TonyCinTX

What's Next for Gold and Silver ETFs?

I am in Gold at 25% of my investment. Although I politically support the government spending that has and will occur on Obama's watch as necessary, I cannot see how it we can possibly pay for it without printing money. Print and spend is fine by me; it deflates our real debt (by paying it off with inflated dollars), but it does mean inflation and that HAS to mean gold rising.

I guess if you think we are going to get out from under the current financial mess by some means OTHER than printing money, Gold is a bad bet for you. But I will remind you that taxes, fees, or reduced government payments of any kind are politically unpopular, and only about 15% of voters care anything about the deficit, and only about 5% understand the ramifications (or are even affected) by the government printing money. So my guess is, the politically easy way out is to start the presses.

If Housing Were Priced in Gold

@jrainspe:

Oh, I can imagine it, and I can imagine that if the UN printed money we would have the same problem as all countries have now; they can print money at will. And tying it to some "basket of goods" is no good either, because that would also be subject to political intrigue in determining how to weight the basket, what to include in the basket, and everything else.

And you are wrong; pet rocks and virtual pets have the ultimate real and fair value: They were entertainment. Will you next argue that anything that counts as entertainment has no real value? Not movies, books, water parks, plays, professional sports, music, good clothes or good restaurants? About 75% of people's spent income is "wasted" according to your lights, because they spend it on making their lives more fun and pleasant.

A universal currency is not just pointless, it would be harmful because it provides a single point for corruption and manipulation. At least now, we can measure inflation, corruption, and manipulation by one currency trading against others.

If Housing Were Priced in Gold

Actually the value of the home is in its utility, like any other machine (e.g. car, laptop, lawn mower), not what one can sell it for. After all, you are going to have the expense of living somewhere no matter what. It is incorrect to say sell your home and rent: Your mortgage payment does not rise with inflation or fluctuate with demand, your apartment rent will never decline.

A rise in Gold signals inflation of the dollar, and inflation is either caused by or will produce salary increases. But your mortgage payment is FIXED, so while the number remains the same, as a percentage of income it is reduced by inflation. We also have the situation that home buyers tend to be younger and will earn more as they grow into their careers. This is why anytime you talk to somebody with a twenty year old mortgage their payment seems a ridiculously low fraction compared to typical apartment rents for the same square footage.

The author fails to consider that much of that free 300 ounces of gold would have been eaten by skyrocketing apartment rents rising with inflation; he assumes the apartment rent for the same square footage will just cost the same as the mortgage payment was in 2001. Good luck with that.

I am not arguing that money cannot be made on bubbles if you know when they are coming and when they are ending; far from it. But in times of inflation, a fixed-rate mortgage payment is your friend.

Buffett Gets 'Comeuppance' After Gold Outperforms

Gold beats inflation; at least if you invest in something that tracks real gold prices.

I own both BRK-B and Gold in approximately equal dollar values. I think Gold does better when the economy sucks; BRK-B does better when the economy rocks.

Buffett's problem of the day is that his companies are earning slower, and not beating inflation. When inflation is tame, he gives us great companies that beat inflation and deliver real returns. But that is not the situation now, and probably won't be for the next six years or so. It doesn't have anything to do with Obama either; it is just the natural outcome after deregulation allowed speculation to destroy the financial system. Until we get over that, BRK isn't going to do that great because nothing is going to do that great.

Stocks Will Fall 37% or Gold Will Rally 60%

Actually gold has several industrial uses; it is a great conductor and the only metal that does not oxidize. It doesn't rust, period. Not only that, but gold in general is highly resistant to corrosives and acids; and highly reflective of electromagnetic radiation. It is used as a very thin layer of shielding on satellites, effective but weighing almost nothing. Gold is the most malleable and ductile pure metal known. It is used inside billions of electronic chips as the connecting wires to the outside world, and as a coating on sliding connectors that must be reliable.

Stocks Will Fall 37% or Gold Will Rally 60%

Why use the MEDIAN stock to gold ratio, especially the median over 106 years?

How about telling us when was the last time the gold to stock ratio actually WAS 5.4, or less than that?

World finances changed fundamentally after WW II, and there is no reason on EARTH to include any financial data from before 1945 in any analysis of any kind, at least not without more justification than just because you say so, or just because it gives you the number you want. Essentially you are telling people that data from 1903, before World War One, is an essential part of this analysis; because it certainly contributes to which ratio will be the median.

