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Author Topic:   Why There Are Gold Bugs & Silver Stackers
Phat
Member
Posts: 18388
From: Denver,Colorado USA
Joined: 12-30-2003


Message 1 of 64 (916882)
03-15-2024 3:11 PM


I wanted to bring the rabbit trail conversations from the 2024 Presidential thread over here so that we can rationally (hopefully) discuss the role of hard assets in a likely hard-ass future.
First...about the topic itself. Way back in roughly the year 1995, I received a small inheritance from a deceased Uncle. I sunk ALL of it into Gold, Silver, and Platinum. The Gold was bought at roughly $400.00 an ounce. IIRC, I bought 40 ounces. I also bought 20 ounces of platinum, valued at roughly $450.00 an ounce and 4000 ounces of silver, valued at $4.00 an ounce. Sadly, I grew impatient when the prices barely budged and sold it all within ten years. Fool that I am, I wanted quick ways to make money and acquired a gambling addiction. Had I saved it, I would now have a portfolio of roughly $250,000.00 and would be ready to retire. Critics will say that if I had put the money in stocks instead I would be far wealthier...which I don't dispute but times are arguably different now. Modern investing in fiat assets backed by nothing more than dollars is a house of cards getting ready to implode. The metals gain no compound interest and thus are not as good of an investment when things are going up, but the math can and does work entirely in reverse when things are coming back down. Though, indeed, one cannot eat a rock, one can wipe their arse with paper money in times of rampant inflation.
Let us discuss this topic on the definition of the value of hard assets vs fiat currencies.

Replies to this message:
 Message 2 by Theodoric, posted 03-15-2024 3:14 PM Phat has replied
 Message 3 by Taq, posted 03-15-2024 3:43 PM Phat has replied

  
Theodoric
Member
Posts: 9277
From: Northwest, WI, USA
Joined: 08-15-2005
Member Rating: 2.3


Message 2 of 64 (916883)
03-15-2024 3:14 PM
Reply to: Message 1 by Phat
03-15-2024 3:11 PM


How much was the inheritance?

What can be asserted without evidence can also be dismissed without evidence. -Christopher Hitchens

Facts don't lie or have an agenda. Facts are just facts

"God did it" is not an argument. It is an excuse for intellectual laziness.

If your viewpoint has merits and facts to back it up, why would you have to lie?


This message is a reply to:
 Message 1 by Phat, posted 03-15-2024 3:11 PM Phat has replied

Replies to this message:
 Message 6 by Phat, posted 03-15-2024 3:59 PM Theodoric has replied

  
Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


Message 3 of 64 (916885)
03-15-2024 3:43 PM
Reply to: Message 1 by Phat
03-15-2024 3:11 PM


Phat writes:
Modern investing in fiat assets backed by nothing more than dollars is a house of cards getting ready to implode.
What makes you say that?
I would fully agree that stocks do come with risk, but the fact they are bought and sold in dollars is not why they are risky.
If you were looking for something low risk then treasury bonds would have been a great choice. It looks like the return on a 5 year treasury bond in 1995 was 7.4%. Returns were crap in the 2000's because interest rates were so low, but even then there were a lot of lower return mutual funds designed for safe investing. There were tons of options other than commodities like precious metals.
Let us discuss this topic on the definition of the value of hard assets vs fiat currencies.
Gold has value because you can trade it in for dollars. If you couldn't trade gold for dollars then it would not have any value. It would just be a paperweight. The value of gold is based on what other people are willing to pay for it, in fiat currency. The only upside is that gold prices probably won't ever tank like a stock can.

This message is a reply to:
 Message 1 by Phat, posted 03-15-2024 3:11 PM Phat has replied

Replies to this message:
 Message 4 by Phat, posted 03-15-2024 3:53 PM Taq has replied

  
Phat
Member
Posts: 18388
From: Denver,Colorado USA
Joined: 12-30-2003


Message 4 of 64 (916886)
03-15-2024 3:53 PM
Reply to: Message 3 by Taq
03-15-2024 3:43 PM


