Nothing wrong with precious metals, and if you bought most of your holdings a few years ago, I'd think you'd just want to hold a bit longer for now. That's certainly my plan.
How many years of gold kicking the Dow's or S&P's a$$ will it take before the anti-gold crowd finally says, "ok, I guess gold wasn't such a bad play these past few years."
Gold has been a nice play...and by all indications should continue to be a nice play. Let's leave it at that. But then again....look at the 50 yr. chart !
So what companies lost $1-$10 BILLION in derivatives this past week? Multiple choice quiz to follow.
The value of the USD has fluctuated in cycles over time. Inflation is up, long term rates have edged up. If the cycle of interest rate drops will turn into rate increases (and the FED can't control long term rates), the dollar could start to strengthen, making gold less valuable in USD.
Robert Scot: Engraving Liberty - biography of US Mint's first chief engraver
"I guess gold wasn't such a bad play these past few years"
RR -- I certainly agree with the statement, and I would not be at all surprised to see gold rise significantly over the next decade, but I don't feel at all confident making that prediction -- it is too dependent on political events.
Changing the basket is not manipulation, it is a matter of keeping the index up with the nature of the current economy. If you had kept a portfolio that broadly followed the index, you would have achieved a return that tracked the index
So if I could pick a basket of top performing commodities every few years for the CRB then that would be a "fair" reflection of the commodities market....keeping up with the current economic forces . Then we could compare my basket to the similarly "not manipulated" market of Dow stocks.
Now I think I finally understand all this stuff.
It's more a matter of selecting what item has the best chance of performing well over the next decade. Unless govt's can confiscate gold again, or tax it to kingdom come, it will perform.
RR -- I believe you are joking -- that is, I believe you understand the reasonableness of re-weighting and redefining averages. But, you have baited me to respond anyway!
Sure, if I kept my money in steel and railroads, I would not have done very well. I am slow, but not that slow.
With respect to commodities, if you wanted to invest in a basket of commodities that was changed periodically to reflect the importance of each commodity in the economy, and felt that passive investment in this type of a basket was better than actively choosing which commodities will excel, I would not consider your basket "manipulated". It would be a reasonable approach if you wanted to invest passively and broadly in commodities.
In the long term, everything is, of course, which is why long term economic forecasts are always wrong. (although they are nonetheless useful, an apparent paradox many don't appreciate)
However, my gut feeling (which is only as good as any one else's gut feeling!) is that we are at a point where political inputs could result in fairly large disruptions, and I don't have a clue where these may lead.
“If you had kept a portfolio that broadly followed the index, you would have achieved a return that tracked the index.”
Higashiyama,
Well Sir, of course you are correct, and quite naturally no one could put a great deal of their money into one commodity and sit on it for 30 plus years.
RR’S point was that it makes no sense to keep posting long-term charts of one investment without posting the others; the variables are just too great.
So if one were a real gold bug and “ kept a portfolio” of U.S. uncirculated gold coins over the last 33 years what would that be worth? I mean you cannot buy a 33-year futures contract.
The point here is that many of the better companies that are now in the Dow were not even in existence in 1975, and many others are now bankrupt.
What is irritating to me is all these pundits continually telling everyone how the Dow has out performed all other investments, but they fail to tell the folks that like all investments you had to continually change your portfolio to make those gains.
The simple fact is that if you bought $10,000 worth of equal amounts of all the Dow stocks in 1975 most likely you would have lost money, since many of these companies went broke, and many of the great companies that now occupy Dow spaces did not even exist!
One more note of interest here. It has now been 3 months since I started my experimental stock account.
I am up only 9% as an annual percentage rate. Perhaps that is not to bad, but I have to work on this some every day, and dodging bullets in this market is not easy. If I had not invested in some of the short side of this market I would have lost a big portion of my money by now.
I was too lazy to summarize this (I am just an unpain intern here) but here is the information on dow jones component changes over history, at least to 2003.
It would be interesting to calculate the real rate of return, including dividends (which I don't have info for) and time value of money against the POG since 1975. Anyone want to take a shot?
I believe the stock market is good for one thing, leveraging your money. During upswings in the economy it is advisable to leverage your investments and stay out of assets that have no leverage, such as precious metals.
