Does anyone own gold?

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Erwin
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Does anyone own gold?

Post by Erwin » Wed Feb 22, 2017 9:16 am

Does anyone own gold, and why?
Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see..
https://www.evansonasset.com/64.htm
Erwin

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cheese_breath
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Re: Does anyone own gold?

Post by cheese_breath » Wed Feb 22, 2017 9:18 am

Not unless there's some gold stock in my TSM index fund.
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taguscove
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Re: Does anyone own gold?

Post by taguscove » Wed Feb 22, 2017 9:28 am

Yes, but I view it as a position similar to cash. Gold (like cash) doesn't provide income or growth, just a preservation of capital. Gold also looks great in jewelry.

P.S. I just clicked on the link and the article is hilariously conspiratorial. I was half expecting the Rothschilds, Illuminati, or free masons to pop up.
Last edited by taguscove on Wed Feb 22, 2017 9:33 am, edited 1 time in total.

sreynard
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Re: Does anyone own gold?

Post by sreynard » Wed Feb 22, 2017 9:33 am

I have a wedding band, but I consider that more of a DW investment than a gold investment.

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Re: Does anyone own gold?

Post by Whakamole » Wed Feb 22, 2017 10:25 am

If you want to read gold bull articles from an investment perspective, Frank Holmes' newsletter from US Funds is much better (with some talk about EM and natural resources): http://www.usfunds.com/investor-library/investor-alert/ Note that his firm offers an expensive (2% ER!!) gold fund and everything is a bit tainted through that lens.

Jiu Jitsu Fighter
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Re: Does anyone own gold?

Post by Jiu Jitsu Fighter » Wed Feb 22, 2017 10:28 am

Yes ~5%. Not at all popular in this forum though. I know that it yields nothing and I cannot eat it. I cannot eat my mutual funds either. Also, I don't own it for an end-of-the-world scenario ("I'd rather have lead and canned goods than gold when..." whatever the usual argument is). However, it is uncorrelated with stocks (slightly negative if anything) and negatively correlated with bonds. You also do not have to worry about contango issues as you do with commodity futures. My rebalancing band is larger than for stocks to take advantage of momentum spikes.

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Re: Does anyone own gold?

Post by oldcomputerguy » Wed Feb 22, 2017 10:31 am

Yep. My portfolio tilts to gold by way of my wedding ring and my high school class ring.
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Johnnie
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Re: Does anyone own gold?

Post by Johnnie » Wed Feb 22, 2017 10:51 am

You know, a little to bribe the border guards with. :twisted: Insurance not investment.
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toto238
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Re: Does anyone own gold?

Post by toto238 » Wed Feb 22, 2017 10:57 am

1. It's as risky as stocks, if not more risky
2. It doesn't provide a lot of hedging value (maybe a little, arguably)
3. It's extremely expensive to buy and sell in physical bullion
4. Its expected long-term real return is 0% (possibly less)
5. It makes for a very poor currency due to its wildly fluctuating real value, its lack of fungibility without an outside source guaranteeing its purity, and its high expense for storage and protection

Yeah, sounds like a great thing to hold a lot of. Will it destroy your portfolio to put 5% in it? Probably not. But why waste 5% of your money when you can invest it in something that's an actual investment?

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Re: Does anyone own gold?

Post by Broken Man 1999 » Wed Feb 22, 2017 10:58 am

I have six ounces of gold in the form of six, one ounce US Mint proof coins. I started out with the idea of buying the proof coins every year. But it quickly became a very pricey idea! :dollar

I have bought silver one ounce proof coins for a long time; they are much more affordable. I also have miscellaneous coins in a coin collection that my grandchildren can fight over when I'm gone. I suppose if I bought two more ounces of gold I could give each grandchild two ounces.

I have been known to buy ten or twenty, one ounce silver rounds for no particular reason, other than having a few extra bucks left over in the monthly budget.

I have started putting one ounce silver rounds with Christmas themes in the grandchildren's Christmas stockings the last few years. As well, I found a one ounce silver round that was designed to resemble a soccer ball, so I gave one of them to each of the three grandchildren who scored goals a couple of weeks ago.

Silver, the "poor man's gold!"


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Kevin K
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Re: Does anyone own gold?

Post by Kevin K » Wed Feb 22, 2017 11:07 am

Erwin wrote:Does anyone own gold, and why?
Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see..
https://www.evansonasset.com/64.htm
Yes, 5% in my case in the form of IAU though I would much prefer to own physical gold if my circumstances made it feasbile.

