Gold
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Gold
For the last couple of years, gold has consistently been debated on this forum. The vast majority of the posts were against using gold in a portfolio (except the PP folk), but there were a few aggressive "gold bugs" standing their ground. Where are they today? I didnt think people on this forum were such trend chasers...
In any case, what is the historical mean price for gold in 2013? If we are reverting to the mean, I would love to know how much more downside there is.
In any case, what is the historical mean price for gold in 2013? If we are reverting to the mean, I would love to know how much more downside there is.
Re: Gold
Well, I am not really a "gold bug" because I am neither bullish nor bearish I just use it for diversification purposes. I do plan on rebalancing if it keeps dropping, becoming too small a part of my portfolio. The drop has coincided with a large stock market rally, so the diversification argument has not really been hurt in my mind. When you are truly diversified, one of your assets (you never know which one in advance) will be dropping or performing below average.
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Re: Gold
I mean, I don't consider myself a Gold Bug, or a Trend Chaser, or a PP advocate for that matter. But I do like to keep a 5% allocation in gold and silver bullion if that counts.
Where is the bottom? I don't know, and I haven't really though about it. I worry about the bottom in gold about as much as I worry about the bottom (or top) in VTI, VINIX, VBTIX, VNQ, and VXUS. Rick Ferri suggested that the mean will revert to about the inflation-adjusted historical price of $850. I would say his guess is as good as any.
Where is the bottom? I don't know, and I haven't really though about it. I worry about the bottom in gold about as much as I worry about the bottom (or top) in VTI, VINIX, VBTIX, VNQ, and VXUS. Rick Ferri suggested that the mean will revert to about the inflation-adjusted historical price of $850. I would say his guess is as good as any.
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Re: Gold
I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
In theory, theory and practice are identical. In practice, they often differ.
Re: Gold
technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
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Re: Gold
TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
Last edited by technovelist on Thu May 16, 2013 2:49 pm, edited 1 time in total.
In theory, theory and practice are identical. In practice, they often differ.
Re: Gold
Ouch.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
- mephistophles
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Re: Gold
Most things, including investment in gold, are not black and white.
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Re: Gold
This year hasn't been much fun so far, but then neither was much of 2008, which ended up all right.rmelvey wrote:Ouch.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
In theory, theory and practice are identical. In practice, they often differ.
Re: Gold
If I held an asset class that had maintained abnormally high returns for the last decade, I would be concerned, not comforted. Mean reversion and all.technovelist wrote:I'm not too concerned about this drop, as I expect the price to continue its decade-long rise
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Re: Gold
Hope isn't a strategy. You haven't made a single point that isn't in the news everyday, and therefor priced in. Good luck.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
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Re: Gold
Thanks. Let me know when the average investor has a 10% allocation to gold, and then I'll reconsider.Investing is boring wrote:Hope isn't a strategy. You haven't made a single point that isn't in the news everyday, and therefor priced in. Good luck.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
In theory, theory and practice are identical. In practice, they often differ.
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Re: Gold
Don't see the gold-owner mentioning anything about "hope" at all.Investing is boring wrote:Hope isn't a strategy. You haven't made a single point that isn't in the news everyday, and therefor priced in. Good luck.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
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Re: Gold
Thanks. I have noticed that there seems to be an irrationally negative tone toward the notion of gold as an investment here, and not just because of my high allocation. The thread on 100% stock allocation seems more reasoned, and that's a pretty extreme choice as well.donaldfair71 wrote:Don't see the gold-owner mentioning anything about "hope" at all.Investing is boring wrote:Hope isn't a strategy. You haven't made a single point that isn't in the news everyday, and therefor priced in. Good luck.technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
In theory, theory and practice are identical. In practice, they often differ.
Re: Gold
Possibly because many of us have been exposed to gold investors who have fringe-y world-views. For example any time the price of gold goes down the investment blogs will be full of claims it's the result of a conspiracy between international bankers and central banks. Another one is the 'you must own physical gold' crowd - paper gold is a sham. The GLD ETF doesn't actually have anything like the reserves claimed. I'm also sure we've all seen the claims that the stated US Treasury gold reserve amounts are a complete lie.technovelist wrote: Thanks. I have noticed that there seems to be an irrationally negative tone toward the notion of gold as an investment here, and not just because of my high allocation. The thread on 100% stock allocation seems more reasoned, and that's a pretty extreme choice as well.
