Xyrus

Spread the Wealth with Gold: Three Longer Term GLD Option Strategies

Except gold doesn't really increase in value. Gold is a store of value. There are few industrial uses of gold, and a relatively small amount of gold is dug up every year. This keeps the amount of gold fairly stable.

Other commodities such as silver, platinum, and oil, on the other hand really do increase and decrease in value since they have wide industrial uses and, at least in the case of oil, it is being depleted and cannot be replaced easily.

Chances are when gold goes up in price in your currency, your currency has weakened yielding a low (if any) gain in your pocket. So you may have bought gold at $500 and sold at $1000, but that does little good when the currency depreciated by 50% during that timeframe (and now you've got to pay taxes on the gain, though in real terms you've gained nothing).

Gold is a good hedge against inflation, but it isn't the best investment if you're looking to grow your money.

~X~

Why Leveraged ETFs Are Bound to Deteriorate

Widestrides said:
"But wouldn't ANY volatile stock be subject to the same "decay?" If a biotech stock goes up 10% one day and down 10% the next, it also is not back to even. It has decayed 1%"

Only if you sold it.

A stock doesn't decay. The price of the stock is always the price of the stock. Your return is whatever you sell it at minus whatever you bought it for, regardless of any volatility in the price.

The problem with these ETFs is that they don't hold their positions. Every day they reset. In other words, they are directly exposed to the daily volatility of their underlying assets. That's where the decay happens. The more volatility in day to day price, the worse the decay gets.

Normal index tracking ETFs don't suffer these issues much since most of them don't rebalance that often. But any ETF, or more to the point, any investment strategy that moves in and out of the market "quickly" will end up suffering from decay if they aren't exceptionally careful. And since these ETFs operate "blindly" (no active management) then they will undoubtedly bleed dry over time, especially in markets like we've been having lately.

~X~


On Jul 13 12:40 PM widestrides wrote:

> But wouldn't ANY volatile stock be subject to the same "decay?" If
> a biotech stock goes up 10% one day and down 10% the next, it also
> is not back to even. It has decayed 1%.
>
> So it is the volatility that creates the danger, and true these leveraged
> ETFs are leveraged by design, but they aren't necessarily volatile.
> True, they have been this past year, but this has been a volatile
> year and a "perfect" storm to decay these ETFs. But if they trend
> your way or if you "rebalance" them yourself, you can take the decay
> out of them.
>
> GL

Global Stock Markets: In the Grip of Fear?

There is fear driven selling and there is logic driven selling. In this case, thy happen to coincide.

One of the reasons why all these announcements of bailout and such don't sem to have any impact is because there is no truth hat these measures will do anything. That is backed up by the fact that they haven't one anything. Almost as soon as one plan is approved it either needs to be immediately increased or another plan has to be created.

That ends up painting a picture that even our "leaders" really don't have a clue to how large and deep the credit crisis really is. Until they're more certain, people in general are going to sit it out on the sidelines and cash out.

This is as much a crisis in confidence and trust as it is a financial crisis. Face it, the general populace has been lied to many time over the past in regards to the crisis. Firms have reassured their investors only to have to back track weeks later. Banks have reassured their depositors only to have the FDIC come in and take them over.

If people don't trust banks, companies, or their leaders then they aren't going to put their money anywhere near them.

And did I mention that the bailout package was extremely unpopular but was rammed through congress anyway?

Here's the truth. No one knows how bad this is going to get. The Lehman settlement showed us one thing, that things are worse than they seem. Institutions still are not being 100% forthcoming. They will be forced to over the next couple of years, but until that happens the market is going to be a roller coaster at best.

~X~

A Magic Multiplier?

The best way to get out of a hole is to dig a deeper hole. Then, from where you're standing, you're not in a hole.

The banks screwed everyone over, and now we are bailing them out with our money. Absolutely brilliant.

The banks need to fail. The pain needs to be felt. Nothing will change otherwise.

~X~

Equities: Nightmare on Wall Street?

The real nightmare of wall street jockeys is a mop, bucket, and a name tag with their name on it. Everything up to this point has just been testing to see how well all those teflon suits they bought from the government over the past 8 years really work.

~X~

America's Fiscal Crisis: Tough Decisions Needed Now

CLH, you're post contributes nothing useful and really only demonstrates you're lack of understanding.

Ron Paul is a conservative. He is a fiscal conservative, a social conservative, and a foreign policy conservative. Conservative is right wing, not left wing.

Bush, on the other hand is only a social conservative. He is a fiscal liberal and a foreign policy liberal.

Fascism is a unification of business and state. Ron Paul does not support that, and has consistently warned against businesses mingling with government. Cheney and Bush however, seem to encourage it.

