Posted on 05/27/2010 6:47:03 AM PDT by SeekAndFind
This is a very sad day for me.
In Part One of this series, when I argued that gold might be about to go vertical, I made a whole bunch of new friends among the gold bugs.
And now I'm going to lose them all.
That's because even though I think gold might be about to take off, I don't recommend you rush out and put all your money into gold bars or exchange-traded funds that hold bullion.
And this is for one simple reason: At some levels, gold, as an investment, is absolutely ridiculous.
Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
And that's not the half of it.
Gold is volatile. It's hard to value. It generates no income.
Yes, it's a "hard asset," but so are lots of other things—like land, bags of rice, even bottled water.
It's a currency "substitute," but it's useless. In prison, at least, they use cigarettes: If all else fails, they can smoke them. Imagine a bunch of health nuts in a nonsmoking "facility" still trying to settle their debts with cigarettes. That's gold. It doesn't make sense.
As for being a "store of value," anyone who bought gold in the late 1970s and held on lost nearly all their purchasing power over the next 20 years.
I get worried when I see people plunging heavily into gold at $1,200 an ounce. What if the price goes back to where it was just a few years ago, at $500 or $600 an ounce? Will you buy more? Sell?
(Excerpt) Read more at online.wsj.com ...
I think we are all on the same page here. When things are going well the value of gold tends to decrease as other monetary units are considered safe. When things are risky gold increases because it is seen as retaining value relative to other monetary units. But when the **** totally hits the fan, when the society has completely collapsed, it has no value other than as a piece of pretty metal. Unless a huge asteroid hits the planet I dont see society falling that far. That being said even in prehistoric times, people valued gold for its use in jewelery or as a show of wealth.
Well, since I already have rice, beans, canned food, plenty of water, and veggies in the garden, I'll take the gold.
During recovery, I can turn that gold back into something valuable, whereas the pile of mold that was once an unneeded loaf of bread won't be worth much.
These "you can have this OR that" type questions are pretty silly.
“and takes steps to match money supply growth to growth in real productivity”
What a pathetic expectation. You know, back in the day, when an economy grew prices actually dropped, because the money supply stayed (roughly) the same. Which is possible, you know. The money supply does not have to expand, no matter what some people tell you. Anyway, people’s wages were stagnant, but they could buy more. Which was fun and made everyone happy.
But then the counterfeiters came to town, and they made everyone accept their funny money, and they stole real things from the people, which made prices go up, which made people able to buy less. But their wages went up. Eventually, after the counterfeiters already got their cut of the loot. Which helped. But the counterfeiters never stopped buying stuff with their funny money, which made things so confusing all the time that no one ever bothered to pause, go back, and wonder whatever happened to the time when prices didn’t always go up.
“Without that one utility (and slight electronics which would not be there at higher prices), it would be NO DIFFERENT FROM A FIAT CURRENCY. Artificially inflated value beyond real”
Oh, please. Grow up and think things out for a second. It’s infinitely easier to put more ink on more pieces of paper than to find and mine more gold. Also, it’s infinitely easier to counterfeit a piece of paper than a piece of gold.
Greeceland is a good example.
The inclination to manipulate the money supply via the production of fiat is simply too strong. We’re evidencing that now with the dollar having lost over 95% of its value since 1913 with the depreciation accelerating recently.
From roughly our founding to 1913 the dollar appreciated in value by nearly 11% when it was backed by gold and couldn’t be created out of thin air. The founders understood this danger very well and thus resisted the drive to establish a central bank and prohibited the states from issuing bills of credit although they could issue legal tender in the form of gold and silver.
I simply don’t trust anyone to control the supply of money. There needs to be an external restraint tied to the true wealth of the state. A group of guys meeting on a monthly basis doesn’t meet that requirement. They’ve gotten it wrong time and again leading to a series of rolling bubbles as this hot money seeks a home.