Whatever the merits of gold are (and I think if you have above some asset level it makes sense to own gold) these viewpoints turn people off.
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Re: Gold
Have you read the GLD ETF's prospectus? I have, and you could drive an armored truck through the loopholes they have written into it to protect them if the gold turned up missing.Ged wrote:Possibly because many of us have been exposed to gold investors who have fringe-y world-views. For example any time the price of gold goes down the investment blogs will be full of claims it's the result of a conspiracy between international bankers and central banks. Another one is the 'you must own physical gold' crowd - paper gold is a sham. The GLD ETF doesn't actually have anything like the reserves claimed. I'm also sure we've all seen the claims that the stated US Treasury gold reserve amounts are a complete lie.technovelist wrote: Thanks. I have noticed that there seems to be an irrationally negative tone toward the notion of gold as an investment here, and not just because of my high allocation. The thread on 100% stock allocation seems more reasoned, and that's a pretty extreme choice as well.
Whatever the merits of gold are (and I think if you have above some asset level it makes sense to own gold) these viewpoints turn people off.
As for the US Treasury reserves, when was the last time they were audited? Of course the government would NEVER lie to us about anything important!
None of which has anything to do with the investment performance of gold over the last decade...
Last edited by technovelist on Thu May 16, 2013 4:25 pm, edited 1 time in total.
In theory, theory and practice are identical. In practice, they often differ.
- danwhite77
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Re: Gold
As a 100% equities investor, I'll chime in. I think what turns many equity investors off to a gold dominated portfolio is the seemingly arbitrary nature of the choice of gold. Certainly, gold has been a store of value of thousands of years, longer than any civilization has lasted in its present form, so that makes it unique. However, there's no inherent industrial or practical application for gold (as there is for, say, oil or even platinum) so the value of gold is reliant on investors' opinion of gold's value alone. There's no other gauge of gold's value, it's whatever the next guy is willing to pay. Nothing more, nothing less.
With 100% equities, I'm invested (in very small increments) in businesses all over the world that provide goods and services and, in exchange, are paid money. If every investor in the world suddenly decided that all stocks should go to zero, I'm fine with that (and I'll buy everything for nothing!) so long as the underlying businesses are operating as normal. Eventually, the money the businesses are paid for their goods and services will flow through in the form of stock repurchases or dividends. Unlike gold, there is some return that will support the value of that equity, some money that will flow through the business to the investor (theoretically, anyway).
I think this is the difference that really polarizes people. And having said this, I certainly do not pass judgment on anyone 70% or 100% in gold. We all have to make our allocations and make peace with them. This is merely my take on why the gold investors and equity investors are sometimes diametrically opposed on this board and elsewhere. The investments are fundamentally very different.
With 100% equities, I'm invested (in very small increments) in businesses all over the world that provide goods and services and, in exchange, are paid money. If every investor in the world suddenly decided that all stocks should go to zero, I'm fine with that (and I'll buy everything for nothing!) so long as the underlying businesses are operating as normal. Eventually, the money the businesses are paid for their goods and services will flow through in the form of stock repurchases or dividends. Unlike gold, there is some return that will support the value of that equity, some money that will flow through the business to the investor (theoretically, anyway).
I think this is the difference that really polarizes people. And having said this, I certainly do not pass judgment on anyone 70% or 100% in gold. We all have to make our allocations and make peace with them. This is merely my take on why the gold investors and equity investors are sometimes diametrically opposed on this board and elsewhere. The investments are fundamentally very different.
"While some mutual fund founders chose to make billions, he chose to make a difference." - Dedication to Jack Bogle in 'The Bogleheads' Guide to Investing'.
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Re: Gold
Thanks for the reasoned response. I also do not pass judgment on those with different allocations. We each have to go with what lets us sleep at night, and we all have different goals and concerns...danwhite77 wrote:As a 100% equities investor, I'll chime in. I think what turns many equity investors off to a gold dominated portfolio is the seemingly arbitrary nature of the choice of gold. Certainly, gold has been a store of value of thousands of years, longer than any civilization has lasted in its present form, so that makes it unique. However, there's no inherent industrial or practical application for gold (as there is for, say, oil or even platinum) so the value of gold is reliant on investors' opinion of gold's value alone. There's no other gauge of gold's value, it's whatever the next guy is willing to pay. Nothing more, nothing less.
