19 replies to this topic

[johngeorge]

People think that gold is inflation hedge.. its not...

ogm

Being a believer in gold when I first read your above quote I said to myself ogm is wrong. However, after a bit of thought I do agree with you. Gold is not an inflation hedge, rather it is a value play. Value storehouse. 200 years ago one ounce of gold bought X. Today (give or take a year or two) one ounce of gold will buy X. This country has not gone through what most of Europe, India, and Asia has gone through in history. There they have had wars and conquering back and forth generation after generation ad nauseum. For them gold was the key to maintaining some type of worth...value. Today it is no different with gold as it continues its value maintaining role.

Another point often overlooked about gold is that there is ALWAYS a market for gold, every day of the year, year after year after year. No worries ever about liquidity! IMO those that are able need to keep a minimum of 5% or more of their assets in gold. Gold never dies nor does it fade away. No wonder it remains a favorite with the gods and man.
Best to you

[SandStorm]

But lets look at the inflow into the stockmarket. Do americans really have enough disposable income to shove into the stock market? With savings rates low, debt really high, I tend to think a lot of the money is coming from overseas where they're actually saving money by making it off of consumer buying frenzy in the US.

I had to offer this.

Individuals are barely worth considering when it comes to this market. The big money is institutional, insurance and pension fund. Some of it is ALWAYS earmarked for the US market. Period. Some can shift from Europe to Asia and back to the US, or whatever, but the lion's share is required to be here in the most liquid, most transparent, most secure market in the world.

I'd NEVER put much of my clients money into markets in pseudo-socialist, communist, or thug-run countries. A little speculation? Sure. Serious money? No way in hades. I don't think that I'm inordinately conservative, either.

Mark

You are absolutely right, Mark. Our bombs ensure that there will always be capital inflows. There are countries, such as Japan and the Saudis, that will always inject liquidity here no matter what. For them, it's like doing businesses in Asia where you have to pay "protection fee" to the Triad or else . . . oh, I dunno, like someone will often fight or die in your premises. lol.

But for those who can fend themselves, do you think we can reach a point where they realize that the economic disincentive is just too great to be investing in the all powerful US anymore? Economic disincentive such as greenback's fall from grace and a economic base that changes from mostly consuming to mostly producing = boring all work but no play.

[SandStorm]

People think that gold is inflation hedge.. its not...

ogm

Being a believer in gold when I first read your above quote I said to myself ogm is wrong. However, after a bit of thought I do agree with you. Gold is not an inflation hedge, rather it is a value play. Value storehouse. 200 years ago one ounce of gold bought X. Today (give or take a year or two) one ounce of gold will buy X. This country has not gone through what most of Europe, India, and Asia has gone through in history. There they have had wars and conquering back and forth generation after generation ad nauseum. For them gold was the key to maintaining some type of worth...value. Today it is no different with gold as it continues its value maintaining role.

Another point often overlooked about gold is that there is ALWAYS a market for gold, every day of the year, year after year after year. No worries ever about liquidity! IMO those that are able need to keep a minimum of 5% or more of their assets in gold. Gold never dies nor does it fade away. No wonder it remains a favorite with the gods and man.
Best to you

Of course gold is an inflation hedge. Every commodity /real asset that is priced for x units of a fiat currency is. Question is can commodity's REAL return outpace that of stocks over the long run? I can't think of a reason that a dead object can have more value than stock certificates that are claims to "living," "breathing," and producing companies that add tremendous values to the economy.

[Tor]

People think that gold is inflation hedge.. its not...

ogm

Being a believer in gold when I first read your above quote I said to myself ogm is wrong. However, after a bit of thought I do agree with you. Gold is not an inflation hedge, rather it is a value play. Value storehouse. 200 years ago one ounce of gold bought X. Today (give or take a year or two) one ounce of gold will buy X. This country has not gone through what most of Europe, India, and Asia has gone through in history. There they have had wars and conquering back and forth generation after generation ad nauseum. For them gold was the key to maintaining some type of worth...value. Today it is no different with gold as it continues its value maintaining role.

Another point often overlooked about gold is that there is ALWAYS a market for gold, every day of the year, year after year after year. No worries ever about liquidity! IMO those that are able need to keep a minimum of 5% or more of their assets in gold. Gold never dies nor does it fade away. No wonder it remains a favorite with the gods and man.
Best to you

I am no goldbug as gold has a positive cost of carry, unlike all other assets pretty much. Also wanted to say in these current times, gold as a currency can be used as an untraceable currency, unlike others which go through the banking system. It can be bought and sold under the rader. I think more of this is going to happen.

[jack]

dcengr said "This is simple economics, and you only need to look at year 2000-2002 to see how everything, including stocks, commodities, realestate, all dropped at the same time while the dollar was getting weaker." dollar index jan 2000 to 2002 up 20%

[johngeorge]

People think that gold is inflation hedge.. its not...

ogm

Being a believer in gold when I first read your above quote I said to myself ogm is wrong. However, after a bit of thought I do agree with you. Gold is not an inflation hedge, rather it is a value play. Value storehouse. 200 years ago one ounce of gold bought X. Today (give or take a year or two) one ounce of gold will buy X. This country has not gone through what most of Europe, India, and Asia has gone through in history. There they have had wars and conquering back and forth generation after generation ad nauseum. For them gold was the key to maintaining some type of worth...value. Today it is no different with gold as it continues its value maintaining role.

