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I came across this 2018 video from Warren Buffett, and frankly, I have seen others where he is even harsher in his denunciation of bonds. Here is the relevant quote (emphasis mine; this statement occurs at 29:59 in the video): https://www.youtube.com/watch?v=isUcApqOPIM&t=1833s "That’s why I’ve said for a long time that equities were the place to be. I mean, there’s been no comparison. To me, it’s just been absurd to see pension funds and those people, in the early teens of this century, saying, 'We ought to have 30 or 40% in bonds.' There’s no comparison. A bond that pays you 2% is selling at 50 times earnings, and the earnings can’t go up. And the government has told you, 'We’d like to take that 2% away from you by decreasing th...

This question I suppose concerns a corollary of dollar cost averaging. I've seen the posts that lump sum investing seems to perform better than dollar cost averaging. But how about when it comes time to make withdrawals during retirement? Is it better to take a lump sum once per year or take withdrawals on a monthly or even bi-weekly basis? Lump sum is better 'on average' but will also tend to have the worst individual worst case. More extreme/volatile individual outcomes. That tends to hold for other measures, the best as-in 'average' case often aligns with that also having the best individual best case, and the worst individual worst case. Relatively few if any investors achieve the 'average' as they're just a single sample within the se...

GAAP wrote: ↑Mon Mar 27, 2023 1:41 pmBut you were responding to a post that was directly about those total disaster situations -- specifically "what gold in the form of a put option against civilization might offer".

Forgive me, went off-rail and forgot. I tend to dismiss such Mad Max worlds as being just fictional, that if ever they did become real likely I wouldn't be around to partake of anyway (I'm past being a potential contender for survival of the strongest). A extreme for me might be like the Afghans - where 10 gold one ounce coins might very well have bought your family though the otherwise locked/guarded gates and onto a plane.

Thanks for all of the info. One particular shocking stat. The safe withdraw rate for Japan is 0.26%. Only if they were speculators, invested in domestic stocks and bonds, rather than investors who diversified risk such as including holding some gold ... oh wait! Aren't those who hold gold considered as being the speculators ??? :oops: :D Ancient Talmud advocated thirds each land, business, in-hand. In today's terminology maybe own your own home, perhaps one in the UK, stocks - a third in US$ (US stocks), a third in gold. Three currencies, three assets. Internationally (geopolitical risk) diversified. Some used to store gold in Swiss vaults, Singapore however seems to be the more recent preference. Gold in a Swiss vault, UK home, US$ with a...

The key assumption here is that T-Bills/Treasuries/USD still have value through the entire simulation. The dollar will lose near all of its value, just a matter of time with fiat currencies, a certainty. Only the speed is unknown/variable. The dollar is less than 5% of its value a century earlier, so has depreciated at least at a rate of 0.05^0.01 -1 = -3% annualized. Commonly called inflation (of goods/services prices), rather than deflation of fiat-currency value. One hopes that depositing/investing will negate that decline. In contrast another might value a ounce of gold in US dollar purchase power terms much the same if they were buying now, or a century earlier. The price of gold is inclined to increase as the fiat currency value decl...

What if you stuff $100M into your safe, alongside $100M worth of gold, and drop the remainder $100M into a stock index accumulation fund. Spend that safe money first, perhaps dollars and then gold as dollars are more inclined to deflate. Some years later, the safe is empty, and as you spend the last dollar or gold coin you're at 100% stock, having started at thirds each stock/cash/gold. Fiddly to measure, but a reasonable alternative is to assume the time weighted average, 67/17/17 stock/cash/gold and measure that. Now instead of hard US dollar bills in the safe, those dollars might be deposited with the treasury, T-Bills, that are fully protected no matter how much you deposit, and in effect pay interest that goes some way to offset other...

What if you stuff $100M into your safe, alongside $100M worth of gold, and drop the remainder $100M into a stock index accumulation fund. Spend that safe money first, perhaps dollars and then gold as dollars are more inclined to deflate. Some years later, the safe is empty, and as you spend the last dollar or gold coin you're at 100% stock, having started at thirds each stock/cash/gold. Fiddly to measure, but a reasonable alternative is to assume the time weighted average, 67/17/17 stock/cash/gold and measure that. Now instead of hard US dollar bills in the safe, those dollars might be deposited with the treasury, T-Bills, that are fully protected no matter how much you deposit, and in effect pay interest that goes some way to offset otherw...