With 100% equities, I'm invested (in very small increments) in businesses all over the world that provide goods and services and, in exchange, are paid money. If every investor in the world suddenly decided that all stocks should go to zero, I'm fine with that (and I'll buy everything for nothing!) so long as the underlying businesses are operating as normal. Eventually, the money the businesses are paid for their goods and services will flow through in the form of stock repurchases or dividends. Unlike gold, there is some return that will support the value of that equity, some money that will flow through the business to the investor (theoretically, anyway).
I think this is the difference that really polarizes people. And having said this, I certainly do not pass judgment on anyone 70% or 100% in gold. We all have to make our allocations and make peace with them. This is merely my take on why the gold investors and equity investors are sometimes diametrically opposed on this board and elsewhere. The investments are fundamentally very different.
In theory, theory and practice are identical. In practice, they often differ.
Re: Gold
Gold is really not that arbitrary of a commodity to hoard. It is by far the easiest commodity to hoard because it lasts forever and is rare which means it usually has a high value relative to the weight. Can you imagine shoving barrels of oil into a safety deposit box? It wouldn't work. CCF are ofcourse another option, but they are exactly a "real asset" they are a financial contract.
Re: Gold
The best projection of gold performance over time is that it will match inflation. One ounce of gold buys a nice suit today, and will continue to do so in the future. I need better performance than that.technovelist wrote: Have you read the GLD ETF's prospectus? I have, and you could drive an armored truck through the loopholes they have written into it to protect them if the gold turned up missing.
As for the US Treasury reserves, when was the last time they were audited? Of course the government would NEVER lie to us about anything important!
None of which has anything to do with the investment performance of gold over the last decade...
Re: Gold
The point of owning gold is to own an asset that as free of counterparty risk as possible, which stocks, bonds, and other financial instruments are not. So, to really benefit the most from the diversification and hedging potential of gold you should own it in physical form store it outside the reach of others, particularly governments. That said, I own gold in the form of a gold ETF. Buying gold bullion and burying it in the backyard, while being the best way to own it IMO, is a little too far out there for me. But I readily admit that isn't as effective.
We don't know where we are, or where we're going -- but we're making good time.
Re: Gold
Bank of America gives free safety deposit boxes if you have enough money with them. Not a bad way to go. I am also a fan of GTU because their prospectus is short and simple. Additionally, one can spread their ETF gold over many different ETFs, each one held in different geographic locations and with different institutions to help mitigate that counter-party risk. Whenever people ask me about which gold option is best I really think it's an "all of the above" approach.Browser wrote:The point of owning gold is to own an asset that as free of counterparty risk as possible, which stocks, bonds, and other financial instruments are not. So, to really benefit the most from the diversification and hedging potential of gold you should own it in physical form store it outside the reach of others, particularly governments. That said, I own gold in the form of a gold ETF. Buying gold bullion and burying it in the backyard, while being the best way to own it IMO, is a little too far out there for me. But I readily admit that isn't as effective.
Re: Gold
But if you have your gold in a bank's safety deposit box it is within reach of the bank and the government, violating my premise that you should ideally hold it out of reach if that is possible. You may be aware of the following:
By Executive Order Of The President of The United States, March 9, 1933.
By virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people.
Therefore, pursuant to the above authority, I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government.
All safe deposit boxes in banks or financial institutions have been sealed, pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the United States and its territories and all foreign exchange transactions or movements of such metals across the border are hereby prohibited.
Your possession of these proscribed metals and/or your maintenance of a safe deposit box to store them is known by the government from bank and insurance records. Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service.
By lawful order given this day, the President of the United States.
Franklin Roosevelt—March 9, 1933
We don't know where we are, or where we're going -- but we're making good time.
Re: Gold
Every option has its risks. I think just choosing one is less than ideal. You can do a little bit of all of the options and reduce your risk.
Re: Gold
technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
I think I would lower that 70%
Re: Gold
technovelist,technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
If you don't mind I have a couple of questions.