Another point often overlooked about gold is that there is ALWAYS a market for gold, every day of the year, year after year after year. No worries ever about liquidity! IMO those that are able need to keep a minimum of 5% or more of their assets in gold. Gold never dies nor does it fade away. No wonder it remains a favorite with the gods and man.
Best to you

Of course gold is an inflation hedge. Every commodity /real asset that is priced for x units of a fiat currency is. Question is can commodity's REAL return outpace that of stocks over the long run? I can't think of a reason that a dead object can have more value than stock certificates that are claims to "living," "breathing," and producing companies that add tremendous values to the economy.

Sandstorm
Perhaps you misunderstood my post so I will attempt to clarify. I agree gold is a "dead object" and as Tor rightly pointed out there is a cost of carry associated with holding it. What you are saying, though, that stock certificates somehow have more value in the long run I disagree with. After all, what is a stock certificate? Piece of paper that says you have an interest in some type of public company which may or may not be here tomorrow. Stock certificates are but paper assets, nothing more. Lots and lots of worthless ones have been printed over many years with much more of the same thing to come. Now if you are talking about trading stock certificates.......that is a horse of a different color. Bet on this horse, errr company, bet on that one etc etc. In polite circles it is called trading, in other circles it isn't called trading.

Gold is everything that a stock certificate is not. Gold will be here long after you and I are not. It will have value as it always has. And I repeat.........THERE IS ALWAYS A MARKET FOR GOLD EVERY DAY OF EVERY YEAR. I dont know of any other asset with that liquidity.
Best to you

[SandStorm]

People think that gold is inflation hedge.. its not...

ogm

Being a believer in gold when I first read your above quote I said to myself ogm is wrong. However, after a bit of thought I do agree with you. Gold is not an inflation hedge, rather it is a value play. Value storehouse. 200 years ago one ounce of gold bought X. Today (give or take a year or two) one ounce of gold will buy X. This country has not gone through what most of Europe, India, and Asia has gone through in history. There they have had wars and conquering back and forth generation after generation ad nauseum. For them gold was the key to maintaining some type of worth...value. Today it is no different with gold as it continues its value maintaining role.

Another point often overlooked about gold is that there is ALWAYS a market for gold, every day of the year, year after year after year. No worries ever about liquidity! IMO those that are able need to keep a minimum of 5% or more of their assets in gold. Gold never dies nor does it fade away. No wonder it remains a favorite with the gods and man.
Best to you

Of course gold is an inflation hedge. Every commodity /real asset that is priced for x units of a fiat currency is. Question is can commodity's REAL return outpace that of stocks over the long run? I can't think of a reason that a dead object can have more value than stock certificates that are claims to "living," "breathing," and producing companies that add tremendous values to the economy.

Sandstorm
Perhaps you misunderstood my post so I will attempt to clarify. I agree gold is a "dead object" and as Tor rightly pointed out there is a cost of carry associated with holding it. What you are saying, though, that stock certificates somehow have more value in the long run I disagree with. After all, what is a stock certificate? Piece of paper that says you have an interest in some type of public company which may or may not be here tomorrow. Stock certificates are but paper assets, nothing more. Lots and lots of worthless ones have been printed over many years with much more of the same thing to come. Now if you are talking about trading stock certificates.......that is a horse of a different color. Bet on this horse, errr company, bet on that one etc etc. In polite circles it is called trading, in other circles it isn't called trading.

Gold is everything that a stock certificate is not. Gold will be here long after you and I are not. It will have value as it always has. And I repeat.........THERE IS ALWAYS A MARKET FOR GOLD EVERY DAY OF EVERY YEAR. I dont know of any other asset with that liquidity.
Best to you

Thanks for clarifying. I see where you are going with this, but I am all lost for words. I hope the world doesn't come to this state, a state where there is no one of significance left standing for you to better invest your money in stocks than to put it in gold.

On the eve of annihilation of global proportion . . . hold gold. Good advice.

[pdx5]

If you bought gold, the so called inflation hedge during the Carter administration, you would be at a huge this-advantage to those "pieces of paper" also known as stocks. To me gold is more of a value play. Buy it when it is selling at or near 10 year lows. Not when it is near 10 year high's as it is now.

[OEXCHAOS]

dcengr said
"This is simple economics, and you only need to look at year 2000-2002 to see how everything, including stocks, commodities, realestate, all dropped at the same time while the dollar was getting weaker."

dollar index jan 2000 to 2002 up 20%

The Bonds were rallying pretty smartly, during that time. And, as for realestate, are you SURE about that? Seems like out here homes moved like hot cakes. And this is fly-over country. In fact, I think that the rallying bonds and falling stocks drove money into real estate.

Mark

[dcengr]

Make that 2001-2003 ish era. You all know what I mean. I think you're missing the forest for the trees. The point being made is that deflation CAN hit all assets at once, not push cash into some other bubble, especially if its a credit based bubble.



http://stockcharts.com/c-sc/sc?s=$USD&p=W&st=2000-01-01&i=p21503304975&a=80719048&r=8790.png