This leverage benefit shows in the dow history from the 70s to after 2000. This large economic trend was acheived in large part due to the engineered increase in liquidity and money supply, along with the baby boomers reaching their peak productive years.
During upswings in the economy it is a rather ill informed things to have money in precious metals because they do not have any leverage.
Conversely if we take the same leverage and apply it in an economic downswing, we would lose much more money than by putting money in the metals. This is the value of precious metals and the only time you would want to own them is during economic hard times. They do not really "make" you money, they preserve at least most of the wealth you made during the good times via the stock market.
I believe we have entered another large economic trend, to the downside. This is for the opposite reasons that we had a large economic upswing for the past 30 years. The boomers are now retiring and becoming less productive and the liquidity expansion has about played out.
Now is not a good time to own stocks IMO nor has it been since 2001 as mentioned on this board. You should be in the PMs due to the lack of leverage they provide.
Crowing about the benefits of owning stocks during the last 30 years as a reason to own them now is comparing apples to oranges IMO.
“If you had kept a portfolio that broadly followed the index, you would have achieved a return that tracked the index.”
Not true for the Dow.
The Dow 30 index does not include dividends. A real investor in those stocks would obviously receive them, and over a 30 year period the benefit would be remarkable.
Changing the basket is not manipulation, it is a matter of keeping the index up with the nature of the current economy.
What was it, year 2000 or 2001 when the Dow dropped "big oils" and replaced them with Intel and Microsoft. It would be fun to see how high the Dow would have gone, if they had not updated themselves into a Tech bear market.
<< <i>Now is not a good time to own stocks IMO nor has it been since 2001 as mentioned on this board. You should be in the PMs due to the lack of leverage they provide. >>
Thank God, I'm not a fortune telling economist, nor do I listen to them. Since 2001 my stock mutual fund ( Heritage with American Century ) has more than doubled. It's up more than 30% year to date. I agree, that now (2007) may not be a good time to jump in, but for the long term, you can't beat the stock market for a decent return.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
While we could put the big oils back in place of some Tech, I still doubt you'd get a positive inflation adjusted DOW since 2001. Let's face it, changing DOW stocks is usually done to better the DOW average. For every exchange that misses the mark, there are probably 10 others that are pure winners.
It would be interesting to calculate the real rate of return, including dividends (which I don't have info for) and time value of money against the POG since 1975. Anyone want to take a shot?
Again, not interested in what gold has done for 30 years, but rather the past 5-10 that influence the future trends. No doubt you will find that the 30 yr performance of dividend producing gold companies is not good. You'd probably find the same thing for most stocks from 1929-1954 and 1966-1987. Considering that gold producers in the 1990's were happy to hedge their future production (i.e. cut their own throats) to participate in the gold carry trade what good is that dividend-adjusted data? The banks were happy to see the miners play their game, pocket the interest rate differential, and forego future production and capital investments, all the while keeping the dollar up and gold down. Looking back now, the mining infrastructures are years behind where they should be and many miners are not that profitable. Gold production has lagged demand for several years. Miners took the easy money in the 90's and are now losing out on the truly big money of today. Though with the PPT manipulation of the gold market, you are hard pressed to see much difference yet between prices of hedged vs. unhedged miners. It was estimated that Barrick (ABX) made $2 Billion in the gold carry trade during those 10 years. However today their hedge book is at least $2 billion (ie potential losses) and growing. They are "solving" their problem by swallowing up smaller miners with unhedged assets. While this won't solve the problem, it does delay the end game and keeps Barrick (thought to be a PPT favored son) near the top of the market.
I believe the stock market is good for one thing, leveraging your money. During upswings in the economy it is advisable to leverage your investments and stay out of assets that have no leverage, such as precious metals.
Depends on how you classify "leverage." Gold has leverage to the USDX as it has gone up multiples of what the US dollar has dropped. Sounds like leverage to me. Precious metal's miners (ie gold stocks) certainly have tremendous leverage, often exceeding the gains in gold by 5 to 10X (or 100X or more). Leverage comes from paper or debt. The leverage in the USEconomy since the end of the gold standard is basically due to a mountain of debt. You can call it leverage, or derivatives, or assets, or "economic trend," or whatever, it's still debt. And that debt leads to asset price inflation. It's engineered alright...but not for the good of long term USE.
