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Who's Buying Gold

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

  1. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,075

    Location: Manchester, UK

    Your post completely avoids the very basic points I raised. How can you possibly believe gold leads to hoarding of wealth, when we currently live in an age where almost half the world is in dire poverty and about 90-95% of the entire worlds wealth belongs to 5-10% of the worlds population. I can't find the actual stats but I remember it was something ridiculous like that, which clearly suggests some criminal activity is going on. If you trust those people at the very top who are currently in power, maybe you have no problem with them pulling wealth out of thin air, I don't know, but for anyone remotely religious it is a bit difficult to swallow. If you really believe there is integrity in this monetary system, just wait because I don't think it's far off now (and the 'experts' agree) that it's all gonna come crashing down, and then we will see what value all the paper has, it may only be good for wallpaper by then.
     
  2. Energize

    Caporegime

    Joined: Mar 12, 2004

    Posts: 27,823

    Since when has gold been considered an investment? It's just used as a store of wealth to protect against inflation. I don't know if devaluing peoples work to encourage risky investments which could bankrupt them is a good thing personally.
     
  3. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    You don't seem to understand - over the long term gold has around a 0% real return, that's the point of it. Stocks historically have around 6-7% return, bonds 3-4%. Cash has a negative return which is equal to the inflation rate. If you have a properly diversified portfolio the main risk of stocks is the variance, which can be countered by the counter-cyclical nature of bonds. The risk in gold is that although you'll beat inflation, it's a certainty that even slightly riskier investments will beat it.

    If you buy gold in the long term you will experience an opportunity cost loss of whatever the difference is between inflation and the return of riskier investments. That's why professional investors, including those in charge of pensions funds and the like, have only very small exposure to it. Basically if you buy gold you're commiting yourself to making nothing of your savings.

    Plus, buying gold now - at historic highs! - carries the risk that you'll catch the downswing as gold returns to its 0% average after the last few years of 15-30% or so gains.

    Look at the charts here:

    http://twocents.blogs.com/weblog/2009/04/long-term-total-returns.html
     
    Last edited: Jul 2, 2011
  4. Energize

    Caporegime

    Joined: Mar 12, 2004

    Posts: 27,823

    I think your replying to the wrong person because that's what I just said...
     
    Last edited: Jul 2, 2011
  5. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    It was more in response to your second sentence about 'devaluing people's work' with risky investment. Gold is risky, it's just that it's a more subtle risk than a common stock for example - the risk is in the opportunity cost.

    Put it this way, in an investing career can you afford to shun stocks or bonds for gold? If your investment goals are only to beat inflation then they're pretty stupid goals.
     
    Last edited: Jul 2, 2011
  6. Energize

    Caporegime

    Joined: Mar 12, 2004

    Posts: 27,823

    Opportunity cost is incomparable to actually losing money. You said you dislike gold because it doesn't encourage people to take out investments, but ethically it is not desirable to encourage people to take out investments which could subsequently bankrupt them.
     
  7. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I disagree. Ethically we should be encouraging people to maximise their return over the long run in order to give them financial independence and ultimately a secure and comfortable retirement. Excessive emphasis on gold does not tally with this. Ethically we should not be scaremongering people into investing in gold with ill thought out arguments about monetary collapse.

    A properly diversified and properly managed portfolio has 0 risk of bankrupting the client. With index investing it's effectively impossible to lose all your money, in fact a properly managed portfolio can take advantage of market declines to actually increase overall returns.

    But don't take my word for it, look at what the professional money managers, particularly pension fund managers, are doing.
     
  8. RDM

    Capodecina

    Joined: Feb 1, 2007

    Posts: 20,211

    So when was the best age in history? Because all things considered I would rather be poor in the UK now than at pretty much any time in recorded history...
     
  9. Zarf

    Mobster

    Joined: Jul 11, 2007

    Posts: 2,527

    If and when it 'all comes crashing down', nobody is going to care how much shiny useless metal anyone has for a very long time. If you truly believe disaster is coming a far better 'investment' would be a house in the middle of nowhere set up for sustainable living and some good hand tools.
     
  10. arknor

    Caporegime

    Joined: Nov 22, 2005

    Posts: 35,597

    Location: Newcastle/Zurich

    tinned food/dried is where its at
     
  11. Energize

    Caporegime

    Joined: Mar 12, 2004

    Posts: 27,823

    People with a significant amount of money to invest are financially secure so I can only see them being forced to invest as ethically undesirable, both in terms of the risk of them losing money and in taking a choice away from them which is what inflation does. If people want to keep their wealth in gold rather than in cash or investing then that's their choice.
     