Let's take a look at the last 64 years, since 1945, and see what the median ratio is there. Or perhaps we will look at the linear trend, or robust regression. I see no reason to believe the median ratio is the best predictor (or even a good predictor) of where we should be, when the world is changing.

For example, would anybody believe us if we used IBM's median revenue since inception to predict its revenue next year? I think not. Why then should we believe the ratio of DJIA to Gold should be a constant?

If Gold Bugs' Fantasies Came True

Up front, I have 1/4 of my assets in gold and 3/4 in various stocks. I own no other commodities. That said, it comes down to alternatives. You have to put your money somewhere.

I lived through the Carter inflation at least, and in any inflationary scenario the last thing you want to hold is CASH.

Does it matter? Yes, because the two alternatives are
a) Lose half your purchasing power,
b) Lose ALL your purchasing power.

Do I get to keep it? Honestly, why worry? If society falls apart, police protection vanishes and we are overrun by murderous gangs, nothing we own is safe anyway. They will take our homes, our property, and in all likelihood, our lives, since the food supply will dry up and 95% of us could not fend for ourselves in that environment. Game over.

What happens afterwards? The most likely scenario is not some Mad Max fantasy, it is what we have already seen in the 1930's. Global Depression, soup lines, 30% unemployment, etc. Like then, this will lead to political tension and wars. However, even in such "end of the world" times (and that is how they all saw WW II) gold was not worthless.

What happens afterward is not worth worrying about either, because again, the question is one of alternatives: Do you want to enter that era with empty pockets, or with gold in your pockets?

I have worked as a computer consultant on the periphery of the criminal justice system, and seen enough depositions, trials, gangs, and criminals to last me a lifetime. There are some tough, ruthless mofos on our streets, my friends. Now I do own a handgun, but I maintain zero illusions about my ability to fight them off in some Mad Max societal collapse scenario. They win.

So why worry? The only "afterward" that counts is one in which there is some semblance of law that keeps your assets from being stolen or seized by the government. Again, the Great Depression is the model there, and I'd rather go through that with something, instead of nothing.

The Dow's Weight in Gold

Oh c'mon, a linear trend on an obviously exponential curve? This is a joke, right?

Not by any chartist magic, but by simple robust statistical fitting to *appropriate* curves, we can see a significant chance of the Dow settling in at the 6000 range (but more likely 9000) and a rise in Gold to 1200 with what seems like inevitable inflation (not hyper). I can't even see where a ratio of "5" or "7" is on this stupid chart.

The biggest thing holding Gold down right now is increased supply due to sales of scrap gold (old jewelry), which has risen due to the recession, and will play out in a few years.

So let us ask the most basic question: By what logic is the relationship between Gold and the Dow meaningful at all? I don't understand what the interaction between these is supposed to be; it isn't like a company where earnings and growth and the value of future opportunity all determine the stock price, which can thusly be used as a rough proxy for judging the competence of the company, or at least the public perception of the prospects of the company.

I think this Dow/Gold comparison is just a skewed version of the Dow itself, it tells us nothing new.

Stick with Gold and the Oil Stocks

The USA has four great clean natural resources that could replace oil within ten years. Besides natural gas (which burns cleaner than coal, oil or gasoline), we have wind power and thermal-solar that have both been proven to generate electricity competitive with our dirtier alternatives. We also have proven geothermal electric on hundreds of installations right here in the USA, some are fifty years old and still working. Geothermal is a zero emission solution, perfectly clean, and requires nothing but a drilled hole. We know how to drill! A plant can be built for a few million dollars and pay for itself within five or six years. The energy is free, and a geothermal plant is about the size of a standard warehouse, literally.

We don't need biofuels. We don't need to invent clean coal. A wind turbine pays for itself in three years and lasts for twenty five. All we lack is the political will to actually change gears, because the change would put existing wealth at risk.

The Bedrock Case for the Return of the Gold Bull

It is funny how many ideologues rail against fiat currency. Well, guess what? You are wasting your time, and anything you want you can buy with that currency. Wake up, dudes. Thomas Jefferson was wrong, I own clear title to real property, stocks, bonds, gold, diamonds, cars, electronics and more, all bought with my "fiat currency", funny money, whatever you want to call it. The fact is that stores take twenties in exchange for their goods without question. So what's the point of all this conspiracy theory that is never going to lead to anything important?