Conversely if we take the same leverage and apply it in an economic downswing, we would lose much more money than by putting money in the metals. This is the value of precious metals and the only time you would want to own them is during economic hard times. They do not really "make" you money, they preserve at least most of the wealth you made during the good times via the stock market.
Look back on strong inflationary times and you will see gold/silver performing. They made people lots of money in the late 1970's and now since 2001. Due to the economic paper debt trends of 1981 to 2001, metals had no chance to participate. Don't use those 20 yrs as the only possible trend. Ironically, those strong inflationary times have occurred because of the loss of the gold standard. So we really only have 3 windows to chart (1971-1980, 1980-2001, 2001-present). It's not much of a track record. And imo we've never really played out the PM's to their end game. That's what's coming next. I do concur that 30 yrs of "king" equity paper is on the wane, with 15 or more years of "king" metals and commodities replacing it, regardless of the actions of the Fed, PPT, and "GS and "da boyz club."
Gold has done well the past 6 years so were those "recessionary" times or "inflationary" times or something else? This is a good question since neither the BLS, media, or the public in general feel we are in a recession or have any significant inflation. So gold must be doing good because of something else..... global warming?
I've mentioned it before, but one only needs to look at one chart if you're investing for the long haul.
The Dow Jones : Gold Ratio.
This chart will show you extremely well defined trends that occur in 20 to 30 year cycles.
Example:
1980 to 2000: definitely a 20 year Bull cycle for the stock market and a definite no-no for precious metals investments. We seem to only trust and remeber this trend as this trend happened in out lifetime. We don't put any trust in previous or future trends because we only 'trust' the 1980 to 2000 trend. Of course this was a major stock market bull trend. The largest ever. And gold really went in the dumper between these years. But this trend is OVER!!!! Look at the trend starting from the year 2000!!! A change has occurred and will continue for another 15 years. Presently., we are in a Precious metals BULL cycle trend. And it's only just beginning!!
but from 1965 to 1980: you would have done so much better investing in Gold as compared to stocks.
These major trends take 'turns' and now (since 2000) we are in a trend that definitely favors precious metals over stocks. We still have about another 15 years of this trend and it won't end until the ratio of the Dow:Gold is down to 3:1, 2:1 or even 1:1.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
Rob has a habit of digging into the govt stats we often find so puzzling. He called the people that publish the PPI and asked where the crude oil input price comes from.
The answer: A one day data point on a Tuesday from various producers taken during the week of the month which has the 13th day in it. Solution: buy your oil stocks on the Monday or Friday before that Tuesday each month.
Curiously, the chart linked shows oil at a low during thay day in the previous few months....even though the monthly trend has been upwards. More top notch ciphering from our Bureau of Laughable Statistics.
I had a crafted a very long winded, detailed addendum to my previous thought with attachments etc. and my dam* wireless connection went down! I really don't feel like rewriting it at this time. Took about 45 minutes too. Doh!
Not sure if this will load or be legible but I had made a couple of models around May 05 while I was attempting to understand all the economic theory i was reading as it relates to gold/silver. I am attaching it so if it works, the 'S's signify a direct impact and the O's signify an inverse one. I had to convert these to GIF files to load.
These are "10,000 foot" models (if they load) and I do not entirely agree with all of what is in these now that i have learned a bit more. But overall it describes my interpretation of what i read.
<< <i>I've mentioned it before, but one only needs to look at one chart if you're investing for the long haul.
The Dow Jones : Gold Ratio.
This chart will show you extremely well defined trends that occur in 20 to 30 year cycles.
Example:
1980 to 2000: definitely a 20 year Bull cycle for the stock market and a definite no-no for precious metals investments. We seem to only trust and remeber this trend as this trend happened in out lifetime. We don't put any trust in previous or future trends because we only 'trust' the 1980 to 2000 trend. Of course this was a major stock market bull trend. The largest ever. And gold really went in the dumper between these years. But this trend is OVER!!!! Look at the trend starting from the year 2000!!! A change has occurred and will continue for another 15 years. Presently., we are in a Precious metals BULL cycle trend. And it's only just beginning!!
but from 1965 to 1980: you would have done so much better investing in Gold as compared to stocks.
