A timely and equanimous article on gold

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Uncorrelated
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Re: A timely and equanimous article on gold

Post by Uncorrelated »

hdas wrote: Tue Aug 25, 2020 9:12 am
Uncorrelated wrote: Mon Aug 24, 2020 7:33 am
If you really want to pick an asset that does well in stagflation, buy the only instrument with a guaranteed negative correlation with inflation: negative bonds.
What is this?. Short treasury bond futures?........Can u provide a reference?. H
Just short treasury futures or take a mortgage with long-term fixed interest. I hope I don't have to provide a reference that such products are likely to do well in a stagflation environment.

Of course the question before that is why you would specifically need assets that do well in a stagflation environment. Unless you can come up with very convincing reasons why stagflation would hurt you more than the average investor, it is very likely that you shouldn't buy such assets for their stagflation performance alone (ref: Portfolio advice for a multifactor world, John H. Cochrane).
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arcticpineapplecorp.
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Re: A timely and equanimous article on gold

Post by arcticpineapplecorp. »

I’ve highlighted in gray the timeframes where real rates were less than 1%. While there are a few notable exceptions (like the early 1970s where gold corrected after coming off the gold standard — more on that in a minute), the relationship between the gold price and real interest rates is fairly strong. When real rates are sufficiently positive, gold does poorly because investors prefer assets that pay interest. But when real rates are very low or negative, gold does well because investors prefer not to lose purchasing power on a “safe” investment.

source: https://portfoliocharts.com/2020/08/21/ ... e-of-gold/
this reminds me of people who don't like the low interest on their cds/savings accts/high quality bonds and decide to start putting money into high yield bonds instead.

stretching for yield is stretching for yield. just because investors don't want to lose purchasing power on safe assets doesn't mean they should buy gold (or junk bonds, or stocks). You can't rationalize taking money that is for safekeeping and take risk with it. The proper understanding is rather that safe assets generally lose purchasing power...because there's no risk, so why should there be return? I often say the one guarantee I can make is that you'll lose money in a savings account (because of inflation).

I also think this article is basically saying when real interest rates are high, expect low gold returns, when real interest rates are low, expect high gold returns. this strikes me as market timing. when do you sell gold or buy gold? how low is low enough, how high is high enough?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Re: A timely and equanimous article on gold

Post by KlangFool »

arcticpineapplecorp. wrote: Tue Aug 25, 2020 2:36 pm
I also think this article is basically saying when real interest rates are high, expect low gold returns, when real interest rates are low, expect high gold returns. this strikes me as market timing. when do you sell gold or buy gold? how low is low enough, how high is high enough?
arcticpineapplecorp.,

If a person has a fixed allocation to Stock, Bond, CASH, and Gold, the rebalancing will let them know when to buy or sell Gold. This is the same as anyone with a fixed allocation only to the Stock and the bond. In that case, it is not market timing.

In my case, I am not investing in Gold/Silver. I am buying them as an insurance against hyperinflation. I am buying Gold/Silver with a very small percentage of my portfolio. I buy them when my portfolio grow to a certain size. I do not sell them except in the case of hyperinflation. This is not market timing too.

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Re: A timely and equanimous article on gold

Post by 000 »

Uncorrelated wrote: Tue Aug 25, 2020 3:32 am it just turns out the evidence for gold is so weak that data-driven arguments just don't work.
What data would change your mind?
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Uncorrelated
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Re: A timely and equanimous article on gold

Post by Uncorrelated »

000 wrote: Tue Aug 25, 2020 3:24 pm
Uncorrelated wrote: Tue Aug 25, 2020 3:32 am it just turns out the evidence for gold is so weak that data-driven arguments just don't work.
What data would change your mind?
Better data obviously... For instance "gold returns > 0" reaching a t-stat higher than that of HmL, and/or "negative correlation between gold and equities" having a t-stat above 2 or 3.

If you come back in 40 years, I suppose we can run the numbers?
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Re: A timely and equanimous article on gold

Post by 000 »

Uncorrelated wrote: Tue Aug 25, 2020 3:42 pm Better data obviously... For instance "gold returns > 0" reaching a t-stat higher than that of HmL, and/or "negative correlation between gold and equities" having a t-stat above 2 or 3.

