1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Who's Buying Gold

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

  1. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Well no actually, because gold is at an all time high due to being bud up by speculators, whereas the FTSE has been on it's arse for a decade (1999 closing price was 6930, currently it's at a shade over 6000). If I'd stopped the return at the year 2000 it would have been more like 15% vs. 1% in favour of stocks. Also note that the FTSE has experienced 3 dramatic declines in that 21 year period - the Emerging Markets/LTCM debacle of 1998, the tech bubble bursting, and the 2008 financial crisis. Regular investments during this period for pound cost averaging would have boosted returns by another 0.5-1%.

    My concern with people buying gold is that they don't seem to have a strategy for it. They've seen the dramatic price increase and decided they'd like a piece of it, usually missing off that initial long tail where most of the gains are made. What exactly is your plan for closing out your position? I suspect it's something along the lines of attempting to time the market, which has been statistically proven to be impossible - especially so in your case if you hold illiquid, hard-to-get-rid-of-in-a-hurry physical gold.

    You can argue that gold is cash if you want, but at the end of the day it's all semantics. Whether you like it or not it is an investment, and the declines that are more than likely to come as gold mean reverts back to its historical 0% return (i.e. double-digit declines) will be just as real as the gains of the last decade.
     
    Last edited: Jul 6, 2011
  2. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    You can buy:

    physical gold in the form of small bars or coins that you keep yourself, in which case you are responsible for its security.

    gold which is held in a secure vault on your behalf - usually for a fee.

    gold in the form of some sort of commodity tracking fund, which tracks the performance of oil, gold, sliver, cocoa, wheat etc. by buying either physical commodities or futures contracts. May come in the form of a traditional managed fund or an ETF.

    gold futures contracts - an agreement to buy gold at a certain price in the future. This can be sold on before the due date for a profit/loss. Primarily used by high-level, professional financiers.

    You can also buy shares in gold related companies, e.g. mining or jewelry firms.
     
  3. badcompany

    Soldato

    Joined: May 12, 2004

    Posts: 7,020

    Location: England

  4. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    dp please delete
     
    Last edited: Jul 18, 2011
  5. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    20th May 2011
    20th May 2011
    18 july 2011
    $1600 and £1000 record highs todays:D
     
    Last edited: Jul 18, 2011
  6. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I bet you won't be so quick to post when it's heading the other way.
     
  7. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,098

    Location: Manchester, UK

    Why would he though, he stated what he thought would happen and it did whilst others were saying he was mad. I've been saying the same for years, the fraudulent paper system is collapsing. When people can pull wealth out of thin air, something isn't quite right and you don't need to have a phd to understand that.
     
  8. uniQ

    Mobster

    Joined: May 8, 2011

    Posts: 4,910

    Location: HQ

    I sold all mine last year made a healthy profit. While it's gone up since then it's hard to call the top/bottom and profit is profit so I'm still happy :)
     
  9. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    It's not hard, it's impossible. Market timing has been statistically proved to be a complete waste of time.

    Whilst I think you should never have got into gold in the first place, talking the money and running now is probably the best thing to do regardless of whether gold continues to climb in the short to medium term.
     
    Last edited: Jul 19, 2011
  10. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Sorry to disappoint you, but people predicting financial collapse of this sort clearly don't know what they're talking about. As I've said before, look at what the really big money is doing - pension funds and other extremely large investment funds. They have the money to hire the very best market strategists and fund managers available, including more PhDs than you can throw a stick at and more than a few Nobel prize winners.

    What are these guys doing? Well, as it turns out, not buying gold. In fact, not even holding gold. They own a good mix of stocks, corporate bonds, government bonds, and property. As they have for years.
     
  11. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    By the big money with 'more PhDs than you can throw a stick at and more than a few Nobel prize winners' like for example Long Term Capital Management .
     
    Last edited: Jul 19, 2011
  12. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    No, actually. LTCM's strategy was very far from what I advocate, and they were more heavily into derivatives like options which aren't even available to smalltime investors.

    I mean people like CalPERS, the California State employee's pension fund. Their current asset allocation is listed here: http://www.calpers.ca.gov/index.jsp?bc=/investments/assets/assetallocation.xml

    They went from $100billion under management in 1996 and $200 billion in 2005 to just under $239billion right now, despite (in fact partially because of) the ups and downs of the last decade and beyond - including the LTCM collapse.

    And how much do they have in gold? Not a penny.

    e: fixed my stats!
     
    Last edited: Jul 19, 2011
  13. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    All can say to that is they could have done better if the had some gold and silver as well.;)
     
    Last edited: Jul 19, 2011
  14. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    No, they couldn't...

    Gold would have been a huge drag on their returns in the 1990s and would have put them overweight gold right now. It also would have provided no yield, and not provided any of the benefits of dollar cost averaging that return-yielding investments have over that time.

