.

Similarly, they discuss on another thread how the most anti-Fed legislator in history, Ron Paul, has just been appointed to chair the subcommittee that oversees the Fed; if he manages to push through policy changes that strip the Fed of it's authority to increase the money supply, no one knows exactly how much damage that would do to the economy.

As a third example, Gov. Christie just killed the tunnel project that would have put 6,000 construction workers to work in New Jersey and created 50,000 jobs on project completion. With only about four million jobs in New Jersey to begin with, that's 0.15% higher unemployment rate increase at the stroke of a pen. It wouldn't surprise me to learn that he had managed to put the recovery off (in the New Jersey region, at least) by six months to a year.

That kind of policy decision is one of the reasons that long-term economic forecasting is difficult. I can tell you what will happen with the current situation, and I can tell you what the likely consequences of any proposed policy change might be. But I can't tell you what policy changes will be proposed, and I can't tell you which proposed changes will be enacted. That's not economics, but politics. I can tell you that defunding the Department of Education will cost hundreds of thousands of teachers their jobs and thereby raise the unemployment rate. But I can't tell you whether the current legislature will really follow through on the threats by a few (e.g. Rand Paul) to do that.

[Babbylonian]

I'm putting all my money in Uranium Pu-36. Explosive space modulators are the next big thing!

[Frank Newgent]

Can't be done. There are too many open political questions for economics to give you an answer.

For example, the Fed has been trying to engineer an economic recovery by increasing the money supply to pull us out of the liquidity trap we seem to be in now. The Japanese experience, however, suggests that monetary policy alone can't do that, and there will need to be some active government stimulus as well. When will we see a real jobs bill? That's the sort of thing that could be passed on Monday by the lame-duck legislature, or could be delayed for years by Tea Party obstructionism.

Similarly, they discuss on another thread how the most anti-Fed legislator in history, Ron Paul, has just been appointed to chair the subcommittee that oversees the Fed; if he manages to push through policy changes that strip the Fed of it's authority to increase the money supply, no one knows exactly how much damage that would do to the economy.

As a third example, Gov. Christie just killed the tunnel project that would have put 6,000 construction workers to work in New Jersey and created 50,000 jobs on project completion. With only about four million jobs in New Jersey to begin with, that's 0.15% higher unemployment rate increase at the stroke of a pen. It wouldn't surprise me to learn that he had managed to put the recovery off (in the New Jersey region, at least) by six months to a year.

That kind of policy decision is one of the reasons that long-term economic forecasting is difficult. I can tell you what will happen with the current situation, and I can tell you what the likely consequences of any proposed policy change might be. But I can't tell you what policy changes will be proposed, and I can't tell you which proposed changes will be enacted. That's not economics, but politics. I can tell you that defunding the Department of Education will cost hundreds of thousands of teachers their jobs and thereby raise the unemployment rate. But I can't tell you whether the current legislature will really follow through on the threats by a few (e.g. Rand Paul) to do that.


And the uncertainty you invoke will act to suppress gold prices? I doubt that.

I'm not here to argue politics with you by the way.

[drkitten]

And the uncertainty you invoke will act to suppress gold prices?

No. The uncertainty is what's going to keep the bubble inflated; the fundamentals of the economy are already sound enough that gold should be dropping soon. (For example, the various stock indices are mostly recovered to above where they were on September 12, 2008, just before the Lehman Brothers filed for bankruptcy and triggered the Great Recession.) Rational investors are already flooding into the stock market, and by extension, out of gold.

[Frank Newgent]

No. The uncertainty is what's going to keep the bubble inflated; the fundamentals of the economy are already sound enough that gold should be dropping soon. (For example, the various stock indices are mostly recovered to above where they were on September 12, 2008, just before the Lehman Brothers filed for bankruptcy and triggered the Great Recession.) Rational investors are already flooding into the stock market, and by extension, out of gold.


My bolding.

I hope you are right. I fear the world might disagree.

[TraneWreck]

Do you really think people who may be preparing for various possible future scenarios as you describe are just purchasing gold? Apparently certain advertisers also think they'd be interested in buying seeds ...

...which is why I brought up the seeds.

I'm not really sure what you're point is. I was simply observing how useless gold would be in the world they're buying the gold to prepare for.

[drkitten]

I hope you are right. I fear the world might disagree.

"The world" is often irrational. In fact, bubbles are basically defined as "the world is being irrational." "Markets can remain irrational a lot longer than you and I can remain solvent." While attributed to Keynes, that quote is actually (according to Wikipedia (http://en.wikiquote.org/wiki/John_Maynard_Keynes)) from A. Gary Shilling, Forbes (1993) v. 151, iss. 4, pg. 236.

But here's a genuine Keynes quote to ponder:


Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness finds its nemesis in the [financial market].

[Blue Mountain]

Back in January 1999 I bought a 1 ounce gold wafer for $US 300, which at the time cost me $475 Canadian. Inflation means that $475 would today be $593. I could sell the wafer today for about $C 1390, which represents a two-fold increase in value over 11 years.

For sure sticking it into something that gave 3% interest wouldn't have done nearly so well; a quick program I wrote indicates $475 invested that way since January 1999 would be worth only $680 today.

The stock market, though, could have very well outperformed it.

The moral? Buy low, sell high :p

[timhau]

The stock market, though, could have very well outperformed it.


Depends on the market. The S&P 500 is now about where it was on the first day of trading in 1999; the Nasdaq composite has gained roughly 15%. The Brazilian Bovespa index, tracking the Sao Paolo market, has gone from about 7,000 to over 72,000.

[UWdude]

...which is why I brought up the seeds.

I'm not really sure what you're point is. I was simply observing how useless gold would be in the world they're buying the gold to prepare for.

Seeds, food and ammunition are for worst case scenarios.
Gold and silver is just for hyperinflation or just gross inflation.

BTW, I don't support gold. Gold is too expensive to have many industrial uses, but silver is worth it for its electrical conductivity for sensitive electronics, enough to beat the loss from the photograph industry.

Even though people in America will find it hard to find people willing to exchange goods for their FRNs, people in the BRIC nations will be able to find plenty of corporations willing to sell them electronics for their currencies.

Silver, baby!

I bought most of my silver at $14/oz year/year and a half ago. Although it has now doubled in price, I bought it expecting to sell it at $75 at the least, but depending on the rate of inflationary acceleration, I may just hold until $200/oz, and no, I don't think that is ridiculous in the least. I also like the fact that I have the physical silver, and plan to hold it until I die, or until it hits my price.

And no, gold and silver are not in a bubble. While everybody on forums that care about the economy are talking about it, Franny in New York is selling her old gold jewelry from her third husband for $700/oz because it is such a good deal. Everybody was buying a house during the real estate bubble, and everybody was playing the market during the tech bubble.

[NewtonTrino]

How much silver do you have?

[balrog666]

Seeds, food and ammunition are for worst case scenarios.
Gold and silver is just for hyperinflation or just gross inflation.

BTW, I don't support gold. Gold is too expensive to have many industrial uses, but silver is worth it for its electrical conductivity for sensitive electronics, enough to beat the loss from the photograph industry.

Even though people in America will find it hard to find people willing to exchange goods for their FRNs, people in the BRIC nations will be able to find plenty of corporations willing to sell them electronics for their currencies.

Silver, baby!

I bought most of my silver at $14/oz year/year and a half ago. Although it has now doubled in price, I bought it expecting to sell it at $75 at the least, but depending on the rate of inflationary acceleration, I may just hold until $200/oz, and no, I don't think that is ridiculous in the least. I also like the fact that I have the physical silver, and plan to hold it until I die, or until it hits my price.

And no, gold and silver are not in a bubble. While everybody on forums that care about the economy are talking about it, Franny in New York is selling her old gold jewelry from her third husband for $700/oz because it is such a good deal. Everybody was buying a house during the real estate bubble, and everybody was playing the market during the tech bubble.


Look inside your computer - every connector, the motherboard leads, and almost every internal chip connector is constructed from gold. And for obvious functional reasons. Silver is sometimes used internally only because it is significantly cheaper to the point of offsetting its poor ductile quality.

Gold has a thousand industrial uses in a million everyday products; silver is much less useful; the silver market essentially collapsed with the death of photographic film although it is still around as obsolete coinage. Silver could return to a monetary form quite easily if any country wants to take the lead but I don't see it coming.

[The Central Scrutinizer]

And no, gold and silver are not in a bubble. While everybody on forums that care about the economy are talking about it, Franny in New York is selling her old gold jewelry from her third husband for $700/oz because it is such a good deal. Everybody was buying a house during the real estate bubble, and everybody was playing the market during the tech bubble.

Everybody? I know for a fact that it is at least everybody - 1.

[NewtonTrino]

... and gold hit $1400oz today!

Silver is up too.

[UWdude]

... and gold hit $1400oz today!

Silver is up too.

Big time. But this time, the stock market was down slightly.

[NewtonTrino]

Big time. But this time, the stock market was down slightly.

Yup, but not down enough to compensate for last weeks bump.

The stock I've been waiting to come down keeps going up dammit (it was up today as well).

[Gord_in_Toronto]

Big time. But this time, the stock market was down slightly.


"The Stock Market"? Not the TSX. It was above 13000 for the first time in a moose's age. ;)

[UWdude]

Yup, but not down enough to compensate for last weeks bump.

The stock I've been waiting to come down keeps going up dammit (it was up today as well).

the pattern has been that the DJIA and PM's rise and fall together. Today, however, PM's rocketed up, but DJIA and NASDAQ were lackluster.

[dudalb]

I think that's it.

I think this is basically Survivalism for Dummies. In the sense of "it is morally wrong to allow a sucker to keep his money" (W.C. Fields) "dummies." Lots of people are expecting society to disintegrate; lots of people want society to disintegrate, because society has not been particularly good to them and they feel that they've been unjustly deprived of the wealth and status that is their due.

So, if you think about what made barbarian kings rich,.... it's gold, right? So if you have enough gold, you can become a barbarian king when It All Goes To Hell, right?

Of course, what really made barbarian kings rich is the fact that they were awesome swordsmen who could take the gold from rich schnucks who didn't realize that in the hands of the right person, steel is much more valuable than gold. Conan the Cimmerian was indeed a barbarian king with rooms full of gold, but he got that way by taking over the palace where the rooms were already.

Yeah, if you really beleive Beck's doomsday scenario,you would be better off following Brains Gremlin's investment advice in "Gremlins 2" ..."Invest in canned foods and Shotguns"...rather then Beck's advice.

[UWdude]

I think that's it.

I think this is basically Survivalism for Dummies. In the sense of "it is morally wrong to allow a sucker to keep his money" (W.C. Fields) "dummies." Lots of people are expecting society to disintegrate; lots of people want society to disintegrate, because society has not been particularly good to them and they feel that they've been unjustly deprived of the wealth and status that is their due.