A number of past Fed Chair have indicated that gold was a meaningful factor in their policy setting. More a case of still 'on' but in a more loose manner, with periodic 'off' events (even when on the gold standard periodic 'off' type events occurred). That influence is based on the observation of when not so (not setting policies with gold in mind) bad things tend to happen. Yes, but if you want to pay attention to that, look at recent central bank purchases of gold (which I posted upthread), not what happened in the 1930s. Fundamentally however the history indicates the cyclical nature, gold isn't just a post 1970's thing, but has financial history dating back millennia. Fiat (US$) and commodity (gold) currencies have played-off since the...

Optimal is subject to the time/data/circumstances measured across Pre 1930's and bonds yielded similar total returns as stocks (money was gold, deposit that gold for interest - returned more gold). From the 1930's and direct gold/money convertibility was ended, after which a 50/50 stock/gold barbell held up well against stocks While historically interesting, we're not on the gold standard anymore. A number of past Fed Chair have indicated that gold was a meaningful factor in their policy setting. More a case of still 'on' but in a more loose manner, with periodic 'off' events (even when on the gold standard periodic 'off' type events occurred). That influence is based on the observation of when not so (not setting policies with gold in min...

Optimal is subject to the time/data/circumstances measured across

Pre 1930's and bonds yielded similar total returns as stocks (money was gold, deposit that gold for interest - returned more gold). From the 1930's and direct gold/money convertibility was ended, after which a 50/50 stock/gold barbell held up well against stocks

Gold (finite commodity currency) since the 1930's has been a competitor to the US dollar (unlimited fiat currency) and vice-versa. That competition has somewhat followed a periodic up-spike in gold, followed by prolonged decline type motion. A saw-tooth type progression. 1930's up-spike, another in the 1970's, another more recently. So somewhat a 40 year type interval (that may have changed now that gold is free-traded/market priced). Gold is for the long term investor, or short term speculator. Between the 1980 up-spike up to the end of the 1990's lows and gold declined in nominal price, let alone in real terms. 50/50 with stocks however and as stocks did well during those gold price declines years there was much repeated selling of some s...

You can deposit as much as you like into T-Bills with them pretty much being totally guaranteed, physical gold in-hand totally eliminates counter-party risk, but has its own risks such as security of storage. Stock/Bond (T-Bill)/Commodity equal exposure diversity - such if concerns were increasing as to brokerages, concentration of wealth via a single counter-party, then the diversity of also holding T-Bills and gold might be more comfortable ...etc. Don't forget, governments can also make owing gold illegal -- we did here for 40 years. Gold doesn't serve the same purpose now as it did. The closest financial instrument probably now TIPS. So, yes, they could probably convert your TIPS to nominals. Although, they'd probably start by changing...

GAAP wrote: ↑Thu Mar 23, 2023 1:20 pm Don't forget, governments can also make owing gold illegal -- we did here for 40 years.

Only American based physical investment gold had to be submitted (compulsory purchased), most of the rest of the world still traded gold. Americans could have phoned a London or Swiss broker to buy/hold/trade/gold outside of America. Also when gold was money, gold coins, so also was silver, smaller change. Typically there were also paper versions also, but with direct convertibility. For instance a British holder of a One Pound Note could go into a bank and swap that for a One Pound gold Sovereign coin and vice-versa. Silver substituted gold relatively closely.

Many stocks borrow, such as issuing corporate bonds. In effect when you buy stock shares you are also buying into a element of short (sold) bonds. Borrowing to invest tends to just scale volatility, more broadly rewards tend to still be much the same as not having borrowed. If you consider stocks to be 1.5x leveraged due to having borrowed, then its not unreasonable to de-leverage that exposure, opt for 67/33 stock/bonds (which could equally be held via the likes of thirds each in 2x stock/gold/T-Bills ) The broader tendency for that might to to see the 100% stock zig-zag around the 67/33 stock/bond, similar overall rewards, but with more volatility. If you buy stock, that in turn sell some bonds, and you also buy those bonds, then that mig...