These major trends take 'turns' and now (since 2000) we are in a trend that definitely favors precious metals over stocks. We still have about another 15 years of this trend and it won't end until the ratio of the Dow:Gold is down to 3:1, 2:1 or even 1:1. >>
Just wondering what your basis is for making such a definate prediction that the current gold/dow ratio will continue down for another 15. If this was a chart of GOOGLE then one would could just as easily write this this current downtrend is merely a correction and that the upward trend will soon resume. As my weather geek buddies say, this sounds like wishcasting.
When I see this chart I see about a 6 month time period in which the gold/dow ratio was about 1.5. I dont really think you can take such a short time moment in time and say that history will repeat. I read the chart as saying that 1.5 and 40 are extremes that should probably be thrown out. To my untrained eye it looks as though 10 may actually be a better long term ratio.
The greatest thing about trends is that they are until they arent. Sounds simple but most people dont understand.
Just wondering what your basis is for making such a definate prediction that the current gold/dow ratio will continue down for another 15
The chart I showed earlier was just a part of this one.
Below is a chart of the Dow/Gold for a very long period of time. There are many well defined 'long cycles' that show up.
Interpretation of this chart: when the chart goes up means you should be in stocks (dow) rather than gold. when the chart goes down: Gold definitely outperforms the Dow.
If the chart is 'true', then gold will outperform the Dow in the next 10 to 15 years.
Note: we are presently at a value of "17" on this chart as the Dow is approx 13500 and gold 800. So 13500/800 = 17.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
Microsoft Corporation, Intel Corporation, SBC Communications and Home Depot Incorporated replaced Chevron Corporation, Goodyear Tire & Rubber Company, Union Carbide Corporation and Sears, Roebuck.
Since then -
Microsoft share price lost 20%. Intel share price lost 30% at least. Home Depot is cut in half (must have not paid a big enough bonus to their CEO). SBC share price lost 20%.
Chevron shares are up 100% not including a decent dividend. Goodyear shares are up 50%. Union Carbide was purchased by Dow Chemical. Dow stock is flat, but dividends return is notable. Sears - heck I can't tell, it's too complicated. Up 100%?
As we all know the Dow changes on a constant basis, in fact of the 30 stock that make up the current Dow there have been 50 changes in the last 75 plus years.
Naturally all of these stock charts showing the price of gold compared to 30 different, and changing stocks, is a shell game promoted by those blue shoes salesmen on Wall Street. So what we need to figure out here is would it have been better to have been in a group of 30 commodities in the last 35 years. Or would it have been better to have been in the ORIGINAL Dow stocks for 1970.
Unfortunately, I do not think any one on Wall Street wants anyone to look at a comparison of these charts.
Below is an interesting chart comparison of hard assets against paper assets. Lets let our readers decide. Lets take the Dow as it was in 1970 with its 30 components and compare them to a chart of 30 commodities and decide if it was indeed better to own Dow stocks.
Looks to me that the Wall Street power brokers just made some bad forecasts on where the economy was going. No doubt they figured on a continuing tech surge, falling retail, and weak commodity prices (ie oil). They just blew it. Who could of thought up a 9-11 scenario and the FED's massive liquidity injections since then? And they in their blindness did not see the shifting sands from paper to commodities occuring in the late 1990's. For once the money manipulators own shenanigans backfired. Too bad! Why is it you never see a Dow/S&P inflation adjusted chart in your regional and town newspapers? Or a Dow vs gold chart?
Sears up around 100%? Hardly. While a Sears and Goodyear may have just recently performed in past years their most recent year is hardly laudatory. I doubt very much if retailers and service companies aren't already on the down swing. If the consumer is not buying, the retailers will suffer. Sears has been tanking for the past 3 quarters and has erased all the gains since Dec. 2004. Some investment. Home Depot just got hit earlier since they are a more a direct representation of the housing market than the regular retailers. Goodyear benefited from the China and US "expansion" since 2003 but has faltered this year giving back all the 2007 gains. If one had purchased Goodyear in 2001 you'd be even on paper. It's last split was in May 1993.
Wonder how long before Wall Street plops a major mining or commodities company into their index...... and dumps some more losers? Or maybe bring Chevron back? Citigroup is as close to bankrupt as you can be. And to make matters worse just assumed $49 BILL in already downgraded sub-prime junk loans. Those loans should be winners! And JPM looks not so healthy carrying about $100 TRILL in derivatives at 50 to 1 leverage. And since their performances will sour for years to come, why not dump them? Or how about GMC who is very deep into derivatives risk as well? All will have a tough time surviving the fallout.