Hard Ass(ets)
Taq writes:
Our economy would be dire straits if there was deflation of the dollar. Some inflation (1-3%) is good thing for an economy.
"They" tell us its running around 4.5%. I dispute that, though have no counter data except personal observation.
The prices at the grocery store don't shift day to day based on the changing price of gold. Everything is advertised with a cost in dollars, not gold. When you pay taxes you can only pay your taxes in dollars
My grocery budget is running at least 25% higher than a year ago.
Theo writes:
As you have been told repeatedly. Wrong, wrong and did I say wrong.
I may have been *told* a lot of things by various sources but that does not mean I do not question their accuracy.
Theo writes:
The faith and credit of the United States of America is the best backing any currency could have.
Faith in what?
Perhaps your faith is misplaced.
The "value" of Gold has remained stable. The value (purchasing power) of the U.S. Dollar is declining.
You may retort that the reason that the price of gold goes up is due to inflation and depreciation of the US Dollar, but this only proves the dollar's weakness rather than its strength.
It's a house of cards.
If ever there is a financial reset, the bedrock of it all is gold. Not people. Not productivity. Not military strength. The faith and credit of the United States is precisely part of this topic, just so you all know.
Taq writes:
There isn't enough available gold to cover a tiny fraction of the US dollars in circulation, much less the currency of the rest of the world. You are living in fantasyland.
I'm not so sure who is living in fantasyland, but I know im not the only one. What do you mean by "cover"? Fiat currencies have no definite mass so are not defineably "covered". The abstract which is covered is value.
Taq writes:
Gold has value because you can trade it in for dollars. If you couldn't trade gold for dollars then it would not have any value. It would just be a paperweight. The value of gold is based on what other people are willing to pay for it, in fiat currency. The only upside is that gold prices probably won't ever tank like a stock can.
Gold may be a paperweight in some fantasyland, but fiat currencies are simply paper in other points of view.

This message is a reply to:
 Message 3 by Taq, posted 03-15-2024 3:43 PM Taq has replied

Replies to this message:
 Message 7 by Taq, posted 03-15-2024 4:06 PM Phat has seen this message but not replied
 Message 8 by Theodoric, posted 03-15-2024 4:08 PM Phat has replied
 Message 12 by Tanypteryx, posted 03-15-2024 4:44 PM Phat has seen this message but not replied

  
Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


(1)
Message 5 of 64 (916887)
03-15-2024 3:57 PM


Gold is safe, but there is better
I also don't want to poo poo investing in gold. It can be a solid (pun intended) part of any long term investment portfolio. It's always a good idea to have a mix of higher and lower risk investments, and to also adjust the risk within a portfolio depending on your specific situation.
quote:
Gold is considered a safe investment. It is supposed to act as a safe haven when markets are in decline, because the price of gold typically doesn’t move with market prices. As a result, gold also can be considered a risky investment, as history has shown that the price of gold does not always go up, particularly when markets are soaring. Investors typically turn to gold when there is fear in the market and they expect prices of stocks to go down.
Furthermore, gold is generally not an income-generating asset, though there are some gold bonds. Unlike stocks and bonds, the return on gold is typically based entirely on price appreciation. Moreover, an investment in gold carries unique costs. As it is a physical asset, it requires storage and insurance costs. And, while gold is traditionally thought of as a safe asset, it can be highly volatile and drop in price.
Taking into consideration these factors, gold works best as part of a diversified portfolio, particularly when it is acting as a hedge against a falling stock market. Let’s take a look at how gold has held up over the long term.
Has Gold Been a Good Investment Over the Long Term?
I think that is a perfect description of where gold fits into investing. It's a little bit of a hedge against the market, but its volatility and insurance cost is still something that needs to be taken into account.

  
Phat
Member
Posts: 18388
From: Denver,Colorado USA
Joined: 12-30-2003


Message 6 of 64 (916888)
03-15-2024 3:59 PM
Reply to: Message 2 by Theodoric
03-15-2024 3:14 PM


Not that it's any of your business, but it was $40,000.00.