The US dollar has lost more than 99% of its 1930's gold purchase power, that's a pretty traumatic crash. Shiller's data for 1946 indicates a S&P500 price of $18.02 and a dividend of $0.71, so near-as $18 bought you a 4% dividend income flow. In 1986 the S&P500 price was $208.19 and for that you received a dividend of $8.28, so also bought a 4% dividend income flow. Both of those dates were selected for that 4% dividend income stream alignment, to level-the-field so-to-speak. S&P500 price gain (dollar decline) over those years, a 11.5 factor. Price increase (dollar decline) over the same period for gold = 11.3 factor ($34.7 1946 gold price, $393 1986 gold price). So you could have held gold, and seen its stock dividend yield purc...

A present-day Turkish person mitigating lira inflation wouldn't have to pay for food on the way out of the country using gold, ETFs, or anything other than Turkish lira. And then use currency of wherever they're going (euros, dollars, dinars, etc)....if they're fleeing at all. These "WWII Jews fleeing and bribing guards with gold" type scenarios aren't really what is happening today with many people living in highly inflationary (but not quite hyper-inflationary) currency regimes. They're often not even trying to leave the country -- they're just trying to protect their wealth from inflation, capital controls, etc -- and and ... counter party risks? https://www.bogleheads.org/forum/viewtopic.php?p=7172658#p7172658 https://i.posti...

Gold as fire insurance? No, at best it sounds more like earthquake insurance (10% deductible on the total policy). I do buy earthquake insurance, and I did buy flood insurance in the 500-year flood plain, not just the 100-year flood plain that FEMA recommends. I don't hold gold except for the ring I'm wearing. Gold as a store of value? Yes, but in those doomsday scenarios you need to have physical gold, a way to protect it, a way to transport it to a better/safer location, and someone willing to accept it as payment. I'm more likely to accept food than gold in that sort of situation. Gold arguably provided a better return when currencies were linked to it precisely because that linkage led to deflationary events that improved gold returns....

If you're going to hold (as opposed to trade), I prefer the mini-shares version of SPDR Gold, GLDM, for it's lower ER compared to GLD. In my British tax exempt account, you aren't allowed to hold foreign currencies and conversion for small/modest amounts has a 1.5% FX cost, 3% round-trip. Similar to gold coin spreads through dealers. In gold clubs you'll often find both buyers and sellers content to cut out the middle man and buy/sell at spot. Some self-insure, store/hide wherever for no additional cost, rather than having it on record at some insurance company that you have $x value of gold that under the terms has to be stored in a safe - that can be opened with a pencil (held close to a loved ones eye). But funds are easier to sell fixe...

In pre 1930 times when gold and silver coins were money, worth their weight, savers might have been inclined to be content with lending/depositing surplus money into bonds, as per that earlier chart I posted, where total returns compared to stocks https://i.postimg.cc/43ZsN8C5/i.png What bonds? Well maybe a 1 and 20 year treasury barbell perhaps. What about when that ended however, 1931 UK, 1933 US, when bonds (deposited gold) transitioned from being positive real due to inflation broadly averaging 0%, to where inflation became predominant (a form of taxation)? Well a barbell of 50/50 stock/gold combines in a somewhat similar manner to how 1 and 20 year treasury combine to a central 10 year bullet, two polar opposites. Combining somewhat to...

-0.43 correlation between 15 year 8% SWR outcome for stock and gold https://i.postimg.cc/2SQ4810L/c.png For much of 15 year start years a 50% stock allocation and 8% SWR (so 4% relative to total portfolio value) ended those 15 years with a decent amount of the start date (real) value still remaining. In some cases ended with more than the start date value available. In other cases would have drawn down into negative territory, i.e. ran out of money before fulfilling that objective - but when so, often gold did OK as a alternative. You wouldn't be inclined to start with half in stock, half in gold and draw 8% 15 year SWR solely from one alone until exhausted, more generally you just pick whichever is doing the better at the time, i.e. is the...

One of the sayings I've heard is that 1 oz of gold will buy you a quality men's suit at any time in the past few hundred years. Apparently tailoring hasn't gotten cheaper over the centuries. But salt has :) Many Roman soldiers paid in salt for their suit, that was prized/valued at the time. Whilst a Roman suit costing one ounce of gold might equally see a ounce of gold buy a good suit in modern times, in terms of salt suit prices have soared. Anything, stocks, gold, salt, iron, whatever will tend to see prices pace inflation if the supply/demand remains the same. Or otherwise see prices rise to exceptionally high, or decline to very low levels. Gold is inclined to broadly offset inflation all the while whilst central banks tend to value it...