So, if you think about what made barbarian kings rich,.... it's gold, right? So if you have enough gold, you can become a barbarian king when It All Goes To Hell, right?

Of course, what really made barbarian kings rich is the fact that they were awesome swordsmen who could take the gold from rich schnucks who didn't realize that in the hands of the right person, steel is much more valuable than gold. Conan the Cimmerian was indeed a barbarian king with rooms full of gold, but he got that way by taking over the palace where the rooms were already.


Yes. Power flows from the barrel of a gun. It is survival of the fittest. And every now and then the masses realize money is nothing in the face of an armed mob.

[The Central Scrutinizer]

Yes. Power flows from the barrel of a gun. It is survival of the fittest. And every now and then the masses realize money is nothing in the face of an armed mob.

Unless you have the money to hire a bigger armed mob.

[A Christian Sceptic]

Yeah, if you really beleive Beck's doomsday scenario,you would be better off following Brains Gremlin's investment advice in "Gremlins 2" ..."Invest in canned foods and Shotguns"...rather then Beck's advice.

You might want to do some research on what Beck's advice has been and where on his list of preparing Gold is.

[NewtonTrino]

I had an interesting lunch today with a friend of mine who is an investment banker. He also happens to own a literal gold mine. He's also got a degree in that area as his family has been in the mining business for 150 years or so.

In his opinion gold is currently in a bubble and he thinks the price is going to collapse. Too bad he doesn't know when ;)

[drkitten]

In his opinion gold is currently in a bubble and he thinks the price is going to collapse. Too bad he doesn't know when ;)

I'd be worried if he did. Market manipulation is one of those things that can get you a lengthy vacation in a government-run motel. :D

[Frank Newgent]

I've read Mark Twain once said:

A gold mine is a hole in the ground with a liar standing next to it.

[Fast Eddie B]

I remember when gold was about $800/oz in the 80's, and silver was pushing $50. At the time everyone thought $1,000/oz was inevitable - very few predicted it would ever pull back to the $200's, which it did.

Timing markets and commodities is very difficult - perhaps even impossible in principle. A year from now gold could be $2,000/oz or $200/oz - anyone who claims to know what it will do is blowing smoke.

Holding some gold is a time honored hedge against inflation. 10% of one's holdings in precious metals is considered about right.

I own some gold coins, bought over the years for prices between just under $300 to a couple at just over $1,000. Its best thought of not as an investment, per se', but as insurance.

[The Central Scrutinizer]

Holding some gold is a time honored hedge against inflation. 10% of one's holdings in precious metals is considered about right.

By who?

I own some gold coins, bought over the years for prices between just under $300 to a couple at just over $1,000. Its best thought of not as an investment, per se', but as insurance.

Insurance against what?

[Fast Eddie B]

By who?

I was thinking "weasel words" as I wrote that. You know, "some say..."

I've heard that 10% figure a lot, but I've also heard we use 10% of our brains!:blush:

Insurance against what?

Inflation. When dollars are worth less, commodities tend to rise. Its not so much that you hope to make money - its just something to hold that will help you store value.

It could be run-of-the-mill inflation over time - gold was $35/oz in the not-too-distant past. I'm 61 and the prices of most things have gone up by about a factor of ten since I was young - it insidious, but in my formative years a basic car was about $2,000 - now its about $20,000 (for instance).

Or it could be hyper-inflation. Other countries have seen it and there's no reason to think the US is immune.

As others have said here, if we have anarchy, then food and water and guns and ammo look pretty good.

No one has to own gold - but it helps some people sleep at night to have at least some of one's assets in something other than paper.

[Fast Eddie B]

Google can get one started on the 10% figure...

http://farm5.static.flickr.com/4065/5165249833_c2e5cfa643_b.jpg

[The Central Scrutinizer]

Inflation. When dollars are worth less, commodities tend to rise. Its not so much that you hope to make money - its just something to hold that will help you store value.

Personally, I own blue chip stocks as a hedge against inflation.

No one has to own gold - but it helps some people sleep at night to have at least some of one's assets in something other than paper.

I'm glad I'm not one of them!

[The Central Scrutinizer]

Google can get one started on the 10% figure...

http://farm5.static.flickr.com/4065/5165249833_c2e5cfa643_b.jpg

No offense, but I'll stick with my guys:

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." - Warren E. Buffett

"Owning gold is dumb." - Charles T. Munger

:)

[UWdude]

Unless you have the money to hire a bigger armed mob.

such a shame you would have to pay such a mob. And then, sometimes, the size of your mob is nothing compared to the size of the mob that believes utopia is right around the corner, as soon as you are out of the way. Whether it is true or not really doesn't matter once your neck is on the chopping block.

and sometimes, you cant pay a mob more, because the other mob is offering your mob everything you have in return for joining them. either way, you lose everything.

once again, power comes from the barrel of a gun, and not from some old man's feeble attempts to hand out a share of his coin.

Personally, I own blue chip stocks as a hedge against inflation.

Industrial corporations are susceptible to commodity price spikes.
Financial corporations are susceptible to widespread profit losses due to rising commodity prices of the industrial corporate stocks they own.
Insurance corporations are susceptible to the contract payouts for portfolio losses from both.

[UWdude]

I remember when gold was about $800/oz in the 80's, and silver was pushing $50. At the time everyone thought $1,000/oz was inevitable - very few predicted it would ever pull back to the $200's, which it did.


Volker stepped in and made the overnight lending rate 17.5%, IIRC.
That was a fed chairman with cahones.

The current, and safe bet, is the fed will keep interest rates at or below zero, and will continue to buy US treasuries.

[Fast Eddie B]

Personally, I own blue chip stocks as a hedge against inflation.

To be sure, owning quality blue chip stocks, either individually or in a mutual fund, is a good idea to have as part of an overall investment strategy.

But its not specifically an inflation hedge. If the value of the dollar gets cut in half via inflation, there's no reason a specific stock would benefit, unless its product or service was one that somehow benefited from a weak dollar.

[The Central Scrutinizer]

Industrial corporations are susceptible to commodity price spikes.

True

Financial corporations are susceptible to widespread profit losses due to rising commodity prices of the industrial corporate stocks they own.

True

Insurance corporations are susceptible to the contract payouts for portfolio losses from both.

True

You forgot a few:

The sun rises in the east.
Lionel Messi plays football
Barack Obama is the US president

Were you trying to make some sort of point?

[Francesca R]

owning quality blue chip stocks [is] not specifically an inflation hedge.Yes it is. Equity is the residual claim on a real asset, where both the cash flow and the discount rate are equally affected by inflation (or deflation)

If the value of the dollar gets cut in half via inflation, there's no reason a specific stock would benefit, unless its product or service was one that somehow benefited from a weak dollar. . . . or if its product or service was traded with a floating price. Which they almost all are (utilities being a bit of an exception)

[The Central Scrutinizer]

To be sure, owning quality blue chip stocks, either individually or in a mutual fund, is a good idea to have as part of an overall investment strategy.

But its not specifically an inflation hedge. If the value of the dollar gets cut in half via inflation, there's no reason a specific stock would benefit, unless its product or service was one that somehow benefited from a weak dollar.

Explain this whole "gold as a hedge against inflation" thing. What that means to me is that if inflation is 3%, the price of gold will rise by 3% or more. Are you saying that is always true?

[drkitten]

If the value of the dollar gets cut in half via inflation, there's no reason a specific stock would benefit, unless its product or service was one that somehow benefited from a weak dollar.

But there's also no reason that a specific stock would be hurt, either. I mean, if a $3 tube of toothpaste suddenly costs $6, I still want to brush my teeth, which means that JNJ is still selling toothpaste.

Which is why, historically, stocks have been a much better inflation hedge than precious metals. Stocks and useful commodities -- anything that people actually want and use.

I'm always amused at people who claim they want to own gold as an inflation hedge. That's like owning toothpaste as an adhesive and eschewing glue.

[Fast Eddie B]

I'm always amused at people who claim they want to own gold as an inflation hedge.

Glad I can be amusing!

If you want, you can read the Wikipedia entry on hyperinflation. Look at prior examples.

It's just that, let's say, it took one silver dollar 50 years ago to buy a given item. Today, that same item may cost $20 or so in paper money, but still could be bought for a silver dollar.

That would seem to be an inflation hedge. The value of the coin remains relatively constant in relation to what it can buy, while the currency devalues. As I said, a way to store value, not make money.

But there's also no reason that a specific stock would be hurt, either.

I don't think I said or even implied that.

[The Central Scrutinizer]

Glad I can be amusing!

If you want, you can read the Wikipedia entry on hyperinflation. Look at prior examples.

It's just that, let's say, it took one silver dollar 50 years ago to buy a given item. Today, that same item may cost $20 or so in paper money, but still could be bought for a silver dollar.

That would seem to be an inflation hedge. The value of the coin remains relatively constant in relation to what it can buy, while the currency devalues. As I said, a way to store value, not make money.

Huh??? A silver dollar is worth 1 dollar, when used in commerce. Meaning, if a bottle of Coke costs a dollar, I can buy it with a paper dollar printed yesterday, or a silver dollar minted 100 years ago. Both are worth 1 dollar.

Now of course, I would be foolish to do that, because the silver content, when melted down, would make the silver dollar worth more than a dollar. But unless you melt it down or sell it to a collector, to the clerk at the 7-11, it is still 1 dollar.

[A Christian Sceptic]

I'm always amused at people who claim they want to own gold as an inflation hedge. That's like owning toothpaste as an adhesive and eschewing glue.

Well - a 1 oz. gold coin in 1970 worth $35 (which was not a market value, but rather a value set by the US Government), according to the bls.gov inflation calculator http://www.bls.gov/data/inflation_calculator.htm, should be $197.05. It seems gold has protected against inflation and then some. It needs to drop below $197.05 to cease being a hedge against inflation for the set price of $35 for gold.

Toothpaste could also be a hedge against inflation. Just stockpile the toothpaste at today's prices and use them in the future. You then don't pay the inflated prices.

[The Central Scrutinizer]

Well - a 1 oz. gold coin in 1970 worth $35 (which was not a market value, but rather a value set by the US Government), according to the bls.gov inflation calculator http://www.bls.gov/data/inflation_calculator.htm, should be $197.05. It seems gold has protected against inflation and then some. It needs to drop below $197.05 to cease being a hedge against inflation for the set price of $35 for gold.

Toothpaste could also be a hedge against inflation. Just stockpile the toothpaste at today's prices and use them in the future. You then don't pay the inflated prices.