If you come back in 40 years, I suppose we can run the numbers?
I don't understand your insistence on backtesting when you ignore the thousands of years backtest in Gold's favor.
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Uncorrelated
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Re: A timely and equanimous article on gold

Post by Uncorrelated »

000 wrote: Tue Aug 25, 2020 3:45 pm
Uncorrelated wrote: Tue Aug 25, 2020 3:42 pm Better data obviously... For instance "gold returns > 0" reaching a t-stat higher than that of HmL, and/or "negative correlation between gold and equities" having a t-stat above 2 or 3.

If you come back in 40 years, I suppose we can run the numbers?
I don't understand your insistence on backtesting when you ignore the thousands of years backtest in Gold's favor.
The thousands of years in which gold failed to meet the qualifications outlined above. You'll have to explain to me which part of that is in gold's favor.
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Re: A timely and equanimous article on gold

Post by 000 »

Uncorrelated wrote: Tue Aug 25, 2020 4:15 pm The thousands of years in which gold failed to meet the qualifications outlined above. You'll have to explain to me which part of that is in gold's favor.
Gold failed because public equity markets didn't exist? :oops:
All Seasons
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Re: A timely and equanimous article on gold

Post by All Seasons »

000, you waste your breath.

Some people will just never understand that investing is a field that is not fully amenable to math. There are qualitative considerations and some people just refuse to believe it.

Or perhaps this is just another insistence of "to a man with a hammer..."
The market portfolio is always a legitimate portfolio.
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Re: A timely and equanimous article on gold

Post by 000 »

All Seasons wrote: Tue Aug 25, 2020 5:51 pm investing is a field that is not fully amenable to math. There are qualitative considerations
+1000
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Re: A timely and equanimous article on gold

Post by Pu239 »

All Seasons wrote: Tue Aug 25, 2020 5:51 pm 000, you waste your breath.

Some people will just never understand that investing is a field that is not fully amenable to math. There are qualitative considerations and some people just refuse to believe it.

Or perhaps this is just another insistence of "to a man with a hammer..."
No, people believe it. This area of investing is controlled by the Greater Fool Theory which is why mathematical analysis falls short with valuation. I admit to being a Great Fool. I like owning some of the stuff but I don't call it an investment.
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot
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Re: A timely and equanimous article on gold

Post by GRP »

AlohaJoe wrote: Tue Aug 25, 2020 6:25 am
I understood what Uncorrelated posted. If you didn't, that doesn't make it word salad.
I understood what was said and I'm keen enough to know that the approach of using abstruse mathematics simply doesn't hold water in investing. (And you're talking to someone who otherwise LOVES math.)

Think about the massive statistical evidence behind, say, the value factor that culminated in the publishing of the famous 1992 Fama/French paper. You could hardly get more robust statistical results than those findings. Then what happened in the 27 year out of sample period? Value failed to deliver and practically disappeared.

It's not that I don't understand Uncorrelated's arguments. I do understand them and that's why I know they're baloney.
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Steve Reading
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Re: A timely and equanimous article on gold

Post by Steve Reading »

GRP wrote: Tue Aug 25, 2020 10:33 pm
AlohaJoe wrote: Tue Aug 25, 2020 6:25 am
I understood what Uncorrelated posted. If you didn't, that doesn't make it word salad.
I understood what was said and I'm keen enough to know that the approach of using abstruse mathematics simply doesn't hold water in investing. (And you're talking to someone who otherwise LOVES math.)

Think about the massive statistical evidence behind, say, the value factor that culminated in the publishing of the famous 1992 Fama/French paper. You could hardly get more robust statistical results than those findings. Then what happened in the 27 year out of sample period? Value failed to deliver and practically disappeared.

It's not that I don't understand Uncorrelated's arguments. I do understand them and that's why I know they're baloney.
Let's forget about the fact that the value premium actually has been positive post-publication in the US and has been rather robust internationally post-publication (i.e. has most definitely not "disappeared"). But let's say it has in fact disappeared.

I take that to me: even when you're very confident statistically of something, it doesn't mean it will continue. But the implication is that, with gold, which has far less statistical backing, then I would be even less impressed by it.

You take it to mean: abstruse (?) mathematics doesn't work in investing at all. It's "baloney".

Ok fair enough. Then could you advance a strong qualitative argument about gold? Typically, the arguments I see for gold are of the quantitative variety (backtesting, supposed relationships between inflation/real rates, correlation). Which are also "abstruse" mathematics that might or might not continue (and which are far weaker than value's evidence). But I haven't heard a good fundamental argument for the shiny rock.