Contrary to what one poster on this thread implied, Steven Evanson, the author of the article(s) you provided the link to, far from being a "gold bug" is in actuality one of the most knowledgeable and informed FA's in the DFA universe and said articles, cumulatively (and if read carefully) just give some great long-term perspective on gold relative to fiat currrencies and other assets. Mr. Evanson couldn't be further removed from the "gold buried in the yard/MRE's safe in the fallout shelter" stereotype that invariably arises when someone dares to utter that particular four-letter word on these forums. He's merely recommending that 5-10% allocated to gold can be a useful diversifier for some investors.

At the risk of beating a dead horse, I'll just point out that not only the Golden Butterfly and Permanent Portfolio but pretty much every other optimized (in terms of risk:return, drawdowns and safe withdrawal rates during retirement) on the excellent Portfolio Charts site features 10-25% gold.

https://portfoliocharts.com/portfolio/gld/

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Re: Does anyone own gold?

Post by Valuethinker » Wed Feb 22, 2017 11:08 am

Jiu Jitsu Fighter wrote:Yes ~5%. Not at all popular in this forum though. I know that it yields nothing and I cannot eat it. I cannot eat my mutual funds either. Also, I don't own it for an end-of-the-world scenario ("I'd rather have lead and canned goods than gold when..." whatever the usual argument is). However, it is uncorrelated with stocks (slightly negative if anything) and negatively correlated with bonds. You also do not have to worry about contango issues as you do with commodity futures. My rebalancing band is larger than for stocks to take advantage of momentum spikes.
There's merit. See William Bernstein Efficient Frontier article (something like "the most patient investment").

The politics and apocalyptic visions of many gold investors put me off.

The case then is *not* about a Cormac Macarthy "The Road" type scenario, or a Weimar hyperinflation, but rather that it does have apparently attractive characteristics (negative correlation).

My own view is that with real interest rates negative in recent times, gold doesn't have any cost of carry. Therefore the price has been overcooked. If and when positive real interest rates assert themselves, it will become a very expensive thing to keep holding in size. Not all would agree. Enough nations still have monetary controls (China, India, Iran etc.) to mean there is a real retail market for the stuff- it's not just westerners reading the wrong websites.

Holding gold does have merit as an investment thesis, although I am sceptical in a monetary collapse that it would prove to be that useful vs. pharmaceuticals, ammunition, batteries, razor blades, liquor and other tradables. That may simply be that I lack imagination.

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Re: Does anyone own gold?

Post by willthrill81 » Wed Feb 22, 2017 11:09 am

Johnnie wrote:You know, a little to bribe the border guards with. :twisted: Insurance not investment.
I keep a fair amount of physical precious metals as insurance against certain economic woes due to its history as a valuable item spanning millenia. However, I've seen what the value of a small amount of gold in portfolio does to reduce volatility and, hence, reduce drag and improve returns. Some argue that this is only true if you include data from the early 1970s, but that's simply false.

Take a look at the heat map for the Golden Butterfly portfolio. In any starting year from 1970 forward, you were in the black after three years and never went backward (over the entire period); the lowest 15 year rolling period had a real CAGR of nearly 5% (1994-2009, spanning two recessions, quite impressive actually). Granted, portfolios like this don't have returns as high as those that are equity heavy, but they don't have nearly as much volatility either, and for retirees who are making withdrawals, volatility is more detrimental to your withdrawal strategy than modest returns. Further, the drawdowns on these types of portfolios are far less than traditional portfolios as well; the deepest drawdown for the GB since 1970 was 10%, and it recovered in two years.
https://portfoliocharts.com/portfolio/golden-butterfly/

That being said, I'm currently more interested in maximizing my returns than minimizing volatility, so my investments are currently 100% equities. But when I get around ten years out from retirement, I'll probably move to a portfolio that incorporates some amount of gold to smooth out the final years at the cost of lower expected returns.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

stimulacra
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Re: Does anyone own gold?

Post by stimulacra » Wed Feb 22, 2017 11:14 am

Yes,

3% in ETF form (GLD)
3% in bullion form
6% of total allocation.

As the value goes up or down, I rebalance whenever I need to (easier to do with the ETF).

I use it as a hedge in my portfolio… insurance policy against catastrophe. I have no emotional investment in it past that.

It helps me stay the course with my current allocation and ignore the headlines.