If a young investor had decided in 1980 to put 10% of their portfolio in gold, they would have purchased it for close to $700 an ounce. That $700, when adjusted for inflation is today worth roughly $2000. Gold is worth $1400 an ounce.

Now, I may have flunked economics, but perhaps someone could explain to me exactly how that is a hedge against inflation. Sounds more like a hedge against making money!

[Fast Eddie B]

Now, I may have flunked economics, but perhaps someone could explain to me exactly how that is a hedge against inflation.

Let me try. (As a reducto ad absurdo analogy, let me play fast and loose with the numbers - it's the concept and not the particulars that matter).

Two citizens of Germany in early 1923 are given a choice in payment types for services rendered. One accepts a paper mark, the other takes a silver coin worth one mark.

Then this happens:

http://www.thepeoplesvoice.org/cgi-bin/blogs/media/weimar_hyperinflation2.gif

At the end of the year, both are thirsty for a bottle of wine. They go to a wine shop. A bottle of wine had sold for one mark a year ago, but no longer. The one with a paper mark is told he's short about 999,999,999 marks, and is offered the use of a wheelbarrow if he wants to try to round up that much. The other fellow presents the silver mark coin. The shopkeeper knows the value of the silver in a silver mark coin, and trades the fellow a bottle of wine for the coin.

This seems clear and obvious on the surface. I'd say the fellow that took the silver mark successfully "hedged" against inflation. What applies in times of hyperinflation would be true to a lesser extent in times of humdrum inflation - as we've seen in the price of gold and silver over the recent past.

Sounds more like a hedge against making money!

If I want to make money, I don't choose gold or silver. I earn it or try to invest in securities (stocks and bonds) or even real estate, and over time I've been pretty successful. Taking 10% of one's assets "off the table" to put into precious metals is not unreasonable.

[TraneWreck]

If a young investor had decided in 1980 to put 10% of their portfolio in gold, they would have purchased it for close to $700 an ounce. That $700, when adjusted for inflation is today worth roughly $2000. Gold is worth $1400 an ounce.

Now, I may have flunked economics, but perhaps someone could explain to me exactly how that is a hedge against inflation. Sounds more like a hedge against making money!

The gold thing is a myth for apocalypse fetishists who don't realize that they're being bilked by smooth snake-oil salesmen that are taking ENORMOUS commissions off of the purchases.

Remember, they're not worried about the past performance of gold, they think Obama is going to cause Zimbabwe-esque inflation (despite the ten-year bond rate being below 3% and our major problem being one of potential deflation).

It's not going to make sense, it's stupid, as your calculations have shown.

[drkitten]

It's just that, let's say, it took one silver dollar 50 years ago to buy a given item. Today, that same item may cost $20 or so in paper money, but still could be bought for a silver dollar.

That would seem to be an inflation hedge. The value of the coin remains relatively constant in relation to what it can buy, while the currency devalues. As I said, a way to store value, not make money.

So, you're saying that precious metals are a better investment than keeping currency in a cookie jar?

If you took that dollar and used it to buy a blue chip stock fifty years ago, you'd likely have substantially more than $20 in stock today, and you would have been getting dividend payments for the past fifty years as well.

[A Christian Sceptic]

If a young investor had decided in 1980 to put 10% of their portfolio in gold, they would have purchased it for close to $700 an ounce. That $700, when adjusted for inflation is today worth roughly $2000. Gold is worth $1400 an ounce.

Now, I may have flunked economics, but perhaps someone could explain to me exactly how that is a hedge against inflation. Sounds more like a hedge against making money!

The investor only purchased one gold coin - ever? And he bought at a market peak and never bought again? Sounds like he flunked investing 101.

[Mister Earl]

(despite the ten-year bond rate being below 3% and our major problem being one of potential deflation).

I'd welcome deflation at the moment. It'd be the only anyone at my company could get anything even approximating a raise.

[Fast Eddie B]

If a young investor had decided in 1980 to put 10% of their portfolio in gold, they would have purchased it for close to $700 an ounce. That $700, when adjusted for inflation is today worth roughly $2000. Gold is worth $1400 an ounce.

Cherry picking.

I could cherry pick as well and have the young investor in gold at $250/oz in the 80's, or even $35 not long before. I'll let you run those numbers if you're so inclined.

[A Christian Sceptic]

So, you're saying that precious metals are a better investment than keeping currency in a cookie jar?


I think investment is the wrong work here. In the past 100 years how much has the dollar been devalued?


If you took that dollar and used it to buy a blue chip stock fifty years ago, you'd likely have substantially more than $20 in stock today, and you would have been getting dividend payments for the past fifty years as well.

You have to pick the correct stock, of course.

Stocks can become worth $0.

Paper Money can become worth $0.

Have gold and silver ever been worth $0?

If anyone here has gold and silver valued at $0 I'll happily buy it from you.

[A Christian Sceptic]

Cherry picking.

I could cherry pick as well and have the young investor in gold at $250/oz in the 80's, or even $35 not long before. I'll let you run those numbers if you're so inclined.

Well - your numbers would be more accurate since for most of the past 40 years gold has been below the peaks, and still above inflation.

[Fast Eddie B]

The gold thing is a myth for apocalypse fetishists who don't realize that they're being bilked by smooth snake-oil salesmen that are taking ENORMOUS commissions off of the purchases.

I buy non-collectible "bullion" coins - Krugerrands, Maple Leafs, Double Eagles, that sort of thing.

The commission on these, and the premium over the gold content, is very reasonable if you know where to shop.

[TraneWreck]

I buy non-collectible "bullion" coins - Krugerrands, Maple Leafs, Double Eagles, that sort of thing.

The commission on these, and the premium over the gold content, is very reasonable if you know where to shop.

Sure, but those sorts of investments aren't driving the bubble.

There were a lot of people who took out mortgages from honest lenders and paid them in the last 10 years as well.

[The Central Scrutinizer]

The investor only purchased one gold coin - ever? And he bought at a market peak and never bought again? Sounds like he flunked investing 101.

OK, let's pick a time when the market wasn't at a peak. A young investor plunk down $125 for an ounce of gold in 1973. That $125 is now worth $716. An ounce of gold is worth $1400.

Congratulations, you've doubled your money!!! :)


It only took 40 years.... :rolleyes:

[The Central Scrutinizer]

Let me try. (As a reducto ad absurdo analogy, let me play fast and loose with the numbers - it's the concept and not the particulars that matter).

Two citizens of Germany in early 1923 are given a choice in payment types for services rendered. One accepts a paper mark, the other takes a silver coin worth one mark.

Then this happens:

http://www.thepeoplesvoice.org/cgi-bin/blogs/media/weimar_hyperinflation2.gif

At the end of the year, both are thirsty for a bottle of wine. They go to a wine shop. A bottle of wine had sold for one mark a year ago, but no longer. The one with a paper mark is told he's short about 999,999,999 marks, and is offered the use of a wheelbarrow if he wants to try to round up that much. The other fellow presents the silver mark coin. The shopkeeper knows the value of the silver in a silver mark coin, and trades the fellow a bottle of wine for the coin.

This seems clear and obvious on the surface. I'd say the fellow that took the silver mark successfully "hedged" against inflation. What applies in times of hyperinflation would be true to a lesser extent in times of humdrum inflation - as we've seen in the price of gold and silver over the recent past.




I'll let Tranewreck take this one:

The gold thing is a myth for apocalypse fetishists who don't realize that they're being bilked by smooth snake-oil salesmen that are taking ENORMOUS commissions off of the purchases.

Remember, they're not worried about the past performance of gold, they think Obama is going to cause Zimbabwe-esque inflation (despite the ten-year bond rate being below 3% and our major problem being one of potential deflation).

It's not going to make sense, it's stupid, as your calculations have shown.

As too the last point:

If I want to make money, I don't choose gold or silver. I earn it or try to invest in securities (stocks and bonds) or even real estate, and over time I've been pretty successful. Taking 10% of one's assets "off the table" to put into precious metals is not unreasonable.

If I really thought there was a chance, any chance whatsoever, of German or Zimbabwaen style inflation in the US at any time in the next 40 years, I'd have 100% of my money in gold (or more accurately, guns and canned goods). Why limit it to 10%?

[The Central Scrutinizer]

Cherry picking.

I could cherry pick as well and have the young investor in gold at $250/oz in the 80's, or even $35 not long before. I'll let you run those numbers if you're so inclined.

Done:

OK, let's pick a time when the market wasn't at a peak. A young investor plunk down $125 for an ounce of gold in 1973. That $125 is now worth $716. An ounce of gold is worth $1400.

Congratulations, you've doubled your money!!! :)


It only took 40 years.... :rolleyes:

[Francesca R]

Cherry picking. I could cherry pick as well [ . . . ]Will cherries outperform gold? What about the CPI?

[A Christian Sceptic]

OK, let's pick a time when the market wasn't at a peak. A young investor plunk down $125 for an ounce of gold in 1973. That $125 is now worth $716. An ounce of gold is worth $1400.

Congratulations, you've doubled your money!!! :)


It only took 40 years.... :rolleyes:

Well - since your goal was not to double your money but to preserve your wealth I'd think the timeframe shouldn't matter. And since a person doing this is probably making multiple gold purchases throughout the 40 years the dollar-cost averaging will help smooth out the volatility. But again - it's about preserving wealth. And gold would only be one part of your strategy. I'd recommend stocking up toothpaste first or maybe at the same time as buying gold. :)

[The Central Scrutinizer]

Well - since your goal was not to double your money but to preserve your wealth I'd think the timeframe shouldn't matter. And since a person doing this is probably making multiple gold purchases throughout the 40 years the dollar-cost averaging will help smooth out the volatility. But again - it's about preserving wealth. And gold would only be one part of your strategy. I'd recommend stocking up toothpaste first or maybe at the same time as buying gold. :)

I'd rather create wealth than preserve it.

[The Central Scrutinizer]

Well - since your goal was not to double your money but to preserve your wealth I'd think the timeframe shouldn't matter. And since a person doing this is probably making multiple gold purchases throughout the 40 years the dollar-cost averaging will help smooth out the volatility. But again - it's about preserving wealth. And gold would only be one part of your strategy. I'd recommend stocking up toothpaste first or maybe at the same time as buying gold. :)

Ask yourself this question - take a look at the Forbes 400 sometime. Buffett, Gates, Walton's, etc. Do you really, truly, honestly believe that any of them have 10% of their money in gold? Really, truly, honestly. And if the answer is no, why do you think that is?

Why is it that the only people who push for 10% gold are nuts on internet conspiracy forums or hucksters on late night TV?

If it was such a great investment, wouldn't Buffett, Munger, Gates, Walton, et al, be advising all of us to invest in gold?

Just wondering.....