-- Are you in the accumulation phase?
-- Do you continue to buy Gold still to keep your allocation to 70%?
-- What does your remaining 30% contain?
Just curious... Thanks.
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Re: Gold
1. I'm technically still in the accumulation phase, but haven't added significantly to my investment holdings for the past several years. I'm sort of in a holding pattern until I have more clarity as to my life path down the road.rr2 wrote:technovelist,technovelist wrote:TO39 wrote:technovelist wrote:I'm not sure of the definition of "gold bug", but I do keep a significant proportion of my assets in gold. I'm not too concerned about this drop, as I expect the price to continue its decade-long rise as soon as all of the weak hands have been shaken out. None of the reasons for that rise have gone away; in fact, they have intensified.
Not too significant a portion I hope
About 70%.
My average cost basis is about $500/oz.
If you don't mind I have a couple of questions.
-- Are you in the accumulation phase?
-- Do you continue to buy Gold still to keep your allocation to 70%?
-- What does your remaining 30% contain?
Just curious... Thanks.
2. Whenever I have additional funds I generally buy Central Fund of Canada (CEF), which is sort of a mutual fund that holds almost exclusively physical gold and silver.
3. Most of the other 30% is a Swiss franc fixed annuity that has a guaranteed 2% interest rate. That was pretty laughable when I bought it a number of years ago, but now looks pretty good. I might add more to that but don't want to increase my counterparty risk by having too much of my money with one institution that might have trouble paying their guaranteed rate.
In theory, theory and practice are identical. In practice, they often differ.
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Re: Gold
i own gold as a hedge and have not sold it. If it falls outside my bands I will buy more. there is way to value gold. It usually trades at 16x the price of oil. At 10x the price it is cheap. At 20 x the price it is expensive. Therefore we can see that gold is fairly priced at todays level.
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Re: Gold
This is one of the reasons I hold gold. Why I like Gold and Silver:Ged wrote:The best projection of gold performance over time is that it will match inflation. One ounce of gold buys a nice suit today, and will continue to do so in the future. I need better performance than that.technovelist wrote: Have you read the GLD ETF's prospectus? I have, and you could drive an armored truck through the loopholes they have written into it to protect them if the gold turned up missing.
As for the US Treasury reserves, when was the last time they were audited? Of course the government would NEVER lie to us about anything important!
None of which has anything to do with the investment performance of gold over the last decade...
1. It does not correlate well to my other holdings (Domestic Index, Int. Index, REIT Index, Bond Index)
2. I hold relatively low % in fixed income for a 32 year old (15%), and gold/silver can (not does, but can) work as a wealth preserver should we see another 2008-like dive (which, as a 32 year old, I will see at least once more).
3. Some people choose to use a small % of their portfolios in speculative investments. I choose to use Gold because, at worst, over my next 30-40 years it will hold with inflation in my opinion. But there are also certain times (such as about 2001-2011) where it can go insane. It may drop and stay at $500 for a 20 year stretch (in which my inflation-pacing idea is incorrect) in my next 30 years, in which I will add to it. It may also bottom at $1000 and jump to $4000 in the next 10 years. I will sell some.
I put approximately 24% of my total income into stocks/bonds in my tax-advantaged accounts, and will only add to that as I grow older. I only put into gold what I understand could be EXTREMELY volatile for a long time, and sit collecting no income or growing at all. High opportunity cost? Probably. But it helps me sleep at night.
Re: Gold
I've invested in gold for at least the last 10 years. Before that, I thought it was goofy but I guess I changed my mind just in time for the big run up. After having studied it and thought about it for a great deal of time, I have to say that I'm of the opinion that there is no way to "value" gold in any fundamental sense. The price is mostly driven by sentiment -- you can see that there have been two multiyear periods during which the financial and economic factors became unglued and gold became an attractive alternative: 1972-1980 and 2002-2011. If any asset screams to be managed with a momentum strategy, it is gold. You would have done quite well, for example, using a moving average strategy which would have kept you in gold for most of the time since 2002. And you would have done quite well by getting out of gold when it crossed decisively below it's 200-day MA back in 2012. Rather than throwing good money after bad by continuing to "rebalance" by buying more gold, I'd consider staying out until if and when it crosses back above the 200-day MA. I personally haven't gotten out of gold, which I probably should have, but I don't plan to add to my holdings while it stays below the MA. I'll wait until the momentum shifts back to positive, if it does, before committing any more funds.wesleymouch wrote:i own gold as a hedge and have not sold it. If it falls outside my bands I will buy more. there is way to value gold. It usually trades at 16x the price of oil. At 10x the price it is cheap. At 20 x the price it is expensive. Therefore we can see that gold is fairly priced at todays level.
