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Who's Buying Gold

Discussion in 'Speaker's Corner' started by fester, Feb 4, 2009.

  1. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    The inflation of the money supplies starter long before the Qe's, which where to bail out speculators.The speculative low interest money that drove the dot.com and the housing bubbles and the deficit war spending for example is still the policy with 0.5% us and uk base rate for the chosen few.Resulting in continued pumping up the fiat debt money supple bubble.
     
    Last edited: May 21, 2011
  2. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I really have no idea what you're talking about, unless your referring to the move off the gold standard which naturally results in higher inflation, in which case that happened over 30 years ago - why has it taken so long for commodities to appreciate in response? Ditto if you're talking about Greenspan's crazy low interest rate policies of the 90s, why has it taken over a decade to be be reflected in commodity prices?

    Here's the answer for you: the hot money has been chasing various bubbles - tech, mortgages, now commodities. If what you were saying was true, the run up would have been steady since at least the mid-90s, maybe earlier. But it hasn't been. There were steady rises until de-regulation and the collapse of earlier bubbles lead to a rush for commodities, which is why we've seen sky-high prices during the last 3-4 years.
     
  3. paspc

    Gangster

    Joined: Jun 1, 2004

    Posts: 129

  4. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

  5. LeJosh

    Capodecina

    Joined: Sep 24, 2008

    Posts: 10,434

    Location: Edinburgh.

    That didn't last very long but it was a hell of an upswing.
     
  6. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

  7. LeJosh

    Capodecina

    Joined: Sep 24, 2008

    Posts: 10,434

    Location: Edinburgh.

    The global collapse of the economy in 2008 was due to unregulated speculation, in a nutshell.
     
  8. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I don't think so, I think it was more 2006/2007 when the crazy, unregulated, and mis-rated speculation in mortgages and their derivatives that caused that collapse.

    I think 2008 was the flight of money out of mortgages and into commodities, i.e. swapping one bubble for another.

    I think someone may have already mentioned it, but there's a brilliant book called The Big Short by Michael Lewis, about the handful of people who saw the collapse coming and put massive short bets on it. The greed and outright stupidity of everyone on the other side of the bets beggars belief.
     
    Last edited: May 27, 2011
  9. LeJosh

    Capodecina

    Joined: Sep 24, 2008

    Posts: 10,434

    Location: Edinburgh.

    Yup, previous to 2008 was the mortgage crisis that I was actually thinking about but they dropped the ball on that as you rightly said to commodities.

    There was many notions sent to higher ups to initiate regulation but they were rejected and the economy fell over. Quite ridiculous really.
     
  10. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    An other way of looking at it is, this was a not so much swapping one bubble for an other but a "flight to quality" both in currency(gold) and investment's.
     
    Last edited: May 28, 2011
  11. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Can you expand on what you mean by this, because I'm not sure that I follow. I can see where you're coming from in that people 'always' have to buy commodities, but they're peculiar as an investment in that for them to be of maximum benefit to people, they should be as cheap as possible. A rapidly rising price benefits only speculators, then an excessive high point severely damages consumption.

    And of course higher cost of commodities translates into less consumer spending on other stuff, and greater civil unrest - see the Arab Spring. I really have a hard time justifying commodity speculation morally.

    e: also, you can say that mortgages were the 'quality' product in 2005/6, because after all the 'nothing as safe as houses' applies more to the mortgage holder than the homeowner. Mortgages have long been seen as a safe bet, until they weren't.
     
    Last edited: May 28, 2011
  12. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Flight to quality

    http://en.wikipedia.org/wiki/Flight_to_quality

    With failure of Lehman Bros. and AIG the sham that is Wall st became blatantly obvious.Who and what can your trust? Certainly not the banks who issued ninja loans then created junk CDS bonds to get them of there balance sheet , ratings agents who give AAA to junk, the mutuals and pensions that bought junk all of whom collected bonuses.Then there is the mater of Us government bonds paying historicity low rate's while the government is inflating away the Us$ value with war spending and unlimited bailout's guarantees for the too big to fail not to mention the increasing unemployment hence a lower tax pool to repay bonds.Same goes for the 51st state the uk.

