Groundbreaking WSJ Story on Gold 119 comments
Tim Iacono
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This story about investing in gold (hat tip NG) that appeared on the front page of the Wall Street Journal's Personal Journal section is ground-breaking in many ways, the most important of which is that it paints today's financial advisers as being just about the dumbest guys in the room. Catching The Gold Bug Many mainstream financial advisers, however, are leery about owning gold in its physical form. “If we get total chaos, are you going to chip off a piece of your gold to buy milk at the store?” says Michael Goodman, president of Wealthstream Advisors in New York.
You can get the entire front page of the Personal Journal in .pdf form here($). Fortunately, the article itself is in the free area of the online Journal.
Why is this ground-breaking?
First, it's in the Personal Journal section, not the Money & Investing section and, while they've had similar stories like this over the years, I can't remember one that dominated a section of the newspaper like this one does.
Anyone who picks up today's paper can't help but see this story in which author Larry Light talks glowingly about the yellow metal. Although he comes up short in a few areas, probably due to not having covered this topic in such detail before, his heart seems to be in the right place, his views clearly unaffected by how money makes its way into his wallet.
To wit:
While Mr. Van Steyn's views are indicative of the changing mood of retail investors who, after the bursting of two or more gigantic asset bubbles over the last ten years still have money left to invest, the comment by Mr. Price is somewhat puzzling.
Worried about a harrowing, inflation-ridden future, Scott Van Steyn has found the answer in a batch of glittering one-ounce gold coins. In fact, they make up a large chunk of the physician’s assets.
“There’s 2,000 years of history to show that gold is the best thing to own during bad inflation,” says Dr. Van Steyn, a 45-year-old orthopedic surgeon in Columbus, Ohio. “People used to laugh at me for buying gold. They don’t anymore.”
More and more investors are acquiring physical gold, or bullion, in the form of small bars the size of iPhones or coins like American Eagles and South African Krugerrands. Individuals’ bullion purchases almost doubled last year, amid apocalyptic panic over the financial system, to 862 metric tons.
Lately, that panic-driven demand has given way to a more subdued, yet still potent, fear that stocks will suffer as the recession grinds on for a long time, so gold makes sense. At the same time, there’s a rising anxiety about inflation among people like Dr. Van Steyn, resulting from the Obama administration’s massive stimulus spending.
“When you’re in uncharted economic waters, people buy gold,” says Shawn Price, manager of the Touchstone Large Cap Growth fund, which holds several hundred ounces of the stuff.
The total of "several hundred ounces" of gold is not a lot of gold for a mutual fund, especially one that has over $400 million in assets, according to this entry at Yahoo! Finance. By my calculation, that $250,000 or so allocation to gold is not only less than one percent, it's less than a tenth of one percent.
Certainly a quick calculation would have been in order here, though you can't really argue with what Mr. Price says.
The report goes on to talk about flagging jewelry sales, decreased mining output, along with the surge in investment demand over the last year or so and then turns to the "experts" on personal wealth management - financial advisers.
That is, the people who have been wrong about gold for almost ten years now and have been steadily losing money for their clients while continuing to earn fees for their effort.
The fact that a "financial adviser" can't make any money from clients if they recommended the client go out and buy some gold coins and put them in safe deposit box pretty much precludes this as a common recommendation.
And while they often recommend putting 10% of your portfolio into commodities such as gold for the long term, a number of advisers think that no gold should be included, physical or held in other vehicles such as exchange-traded funds. The thinking is that gold performs best during times of unrest, and not so well at other times.
This is an important point here, one that the author should have broached in some way.
As for "chipping off a piece of your gold to buy milk at the store", there's an easy solution to that one - it's called "junk silver". In a worst case scenario, pre-1969 silver coins that people of all walks of life have long since removed from circulation because its metal content is roughly ten times its face value will do just fine to buy milk in any Armageddon-type outcome.
Then there are the performance claims from the financial advisers.
Over the past four decades, gold has been one-third more volatile than the Standard & Poor’s 500-stock index, and yet has delivered a lower return: an annualized 8.4%, versus 9.1% for the S&P index, says Steve Condon, director of investor advisory services at Truepoint Capital in Cincinnati.
I don't know where Mr. Condon gets his data, but if I go back 40 years, I find gold at about $40 an ounce versus $917 today - an annual gain of 11 percent. As for the S&P 500, its average 1969 value is right around 100, which, when compared to today's 885 level produces an annual gain of about 7.5 percent. As an inflation hedge, gold’s record isn’t perfect either. After reaching a record high of $850 per ounce in January 1980, gold’s price fell almost 44% in two months. It didn’t reach $850 again until January 2008, meaning it was flat while inflation rose 175%, Mr. Condon calculates. Indeed, today’s gold price is far below its 1980 apex when inflation is factored in: That $850 is worth $2,206 in today’s dollars. Gold’s tangible quality is reassuring to its owners. Gold owner Richard Dempsey, 63, a vice-president at Bank of New York Mellon, keeps some of his 60 gold coins in a safe at his Point Pleasant, N.J., home and some in a safe-deposit box. “I like to know it’s there,” he says. Gold-mining stocks often don’t correlate well with ETFs dedicated to physical gold, and sometimes lag the price of gold. SPDR Gold Shares, which holds gold, returned 4.9% last year and 5.4% in 2009. Meanwhile, Market Vectors Gold Miners, owner of mining stocks, lost 26% in 2008 and is up 11.6% this year. One problem is that miner stocks track the broader stock market, and gold prices don’t. Another is that the miners have capital costs and can waste money on fruitless digs. Garry Stoklas wrote:
At least the investment performance wasn't based on the 1980 peak when, for a few days in January of that year, gold spiked some 30 percent.
Ooops, that was a bit premature...
Here comes the 1980 comparison and the "poor inflation hedge" mantra that every financial adviser must have committed to memory by now.
I'll be the first one to tell you that gold was a terrible investment from 1980 to around 2000. But, that doesn't mean that it will always be a terrible investment.
Aside from gold stocks, gold bullion has been about the best investment of this decade, a fact that still seems to be beyond the grasp of most financial advisers.
A couple more man-on-the-street stories follow, all of which make much more sense than what the investment "professionals" have to say, and then we come to Mr. Richard Dempsey who just told the world he has gold coins at his home in New Jersey.
Anyone who owns precious metals in physical form should know that there's very little upside to telling people that you have tens of thousands of dollars worth of valuables in your house. It's not clear who's dumber here - the interview subject or the author.
The topic of gold versus gold mining stocks is then discussed, Mr. Light doing a fine job of distinguishing between the two.
Earlier in the story it is learned that Mr. Martenson is a scientist who favors gold over other forms of money, a view with which it is easy to agree.
The truest gold buffs, though, want nothing to do with ETFs or mining stocks. Mr. Martenson, who runs an investing Web site, dismisses them as creatures beholden to untrustworthy managements and financiers. “I’ve lost faith in how Wall Street does business,” says Mr. Martenson, who keeps more than half his portfolio in bullion.
It's funny how those who have not had formal training in the ways of modern finance (like myself) can so easily come to conclusions about gold that are so different than those who have had formal training.
Maybe funny isn't the right word there...
A bit more discussion about futures markets, insuring gold stored at home, coin premiums, tax issues, and a breakdown of global demand round out the discussion in what is really a pretty good, highly favorable article about gold as an investment.
Lastly, this comment from a financial adviser (comment #2 at the WSJ online) just serves to reinforce how dopey these people are sounding after losing money for their clients over the last ten years.
If only financial advisers could make money by recommending gold...
While I agree that gold has never been worth zero and it has been used for thousands of years as a medium of exchange, It isn't worth any more than what you can trade it for. If you have gold and want food, the gold is only worth something if the person with food is willing to trade what they have for your gold. As noted in the article, gold is worth a very small percentage above the 1980 high and worth considerably less when you take inflation into account. I'm a financial advisor. I get client who regularly ask my advice on owning gold. The majority of those interested in buying gold are concerned that we will have a total or near total collapse of our financial system. What I tell them is that if it makes them feel better prepared, go ahead and buy some. But if they truly believe in a near or total collapse, they would be better off having food, water, fuel, guns and ammunition stored. Gold is only worth what someone is willing to trade you for it and you certainly can't eat it.
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This article has 119 comments:
I bet the list of recommendations that precludes them from making money is very short or non-existent.
With that view in mind remember the laws of diversification are still in place. Those who spend their time trying to prognosticate future events are far too often wrong. This means you still need a diversified selection of equities and high grade bonds. If you don't like the dollar (I don't) then spread some or even most of your money into non USD denominated securities.