[A Christian Sceptic]

I'll let Tranewreck take this one:



As too the last point:



If I really thought there was a chance, any chance whatsoever, of German or Zimbabwaen style inflation in the US at any time in the next 40 years, I'd have 100% of my money in gold (or more accurately, guns and canned goods). Why limit it to 10%?

Do you know 100% that high inflation will not be coming? It doesn't even need to approach hyperinflation to be a burden. But then again - do you know 100% hyperinflation will not be happening in America - ever? It's happened before. But of course now we have Bernanke to protect us ....

[The Central Scrutinizer]

Do you know 100% that high inflation will not be coming? It doesn't even need to approach hyperinflation to be a burden. But then again - do you know 100% hyperinflation will not be happening in America - ever? It's happened before. But of course now we have Bernanke to protect us ....

No. Nor do I "know" 100% that the Earth won't explode tomorrow. Do you?

[A Christian Sceptic]

Ask yourself this question - take a look at the Forbes 400 sometime. Buffett, Gates, Walton's, etc. Do you really, truly, honestly believe that any of them have 10% of their money in gold? Really, truly, honestly. And if the answer is no, why do you think that is?

Why is it that the only people who push for 10% gold are nuts on internet conspiracy forums or hucksters on late night TV?

If it was such a great investment, wouldn't Buffett, Munger, Gates, Walton, et al, be advising all of us to invest in gold?

Just wondering.....

I don't know where the 10% comes from. I don't follow it. I have my own strategy which doesn't come out to that 10%. In fact, gold is rather low on my prioritized list. I watch what other super-wealthy investors do and I see some recommend for precious metals and some against. I also watch what nations are doing. And banks. You seem to have some inside information on those people's portfolio's- care to share what they are investing in?

[A Christian Sceptic]

No. Nor do I "know" 100% that the Earth won't explode tomorrow. Do you?

Not an accurate comparison. But I do know that where I live there is a higher liklihood of certain natural disasters and so I plan accordingly.

You have alot more faith in central planners than I do.

[TraneWreck]

Do you know 100% that high inflation will not be coming?

Yes. It will not be coming. It is a fantasy.

[timhau]

Well - a 1 oz. gold coin in 1970 worth $35 (which was not a market value, but rather a value set by the US Government), according to the bls.gov inflation calculator http://www.bls.gov/data/inflation_calculator.htm, should be $197.05. It seems gold has protected against inflation and then some. It needs to drop below $197.05 to cease being a hedge against inflation for the set price of $35 for gold.

On January 2nd, 1970, shares of General Electric closed at $76.62. If you had then bought one share at the closing price, after multiple stock splits you'd now have 96 shares valued at about 16.30 apiece, or well over $1500 in total. In addition to that, you would by now have gotten the nominal value of your initial investment back in dividends several times over.

That sounds like beating inflation.

[Fast Eddie B]

Again, its educational to go here:

http://en.wikipedia.org/wiki/Hyperinflation

Scroll down to the list of countries in which it has happened.

Its easy top think "it's different now" or "it's different here".

I'll be that's what the residents of those countries felt as well.

I'm not saying its likely here; just that its possible.

[TraneWreck]

Again, its educational to go here:

http://en.wikipedia.org/wiki/Hyperinflation

Scroll down to the list of countries in which it has happened.

Its easy top think "it's different now" or "it's different here".

I'll be that's what the residents of those countries felt as well.

I'm not saying its likely here; just that its possible.

Right now Glenn Beck and Alex Jones are cackling and rolling a blunt. Their paranoid ********* has been amazingly successful.

Hyperinflation is not coming. Hell, the Fed just spent $600 billion trying to avoid deflation.

You're looking at the sky and calling it green.

[Fast Eddie B]

On January 2nd, 1970, shares of General Electric closed at $76.62.

So?

There are many stocks which did not perform as well, or were down substantially.

Or gone entirely.

If your point is that one can make money buying individual stocks, I agree.

Choosing one particular stock over one particular time frame seems arbitrary. We could also use GM or Apple or Enron or Microsoft. But it seems like a silly exercise.

I own stocks. I like stocks. I've made a lot of money in stocks. But if they're 100% pf your portfolio, you're very exposed to "Black Swan" events.

[A Christian Sceptic]

Yes. It will not be coming. It is a fantasy.

OK - then plan accordingly and hope you're right.

[timhau]

Again, its educational to go here:

http://en.wikipedia.org/wiki/Hyperinflation

Scroll down to the list of countries in which it has happened.

... and you'll see how rare it is, and how it has mostly come in the coattails of a world war/civil war or the break-up of Communism. I don't think many people in those countries thought they were living in a stable economy.

[TraneWreck]

... and you'll see how rare it is, and how it has mostly come in the coattails of a world war/civil war or the break-up of Communism. I don't think many people in those countries thought they were living in a stable economy.

I would like an example of a single one of those countries that could borrow money at a ten year rate of below 3% before hyperinflation hit--without an intervening war, of course.

[A Christian Sceptic]

There seems to be quite a bit of faith being displayed here. ;)

[TraneWreck]

There seems to be quite a bit of faith being displayed here. ;)

So no luck on finding a nation that entered hyperinflation shortly after having a ten year rate of below 3%?

[A Christian Sceptic]

So no luck on finding a nation that entered hyperinflation shortly after having a ten year rate of below 3%?

I'm not claiming any time frame. At what ten year interest rate would you consider it a potential?

[The Central Scrutinizer]

I don't know where the 10% comes from. I don't follow it. I have my own strategy which doesn't come out to that 10%. In fact, gold is rather low on my prioritized list. I watch what other super-wealthy investors do and I see some recommend for precious metals and some against. I also watch what nations are doing. And banks. You seem to have some inside information on those people's portfolio's- care to share what they are investing in?

Generally securities and/or real estate.

[The Central Scrutinizer]

But if they're 100% pf your portfolio, you're very exposed to "Black Swan" events.

Or what some people call "buying opportunities".

[A Christian Sceptic]

Generally securities and/or real estate.

That's 100% of their portfolios?

[The Central Scrutinizer]

OK - then plan accordingly and hope you're right.

That's what I've been doing. So far I've been right for 50 years and you've been wrong for 50 years. Or longer, if you're older than 50.

[TraneWreck]

I'm not claiming any time frame. At what ten year interest rate would you consider it a potential?

You could start by examining the willingness of investors to lend money to nations that entered hyperinflation and compare that to, say, America of November, 2010.

I think you'll find a bit of difference.

America is currently the safest investment in the world, which is why the ten year rates are so low. Now, I'm no economist, but in the last two centuries I don't think any nation has gone from "safest investment in the world" to "hyperinflation" without having a couple of nuclear bombs dropped on them.

But hey, maybe that's just my "faith" speaking.

[The Central Scrutinizer]

That's 100% of their portfolios?

Most likely.

[Fast Eddie B]

So far I've been right for 50 years and you've been wrong for 50 years.

This is a huge mischaracterization of the views that have been expressed here.

It's not wrong to say that its prudent to prepare one's self for possible eventualities, even if those eventualities never play out.

Again, its like insurance. You don't buy term life insurance expecting to die in the next year. You buy it to insure against a possibility that you hope, and assume, will not happen.

I don't think anyone in this thread has predicted hyperinflation, though there are pundits at large who do. But to say with certainty that it can't happen seems naive and presumptuous at best.

Reminds me of these lyrics (name that tune!):

It can't happen here
It can't happen here
I'm telling you, my dear
That it can't happen here
Because I been checkin' it out, baby
I checked it out a couple a times

But I'm telling you
It can't happen here
Oh darling, it's important that you believe me
(Bop bop bop bop)
That it can't happen here...

And they thought it couldn't happen here
(duh duh duh)
They knew it couldn't happen here
They were so sure it couldn't happen here
But . . .

[TraneWreck]

This is a huge mischaracterization of the views that have been expressed here.

[...]

And they thought it couldn't happen here
(duh duh duh)
They knew it couldn't happen here
They were so sure it couldn't happen here
But . . .[/I]

Two things:

1) I notice no one has even remotely tried to perform the historical analysis they were challenged with. Shocking.

2) Do you really think gold and silver will make a difference if America goes into hyper-inflation? Have you bothered to see if any of the countries on that list had individuals in possession of precious metals and how they fared through the crisis? My guess is: not much differently.

Unless you have Ft. Knox in your basement, that little bit of gold isn't going to go very far.

[UWdude]

2) Do you really think gold and silver will make a difference if America goes into hyper-inflation? Have you bothered to see if any of the countries on that list had individuals in possession of precious metals and how they fared through the crisis? My guess is: not much differently.

Unless you have Ft. Knox in your basement, that little bit of gold isn't going to go very far.

read some history on Weimar Germany. Neighboring countries currency became valued, and even rose in value because of the complete instability of the mark.

People would come over from Belgium and the netherlands, and get eggs, bread etc dirt cheap with their "hard currency", further compounding the issues in of product per mark Germany.

People with silver/gold fared much better, because you could always exchange your silver or gold for the "hard currencies" that were valued.

So yeah, an ounce of gold would only get you about what $1400 would get you today.

Oh, one other thing, while everything else was skyrocketing, housing prices remained relatively stable. they (rent) eventually became only about 2% of total household expenditures. Because nobody wants to move to Germany when it has a worthless currency.

[The Central Scrutinizer]

This is a huge mischaracterization of the views that have been expressed here.

It's not wrong to say that its prudent to prepare one's self for possible eventualities, even if those eventualities never play out.

Again, its like insurance. You don't buy term life insurance expecting to die in the next year. You buy it to insure against a possibility that you hope, and assume, will not happen.

I don't think anyone in this thread has predicted hyperinflation, though there are pundits at large who do. But to say with certainty that it can't happen seems naive and presumptuous at best.

So you agree it is naive and presumptuous to assume that the world cannot blow up tomorrow?

[TraneWreck]

read some history on Weimar Germany. Neighboring countries currency became valued, and even rose in value because of the complete instability of the mark.

[...]

Oh, one other thing, while everything else was skyrocketing, housing prices remained relatively stable. they (rent) eventually became only about 2% of total household expenditures. Because nobody wants to move to Germany when it has a worthless currency.

I'm sure it was a little better, but how much? If the country goes into full meltdown, you think you're gold is going to last very long?

You're going to get a couple of months out of your gold stores, then you'll be struggling with the destroyed ecomony like everyone else.

[UWdude]

I'm sure it was a little better, but how much? If the country goes into full meltdown, you think you're gold is going to last very long?

You're going to get a couple of months out of your gold stores, then you'll be struggling with the destroyed ecomony like everyone else.

Right, if you have a few months savings in gold*, you have a few months' savings in gold, which will act as a few months of savings. People who do not have a few months savings in gold will not have any savings, so they will start out struggling.

