Now that the stock market has tanked 500 points in the past month is gold trending up again ?
barberlover
Posts: 2,228 ✭✭
It wasn't long ago that the stock market hit highs it hadn't seen in 3 years at over 10,700, but after the beating it took yesterday the market is down about 500 points in the past month.
What has gold done since it retrenched at 390 an ounce back then ? Where is it today ?, and has the downword trend of the stock market had a coresponding uptrend in gold this month ?
Les
What has gold done since it retrenched at 390 an ounce back then ? Where is it today ?, and has the downword trend of the stock market had a coresponding uptrend in gold this month ?
Les
The President claims he didn't lie about taxes for those earning less then $250,000 a year with public mandated health insurance yet his own justice department has said they will use the right of the government to tax when the states appeals go to court.
0
Comments
1) I won't be hanging around here, and
2) I wouldn't be telling anyone.
To answer your question, I don't see the current slight drop in the stock market as a buying opportunity for gold. On the contrary, I see this as a buying opportunity in the stock market. Gold is now hovering around $400 per ounce.
I'd like to reference a popular new personal finance book, The Total Money Makeover, (c) 2003, by Dave Ramsey. IMO, gold is a HORRIBLE investment for several reasons:
- "... gold is a lousy investment with a long track record of mediocrity. The average rates of return tracked as far back as Napoleon are around 2 percent gain per year. In recent history, gold has a fifty-year track record of around 4.4 percent, about the same as inflation and just above savings accounts." (reference The Total Money Makeover, page 55)
- "...gold is not used when economies fail. History shows that when an economy completely collapses, the first thing that appears is a black-market barter system..." (reference The Total Money Makeover, page 55)
I also don't think gold is a good short-term investment due to some bizzare theories like the drop in the value of U.S. currency (due to the national debt), worldwide economic conditions, the Chinese buying commodies, or worldwide political instability. Recent history has shown that gold is not used when the economy fails. This was true after the fall of the Soviet Union, and it was true in Iraq. IMO, I would stay far away from gold and stick with good growth stock mutual funds and paid-for real estate. I am all for putting your money to work by investing in businesses (stock market) and paid-for real estate that create jobs and income. If you invest in these two things, plus have a 3-6 month emergency fund in a money market account, you don't need anything else that has high-risk and low return.
Check out a Vanguard Roth IRA.
According to my investment readings, gold is due for a fairly good correction soon. I just made some money on the PhilaEx ("XAU") shorting it. I'm waiting now for the signal to go long on the index (better than tying up tons of money on the actual metal, as the index contains gold, silver, etc.) after the correction.
Bob
Vietnam Vet 1968-1969
In the early 1900's, 30 $20 gold coins would buy a new Ford. So would 600 in paper money. Today 30 double eagles will still buy a new basic Ford. And 600 in federal reserve notes wouldn't even pay the "taxes" on said Ford.
Did someone here say that gold wasn't a good investment and likes federal toilet paper, er "money"?
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
You're comparing holding 30 gold eagles in 1930 rather than stuffing $600 in your mattress. I think everyone knows holding fiat currency is the worst long-term plan imaginable. Now compare the value of those 30 gold eagles to buying a diversified mix of stocks in 1930.
Today you may be able to buy the Ford Motor Company.
2 Cam-Slams!
1 Russ POTD!
Today you may be able to buy the Ford Motor Company. >>
And probably not
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
2 Cam-Slams!
1 Russ POTD!
the US dollar? Down 97%.
The stock market moves in 15-20 year cycles. We just finished a 20 year up cycle. Does anyone really think we are in a new long term bull run after a measly 20% correction to the DOW/S&P? Don't forget that NO BULL market in the last 400 years of world history started from anything less than a 50-70% corrrection. Bull markets have begun from valuations and PE's 30-50% less than what we currently have. They also started from a point where everyone tossed in the towels and hated stocks. We have not gotten there yet. I invested through the 1966-1982 bear market and saw stocks do nothing for nearly 20 years. Do you really think we have invented a new era where market history is totally rewritten and the past is erased? I feel badly for those who have no experience prior to the 1982 markets and ignore this era as if it didn't happen.