Which highlights how inflation is a job form of taxation. Not disagreeing with you, just highlighting that the above is true if you have assets. If you are in debt, inflation can be your friend, depending how the debt is structured. Just continuing the just-saying sideline :) .... When I've looked at employing 2x leverage, such as 50/50 2x stock/gold instead of 100% 1x stock, I noted that even with just yearly rebalancing the two tended to compare reasonably PV . With higher leverage you need to rebalance more often, a third 3x, two thirds bonds for instance aligns better if you rebalance every six months. For Zvi Bodie's 10/90, 10% in 10x leveraged Traded Options, 90% in safe, then you need to rebalance monthly. Based on that, I've used s...

I see the argument, but I'm not convinced. Could you elaborate on how gold could grow its real value over the long term (call it 50 years plus)? It is easy for me to accept that outcome over any shorter term, call it two or three decades, in the spirit of over-shooting. But I do not see how gold could grow in real value (=real spending power) over the long term. UK ended direct gold/money convertibility in 1931. Comparing share and gold price increases since then and demand for each waxed and waned https://i.postimg.cc/sxq8dHzs/i.png At around 60 years later (1990) gold bought a similar amount of stock shares. Step back a decade prior to that (to 1980) however and gold bought considerably more stock shares. If instead you stepped on a deca...

Just stating the obvious, but in January 1982 the U.S. Treasury 10 year yield was 14.4%. Today it's 3.5%-4.0%. So there has been a strong tailwind for bond returns for the last 40 years. And this tailwind can't repeat since the yields can't go significantly negative. So that also skews the stocks/gold vs. stocks/bonds comparison for that time period. But every time period has its own problems... Bond returns primarily come from interest payments, where regular interest payments are typically taxed. Discounting a 20% average tax rate and comparing to gold since the ending of money = gold https://i.postimg.cc/L8SWqtpw/a.png Broadly comparable, and hence interchangeable. Pre 1930's and for data from https://papers.ssrn.com/sol3/papers.cfm?abs...

Fremdon Ferndock wrote: ↑Mon Mar 20, 2023 11:01 am What the heck is iShares Physical Gold ETC? I don't know what an ETC is and it isn't listed at my brokerage. Is it something listed on another exchange?

Exchange Traded Commodity. There are ET (exchange traded) funds, commodities and notes, ETF, ETC, ETN

Similar, but different.

In London there are both the London Stock Exchange and London Metal Exchange markets. Again similar, but different.

Hedge fund guys, like Michael Platt (afaik), like to have quite a bit in gold bars. One could do this with the core allocation, while having a buffer of Gold ETFs to rebalance with. The reason I suspect they like owning gold and real assets may be because of their relationship to the derivatives market. I wonder if they view the whole financial system as a castle built on sand – it's how a trader friend of mine tends to talk. So I think there's definitely an element of wanting to stay wealthy if the whole system comes down. The ancient Talmud advocated thirds each in land, business, in-hand. For British investors over the last 130 years initial thirds each UK home, US dollars invested in US stocks, and gold has three currencies/three asset...

Just curious: Do proponents of gold tend to favor gold stocks/ETFs, owning the physical metal in a bank safety deposit box or other 3rd party location, or owning the physical metal at home? I know there will different preferences but, as a general rule, what does “including gold” tend to mean? Generally physical gold in-hand is preferable, no counter-party risk. But more generally each individual has different requirements/objectives so combinations of those. Consider a end of 1971 retiree, who lumped their retirement pot equally between stocks and gold after having taken their first year 4% SWR. Thereafter they drew the inflation adjusted SWR value from whichever was the higher valued at the time (stock or gold), no other rebalancing/acti...

Here in the UK banks are increasingly being put under pressures to flag, without alerting individuals, suspected fraud/money laundering cases, under penalty of being associated to such fraud/money-laundering. In the past you might have seen anything under $5000 transactions simply being waved through, but that has dramatically changed in more recent times. As I understand it banks should flag suspicious cases and if no contact is established by the 'anti fraud' agent within a certain time-frame then assume its OK and permit the transaction. In some cases individuals are asked to phone the anti-fraud agent and progress through a interrogation to convince the agent that the transaction is 'proper' or otherwise having it declined. In yet other...