If you have a years' worth of gold, you have a years' worth of savings, that will be a few years worth of savings, regardless of the currency value. If you have a few years worth of savings in marks, those savings are gone in a month or two.

PMs are a hedge against inflation.

*I prefer silver, BTW.

[UWdude]

So you agree it is naive and presumptuous to assume that the world cannot blow up tomorrow?

There are plenty of economists around the world worried about the massive devaluing of the dollar. They are so ignorant, I guess, to think such a thing. Because some folks in America think because our flag has fifty stars and thirteen stripes, we are immune to inflation. I guess they should be just as worried about the world blowing up tomorrow.

[TraneWreck]

Right, if you have a few months savings in gold*, you have a few months' savings in gold, which will act as a few months of savings. People who do not have a few months savings in gold will not have any savings, so they will start out struggling.

If you have a years' worth of gold, you have a years' worth of savings, that will be a few years worth of savings, regardless of the currency value. If you have a few years worth of savings in marks, those savings are gone in a month or two.

PMs are a hedge against inflation.

*I prefer silver, BTW.

I should note that my issue with gold is not purchasing it, it's the fantasy that's grown up around it.

Let's change those commercials that run during Beck's show to the following, "GOLD: an investment that will give a not so great return unless the entire economy collapses and all hell breaks loose. Then you'll have a couple of nice months before you run out of the stuff and have to battle zombies in the streets with shovels. And also we will charge an outrageous commission."

[UWdude]

I should note that my issue with gold is not purchasing it, it's the fantasy that's grown up around it.

Let's change those commercials that run during Beck's show to the following, "GOLD: an investment that will give a not so great return unless the entire economy collapses and all hell breaks loose. Then you'll have a couple of nice months before you run out of the stuff and have to battle zombies in the streets with shovels. And also we will charge an outrageous commission."

well, people didn't start using wheelbarrows until the third or fourth year of hyperinflation in Germany.

the nice thing about PMs, is they are a hedge against 10% inflation as much as they are a hedge against 10,000% inflation. 10% is more likely than 10,000%, but either way...

[The Central Scrutinizer]

There are plenty of economists around the world worried about the massive devaluing of the dollar. They are so ignorant, I guess, to think such a thing. Because some folks in America think because our flag has fifty stars and thirteen stripes, we are immune to inflation. I guess they should be just as worried about the world blowing up tomorrow.

Evasion noted.

You'll also note that most of those "economists" tend to hang out on gold bug conspiracy forums.

[UWdude]

Evasion noted.

You'll also note that most of those "economists" tend to hang out on gold bug conspiracy forums.

Let the chips fall where they may. May the wise man prosper, and the foolish man languish.

[The Central Scrutinizer]

Let the chips fall where they may. May the wise man prosper, and the foolish man languish.

That has been happening for quite a few years now.

Another unhappy gold bug.

[A Christian Sceptic]

Two things:

1) I notice no one has even remotely tried to perform the historical analysis they were challenged with. Shocking.

2) Do you really think gold and silver will make a difference if America goes into hyper-inflation? Have you bothered to see if any of the countries on that list had individuals in possession of precious metals and how they fared through the crisis? My guess is: not much differently.

Unless you have Ft. Knox in your basement, that little bit of gold isn't going to go very far.

In Zimbabwe individuals are panning for gold to pay for their food.

In 1930's Germany individuals with gold were able to escape quicker by buying passage.

In Argentina people were able to pawn their gold to pay bills and eat.

During the Great Depression in America many people sold their Sterling Silver to survive.

[UWdude]

That has been happening for quite a few years now.

Another unhappy gold bug.

?

My silver value has almost doubled since I bought it less than two years ago.
Why would I be unhappy about that?

[The Central Scrutinizer]

?

My silver value has almost doubled since I bought it less than two years ago.
Why would I be unhappy about that?

You should put all your money into silver!

[UWdude]

You should put all your money into silver!


I did (investment money). That's the way I roll.

[A Christian Sceptic]

You should put all your money into silver!

Why?

[Gord_in_Toronto]

Why?

Because that will drive the price up and Scrut can sell just before the Hunt Brothers bail. :covereyes

[The Central Scrutinizer]

Why?

It doubled in 1 year! And since hyperinflation is coming, he'll need it to buy bread!

[WildCat]

I'm sure it was a little better, but how much? If the country goes into full meltdown, you think you're gold is going to last very long?

You're going to get a couple of months out of your gold stores, then you'll be struggling with the destroyed ecomony like everyone else.
In a total economic meltdown, guns > gold.

[TraneWreck]

In a total economic meltdown, guns > gold.

Cause if you've got the guns, chances are you're going to end up with the gold, anyway...

[WildCat]

Cause if you've got the guns, chances are you're going to end up with the gold, anyway...
You don't need gold at all if you have guns. The people with gold will be like Thurston Howell III on Gilligan's Island, trying to buy off the headhunters...

[Fast Eddie B]

I'm surprised at the vehemence of some here in their stances against gold holdings - I never imagined it could be that controversial.

Anyway, without searching back and copying and pasting, let me address:

1) How a stable and low interest rate somehow makes us immune from hyperinflation and...

2) How rare hyperinflation is (requiring war or something)

To handle the second, first - a major war involving the US is certainly possible. I'm not predicting WWIII, but how can one exclude it, looking at the history of the world? Any little rogue nation that gets its hands on a nuclear weapon could become part of an Axis against which the rest of the world will fight, and the outcome of which will only be clear after the fighting is over.

To the first, I recommend this book:

http://photo.goodreads.com/books/1173056049l/242472.jpg

In short, we can look at something like "x" years without a World War or "Y" years without hyperinflation and think we're living in what Taleb calls "Mediocristan". He compares that to a turkey that assumes from a lifetime of experience that its keepers only want to keep it healthy and fed, and assumes that will continue forever.

But that turkey faces something totally unforseeable to it - a "Black Swan" event that in one fell swoop negates all its prior assumptions about the world.

Taleb calls the world in which we might find ourselves facing the unforeseen as "Extremistan". That forecasting the next "big thing" is impossible, but that truly monumental things can and will happen that we should protect ourselves against.

We all have fertile imaginations. How would US markets and the US dollar react to:

1) an H1N6 virus that killed 90% of the US and world population?

2) a WWIII started by Iran and N Korea which pivoted on the survival of Israel?

3) a Cyber-attack that crippled the internet for months?

etc. etc.

I'm not predicting any of these - whatever the next big thing is it will probably come "from left field" as it were.

[Fast Eddie B]

To continue the above...

Dan Carlin has an excellent podcast called "Hardcore History". You can Google it or find it on iTunes.

One really worthwhile episode was titled "Desperate Times". Its now in his paid archives, but is worth the nominal $1.99 fee.

http://dancarlin.com/dcosc/product_info.php?cPath=21&products_id=178

Show description: "The tough economic climate after the First World War fostered the growth of radicalism around the world. Did it also create tougher people? Dan looks at the connection between tough times and the "Greatest Generation"."

Worth a listen - really.

[Sceptic-PK]

If there is something akin to WW3 on the horizon, you would be far better served sinking your money into the bomb-making factory than a precious metal.

[Fast Eddie B]

...you would be far better served sinking your money into the bomb-making factory than a precious metal.

Maybe.

Especially if you emerge the winner.

Might not have worked out so well for a German investor anticipating WWII.

[Sceptic-PK]

Yeah, well I exist in the real world and manage my finances/investments based upon likely scenarios. If the entire world collapses and goes to hell, whether I have money or not will be the least of my worries. I think its ridiculous the kinds of extremes you have to invent in order to make gold look appealing.

[Fast Eddie B]

I think its ridiculous the kinds of extremes you have to invent in order to make gold look appealing.

"Those who cannot remember the past are condemned to repeat it."

George Santayana

[Gord_in_Toronto]

"Those who cannot remember the past are condemned to repeat it."

George Santayana

"History is bunk." Henry Ford ;)

[Fast Eddie B]

I think of gold in the same way as some think of a firearm...

...far better to have it and not need it than to need it and not have it.

But again, I don't see the big deal. If you feel there could never come a time that it would be handy, don't buy it - there are lots of other things to do with discretionary dollars. If you can imagine a scenario, even an improbable one, where it might be a good thing to have, squirrel some away and don't worry about it.

Maybe some of us have this fable/image hidden deep in our psyches:

http://1.bp.blogspot.com/_s6Cu32Fga4k/SyVqoDMRANI/AAAAAAAAFbs/2O3W2B9sJAk/s400/i028_th.jpg

And some don't.

And never the twain shall meet.

[UWdude]

I've read The Black Swan. But it is a philosophical work, so I think you may have trouble convincing skeptics of its merits. I loved it, of course.

But Taleb was not necessarily warning against natural disasters. The point of his argument was the more systems are built to keep the world in Mediocristan, the more they push risk forward and make it more terrible when it actually happens.

So we don't need a super virus (even though, a super-virus would definitely be a black swan), because really, the markets themselves are eventually going to go haywire.

If the entire world collapses and goes to hell, whether I have money or not will be the least of my worries.

The stock investor's fallacy.

[Sceptic-PK]

"Those who cannot remember the past are condemned to repeat it."

George Santayana

Lol, that's the way champ! Cute quotes are always a valid substitute for logical argument.


The stock investor's fallacy.

Don't try and lecture me on fallacies, 911 conspiracy theorist!

[NewtonTrino]

So for those of you that own gold/silver you literally are stockpiling this at your house or something? Otherwise if things go to **** you might not have it.

[YoPopa]

...... I think its ridiculous the kinds of extremes you have to invent in order to make gold look appealing.

I have a question for you Sceptic. Do you see George Soros as a harmless crank with no power to devalue a currency?

[Fast Eddie B]

Lol, that's the way champ! Cute quotes are always a valid substitute for logical argument.

I've already attempted to form well-crafted arguments using history and analogy.

The quote was in addition to, not in lieu of, logical argument.

[UWdude]

Don't try and lecture me on fallacies, 911 conspiracy theorist!

Even if 9/11 wasn't an inside job (ha!), it would have no bearing on your investors fallacy. Almost every person that foolishly plunges into the market makes the same statement as you did, and then when the crash happens, they realize having that money back would be better than not having it at all.

[lomiller]

I think of gold in the same way as some think of a firearm...

...far better to have it and not need it than to need it and not have it.


You never *need* gold, it`s inherently useless in crisis times. The only use it would have in a real crisis is to trade away at pennies on the dollar to a speculator who was smart enough to invest in freeze dried food.

[YoPopa]

You never *need* gold, it`s inherently useless in crisis times. The only use it would have in a real crisis is to trade away at pennies on the dollar to a speculator who was smart enough to invest in freeze dried food.

