Posted on 05/27/2006 10:32:04 PM PDT by roostercogburn
My wife and I have recently purchased about 11K worth of gold. Our average buy price is at $650 per ounce. We have about another 15K of "mad money" we are not sure what to do with. We both have IRA's and money in some mutual funds. No debts outside of mortgage. This money is not emergency type funds. This is absolute "mad money". But I do not want to sit in a bank for 4%. With everything going on in the world, how safe are the banks anyways?
"Barrick"
I see the hit. Barrick is the one gold stock I would never buy becaused they are hedged way beyond their heads. It is very doubtful at this point if they will ever be able to profit from the coming increase in the POG.
Your guns and bullets are a good idea but you forgot booze.
"No way would I invest in a gold stock mutual fund."
You're like me you trader! Of course it would depend on Rooster's style of investing. I'm glad you did bring these up.
Barrick does hedge which is why I've been holding it for the last 7-8 years.
I was going to mention the booze, but then I get fearful that it could become an invitation for someone to think they could requisition my supplies after another hurricane.
Me, a trader? LOL...GM better drop on monday!
You've carefully neglected to describe your risk tolerence and investement objectives.
Fundamentally, there are three types of approaches to how someone cares for their money. There are investors, traders and speculators. I rarely see investors, who by definition are concerned about long term capital appreciation, take speculative risk with even relatively small portions of their portfolios.
Even if you are the type of person who is comfortable with plunking this kind of money on a roll of the dice at Las Vegas or Atlantic City the potential return is several time your bet in a controlled game with known odds.
I suspect from your albeit brief description of your situation, that you are not a desciplined investor. I further suspect that you lack any successful commodity investing experience.
Your current holdings are near 20 year highs with further appreciation a crap shoot at best. You didn't address the issue of an exit strategy, so I suspect you don't have one.
I also don't know if you would ride a downturn in the market to the bottom before bailing out as is typical of someone who jumps in near the top of a market.
By siginifying that this is "mad money" you seem eager to "let 'er rip" and lose most of it with little other than emotion as justification.
My advice is to at least get "comped" by a casino for air fare, hotel room and a short decent vacation for your money.
As for how low it will go, it doesn't matter to me. I'm a coin guy, so the Double Eagles I bought in 2000, that I sold last week, are really all I know.
Other than this, a US coin will never drop below face value.:)
Gold has been a bad investment since the early eighties. It has regained the lost value over the last 20+ years and will likely drop back before it tacks upward again. Hence, over that period it has increased in value by less than 1%. So someone who bought gold at the 1980 price would have paid far more than the appreciation in storage costs and commissions.
It is not a good investment but almost purely a speculation. This does not, of course, mean that NO ONE makes money speculating in it but there are much more profitable means of speculating. It will never skyrocket or make dramatic leaps upwards.
"Me, a trader? LOL...GM better drop on monday!"
A shortie A? Don't you hate 3 day weekends? hint hint
Too lote. You missed the run up. If you did invest, the bottom would drop out about the time you were thinking you were starting to make some decent money.
You should have got in at $300.
Assuming "domestic" means "Canadian".
Not to bust your balls or anything, but a major chunk of the gold mining market is controlled by Canadian companies, even in the US (a major gold producer). Not an argument, just nitpicking a technicality. :-)
I am not particularly bullish on the price of gold. The internal reserve numbers for companies like Barrick and Newmont deviate significantly from their published reserve numbers in that the internally estimated reserves are significantly larger than the published reserves. This is evidenced in the percentage of production that is not produced from any previously published reserve.
If I was going into metals, I like the platinum group much better.
Gold and silver should theoretically be independent in the market. Gold is a primary ore, but a massive chunk of silver production is as a secondary ore. Silver is a byproduct of gold, copper, and lead mining (plus a few other metals like tin) to a significant extent, and has very different economics as a result. To a significant extent, silver is a waste product of mining for other valuable metals. If demand for primary metals like gold and copper increases, silver supply will increase as a result regardless of demand. Gold supply tracks demand, but silver supply tracks the production of other metals and so the price is set by supply (in theory).
While Barrick is HQed in Toronto, Newmont is HQed in Denver.
its a bit spendy... not sure how much you have to invest... but maybe would be more wise to look for cheeper stocks.
Your link didn't work for me, but I certainly agree about creativity. That is what creates new wealth and enlarges the size of the pie. I think Warren Buffet would advise someone with $36K mad money to look around and invest in something he knows and understands. One would think that surplus indicates he knows something about making money.
Since you are in a comfortable position ask yourself what you would do if you lost your job for a year or the power grid went down for a month. Do you need to think about having more cash on hand than you do now, what about buying a generator, food supplies or perhaps set up a better security system for your residence? What can you do to hurry your or your wifes retirement so that you are truly independent?
There's lots of things you can do to make your life easier without sinking your money into places/ideas/programs that you know nothing about. Do you have any idea when to sell your gold, what the indicators are to sell. I think you probably bought because you've been reading about the idea for a couple of years.
Following the crowd isn't my style, especially if they are getting their information from the TV or newspapers. Earn your money in areas that you are familiar with, hire a couple of proven experts to guide you and keep it 100% legal so the law isn't going to come after you.
Myself, I like the idea of having a shoebox full of small bills close at hand. If I need to hire a biz jet for an emergency flight somewhere at 3:00AM, I don't want think about going to the bank for cash or registered checks. In a town where your name or face isn't well known, cash will do a lot to getting people to do your wishes without hesitation or question.
So, if you truly are in a comfortable financial position don't bother worrying about the loss to inflation on your cache of cash. That's one cost of independence I accept glady.
If it comes to that, one uses the guns and bullet to GET the booze.
I have plenty of cash kept locked away.
And plenty of guns.
What do you think the chances of OPEC trading oil in Euros instead of dollars?
One word, "Plastics."
Do that anyway until you pick out a municipal bond or two for purchase.
"What do you think the chances of OPEC trading oil in Euros instead of dollars?"
That is why I hire professionals to guide me in where I make my investments. I let them do the research on cause and effect about such things. They may even use their research as part of an 'argument' of why investing 'here' or 'there' is a good idea.
I will ask the question next month when we have our meeting.
Check your FR mail.
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