If we have nasty inflation foreign bonds should do very well. On the off chance that we inflationists are wrong those bonds will still make you money. Gold however does not generally perform well in times with low or no inflation.
Bottom line... Yes you need some gold. But don't go crazy and remember to hedge your bets. I am betting on inflation. But I am humble enough to admit I could be wrong. Stay diversified.
1) Physical gold bullion MUST be assayed before it can be sold.
This adds undue expense and inconvienance to selling gold.
2) The Government will confiscate gold in the event of economic collapse. This you can be sure of .
3)Huge security risk: where will you keep your Canadian maple leafs? On your person? In your home? Your car? Certainly not in a safe deposit box (those will be banned by government like in the 30's).
I have watched way too many apopolyptic horror scenarios ,home invaders,etc willing to do your family or yourself great bodily harm to get at your gold.
4) Now lets say you have the perfect storm. You have adequate security no one knows you have gold and silver hidden. Civilization comes crashing down around us -where will you spend your gold ? Barter with some local blackmarketers?
With just in time inventories store shelves will be empty in hours.
Will you and your family eat while your extended family and friends go hungry? "Sorry lil nephew I cannot feed you ,You should have told that deadbeat father of yours to hoard gold like me!"
You see the problems that will rise? If you are that certain that our society will be consumed by financial chaos then you would be far wiser to spend your money now. Buy a cabin in the mountains stock it with food and all your toys and then when the moment comes - you leave!
Hoarding gold in a metropolitan environment is at best delaying your own demise and at worse suicidal.
YOU DON'T.
You take the coin to a dealer, get cash, then buy your stuff with the new worthless cash available at that particular point in time.
I agree with your sentiments about money and banking. As Marc Faber said, we each have to be our own Fed, by owning gold.
On Jul 09 05:16 PM debtacid wrote:
> If money and banking were honest, gold would be easy to use. Just put your gold in a an insured gold depository that does not engage in fractional reserve lending. Then you could pay for goods and services in gold using a gold asset card. You could even loan your gold out and collect interest on it. Banks would be become obsolete throwbacks to a time of fraud and corruption. Imagine a world with honest money, no federal reserve, no irs and small government.
JIT inventories will prohibit stores from having goods to purchase.
Do you think people are stupid? If you go walking around to to "dealers" to "cash in " your gold you will be followed and robbed. You will also get the worst price available- guarantee!
You would be far better off fleeing to the mountains or the country. Do you have any idea at all what civilization will be like with mobs of angry hungry people roaming around and NO POLICE?
Only arrogance and ignorance would would lead a person to believe that he/she will be allowed to live in peace with a stash of gold to serve them ...lol
p.s.
Things can and do go bad instantly literally overnight.Just ask anyone living in Iceland ,Zimbabwe or Argentina. As far as roving bands of thieves just look at Brazil !
On Jul 09 04:30 PM yellowhoard wrote:
> I hear this idiotic argument all the time, "how are you going to
> buy a loaf of bread with a gold coin?"
>
> YOU DON'T.
>
> You take the coin to a dealer, get cash, then buy your stuff with
> the new worthless cash available at that particular point in time.
On Jul 09 05:35 PM jrainspe wrote:
> This whole discussion is a fool's argument. There is intrinsically
> no difference between a piece of plastic you call a "gold asset card"
> and the metal itself. Except for jewelery, gold does not add anything
> to the quality of one's life. You can't eat it; you can't drink it;
> it doesn't cure disease; in fact, of itself it does nothing, just
> like the one dollar bill in your wallet or a gold asset card. The
> fact that humans place one inanimate object as "more valuable" than
> another inanimate object is only one of the reasons I have very little
> respect for humans as a whole. Remember, 50% of the population have
> an IQ of 100 or less.
Gold is money in any age and any country. If fiat currencies collapse, it's barter or precious metals.
NOW: Central Bankers holding hands on ultra-low interest rates, and printing money with abandon. This is what inflation is made of.
Question: Who cares if gold doesn't pay interest? The real interest rate is negative. Buy bonds and you are guaranteed to lose money. However since 2000 gold has risen from 275 to 900. I will take no interest any day. Similarly, since 2000 gold has outperformed the major indexes hands down. It is no contest.
Well....if we get "total chaos", why would anyone think there would be any milk in the stores ? Or any stores ?
But, OK, let's play along...Yes, in "total chaos", if you can find an open grocery store that has milk, you probably would chip off a piece of gold for it. And the store would probably take it over paper money. (Of course, in "total chaos", you would probably be mugged in the parking lot, but we are playing along with a clown, so...)
Please, let's have a moratorium on dopey quotes about buying some groceries with gold (especially during total chaos). It is not about buying a Big Mac with it, either. It is an insurance policy for an incredibly shaky, wobbly and unpredictable financial world, protecting against everything up to-- BUT NOT INCLUDING-- total chaos.
For total chaos, you need a gun. And I'm having mine gold-plated.
My only concern with owning physical gold is how I will sell it when the time comes that I need to or have to. I have never tried to sell physical gold, but something tells me that when the time comes for me to sell it that I will end up getting some small percentage less than the going spot price. 10% less maybe?
I am fortunate enough to have bought my physical gold at around $450/oz a few years ago, but at the current spot price physical gold carries a pretty high premium to purchase and a high penalty to sell. I am going to roughly speculate that the spot price would have to go up 15% just to break even on a buy/sell transaction of whatever your purchase price of physical gold was just to break even.
If the US dollar crashes, then thats a whole different matter, but what if the US dollar does not crash? There were alot of people in the 70's predicting the same thing about the dollar that they are saying now.
I am just playing the devils advocate so you gold bugs please dont get your panties in a wad.
And if anyone is that confident about the price of gold going higher, then I would be happy to sell my gold eagles right now for 15% over spot. :-)
It is therefore insurance against any currency default. The exact mechanics of spending it are not important until the day someone will not accept anything other than trade-goods or Gold in exchange for the production they offer.
That will be the same day that dollars have become an unwelcome nuisance because there are just too many of them floating about.
All through the Great Depression people who could not earn money turned their attention to panning or digging money out of the ground.
From California up through Oregon, Washington state, British Columbia and on into the Yukon and Alaska thousands made a (mostly meagre) living finding money in the ground. But it was real money and everyone knew it then. They know it now too. And Barter for finds was indeed the coinage of the day.
On Jul 09 09:20 PM bkdc wrote:
> Go to Youtube and search the worlds 'Zimbabwe' and 'gold' and see
> how the poor folks in Zimbabwe are panning for gold so they can buy
> a loaf of bread which costs 0.1 grams as no other currency is being
> accepted.
>
> Gold is money in any age and any country. If fiat currencies collapse,
> it's barter or precious metals.
On Jul 10 02:19 AM Gold Barron wrote:
> I own physical gold and I think it is a pretty good hedge against
> inflation or in uncertain economic times.
>
> My only concern with owning physical gold is how I will sell it when
> the time comes that I need to or have to. I have never tried to sell
> physical gold, but something tells me that when the time comes for
> me to sell it that I will end up getting some small percentage less
> than the going spot price. 10% less maybe?
>
> I am fortunate enough to have bought my physical gold at around $450/oz
> a few years ago, but at the current spot price physical gold carries
> a pretty high premium to purchase and a high penalty to sell. I am
> going to roughly speculate that the spot price would have to go up
> 15% just to break even on a buy/sell transaction of whatever your
> purchase price of physical gold was just to break even.
>
> If the US dollar crashes, then thats a whole different matter, but
> what if the US dollar does not crash? There were alot of people in
> the 70's predicting the same thing about the dollar that they are
> saying now.
>
> I am just playing the devils advocate so you gold bugs please dont
> get your panties in a wad.
>
> And if anyone is that confident about the price of gold going higher,
> then I would be happy to sell my gold eagles right now for 15% over
> spot. :-)
>
personally...wouldn't register it in any bank in the states. jussssst in case
On Jul 10 02:54 AM Freya wrote:
> I am fortunate to have bought My Gold at $40, $100, $400, $800, $400
> and below $300 for a Decade, my most Recent Scrap Purchase was around
> these levels. I do not Have a clue as to how many pounds I have by
> weight or Purity.
>
> Over 40 years worth of Scrap Gold Jewelry, I am really afraid to
> have it all appraised. I might have to store it in a Safe Deposit
> Box instead of Drawers and Jewelry Boxes.
>
> "Sell your Scrap"! Not this Kid.