Evidence please. Words like "never" and "inherently useless" sound pretty extreme. There are lots of kinds of crisis and you seem to be including them all.

[Dunstan]

So for those of you that own gold/silver you literally are stockpiling this at your house or something? Otherwise if things go to **** you might not have it.

And if you do keep it in your house, which do you think is more likely: (1) the national/global crisis that makes your stockpile valuable; or (2) your house being robbed (bearing in mind that, no matter how many guns you own, you probably still leave the house once in a while).

[oggiesnr]

In the non-Dollar world (ie most of it) the relative value of the dollar against your home currency (at the time of purchase and disposal) is also a major issue especially as the dollar is now rather more volatile (over periods of several year) than was once thought to be the case (approx 25% variation over the last decade against the pound sterling).

Of course as the "ultimate hedge" all that will matter, if it is required, is the exchange rate against a loaf of bread.

Steve

[UWdude]

And if you do keep it in your house, which do you think is more likely: (1) the national/global crisis that makes your stockpile valuable; or (2) your house being robbed (bearing in mind that, no matter how many guns you own, you probably still leave the house once in a while).

every house is not going to get robbed. Yes there is a chance, but it would have to be straight Mad Max for every house to get robbed, or even 1 out of 5.

[TraneWreck]

every house is not going to get robbed. Yes there is a chance, but it would have to be straight Mad Max for every house to get robbed, or even 1 out of 5.

Yeah, I wouldn't rob every house. I'd just look for the ones with gold in them.

[A Christian Sceptic]

Yeah, I wouldn't rob every house. I'd just look for the ones with gold in them.

Why? I thought gold was useless - especially in a meltdown scenario.

[Dunstan]

every house is not going to get robbed. Yes there is a chance, but it would have to be straight Mad Max for every house to get robbed, or even 1 out of 5.

I don't think you answered my question, unless you're implying that you believe the chances of economic/societal meltdown are 1 in 5 or greater.

Some people have defending holding gold as a rational hedge against a remote, "Black Swan" event. I'm just pointing out that physically possessing gold exposes you to a not-so-remote risk of robbery.

[YoPopa]

.....
Some people have defending holding gold as a rational hedge against a remote, "Black Swan" event. I'm just pointing out that physically possessing gold exposes you to a not-so-remote risk of robbery.

In the event of that economic/societal meltdown then the risk of being robbed for a loaf of bread, or a box of Twinkies would be the greater threat. But these total meltdown scenarios are on the silly side considering the OP.

[TraneWreck]

Why? I thought gold was useless - especially in a meltdown scenario.

It's pointless to buy it now and think you'll get a great deal of benefit.

If we're in full-on apocalypse, it'd probably get you a gallon of water or some bread for a day or two.

[TraneWreck]

In the event of that economic/societal meltdown then the risk of being robbed for a loaf of bread, or a box of Twinkies would be the greater threat. But these total meltdown scenarios are on the silly side considering the OP.

Of course, but those fantasies are what's building the gold bubble.

It's Glenn Beck and Alex Jones and seed gardens and hyperinflation in the 30's...bunch of nutty stuff.

Several posters are just noting that should the reason many of these people are buying gold come to pass, that gold won't do a hell of a lot.

If you don't think the Apocalypse is coming, aren't paying some shady Beck-advertiser ridiculous commission fees, and just think you're making an investment, then it's not that big of a deal (although expect to lose some money if you're still in when the bubble bursts).

[Dunstan]

Just to be clear, I was talking about the risk of being robbed of your gold now, while you're waiting for the apocalypse to hit. (Obviously, in a post-apocalypse world in which only gold has value, it's better to have gold and risk being robbed of it than to not have it at all.)

[UWdude]

Yeah, I wouldn't rob every house. I'd just look for the ones with gold in them.

How would you know?

If there was mass looting, then yes, even gold would be worth less (not worthless). But hyperinflation does not necessarily imply mass looting. it means shortages and fights in grocery stores and such, but not widespread mad max anarchy. (although frankly, I think Americans would be worse than Zaire, Zimbabwe or Germans, because of their current every man is a king attitude)

Just to be clear, I was talking about the risk of being robbed of your gold now, while you're waiting for the apocalypse to hit. (Obviously, in a post-apocalypse world in which only gold has value, it's better to have gold and risk being robbed of it than to not have it at all.)

You are probably more likely to be robbed by your financial investment company. ;)

If we're in full-on apocalypse, it'd probably get you a gallon of water or some bread for a day or two.

yeah, because.... ... why? Because people will be trading what instead?

[TraneWreck]

How would you know?

So you're of the position that I was serious?

[UWdude]

So you're of the position that I was serious?

All your posts on this topic are quite ridiculous. I am pretty sure your statement about gold only being able to buy bread and water was a serious attempt at dismissing gold. So it is hard to tell when you are being serious or not.

I don't think you answered my question, unless you're implying that you believe the chances of economic/societal meltdown are 1 in 5 or greater.

I was implying, even in a mad max kind of world, your chances of your house getting robbed would still only be about 1/5. It's a total out of my donkey number.

[Sceptic-PK]

I have a question for you Sceptic. Do you see George Soros as a harmless crank with no power to devalue a currency?

I honestly don't care either way. There will always be much bigger fish out there than me, regardless of my investment methods. I don't live in perpetual fear of currency devaluation. If my currency devalues, it's good for my country's exporters and miners. If it values, it's good for my shopping tendencies. These fanciful doomsday scenarios do not enter my mind when planning longterm investment strategies. I find them rather childish.

[YoPopa]

I honestly don't care either way. There will always be much bigger fish out there than me, regardless of my investment methods. I don't live in perpetual fear of currency devaluation. If my currency devalues, it's good for my country's exporters and miners. If it values, it's good for my shopping tendencies. These fanciful doomsday scenarios do not enter my mind when planning longterm investment strategies. I find them rather childish.

Childish to be aware of threats to our economy? You remain ignorant by intention yet you feel informed enough to post your opinions in this thread.

[balrog666]

http://www.marketoracle.co.uk/images/2008/commodities-vs-dollar-feb08.gif



You buy what you want and I'll buy what I want and we'll let "fate" sort it out.







Of course at this time , "fate" means Bernanke and QE2 and QE3 and QE4 and ...

[Sceptic-PK]

Childish to be aware of threats to our economy? You remain ignorant by intention yet you feel informed enough to post your opinions in this thread.

No, childish to focus intently upon it (doomsday) to the exclusion of everything else, and base an investment strategy upon extreme situations, that do not represent normal, regular market activities or outcomes. This thread is a perfect example, in order to justify investment in gold the most unlikely scenarios are being used as evidence/examples. Childish.

[YoPopa]

No, childish to focus intently upon it (doomsday) to the exclusion of everything else, and base an investment strategy upon extreme situations, that do not represent normal, regular market activities or outcomes. This thread is a perfect example, in order to justify investment in gold the most unlikely scenarios are being used as evidence/examples. Childish.

You say unlikely. History says otherwise. Take George Soros' history for example.

You seem unable to answer this simple question.

Is George Soros a harmless crank with no power to devalue a currency?

For those who know the answer to that question there is a follow up for extra credit. Has George Soros said that he favors the devaluation of the UD$?

[Sceptic-PK]

You say unlikely. History says otherwise.

Please note we are talking about doomsdays, not devaluations. We've just experienced the most severe economic calamity we're likely to see in a long time, yet where's the revolution? Where's the end of civilisation as we know it?


Is George Soros a harmless crank with no power to devalue a currency?

I really don't understand the question. Of course there are extremely rich people/businesses who have the ability to influence all kinds of economic outcomes, including currency. What does Soros' history of currency speculation have to do with whether gold is a sensible investment in longterm investment strategy? What do market/currency crashes have to do with doomsdays? Why would I care if my currency devalues as long as the businesses I invested in remain profitable (not even touching on the fact that certain businesses make substantial gains with a weaker currency)?

It is silly to invest as if calamity is around every corner. Calamity is not the norm.

[Frank Newgent]

These are not normal times.

[Fast Eddie B]

No, childish to focus intently upon it (doomsday) to the exclusion of everything else...

Straw Man.

No one has said to exclude everything else.

In fact, most here have said that at the most, some gold could/should be part of a diversified portfolio.

[Fast Eddie B]

These are not normal times.

I like this quote, from Jim Rogers book, "Investment Biker":

"We [specifically Americans] think we are exempt from universal laws but we are not. People who think they are exempt from universal laws have a moral disease called, hubris, frequently fail. I am not trying to be clever or outrageous; this is simply history, the way the world has been ever since we've been recording it. Seperatism is a fact of history at all times of economic distress. Most people will maneuver to maximize their economic lives, always have and always will, and in the process new societies and structures will be established. Sooner or later political structures around them must shift to deal with the change.
Americans find it hard to believe that such laws apple to their country that even their borders can change. They shouldn't. Borders and governments move to follow economic interests, which shift constantly, as Adam Smith, Marx and Keynes all noted; then come religious, ethnic, and linguistic reasons. There is no border in the world that has lasted centuries, much less forever. With our short-term myopia, we think it's different this time.......Well, in the laws of economics, in the laws of history, in the laws of politics, and in the laws of society its never different this time. The law of gravity isn't ever suspended for someone's convenience, and these laws are just as rigorous, though more subtle and complex. "Oh come on!" I hear all the time [ I heard it from Buffet last Thursday night], "This is American. It's different here." I wish it were, but unfortunately, its never different anywhere, never different anytime. Every piper has to be paid Fall of a cliff and no matter whether you're Spanish, Argentine, Chinese or American, gravity still operates, no different from any other time."

(bolded mine)

[drkitten]

In the event of that economic/societal meltdown then the risk of being robbed for a loaf of bread, or a box of Twinkies would be the greater threat. But these total meltdown scenarios are on the silly side considering the OP.

One doesn't get to have it both ways.

If gold is valuable enough to have (over stock certificates or commercial real estate, for example, which represent shares in a productive and revenue-generating enterprise), then it's valuable enough to be worth stealing. In fact, it's an ideal thing to steal and people will steal it in preference to bread (because gold doesn't go stale or rot, it's dense enough that I can carry enough away with me for a truckload of bread, it can be melted down so it can't be traced, and so forth).

If gold isn't valuable enough to be worth stealing (with all of its advantages over stealing bread), then it's not valuable enough to be worth owning in the first place.

Similarly, one doesn't get to have it both ways about black swan events. If I need to take seriously the idea of hyperinflation and the possibility that the currency in my wallet might go to zero and take my shares in Caterpillar with it --- itself a ludicrous proposition, as farmers will still need to buy tractors and tractor parts regardless of the value of a dollar -- as I said, if I need to take seriously the idea of hyperinflation, goldbugs need to take serious the idea of a physical loss.