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Re: Does anyone own gold?

Post by linenfort » Wed Feb 22, 2017 11:23 am

1/2 in ETFs
1/2 in physical (1oz coins)
-----
8% of total assets.
Jiu Jitsu Fighter wrote:Yes ~5%. Not at all popular in this forum though. I know that it yields nothing and I cannot eat it. I cannot eat my mutual funds either.
:thumbsup

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Re: Does anyone own gold?

Post by toto238 » Wed Feb 22, 2017 11:29 am

By the way, the argument of "gold maintains its values over period of millennia" is only valid if your investment horizon is millennia. I don't anticipate being alive in 1000 years so I care more about what gold does in shorter time periods.

It's like saying "Sea levels don't change drastically over periods of millennia, therefore there's no such thing as waves, and waves can never hurt you."

The reality is that over normal human lifespans, gold can be a very volatile investment. And putting too much of your money in it is putting that money at serious risk, with no expected real return in exchange for that risk.

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Re: Does anyone own gold?

Post by adamthesmythe » Wed Feb 22, 2017 11:32 am

I have gold crowns, does that count?

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Re: Does anyone own gold?

Post by linenfort » Wed Feb 22, 2017 11:33 am

For any gold holders who are new to the forum, don't even try to debate.
You may as well harbor a secret love of watching "My Little Pony." Just buy it, hold it, and shush. 8-)

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Re: Does anyone own gold?

Post by Jiu Jitsu Fighter » Wed Feb 22, 2017 11:52 am

toto238 wrote:1. It's as risky as stocks, if not more risky
2. It doesn't provide a lot of hedging value (maybe a little, arguably)
3. It's extremely expensive to buy and sell in physical bullion
4. Its expected long-term real return is 0% (possibly less)
5. It makes for a very poor currency due to its wildly fluctuating real value, its lack of fungibility without an outside source guaranteeing its purity, and its high expense for storage and protection

Yeah, sounds like a great thing to hold a lot of. Will it destroy your portfolio to put 5% in it? Probably not. But why waste 5% of your money when you can invest it in something that's an actual investment?
I would recommend reading the article posted. While gold was vastly outperforming stocks, when I would review portfolios for those family members who I manage money for, I'd explain that I did some rebalancing by selling gold and buying stocks. The question at the time was, "why would I sell gold". Then, when stocks outperformed gold after 2012, I'd get just the opposite question, "why would I sell stocks to buy gold. You have to look at the portfolio in totality, not the individual components. Including gold increases the Sharpe ratio for almost all portfolios.

If you do own gold, I would keep it at a small % allocation of your portfolio and to do it in an IRA if possible.

A two-year treasury note yields about 1.2%, which is less than the rate of inflation. Is this an example of an "actual investment" that you are talking about?

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Re: Does anyone own gold?

Post by willthrill81 » Wed Feb 22, 2017 11:58 am

linenfort wrote:For any gold holders who are new to the forum, don't even try to debate.
You may as well harbor a secret love of watching "My Little Pony." Just buy it, hold it, and shush. 8-)
That sounds like good advice.

Apparently, decades of data showing the value of a small slice of gold in a portfolio isn't enough to persuade some people that it's not just a metal used to make jewelry.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does anyone own gold?

Post by ralph124cf » Wed Feb 22, 2017 11:38 pm

There are three ways of answering this question: Do you invest in physical gold? No. I own some as a coin collector, not as in investor in gold. Do you invest in gold as an asset in itself, such as by buying GLD or gold futures or options? No. Do I bet on the rising price of gold by buying gold mining mutual funds? Yes I do. Mining stocks can make money even with a static value of gold. It is a leveraged bet on the price of gold, with the advantage of the gold mining earnings.

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Re: Does anyone own gold?

Post by raven15 » Wed Feb 22, 2017 11:55 pm

willthrill81 wrote:
raven15 wrote:
willthrill81 wrote:
Kevin K wrote:Not only the GB but all of the optimal risk:reward allocations on Portfolio Charts have some allocation to gold, which of course drives many Bogleheads crazy. The Golden Butterfly is basically an optimistic (prosperity and inflation focused) tweak of Harry Browne's 4 x 25% Permanent Portfolio, tilting towards equities and including some small caps by shaving 5% off of the other assets. If it appeals to you (as it certainly did/does to me) you might also take a look at this iteration that effectively blends the Larry Portfolio with the PP/GB:

That's a really defensive low fat tails allocation to be sure.
The GB still outperforms that portfolio though, likely because it has 10% more in equities.