This thread reminds me of a paper I read recently re: Swiss Francs vs gold as a portfolio diversifier. I was reading it after finding out from nisiprius that the original Harry Browne Permanent Portfolio held Swiss Francs, not gold. The Swiss Franc was pretty much the last currency to officially end it being backed by gold in May 2000. Prior to that and holding/depositing/investing Swiss Francs was much like pre 1933 when gold was money. British gold Sovereigns for instance, one Pound currency value, that ran alongside and was directly convertible between paper one Pound notes. Under such circumstances savers wouldn't hold 'cash' such as gold Sovereign coins at home, but instead deposited/invested them, in return for interest/rewards (more...

Gold, as a store of value, has an expected real return of 0%. . . At this point the battle cry will be heard: fiat currency has no intrinsic value! Pre 1933 and gold was money/currency, a troy ounce of gold being worth around 20.8 US dollars. At the end of 2022 and a ounce of gold converted to around 1826 US dollars, nearly 88 times more. Over those years a item that cost one dollar in the early 1930's increased to costing 23 dollars at the end of 2022. So a US dollar lost considerable purchase power. But what if that dollar was invested in T-Bills, perhaps incurring a 20% yearly taxation on the 'interest/gains', well in that case it lost only a little over half of its purchase power, required 2.11 dollars to buy the same item at the end o...

Market history clearly makes a very strong case for gold in a portfolio. Arguments against would be speculation on gold's current fair value, and whether another asset might become a preferred safe haven. https://www.forbes.com/sites/nathanlewis/2018/04/02/did-we-just-enjoy-the-yellen-gold-standard/?sh=4ed14a0e23fa On February 3, 2014, Janet Yellen's first day in office at the Federal Reserve, the dollar's value compared to gold was 1261:1, or "$1,261 per oz." On February 3, 2018, her last day, it was 1331:1, a difference of 5.6%. Did Yellen use gold as a target, as her predecessor Alan Greenspan says he did? Paul Volcker, head of the Fed in August 1979-August 1987 When I was Chair of the Federal Reserve I used to testify before ...

Anything that is in demand will tend to broadly see the price rise with inflation, so I'd expect shares prices, bond total returns, gold, house prices ...etc. to maintain such demand/inflation pacing. Stocks additionally pay dividends, and owning a house avoids having to find/pay rent to others (imputed rent benefit). The alignment to inflation is also (considerably) variable over prolonged periods (can see two or more decades of high/rising or low/falling demand). Trading those difference can also yield dividends, where the trading method might be mechanical/simple such as rebalancing back to target weightings yearly/periodically. Diversifying across multiple assets also has a smoothing effect, avoids having been all-in on the worst case a...

To bring this back to actionable items: T-bills and t-bill money market funds serve many of the same purposes of a checking account, with a little more work needed. So anyone who is worried about the safety of their cash has those as alternatives to banks. Generally leveraged ETF's are frowned upon, however ... PV 50/25/25 2x stock/T-Bills/Gold has aligned to 100% stock whilst having half of the total portfolio value in very low/no counter-party risk (assuming physical in-hand gold) https://i.postimg.cc/qR15X0Qb/d.png You could do the same/similar with thirds each 3x/TBills/Gold, reducing the risk/cost of a brokerage/nominee failure down to a third, unpleasant if that occurs, but not critical (in general and in some years a portfolio might...

I agree. This thread has grown quite long, mostly discussing a very basic reality of our banking system that most seem to either not realize or just ignore: EVERY bank would be perceived illiquid if a sufficient run its deposits would occur. EVERY bank. Except for custodial banks, the former banking where you deposited your money/assets into the banks safe for safekeeping, but paid a fee for the banks services/insurance. I'm not sure why this is considered unthinkable. Maybe it's an educational problem because people don't know enough about the history of banking? It isn't that it is unthinkable. It is that I do not believe that a custodial bank's model would be able to compete with the current commercial and retail banks to make it worthw...

When other people lose faith in the government it seems like you can gain. Flight to safety and all that. When inflation is viewed as just another form of taxation then pre 20th century under a finite gold backed based money system that taxation averaged 0%. Kings/states had to pay real rates of returns in order to borrow other peoples money/gold. Decoupling money from gold facilitated being able to print/spend money, create inflation such that after inflation and taxation kings/states could in effect borrow money for nothing (no cost). I guess the price of gold is a form of confidence measure, in some concerning times investors might be content to flight to bonds, in other cases investors may have concerns about such bonds and instead opt...