I'd suggest, in fact, that a physical loss like a burglary is much more likely than hyperinflation or a Mad Max crash. I've been burglarized twice in my life, and robbed once. I've never experienced hyperinflation. Simple statistics suggest that burglary is not particularly a black swan -- light gray at worst.

Basically, if the best argument for gold is hyperinflation (especially with inflation rates running at <2%, historically low rates, low enough to cause problems), I think the serious day-to-day practical concerns about gold (the fact that it doesn't pay dividends, for example) should totally damn it.

[Fast Eddie B]

Re: theft of gold...

...there's no absolute protection against theft, but...

...one of these would certainly deter the average burglar:

http://www.ammoland.com/wp-content/uploads/2009/05/fire-proof-gun-safe.jpg

Also, a safe deposit box is a viable option, barring a near-instantaneous doomsday scenario. Even when banks get shut down, the contents of the boxes are protected and available.

[drkitten]

Re: theft of gold...

...there's no absolute protection against theft, but...

...one of these would certainly deter the average burglar:

http://www.ammoland.com/wp-content/uploads/2009/05/fire-proof-gun-safe.jpg

Would it? Which is more likely, a hyperinflationary scenario, or an ordinary safecracking?

How many people have had their safes rifled in the past twenty-five years, vs. how many have experienced hyperinflation?

As I said, you don't get it both ways. If you get to say "well, my home safe provides reasonable protection for my gold stock," I can say, with much greater justification that the Fed provides much greater protection against hyperinflation.

[Fast Eddie B]

How many people have had their safes rifled in the past twenty-five years, vs. how many have experienced hyperinflation?


In response to the first question: I don't know - do you?

In response to the second part: millions.

[drkitten]

In response to the first question: I don't know - do you?

In response to the second part: millions.

Sorry, allow me to rephrase.

How many people not living in a third-world kleptocracy have experienced hyperinflation in the past twenty-five years?

If you want to know what makes the United States special and nearly immune to hyperinflation, "a stable government with rule of law" is one good indicator.

[Gawdzilla]

Whenever I see this thread I'm reminded of a book that was being sold back in '07 or '08, Dow 50,000.

[Fast Eddie B]

How many people not living in a third-world kleptocracy have experienced hyperinflation in the past twenty-five years?

Probably not too many, or none.

But does this really inform us about the next twenty-five years?

[UWdude]

I'd suggest, in fact, that a physical loss like a burglary is much more likely than hyperinflation or a Mad Max crash. I've been burglarized twice in my life, and robbed once. I've never experienced hyperinflation. Simple statistics suggest that burglary is not particularly a black swan -- light gray at worst.


burglary isn't a black swan at all.

How many people have had their safes rifled in the past twenty-five years, vs. how many have experienced hyperinflation?

You should read The Black Swan.

[stilicho]

Whenever I see this thread I'm reminded of a book that was being sold back in '07 or '08, Dow 50,000.

I am pretty sure that book was from the late 1990s and covered by the National Post's Jonathon Chevreau who asked at the time: "Why not Dow at 100,000? Or a million?"

I'm always perplexed that these threads turn into apocalyptic scenarios led in the vanguard by well-armed people breaking into one anothers' households searching for more ammunition or something.

Here's a better idea. Those who believe gold will reach $2K or so should just continue buying it and the goldbugs will keep selling it to you at the price you're willing to pay to them. Millionaires are being created daily out of this situation and none of them are on the buying side.

I ought to qualify that last line. The company I work for is involved in the gold business and we purchase at about $0.20 on the dollar and sell at $0.97 on the dollar. You can understand our enthusiasm at the widening profit margin the higher the price of gold ascends. But, even if the price settles to half what it is now, we'll still make a bundle from gold. I can't say as much for the people buying gold at a high and entirely dependent on a price set by a notoriously volatile market.

[stilicho]

As I said, you don't get it both ways. If you get to say "well, my home safe provides reasonable protection for my gold stock," I can say, with much greater justification that the Fed provides much greater protection against hyperinflation.

Actually, that safe depicted is swinging wide open in the breeze with a free gun and ammo available to the illegal immigrant (I assume) looking for the means to arm himself.

When the economic apocalypse arrives, I'll go to that guy's house because he has a gun that I could use to steal more gold. Muwahahahahaha.

[Frank Newgent]

I am pretty sure that book was from the late 1990s and covered by the National Post's Jonathon Chevreau who asked at the time: "Why not Dow at 100,000? Or a million?"

I'm always perplexed that these threads turn into apocalyptic scenarios led in the vanguard by well-armed people breaking into one anothers' households searching for more ammunition or something.

Here's a better idea. Those who believe gold will reach $2K or so should just continue buying it and the goldbugs will keep selling it to you at the price you're willing to pay to them. Millionaires are being created daily out of this situation and none of them are on the buying side.

I ought to qualify that last line. The company I work for is involved in the gold business and we purchase at about $0.20 on the dollar and sell at $0.97 on the dollar. You can understand our enthusiasm at the widening profit margin the higher the price of gold ascends. But, even if the price settles to half what it is now, we'll still make a bundle from gold. I can't say as much for the people buying gold at a high and entirely dependent on a price set by a notoriously volatile market.


The company you work for makes a nearly 5X markup in gold buying/selling?

I call BS unless you all are really reaming folks who don't know what they are doing.

[Fast Eddie B]

I know a reliable dealer in South Florida that will sell gold bullion coins at a very reasonable markup over their gold content.

I have zero financial interest in them, but if you're interested, please PM me.

This is not them, but for representative prices of gold coins (from an apparently non-predatory source) check here:

http://www.gainesvillecoins.com/

and sell at $0.97 on the dollar.

Ummm...why sell for 3% less than its worth?

I smell something fishy.

[Gord_in_Toronto]

<snip>


Ummm...why sell for 3% less than its worth?

I smell something fishy.

They make it up on volume? ;)

[UWdude]

I know a reliable dealer in South Florida that will sell gold bullion coins at a very reasonable markup over their gold content.

I have zero financial interest in them, but if you're interested, please PM me.

This is not them, but for representative prices of gold coins (from an apparently non-predatory source) check here:

http://www.gainesvillecoins.com/



Ummm...why sell for 3% less than its worth?

I smell something fishy.

He would have to have direct connections to the mine to buy at 20%. (IIRC, it costs about $350 per oz to extract gold)

[stilicho]

The company you work for makes a nearly 5X markup in gold buying/selling?

I call BS unless you all are really reaming folks who don't know what they are doing.

It's somewhere between $0.18 and $0.25 on the dollar. This is pretty standard in the business.

The thing is, we can charge a hefty premium since old Grandma has a bunch of old jewelry sitting around the house and couldn't hope to sell it or even pawn it at a fraction of its value. Have you ever tried to pawn an old wedding ring?

We provide a fair price and we take the risk at authenticity and the conveyance costs to the smelters. (The smelters, it's interesting to know, are not big companies either but instead little boxes contained within offices scattered around almost any large city.)

It's the high price of gold, incidentally, that spurs Grandma to loot her old jewelry box for things that she doesn't use any longer. And really it shows how little intrinsic value gold or gold artifacts hold. Our customers are simply exchanging old inventory for fresh new dollar bills they can actually use for something.

It's win-win.

[stilicho]

I know a reliable dealer in South Florida that will sell gold bullion coins at a very reasonable markup over their gold content.

I have zero financial interest in them, but if you're interested, please PM me.

This is not them, but for representative prices of gold coins (from an apparently non-predatory source) check here:

http://www.gainesvillecoins.com/



Ummm...why sell for 3% less than its worth?

I smell something fishy.

The $0.03 discount is the smelter's fee. Since they're jewellers, too, they can try to do something with the gemstones. Unless the fittings are special (in which case we clean them and resell them upon appraisal), the gemstones float to the surface, are skimmed off, and kept without any compensation by the smelters.

[stilicho]

I know a reliable dealer in South Florida that will sell gold bullion coins at a very reasonable markup over their gold content.

Someone argued that our business is a rip-off. But your "reliable dealer" is outright molesting his customers. He's charging more than the value of the gold contained in the coins.

As an empirical experiment, why don't you buy one from him and try to resell it. Come back here to tell me how much money you lost on the pair of transactions.

[Fast Eddie B]

But your "reliable dealer" is outright molesting his customers. He's charging more than the value of the gold contained in the coins.

Ummm...this quote makes me wonder.

Of COURSE he charges more than the value of the gold in the coins.

1) There's always a premium above the gold content for coins*, and,

2) He needs to make some sort of profit to stay in business.

If I call my stock broker to buy a share of Apple, I will pay slightly more than what a share of Apple costs. If I buy a used car from a dealer, I will expect to pay more than what he gives as a trade-in.

As an empirical experiment, why don't you buy one from him and try to resell it. Come back here to tell me how much money you lost on the pair of transactions.

I will try to do that tomorrow and will report back. There is always, of course, a "spread". Another company in S Florida used to publish "buy" and "sell" prices in the paper. There's always a "spread", but that's true of almost anything where a dealer is involved. How else would they stay in business?

*one accepts that premium, since it avoids assaying fees that might be involved with bullion.

[Fast Eddie B]

A quick Google search came up with this:

http://www.golddealer.com/bullionpage.html

From that site:

http://farm5.static.flickr.com/4083/5177217944_fb801ac859_z.jpg

Spreads like that seem typical.

Molestation in your book?

[stilicho]

A quick Google search came up with this:

Spreads like that seem typical.

Molestation in your book?

I wouldn't recommend purchasing gold at a premium. What exactly are you paying for?

They're also in a slightly different business than we are and that's why their CM is narrower. We don't sell our gold at a premium because we buy it in whatever form it's presented, do the diligence, pay for the armoured cars, vault it, assume the risks of loss (each vicinity has its own rules for retention--higher in areas where theft is a problem), and hand it over to bullion dealers. Some of that gold likely winds up in coins but coins are not really much of an investment.

You can see that easily by looking at how much money you'd lose buying that site's coins and selling them back to them. You can, of course, assume that the buy price will go past the current sell price but how long are you willing to hold on to them to get your money back?

I would guess that that dealer works on high volume and high turnover to make a decent profit. In other words, nothing really stays in inventory. They could be taking orders for coins they don't even have yet. That's how I'd run it.

[stilicho]

Spreads like that seem typical.

Molestation in your book?

The prices look fairly good and the BBB report on that company checks out. They're typically in the top five dealers of repute and are listed on the US government mint's site. That's where they get the coins at a discount to sell to you. (Remember that's a 22K coin).