As for theft risk, wouldn't anything of value be a theft risk? Wouldn't thieves come for your food, guns, etc. just as much as for your gold? Wouldn't gold be much easier to hide?
On Jul 09 04:26 PM the_feds_corrupt wrote:
> I think physical gold ownership is absurd.Unless you are planning
> on fleeing the country- forget it !
> 1) Physical gold bullion MUST be assayed before it can be sold.<br/>
> This adds undue expense and inconvienance to selling gold.
> 2) The Government will confiscate gold in the event of economic
> collapse. This you can be sure of .
> 3)Huge security risk: where will you keep your Canadian maple leafs?
> On your person? In your home? Your car? Certainly not in a safe deposit
> box (those will be banned by government like in the 30's).
> I have watched way too many apopolyptic horror scenarios ,home invaders,etc
> willing to do your family or yourself great bodily harm to get at
> your gold.
> 4) Now lets say you have the perfect storm. You have adequate security
> no one knows you have gold and silver hidden. Civilization comes
> crashing down around us -where will you spend your gold ? Barter
> with some local blackmarketers?
> With just in time inventories store shelves will be empty in hours.
>
> Will you and your family eat while your extended family and friends
> go hungry? "Sorry lil nephew I cannot feed you ,You should have told
> that deadbeat father of yours to hoard gold like me!"
> You see the problems that will rise? If you are that certain that
> our society will be consumed by financial chaos then you would be
> far wiser to spend your money now. Buy a cabin in the mountains stock
> it with food and all your toys and then when the moment comes - you
> leave!
> Hoarding gold in a metropolitan environment is at best delaying your
> own demise and at worse suicidal.
Gold purched Two or Eight years ago was an excellantant investment.
Same goes for gold purchased in 1900 versus a buck that is still a buck, that you cant buy a pack of chewing gum with.
Financial advisor or Financial idiots?
It is your pick!
On Jul 09 04:30 PM yellowhoard wrote:
> I hear this idiotic argument all the time, "how are you going to
> buy a loaf of bread with a gold coin?"
>
> YOU DON'T.
>
> You take the coin to a dealer, get cash, then buy your stuff with
> the new worthless cash available at that particular point in time.
On Jul 10 02:19 AM Gold Barron wrote:
> I own physical gold and I think it is a pretty good hedge against
> inflation or in uncertain economic times.
>
> My only concern with owning physical gold is how I will sell it when
> the time comes that I need to or have to. I have never tried to sell
> physical gold, but something tells me that when the time comes for
> me to sell it that I will end up getting some small percentage less
> than the going spot price. 10% less maybe?
>
> I am fortunate enough to have bought my physical gold at around $450/oz
> a few years ago, but at the current spot price physical gold carries
> a pretty high premium to purchase and a high penalty to sell. I am
> going to roughly speculate that the spot price would have to go up
> 15% just to break even on a buy/sell transaction of whatever your
> purchase price of physical gold was just to break even.
>
> If the US dollar crashes, then thats a whole different matter, but
> what if the US dollar does not crash? There were alot of people in
> the 70's predicting the same thing about the dollar that they are
> saying now.
>
> I am just playing the devils advocate so you gold bugs please dont
> get your panties in a wad.
>
> And if anyone is that confident about the price of gold going higher,
> then I would be happy to sell my gold eagles right now for 15% over
> spot. :-)
>
And the government CAN order you to turn in your gold, as in 1933.
If you're a moron, you'll follow their request. But how can they confiscate what they don't know you have or can't find??
On Jul 09 04:26 PM the_feds_corrupt wrote:
> I think physical gold ownership is absurd.Unless you are planning
> on fleeing the country- forget it !
> 1) Physical gold bullion MUST be assayed before it can be sold.<br/>
> This adds undue expense and inconvienance to selling gold.
> 2) The Government will confiscate gold in the event of economic
> collapse. This you can be sure of .
> 3)Huge security risk: where will you keep your Canadian maple leafs?
> On your person? In your home? Your car? Certainly not in a safe deposit
> box (those will be banned by government like in the 30's).
> I have watched way too many apopolyptic horror scenarios ,home invaders,etc
> willing to do your family or yourself great bodily harm to get at
> your gold.
> 4) Now lets say you have the perfect storm. You have adequate security
> no one knows you have gold and silver hidden. Civilization comes
> crashing down around us -where will you spend your gold ? Barter
> with some local blackmarketers?
> With just in time inventories store shelves will be empty in hours.
>
> Will you and your family eat while your extended family and friends
> go hungry? "Sorry lil nephew I cannot feed you ,You should have told
> that deadbeat father of yours to hoard gold like me!"
> You see the problems that will rise? If you are that certain that
> our society will be consumed by financial chaos then you would be
> far wiser to spend your money now. Buy a cabin in the mountains stock
> it with food and all your toys and then when the moment comes - you
> leave!
> Hoarding gold in a metropolitan environment is at best delaying your
> own demise and at worse suicidal.
On Jul 10 08:41 AM Mike10613 wrote:
> I don't eat bread. It's a good idea to use a silver coin to buy meat
> and veg though. Then buy back the silver coins with gold?
You could by a very nice man's suit in 1925 was $20 (gold coin). Today, the same $20 gold coin will buy a world class man's suit. The gold coin held its value because of gold content and the fact that the gold IS the STANDARDnot because a banker decided what it would be worth.
On Jul 09 11:53 PM tunacan wrote:
> THEN: Paul Volcker jacked interest rates to 20%, then gold came down
> from its peak in 79/80.
>
> NOW: Central Bankers holding hands on ultra-low interest rates, and
> printing money with abandon. This is what inflation is made of.
>
>
> Question: Who cares if gold doesn't pay interest? The real interest
> rate is negative. Buy bonds and you are guaranteed to lose money.
> However since 2000 gold has risen from 275 to 900. I will take no
> interest any day. Similarly, since 2000 gold has outperformed the
> major indexes hands down. It is no contest.
However; in dangerous times the risk of attack/injury is high. To save the life of you or yours, gold coins could come in very handy for motivating/paying a doctor....
Your readers may want to be aware of some problems in the article.
You Wrote: " I don't know where Mr. Condon gets his data, but if I go back 40 years, I find gold at about $40 an ounce versus $917 today - an annual gain of 11 percent. As for the S&P 500, it's average 1969 value is right around 100, which, when compared to today's 885 level produces an annual gain of about 7.5 percent"
Tim - Your article has used some fuzzy math & data mining:
1. You said Gold went up 11% per year on average. Gold went from 40 to 917 yields a CAGR of 8.1453%. The geometric average = compound annual growth rate is a more accurate depiction of what investors actually receive after 40 years.
2. You said SP500 went up 7.5% on average. SP500 went from 100 to 885 yields a CAGR of 5.6023% for SP500.
3. Your data on S&P 500 doesn't include reinvested dividends. Gold doesn't pay a dividend, but stocks do (albeit they have been minimal). Your point is misleading because you aren't comparing total returns. The real number is 5.6023% + appx average 3% dividend. so the nominal CAGR on stocks is appx 8.6%. The only fair comparison is total return.
4. As well, you are using the endpoint as one of the all-time lows of the SP500. Unfair! This is data mining.
5. Despite the unfair use of data mining in point #4 above, it looks like stocks have still beaten Gold over the past 40 years.
On Jul 09 04:26 PM the_feds_corrupt wrote:
> I think physical gold ownership is absurd.Unless you are planning
> on fleeing the country- forget it !
Gold is for times of societal breakdown or hyperinflation - - if society breaks down, you might not be able to cash in your certificates for the physical metal. If you are going to own Gold - I would think the best thing would be physical.
> 1) Physical gold bullion MUST be assayed before it can be sold.<br/>
> This adds undue expense and inconvienance to selling gold.
coins do not have to be assayed - they are easily sold
> 2) The Government will confiscate gold in the event of economic
> collapse. This you can be sure of .
Look at Cuba - First they will take your bank account (by devaluation of inflation), your home, your stock certificates, your equity ownership. Because Gold is portable it is the last thing the government will confiscate. Some of the Jews in WWII got out with Gold sewn in the lining of their jackets.
> 3)Huge security risk: where will you keep your Canadian maple leafs?
agreed.
> 4) Now lets say you have the perfect storm. You have adequate security
> no one knows you have gold and silver hidden. Civilization comes
> crashing down around us -where will you spend your gold ?