People talk about how the GB is just a slight change to the PP, but their performance is quite different. The GB has slightly higher volatility but a significantly better return (1.64% more since 1978).

In fact, we could improve the GB's returns (though not the SWR) even more by simplifying it. If we put all of the equities in SCV (40%), merge the STT and LTT into ITT (40%), and leave the gold intact (20%), the CAGR goes up by nearly 1% while the std. dev., worst year, and drawdown hardly budge. Granted, there isn't much gain achieved by combining STT and LTT, but I would argue that ITT achieves pretty much the same effect.

This portfolio really has me wondering whether I and many others are correct in thinking "Gold doesn't have a yield, so it has no place in a good portfolio." I'm not so sure that that's true, especially for retirees. Reducing volatility alone is a worthy goal in the distribution phase because it significantly boosts the SWR, even if the CAGR is slightly lower.

I think that the only reason that the Larry Portfolio hasn't been derided by more people here is because it doesn't use gold. If it did, even just 10%, I strongly suspect that reactions to it, which seem generally positive, would be quite different.
fyi gold looks unrealistically good in Portfoliocharts because of a single year or two in the early 70's when it was illegal for individual investors to own gold. A sharp price rise as it became tradable by institutions coincided perfectly with the bear market to create a likely unrepeatably rosy sequence. Every period PC analyzes passes through those years unless it says otherwise, and unless you can throw them out the result is basically untrue and you would have chosen a different allocation. You can make a case for gold ownership using data since 1975 when it was actually legal to own, but it is IMO a more tenuous case and for a smaller amount.
I've also looked at the performance of the GB and other portfolios that have some gold from 1978 to current, avoiding the period you refer to. The outcome doesn't change substantially.
Replying here so as not to pollute the other thread, this one is more similar and you posted in both. It doesn't change the outcome substantially, but starting in 1975 or 1978 does make substituting with bonds seem the better option in every case for the next 20 or so years. If you think about why that is gold may still seem a reasonable choice, but the point is that every calculator on Portfoliocharts except the heat map guides you to choose a heavy allocation to gold based on a single artificial two year period. If Tyler excised the 1972-1974 period gold would be a lot less prominent, and likely more accurately represented.
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Re: Does anyone own gold?

Post by AlohaJoe » Thu Feb 23, 2017 12:12 am

Erwin wrote:Does anyone own gold, and why?
Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see..
https://www.evansonasset.com/64.htm
It is a bit of a sidetrack but the article starts with a claim that is...not true.
In 1913 the Federal Reserve was created to deal with price variations and booms and busts, an economic problem in part produced by variations in gold supply and demand. Its clear mandate was to maintain stable prices.
They then complain that, due to inflation, the US dollar is worth less than it used to. The only way to avoid that outcome, and thus their complaint, would be for inflation to be 0%, or close to it.

The Federal Reserve was not created with a clear mandate of making inflation be 0%.

The 1913 Federal Reserve act actually doesn't include any mandate or goal. It specifically says, "An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency". Inflation and stable prices aren't mentioned at all.

It wasn't even until 1977 that "Monetary policy objectives" and "stable prices" were added to the Federal Reserve Act. In the aftermath of WW2, when the "Full Employment Bill of 1945" was passed, one of the criticisms was that it didn't give the Fed any price stability mandates. And when stable prices were finally added to the Federal Reserve Act, nobody expected that to mean "no inflation whatsoever".

I can't find any evidence that Evanson didn't make up, from whole cloth, their claim about the Federal Reserve having a mandate of keeping inflation at 0%.

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Erwin
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Re: Does anyone own gold?

Post by Erwin » Thu Feb 23, 2017 12:27 am

AlohaJoe wrote:
Erwin wrote:Does anyone own gold, and why?
Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see..
https://www.evansonasset.com/64.htm
It is a bit of a sidetrack but the article starts with a claim that is...not true.
In 1913 the Federal Reserve was created to deal with price variations and booms and busts, an economic problem in part produced by variations in gold supply and demand. Its clear mandate was to maintain stable prices.
They then complain that, due to inflation, the US dollar is worth less than it used to. The only way to avoid that outcome, and thus their complaint, would be for inflation to be 0%, or close to it.


The Federal Reserve was not created with a clear mandate of making inflation be 0%.