Ron Paul is not an isolationist. He is a non-interventionist. There is a big difference there. Bush is an aggressive (pre-emptive war), which is the stance empire nations typically assume.

Empires don't fail because an outside aggressor destroys them. They fail because they financially collapse. We're following in the footsteps of the British empire. We'[re spending ourselves into oblivion.

Ron Paul and David Walker are trying to get the public to understand how important it is to start taking action now in order to curb our own self-destruction. Your naive belief that everything is fine and that the US is "too big to fail" demonstrates the same hubris as the captain of the Titanic.

~X~

Consumption, Cacophony and Clarity

mkreisel: What's preventing the US from doing the same is ENORMOUS debt, and the fact that the developing countries are using high tech that's already developed.

They can afford to build up infrastructure because they don't have any and a lot of people are dumping in money in the hopes of big returns. And despite being piss poor, their debt levels are minuscule compared to ours.

"-20% GDP? Not in a fiat money superpower like the United States."

Why do people keep bringing this up? Being a super-power means jack. Our GDP is the consumer. If the consumer isn't spending, then th GDP tanks. If our debt levels are so high no one wants to lend to us, our GDP tanks.

Nothing is "too big to fail". All it takes is a few decades of fiscal mismanagement and you can drive any country into the ground. Case and point: if it wasn't for countries like China buying up our bloated debt, our government would suffer a financial collapse. It's foreign debt buyers that are keeping our government running. Does this sound a like a "too big to fail" scenario?

On other comments, I don't see how financial collapse == WW3. That makes no sense. We'd probably see civil unrest and martial law. Maybe even a civil war. But nuking other countries just because we ran our own country into the ground doesn't even begin to make sense. That would just make things worse.

A US collapse would hurt the world economy quite a bit, but they would recover as the Asian consumers replace their US counterparts. The US however, without much more than the consumer supporting the economy, would be in really bad shape.

Right now, there are a lot fairly somber data coming out about the US economy, debt, and such. I think we will continue to see a slide. But a full on collapse is still at least 20 years away.

~X~

Shrinking U.S.A.

Not necessarily. The dollar dropping is only one symptom of the larger issue: The rest of the world is growing up.

The days of the US being the economic bully are coming to an end. And it couldn't come at a better time. We've become both complacent and arrogant on the world stage. Soon we may actually have to (heaven forbid) do some actual negotiation instead of rattling our economic/military sabers to get our way.

We've been on top for so long that I think we've actually forgotten how to be number one. The rest of the developed world is surpassing us on almost all fronts, from healthcare to education, to internet access.

News flash: We aren't number one anymore. Nor will we be if we keep up with our current socio-economic policies. With our $10 trillion in debt and more piling on everyday, exactly how long do you think our government will last? The GAO paints a pretty grim scenario.

Oh but we have the largest consumer base in the world! For how long? India and China are growing fast. Soon, even that banner will fall.

We've got to stop thinking the world revolves around us and start thinking that we are just one player on the world stage. Until we do, we will continue to marginalize ourselves while the world catches up and then surpasses us.

~X~

Preparing for the Fall

Adan- Some companies allow you to do that with PCRAs (personally directed retirement accounts). You can buy just about anything you want. I think it would be a good idea to make that standard, but unfortunately that's not the case.

Daffy- You should do yourself a favor and stick with topics you actually know something about. I can tell, quite easily that you know squat about climatology.

For your benefit, what you are describing are meteorological events. Meteorology is for short timescales; there will be anomalies (periods of heat or cold, drought or flood, etc.).

Climatology is based on long timescales, usually decades to centuries. To illustrate, a week of above normal temperatures really won't affect climatological results that much. However, ten years of above normal temperatures will.

In other words, you can't point to your thermometer and say, "It's below freezing outside, so much for global warming." It doesn't make any sense. That would be like me pointing to a single blade of dead grass on my lawn and saying, "There's a blade of dead grass, so much for Chem-Lawn!".

Another piece of information you overlook is that the warming is an average taken over the globe, not your backyard or any particular city of choice. Some places will get warmer, others will get cooler, and yet others will stay the same. It's the overall global average that is going up, not your backyard.

Lastly, global averages have been rising. Now whether you want to believe it is anthropogenic (man-made), or some natural cycle, or a combination of both is up to you. The copious scientific research pretty much lays most of it at our feet. But what do scientist know compared to some semi-anonymous poster on a financial board.

As far as the article goes, I'm sending the author a bill for the bandwidth I had to use to download it. While it is pretty clear to see that market it is for some rocky times, it has little to do with some spooky global conspiracy or the general intelligence of the investing population. The sky is dipping, not falling. And for anyone on this board, that shouldn't indicate a time to panic, but a time to buy.

~X~