Gold Fever

[AnesthesiaMD]

Originally Posted by ndfmnlf

Meanwhile, gold is about where it was 29 years ago. Go figure.

"Well, there you go again." lol.

[ndfmnlf]

Originally Posted by AnesthesiaMD

I guess, if you want to use some aberrant number, staring off at 4x the real value as your baseline, then you are right. Compare the price of gold to CPI, you will see that inflation was in check while we were on the gold standard. Since 1971 CPI has quintupled and the price of gold has increased 20X. If you take ALL the historical data, and go by historical averages, rather than single points in time that suit your argument, you may view gold differently.

When Nixon delinked gold from the US dollar in 1971, the price of gold floated from $35/oz up to $850 in 1980. That increase in gold price was because of the one time event of delinkage of gold from the US dollar. Since that time, gold has not appreciated significantly. That one time event is not likely to repeat. After all, how can you delink something that is already delinked?

[AnesthesiaMD]

Originally Posted by ndfmnlf

When Nixon delinked gold from the US dollar in 1971, the price of gold floated from $35/oz up to $850 in 1980. That increase in gold price was because of the one time event of delinkage of gold from the US dollar. Since that time, gold has not appreciated significantly. That one time event is not likely to repeat. After all, how can you delink something that is already delinked?

OK, were going over old ground again. I'm fine with letting my argument stand against yours as it is.

BTW, by your rational, the S&P hasn't moved since 1997, while gold has quadrupled. Are you starting to see the futility?

[ndfmnlf]

Originally Posted by AnesthesiaMD

OK, were going over old ground again. I'm fine with letting my argument stand against yours as it is.

BTW, by your rational, the S&P hasn't moved since 1997, while gold has quadrupled. Are you starting to see the futility?

You're cherry picking time periods that support your argument. If I picked the period between 1997 to 2007, I can show you that the SP 500 gained an annualized return of close to 10%. The losses occurred in 2008, so if you include 2008 in your cherry picking, then I guess you'd be correct. But then again, do you know anyone who invests only in the SP 500? I don't. Maybe you do. Investing is not about putting all your eggs in one basket (either in stocks or in gold). Investing is about asset allocation which reduces risk without markedly reducing return. Have you heard of Modern Portfolio theory?

If some bonehead invested only in the SP 500, then he deserves to suffer all the losses he has experienced. The correct portfolio should be diversified across all asset classes: large, mid, and small US stocks; large mid and small foreign stocks; T bills, municipal bonds, and corporate bonds; real estate; and perhaps gold and other commodities.

So your argument pitting gold against the SP 500 is a false dichotomy. These asset classes are not mutually exclusive. Your argument is a sign of limited sophistication and investing knowledge. I suggest you read Eric Tyson's Investing for Dummies. Amazon.com: Investing for Dummies, Second Edition: Eric Tyson: Books

[AnesthesiaMD]

Originally Posted by ndfmnlf

You're cherry picking time periods that support your argument.

Exactly! Now you get it!

[Woof]

Originally Posted by ndfmnlf

The point I'm trying to make is if you have to sell your gold for paper money before you can make a purchase, then that kind of defeats the purpose of having gold as currency. Sure, gold might be a stable reserve (a questionable proposition given that the price of gold today at $850/0z is where it was in 1980), but assuming you are correct, how can you use gold efficiently to buy stuff if you still have to convert it to fiat currency to make a transaction?

That's why I said to convert it into whatever currency (or trade item) is valued by the provider of the service or good that you want. If you need a dozen eggs, and the egg seller accepts Swiss francs, then you sell a suitable amount of gold for enough francs to keep you in eggs for a few day. Chances are if one person accepts francs, many in the area will, so again you sell what's needed to do business for a few days.

Maybe francs will become worthless the next week, so then you buy some canned peaches or some Canadian dollars then to buy some beer.

Originally Posted by ndfmnlf

If civilization collapses, then gold will have no value. Food, medicines, shelter, guns etc are the things that will have value and what you'd want to have. Gold will have value only if a market economy continues to exist, and people exchange goods and services with each other using gold as currency. But in a state of anarchy and civilizational collapse, why would I buy food from you using gold as payment when I can simply rob you?

Beans, bullets, and bandages would be more important than gold in an extreme collapse, but try telling that to most people.

However gold will have some value in either a feudal society or a civilization like ours. If things get primitive but there's no true starvation, there will still be a demand for wedding rings and bling, someone will have something valuable to trade for them so they can have a "real" wedding, or for an ugly male to attract women who wouldn't look at him otherwise without a display of wealth.

As for robbing me, you wouldn't be able to do that because my tribe is stronger and better-armed than yours. Anyone who can't protect their gold or BBB might as well not bother stocking them.

[bluescityleon]

Originally Posted by AnesthesiaMD

I agree. I am mostly in T bills and cash myself right now.
I am 20% in gold because I think history may repeat itself when we finally do break this deflationary cycle. The fact that Volcker is chief econ. adviser reaffirms this belief. It's a bit of a gamble as this recession may last a long time, but I can afford to hold out for a while.

T is paying over 5% div IT IS BETTER THAN gold.SO ARE T bills,.......if our timing fails, all bets are off