The 1913 Federal Reserve act actually doesn't include any mandate or goal. It specifically says, "An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency". Inflation and stable prices aren't mentioned at all.

It wasn't even until 1977 that "Monetary policy objectives" and "stable prices" were added to the Federal Reserve Act. In the aftermath of WW2, when the "Full Employment Bill of 1945" was passed, one of the criticisms was that it didn't give the Fed any price stability mandates. And when stable prices were finally added to the Federal Reserve Act, nobody expected that to mean "no inflation whatsoever".

I can't find any evidence that Evanson didn't make up, from whole cloth, their claim about the Federal Reserve having a mandate of keeping inflation at 0%.
This can get political rather quickly so I will not try to reply, but it happens that I wrote a long article on the subject. If interested, see the first article mentioned in....https://mises.org/profile/erwin-rosen
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Re: Does anyone own gold?

Post by stemikger » Thu Feb 23, 2017 12:39 am

No I don't. When I was a kid I saw a Twilight Zone Episode where two men traveled with bags of stolen gold and put themselves to sleep for 200 years. They thought when they woke up the gold would be worth so much that they will be the richest men on earth. When they woke up, they found out the future had no use for the stuff and it was as worthless as a bunch of rocks. Lesson learned. Thanks Rod Serling.
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Re: Does anyone own gold?

Post by Tyler9000 » Thu Feb 23, 2017 11:23 am

raven15 wrote: Replying here so as not to pollute the other thread, this one is more similar and you posted in both. It doesn't change the outcome substantially, but starting in 1975 or 1978 does make substituting with bonds seem the better option in every case for the next 20 or so years. If you think about why that is gold may still seem a reasonable choice, but the point is that every calculator on Portfoliocharts except the heat map guides you to choose a heavy allocation to gold based on a single artificial two year period. If Tyler excised the 1972-1974 period gold would be a lot less prominent, and likely more accurately represented.
Well, if I excised the historic 90's stock bubble, stocks would also be a lot less prominent and more accurately represented. ;)

For reference, nearly every calculator on the site works the same way as the Heat Map and models every start date simultaneously. For example, in the Retirement Spending or Portfolio Growth charts only five of the 46 lines originate prior to 1975, and you can identify them by color (the darkest ones). Contrary to what you might intuitively think, those early lines for portfolios that include gold tend to get lost in the shuffle rather than runaway at the top. It's why I personally like gold -- it's not about juicing returns, but about compensating for the inevitable failures of other assets (fitting well together).
Last edited by Tyler9000 on Thu Feb 23, 2017 11:32 am, edited 1 time in total.

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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 11:28 am

raven15 wrote:Replying here so as not to pollute the other thread, this one is more similar and you posted in both. It doesn't change the outcome substantially, but starting in 1975 or 1978 does make substituting with bonds seem the better option in every case for the next 20 or so years. If you think about why that is gold may still seem a reasonable choice, but the point is that every calculator on Portfoliocharts except the heat map guides you to choose a heavy allocation to gold based on a single artificial two year period. If Tyler excised the 1972-1974 period gold would be a lot less prominent, and likely more accurately represented.
Actually, my assertion was based on the results provided by other back testing platforms (i.e. Portfolio Visualizer).

But the heat map on Portfolio Charts is not "based on a single artificial two year period." It actually displays the results of starting years from 1970 to current. This map clearly indicates that the results are very similar across any starting year.
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Re: Does anyone own gold?

Post by nisiprius » Thu Feb 23, 2017 11:45 am

Well, lots of people advocate lots of different investments. Why do you think Evanson Asset's opinions are particularly sound?

To tell the truth, I glance at the first few sentences of their description and I tune out:
For six thousand years gold has been considered a unit of account, store of value and medium of exchange, the definition of money... In the last decade skepticism is again growing regarding the trustworthiness of paper money often termed "fiat" currency.
Because this is at best a partial truth and it's a kind of stock "story" people who advocate gold tell about it.

No, gold has not been considered "the definition of money" for six thousand years. Indeed, the gold standard in the US existed for roughly a century or so; from the "crime of 1873" to the "Nixon shock" of 1971. The story in Europe was even shorter, I think.