We don't know where we are, or where we're going -- but we're making good time.
Re: Gold
Another thing to keep in mind is that gold is not that terribly expensive when priced in terms of other commodities. Comparing a raw commodity (gold) to a basket of finished goods and services that changes over time (CPI), is kind of an apples to oranges comparison. In terms of copper or oil, gold is not a crazy parabolic bubble.
If you want to make the argument that commodities in general are a bubble than that is totally different, but to isolate gold is missing the bigger picture.
If you want to make the argument that commodities in general are a bubble than that is totally different, but to isolate gold is missing the bigger picture.
Re: Gold
I don't own gold. If my house is robbed, someone might take it.
Instead I own and store fine bespoke suits, which don't need to be locked up and can be readily exchanged for 1 oz of gold at any time.
Instead I own and store fine bespoke suits, which don't need to be locked up and can be readily exchanged for 1 oz of gold at any time.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
Re: Gold
Indeed.but to isolate gold is missing the bigger picture
Compare for instance a third each in LTT, 2-year T and gold, with 100% 5-year T from 1974 - 2012 inclusive (i.e. ignoring the first couple of years when gold was in effect IPO'd and 'finding its level') and
8.3% annualised, 9.6% standard deviation for the three-way blend
8% annualised and 6.8% standard deviation for 5-year T.
Generally tracking each other somewhat closely, but with the three-way pulling ahead in the first third of years, lagging in the second third, and pulling ahead again in the last third.
At 16% gold, 42% in each of STT and LTT, the variance is much smaller.
Add 30% SCV, combine the STT/LTT into a 5-year-T bullet, and 30% SCV, 10% gold, 60% 5-year-T NON REBALANCED nigh on tracked a Coffee House portfolio since 1974 (rebalancing reduced the volatility further).
Just count gold as a undated zero coupon inflation bond and be done. Include or exclude it as you see fit and mIx it with other bonds as you deem to be appropriate. Stocks can also be measured from a bond-like perspective (undated variable coupon bond, with the yield = earnings yield).
If you're inclined to add to longer dated TIPS, then you might be prepared to extend out further ... into gold. If you're inclined to shorten down term, then you might want to reduce/sell gold.
Re: Gold
Clive said
Compare for instance a third each in LTT, 2-year T and gold, with 100% 5-year T from 1974 - 2012 inclusive (i.e. ignoring the first couple of years when gold was in effect IPO'd and 'finding its level') and
This is ( I hope) what a morningstar growth chart looks like for his comparison . I could only go back to 1992
http://quote.morningstar.com/fund/chart ... %2C0%22%7D
I would like to see a chart going back longer
edited to add. I used CEF as a gold substitute
Compare for instance a third each in LTT, 2-year T and gold, with 100% 5-year T from 1974 - 2012 inclusive (i.e. ignoring the first couple of years when gold was in effect IPO'd and 'finding its level') and
This is ( I hope) what a morningstar growth chart looks like for his comparison . I could only go back to 1992
http://quote.morningstar.com/fund/chart ... %2C0%22%7D
I would like to see a chart going back longer
edited to add. I used CEF as a gold substitute
Re: Gold
Ha! That almost justified the time I spent reading a gold thread.momar wrote:I don't own gold. If my house is robbed, someone might take it.
Instead I own and store fine bespoke suits, which don't need to be locked up and can be readily exchanged for 1 oz of gold at any time.
Re: Gold
I would posit:
To deal intellectually with any issue you have to strip out the content free talk
Gold bug
Barberous relic
Etc. in this case.
People who hold gold, are not bugs.
..... Etc. if gold is a barberous relic, fort knox should be sold, and emptied of the relic, and quit wasting money guarding it, I mean how stupid is that? Just sell it? Heh, don't hold your breath. Won't happen.
