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Yet gold today is at the same price as 2011, seems one would be losing money had they held it for a decade; not really an inflation hedge.
gold is never a moderate inflation hedge …..other assets do it so much better ….gold reacts strongly though as the fear of negative real returns grow worse on cash instruments….
there is a bigger link between gold and interest rates then inflation .
however gold has had a positive real return in 98% of market sell offs so gold responds to fear too.
which is why rebalancing is key to using gold because odds are once fear ends gold goes back down and equities bounce back up
Yet gold today is at the same price as 2011, seems one would be losing money had they held it for a decade; not really an inflation hedge.
You are really going to argue the merits of an investment by picking the top of a market and then conveniently truncate it to a decade ? Try that with housing from 2008 to 2018 in many parts of the country. Try that with equities in the 70s. How about Euro bonds? That was a real winner. Until this year energy has been quite poor for the last decade.
I have identified gold as a lagging inflationary indicator, because its really not a credit driven asset. Sovereigns and bullion banks don't borrow money to buy it, nor does a retail investor take out a mortgage on it. When it rises its usually during credit squeezes where all that newly issued credit seeks preservation. Its biggest competitor, bonds,...well good luck with that.
I am not even a gold bug... To them I typically have to try and talk reason in the other direction. They think its the solution to all our problems. Its not. Its kind of amusing really because gold once was the most corrupting form of wealth because it was very fickle. One does not come into large sums of wealth without some prosperity being created from industrial capital. Gold could just change hands. Just ask king Aegis about the ruin of Sparta. Before then it was fertile lands. Though now, an old enemy to corruption, as it often is, is the best ally against a new enemy.. $USD out of thin air is far more corrupting than anything we have ever seen.
You are really going to argue the merits of an investment by picking the top of a market and then conveniently truncate it to a decade ? Try that with housing from 2008 to 2018 in many parts of the country.
Housing is inflated artificially, as a former building material distributor; I know this fact all too well.
How can one compare this to gold?, which is certainly not over-inflated.
it is like those who want to benchmark gold to a price it should never have been at back in the 1980s .
all that matters is prices when you own it ,like any asset we buy
I have a little GE. Taking a look at the 20 year chart one could conclude it is one of the worst investments ever. I watched it a long time . However now I have a cost basis that computes to a 50% return when I picked it up last year. If you lump sum into anything at an all time high....
Housing is inflated artificially, as a former building material distributor; I know this fact all too well.
How can one compare this to gold?, which is certainly not over-inflated.
I completely fail to understand the point you are making. You took a top in a commodity and truncated it to a range to perfectly match your idea, which is ridiculous. I could do that with any commodity. its also interesting that you use a term like "artificially" with no real explanation.
There is nothing artificial about real estate's ability to suck up the economic surplus. You are merely referring to a shift into what gets the lions share of that surplus which is the financial end of the FIRE sector. With no interest rate risk being anticipated by the market real estate is worth what ever a bank will lend against it. However any movement by the powers that be will be just as "artificial" because the amount of credit flowing in the system is run by edict.
I completely fail to understand the point you are making. You took a top in a commodity and truncated it to a range to perfectly match your idea, which is ridiculous. I could do that with any commodity. its also interesting that you use a term like "artificially" with no real explanation.
There is nothing artificial about real estate's ability to suck up the economic surplus. You are merely referring to a shift into what gets the lions share of that surplus which is the financial end of the FIRE sector. With no interest rate risk being anticipated by the market real estate is worth what ever a bank will lend against it. However any movement by the powers that be will be just as "artificial" because the amount of credit flowing in the system is run by edict.
I know exactly how much it costs to build that now $450K home, $150K; people pay whatever the market dictates. I get it.
However, to put it as simply as I am able; my historical home is now worth 50% more than in 2011.
I could sell it today, and buy 50% more gold at the same price it was in 2011.
Had I bought gold in 2011 instead of the house, well...it just isn't a good hedge against inflation being my point.
I know exactly how much it costs to build that now $450K home, $150K; people pay whatever the market dictates. I get it.
Still not quite. Real estate is not fundamentally based upon the capital improvements of the property, which is why a house in San Fransisco will be 10 times the price of one in Kentucky with similar capital improvements. They have fundamentally different ground rents. Real estate is a mixture of human capital, the rearrangement of the material , and the material itself which cannot be created by human labor but can only be distributed.
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However, to put it as simply as I am able; my historical home is now worth 50% more than in 2011.
I could sell it today, and buy 50% more gold at the same price it was in 2011.
Had I bought gold in 2011 instead of the house, well...it just isn't a good hedge against inflation being my point.
Another act of truncation. 2011 was at the bottom of that cycle. Ask anyone who purchased before 2008 and you will get a different story.
Yes real state at the personal level is a good long term hedge against inflation. However its also the primary cause of it at the macro level because its the biggest source of credit flows. Eventually that credit starts chasing goods and services.
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