And I'm open to hearing one :happy
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: A timely and equanimous article on gold

Post by GRP »

Steve Reading wrote: Tue Aug 25, 2020 11:04 pm
Let's forget about the fact that the value premium actually has been positive post-publication in the US and has been rather robust internationally post-publication (i.e. has most definitely not "disappeared"). But let's say it has in fact disappeared.

I take that to me: even when you're very confident statistically of something, it doesn't mean it will continue. But the implication is that, with gold, which has far less statistical backing, then I would be even less impressed by it.

You take it to mean: abstruse (?) mathematics doesn't work in investing at all. It's "baloney".

Ok fair enough. Then could you advance a strong qualitative argument about gold? Typically, the arguments I see for gold are of the quantitative variety (backtesting, supposed relationships between inflation/real rates, correlation). Which are also "abstruse" mathematics that might or might not continue (and which are far weaker than value's evidence). But I haven't heard a good fundamental argument for the shiny rock.

And I'm open to hearing one :happy
Ray Dalio has the best analysis and papers on the subject IMHO. He has detailed his thoughts and research in a series format and usually posts them on LinkedIn. They are truly excellent. Here's a few of them.

https://www.linkedin.com/pulse/paradigm ... ray-dalio/

https://www.linkedin.com/pulse/changing ... ray-dalio/

https://www.linkedin.com/pulse/big-cycl ... ray-dalio/

Do notice how none of his analysis or his train of thought involves trawling through 50 years of portfoliovisualizer data to try and find a high t-stat. Nor does he rely on the usage of abstruse mathematics as I mentioned in my previous posts.

There's no baloney here.

Dalio's analysis is a common sense, straightforward examination of deep history going back centuries. He looks at the basic cause and effect mechanisms behind monetary expansion, credit cycles, and how they intertwine with human nature. (The propensity to start with sound money, only to chip away at it through the temptation of credit and paper money.) He then goes on to explain gold as being the bedrock monetary asset because it has the physical qualities necessary to be a good money: it's rare but not too rare; it's physically stable; easy to work with; can't be printed; easily transported, and so on.

I could go on about how great the content is, but I don't want to just regurgitate what he's said. Again, notice how all of this is qualitative and doesn't really involve math beyond maybe basic arithmetic. Good investing is partially mathematical yes, but it's easy to abuse math as a tool in investing. A qualitative perspective and look at history provides as deep (perhaps deeper) insight.
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Re: A timely and equanimous article on gold

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GRP wrote: Wed Aug 26, 2020 12:13 am
Steve Reading wrote: Tue Aug 25, 2020 11:04 pm
Let's forget about the fact that the value premium actually has been positive post-publication in the US and has been rather robust internationally post-publication (i.e. has most definitely not "disappeared"). But let's say it has in fact disappeared.

I take that to me: even when you're very confident statistically of something, it doesn't mean it will continue. But the implication is that, with gold, which has far less statistical backing, then I would be even less impressed by it.

You take it to mean: abstruse (?) mathematics doesn't work in investing at all. It's "baloney".

Ok fair enough. Then could you advance a strong qualitative argument about gold? Typically, the arguments I see for gold are of the quantitative variety (backtesting, supposed relationships between inflation/real rates, correlation). Which are also "abstruse" mathematics that might or might not continue (and which are far weaker than value's evidence). But I haven't heard a good fundamental argument for the shiny rock.

And I'm open to hearing one :happy
Ray Dalio has the best analysis and papers on the subject IMHO. He has detailed his thoughts and research in a series format and usually posts them on LinkedIn. They are truly excellent. Here's a few of them.

https://www.linkedin.com/pulse/paradigm ... ray-dalio/

https://www.linkedin.com/pulse/changing ... ray-dalio/

https://www.linkedin.com/pulse/big-cycl ... ray-dalio/

Do notice how none of his analysis or his train of thought involves trawling through 50 years of portfoliovisualizer data to try and find a high t-stat. Nor does he rely on the usage of abstruse mathematics as I mentioned in my previous posts.

There's no baloney here.

Dalio's analysis is a common sense, straightforward examination of deep history going back centuries. He looks at the basic cause and effect mechanisms behind monetary expansion, credit cycles, and how they intertwine with human nature. (The propensity to start with sound money, only to chip away at it through the temptation of credit and paper money.) He then goes on to explain gold as being the bedrock monetary asset because it has the physical qualities necessary to be a good money: it's rare but not too rare; it's physically stable; easy to work with; can't be printed; easily transported, and so on.