Trust me. In that scenario, Plenty of people will accept krugerrands
A Hyperinflation really gives a whole new meaning to the phrase "velocity of money". Anyone who ends up with paper cash in a transaction wants to dump it as quickly as possible. And that paper really moves! When you see it in action firsthand it suddenly all makes perfect sense how quickly an economy can get back to full throttle and full employment.
On Jul 09 04:30 PM yellowhoard wrote:
> I hear this idiotic argument all the time, "how are you going to
> buy a loaf of bread with a gold coin?"
>
> YOU DON'T.
>
> You take the coin to a dealer, get cash, then buy your stuff with
> the new worthless cash available at that particular point in time.
As a side note, I’m sure we’re all aware of the Chinese “replica” US coinage finding its way in our markets. The problem is “copy” or “replica” doesn’t always get struck on the coin before it gets shipped. I’m sure they’re just error coins and should actually command a premium as such.
On Jul 10 12:08 PM Freya wrote:
> The Roman Empire initially paid their troops with Gold coins, but
> after a while, when the Empire became so large, they started to coin
> underweighted Gold coins and treated them as if they were Pure.<br/>
>
> North Korea has been spewing out Counterfeit US $100 bills, How hard
> would it be for them to duplicate US Dbl Eagles, or any other Gold
> Coin, with less than the required amount of Gold?
>
> Why should the advertized Purity of Gold Coins be taken for granted
> but everyhing else appraised?
In any case, I am exhausted by the senseless debate about the usefulness of gold in the event of a total U.S. currency failure. There are other mediums of exchange (not to mention barter), that would likely take precedence over silver coins and gold chips. Zimbabwe is a terrible example. Try Iceland, where foreign currencies basically supplanted the native currency when it collapsed. This is a more realistic scenario. I'd be willing to bet that the credit card networks and banks would figure out a way to transact U.S. transaction in Euros or yuan before they would ever start transacting in gold.
As others have noted, some dealers sell for spot price and buy at 30% below. Even if gold goes up 5% a year and stocks stay level, you're looking at half a decade before you break even. If gold goes up 5% a year and bonds go up 4%, you're looking at a very very long time until you turn a profit.
Wholesale spreads on bullion coins are $4-6 in hundred coin lots.
Retail spreads should be $20-25. If you are offered 30% under, you are getting hosed. And that's a polite word.
On Jul 10 03:06 PM Sheik Rattle Enroll wrote:
> In order for gold or silver to become more useful as currency or
> wealth stores the transactional costs of ownership have to go down.
>
>
> As others have noted, some dealers sell for spot price and buy at
> 30% below. Even if gold goes up 5% a year and stocks stay level,
> you're looking at half a decade before you break even. If gold goes
> up 5% a year and bonds go up 4%, you're looking at a very very long
> time until you turn a profit.
Those of you wanting to buy or sell gold and/or silver need to do better research as to where to do this. The reason that your local coin dealer can get a huge commission is because he knows where to buy / sell, and you don't. CNI has very good buy and sell prices. USAGold sells 1 % over spot.
In a barter system silver is a good bet, but so are cigerettes in the freezer, or anything you can produce ie. eggs.
If you need to relocate to a better existence nothing travels better as a major store of wealth than gold and it will convert to whatever currency you wish when you get there.
The problem lies in that the country is moving towards some form of fascism and how soon will it be that you can not travel without authorization. Sensor systems are so complex you will not be able to do anything without oversite. Add an RFID chip that would be your only way to access your finance, shopping, travel authorization, and medical services ability and you are totally on the grid. That same chip is a GPS beacon and can be turned on or off to deny you everything, or come find you. It will all be in Ma and Pa Middle America's best interest of course. The propaganda machine will be in overdrive to convince us all of that .
The best answer may be that both gold and stocks have gained in real value over the past 100 years, and whether you're a gold bug or not, there will be multi-year periods when gold performs better, and vice-versa.
To the folks who think gold hoarders are idiots, I only offer this hackneyed advice: a billion screaming fans (or idiots) can't be wrong. Supply and demand folks. It doesn't matter what the fundamental arguments are one way or the other, if enough people want gold, the "price" of gold will rise. The allure has held up for 2,000 years and counting, so I wouldn't fight the tape on that one. And this is coming from a equities man... I know many people that, despite years of my arguing against it, refuse to give up their secret stash of Thunderdome currency. You can't fight, reason with, or beat out deeply embedded beliefs.
But a closer study of the numbers getting thrown around in some recent articles on SA suggests we need to monitor and read very carefully what the authors are saying when they state their cases. There is often a hidden agenda at play too. Especially when it comes to specific stocks and investments.
Keep up the good work, your finer analysis is always appreciated.
Cam
----------------------...
On Jul 10 10:58 AM Living4Dividends wrote:
> Tim - I like your point - advisors don't recommend holding physical
> gold, because they can't "tax" it. Excellent point !! I also like
> your point that gold has been 1/3rd more volatile.
>
> Your readers may want to be aware of some problems in the article.
>
>
> You Wrote: " I don't know where Mr. Condon gets his data, but if
> I go back 40 years, I find gold at about $40 an ounce versus $917
> today - an annual gain of 11 percent. As for the S&P 500, it's
> average 1969 value is right around 100, which, when compared to today's
> 885 level produces an annual gain of about 7.5 percent"
>
> Tim - Your article has used some fuzzy math & data mining:<br/>
>
> 1. You said Gold went up 11% per year on average. Gold went from
> 40 to 917 yields a CAGR of 8.1453%. The geometric average = compound
> annual growth rate is a more accurate depiction of what investors
> actually receive after 40 years.
> 2. You said SP500 went up 7.5% on average. SP500 went from 100 to
> 885 yields a CAGR of 5.6023% for SP500.
> 3. Your data on S&P 500 doesn't include reinvested dividends.
> Gold doesn't pay a dividend, but stocks do (albeit they have been
> minimal). Your point is misleading because you aren't comparing total
> returns. The real number is 5.6023% + appx average 3% dividend. so
> the nominal CAGR on stocks is appx 8.6%. The only fair comparison
> is total return.
> 4. As well, you are using the endpoint as one of the all-time lows
> of the SP500. Unfair! This is data mining.
> 5. Despite the unfair use of data mining in point #4 above, it looks
> like stocks have still beaten Gold over the past 40 years.
As a side note I did not think N. korea had a marginal amount of gold to counterfit our coins with. They could only gold plate them. They would not pass the bite test.
On Jul 10 12:08 PM Freya wrote:
> The Roman Empire initially paid their troops with Gold coins, but
> after a while, when the Empire became so large, they started to coin
> underweighted Gold coins and treated them as if they were Pure.<br/>
>
> North Korea has been spewing out Counterfeit US $100 bills, How hard
> would it be for them to duplicate US Dbl Eagles, or any other Gold
> Coin, with less than the required amount of Gold?
>
> Why should the advertized Purity of Gold Coins be taken for granted
> but everyhing else appraised?
On Jul 10 02:38 PM long roh wrote:
>
> In any case, I am exhausted by the senseless debate about the usefulness
> of gold in the event of a total U.S. currency failure. There are
> other mediums of exchange (not to mention barter), that would likely
> take precedence over silver coins and gold chips. Zimbabwe is a
> terrible example. Try Iceland, where foreign currencies basically
> supplanted the native currency when it collapsed. This is a more
> realistic scenario. I'd be willing to bet that the credit card networks
> and banks would figure out a way to transact U.S. transaction in
> Euros or yuan before they would ever start transacting in gold.<br/>
What surprised me the most about Tim's data was that Gold has done so well, a CAGR of 8.1453% over 40 years ain't too shabby for a metal that sits there, collecting dust. I get Tim's point.
In other cases there is intentional flim-flamming. Authors, in their zeal to prove a point, overstate their case. This doesn't just happen on Seeking Alpha, but with some highly respected mainstream financial thinkers.
The danger with this is that it mistakenly leads investors to erroneous conclusions like "stocks for the long haul" or "bonds for the long haul" or "gold for the long haul"
On Jul 10 04:40 PM cameroni wrote:
> I appreciate your checking of facts and correcting bad, outdated
> and irrelevant data Living4dividends. I often do it too but in a
> casual way and find I am often too busy to challenge "rough" numbers
> on a case by case point. So I just let it go. Like the proverbial
> duck lets rain roll off it's back. Especially if the idea is approximately
> correct, I find it is easier to respond to the broad points and not
> get to picky.
>
> But a closer study of the numbers getting thrown around in some recent
> articles on SA suggests we need to monitor and read very carefully
> what the authors are saying when they state their cases. There is
> often a hidden agenda at play too. Especially when it comes to specific
> stocks and investments.
