Posts
Simple question.
Re: Should I buy more Gold or a Volvo?
Don't spend a dime you don't have to. Buy more gold. Do not spend right now. Your Car is good for 10 more years if you take of it. You need to buy Gold with this money you have. You will need your gold before the Dollar Collapses under its own weight and distress. And if you Don't have enough you may be Completely wiped out. My View.......
I am going to argue that the first sentence is rational and the part about the car is rational. I think the rest is open for debate. I think two intelligent investors could each come up with different conclusions on the rest of it and this is not really what I am questioning here.
This is. It is written by the very same person.
Re: Should I buy more Gold or a Volvo?
Larry, i bought 100 Austrian 1/10 ounce last July when Gold was $935-, i paid $108.57 that day for them. A huge premium i paid. But i knew gold is dirt cheap, so now they sell for over $144 per coin on APMEX. No worries about an extra premium for the fractionals. When Gold Goes to $2,500 or $5,000, or even if it reaches my target of $7,500, you will look back and realize the premium never mattered.
So let's combine the two posts. Is this rational?
1. "Don't spend a dime you don't have to."
2. "A huge premium i paid.... No worries about an extra premium...."
Never spend a dime you don't have to spend. That's great advice. Yet there he was spending dimes he didn't have to and now telling others not to worry about the premium either.
Northwest Territorial Mint: American Gold Eagle Coins
If you buy 10 one ounce coins it will currently cost you $12,772.00. You can sell them back instantly for $12,312.00. You'll lose 3.6%. That's not bad all things considered. I paid a similar premium when I bought physical gold in 2004 and sold it in 2006.
However, if you buy 100 1/10th ounce coins it will currently cost you $15,530.00. You can sell them back instantly for $12,462.00. You'll lose 19.8%. That's an incredibly bad deal.
You won't be able to haggle when you go to sell either. The Mint is not going to pay you extra for the 10 ounces of gold just because you paid too much when you bought it. All they care about is how much gold you have when you sell. That's pretty much it.
This is exactly the sort of behavior we saw in real estate. Real estate investors were also willing to pay a premium because they were convinced that prices would only go up. How did that turn out?
If you absolutely must own gold even at these prices, then at least buy as much gold as you can for your money. Don't assume that you can overpay for gold just because you think it is destined to skyrocket in price. In other words...
Don't spend a dime you don't have to!
Just something to think about.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
18 hours ago
14 comments:
Geez Mark!
I am not getting dragged into this again. Gold has been money for, well ever, and it holds its value no matter what. I would agree there is too much "stupid" money in gold and when that exits it will drop. To what? $1000?
Smart money is moving into gold as well as many central banks. I find it the apex of irony that the IMF will have to sell gold to get cash to pay for bailouts. Its like a cartoon.
Sadly too many now think gold is good in all of the following:
-inflation
-deflation
-world ends
-world re-begins
-natural disaster
-add your own
Still, the macro view on metals (gold and silver) is intact and the new round of fiat printing, when its clear the last round did not do squat) will mean higher prices.
Other than that I have nothing to say...LOL
GYSC,
Gold has been money for, well ever, and it holds its value no matter what.
1. Gold is not money. I cannot pay my bills with gold. I must sell gold to someone else first in order to come up with the money to pay my bills. In that respect, it is no different than owning a used bicycle (other than the fact that a used bicycle has an actual use to me).
Money
Money is anything that is generally accepted as payment for goods and services and repayment of debts.
Gold most certainly does not meet that requirement.
2. Gold does not hold its value no matter what. Gold hit $850 an ounce on January 21, 1980. Those who held it exactly 20 years and sold it on January 21, 2000 only got $287.75 for it. Adjusted for inflation as seen in the CPI-U, it lost 85% of its value. That's even worse than the Nasdaq's collapse of recent years.
So with all due respect, if you want to list off the reasons gold can still go up in price from here that's fine, but please don't go tell me that gold is money and it never loses its value.
Further, even for those who think gold is the oldest form of money and it is therefore somehow special are rationalizing the investment/speculation. It's not even close.
What is money?
The use of cattle as currency is thought to be the oldest form of money - dating back eight thousand years. Three thousand years ago, the Chinese used cowry shells. And from 1,000BC they made cowry shell imitations out of base metals.
I'd much rather be hoarding cattle and the things that feed the cattle than gold at these prices. At least I can eat cattle and also eat what they eat, at least in theory.
As for smart money moving into gold, that's your opinion. My opinion would be the opposite. The smartest money already made a killing. The lowest lying fruit is now gone.
Even Soros, a believer in riding parabolas long and hard, reduced his gold holdings in the first quarter. It certainly wasn't because he thought it was tremendously undervalued.
Soros Holdings
Soros, who took a significant position in SPDR Gold Trust (GLD: 119.19, 1.23, 1.04%) in the fourth quarter, lowered his position to 5.2 million shares, or $566.9 million. He initially reported a position of 6.2 million, or $663 million at the end of 2009.
If there is one thing Soros is good at, it is spotting bubbles.
May 26, 2008
George Soros: rocketing oil price is a bubble
"Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.
If you will recall, that was said in May 2008 shortly before oil collapsed in price.
However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.
Bingo!
June 12, 2000
Soros abandons the markets
Announcing this, in a brief message recently, he said, ``I am very happy to pull my money out of the market.'' Mr. Soros further explained that he no longer had any faith in the way the stock market behaved.
Bingo! He rode that one right to the very top and then stepped aside as it came crashing back on down.
I would agree there is too much "stupid" money in gold and when that exits it will drop. To what? $1000?
You think $1000 is your downside limit? Really? It is that much of a sure thing to you now?