<< <i>As we all know the Dow changes on a constant basis, in fact of the 30 stock that make up the current Dow there have been 50 changes in the last 75 plus years.
Naturally all of these stock charts showing the price of gold compared to 30 different, and changing stocks, is a shell game promoted by those blue shoes salesmen on Wall Street. So what we need to figure out here is would it have been better to have been in a group of 30 commodities in the last 35 years. Or would it have been better to have been in the ORIGINAL Dow stocks for 1970.
Unfortunately, I do not think any one on Wall Street wants anyone to look at a comparison of these charts.
Below is an interesting chart comparison of hard assets against paper assets. Lets let our readers decide. Lets take the Dow as it was in 1970 with its 30 components and compare them to a chart of 30 commodities and decide if it was indeed better to own Dow stocks.
Someone is just as likely to buy each of these commodities as they are to buy every stock in the SP500. A better comparison would be the CRB index VS SP500.
A stock market VS gold arguement is pointless in this thread. Each asset class has its day in the sun. Right now gold is outperforming the broader markets, however there are hundreds, if not thousands of stocks that are grossly outperforming gold. To compare a single asset to a basket is both irresponsible and misleading. Did you know that when MSFT went public in 1986 until it peaked in 2000 that it had an average return of 1% per WEEK for 15 years!!!! Now before you all jump on me and say this this is an isolated event, first I could post 1000's of such examples, and second to use a "manipulated"--as some say--asset to make a point is even more eggregious.
And to base future predictions based on such phantom entities as PPT, ponzi schemes, et al, is very unfortunate.
The bottom line is every dog has its day. The past 7 years have been relatively good for gold. No one knows what the next 7 years will bring but I have a feeling that those who prognosticate with blind faith have a very good chance of being blindsided.
No blind faith, just follow the fundamentals. And until those change it's anything but faith:
Weak dollar, weak UST long bond, negative deficits for current account, TIC, and budget, lack of trust in USA paper, bullish general commodity trends. When one of these goes away, then it will be time to reassess the major trend. Until then, it's hardly blind faith.
However there are hundreds, if not thousands of stocks that are grossly outperforming gold
No doubt true. And those stocks are probably owned by < 1 out of 1,000 people in the general population. So small as to make it an insider's play. The odds of Joe Public being invited to participate are only when those stocks are peaking, so Joe can bail out those who helped run them up.
The CRB, HUI, XAU indicies have kicked the keister of the DOW and S&P over the past 6 years. Now those are all well-diversified funds covering many different items. A fair comparison. Gold or even gold stock indicies have probably out performed 90-95% of all stocks out there. Any anyone could have easily picked them. I'm sure a fairly large % of forum members have some gold, silver, and other PM's.
I like the veiled concept of PPT, Ponzi, etc as if it only applies to the metals markets. Hint: It's all manipulated, very much so. The FED/PPT is in the stock and bond markets daily massaging things. Some days worse than others. They are bolstering up your favorite beaten down stocks just as John Q. thinks he should own some. "Ponzi" scheme is quite apropos to the derivatives market or possibly even to the long term hold in stocks. If one thinks the stock market (esp the major financials) are not rotten to the core, their eyes will be opened in the near future. The average guy has made very little in stocks now over the past 10 years. He held the Nasdaq until under 3000 (or even 2000) and will do the same elsewhere.
<< <i> And to base future predictions based on such phantom entities as PPT, ponzi schemes, et al, is very unfortunate.
The bottom line is every dog has its day. The past 7 years have been relatively good for gold. No one knows what the next 7 years will bring but I have a feeling that those who prognosticate with blind faith have a very good chance of being blindsided. >>
Very well put Cohodk. No one would deny that those who bought gold around 2000 / 2002 have done very well. Congratulations are in order to them. But the only question I care about is "where do we go from here?" I am not convinced that gold will be a good investment in the next few years.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
I just don't think one can classify precious metals along with other commodities. Sure, they are commodities, but for the most part save silver, they aren't being "used up" in the sense that other commodities are.