>
> Keep up the good work, your finer analysis is always appreciated.
>
>
> Cam
> ----------------------...
> On Jul 10 10:58 AM Living4Dividends wrote:
You brought it up to this audience.
Looking to jazz up your weekend?
Hope you can personally answer all these bugs.
BTW Your article is longer than the one in the WSJ, but thanks for carrying the link. I'm just waiting for Mish & all these other dudes to say for sure whether there will be deflation or hyperinflation.
This feels a lot like Howard Ruff back in 1979 before Volker kicked butt. That was the last time I heard the terms junk silver and buy food used together.
I know this is going to sound idiotic, but aside from not being able to fondle it, why not keep bullion in a SAFE DEPOSIT box if you're worried about it getting stolen or the cost of insurance.
There is a real preference to keeping gold bullion and coin close to home and away from the prying eyes and sticky fingers of government. And also, you will need it to be readily accessible if all hell breaks loose. That is, in the event that banks fail and you cannot access your box for weeks or even months at a time during a crisis.
Banks are failing now. We are our own best safe-keepers.
On Jul 10 05:56 PM TinyTim wrote:
> I know this is going to sound idiotic, but aside from not being able
> to fondle it, why not keep bullion in a SAFE DEPOSIT box if you're
> worried about it getting stolen or the cost of insurance.
On Jul 10 02:38 PM long roh wrote:
> What ever happened to the wisdom about stock-tips from the shoe-shine
> boy? Could gold be getting close to that? (Thank goodness the article
> is quoting doctors and bankers and not some average goober.) Given
> that gold bugs are always complaining about banks shorting gold (I
> don't know if that's true or not), one can assume that we would be
> in the throes of a huge gold bubble if the banks were not betting
> against it. (I have been long GLD based on the theory about picking
> the winner of the beauty contest based on who you think the judges
> will pick.)
>
> In any case, I am exhausted by the senseless debate about the usefulness
> of gold in the event of a total U.S. currency failure. There are
> other mediums of exchange (not to mention barter), that would likely
> take precedence over silver coins and gold chips. Zimbabwe is a
> terrible example. Try Iceland, where foreign currencies basically
> supplanted the native currency when it collapsed. This is a more
> realistic scenario. I'd be willing to bet that the credit card networks
> and banks would figure out a way to transact U.S. transaction in
> Euros or yuan before they would ever start transacting in gold.<br/>
On Jul 09 05:35 PM jrainspe wrote:
> This whole discussion is a fool's argument. There is intrinsically
> no difference between a piece of plastic you call a "gold asset card"
> and the metal itself. Except for jewelery, gold does not add anything
> to the quality of one's life. You can't eat it; you can't drink it;
> it doesn't cure disease; in fact, of itself it does nothing, just
> like the one dollar bill in your wallet or a gold asset card. The
> fact that humans place one inanimate object as "more valuable" than
> another inanimate object is only one of the reasons I have very little
> respect for humans as a whole. Remember, 50% of the population have
> an IQ of 100 or less.
This is a good point, of course. But I also wonder when I hear this argument, what else am I going to buy bread with? A printout of my online stock portfolio? Clearly those who advocate stocks don't think you use them to buy bread. They think you SELL them and then buy bread. I have never understood why they can't see that it is the same thing with gold except that gold holds value in a crisis. And goldbugs are the morons?
On Jul 09 04:30 PM yellowhoard wrote:
> I hear this idiotic argument all the time, "how are you going to
> buy a loaf of bread with a gold coin?"
>
> YOU DON'T.
>
> You take the coin to a dealer, get cash, then buy your stuff with
> the new worthless cash available at that particular point in time.
Gold overshoots each direction. Some excellent cycles work gives the yellow brick a decent chance to visit the sub-750 area for maybe a nano-second. The premiums charged for buying gold coins is almost ridiculous and that says plenty about where this market is going. Small investors....band together and take delivery on the 100-ounce bar. You might enjoy getting that premium too.
I'm talking about the essence of freedom here, and you either understand, or you do not.
On Jul 10 07:57 AM Mono wrote:
> as i don't think we will revisit 1933 (exec order 6102) obama has
> already touted roosevelts moves as nation savers. at the same time
> if we did find ourselves in that position again- i wouldn't be surprised.
> nothing surprises me anymore. people can talk of money velocity being
> long and blah blah blah but they focus on demand-pull inflation instead
> of cost-push, with the latter being brought about by a failure of
> currency to hold its value due to a loss of confidence stemming from
> trade/fiscal imbalances. that is what we're about to go through.
> every instance of cost-push inflation in history has arisen amidst
> low capacity utilization, high unemployment, and generally terrible
> business conditions. the end result is usually some form of hyperinflation.
>
>
> personally...wouldn't register it in any bank in the states. jussssst
> in case
Here's just one suggestion for a creative hiding place:
"I'm a fan of hiding coins in plain sight. Thieves look for obvious signs of value, such as safes, jewelry boxes, etc. My solution is to place some gold coins in a ziplock bag, then put that bag into a second ziplock. Make sure ALL the air is out of both bags. Then, locate a half-used can of paint which shows signs of use (drips down the outside, etc). Drop the ziplock bags into the paint, and they disappear beneath the remaining paint to the bottom of the can. Reclose the can and store wherever you keep such items...in a utility closet, garage, basement, etc. The metal can will foil metal detectors and who would ever think to steal a half-used gallon of paint?"
Silver coins (dimes, quarters, half-dollars) 1964 and before are 90% silver.
The 40% silver clad 1/2 dollars were minted from 1965-1970.
Or you had some REAL Money - some pounds sterling lets say - you'd peel off a pound note, go to the money changer, buy 1 billions marks - spend it as fast as you could and repeat the process the next day.
On Jul 10 06:25 PM surf wrote:
> I don't know the answer, but I am going to try to find out. What
> happened in Germany in their hyperinflation in the 20s? If you were
> a German and had gold, instead of Marks (or whatever their currency
> was then), how did you make out? My bet is that if you occasionally
> traded some or your gold for currency at the then price, you were
> able to live substantially better than your peers without gold.
Smart money is getting out of commodities, at least until such time that the economy shows real recovery signs and inflation becomes a reality. That might be a much as two years away.
In the meantime, owning a bit of bullion makes you feel good, but putting most of your wealth in it... pretty nervous.
On Jul 11 08:20 AM TERN wrote:
> When such articles appear in the mainstream financial press, they
> are intended as a warning signal that the long gold trade is getting
> crowded and that it may be time to get out for a while.
>
> Smart money is getting out of commodities, at least until such time
> that the economy shows real recovery signs and inflation becomes
> a reality. That might be a much as two years away.
>
> In the meantime, owning a bit of bullion makes you feel good, but
> putting most of your wealth in it... pretty nervous.
As for the type of investments out there. One should always own a little physical ,which is important to have around as an immediate form of currency in civil strife, unrest, etc. Otherwise the single cheapest and safest way of owning gold or silver is the three pure play bullion products from Central Group of Canada. They are Central Fund of Canada (1/2 silver and 1/2 gold ). Central Gold Trust (100 % gold) and now Central's Silver Bullion Trust ( 100% silver) which IPO's in next two weeks (comes with a free 9 month warrant). These products have proven to have the lowest admin fees and MER's in the world. Central Fund's
MER is .37 of 1%. They have no sub-custodians, can't lease the bullion, don't use derivatives and all bullion stored safely in segregated Canadian bank vaults with annual audits.
As comparison, vehicles like GLD and SLV have MER's of 40 and 50 basis point respectively plus extra expenses, have many sub-custodians all of which lack oversight controls. Other bullion products all have fancy derivatives, currency hedging , call writing , high MERs, bullion that is stored in different juristictions, etc. They are not passive pure plays but essentially gimmicks.
In the good times buy a few gold and silver coins and store them in a safe deposit box.
On the other hand back when the modern world monetary system was developed at Bretton Woods the great financial leaders found gold to be imperfect as a monetary system because it paid no interest. However they backed currency with gold.
For me gold/silver is good for up to 10% of a portfolio. At this point in time Silver is probably a better buy.
When I graduated from college in 1979 an engineer I worked with would always say I am investing in mother nature (Gold, Silver, Mining) etc. Gold was $750-$800 an ounce and Silver was $$40-50 an ounce. You do the math on how that worked out.
I used to go to auctions and see buyers paying huge money for gold and silver coins. So I went to coin dealers and bought gold and silver dollars and sold them at auctions. I nearly always doubled my money. People just go crazy with greed in an auction bidding process.