It is quite one thing to say "gold has been considered to have value for a long time in many places; a lot of cultures regarded it as a precious metal and minted coins out of it;" that's true. To say it has been "for six thousand years... the definition of money," well, I think I'll say simply, "that's false." The Magi brought Jesus gifts of myrrh and frankincense, as well as gold. Peppercorns were the medium of exchange and unit of value in mercantile Venice and Genoa for a while. Gold has not had value in every culture, that's one of the reasons Spain didn't find it too difficult to rip off the indigenous Americans. And so forth and so on.

Yes, sure, I grew up on fairy tales that taught me the relative values of the precious metals--"The Tinder-Box" where the soldier encountered the dog with eyes as big as teacups and the copper, the dog with eyes as big as mill-wheels, and the silver, and the dog with eyes as big as the Round Tower, whatever that is, and the gold. Actually, even that story underlines the status of gold as a precious metal, not the definition of money. (Do I even need to explain that silver was also "the definition of money" in the United States until the "crime of 1873?" Bimetallism isn't just for thermostats! <--- Nerdy, feeble joke, I'm sorry...)

But when people lead off by launching into half-baked, quarter-true rhapsodies about gold that are wildly overstated in several different ways, I conclude that they are trying to persuade me, not inform me.
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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 12:15 pm

nisiprius wrote:Well, lots of people advocate lots of different investments. Why do you think Evanson Asset's opinions are particularly sound?

To tell the truth, I glance at the first few sentences of their description and I tune out:
For six thousand years gold has been considered a unit of account, store of value and medium of exchange, the definition of money... In the last decade skepticism is again growing regarding the trustworthiness of paper money often termed "fiat" currency.
Because this is at best a partial truth and it's a kind of stock "story" people who advocate gold tell about it.

No, gold has not been considered "the definition of money" for six thousand years. Indeed, the gold standard in the US existed for roughly a century or so; from the "crime of 1873" to the "Nixon shock" of 1971. The story in Europe was even shorter, I think.

It is quite one thing to say "gold has been considered to have value for a long time in many places; a lot of cultures regarded it as a precious metal and minted coins out of it;" that's true. To say it has been "for six thousand years... the definition of money," well, I think I'll say simply, "that's false." The Magi brought Jesus gifts of myrrh and frankincense, as well as gold. Peppercorns were the medium of exchange and unit of value in mercantile Venice and Genoa for a while. Gold has not had value in every culture, that's one of the reasons Spain didn't find it too difficult to rip off the indigenous Americans. And so forth and so on.

Yes, sure, I grew up on fairy tales that taught me the relative values of the precious metals--"The Tinder-Box" where the soldier encountered the dog with eyes as big as teacups and the copper, the dog with eyes as big as mill-wheels, and the silver, and the dog with eyes as big as the Round Tower, whatever that is, and the gold. Actually, even that story underlines the status of gold as a precious metal, not the definition of money. (Do I even need to explain that silver was also "the definition of money" in the United States until the "crime of 1873?" Bimetallism isn't just for thermostats! <--- Nerdy, feeble joke, I'm sorry...)

But when people lead off by launching into half-baked, quarter-true rhapsodies about gold that are wildly overstated in several different ways, I conclude that they are trying to persuade me, not inform me.
Referring to gold as "the definition of money" is certainly hyperbole, but nothing else can come close to gold's track record as a highly regarded form of money. Certainly many other objects have been used throughout history as money, but gold has the longest track record of any that I've ever heard of, with the possible exceptions of silver and copper.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does anyone own gold?

Post by nisiprius » Thu Feb 23, 2017 12:21 pm

willthrill81 wrote:...Referring to gold as "the definition of money" is certainly hyperbole,...
We agree. And in my opinion, hyperbole is a good reason for being skeptical of what we'd hoped was disinterested financial advice.

My underlining:
...but nothing else can come close to gold's track record as a highly regarded form of money. Certainly many other objects have been used throughout history as money, but gold has the longest track record of any that I've ever heard of, with the possible exceptions of silver and copper.
Again, we agree.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Does anyone own gold?

Post by mmcmonster » Thu Feb 23, 2017 12:32 pm

Broken Man 1999 wrote:I have six ounces of gold in the form of six, one ounce US Mint proof coins. I started out with the idea of buying the proof coins every year. But it quickly became a very pricey idea! :dollar

I have bought silver one ounce proof coins for a long time; they are much more affordable. I also have miscellaneous coins in a coin collection that my grandchildren can fight over when I'm gone. I suppose if I bought two more ounces of gold I could give each grandchild two ounces.
My dad (who just retired a year ago) gave me his silver collection and my brother his gold collection. All in the form of commemorative coins.

