Calvin Oh

Gold Even More Attractive as Cash Yields Approach 0%

Gold goes down when the supply is greater than the demand. Such as was the case from 1980-2000.


On Jan 13 04:49 PM lbsterling wrote:

> Risk of theft, I mean.
>

Gold Even More Attractive as Cash Yields Approach 0%

lbsterling,

Gold has no financial risk in the sense that there is no obligation attached to it. The argument that there is risk to confiscation or theft can be applied to anything and therefore I don't know how to answer you.

If you study history you will see that gold does well in extreme inflationary and deflationary times. This is because there is a high degree of uncertainty during these times and therefore the demand for gold increases. You need to understand that gold is the ultimate form of currency. It has been and it always will be. My world is based on studying history which, if studied, provides insights into what we may expect for the future.

Gold has periods where it outperforms. Again study history. It is not merely a counterweight to inflation. It is money.

My article was addressing the common argument that gold naysayers usually point to the fact that gold does not pay any interest as a reason not to own it.

There will come a time when gold will not be the most important investment in my portfolio. Right now, I believe the risks in the system merit an overweight position in physical gold and then some gold derivatives and stocks.


I am pointing out a fact that now Treasury instruments (which were formerly considered "as good as gold") and therefore all it's derivatives, such as cash and deposit yields pay next to nothing. So that argument is now moot.

Gold Even More Attractive as Cash Yields Approach 0%

Do you really believe those numbers?

I don't think you understand the concept of real yield. 2-3% yield on an instrument does not take into account inflation.

And I think we need to clear up the use of deflation and inflation if we are going to toss those words around. You are referring to deflation as price depreciation. What we had was a historic credit expansion and credit collapse. Assets were sold by over-leveraged institution to meet liquidity and margin requirements. This led to a wholesale panic out of most assets, which went into dollars for a few reasons (of many).

1. As I mentioned, it is the best of the worst (out of all the currencies)

2. It is one of only a few markets large enough to sustain such a large amount of surge buying. (Any other market would have gone into a moon-shot)

When I refer to inflation, I refer to it explicitly as a monetary phenomenon which always eventually translates into price inflation. If you take a look at the amount of money that has been created over the last few months, the only conclusion you can come to is that some of that money will eventually hit the streets (and some of a grossly humongous amount, equals a very large amount) and cause an upward spike in price inflation. The only reason you are not seeing it now is because the money is not being released from the balance sheets of the banks because they are refusing to lend. This is exactly what happened during the Great Depression. As it is the Feds mandate to get this credit freeze thawed and money flowing again, the massive money printing operations will eventually translate into hyper-inflation, which will result in the collapse of the dollar. At which point the dollar will either be replaced or propped up in some hybrid form. (several years from now?)

Gold Even More Attractive as Cash Yields Approach 0%

Sorry I had to rewrite. Didn't think comment had gone through. I was wrong!


On Jan 13 12:46 PM Gold-Speculator.com wrote:

> Hefaistos, I'm curious what you believe the inflation rate to be.
> I hope you're not quoting off government statistics. So let's say
> that the long bond does yield enough to cover inflation (which I
> don't believe it does And to believe that over 30 years a rate of
> 2.99% will suffice? C'mon....) then you're still only getting a 0%
> return instead of a negative return. This doesn't cover any of the
> default risk.
>
> As far as my comment being one-sided. Guilty as charged. It is an
> opinion piece. I'm sure there is another article floating around
> here on SA with the exact opposite argument so we should be fine.
> The universe will not tilt off it's axis because all commentary has
> now been cosmically balanced. Guess what? You're comment is pretty
> biased. You should balance out the negativity with a picture of a
> bunny.
>
> Bio has been sent to editor.
>

Gold Even More Attractive as Cash Yields Approach 0%

Hefaistos, I'm curious what you believe the inflation rate to be. I hope you're not quoting off government statistics. So let's say that the long bond does yield enough to cover inflation (which I don't believe it does And to believe that over 30 years a rate of 2.99% will suffice? C'mon....) then you're still only getting a 0% return instead of a negative return. This doesn't cover any of the default risk.

As far as my comment being one-sided. Guilty as charged. It is an opinion piece. I'm sure there is another article floating around here on SA with the exact opposite argument so we should be fine. The universe will not tilt off it's axis because all commentary has now been cosmically balanced. Guess what? You're comment is pretty biased. You should balance out the negativity with a picture of a bunny.

Bio has been sent to editor.

Gold Even More Attractive as Cash Yields Approach 0%

Heifastos, I'm curious. What do you supposed the inflation rate is? And so let's say long bonds do cover the inflation rate (which I don't think they do). Your real rate of return is effectively 0 instead of negative. So given the opportunity to hold a Treasury instrument, which is actually a liability on the part of seller, vs. holding gold, which is a sovereign asset with no liabilities attached, both paying "ZERO INTEREST" what would you hold?

The flight to the dollar of late is just a flight to liquidity. It's merely a choice of the 'best of the worst'. All fiat currencies are floating abstractions. The wealth will eventually flow to where it is treated best. This is not going to be treasury instruments.

As far as my comments being one sided. Yes I'm guilty. I have an agenda to promote gold. And guess what, my one sided comment probably cancels out an opposing one sided editorial on the SA site. And guess what? Opinion pieces are usually one-sided. I might add that your comment is pretty one-sided. You should add an addendum to your comment to balance it out. Sounds a bit negative. That way we can all be one step closer to utopia.

Bio will be up shortly. I just sent to the editor.


On Jan 13 08:44 AM hefaistos wrote:

> "Guess what folks, Treasuries don't pay enough to cover the inflation
> rate. And yet you still have all the risk of default, inflation risk
> and lost opportunity cost. This argument has got absolutely no more
> legs to stand on. The argument is worthless."
>
> For one thing, long bond yields definitely cover inflation.
>
> "Guess what folks" - I don't understand how this populistic and one-sided
> article qualified for publication at SA? T

Investing Like Buffett: Why NovaGold is a Buy

Keep in mind also, that Barrick is the other 50% partner on the project, which gives the project a higher probability of becoming a mine, because of the expertise in mine building and financial capacity that Barrick brings to the table.

Investing Like Buffett: Why NovaGold is a Buy

I don't know what it would cost. That is the concern that caused the precipitous decline in the stock price. This uncertainty is an opportunity for investors who have been wanting to establish a position or accumulate.

There were previous estimates that the costs to build a mine would be in the $2 billion area but now estimates are $4 billion plus. The exact numbers, I don't know since I am not a mine engineer. The pre-feasibility is due in Q-1 of 2009. We'll have a clearer picture when the study is released. If you're waiting for all the risk to be gone before taking a stab at NG then you should wait until the stock goes back above $20 or steer clear of the junior mining sector all together.

The costs to extract gold out of the world's oceans would be approximately $35,876 per gram.