If you buy gold in the good times from a reputable coin dealer you will do fine. Unfortunately everyone wants to buy when things get dicey. It doesnt usually turn out so well. I remember well the price of gold dropping in half around 1980.
On Jul 09 05:35 PM jrainspe wrote:
> This whole discussion is a fool's argument. There is intrinsically
> no difference between a piece of plastic you call a "gold asset card"
> and the metal itself. Except for jewelery, gold does not add anything
> to the quality of one's life. You can't eat it; you can't drink it;
> it doesn't cure disease; in fact, of itself it does nothing, just
> like the one dollar bill in your wallet or a gold asset card. The
> fact that humans place one inanimate object as "more valuable" than
> another inanimate object is only one of the reasons I have very little
> respect for humans as a whole. Remember, 50% of the population have
> an IQ of 100 or less.
Gold is not a stable store of value. It can go down as well as up and very quickly.
On Jul 09 04:19 PM Ad Orientem wrote:
> The lesson here is that gold should be a part of a well balanced
> and diversified portfolio. Should you have the bulk of your portfolio
> in gold? No. It's a physical commodity that yields no interest
> and with few practical commercial or industrial uses. But it is
> THE store of value. If you are worried about the value of your money
> you should have chunk of your portfolio in gold with at least some
> of that being physical. But the future is unpredictable.
>
> With that view in mind remember the laws of diversification are still
> in place. Those who spend their time trying to prognosticate future
> events are far too often wrong. This means you still need a diversified
> selection of equities and high grade bonds. If you don't like the
> dollar (I don't) then spread some or even most of your money into
> non USD denominated securities.
>
> If we have nasty inflation foreign bonds should do very well. On
> the off chance that we inflationists are wrong those bonds will still
> make you money. Gold however does not generally perform well in
> times with low or no inflation.
>
> Bottom line... Yes you need some gold. But don't go crazy and remember
> to hedge your bets. I am betting on inflation. But I am humble
> enough to admit I could be wrong. Stay diversified.
On Jul 11 02:50 PM jstratt wrote:
> a perspective on Gold
>
> In the good times buy a few gold and silver coins and store them
> in a safe deposit box.
>
> On the other hand back when the modern world monetary system was
> developed at Bretton Woods the great financial leaders found gold
> to be imperfect as a monetary system because it paid no interest.
> However they backed currency with gold.
>
> For me gold/silver is good for up to 10% of a portfolio. At this
> point in time Silver is probably a better buy.
>
> When I graduated from college in 1979 an engineer I worked with would
> always say I am investing in mother nature (Gold, Silver, Mining)
> etc. Gold was $750-$800 an ounce and Silver was $$40-50 an ounce.
> You do the math on how that worked out.
>
> I used to go to auctions and see buyers paying huge money for gold
> and silver coins. So I went to coin dealers and bought gold and silver
> dollars and sold them at auctions. I nearly always doubled my money.
> People just go crazy with greed in an auction bidding process.<br/>
>
> If you buy gold in the good times from a reputable coin dealer you
> will do fine. Unfortunately everyone wants to buy when things get
> dicey. It doesnt usually turn out so well. I remember well the price
> of gold dropping in half around 1980.
Silver Will not Collapse because it Is an Industrial Metal with ties to gold.
The only real question in my mind for you is, How will the USD remain strong in the Face of the Fed/Treasury/California money printing Turbines?
The SEC apparently thinks those CA IOUs should be rated as Securities. How many other States will follow California's lead?
On Jul 11 12:25 PM bullionboy wrote:
> I have done plenty of research on the subject of owning gold or silver.
> It needs to be owned as an insurance policy for all the wealth one
> has built up over their lifetime. If you allocate 10% and it does
> nothing so be it, the other 90% of your wealth is protected. If
> inflation/ hyperinflation kicks in hard then you have protected your
> wealth and then some.
> As for the type of investments out there. One should always own a
> little physical ,which is important to have around as an immediate
> form of currency in civil strife, unrest, etc. Otherwise the single
> cheapest and safest way of owning gold or silver is the three pure
> play bullion products from Central Group of Canada. They are Central
> Fund of Canada (1/2 silver and 1/2 gold ). Central Gold Trust (100
> % gold) and now Central's Silver Bullion Trust ( 100% silver) which
> IPO's in next two weeks (comes with a free 9 month warrant). These
> products have proven to have the lowest admin fees and MER's in the
> world. Central Fund's
> MER is .37 of 1%. They have no sub-custodians, can't lease the
> bullion, don't use derivatives and all bullion stored safely in segregated
> Canadian bank vaults with annual audits.
> As comparison, vehicles like GLD and SLV have MER's of 40 and 50
> basis point respectively plus extra expenses, have many sub-custodians
> all of which lack oversight controls. Other bullion products all
> have fancy derivatives, currency hedging , call writing , high MERs,
> bullion that is stored in different juristictions, etc. They are
> not passive pure plays but essentially gimmicks.
On Jul 11 07:06 PM American in Paris wrote:
> And what are going to do when the inflation fears are proven wrong
> and your gold and silver collapse in price?
On Jul 12 12:15 PM bobauss wrote:
> If armageddon happens there won't be any cows, milk or anyone to
> take your dopey gold coins, worthless cash, or anything else you
> wish to trade. IT'S ARMAGEDDON....FINITO..... Why do you think you'll
> survive it !!!!
You can get a ton of the stuff for pocket change.
> And what are going to do when the inflation fears are proven wrong
> and your gold and silver collapse in price?
I'll keep my gold & silver and buy more until the dollar resumes its downward slide. Any uptick in the strength of the dollar is temporary. The thirty-year trend is clearly downward, and that trend will only be exacerbated by $2 TRILLION+ federal deficits and unlimited Fed printing, not to mention the $74 TRILLION unfunded liability for Medicare or the $18 TRILLION unfunded liability for SS.
And hey, if the world does collapse, I guess we won't be worried about our gold stash either as the chaos will I am sure be keeping us occupied!!
With regard to selling your gold when you need to, if you buy it from here, you can instantly sell it from here:
www.bullionvault.com/#...
P.S. the sutski bit at the end makes me a referrer if you or anyone clicks this link and then signs up. (scratch my back please!!) haha thanks!!
Seriously though, bullionvault is the best medium I have found so far for bullion trading.
Cheers,
sutski
On Jul 09 04:26 PM the_feds_corrupt wrote:
> I think physical gold ownership is absurd.Unless you are planning
> on fleeing the country- forget it !
> 1) Physical gold bullion MUST be assayed before it can be sold.<br/>
> This adds undue expense and inconvienance to selling gold.
> 2) The Government will confiscate gold in the event of economic
> collapse. This you can be sure of .
> 3)Huge security risk: where will you keep your Canadian maple leafs?
> On your person? In your home? Your car? Certainly not in a safe deposit
> box (those will be banned by government like in the 30's).
> I have watched way too many apopolyptic horror scenarios ,home invaders,etc
> willing to do your family or yourself great bodily harm to get at
> your gold.
> 4) Now lets say you have the perfect storm. You have adequate security
> no one knows you have gold and silver hidden. Civilization comes
> crashing down around us -where will you spend your gold ? Barter
> with some local blackmarketers?
> With just in time inventories store shelves will be empty in hours.
>
> Will you and your family eat while your extended family and friends
> go hungry? "Sorry lil nephew I cannot feed you ,You should have told
> that deadbeat father of yours to hoard gold like me!"
> You see the problems that will rise? If you are that certain that
> our society will be consumed by financial chaos then you would be
> far wiser to spend your money now. Buy a cabin in the mountains stock
> it with food and all your toys and then when the moment comes - you
> leave!
> Hoarding gold in a metropolitan environment is at best delaying your
> own demise and at worse suicidal.
Silver.
Freeze Dried Food.
Water.
Guns.
Ammo.
A KJV Bible.
Come what may, I am ready.
I gues it's my lack of sophistication that keeps me from buying physical gold. First, when buying coins, I don't know who to trust. I don't know if the coin has been diluted with alloy. Also, I don't know how much cash I could get in a time of hyperinflation and whether I would just get cheated by middlemen. In fact, I don't know in a lawless time of hyperinflation how I would even keep the metal safe and get it to a place where I could negotiate it.
I don't care how long any dealer has been in business, or how many recommendations they have, or if there is a sealed little plastic bag around the coin. Madoff taught us that the most respected can cheat you. Lord knows what is being sold to Chinese and Indians, but my gut tells me there is more than a little larceny in some of the "pure gold" being sold.