How many of those stocks from the 1900-1920 era are even around today? Most of those firms have gone under. That's one of the geniuses of tracking the stock indices...you can always toss out the dogs and throw a Microsoft in its place. The creation of the Federal Reserve system in 1913 has led to the destruction of our currency over the passing 90 years and a major transfer of wealth to the upper class. All currency debasement systems have eventually led to the bankruptcy of the applicable nation. To my knowledge NONE have ever survived in the past 2500 years.
I figured that if the usual anti-gold pundits can repeat their beliefs I can post mine. Gold is currently chopping in the $390-410 range.
Credit the Japanese and our govt. for some great intervention to keep gold stable rather than ascending. This is a good pause in a bull market. Silver, gold, raw materials and commodities in general are about the only thing that will protect your assets in the coming inflationary spiral. The stock and real estate bubbles were created by your govt to keep the economy afloat until the elections. Rather than create real wealth and productivity, Greenspan added to the asset bubbles to give us all a false sense of wealth. So far it has worked. Fannie and Freddie have about 6 TRILLION in mortgages that are heavily leveraged by interest rates. The Japanese buying of $200 BILL of our debt the past 6 months has helped us to keep the rates down. What happens to this scheme when interest rates move up? Recall that derivatives based on interest rates entails about $150 TRILLION in derivatives.
Gold and silver will be a good place to be when the remaining asset bubbles give way. If you do have to own stocks ensure they are with specific sound companies in key demand areas such as oil, energy, health care, commodities, etc. Gold is following the US dollar for the time being as it is behaving like currency. Once the dollar continues its fall, gold will continue its rise to the $450-500 area. It should happen this year. Gold is a proven short term hedge during uncertain times. The current establishment is so anti-gold it is pretty hard to find any politician other than Ron Paul (TX) who understands the topic. The rest are clueless. And real estate has been a great performer for the past 50 years. Don't expect this to continue for the next cycle. Just the fact that "everyone" believes this ensures that it will not happen and the majority will be wrong.
roadrunner
For the last month, gold has been stagnant.
Warren Buffet recently said most stocks are losers.
Bonds also are currently a lost cause.
Personally, I haven't bought any stocks or gold.
My only investments have been money markets,
which are pathetic but at least positive,
and rare coins..
roadrunner
I've been hearing the same arguments against PMs since I bought all the gold I own when spot price was in the $260s. In fact, the guy I bought a bunch of platinum from when spot was $416 tried hard to talk me out of it, saying it was already at a multi year high, which it was, that I'm a dummy, etc. Sold half of it back to him when spot was $927 last week.
To bet on gold is to bet against the entire dollar based financial system and the Wall Street sales and marketing machine that sells dollar denominated equity based products that both support and benefit from that system. For more than 20 years Wall Street has been marketing stocks, stock index funds, and stock mutual funds to Main Street and very successfully. But now, as you say, that party is over. We started heading into the next part of the cycle in the late 1990s. Some would say that it's not merely the cycle that started at the end of the last commodity boom and that start of the stock market boom in the early 1980s but the credit and dollar boom that started with Bretton Woods after the end of WWII. In either case, whether it's a big cycle or a Big cycle we are going to experience a difficult transition from a US centric to a multilateral global trade system that will cause the dollar to lose its status as the world's reserve currency and result repudiation of a large portion of dollar denominated debts outstanding via default and inflation.