    I should fess up and admit that CalPERS are currently examining the possibility of investing in gold - they are thinking of a $500million investment in a commodity index tracking fund. Depending which index they use, that's likely to equate to less than $100million in gold...in a fund of $240billion. It's a rounding error. Shows how important the pros think it is.
     
  15. e36Adz

    Capodecina

    Joined: Nov 28, 2003

    Posts: 11,098

    Location: Manchester, UK

    I see. So you don't believe the dollar will collapse?

    You are talking about the 'guys with big money' whereas I am talking about the vast majority of people in the world, some of whom are stuck in permanent poverty due to a system put in place by a criminal ruling elite. We are not all interested in how to make big bucks here, rather how humanity as a whole can benefit and get out of this utter mess it is currently in where most of the world is stuck in dire poverty.

    You are advising people not to buy gold yet we have clearly seen the value of gold has shot up. No one is saying it will continue to rise forever. I am arguing this whole system is fraudulent because you have people essentially making wealth out of nothing ie. printing as much paper money as they want and assigning an artificial value to it. If I decided to do that I would be locked up. I don't believe we would have a situation like we have today where a tiny % of the worlds population own a massive % of the worlds wealth IF humankind continued to trade in gold and silver which has intrinsic value. It is theft on a grand scale just like what the US government did in 1933.
     
  16. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    I'm sorry but I don't know how to respond to your post. You posit random thoughts that are irrelevant to each other. You offer no evidence to back up your crackpot ideas that the dollar will 'collapse' (what the hell does that even mean, in technical terms?) then complain about poor people. There were poor people when we had a gold standard too you know, they didn't magically appear in 1971, or even 1933.

    You have some vaguely formed ideas about paper currency being theft, which it isn't. Financial systems may have been manipulated to transfer wealth upwards but gold is irrelevant to reversing that. In fact, a society based less on consumption and more on saving (which is what mine and CalPERS investment strategy advocates!) is the best way of doing it outside of revolution.

    You don't seem to be able to differentiate between gold as an investment and gold as a backing for currency, which is why I think your post is so thoroughly confusing.
     
    Last edited: Jul 19, 2011
  17. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast



    So a small let say 5% or so invested in 2005 split 50/50 au/ag and conservatively ratio traded until now would that have made no difference or been a burden?
     
    Last edited: Jul 19, 2011
  18. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    No, no, no, no, no. It's like you haven't understood a thing I've said.

    Investing in 2005 is market timing. How convenient that you put your start point right before the biggest bull run in gold trading history. If CalPERS had a time machine then maybe your strategy would work, but alas we don't live in a fantasy world.

    If (big if) CalPERS bothered with gold, they would buy it regularly and hold forever, starting when the fund started. Therefore they would have suffered from stunted returns when gold was bimbling along in the 80s, 90s and early 00s, then become overweight gold now, and therefore overexposed to the inevitable downward slide.

    Again, the passive strategy that both CalPERS and I use is intelligent asset allocation, indexing, regular investment, and re-balancing. Market timing and stock/asset picking are the tools of the anti-christ (or just people who get poor returns, if I'm less dramatic!).
     
    Last edited: Jul 19, 2011
  19. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Fair point due to my lazy wording.As for the time machine best we both stop using it CalPERS started in 1931 not the 80's or 90's
    There portfolio for what I can decipher is 67% equities(stocks) 7% real estate leaving what I assume to bonds,treasury's,financial alchemy and as they say liquid assets and cash equivalents 1.5% .
    Perhaps a little bit of a rebalance with a little less us T bill's,financial alchemy and bit more liquid assets and cash equivalents in the form of gold and silver would not have been such a bad thing when they hit 10,000 year lows in the early 2000's at the same time 2 war's started to be paid for thought government deficit spending.I will be kind by not even go into their investing in 07 in mortgage CDO's talk about timing the market.

    A little clue as to why the shun gold and love gov paper can be gleaned from their web address. http://www.calpers.ca.gov
     
    Last edited: Jul 20, 2011
  20. Nerusy

    Wise Guy

    Joined: Jul 12, 2010

    Posts: 2,470

    Gold offers less return than other investments on average. Thus for people who are looking for big profits investing money into gold is not an option.

    Sure some people like to put their money into something "safe" when the markets are very volatile which is why since the financial collaps the value of gold has risen so much, a lot of panic.

    Perhaps now seen as markets are freaking out about europe the price of gold will continue to rise until investors will be comfortable not to be scared into buying gold.

    In 2005 investing into gold as opposed to other alternatives would have been a bad move as you'd get more return on your investment in other field.

    In 2011 with all the panic and uncertainty it's not such a bad move. I personally feel gold will still keep rising a bit.

    All of it is my understanding and opinion, am I completely wrong or does it make sense? :o