While the past shows gold acting inversely of the DOW, in today's world wide market and with currencies being devalued left and right, I think it's going to stand on it's own as real value. Regardless of the paper manipulators.
I don't see this PM bull market going on for another 10-15 years, my gut says 6-7 more with only silver having the possibility of continuing to move on past that time frame as it's shortages are going to have to be felt. They already have, but there's more to come and the outlook for the shortages are only going to get worse.
Time will tell.
Speaking of commodities that aren't really used up, but are continually recycled, does anybody know what has happened to diamonds and/or other precious gems over the last 7 years?
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I tried searching for some basic diamond investment track record but got fed up with all the scam artist links listed. If you can find one that makes sense, good luck. Diamonds are good for DeBeers, the Queen of England, and Elizabeth Taylor. Outside of those three I'm not sure who invests in diamonds.
See Rob's TIC data which shows how the UK has singlehandly purchased approx $235 BILL of US financial paper over the past year. Without this UK infusion (or confusion?) the TIC would be NEG for the year. Just this past month they pumped in another $30 BILLION to give one of the strongest TIC monthly reports in a years. No doubt this has indicated to the financial powers to be that things have turned around. But on closer inspection it's more a sign that the UK is covering our a$$ in the banking liquidity mess. The only question is how many Billions will they lose after helping us out? How much sub-prime sewage did they unknowingly take in over the past year? But, this also could just be the FED buying for themselves to liquify our markets. Any way you look at it, it smells funny.
With the exception of a few huge, colored diamonds most are just widgets. If you want to buy diamond jewerly go to your local B&M coin dealer. They frequently buy earrings, rings, necklaces, ect. and you can usually buy for about 10-30% of jewerly store retail. Diamonds ARE controlled by DeBeers and are not rare.
<< <i>I tried searching for some basic diamond investment track record but got fed up with all the scam artist links listed. If you can find one that makes sense, good luck. Diamonds are good for DeBeers, the Queen of England, and Elizabeth Taylor. Outside of those three I'm not sure who invests in diamonds.
roadrunner >>
Yeah, that's why I asked. I've heard that market is so manipulated that you can figure on paying 300-500% of value when buying, maybe more. I was just wondering if anyone had a source of actual knowledge. Some claim they have been a good investment, others say the bottom is about to drop away and leave a lot of people with pricey diamonds that will soon be worth 10 cents on the dollar.
I just don't know what to think there. Do we have a jeweler on the boards?
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
The EU Central Banks just came out with $500 BILL in liquidity to help massage the market mess. That was about 3X what they originally were planning to do. Supposedly a 2 week window on these central bank loans.
Here is the scoop on the Fed auctions. They are not giving this money away, in fact the rate seems pretty high. With what has already been done, these auctions and the new European Central Bank 500 BILLION, I would say we are past a TRILLION by now.
“Fed loans banks $20 billion AP WASHINGTON - Cash-strapped banks took the Federal Reserve up on its offer of $20 billion in short-term loans to help them overcome credit problems, but the interest rate wasn't as low as some had hoped.
The central bank said Wednesday that it had received bids for $61.6 billion worth of loans, more than three times the amount that was made available. The loans carried an interest rate of 4.65 percent, which is slightly less than the 4.75 percent the Fed charges banks on emergency loans through its "discount" window. Banks have been reluctant to use the Fed's discount window because of the fear that investors will believe they are having trouble getting funds.
There were 93 bids for the loans, the Fed said. Each bank could submit up to two bids. The auction for the 28-day loans was conducted on Monday, and the results released on Wednesday.
The European Central Bank on Tuesday opened its credit tap wide, pumping a record amount of cash — more than $500 billion — into markets to keep banks from Finland to France flush with the cash they need to operate.
Bear's $500B flush leads right into an excerpt from the Weimar Republic. See the Sinclair site for more....
"By July 1922, the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923, it was at 1,100,000 to $1. It reached 2! 5 trillion marks to $1 in mid-November 1923, varying from city to city. So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. Dr. Havenstein, the president of the Reichsbank, did not get his new suit. A factory worker described payday, which was every day at 11:00 a.m.: "At 11:00 in the morning a siren sounded, and everybody gathered in the factory forecourt, where a five-ton lorry was drawn up loaded brimful with paper money. The chief cashier and his assistants climbed up on top. They read out names and just threw out bundles of notes. As soon as you had caught one you made a dash for the nearest shop and bought just anything that was going." Teachers, paid at 10:00 a.m., brought their money to the playground, where relatives took the bundles and hurried off with them. Banks closed at 11:00 a.m.; the harried clerks went on strike. “The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning."