Here's the 1 oz bullion available to the public (including Americans) from the Canadian mint at about $1,526 USD:

http://www.mint.ca/store/coin/1oz-gold-bullion-wafer-prod850001

I've never denied that selling gold is a profitable business.

[Fast Eddie B]

Thanks for taking the time to investigate that company. I have no stake in it - it was merely the first I came across in a Google search that demonstrated typical "spreads" on gold coins.

You can see that easily by looking at how much money you'd lose buying that site's coins and selling them back to them. You can, of course, assume that the buy price will go past the current sell price but how long are you willing to hold on to them to get your money back?

I have some 1 oz. coins I paid as little as $250 for. One I paid just over $1,000 for. So all are in the black (for now), having well covered the spread. But gold could go back down to $200, or go to $20,000. Whether I'm ahead on gold at any given time interests me of course, but is not a vital concern.

I plan on holding them forever. I've never sold a gold coin since I began acquiring them in the late 70's. I don't believe one can successfully and consistently "time" markets. There is no price point where I'll sell for a profit. Of course, at some point in the future, I may need to sell some off for unforeseeable reason, and I'll do so at the price current then. Or my heirs will have to decide what to do with them.

BTW, another factor to be considered is capital gains tax - 15% now, possibly going up to 20% soon and who knows where in the future. Though the government has no easy way to track gains on the sale of coins, tax is still due on gains - but that's true with virtually any investment and is not a point against gold.

Again, anything I can think of in which dealers are involved will have a spread between the buy and the sell price - coins, stocks, cars, pork bellies, you name it. Dealers provide a service for which they get compensated.

Your business seems to be a little different, with larger spreads and risks. I do see the ads on TV and as I drive along offering to buy gold. I assume they'll offer below the market value and then sell above where they bought it. The nice thing about free markets is that they provide opportunities like that.

[A Christian Sceptic]

I wouldn't recommend purchasing gold at a premium. What exactly are you paying for?

They're also in a slightly different business than we are and that's why their CM is narrower. We don't sell our gold at a premium because we buy it in whatever form it's presented, do the diligence, pay for the armoured cars, vault it, assume the risks of loss (each vicinity has its own rules for retention--higher in areas where theft is a problem), and hand it over to bullion dealers. Some of that gold likely winds up in coins but coins are not really much of an investment.

You can see that easily by looking at how much money you'd lose buying that site's coins and selling them back to them. You can, of course, assume that the buy price will go past the current sell price but how long are you willing to hold on to them to get your money back?

I would guess that that dealer works on high volume and high turnover to make a decent profit. In other words, nothing really stays in inventory. They could be taking orders for coins they don't even have yet. That's how I'd run it.

If you're selling gold for less than the market price - PM me your company contact. I'm interested in buying some. Are you melting the gold into bullion? Or creating new jewelry?

[Fast Eddie B]

If you're selling gold for less than the market price - PM me your company contact.

I nearly posted the same thing.

But I'm reminded of the caveat: "When something sounds too good to be true..." :rolleyes:

[Howie Felterbush]

No one has ever explained to me why gold would be a good thing to have in case of a total societal meltdown (zombies, nuclear war, etc). People seem to think that gold will still be valuable if something happened to render paper money useless. Seems to me you'd be better off with a trunk full of whiskey, a good rifle and a brick of ammunition. In some post-Apocalyptic wasteland, who would be dumb enough to sell the raccoon they just shot for a handful of Kruggerands? You can cook a Kruggerand all day and it still won't taste good.

I don't really know about investing or anything like that, but I have heard the "gold as a hedge against societal breakdown" for years. Anyone have some rationale for this idea?

[drkitten]

No one has ever explained to me why gold would be a good thing to have in case of a total societal meltdown (zombies, nuclear war, etc). People seem to think that gold will still be valuable if something happened to render paper money useless. Seems to me you'd be better off with a trunk full of whiskey, a good rifle and a brick of ammunition. In some post-Apocalyptic wasteland, who would be dumb enough to sell the raccoon they just shot for a handful of Kruggerands? You can cook a Kruggerand all day and it still won't taste good.

I don't really know about investing or anything like that, but I have heard the "gold as a hedge against societal breakdown" for years. Anyone have some rationale for this idea?

The basic idea is that it's a hedge against partial societal breakdown. The Weimar Republic (and more recently Zimbabwe) are examples of this; if you had gold, you had access to a wider economy that you didn't have with local currency. (I could slip across the border into France, for example, and trade my gold watch for what I wanted. And because I could do that, I would be willing to sell bread in exchange for gold watches from other people where I might not be willing to accept semi-worthless currency.)

So what they're really hedging against is the idea that the United States will descend into hyperinflation, anarchy, and civil disorder that will magically stop at the Canadian border. Because, of course, the Canadian economy is not in any way dependent upon exports to the United States....

And we all know that since Obama has taken office, inflation has been running at close to 10%, with correspondingly negative unemployment rates. Oh, wait, did I get those reversed?

[timhau]

I don't really know about investing or anything like that, but I have heard the "gold as a hedge against societal breakdown" for years. Anyone have some rationale for this idea?

You simply don't understand. Gold is shiny and pretty and rare, and just like every swan is white, shiny and pretty and rare things will always be valuable and people will always be willing to give you food, tools, fuel, etc. for it.

[Howie Felterbush]

Thanks, drkitten. Makes sense, but it doesn't really explain the survivalist with the box of gold coins buried in the back forty. I know some of these oddballs, and many of them feel like we'll all be living in the woods in a few years. How is gold going to help them? I've asked them before, but never really got a good answer.

I haven't ruled out the possibility that they're just crazy as hell.

ETA: Thanks to timhau, as well. Because of you, I still haven't ruled out the possibility that they're just crazy as hell. :)

[Fast Eddie B]

Seems to me you'd be better off with a trunk full of whiskey, a good rifle and a brick of ammunition.

Not really an either/or. Lots of people have gold AND ammunition AND weapons. I'm not sure how the whiskey fits in, exactly.

I don't really know about investing or anything like that, but I have heard the "gold as a hedge against societal breakdown" for years. Anyone have some rationale for this idea?

It doesn't appear you've read this thread - the rationale has been given repeatedly. If you wish not to agree with it, or not give it the weight others do, that's another story.

[Howie Felterbush]

Not really an either/or. Lots of people have gold AND ammunition AND weapons. I'm not sure how the whiskey fits in, exactly.



It doesn't appear you've read this thread - the rationale has been given repeatedly. If you wish not to agree with it, or not give it the weight others do, that's another story.

Whiskey would be a more welcome commodity than gold if everything went in the crapper.

Imagine this: You're sitting around the campfire after a busy day of fighting Hunter/Killers and T-1000's. The pot of possum boulliabaise is just about done simmering when some bedraggled survivor staggers into camp, moaning that he hasn't eaten in days. There's only enough possum for you and your companions, and you're about to chase the interloper away at gunpoint , when suddenly he hauls a full bottle of Wild Turkey out of his pocket and offers to trade it for some soup. Now, a little snort would be pretty welcome right now, so you let him stay and you eat a little less possum, but you get a slug of whiskey.

If he had gold instead of Wild Turkey, would you make the trade? Why carry heavy gold around with you when you're better served by ammo or food?

This example is extreme, I know, but I'm not talking about the situation that drkitten gave, where gold might get you out of the country because it's still perceived as valuable. I'm talking about the total breakdown of everything. The rationale given so far in this thread seems to assert that gold will help in times of economic uncertainty or rampant inflation. How's it going to help in a full-on Mad Max type situation? I'm not trying to start a big poop storm, I'm just wondering where this idea came from?

[drkitten]

Thanks, drkitten. Makes sense, but it doesn't really explain the survivalist with the box of gold coins buried in the back forty. I know some of these oddballs, and many of them feel like we'll all be living in the woods in a few years. How is gold going to help them? I've asked them before, but never really got a good answer.

I haven't ruled out the possibility that they're just crazy as hell.

Don't confuse "crazy as hell" with "pig-ignorant" and/or "dumber than a sack of hammers."

Although a lot of goldbugs seem to be all three, any one of the three is a sufficient condition.

[lomiller]

Not really an either/or. Lots of people have gold AND ammunition AND weapons. I'm not sure how the whiskey fits in, exactly.

Unlike gold the whisky would go up in value under these conditions. I’m a big fan of freeze dried food. Under really desperate conditions it will increase in value even more then the whisky and in the worst case you can use it all yourself.
The basic idea is that it's a hedge against partial societal breakdown. The Weimar Republic (and more recently Zimbabwe) are examples of this; if you had gold, you had access to a wider economy that you didn't have with local currency. (I could slip across the border into France, for example, and trade my gold watch for what I wanted. And because I could do that, I would be willing to sell bread in exchange for gold watches from other people where I might not be willing to accept semi-worthless currency.)

So what they're really hedging against is the idea that the United States will descend into hyperinflation, anarchy, and civil disorder that will magically stop at the Canadian border. Because, of course, the Canadian economy is not in any way dependent upon exports to the United States....

Even then it would depend on there being some culture of accepting gold as an exchange medium, which doesn’t really exist anymore. You can’t “spend” gold these days, so if the collapse really happens you still need find someone who will buy your gold and give you bottle caps or whatever the new popular exchange medium is.

My guess is that whisky would be a much better exchange medium then gold because people can use it themselves if it turns out they can’t trade it. With gold, I’d be waiting to see if people are willing to give me anything for it before taking it in exchange for anything.

[drkitten]

Even then it would depend on there being some culture of accepting gold as an exchange medium, which doesn’t really exist anymore.

Not really. In any reasonably prosperous society, you will find people who want shiny metals because they're shiny -- in the same way that you could use gems to hedge against Weimar Republic hyperinflation even though no society in history has ever been on the "ruby standard." But shiny rocks are shiny, and shiny gold is shiny, and if you give your sweetie a gold-and-ruby necklace you might get some, so you will be willing to trade your unneeded bread for gold and rubies.

Of course, the key word there is unneeded. In today's prosperous economy, I have more bread than I can eat and no reasonable expectation of ever going hungry. So I'm willing to trade my bread for shiny rocks from the people across the border who are trying to figure out how long you need to boil rubies to make them tender. If I were one of those people, I'd probably be trading my rubies for someone else's bread, because rubies al dente don't taste good and therefore would be all but valueless to me.


You can’t “spend” gold these days, so if the collapse really happens you still need find someone who will buy your gold and give you bottle caps or whatever the new popular exchange medium is.

My guess is that whisky would be a much better exchange medium then gold because people can use it themselves if it turns out they can’t trade it. With gold, I’d be waiting to see if people are willing to give me anything for it before taking it in exchange for anything.

And in the absence of people with more whisky than they can drink, you'd be looking at the thirst-quenching properties of gold and wondering why you had bothered.....