Until customers can feel safe (i.e. by buying gold directly from the government and storing it with the government) I wonder if there really will be a wholesale transfer of paper money to gold.
On Jul 13 09:22 AM Search4Truth wrote:
> Gold.
>
> Silver.
>
> Freeze Dried Food.
>
> Water.
>
> Guns.
>
> Ammo.
>
> A KJV Bible.
>
> Come what may, I am ready.
I was going along until you included the KJV bible, even though I heard a story where it stopped a bullet, I think I'd rather have a reference book of health/medicine, you know non-fiction.
On Jul 09 05:35 PM jrainspe wrote:
> This whole discussion is a fool's argument. There is intrinsically
> no difference between a piece of plastic you call a "gold asset card"
> and the metal itself. Except for jewelery, gold does not add anything
> to the quality of one's life. You can't eat it; you can't drink it;
> it doesn't cure disease; in fact, of itself it does nothing, just
> like the one dollar bill in your wallet or a gold asset card. The
> fact that humans place one inanimate object as "more valuable" than
> another inanimate object is only one of the reasons I have very little
> respect for humans as a whole. Remember, 50% of the population have
> an IQ of 100 or less.
Gold was $ 40 and below when gold price was controlled so looking at data before 73 serves no purpose at all – 73-80- was time of transition, so look at gold prices after ’80 and see how well it has done against S&P and inflation and bonds – it has performed poorly against everything. One of the reasons for the underperformance is no dividends.
It has indeed performed well since 2001 – but it is long game –lets’ see how things unfold. As should be readily evident to every gold bug – gold has not gone even above $1000 despite the supposed dollar collapse and financial system meltdown.
I will not recommend more than 10% investment in gold – it would turn out to be fools gold.
I have my gold futures margin account ready now. I am hoping that some crazy people from the media launch their last wave of gold rush. Then I will short-sell a couple of lots of gold in the futures market to earn some interest when it reaches close enough to $1,000 per troy oz again!
If everything goes well, we will see gold price falling below $600 some time next year! So, my gold futures account will show $400 capital gain per troy oz, plus interest from short sales! :-)
Why would gold ever fall below $600?
1. No one has too much money to hoard too much gold, except for the Chinese who would like to get rid of the U.S. dollars by buying some gold.
2. The production cost of gold keep falling as the oil price falls.
3. Unlike oil, the stock of gold can only rise cause it is pretty much not a consumable asset (with the exception of some gold being used for industrial purposes).
4. Last time when there was a gold rush, there was the Iraq-Iran war, double digit cost push inflation, ... Now, we only have a fading oil crisis, a bearish asset market, ...
5. The low interest rate cycle will soon be over some time next year cause they are starting to talk about the strategies for the current stimulus package.
The last bubble remaining is in the raw material and precious metal markets! No doubt about that!
theburningplatform.com...
en.wikipedia.org/wiki/...
One thing for sure is that is well illustrates that using a gold backed currency is no assurance that you won't have all sorts of problems.
One of the reasons that gold is historically popular as money is that there are easy ways to detect if it has been debased. Archimedes found one such method; you measure the density. Another is the use of a touchstone.
All a shopkeeper will need to assay your gold coin is one of these simple methods.
On Jul 10 12:08 PM Freya wrote:
> The Roman Empire initially paid their troops with Gold coins, but
> after a while, when the Empire became so large, they started to coin
> underweighted Gold coins and treated them as if they were Pure.<br/>
>
> North Korea has been spewing out Counterfeit US $100 bills, How hard
> would it be for them to duplicate US Dbl Eagles, or any other Gold
> Coin, with less than the required amount of Gold?
>
> Why should the advertized Purity of Gold Coins be taken for granted
> but everyhing else appraised?
On Jul 09 04:26 PM the_feds_corrupt wrote:
> I think physical gold ownership is absurd.Unless you are planning
> on fleeing the country- forget it !
> 1) Physical gold bullion MUST be assayed before it can be sold.<br/>This
> adds undue expense and inconvienance to selling gold.
> 2) The Government will confiscate gold in the event of economic collapse.
> This you can be sure of .
> 3)Huge security risk: where will you keep your Canadian maple leafs?
> On your person? In your home? Your car? Certainly not in a safe deposit
> box (those will be banned by government like in the 30's).
> I have watched way too many apopolyptic horror scenarios ,home invaders,etc
> willing to do your family or yourself great bodily harm to get at
> your gold.
> 4) Now lets say you have the perfect storm. You have adequate security
> no one knows you have gold and silver hidden. Civilization comes
> crashing down around us -where will you spend your gold ? Barter
> with some local blackmarketers?
> With just in time inventories store shelves will be empty in hours.
>
> Will you and your family eat while your extended family and friends
> go hungry? "Sorry lil nephew I cannot feed you ,You should have told
> that deadbeat father of yours to hoard gold like me!"
> You see the problems that will rise? If you are that certain that
> our society will be consumed by financial chaos then you would be
> far wiser to spend your money now. Buy a cabin in the mountains stock
> it with food and all your toys and then when the moment comes - you
> leave!
> Hoarding gold in a metropolitan environment is at best delaying your
> own demise and at worse suicidal.
>>> The Roman Empire initially paid their troops with Gold coins,<<<
Not true. Paid in salt ("sal" in Latin. Origin of "salary).
Sal vobiscum, Freya.
"I don't know where Mr. Condon gets his data, but if I go back 40 years, I find gold at about $40 an ounce versus $917 today - an annual gain of 11 percent. As for the S&P 500, its average 1969 value is right around 100, which, when compared to today's 885 level produces an annual gain of about 7.5 percent.".......
Well, feces head, if I go back 30 years I find gold at $1000 an ounce in the Carter/Early Reagan years...vs $970 today, for an annual loss of...well, you get the point!
Pick whatever time period fits your analysis. Schlock statistics by a schlock analyst.
On Jul 13 02:33 PM cyclingscholar wrote:
> Gold bugs are such MORONS.....
>
> "I don't know where Mr. Condon gets his data, but if I go back 40
> years, I find gold at about $40 an ounce versus $917 today - an annual
> gain of 11 percent. As for the S&P 500, its average 1969 value
> is right around 100, which, when compared to today's 885 level produces
> an annual gain of about 7.5 percent.".......
>
> Well, feces head, if I go back 30 years I find gold at $1000 an ounce
> in the Carter/Early Reagan years...vs $970 today, for an annual loss
> of...well, you get the point!
>
> Pick whatever time period fits your analysis. Schlock statistics
> by a schlock analyst.
Are we forgetting that there have been times where our own government set the price of gold, at levels below prevailing markets? (Great Depression) Have we forgotten there have been times when the use of gold for payment of U.S. Debts was prohibited via gold?
Most importantly to me though is the inabilty to trade the stuff which in my estimation is it's only real value. At least with and ETF you can buy and sell the stuff for a profit and actually request physical delivery if you choose. (Who would?
As for an inflation hedge the stuff may make a great hedge but to do so, it needs to be liquid which physical gold is not. I do not trust theis Government today and certainly do not trust that they will not repeat the Great Depression and set a limit as to golds value and preclude it's use as currency if the great armaghedon actually arrives.
Indeed! I've been trying to get financial advisor's to respond to this issue, even to a few here on Seeking Alpha, but I don't get any responses from them.
I was a financial advisor for over 20 years and have decided to set out and write about the industry (and other things) as I feel it's more important and I can reach more individuals with my understanding of what really is going on.
My articles written in the past week or so....
"Gold: Why Doesn't Your Financial Advisor Recommend It?"
fedupbook.com/blog/inv.../
"Challenging Financial Advisors On the Need to Diversify Into Gold"
fedupbook.com/blog/inf.../
"Gold Investment Bashers Won't Respond to Critique"
fedupbook.com/blog/inv.../
I had replied to the WSJ online article over the weekend that Tim's article references and true to form, received no replies: online.wsj.com/article...
If a financial advisor wants to stop by my blog and debate the issue, feel free....unless of course you have to get SEC permission.
MDP, which ETF are you referring to that allows one to request physical delivery (not to be confused with ETC's)?
The two gold ETFs are GLD (the largest) and IAU offer a way to invest in gold and profit from its rise in price. The caveat being that you can't take delivery of that gold the ETFs invest in, so you are technically buying "paper" gold.
Source(s):
GLD Prospectus www.spdrgoldshares.com.../p…
IAU Prospectus us.ishares.com/library.../prosp…
I do agree that you can "trade" the ETF's, but wouldn't recommend them as an alternative to physical as a U.S. dollar insurance hedge.