This message is a reply to:
 Message 2 by Theodoric, posted 03-15-2024 3:14 PM Theodoric has replied

Replies to this message:
 Message 9 by Taq, posted 03-15-2024 4:14 PM Phat has seen this message but not replied
 Message 10 by Theodoric, posted 03-15-2024 4:25 PM Phat has not replied

  
Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


(1)
Message 7 of 64 (916889)
03-15-2024 4:06 PM
Reply to: Message 4 by Phat
03-15-2024 3:53 PM


Re: Hard Ass(ets)
Phat writes:
"They" tell us its running around 4.5%. I dispute that, though have no counter data except personal observation.
Current inflation is higher than the goldilocks zone. However, high inflation is still way better than deflation.
My grocery budget is running at least 25% higher than a year ago.
That might have been lag from the previous year where there was food inflation of about 11%. That has calmed down quite a bit and is coming back under control.
quote:
The average price of food in the United States increased 2.2% in the 12 months ended February, after posting an annual increase of 2.6% in January, according to the latest inflation data published Mar. 12, 2024, by the U.S. Labor Department’s Bureau of Labor Statistics (BLS). As recently as August 2022, the rate of inflation for food at 11.4% was the highest since May 1979.
Food Inflation in the United States (1968-2024)
Yes, there was a period of high inflation recently. It's back down. It could go up in the future if we see a massive increase in the US industrial plant that some are predicting as a consequence of reshoring Chinese manufacturing. Inflation does happen which is why it is always a good idea to have money invested instead of sitting in a bank account. Gold can be a solid part of any investment portfolio.
If you want to see what an economy looks like when there is little to no inflation, look at Japan. They have had a stagnant economy for decades, and the lack of inflation is a symptom of that stagnant economy.

This message is a reply to:
 Message 4 by Phat, posted 03-15-2024 3:53 PM Phat has seen this message but not replied

  
Theodoric
Member
Posts: 9277
From: Northwest, WI, USA
Joined: 08-15-2005
Member Rating: 2.3


Message 8 of 64 (916890)
03-15-2024 4:08 PM
Reply to: Message 4 by Phat
03-15-2024 3:53 PM


Re: Hard Ass(ets)
"They" tell us its running around 4.5%. I dispute that, though have no counter data except personal observation
So your "personal observation" is more valid than verifiable facts and data points?
My grocery budget is running at least 25% higher than a year ago.
Bullshit. Provide facts and figures. Anecdotes are not evidence. Comparing grocery bills year to year to come up with some sort of inflation rate is stupid. Peoples tasts change, they change diets. There are regional issues.
AS for the rest of the crap you spout. Look up deflation. YOu are wrong about gold. The same could be said about any other metal commodity. None of them are bedrocks.
You are the mark every scammer is looking for.

What can be asserted without evidence can also be dismissed without evidence. -Christopher Hitchens

Facts don't lie or have an agenda. Facts are just facts

"God did it" is not an argument. It is an excuse for intellectual laziness.

If your viewpoint has merits and facts to back it up, why would you have to lie?


This message is a reply to:
 Message 4 by Phat, posted 03-15-2024 3:53 PM Phat has replied

Replies to this message:
 Message 14 by Percy, posted 03-15-2024 5:16 PM Theodoric has replied
 Message 22 by Phat, posted 03-16-2024 8:34 AM Theodoric has replied

  
Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


(1)
Message 9 of 64 (916891)
03-15-2024 4:14 PM
Reply to: Message 6 by Phat
03-15-2024 3:59 PM


Phat writes:
Not that it's any of your business, but it was $40,000.00
I'm just a Joe Blow when it comes to investment. With that said, if someone came to me for advice on how to invest 40k for the long term I would have told them to split it between two market index funds (say NASDAQ and S&P) and forget about it for 20 years. Don't touch it. Don't even think about it. Just let it be.
10% return on 40k over 20 years would be about 230k.

This message is a reply to:
 Message 6 by Phat, posted 03-15-2024 3:59 PM Phat has seen this message but not replied

  
Theodoric
Member
Posts: 9277
From: Northwest, WI, USA
Joined: 08-15-2005
Member Rating: 2.3


(2)
Message 10 of 64 (916892)
03-15-2024 4:25 PM
Reply to: Message 6 by Phat
03-15-2024 3:59 PM


If it is a central part of your argument than it is my business. You cannot make a claim and leave out a central part of the argument.
If you had invested in a DJIA index fund you would have over $300k
Gold about $220k
NASDAQ Index $540k
S&P 500 index $330k
So you were saying about gold? Also, it was never an actual iinvestment for you. It was just a place to park your money until your addictions forced you to access it. All of my investments have a purpose and most are not to be accessed until after my wife retires. Some are for large expenses down the road. We have a fund for car downpayments, garage expansion, travel. Things like that. If the funds are not there, we do not spend the money. Makes us prioritize needs over desires.
I calculated using the 2023 close with 2024 YTD figures.
Historical Investment Calculator [Rev.: 2024]

What can be asserted without evidence can also be dismissed without evidence. -Christopher Hitchens

Facts don't lie or have an agenda. Facts are just facts

"God did it" is not an argument. It is an excuse for intellectual laziness.