They're nice, but we're caught between selling it and knowingly take the loss (the coins are at a premium above bullion and it's hard to get your value back) and storing the coins for a later day.

At this point we stored all the coins in their original US Mint boxes. Will eventually have to find a place to unload them without taking a bath.

In retrospect, we're much happier with the 30 year U.S. Treasury Bonds he gave our kids. They are pretty to look at and the whole collection fits in an envelope. :beer

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Re: Does anyone own gold?

Post by AlohaBill » Thu Feb 23, 2017 12:35 pm

If I own a total stock market fund, how much is invested in precious metals and mining companies? That would be the amount of gold I have.

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Re: Does anyone own gold?

Post by toto238 » Thu Feb 23, 2017 12:48 pm

nisiprius wrote: (Do I even need to explain that silver was also "the definition of money" in the United States until the "crime of 1873?" Bimetallism isn't just for thermostats! <--- Nerdy, feeble joke, I'm sorry...)
I got that reference! This excites me!

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Re: Does anyone own gold?

Post by linenfort » Thu Feb 23, 2017 1:05 pm

mmcmonster wrote:My dad (who just retired a year ago) gave me his silver collection and my brother his gold collection.
Well, we know which sibling he likes better!

j/k :wink:

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Re: Does anyone own gold?

Post by rgs92 » Thu Feb 23, 2017 1:09 pm

A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.

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Re: Does anyone own gold?

Post by Erwin » Thu Feb 23, 2017 1:34 pm

rgs92 wrote:A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.
Yet, no one can complain about its historical performance
Erwin

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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 1:41 pm

Erwin wrote:
rgs92 wrote:A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.
Yet, no one can complain about its historical performance
No one, that is, unless they're comparing it to the Golden Butterfly, which has had a 1.4% better return over the last 47 years with similar volatility. :)
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Re: Does anyone own gold?

Post by rgs92 » Thu Feb 23, 2017 1:46 pm

What is this about historical performance? The permanent portfolio is up 17.65% since 2000, while VBINX (Vang. Balance Index) is up 47.5% ( I just checked on Google Finance). And permanent had more volatility.

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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 1:59 pm

rgs92 wrote:What is this about historical performance? The permanent portfolio is up 17.65% since 2000, while VBINX (Vang. Balance Index) is up 47.5% ( I just checked on Google Finance). And permanent had more volatility.
Your numbers are way off. I just checked it with Portfolio Visualizer.

From 1993 to 2017, the CAGR of PP was 6.29%, while VBINX was 5.34%. The std. dev. of PP was 6.43% and 9.16% for VBINX.

So the PP had a higher return and lower volatility to boot.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does anyone own gold?

Post by rgs92 » Thu Feb 23, 2017 2:46 pm

OK, I'll check it out. Maybe I looked at it wrong or too quickly. Thanks for the fact-check.

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Re: Does anyone own gold?

Post by SouthernCPA » Thu Feb 23, 2017 2:47 pm

Not unless our wedding band, watch and various jewelry count.

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Re: Does anyone own gold?

Post by mmcmonster » Thu Feb 23, 2017 4:23 pm

linenfort wrote:
mmcmonster wrote:My dad (who just retired a year ago) gave me his silver collection and my brother his gold collection.
Well, we know which sibling he likes better!

j/k :wink:
This was not lost on my wife.

There's no argument that my brother could use the money more than I do (even though he has no kids). But never bring logic into a disagreement with the spouse.

I just put it down to a no-win situation. :annoyed

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Re: Does anyone own gold?

Post by learning_head » Thu Feb 23, 2017 4:33 pm

Some extra GDX (gold-related companies) or GLD / physical gold makes sense to me as
- being uncorrelated with other asset classes
- imperfect inflation and political-craziness protection
- more so with valuations for TSM and bonds seemingly on the high side

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Re: Does anyone own gold?

Post by nisiprius » Thu Feb 23, 2017 5:01 pm

Erwin wrote:
rgs92 wrote:A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.
Yet, no one can complain about its historical performance
Why not? Now before I get shouted down... the current backtested Permanent Portfolio is one of several that Browne evolved over the years.

The Permanent Portfolio fund, PRPFX, is real, and Browne was involved in the creation of the fund. It is a real-world example, running real money, with no opportunity to change strategies in the light of hindsight, showing how Browne's ideas actually performed in practice.