On Jul 13 03:34 PM MDP wrote:
> As a RIA myself I cannot comprehend the absurdity of owning physical
> gold, let alone what is most often pushed, rare coins.
>
> Are we forgetting that there have been times where our own government
> set the price of gold, at levels below prevailing markets? (Great
> Depression) Have we forgotten there have been times when the use
> of gold for payment of U.S. Debts was prohibited via gold?
>
> Most importantly to me though is the inabilty to trade the stuff
> which in my estimation is it's only real value. At least with and
> ETF you can buy and sell the stuff for a profit and actually request
> physical delivery if you choose. (Who would?
>
> As for an inflation hedge the stuff may make a great hedge but to
> do so, it needs to be liquid which physical gold is not. I do not
> trust theis Government today and certainly do not trust that they
> will not repeat the Great Depression and set a limit as to golds
> value and preclude it's use as currency if the great armaghedon actually
> arrives.
>
These people who so insist they are "right" and everyone else is a fool are merely arrrogant, or stupid. And of course they don't recognize it as such in any case except when someone disagrees.
I have gold (purchased a few years ago), bonds (purchased over time, doubled up in Dec '08 thru Mar '09), a significant portion international, cash, and.... oh dear! even a few stocks or MFs (sold most of them off between Aug '07 and Aug '08).
I agree with the sentiment that we are in an extremely risky period, and that many brokers ( as with any other profession) don't do their homework. Find one that does and quit generalizing and painting EVERYTHING in either BLACK or WHITE (you all act as if there is only one correct answer and YOU knew all along). I have counseled people to have little debt and some physical on hand, explaining the difference between physical and securities held precious metals.
Oh, by the way, I am a broker and my clients do rely on me and trust me to do what is right, as far as I am humanly capable.
On Jul 11 07:04 PM American in Paris wrote:
> I am afraid gold is just another commodity and subject to the laws
> of supply and demand.
>
> Gold is not a stable store of value. It can go down as well as up
> and very quickly.
Article I Section 10 of the Constitution of the United States:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
A possible collapse of US$ and US economy will not lead to apocalypses similar to one following a nuclear war between major nuclear superpowers.
At "best," we will replay the collapse of the Soviet Union when new people/oligarchs will come to power and majority of people will be highly impoverished. Paper money will devaluate greatly. People with "hard assets" including jewelries, gold, paintings, valuable real estate etc, suffered the least. Criminalization of society became a norm.
At "worst," we will have a revolution in the USA. This is when radical changes in power elite will take place. Again, the life will continue with a majority of people will be impoverished and good many will be killed. But again new political and social structure will emerge with "hard assets" still of great value.
In any case, a "new" America will continue to exist and trade with the rest of world. New currencies will emerge and valuables will continue to be valuables.
You and I will garner negative comments for taking a "contrary" position, but I fully agree with your post. Especially important is your observation that: "The production cost of gold keep falling as the oil price falls."
There is no way that a commodity, even if it's gold, can maintain pricing that is double (at least) the production cost.
With the ability to move funds cross border to sounder currencies, and with the option to purchase baskets of commodities, and with bond vigilantes ready to hike rates if there is a hiccup, there are too many other ways to protect savings than to horde a commodity that is overpriced compared with production costs.
Naysayers, before pouncing, consider which is in the majority these days: posters in favor of gold, or posters who are skeptical? Also, ask yourself how long the US can continue unchecked with its profligate habits. The US will soon be in the humilating position of other banana republics. The IMF will not be telling us what to do, but the bond market will. The unhappy state of US finances does not make gold a good investment at these levels. Bring it down to $5-600, and it's off to the races.
On Jul 13 12:52 PM Arthur Hau wrote:
> I don't know why people are still holding any gold when they could
> have sold their last piece at around $1,000 per troy oz!
>
> I have my gold futures margin account ready now. I am hoping that
> some crazy people from the media launch their last wave of gold rush.
> Then I will short-sell a couple of lots of gold in the futures market
> to earn some interest when it reaches close enough to $1,000 per
> troy oz again!
>
> If everything goes well, we will see gold price falling below $600
> some time next year! So, my gold futures account will show $400 capital
> gain per troy oz, plus interest from short sales! :-)
>
> Why would gold ever fall below $600?
> 1. No one has too much money to hoard too much gold, except for the
> Chinese who would like to get rid of the U.S. dollars by buying some
> gold.
>
> 2. The production cost of gold keep falling as the oil price falls.
>
>
> 3. Unlike oil, the stock of gold can only rise cause it is pretty
> much not a consumable asset (with the exception of some gold being
> used for industrial purposes).
>
> 4. Last time when there was a gold rush, there was the Iraq-Iran
> war, double digit cost push inflation, ... Now, we only have a fading
> oil crisis, a bearish asset market, ...
>
> 5. The low interest rate cycle will soon be over some time next year
> cause they are starting to talk about the strategies for the current
> stimulus package.
>
> The last bubble remaining is in the raw material and precious metal
> markets! No doubt about that!
No need to rush in all at once, now, but silver in particular looks very attractive at these prices. Gold and silver coins have had intrinsic value since ancient times.
As far as purity is concerned, gold or silver coins minted by national mints such as the US, Canada, South Africa, etc, are generally accepted as .999+ pure, although, in the coin world there is an increasing awareness of, and fear of, Chinese counterfeiting.
> This whole discussion is a fool's argument. There is intrinsically
> no difference between a piece of plastic you call a "gold asset card"
> and the metal itself. Except for jewelery, gold does not add anything
> to the quality of one's life. You can't eat it; you can't drink
> it; it doesn't cure disease; in fact, of itself it does nothing,
> just like the one dollar bill in your wallet or a gold asset card.
> The fact that humans place one inanimate object as "more valuable"
> than another inanimate object is only one of the reasons I have very
> little respect for humans as a whole. Remember, 50% of the population
> have an IQ of 100 or less.
Good point!
I suppose many people in this forum should quit their jobs and start their digging.
Well, for the eating thingie. I suppose I will dig a big hole and start stocking up dry corn seeds. BTW, corn seeds serve as a food source and an energy source! What can people do with their gold coins? Opps... :-)
Folks, gold price is still at its historical high. When we saw the oil price dropped from $150 to below $40, didn''t we realize the law of gravitational force? What goes up, must come down!
> What ever happened to the wisdom about stock-tips from the shoe-shine
> boy? Could gold be getting close to that?
Not as long as you see "Cash 4 Gold" signs out there and you have housewives hosting parties where invitees get paid with paper to hand over their gold. When you hear about 18 year olds beginning gold trading companies and when cash4gold.com becomes gold4cash.com, THEN the bubble will have begun.
> In any case, I am exhausted by the senseless debate about the usefulness
> of gold in the event of a total U.S. currency failure. There are
> other mediums of exchange (not to mention barter), that would likely
> take precedence over silver coins and gold chips. Zimbabwe is a
> terrible example. Try Iceland, where foreign currencies basically
> supplanted the native currency when it collapsed.
Why is the Iceland example more reasonable than that of Zimbabwe? If you are going to make such a bold statement, please explain the reasoning behind it. Is it because Iceland has a centuries-long history of democracy? Is it because Iceland has a more Western outlook?
> Gold has never ever worked as an inflation hedge so I don’t quite
> understand why people keep trying to promote it that way. If you
> are worried about inflation (I am not) invest in TIPS it is a substantially
> superior instrument and also will pay dividends unlike gold.
FY, your comments are always well-thought-out and cogent. I would point out, however, that the interest rate on TIPS is calculated by the U.S. government, the self-same debtor who sold the instrument. This creates a HUGE incentive (in addition to the political incentive) for the government to under-report the inflation rate (i.e. substitution theory, hedonic adjustments). Thus I believe TIPS are an imperfect inflation hedge.
> Gold was $ 40 and below when gold price was controlled so looking
> at data before 73 serves no purpose at all – 73-80- was time of transition,
> so look at gold prices after ’80 and see how well it has done against
> S&P and inflation and bonds – it has performed poorly against
> everything. One of the reasons for the underperformance is no dividends.
FY, your comment indicates that you're viewing gold as an investment with expected returns. For many gold holders, this is not the case: we hold gold as a store of value and wealth with the expectation that the value of paper money will decline RELATIVE TO gold. If you're looking at INVESTMENT returns, perhaps a better comparison would be the total return of a basket of gold producing stocks (including dividends) since 1980. I don't have that data at my fingertips, though.