If your viewpoint has merits and facts to back it up, why would you have to lie?


This message is a reply to:
 Message 6 by Phat, posted 03-15-2024 3:59 PM Phat has not replied

Replies to this message:
 Message 11 by Taq, posted 03-15-2024 4:36 PM Theodoric has not replied

  
Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


(1)
Message 11 of 64 (916893)
03-15-2024 4:36 PM
Reply to: Message 10 by Theodoric
03-15-2024 4:25 PM


Theodoric writes:
All of my investments have a purpose and most are not to be accessed until after my wife retires. Some are for large expenses down the road. We have a fund for car downpayments, garage expansion, travel. Things like that. If the funds are not there, we do not spend the money. Makes us prioritize needs over desires.
That's my approach as well. I have found that the key to investment is self control. Invest it in a solid fund, then Jedi mind trick yourself to forget it exists until a given date.

This message is a reply to:
 Message 10 by Theodoric, posted 03-15-2024 4:25 PM Theodoric has not replied

Replies to this message:
 Message 15 by Tanypteryx, posted 03-15-2024 5:21 PM Taq has not replied

  
Tanypteryx
Member
Posts: 4503
From: Oregon, USA
Joined: 08-27-2006
Member Rating: 4.5


(3)
Message 12 of 64 (916894)
03-15-2024 4:44 PM
Reply to: Message 4 by Phat
03-15-2024 3:53 PM


Re: Hard Ass(ets)
Phat in Message 4 writes:
Gold may be a paperweight in some fantasyland, but fiat currencies are simply paper in other points of view.
And yet in every single country on the planet people are using currency to buy and sell commodities. Before during and after financial resets they continue to use money to buy and sell commodities. People decide whether or not to except the value/price points.
The ways that value is assigned to apples, dollars, rupees, gold bars, and candy bars, is exactly the same. If buyers and sellers agree on a price/value a trade can be made. I will never agree that a Tesla electric vehicle is worth $250K, so I will never buy one for that price and if enough other people decide that price is too high they will not buy either, and the price will drop until people are willing to buy it.
That is how the economy works.
Phat in Message 4 writes:
My grocery budget is running at least 25% higher than a year ago.
A sign of record corporate profits.
Phat in Message 4 writes:
The value (purchasing power) of the U.S. Dollar is declining.
That's one of those odd things that seems counter-intuitive. When commodities are scarce or cost more to produce (for example because of higher wages for workers) their price increases. This also means that the economy is growing, which economists measure and claim is a positive goal. So, without price and wage increases there is no economic growth and we do know that economic stagnation is not the goal. What you call inflation is actually economic growth. The economy is not a zero sum game. The reason your wages do not keep pace with inflation is because huge amounts of currency are sequestered or removed from flowing through the economy by the ultra wealthy. They remove more value from the economy than they contribute, which means everyone else has to make up the difference.

Stop Tzar Vladimir the Condemned!
What if Eleanor Roosevelt had wings? -- Monty Python
One important characteristic of a theory is that it has survived repeated attempts to falsify it. Contrary to your understanding, all available evidence confirms it. --Subbie
If evolution is shown to be false, it will be at the hands of things that are true, not made up. --Percy
The reason that we have the scientific method is because common sense isn't reliable. -- Taq
Why should anyone debate someone who doesn't know the subject? -- AZPaul3

This message is a reply to:
 Message 4 by Phat, posted 03-15-2024 3:53 PM Phat has seen this message but not replied

Replies to this message:
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Taq
Member
Posts: 10158
Joined: 03-06-2009
Member Rating: 4.4


(1)
Message 13 of 64 (916895)
03-15-2024 5:09 PM
Reply to: Message 12 by Tanypteryx
03-15-2024 4:44 PM