Furthermore... I'm going lean over backwards here and do some cherry-picking that favors PRPFX because it got off to a rocky start. So instead of instead of starting the chart at 12/1/1982, I'll start it at 12/31/1984. Click on "source" and then click on "maximum" if you want to see how much I helped.

Source
Image

Vanguard Wellesley Income Fund, VWINX (orange) just blows away PRPFX (blue).

You can decide how to look at 2008-2009, but the two funds were roughly comparable. As I measure it, both fell almost exactly the same amount, -20%, but hit bottom at slightly different times.

For Jan 1986 - Jan 2017, the longest period available in PortfolioVisualizer, it is showing:
Image
My summary of their numbers: much higher return, roughly comparable in all other respects, the only one that's actually worse for Wellesley is a worst year of -9.84% versus only -8.36% for PRPFX.

Now, there's another Permanent Portfolio fund, the PERM ETF, which follows the modern 25/25/25/25 allocations, but it only began in 2012. I am tempted to show the chart, because, of course, gold hasn't done well and PERM underperformed VWINX since inception, but really that's too new to count. If you're curious, click this this link. Yes, one could complain about the performance of this Permanent Portfolio fund, too, although I honestly don't think that would be fair.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 5:09 pm

nisiprius wrote:
Erwin wrote:
rgs92 wrote:A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.
Yet, no one can complain about its historical performance
Why not? Now before I get shouted down... the current backtested Permanent Portfolio is one of several that Browne evolved over the years.

The Permanent Portfolio fund, PRPFX, is real, and Browne was involved in the creation of the fund. It is a real-world example, running real money, with no opportunity to change strategies in the light of hindsight, showing how Browne's ideas actually performed in practice.

Furthermore... I'm going lean over backwards here and do some cherry-picking that favors PRPFX because it got off to a rocky start. So instead of instead of starting the chart at 12/1/1982, I'll start it at 12/31/1984. Click on "source" and then click on "maximum" if you want to see how much I helped.
Well fees are steep at .80% for PRPFX.

Just looking at the backtested performance, I think that the Golden Butterfly trounces the PP. Reducing bonds and gold in favor of SCV makes logical sense and is reflected in the returns as well.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does anyone own gold?

Post by stemikger » Thu Feb 23, 2017 7:42 pm

No. John Bogle and Warren Buffett feel the same way about gold. Gold is not an investment at all.

See below:

https://www.youtube.com/watch?v=KlhT07G8zGs

https://www.youtube.com/watch?v=YuJBMVz5DLQ
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Re: Does anyone own gold?

Post by willthrill81 » Thu Feb 23, 2017 7:48 pm

stemikger wrote:Gold is not an investment at all.
I mostly agree with that in the sense of buying gold to make money directly on it over the long-term is not very effective or completely ineffective, but the stabilizing impact of gold (thereby reducing volatility and improving returns) on certain portfolios is undeniable.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does anyone own gold?

Post by rutrow2015 » Thu Feb 23, 2017 8:10 pm

I "own" physical gold in Switzerland via a BullionVault account. Today I'm neither a buyer nor seller. I too went through my doomsday scenario phase but I was much younger and more prone to listen to the interwebz back then. It's unlikely I'll lose money on what I currently "hold" but it's even less likely it will have a positive material influence on my retirement.

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Re: Does anyone own gold?

Post by Sandtrap » Thu Feb 23, 2017 8:19 pm

Does anyone own gold?
Yes. About 2 Tablespoons of around 18-22 carat, pickers, small nuggets, various mesh sizes.
From various streams and bedrock locations. :wink:
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Re: Does anyone own gold?

Post by linenfort » Thu Feb 23, 2017 11:07 pm

nisiprius wrote:Vanguard Wellesley Income Fund, VWINX (orange) just blows away PRPFX (blue).
Wellesley is a fine fund. I wish I had a larger, older tax deferred space, one filled with Wellesley shares.
mmcmonster wrote:This was not lost on my wife.

There's no argument that my brother could use the money more than I do (even though he has no kids). But never bring logic into a disagreement with the spouse.
I hear you. The same thing happened to my mother when her brother turned out to be the sole heir to their father's estate. He was trying to give where it was most needed, but bad feelings were in abundance until someone changed his mind. (It wasn't as nefarious as that sentence sounds).
Ironically, grandpa had given me gold decades earlier, just because.

As for logic: I was once told, "Stop trying to use logic on me. It won't work!" All I could think was, at least she's being honest. :D

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