I could go on about how great the content is, but I don't want to just regurgitate what he's said. Again, notice how all of this is qualitative and doesn't really involve math beyond maybe basic arithmetic. Good investing is partially mathematical yes, but it's easy to abuse math as a tool in investing. A qualitative perspective and look at history provides as deep (perhaps deeper) insight.
I hear you when you talk about more intuitive arguments that don't rely too much on past statistical evidence. I think that's important as well.

I'll take a look, thanks for the resources ^_^
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Uncorrelated
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Re: A timely and equanimous article on gold

Post by Uncorrelated »

All Seasons wrote: Tue Aug 25, 2020 5:51 pm There are qualitative considerations and some people just refuse to believe it.
I have mentioned multiple times that there are other considerations, it's the data approach that doesn't work. If your argument is that gold can be used to bribe your way out of the country, or that you have a real liability in 1000 years, you may have a point. If the argument is that gold has done well in the past, sorry that is statistically insignificant nonsense that should be ignored.
GRP wrote: Tue Aug 25, 2020 10:33 pm
AlohaJoe wrote: Tue Aug 25, 2020 6:25 am
I understood what Uncorrelated posted. If you didn't, that doesn't make it word salad.
I understood what was said and I'm keen enough to know that the approach of using abstruse mathematics simply doesn't hold water in investing. (And you're talking to someone who otherwise LOVES math.)

Think about the massive statistical evidence behind, say, the value factor that culminated in the publishing of the famous 1992 Fama/French paper. You could hardly get more robust statistical results than those findings. Then what happened in the 27 year out of sample period? Value failed to deliver and practically disappeared.

It's not that I don't understand Uncorrelated's arguments. I do understand them and that's why I know they're baloney.
The value premium has been positive, see this paper: https://papers.ssrn.com/sol3/papers.cfm ... id=3525096. However, the premium was too low to pass statistical significance tests (IIRC, the post-publication premium was 0.33 per month and the t-stat was somewhere between 1 and 2). They say in the paper that they are unable to confirm that the premium still exists, but also unable to show that the premium was different than in the original paper. Furthermore, the value premium was strongly positive in international markets with a t-stat of 3.88 (europe), 4.73 (japan) and 3.98 (asia-pacific) in the time period 1992-2014. So no, the claim that value disappeared doesn't hold up to scrutiny. I don't see any statistical tests showing that the premium has disappeared.

Even if we suppose that what you're saying is true, it only means that we should demand far stronger evidence than provided in the 1992 Fama/French paper, and I agree with that. If I was an investor in 1992 I would be criticizing them for data mining. If your standard of proof is so high, there is no alternative to stocks and bonds. But if your standard of proof is so low that you're considering gold, then there are plenty of alternatives for you.
GRP wrote: Wed Aug 26, 2020 12:13 am Ray Dalio has the best analysis and papers on the subject IMHO. He has detailed his thoughts and research in a series format and usually posts them on LinkedIn. They are truly excellent. Here's a few of them.

https://www.linkedin.com/pulse/paradigm ... ray-dalio/

https://www.linkedin.com/pulse/changing ... ray-dalio/

https://www.linkedin.com/pulse/big-cycl ... ray-dalio/
If you take a quantitative argument and omit the relevant statistical tests, that doesn't make it a qualitative arguments. It makes it a bad argument. Here's a hint: if you can show numbers or charts related to your argument, chances are low pretty low it's a qualitative argument.

I suggest you get your information elsewhere, this guy is only skilled at writing marketing material.
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Re: A timely and equanimous article on gold

Post by JimmyJammy »

I have .68% GLD and 1.13% SLV just because I don't want to miss out on the fun.

But, I will not forget how GLD nosedived along with everything else in March of 2020.
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Re: A timely and equanimous article on gold

Post by alfaspider »

000 wrote: Fri Aug 21, 2020 7:16 pm Gold is such a controversial topic because investing in it is viewed as accepting there may be a time institutions fail (e.g. to control inflation).

Many would rather believe that that is impossible and that Gold investing is somehow a subversive act.
This isn't really true. I personally dislike gold because its value is based entirely on confidence- no different than the institutions promoters claim they want protection against. The thing itself has very little intrinsic value; it is only valuable to the extent others think it is valuable.

Investing in gold isn't a subversive act. It's just not investing at all. It's commodity speculation. To be investing there has to be some hope of underlying profit which will be returned to the investor. Gold does nothing and does not itself earn a profit.