At this point in the cycle, it's to be expected that most of Main Street is still looking for a return to "normalcy" where normalcy is a rising stock market. But as you way, periods of 15 - 20 years or more when stock markets move sideways are a normal feature of the long term financial markets landscape. Meanwhile, Wall Street is busy packaging commodities to market and sell to Main Street, in the form of index funds and ERFs and others that look and act like the stock based products that Main Street is used to buying. But it will still take years for Main Street to "get it." In the mean time, before Main Street catches on, there's more cheap gold, silver and platinum for you and me. I have many friends who will be waiting for several years longer for the stock market to come back, and it will rally from time to time, which they will no doubt interpret as meaning it's about to return to a "normal" bull market. They will finally jump into the commodities market when gold is trading over $1,000. That's when you and I will know it's time to start selling commodities and buying into stocks.
By the way, the DOW isn't really up, the dollar is down. If you look at the DOW in dollar depreciated terms, the DOW has never been higher (see link below). That's why Buffet is getting out, even though he usually ignores general market conditions and focuses on individual stocks. In this unusual case, he knows that the macro conditions of the economy and currency markets will overwhelm even the best ruun company.
Atomic
Vladimir: That's what you think.
- Samuel Beckett, Waiting For Godot
My view is certainly biased buy my personal dealings with stocks during the previous bear market of 1966-1982 or even until 1987.
I hated them with a passion and lost all faith in the October 1987 crash. It was hard to blame me as my other hobby was coins and they did fabulously well in the 1973-1980 and 1982-1987 eras.
I knew enough to be out of coins from 1980-1982. No doubt Dollardude and others experiences only include the most recent era where stocks never failed you. No one was more surprised than me at how stocks did in the past 12 years. But there is no doubt in my mind that the next 10-12 years are not going to be kind to equity owners....especially those sreading out "risk" via "packaged baby boomer" indexed funds.
PM's still have 1-10 years to kick serious butt. This is a time warp back to the 1970's. Get used to it. Coins are gonna kick but too.
roadrunner
roadrunner >>
hey Roadrunner, do you agree that real estate is inflated beyond reason at this point and due for a correction like we saw in the northeast in 1990 ( although now across the board/country) and if so, how do you think a 20-30% correction would effect coins?
I'm not baiting you BTW.
Rgrds
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Definitely! Real estate is in a serious bubble and it has been created by the FED. Greenspan found a way to keep the economy afloat after 9/11 and it was by pumping up the money supply and indirectly helping to boost stocks and real estate. The average Joe feels this money hitting the economy and he only knows 2 things: stocks and real estate. They "only" go up and it's the "only" way to create and hold wealth. He also knows that buy refinancing he can create more money to spend and continue his buying spree. The banks made things easier by giving ridiculously easy credit terms to most anyone with a job.
The Real Estate bubble will pop once we can no longer sell our debt to the Asia and interest rates have to rise to make our dollar more attractive to buy. But this won't happen until Bush does all he can to get re-elected. Jobs will not come back with the actions we have been taking. Recovery will not start until we reign in the debt, raise interest rates slowly & surely, and strengthen our dollar. Unfortunately, such actions tend not to get politicians re-elected.
None of them except Ron Paul (TX) have the sack to do the right thing. Same comment to tarrifs. Tarrifs would only make things even worse.
My other concern is that how much of this easy credit has made it's way into coins? The number is not insignificant. Sure, there is lots of foreign money buying our coins cheap with their stronger currencies. When the rug gets pulled out from under the easy credit, IR's go up, people default on ARM's, and some portion of the $150 TRILLION derivative pool starts to crack, watch out. Home prices in general will fall. Freddie and Fannie hold some $6 TRILLION in mortgages. Is there anyone here that thinks these are sound financial companies that have no risk tied to increasing IR's?
The soundness of F & F have already been brought up but no one is willing to look into this pandora's box that has been a major contributor to the housing bubble.
My gut feels says, YES, coin prices will have to come down too if the real estate asset bubble goes pop. If the FED can slow the desent enough, you may see coin prices to continue to increase in price.
I don't believe coins did all that well in the early 1930's and this economy is similar to where things stood in 1929-1930 prior to the FED playing with the money supply and applying tarriffs. The result of that meddling by Hoover and the FED was what turned a bubble asset into the great depression. FDR devalued gold then and don't think the US wouldn't think of devaluing our dollar or gold this time around.