Rather, you need gold if you don't trust the full faith and credit of the United States Treasury anymore (on which TIPS depend). And if that's true, then per seajay, you don't want any counter-party risk, and must hold physical gold in hand. Governments can "partially default" in many ways. UK iBonds were in effect withdrawn from new holders post the 2008/9 financial crisis. inflation and taxation can erode the real returns on existing conventional bonds ..etc. Pre 1933 and bonds (gold) were generally good enough. Money was gold, so inflation broadly was 0% and depositing gold coins in return for interest was a real rate of return. Total returns compared to stocks. Savers might have opted for a 1 and 20 year treasury barbell, or ...

coachd50 wrote: ↑Sat Mar 18, 2023 6:14 amI agree. This thread has grown quite long, mostly discussing a very basic reality of our banking system that most seem to either not realize or just ignore: EVERY bank would be perceived illiquid if a sufficient run its deposits would occur. EVERY bank.

Except for custodial banks, the former banking where you deposited your money/assets into the banks safe for safekeeping, but paid a fee for the banks services/insurance.

Adding to that 50/50 SCV/Gold (silver pre 1976), for a 5% SWR there was a high probability of success since 1934 https://i.postimg.cc/pTRFsqcg/scv-g-5pct-swr.jpg In a couple of the failure cases the Dow/Gold ratio was at relatively low levels at the start, suggestive of a relatively high price of gold (1930's, 1980's). https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart So ballpark indicator of around a 95% or so confidence, perhaps better odds than a 65 year old retiree living another 30 years to age 95. But maybe with half of their portfolio value in-hand (physical gold), the prospect of longevity might be higher compared to another that had the periodic fear of bank-runs or other such counter-party/geopolitical f...

oh wait: gold has only been a traded asset since 1971, after the collapse of the Bretton Woods agreement, the true end of the gold standard, which had held for centuries until that first thunderous crack in February 1934. I think gold has been traded for a little bit longer than that… “rich as Croesus” comes to mind Coinage also included silver as well as gold, such as silver dollars. If in 1934 you were no longer permitted to hold gold coins/currency, had those compulsory purchased from you, then the obvious alternative option was to hold silver instead. Using the leveraged ETF (LETF) version of Simba's spreadsheet, loaded with silver from 1934 to 1975, gold thereafter (and calling that Precious Metals (PM)), with that 50/50 yearly rebala...

Clearly, gold offers investors something they crave and believe they can’t get anywhere else from any other asset. What is that something? Counter-party/geopolitical risk diversification Pre 1932 and gold = bonds, gold was money, such as British gold Sovereign one Pound coins, savers would deposit that gold for safekeeping, and interest. Inflation broadly averaged 0% so the interest was like a real rate of return. Bonds compared to stock total returns. From early 1930's after money was free-floated, there's been predominately inflation. Both bonds and gold transitioned to being more broad 0% real assets, after inflation and taxation. When you substitute gold for bonds then physical in-hand gold has no counter-party or default risk. Whilst ...

eonny wrote: ↑Tue Mar 14, 2023 9:28 pm Any danger in keeping all my money in one institution, in my case, Vanguard?

Unlikely to be a issue, but what if it did become a issue!

Does the client own a share of AAPL (or say VTI), i.e. does the brokerage actually buy the shares on the client's behalf? Or are the client's statements basically just an IOU that tracks the shares' values? https://en.wikipedia.org/wiki/Street_name_securities The phrase street name securities or "nominee name securities" is used in the United States to refer to securities of companies which are held electronically in the account of a stockbroker or bank or custodian, similar to a bank account. The entity whose name is recorded as the legal owner of the securities is known as the "nominee owner," and that entity has ownership rights in the security. The nominee owner holds those ownership rights on behalf of the true eco...

In one of the Gold threads, I came across the J.P. Morgan quote that "Gold is money, everything else is credit." That is really at the center of this discussion. If Gold indeed is money, no wonder why it has had zero real return over millennia. I suppose money just is, it defines itself. But since, I don't know, 1933 or 1944 or 1971, Gold hasn't been money so we are left with credit. So it just might be that most of the history of Gold is irrelevant to this discussion. Perhaps since 1933 or 1944 or 1971, Gold has different characteristics now than it did before. Gold is reduced to being a hedge against fiat currencies, and a volatile hedge at that, and in a currency crisis might not be the ultimate safe haven we hope it will be. ...