Will gold be a good investment going forward? I can't say because I can't predict the social and political currents that drive its value. If you like it, go ahead. It's just not for me.
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Re: A timely and equanimous article on gold

Post by 000 »

alfaspider wrote: Wed Aug 26, 2020 5:05 pm [Gold] itself has very little intrinsic value; it is only valuable to the extent others think it is valuable.
Is this not also true of cash and bonds?
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Re: A timely and equanimous article on gold

Post by burritoLover »

Seems like those that hold gold are doing a 5-10% allocation or so - wondering what stuff-that-hits-the-fan scenario has occurred in the past where you would be glad to be holding this allocation over say TIPS or tbills?
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Re: A timely and equanimous article on gold

Post by alfaspider »

000 wrote: Wed Aug 26, 2020 5:17 pm
alfaspider wrote: Wed Aug 26, 2020 5:05 pm [Gold] itself has very little intrinsic value; it is only valuable to the extent others think it is valuable.
Is this not also true of cash and bonds?
It is true of anything, but investments represent a right to a share of profits from a business enterprise. Those rights aren't directly based on what others think about them.

The difference between cash and gold is that there are quite a few obligations I must legally pay in cash but none I must pay in gold. I don't consider cash an investment or store of value- it's a medium of exchange. I do keep a cash emergency fund, but to cover potential expenses that must be paid in cash in the near future.

Bonds are a contractual obligation. While the secondary market price is based on confidence, whether the interest and principal are repaid by the debtor have nothing to do with what anybody else thinks the bonds are worth. Like equities, bonds are intended to represent return of profits from an active business, it's just that profits are returned in a different manner from equities.

By contrast, gold has no more value than a pebble from my back yard absent someone else wanting to buy it off me.
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Kevin K
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Re: A timely and equanimous article on gold

Post by Kevin K »

alfaspider wrote: Wed Aug 26, 2020 5:30 pm
000 wrote: Wed Aug 26, 2020 5:17 pm
alfaspider wrote: Wed Aug 26, 2020 5:05 pm [Gold] itself has very little intrinsic value; it is only valuable to the extent others think it is valuable.
Is this not also true of cash and bonds?
It is true of anything, but investments represent a right to a share of profits from a business enterprise. Those rights aren't directly based on what others think about them.

The difference between cash and gold is that there are quite a few obligations I must legally pay in cash but none I must pay in gold. I don't consider cash an investment or store of value- it's a medium of exchange. I do keep a cash emergency fund, but to cover potential expenses that must be paid in cash in the near future.

Bonds are a contractual obligation. While the secondary market price is based on confidence, whether the interest and principal are repaid by the debtor have nothing to do with what anybody else thinks the bonds are worth. Like equities, bonds are intended to represent return of profits from an active business, it's just that profits are returned in a different manner from equities.

By contrast, gold has no more value than a pebble from my back yard absent someone else wanting to buy it off me.
It's sad - but predictable - that this thread has largely degenerated into the usual myopic gold-bashing, much of it from folks who clearly haven't read the article I originally posted either carefully or at all.

Gold has been a store of value for thousands of years - something that can't be said of any fiat currency, let alone stocks or bonds. Its value as a diversifier in successful portfolios that include it is amply demonstrated in the article - along with an equally clear acknowledgment that there are a vast number of portfolios without gold that will understandably have much more appeal for the vast majority of investors.

As for cash, its value and role are about as well understood as gold here, but there's always an opportunityn to learn more:

https://portfoliocharts.com/2017/05/12/ ... -investor/
alfaspider
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Re: A timely and equanimous article on gold

Post by alfaspider »

Kevin K wrote: Wed Aug 26, 2020 7:15 pm
alfaspider wrote: Wed Aug 26, 2020 5:30 pm
000 wrote: Wed Aug 26, 2020 5:17 pm
alfaspider wrote: Wed Aug 26, 2020 5:05 pm [Gold] itself has very little intrinsic value; it is only valuable to the extent others think it is valuable.
Is this not also true of cash and bonds?
It is true of anything, but investments represent a right to a share of profits from a business enterprise. Those rights aren't directly based on what others think about them.

The difference between cash and gold is that there are quite a few obligations I must legally pay in cash but none I must pay in gold. I don't consider cash an investment or store of value- it's a medium of exchange. I do keep a cash emergency fund, but to cover potential expenses that must be paid in cash in the near future.