    Last edited: Jul 3, 2011
  12. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Well no, because people with significant assets will still need to derive an income from those assets, especially retirees. If you are forced to continually sell your principle in order to realise an income, then you will draw down your assets and end up with nothing.

    As a low risk investment for people who want to preserve their assets bonds make for a much better investment, because they generate an income and have low volatility - particularly inflation protected gilts or TIPS. If you define an adequate income and arrange your portfolio accordingly, it's possible to have an income stream that will last forever. Not so with gold.
     
    Last edited: Jul 3, 2011
  13. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    The Newtonian gold standard did a pretty good job of directing investment in productive areas thought out the industrial revolution of the 19th century.As did the semi gold standard of Breton Woods system until the war mungers had there way .

    Once the world got rid of the last remnants of the "barbarous relic" in 1971 and moved onto a totally floating system look at the results as you point to above.Yet you still argue that the discipline that hard backing brings is a bad thing.
     
    Last edited: Jul 3, 2011
  14. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,075

    Location: Manchester, UK

    Don't get me wrong, if you are living poor in the UK compared to most places in the world right now (or ever) you aren't doing too bad. That said though, it doesn't mean as human beings we can turn a blind eye to the suffering of others as a direct result of those in power who pretty much control money. Even those who have disagreed with me and even believe there is integrity in this system, haven't disputed that there are people in the world today who can keep printing off as much money as they want. They can keep on justifying how it's better then this or that, or that there is no better alternative, but it is criminal plain and simple and you don't need to be a genius to understand that. If you or I were to do it, we would be put in jail.

    It is just my opinion that this is one of the major tools that the 'Europeans' (refer to Gog and Magog thread) who today dominate the world, have used to enslave mankind. I believe the system will collapse soon, or should I say be brought down soon, and then Jerusalem will take over as the financial capital yet I have absolutely no way to prove that because my reasons are purely interpretation of religious scripture.
     
  15. RDM

    Capodecina

    Joined: Feb 1, 2007

    Posts: 20,211

    Despite your odd mix of religous prophecy and austrian economics you were suggesting in your previous post that this was not the best age in history. So when was? When was the world better than it is now for the majority of people? You seem to be falling into the somewhat churlish "Things aren't what they used to be" whilst looking back with rose coloured glasses at the past.
     
  16. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    This is a pretty daft way of thinking about it. The first country to go off the gold standard was West Germany, who were hardly 'war mungers' (???) then or now.

    The U.S. came off gold because they were already experiencing high inflation and had no way to effectively control it. You could argue that this was due to spending on the Vietnam War, sure, but it was equally because of the expansion of Social Security and the rest of Johnson's Great Society, which were inarguably a good thing for middle and lower class Americans. And the floating currency proved itself pretty useful in 1987, preventing a Wall Street hiccup turning into Great Depression II.

    War spending, I agree, is a waste of money, and both the UK and US would be in a much better position if the stupid adventures of the last few decades had never happened. But if that money had been spent on something a bit more useful like industry, transport or social programs then we would likely have seen greater economic growth - like Germany has.
     
  17. Sho

    Mobster

    Joined: Sep 21, 2006

    Posts: 4,397

    Location: Oldham

    Buying gold is not a bad idea.

    Alot of older generation people (Asians) bought Gold as an insurence policy etc type of thing. I'm not talking about small amounts here btw. So when they did buy gold in bulks back in early 90's which Gold price was alot cheaper then.

    Now selling them today is a good idea, as you know profit margin is very big.
     
  18. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I was interested in this so I looked up the annualised returns of gold and a couple of tracker funds since 1st Jan 1990:

    Gold: 6.39%
    HSBC FTSE All-Share Tracker: 6.28%
    HSBC European Index Tracker: 8.00%

    This is with all dividends re-invested. The fund results include an annual management charge which probably reduces returns by at least 0.5% annualised, whereas the gold price does not include any costs so that probably slightly overstates the return. This also doesn't take into account the boost to return from pound cost averaging that you would have gained.
     
  19. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Isn't it just an other amazing coincidence that a non yield paying lump of useless metal maintained its value against the ftse within a few 10th's of a % guess this would make it a not so useless great stable form of currency or money :D

    My point being gold is not an investment It's cash.
     
    Last edited: Jul 6, 2011
  20. Rameses

    Sgarrista

    Joined: Oct 18, 2002

    Posts: 8,453

    May I ask a really noobish question, you physically buy gold and receive it in post and keep it like you keep stickers? Or is there some business involved like you were buying shares?

    I just don't understand how someone could invest in expensive metals and keep it laying around, or do you have safe deposit boxes?

    I want a safe deposit box. :(