Ok enough blather about straw men and red herrings.
Gold has
1) volatility - a heck of a lot, like it will jump up 4-5 times in value(ditto fall 5 time vale) in 10 years or less even
2) good correlation
Put that behavior in a portfolio, buy and hold, rebalance.
It's a no brainer portfoliowise.
Now in isolation, it's nice to have in Iran, Cyprus, Argentina, etc. currently. Won't ever happen in us? Your guess is as good as mine.
To deal intellectually with any issue you have to strip out the content free talk
Gold bug
Barberous relic
Etc. in this case.
People who hold gold, are not bugs.
..... Etc. if gold is a barberous relic, fort knox should be sold, and emptied of the relic, and quit wasting money guarding it, I mean how stupid is that? Just sell it? Heh, don't hold your breath. Won't happen.
Ok enough blather about straw men and red herrings.
Gold has
1) volatility - a heck of a lot, like it will jump up 4-5 times in value(ditto fall 5 time vale) in 10 years or less even
2) good correlation
Put that behavior in a portfolio, buy and hold, rebalance.
It's a no brainer portfoliowise.
Now in isolation, it's nice to have in Iran, Cyprus, Argentina, etc. currently. Won't ever happen in us? Your guess is as good as mine.
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Re: Gold
Copper. Easy to get from banks in form of one cent coins. Can be acquired without any fanfare. Will hold face value and allows for speculation if copper goes up in price over the years or if the penny is halted in production permanently and becomes a collectible. I like precious metals too, but if they get to a floor on price, it will probably only happen when everybody swears them off for years. Owning them is easy we find. It is the knowing when to sell them that might be the trick.
Re: Gold
Maybe the last decade is the start of the mean reversion, that gold returns have been below their true mean for a long time.Elbowman wrote:If I held an asset class that had maintained abnormally high returns for the last decade, I would be concerned, not comforted. Mean reversion and all.technovelist wrote:I'm not too concerned about this drop, as I expect the price to continue its decade-long rise
I trust that you're not suggesting that you know what the mean return is, are you? And that you know that the last decade's returns are above that level?
Simplify the complicated side; don't complify the simplicated side.
Re: Gold
Try this chartTO39 wrote:I would like to see a chart going back longer
Rule of thumb - change in price equals modified duration multiplied by change in yield.
Duration for a undated (and long dated) security (i.e. stocks and gold) is the inverse of the yield, which for stocks = PE. For short dated duration can be approximated to time to maturity.
If you assume gold has 0% longer term real yield then its nominal yield = % inflation, which might be targeted to be 2% (as per US, UK) = 50 duration (i.e. gold = volatile long dated inflation bond).
LTT's (conventional bonds) might average 5% yield = 20 duration, such that generally LTT's around 2.5 less volatile than gold. Assuming inflation bonds broadly = conventional bonds, and a STT/LTT barbell broadly similar to a bullet, then 70% TIPS, 30% gold broadly similar to a 5 year T fund (10 year T ladder). Of course expectations of future interest rates/inflation etc. may drive deviance of one or the other according to those expectations (longer term outlook) - present day valuations reflect the market wide consensus future expectations. As a broad average however, 20 stocks duration, 50 gold duration = 30% gold/70% stock ratio. 50-50 that with 5 year T bonds = 35% stocks, 15% gold, 50 5-year-T when based on SCV like volatility (less gold, more stock for TSM).
At the bottom of this page http://www.bogleheads.org/forum/viewtop ... 10&t=66790
you get a feel for how adding gold to an otherwise all stock position can result in better risk adjusted rewards. But the efficient frontier isn't static, so that chart just reflects that particular time period. Over that time period around 50-50 stock/gold yielded the highest reward, as both of those achieved somewhat similar gains over that period. Over other periods that likely wouldn't be the case.