I think there is a mismatch between people saying they expect 0% real from gold and then forming conclusions from backtesting data with 6% real returns. Other than that, I believe gold has been a good diversifier over the last 40 years. If I had 8 figures ($10 million) gold would almost certainly make up at least 10% of my portfolio. I'm not there yet so its a soft pass for now. I do enjoy the gold threads. I'm interested in what will be said here. What changes when you go from $8M to $12M? Not much that I know of. Something change in your personal life? Seems like it would do just as much good or bad at $8M as $12M. There's not some magic amount where it starts making a dramatic difference in a portfolio. As people get wealthier, their ne...

And a real worst case for an asset class like stocks (like an 80% drawdown, real or nominal), could be effectively irrecoverable for an investor. And I think the difficulty with working out what to bet on is that every decade is a blank slate, where any one of a dozen broad economic scenarios can occur. 1969 was a bad 30 year SWR start year. For a investor who started with 50/50 stock/gold, initially drawing the first year SWR equally from both at the start, but then in subsequent years drew the SWR from whichever of the two had the higher value at the time, no other rebalancing, then the second and third years drew from stocks, but then the subsequent 17 years drew from gold, the final/remaining years reverting back to stocks sourcing the...

ivgrivchuck wrote: ↑Tue Mar 14, 2023 12:57 am Just stating the obvious, but in January 1982 the U.S. Treasury 10 year yield was 14.4%. Today it's 3.5%-4.0%.

So there has been a strong tailwind for bond returns for the last 40 years. And this tailwind can't repeat since the yields can't go significantly negative. So that also skews the stocks/gold vs. stocks/bonds comparison for that time period. But every time period has its own problems...

Bond returns primarily come from interest payments, where regular interest payments are typically taxed. Discounting a 20% average tax rate and comparing to gold since the ending of money = gold



Broadly comparable, and hence interchangeable.

Gold doesn't pay interest, but the broad tendency is for it to be a 0% real zero-coupon type 'bond'. In contrast US dollar bills stuffed under a mattress will tend to lose purchase power over time, have to be lent (deposited/invested) in the hope/expectancy that the capital value might see preservation of purchase power after inflation/taxation. People often say things like "Yea.. but it can take decades for gold to actually mean revert back towards inflation." But of course that works both ways. Gold's only just touched its inflation-adjusted high from the early 80s, but it can also shoot ahead of inflation for decades. But I'd argue that's everything in markets. There's a probability distribution, for what can happen in a day, ...

Let's go back to Victorian Britain, say 1899. Gold Sovereign coins, weighing a little under a quarter of a ounce were One Pound currency value, actual coins in circulation/use. Along side that there were One Pound Notes, paper currency, that could directly be swapped for a gold sovereign - by law, in banks ...etc. Individuals with surplus money (Sovereigns or Pound Notes) might have been inclined to deposit that into banks or state bonds, in return for interest. Fundamentally they were the same, where savers with gold or bonds yielded the same investment total returns. Being finite gold based inflation broadly averaged 0% such that interest was a form of real rate of return, and where the total returns compared to stocks. That all changed w...

In the US, if FDIC/NCUA insurance were to fail, good luck finding someone with cash who wants to buy your gold. Better holding assets that others could buy than that of being one of those that 'had lost their entire life savings'. I very much suspect that someone in the world would be a buyer. Having one's life savings in an FDIC-insured bank account and holding gold are not the only alternatives, although the lack of a meaningful interest stream is something they have in common. Gold and bonds are interchangeable as a stock diversifier. Pre 1932 and gold was money, Pound Sovereign (near quarter ounce of gold) currency for instance, that ran alongside Pound Notes paper currency (that included the promise to be directly convertible to Sover...

Even if present day protections are reasonable, there is the risk they might decline with time. Here in the UK for instance the protection is just 70K, and that is further being deflated away by inflation. The general trend in the likes of the EU (other parts of Europe) is also towards more bail-ins (savers/investors covering losses) than prior bail-outs (taxpayers). Compounding that is that banks and brokerages have transitioned away from being custodial, safe places for your money/assets, to depository, where money you deposit in a bank becomes the banks money, or money deposited in a brokerage becomes the brokers money where they buy the shares that you like, in their name. It's better to address that risk earlier rather than later, espe...