Gold is no different from any other commodity... its value is determined by supply and demand. We haven’t come close to exhausting the supply (there’s far more to get when the price is worth the effort) and in a true global crisis, who will be demanding it?
Of course, chances are that civilization won’t end, and we won’t all be fighting for toilet paper. We’ll just have hyper-inflation and our paper currency will lose value, or the stock market will crash again. In that case, gold will help people weather the storm without wiping out all their savings.
I wish I had some of my kids’ college funds in gold before the stocks went south. Gold isn’t the perfect investment for every scenario, but it does have its’ place in a well balanced portfolio.
Please stop insulting people based on your portfolio, or your planned portfolio.
Every single time anyone says anything not perfectly positive about gold, one of them has a personal insult for them. I’m sick of their behavior. It’s ALWAYS personal for them, because it’s their nest egg.
You, sir, should consider your own words.
Traditionally, 5% is the max you should have in your portfolio in gold/silver/&c. It’s because the larger players can manipulate the price - making it a high-risk investment.
Personally, I buy bullets and my SOCOM 16 has gained more value than my Washington Mutual stock.
Why make bread when you can take bread. (joke... sorta)
“infinitely easier to put more ink on more pieces of paper than to find and mine more gold”
But arbitrarily increasing the value of gold on a computer to some notional value beyond it’s intrinsic value is NO DIFFERENT FROM PRINTING PAPER!
Now, I’m totally confused. Freepers are way too smart. Every post I read I change my mind. I was about to the point of buying gold. Now I’m thinking silver coins. Then I see “Don’t buy gold unless you can afford to lose money.” I can’t afford to lose right now. I don’t have that much to invest to begin with.
The other side is do I bet on a “mad max” scenario or just a depression. And I simply don’t know. The worst is survival of the fittest. If it’s “only” a depression the government will keep printing money and I’ll get in the welfare line. Personally, I’m betting on Max.
So, I think the safe bet now is to buy basic survival items. And an acre of land to set up a tent if I can find it for the right price.
The scary thing is the fact that intelligent people are talking like this when ten years ago we’d have all been locked up on a looney farm. But those people who WERE talking like this ten years ago are set to go!
I don’t want it as a collector’s item - I want it as an object lesson for my children.
Wish I had enough $$ to do both. :-(
A little over a year ago 500 rounds of .22 long rifle sold for less than $8. Now the same box is $19.
I agree that gold is a good hedge against inflation. I heard a quote once that in 1910, a one ounce gold coin would buy you a very nice suit...and it 2010, it will still buy you a very nice suit.
Over time, gold pretty much follows inflation.
...but its the selling of gold as a hedge against end of civilizaation scenarios that Dave was talking about.
And also, since it is a commodity, he would suggest just investing in a cd, which is much safer....what would happen to gold prices if next week somebody found a huge deposit, or somebody developed a way to extract more gold out of existing mines? I think this actually happened to silver once, and the bottom fell out.
>>>The hard truth told, Gold in a crisis is useless. And, it is hard to carry in your pocket. In crisis, where and who are you going to sell your gold to? How much food could you buy with a bar of gold? If you pull out gold coins to pay for something - will you have a big hairy guy following you out of the grocery? Food, water and ammo is what you need.
Before the Great Depression, one of the owners of George Ranch (near Houston, TX) believed the financial institutions were too frothy, so he exchanged his then liquid paper assets for gold. After the collapse, he used that gold to buy out MANY surrounding farms, amassing a huge land area. After the last heir died, this farm was (largely) donated to the State as one of our best state parks and the farmhouse was turned into an operational working farm for the public to visit. The tour directors very clearly told us, it was because he converted to gold that the family and the farm succeeded while others collapsed.
As a side note, this farm was handed down through the wives as they outlived each of their husbands (often serving in the military and killed in war).
So the price of a nice suit has increased 300% in the last 5 years?
Bad analogy.
Are conservatives hoarding all the gold that liberals want to buy?
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