Re: Hard Ass(ets)
Tanypteryx writes:
That's one of those odd things that seems counter-intuitive. When commodities are scarce or cost more to produce (for example because of higher wages for workers) their price increases. This also means that the economy is growing, which economists measure and claim is a positive goal. So, without price and wage increases there is no economic growth and we do know that economic stagnation is not the goal. What you call inflation is actually economic growth. The economy is not a zero sum game. The reason your wages do not keep pace with inflation is because huge amounts of currency are sequestered or removed from flowing through the economy by the ultra wealthy. They remove more value from the economy than they contribute, which means everyone else has to make up the difference.
Inflation also means debts get cheaper over time. I wish I could have bought a house ~10 years ago because that mortgage debt would be pretty cheap right now. That's because of inflation. It also means capital sunk into infrastructure is going to return higher profits in the future.
If we have deflation, then there is incentive to hold onto your money because stuff will be cheaper tomorrow. This stops money flow into the economy resulting in economic contraction (which is bad, in case anyone is wondering). Inflation encourages spending because today is the cheapest the stuff is going to be.

This message is a reply to:
 Message 12 by Tanypteryx, posted 03-15-2024 4:44 PM Tanypteryx has seen this message but not replied

  
Percy
Member
Posts: 22611
From: New Hampshire
Joined: 12-23-2000
Member Rating: 4.5


Message 14 of 64 (916896)
03-15-2024 5:16 PM
Reply to: Message 8 by Theodoric
03-15-2024 4:08 PM


Re: Hard Ass(ets)
Theodoric in Message 8 writes:
My grocery budget is running at least 25% higher than a year ago.
Bullshit. Provide facts and figures.
According to Quicken, we spent almost exactly 25% more on groceries over the last 12 months than we did the prior 12 months.
This shocked me, but my wife and I figured out that when she's gone to Costco with her friends over the past year she has used her credit card (because she's the member) and her friends reimburse her in cash (which she spends on who knows what, but I know better than to go there), but we can only guess at the amount of the reimbursements. A very rough estimate is that our grocery bill is actually up about 15%.
--Percy

This message is a reply to:
 Message 8 by Theodoric, posted 03-15-2024 4:08 PM Theodoric has replied

Replies to this message:
 Message 18 by Theodoric, posted 03-15-2024 9:44 PM Percy has not replied
 Message 21 by Theodoric, posted 03-15-2024 10:32 PM Percy has not replied

  
Tanypteryx
Member
Posts: 4503
From: Oregon, USA
Joined: 08-27-2006
Member Rating: 4.5


Message 15 of 64 (916898)
03-15-2024 5:21 PM
Reply to: Message 11 by Taq
03-15-2024 4:36 PM


That's my approach as well. I have found that the key to investment is self control. Invest it in a solid fund, then Jedi mind trick yourself to forget it exists until a given date.
That's what we have mostly done as well, but I made a wild gamble once.
The company I worked for years ago had an employee stock purchase plan where you bought shares and for every 4 shares you bought they gave you one share. Right after 9-11 the stock market tanked and our stock price dropped all the way down to $2.10 a share. I took all of our other retirement savings and bought stock...BOY OH BOY was my wife pissed!! Over the years we watched the price climb back up, eventually to $180 per share, I think. Then it slowly dropped back to around $60 and we felt like we had lost a bunch of money (that we never actually had, LOL). Anyway, in 2007-08 sometime the price got up to $80 and we sold all the shares except what was in my 401K, and my wife started speaking to me again. The next day the price jumped to $85 and we groaned...two days later the price started dropping and didn't stop until it got down to around $17 and we were in the middle of the worst recession in my lifetime.
Calculating the cost basis of these stocks for capitol gains tax was a royal pain! The price was different every month when we purchased shares, plus another company bought our whole corporation and then sold off 2 divisions, but continued the same plan with their stock, so we had to calculate the number of new shares we were issued for our old ones.

Stop Tzar Vladimir the Condemned!
What if Eleanor Roosevelt had wings? -- Monty Python
One important characteristic of a theory is that it has survived repeated attempts to falsify it. Contrary to your understanding, all available evidence confirms it. --Subbie
If evolution is shown to be false, it will be at the hands of things that are true, not made up. --Percy
The reason that we have the scientific method is because common sense isn't reliable. -- Taq
Why should anyone debate someone who doesn't know the subject? -- AZPaul3

This message is a reply to:
 Message 11 by Taq, posted 03-15-2024 4:36 PM Taq has not replied

Replies to this message:
 Message 16 by Percy, posted 03-15-2024 5:40 PM Tanypteryx has seen this message but not replied

  
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