Gold and the Dollar: Putting the Relative Cart Before the Relative Horse

The economy sucks and will continue to suck for the foreseeable future. I am not 100% gold, but I am 25% gold and will stay that way, because the dollar will weaken further and Gold will inevitably rise. Politics can do a lot to affect changes, but ultimately they really are all short fixes and facades and bailouts, in the long term the War on Terror is a debt factory that kills the economy. Oil demand will continue to grow in China and India and the rest of the world, political quick fixes are like cocaine in that they do far more long term harm than their immediate feel-good boosts, and all of this means the dollar will dive. Gold isn't a great investment, but it retains its value. When I see the dollar beating both the Euro and Canadian dollar again, then it will be time to consider selling gold.

The Bedrock Case for the Return of the Gold Bull

Litle: Wow, I love this article.

Jakedeez: The point of owning gold is the point of any stock; owning a share of Dell doesn't give you any trading rights to property or equipment or product, you can't go collect on your share whenever you want. You own the stock because you think the *stock* will go up. All these people arguing about whether gold can be used as currency are fools. Stocks can't be used as currency either!

In the case of Gold (IAU for instance), there is a tendency for the price to move counter to the international buying power of the dollar. It also runs counter to some stocks (but tends to move in the same direction as the S&P overall). So for some investments, you can reduce risk by making Gold a part of the mix.

The point has nothing to do with inflation or long term investment, the point has to do with the short term moves of stocks and gold and other commodities, and overall volatility. The advantage of controlling volatility is predictability, at the cost of greater upside. At an extreme for controlling volatility we just buy bonds, but even that doesn't protect you against the dollar sliding; gold does.

Personally, I keep 20-25% of my investments in gold (currently, IAU) since 2005, rebalancing every quarter. I do this because of national debt concerns, the value of the dollar is sliding and I don't think the long term outlook for that is good. If my opinion changes, so will my gold investment. Recently, gold has been tracking energy costs and those seem likely to rise long term as well.

The Myth of Gold as an Inflation Hedge

TRELVIN: >>> Would I carry gold and water in the desert for very long?

WHAT? As to water, YES. As to gold, yes. Somebody might trade me food or more water or shelter or transportation for the gold, so I doubt even a pound of gold coins is going to make a huge difference in how far I can go in the desert. If I can only choose one, I'll take the water, but that (as is pointed out in a post above) is a false choice, we can split our investment money pretty finely.

Also, I disagree with the idea that velocity represents the "intrinsic worth" of gold, it's intrinsic worth is in its rarity and as an ingredient in its inherent elemental properties that cannot be duplicated. It is not just jewelry and its value is not entirely due to some sort of psychological quirk of humans. As for velocity, I don't care a whit how often others are trading gold or whether there is an "opportunity" to raise a price, and I don't know any serious investor that does. My only opportunity to raise the price is when **I** sell what I have. I agree that liquidity is an important consideration, and very active trading is a clear indicator of assymetric information (and a bubble when one side of that information is just mistakenly optimistic). But such indicators are not predictive of prices, they just warn you to pay attention and find out what it is you don't know, and correct at least what may be a personal information deficit.

The Myth of Gold as an Inflation Hedge

FYI, look at this CPI chart on wiki. It isn't hard to find this stuff.

en.wikipedia.org/wiki/...

The Myth of Gold as an Inflation Hedge

Well, isn't this ridiculous? Why start in 1980? Why not in 1985, it is up 120% since then. Why not inflation adjusted?

In 1980 we had the most inflation since 1940 or so, and that is why gold was high. The CPI was 100 in 1982-84, and it is currently around twice that, indicating the value of the dollar has HALVED since then. GOLD has indeed been an inflation hedge, you cannot talk about gold as an inflation hedge being a MYTH without taking inflation into account! Nobody is claiming that it is some great investment, the only claim is that it holds it value when dollars are in decline, so it is at least a safe harbor. And if Newmont Mining is to be believed, it is getting harder to find and reduced supply with increased demand is going to make it an even safer harbor.