For now, coins look ok but I fear that HOW these bubbles pop will determine the rest of the story. We need a light "psss" rather than a "ka-boom." And that means the govt has to come to grips with our out of control spending/entitlements and debt and tie our dollar to something of value. Basically less big govt so that we don't tax, legislate, and penalize our businesses to the point where the only way they can survive is to go overseas. We created this mess and the longer we wait, the more dire the consequences.
roadrunner
None of them except Ron Paul (TX) have the sack to do the right thing. Same comment to tarrifs. Tarrifs would only make things even worse.
My other concern is that how much of this easy credit has made it's way into coins? The number is not insignificant. Sure, there is lots of foreign money buying our coins cheap with their stronger currencies. When the rug gets pulled out from under the easy credit, IR's go up, people default on ARM's, and some portion of the $150 TRILLION derivative pool starts to crack, watch out. Home prices in general will fall. Freddie and Fannie hold some $6 TRILLION in mortgages.
My gut feels says, YES, coin prices will have to come down too if the real estate asset bubble goes pop. If the FED can slow the desent enough, you may see coin prices to continue to increase in price.
I don't believe coins did all that well in the early 1930's and this economy is similar to where things stood in 1929-1930 prior to the FED playing with the money supply and applying tarriffs. The result of that meddling by Hoover and the FED was what turned a bubble asset into the great depression. FDR devalued gold then and don't think the US wouldn't think of devaluing our dollar or gold this time around.
For now, coins look ok but I fear that HOW these bubbles pop will determine the rest of the story. We need a light "psss" rather than a "ka-boom." And that means the govt has to come to grips with our out of control spending/entitlements and debt and tie our dollar to something of value. Basically less big govt so that we don't tax, legislate, and penalize our businesses to the point where the only way they can survive is to go overseas. We created this mess and the longer we wait, the more dire the consequences.
roadrunner >>
Without getting too "political" so that I don't "offend" anyone ( as you have possibly done here you extremist
And yes I agree with you on Ron Paul. He's a real American patriot and voice of reason and freedom.
The big difference between real estate and coins is there ain't no mortgages on coins. Although the financial markets are integrated in one or more ways, the vast majority of people who are buying coins, especially the ones which are 4-5 and 6 figures are not people who will be seen mass selling in the likely event of a major economic downturn. The guys who WILL be affected are the lower end crowd.
I've specialized in the better and higher priced material for a long time and can tell you that the vast majority of the people I've formed relationships and meaningful collections with over the years will not be seen bailing out when the POP is heard round the world. Some will no doubt. I'm talking majority though.
The coin business has gone global. Some of the people I've been building collections with are located in Taiwan, Hong Kong and elsewhere to a lesser extent so US material is not just being aquired in the US by Americans. Just like many better collections of Latin, Asian and European material hasn't been aquired by people in those lands of that ethnicity.
So although I agree that a bust out in the real estate is going to create a real problem economically ( not only here but everywhere), and that coins will be affected, I do not see 1795 half eagles being sold at big discounts anytime soon and quite frankly I think will go in the opposite direction for quite a while, then sort of not be found while the economic woes of a real estate correction and other negativity eventually sorts themselves out.
Your thoughts Mr Roadrunner?
Beep beep!
Rgrds
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I agree completly with Road Runner allthough I didn't have the forsite to buy cheap platinum or gold. I still have my 401 K in stocks and the only other choice is the bond fund, their is no commodities fund in my former companies 401 k plan so my only choices are to roll it over into some other type of retirement account or go to the bond fund. I must say I don't like the choices.
Les
<< <i>Remember a number of years ago for a brief time gold was more expensive then platinum and I acctually thought about buying some, but my heart got the best of my head and I chose my coins instead.
AHHHHHHH I remember when we used to toss paladium in the garbage!