Bonds are a contractual obligation. While the secondary market price is based on confidence, whether the interest and principal are repaid by the debtor have nothing to do with what anybody else thinks the bonds are worth. Like equities, bonds are intended to represent return of profits from an active business, it's just that profits are returned in a different manner from equities.

By contrast, gold has no more value than a pebble from my back yard absent someone else wanting to buy it off me.
It's sad - but predictable - that this thread has largely degenerated into the usual myopic gold-bashing, much of it from folks who clearly haven't read the article I originally posted either carefully or at all.

Gold has been a store of value for thousands of years - something that can't be said of any fiat currency, let alone stocks or bonds. Its value as a diversifier in successful portfolios that include it is amply demonstrated in the article - along with an equally clear acknowledgment that there are a vast number of portfolios without gold that will understandably have much more appeal for the vast majority of investors.

As for cash, its value and role are about as well understood as gold here, but there's always an opportunityn to learn more:

https://portfoliocharts.com/2017/05/12/ ... -investor/
I’m not sure you read my post. I’m not looking for fiat currency as a store of value.

That something was valuable for much of human history doesn’t really say much. Salt was valuable enough to be used as currency for most of human history. It’s not worth much today. Many things were valued in antiquity that are no longer particularly so.

Can gold be part of a reasonably constructed portfolio? That’s probably the case. I’m saying it’s not for me.
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Forester
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Re: A timely and equanimous article on gold

Post by Forester »

On a day when stocks are sinking and real rates are negative.

Gold: -0.1%

Fool's gold (TLT long term bonds): -1.46%
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Re: A timely and equanimous article on gold

Post by Robot Monster »

Forester wrote: Fri Sep 04, 2020 11:33 am On a day when stocks are sinking and real rates are negative.

Gold: -0.1%

Fool's gold (TLT long term bonds): -1.46%
US stocks sank, not Total International (nor International Developed.) Total International Stock ETF (VXUS) went +0.21%, and that's despite a slight uptick in dollar strength (UUP ETF +0.16%.)
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Re: A timely and equanimous article on gold

Post by D-Dog »

I think there is a difference between risk and uncertainty. Risks are measurable, they have known probabilities. Uncertainties don’t. They are the “unknown unknowns”, the black swans. My opinion is that it is foolish to believe we can precisely calculate (or even estimate) all probabilities in the world of investing. There are too many uncertainties. Things will happen in the future that are drastically different than have ever happened in the past.

I’m not a gold bug. But gold has a long history of existing and storing value and it appears to be a fundamentally different thing than stocks and bonds. So it seems reasonable to me to consider it as a potential diversifier.

I think statistical analysis and back testing can be helpful but you also need to step back and think about uncertainties. I struggle every day with how to deal with the unknown unknowns. I don’t know if gold is the right answer, but it seems like a reasonable candidate given its long track record.
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Re: A timely and equanimous article on gold

Post by cheezit »

On another day when stocks are sinking (VOO -2.75%, VXUS -1.43%) and real rates are negative:

Gold (IAU): -0.27%
Long treasurys (TLT): + 0.61%
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Re: A timely and equanimous article on gold

Post by Croissant »

Kevin, thanks for the share. i certainly learned some new things.

whichever side of the gold debate you're on, i think we can agree the world is made up of people who value this shiny metal (as a storage of value) and people who do not. therefore the asset should be priced based on the preference/opinion of the population as an aggregate (b/c they'll provide the liquidity when you sell), even if that strikes you personally as incorrect or irrational.
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Re: A timely and equanimous article on gold

Post by permport »

D-Dog wrote: Sun Sep 06, 2020 10:20 am I think there is a difference between risk and uncertainty. Risks are measurable, they have known probabilities. Uncertainties don’t. They are the “unknown unknowns”, the black swans. My opinion is that it is foolish to believe we can precisely calculate (or even estimate) all probabilities in the world of investing. There are too many uncertainties. Things will happen in the future that are drastically different than have ever happened in the past.

I’m not a gold bug. But gold has a long history of existing and storing value and it appears to be a fundamentally different thing than stocks and bonds. So it seems reasonable to me to consider it as a potential diversifier.

I think statistical analysis and back testing can be helpful but you also need to step back and think about uncertainties. I struggle every day with how to deal with the unknown unknowns. I don’t know if gold is the right answer, but it seems like a reasonable candidate given its long track record.
An extremely well-reasoned and sensible post. Thanks.
Buy right and hold tight.
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