With LTT conventional yields at around 0% real and a gold duration of 50, if LTT real yields rise to 2% real, then gold might halve and halve again from its $1800 highs - perhaps $450 (CPI time value adjusted). Stocks might gain 20% power 2 over the same period, so a 4x25 Permanent Portfolio with 25% in each might see the combined stock+gold 50 amount drop to 43. -7% portfolio decline less whatever the 50% bonds gain. The test being whether PP's might capitulate or not on seeing stocks +44%, PP barely breaking even over such a period. Had a PP'er rebalanced to reduce gold, add to stocks at around the $1800 gold high levels, then that might be more like a 15 gold, 35 stock allocation relative to initial amounts such that the reversal would be less painful, perhaps 50 having risen to 54 ( (35 stock x 1.44 ) + ( 0.15 gold x 0.25 ) = 54 ).I would expect gold to drop to around 800 Or less if economy does well
But all just a guess, a Euro/French crisis could change things overnight. I sold out of gold a couple of years back for around the current price. My speculative play at present is strengthening Japanese stocks, weakening Yen (via DXJ currency hedged Japanese stock ETF) as they print $75B/month. Japan was an outlier, with gold rising the least in Yen terms relative to other currencies - something they had to address. I've been holding that since early April when they announced their QE intent. Usually I'd 'sell in May..' for the summer break, but might keep this one going into June and beyond depending how well it continues to run (trailing 5% stop).
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Re: Gold
I have developed a portfolio which i call the Wesley which consists of:
10% S&P/ 10% small cap value/ 10% EFA/ 15% gold / 50% 5 yr treasuries/ 5% cash
It has delivered a CAGR of 9.8 % from 1971 to 2012 with minimal drawdowns (40 of 42 years positive return and maximum loss of 3.9%.)
10% S&P/ 10% small cap value/ 10% EFA/ 15% gold / 50% 5 yr treasuries/ 5% cash
It has delivered a CAGR of 9.8 % from 1971 to 2012 with minimal drawdowns (40 of 42 years positive return and maximum loss of 3.9%.)
Re: Gold
Very interesting thread. I understand those who own gold in specific amounts and rebalance back to their targeted asset percentage. I'll never understand owning 70% of of one's portfolio in a single commodity. This is just like betting most of your money on one stock or one piece of real estate
I suggest people read an old book called Panic on Wall Street: A history of America's Financial Disasters by Robert Sobel. This book chronicles the US financial disasters of 1792, 1837, 1857, 1865-1869, 1873, 1884, 1893-1895, 1901, 1907, 1914, 1929, and 1962. I only own precious metals in collectable coins, but I was fascinated by the role that gold played for good or bad in many of these disasters. This book can give serious gold investors a side by side history of gold and stock market speculation in the US.
I suggest people read an old book called Panic on Wall Street: A history of America's Financial Disasters by Robert Sobel. This book chronicles the US financial disasters of 1792, 1837, 1857, 1865-1869, 1873, 1884, 1893-1895, 1901, 1907, 1914, 1929, and 1962. I only own precious metals in collectable coins, but I was fascinated by the role that gold played for good or bad in many of these disasters. This book can give serious gold investors a side by side history of gold and stock market speculation in the US.
Never underestimate the power of the force of low cost index funds.
Re: Gold
The Behavior of Gold Under Deflation http://www.nowandfutures.com/d2/Behavio ... lation.pdf
Executive Summary
· Deflation is defined as falling levels of both economic activity and falling price levels on an absolute basis. The contraction of economic activity is generally preceded by an unsustainable boom period and is usually kicked off by an event which causes economic confidence to be lost. Deteriorating credit quality, the shift from capital growth to capital preservation, and the hoarding of capital are characteristics of most deflationary periods. Deflations typically end after crisis conditions force policymakers to enact large-scale inflationary policies designed to counteract deflationary conditions.
· In historic US deflations, individuals had the choice between paper currency or gold as hoarding
vehicles. The historical record demonstrates that loss of confidence in the issuer of paper currency is often a sufficient reason for individuals to choose gold over paper currency. We attach a detailed review of the behavior of gold under each US deflationary period since the Post-Jacksonian deflation of 1837-1843.
· In a prospective deflation, the existence of large foreign exchange reserves and a historic accumulation of financial assets means the magnitude of capital flowing to hoarding vehicles is large. With a limited pool of hoarding vehicles in today’s marketplace, prices of scarce hoarding vehicles would be bid up.
· Compared to widely available cash-substitutes, gold’s relative attractiveness boils down to relative credit quality. Competing against foreign currencies, the role of gold as a preferred hoarding vehicle will depend if deflation is limited to the US or spreads internationally. Under the global deflation scenario, foreign currencies would also be negatively impacted by deteriorating credit quality.