Arghhhhhhhhhhhh!
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I have to disagree with Mrearly about what coins won't be affected if we had a downturn. If things get nasty enough, everything will be for sale. I for one don't intend to be a die hard to the end holding on to my coins like I did in 1990 and to a lesser extent in 1980. Learned that lesson twice, and don't intend to try for a triplet.
Les, my company's 401K also offered inadequate choices and it ultimately caused me a pretty stiff loss as I was trying to find choices to protect my money. In the past year they have offered up a new choice that allows us to use up to 50% of our 401K's to enter any tradeable stocks or funds on the DOW/NASDAQ. The fees are obviously higher and you cannot day trade with these funds. In the next few weeks I'm about to conclude a transfer of some funds into a combined PM's and commodities fund offered by one of the best insurance companies in the world (USAA). If you desire to go into bear funds or reverse index funds there are hundreds out there to investigate. I too am not satisfied with the typical "growth only" mutual funds, bond funds, and Tbill funds that my employer used to offer. Those worked great in the bull market of 1995-2000 but in today's bearish environment we need something a little different to help offset the typical stock and bond fund risks. The same mix or even the same choices doesn't work forever.
roadrunner
<< <i>Remember a number of years ago for a brief time gold was more expensive then platinum and I acctually thought about buying some, but my heart got the best of my head and I chose my coins instead.
I agree completly with Road Runner allthough I didn't have the forsite to buy cheap platinum or gold. I still have my 401 K in stocks and the only other choice is the bond fund, their is no commodities fund in my former companies 401 k plan so my only choices are to roll it over into some other type of retirement account or go to the bond fund. I must say I don't like the choices.
Les >>
TIPS should do well.
Atomic
Read this article by Bill Gross at PIMCO, runs world's largest bond fund
Vladimir: That's what you think.
- Samuel Beckett, Waiting For Godot
First, let's understand why we invest. To make money..........
Gold does not "produce money" It is a nice item to buy low and sell high but if you hold for the long term you will lose. Real estate is a great investment but it is due for a major correction when rates rise. I could spend an hour explaining the relationship between rates and income and property values, instead, take a course.
Now, Stocks. There is some foolish misconception that the reason to buy stocks is because it will go up. If it doesnt it is a bad investment. Stock are purchased because the companies make money and then pay dividends. It you buy big name highly touted stocks that don't make money then don't be suprised when you get a bad return. Right now few stocks have a P/E under 10 and will be losers (try FMT, good investment)
Coins are nice to own and you can make money when you buy low and sell hi but they produce no income and in the end will be a bad place for your retirement money. (how many coins does buffet own?)
This is a tough time for investing but there is money to be made in items that "produce income". Coins and gold do not.
I no longer consider anything an investment. No such thing anymore. We just look for temporary shelters to house our assets and make a fair return. The rules are made in Washington and CEO's and we are not privvy to the insider's plays. We are playing with a rigged deck against us in all the so-called investment areas. In times of trouble, fairly valued "things" and "stuff" is where I want to be....not in paper certificates, promises, phony balance sheets, derivative risks, and IOU's. Bill Gross has a good following. So far I have a tough time getting past the first few paragraphs when he loses me in the financial jargon. Maybe those courses is what I need too. Tens or hundreds of millions were made by PM investors in the late 1970's, tens of millons with coins. I don't think any of them feel badly that they didn't "produce" anything beneficial. When Bush or the next president devalues the dollar by 20-50% I don't think they will feel too bad about it since all of their worth will be in oil and other tangible assets. By the way, does congress have to get involved in a dollar devaluation or can the president and FED do it all by themselves?
roadrunner
Gasoline UP, dollar down
Is this going into a new 1979/1980 type coin and bullion market?
Rgrds
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
If we were really doing well the stock market would go up while the national debt was going down along with precious metals prices. Of course, in reality thats not whats really happening.
Les
They will continue to let the dollar erode to play the sleight of hand game.
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870