    People and real businesses always have to buy commodities to survive.They don't need gov/private bonds, CDS and derivatives or paper promises .

    http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
     
    Last edited: May 28, 2011
  13. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Yeah I should have said I understand the concept of Flight to Quality - I just don't understand how commodities can be the 'quality' given the volatility they've shown the last few years, the speculation, and ongoing (albeit half-hearted) attempts to re-regulate the market.
     
  14. Yamahahahahaha

    Mobster

    Joined: Oct 11, 2008

    Posts: 3,835

    Location: London

    Sold my ETFs in Physical Silver a few weeks ago right after the first dip. Glad I did now.
    Despite the sound industrial uses of Silver (which out number gold) and the much smaller reserves (both total and stockpiles since China's boom started), it was in a bubble.

    I think most of the market is overbought in nearly every respect at the moment.
     
  15. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    I what in your opinion is the 'quality' now ?
     
  16. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Swapped a little bit of silver for gold when the ratio was 33/1. I like to stay in metal and play the ratio.
     
    Last edited: May 28, 2011
  17. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Well I don't chase performance, I just buy broad markets and diversify. So either 'nothing' or 'everything' is, depending on how full you think the glass is.

    I've avoided commodities for the reasons I've mentioned before - they provide no income, and they're volatile. Plus the moral aspect of betting on something that's a necessity for millions rising in price is a bit distasteful.

    But, to be honest and prove I'm not some sort of moral market purest, this is the main reason why: http://www.investorsfriend.com/asset_performance.htm

    Stocks have completely blown away gold and other commodities over the long term, which is my sort of time frame. Bad short-term performance of stocks/bonds, and equally good short term performance of gold/whatever, is of no consequence to me. Chasing performance is a great way to increase your costs and mis-time the market.

    e: a question for you fester: how old are you? Your age should have a great bearing on your investment strategy, so I'm curious. I'm in my 20s so 'preserving purchasing power', as you put it, is a poor strategy for me when I can load up on cheap assets and take advantage of the inevitable rebound.
     
    Last edited: May 28, 2011
  18. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    I guess we need to clear some things up so as to stop going a round in circles.

    1 I'm in total agreement with you in a free market shares in successfully company's will out preform the commodity's they use.This obvious because a good company takes commodity's and using innovation and technology to add value to finished goods,there by creating a profit for it's self and it's out side investor's in excess of the commodity costs.

    2 I'm also in agreement with you in not putting all my egg's in one basket hedging if you will.

    The point am trying to discus here is the safe currency/capital hedge part of the over all strategy in your case bonds and my case gold or for most people a savings account like an isa .

    I am in my 30's and have been self employed for most of my working life.
    My business has be built up upon savings and reinvesting profit not debt like most business.This is why preserving purchasing power is very important to me to allow innovation in changing times. Are the £ $ and the euro maintaining purchasing power in any thing in the free market?

    One simple question just what are these cheap assets you keep talking about could you give a example of a resent purchase?
     
    Last edited: May 28, 2011
  19. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    About 2 years ago I doubled up my regular monthly purchases of a lot of stuff that was in the doldrums, including US, UK and European Index shares mainly. I also have Pacific, Emerging Market, Corporate Bond, and government bond assets too. All nicely diversified, in proportions I'm comfortable with, re-balanced regularly. Like I said, read the 4 Pillars of Investing, that's basically my approach.

    The beauty of the current bear market is that pretty much all of the above are cheap and probably will be until the West starts to get back to real growth again, by which point I'll have had years of buying stuff cheap.

    As for your business - I really don't understand why you're eschewing debt for asset backing, that just seems bizarre to me. Surely that limits your growth?
     
  20. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Could you be a little more specific ie what corp and gov bonds which European indexes or do you buy pre packaged rated investment vehicles.

    Growth and profit or not the same thing.It is very easy to grow and expand though debt but it don't necessary mean more profit.Debt load also causes extreme problem's if it is necessary to down size or restructure.

    You simple would not believe how many people I know personally that have over expanded or started on unprofitable business with rising housing equity and are now in negative equity.When these idiot's start going bust is when you will see some real investment opportunity's.
     
    Last edited: May 28, 2011