Well, at the risk of defending the indefensible, and I should say, the original author showed none of this reasoning in his own justification, if one were buying in with a mind to sell to _really_ dumb money, that is speculating on a greater fool, the 1/10 oz-ers might be a rational purchase. Really dumb money will never be able to afford a full 1 oz coin, but they might be able to swing a 1/10 oz-er marked up a ridiculous amount. (Um, claims to Eagles, Maples, Kruggerands, 1oz bars, and 10oz PampSuiss notwithstanding.)
Note, really dumb money should not be confused with stupid dumb money. Stupid dumb money will buy a 10% alloy marked up 10 times above its base metal content. Of course to sell to stupid dumb money you have to have a serious marketing budget to advertise on late-night TV and newspaper magazines. Internet message boards, despite seemingly all evidence to the contrary, aren't a stupid enough demographic.
BTW Mark, How am I funny?
AllanF,
You are scary funny, lol. ;)
2 thoughts:
Under none-too-hard-to-imagine economic conditions, the guy with the Volvo dilemma could well get to a position where he wont be able to afford to run any car.
Where will you (and everyone else) keep your cows that you/they would rather be hoarding and how will you keep them secure?
Stevie b.,
Although I have some inflation protection with TIPS and I-Bonds, I will still be financially ruined if we hyperinflate. I have stated this time and time again. It is the risk I run.
That said, the 1970s would have financially ruined me too. I would have been SO sure that inflation was a permanent feature of our economy that I would have held gold WAY too long and been forced to sell it long before it recovered in price. I know for a fact it would have ruined me. I was too young to know any better.
My one saving grace is that if I am financially ruined then at least I won't be first and at least I will have more canned goods, toilet paper, and aluminum foil than anyone else on my block, lol.
Further, in the eyes of the typical Chinese worker that alone would make me well off! ;)
I am choosing not to defend myself against a situation that offers me no suitable defense. If things turn THAT bad, I will most likely be shot and mugged simply buying groceries even if I did have gold. And yes, I do own a handgun. Although I am a decent shot with it (more than a few hours at the gun range), I know that a man's got to know his limitations.
Man's Got to Know His Limitations
Put another way...
If things turn so bad that I have to defend my house more than once (assuming I can do it successfully even the one time), it probably isn't going to matter all that much if I have gold or not.
We'll be in a Mad Max world and the lack of gold will be the least of my problems.
Mark - easier to defend your castle (with a few like-minded others perhaps) than to defend your cattle. Although things really aint that bad yet, I know farmers who are already suffering from rustling - and they live a lot nearer to their cows than you would!
Stevie b.,
Oh I hear you.
My "cattle" are within my castle. London broil keeps 2 years in food saver bags. If the power goes out and stays out I "can" also rustle up plenty of tuna. Pun intended.
Once again, we joke that I have an apocalypse pantry. In reality, it isn't. I just can't think of a better place to save the money. It's just a form of savings to me.
If apocalypse does strike (say nuclear war in an unstable world), I'd prefer to be at ground zero and go out with a bang. I'd also want my last words to be something extremely sarcastic! "Peak Civilization! Woohoo!"
Let's hope we don't go there. It is a longshot.
"Peak Civilization! Woohoo!"
Nice epitaph perhaps!
The point really is that you now seem to be using "cattle" as a catch-all for food in general, and comparing historical food prices to gold must be full of an awful lot of (impossible?) variables - unless, of course, you know different?
Stevie b.,
I know with 100% certainty what canned tuna is worth to me. I can buy it right now and lock in that value.
Or...
I can know with nearly 0% certainty what gold is worth to me (since it has no direct use to me) on the hopes that I can find someone else someday to prefer it over their canned tuna to the point they will trade me for it. The less I have to rely on that "someone else" the better.
Further, the government can and will tax the inflationary gains in gold. I certainly paid a lot of tax in 2006 when I sold. Gold therefore actually needs to rise faster than prices in general to even be a decent inflation hedge. I do not trust it to do that.
I was willing to take the chance on gold when it had decent value relative to canned tuna (in my opinion only) but I'm just not willing to take that chance now. The higher gold goes, the more it makes me want to hoard OTHER things that haven't gone up in price much.
Mark - superficially attractive if we get to economic ground zero, in which case i hope you've got a big house...but anyway, looks like you've gone off the idea of keeping meat & milk via 4 legs.
Don't get me wrong, I've got tinned corned-beef, rice, pasta and yes, tinned tuna too. But I'd guess (and who the hell knows of course) that before we ever get to the stage of throwing the gold out with the bathwater, there'll be plenty of opportunity to sell it first.
Nice chatting!
These fly-by-night commenters crack me up. So in the Great Depression II, when folks cannot even afford gasoline to fuel their 12 year old BMW's, gold is going to make them all rich???
Oh, right -- they'll sell it all and buy canned meat. Just before the 2012 Olympics I'm sure.
AllanF,
Here we go again. If you are selling just before the Olympics then I will need to sell the day before you do. Of course, you'll know that and try to be smarter than me.
What a trip down memory lane this is.
Savvy Chinese Know Exactly When Bubble Will Burst!
That was one of the more amusing exchanges in this blog's comment history. It is especially amusing in hindsight, since the sarcasm nailed it.
You: This is all so confusing, maybe I'll just beat the rush and sell August 1.
Me: I'm selling on July 31st!
A friend strategically placed in the audience: July 30th!!!!!
I suspect that within a few minutes of bidding we'd cause a stock market collapse. Just a theory!
The Chinese stock market peaked at 6092 on October 16, 2007.
The day we heckled it was 5536.
It now trades at 2500.
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