· Because of cultural conditioning, Americans may ignore gold as a currency alternative in the early
stages of deflation. Considering the importance of Asian investors to gold demand and the favorable cultural conditioning Asian cultures have towards gold, this may be a mistake. Asian investors may gravitate towards gold much earlier in a deflationary spiral, leaving American investors behind.
Executive Summary
· Deflation is defined as falling levels of both economic activity and falling price levels on an absolute basis. The contraction of economic activity is generally preceded by an unsustainable boom period and is usually kicked off by an event which causes economic confidence to be lost. Deteriorating credit quality, the shift from capital growth to capital preservation, and the hoarding of capital are characteristics of most deflationary periods. Deflations typically end after crisis conditions force policymakers to enact large-scale inflationary policies designed to counteract deflationary conditions.
· In historic US deflations, individuals had the choice between paper currency or gold as hoarding
vehicles. The historical record demonstrates that loss of confidence in the issuer of paper currency is often a sufficient reason for individuals to choose gold over paper currency. We attach a detailed review of the behavior of gold under each US deflationary period since the Post-Jacksonian deflation of 1837-1843.
· In a prospective deflation, the existence of large foreign exchange reserves and a historic accumulation of financial assets means the magnitude of capital flowing to hoarding vehicles is large. With a limited pool of hoarding vehicles in today’s marketplace, prices of scarce hoarding vehicles would be bid up.
· Compared to widely available cash-substitutes, gold’s relative attractiveness boils down to relative credit quality. Competing against foreign currencies, the role of gold as a preferred hoarding vehicle will depend if deflation is limited to the US or spreads internationally. Under the global deflation scenario, foreign currencies would also be negatively impacted by deteriorating credit quality.
· Because of cultural conditioning, Americans may ignore gold as a currency alternative in the early
stages of deflation. Considering the importance of Asian investors to gold demand and the favorable cultural conditioning Asian cultures have towards gold, this may be a mistake. Asian investors may gravitate towards gold much earlier in a deflationary spiral, leaving American investors behind.
Re: Gold
That's simply not true, even with some cursory fact checking. I don't know why people keep trotting out this suit vs gold fable.Ged wrote:The best projection of gold performance over time is that it will match inflation. One ounce of gold buys a nice suit today, and will continue to do so in the future. I need better performance than that.
I've bought more than a few quality suits in the last 20 years. An ounce of gold would have covered perhaps a third to half the cost during the 1990s.
What kind of 70s-style leisure "suits" were people buying for $300 in 1984? Are people who trade their Krugerrands for suits picking polyester one year and wool the next, or discount rack one year and custom tailored the next?
Re: Gold
In Roosevelt's defense, the gold hording was driving up the price of gold and, with the dollar pegged the gold standard, was thus driving up the value of the dollar. Keynes was shouting from the rooftops about sticky wages and deflation bringing down the economy so Roosevelt did what he needed to do to. They had tried changing the gold/dollar ratio in the past but frankly, all that did was validate and encourage the horders' behavior. Without the gold standard today, there's no *honest* reason that the government would ever repeat those actions.Browser wrote:But if you have your gold in a bank's safety deposit box it is within reach of the bank and the government, violating my premise that you should ideally hold it out of reach if that is possible. You may be aware of the following:
By Executive Order Of The President of The United States, March 9, 1933.
By virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people.
Therefore, pursuant to the above authority, I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government.
All safe deposit boxes in banks or financial institutions have been sealed, pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the United States and its territories and all foreign exchange transactions or movements of such metals across the border are hereby prohibited.
Your possession of these proscribed metals and/or your maintenance of a safe deposit box to store them is known by the government from bank and insurance records. Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service.
By lawful order given this day, the President of the United States.
Franklin Roosevelt—March 9, 1933
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Re: Gold
In the 1930s people held gold in safety deposit boxes. Today almost no Americans own gold. If the Govt wanted to confiscate gold they would take GLD, IAU, and other ETF gold not rummage through millions of safety deposit boxes to look for gold.
Re: Gold
Try this chartClive wrote:TO39 wrote:I would like to see a chart going back longer
Thanks Clive, great chart