Ouch!
Morale of the story: slab 2 coins at once, don't wait for fees to go up.
I've been in the Gemstone business since 1982 and don't ever buy diamonds for investment purposes. If the Debeers monopoly failed to exist anymore, the price of Diamonds would fall 90%. Diamonds are very plentiful and there is a huge stockpile of them.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
I've been in the Gemstone business since 1982 and don't ever buy diamonds for investment purposes. If the Debeers monopoly failed to exist anymore, the price of Diamonds would fall 90%. Diamonds are very plentiful and there is a huge stockpile of them.
aluminum was once considered special and expensive. fine jewelry was made out of it and presented to queens. then it was mined in larger quantities.
now diamonds can be produced in a lab.
a monopoly and lab produced stones.... can it get any worse for a diamond investor? screw debeers. i will ask my future wife if she will consider 10 ounces of gold instead of a diamond and then see if a simple band of gold will do for a wedding ring ;0)
The last ring I bought my wife was a Ruby anniversary ring. I figured everybody else had diamonds. Well, it was the thought that counts. My other choice was a 09s VDB in a large setting.
Stay away from diamonds, where I come from they were found lying around in your back yard after a decent rain storm washed the surface dirt away . My clients offered to pay their bills in uncut diamonds ( illegal ...but common) The market is a complete fake with huge hoards of stones slowly leaked to the public . The big fear in the diamond industry is that the Russians will break away from the cartel and flood the market ....the Russians are not stupid so the game goes on . There are a few "Top Pop" diamonds the same way there are few "top pop " coins that have a rarity value , but unless you are the Queen of England or Elizabeth Taylor you wont even see those. Stick with the PMs until the dollar turns around
<< <i>Bear's $500B flush leads right into an excerpt from the Weimar Republic. See the Sinclair site for more....
"By July 1922, the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923, it was at 1,100,000 to $1. It reached 2! 5 trillion marks to $1 in mid-November 1923, varying from city to city. So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. Dr. Havenstein, the president of the Reichsbank, did not get his new suit. A factory worker described payday, which was every day at 11:00 a.m.: "At 11:00 in the morning a siren sounded, and everybody gathered in the factory forecourt, where a five-ton lorry was drawn up loaded brimful with paper money. The chief cashier and his assistants climbed up on top. They read out names and just threw out bundles of notes. As soon as you had caught one you made a dash for the nearest shop and bought just anything that was going." Teachers, paid at 10:00 a.m., brought their money to the playground, where relatives took the bundles and hurried off with them. Banks closed at 11:00 a.m.; the harried clerks went on strike. “The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning."
Ouch!
Morale of the story: slab 2 coins at once, don't wait for fees to go up.
roadrunner >>
That story is amazing, could that ever happen to the dollar?
If that happens to the dollar then you wont want to know what will happen to the rest of the world's currencies
This is a great point, because everybody is keying on only the US dollar and how it is being printed at incredible rates and losing value everyday (which is true).
But the truth is, EVERY currency in the world is doing the same thing.
Look at the Canadian dollar. It has gained so much ground on the USD in the past two years. Why? I guess because most of the world looks at us (Canada) as a natural resource rich country (true) with slightly better economic outlook than the US and plows all their money into the Canadian $. But I think, Canada is printed money at a faster rate than even the US (which should lead to greater inflation for the CDN $).
And look at the Euro. Gaining big ground on the USD. But many economists think the Euro is worse off than the USD.
My personal belief is IF the USD loses a lot more value in the short term ( 20 to 40% in the next 3 years), the light bulb will go off for everyone else in the world and they'll look in their wallets and see worthless pieces of paper and perhaps then, the only SAFE asset in inflationary times (Gold and Silver) will truly take off in price.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
<< <i>I tried searching for some basic diamond investment track record but got fed up with all the scam artist links listed. If you can find one that makes sense, good luck. Diamonds are good for DeBeers, the Queen of England, and Elizabeth Taylor. Outside of those three I'm not sure who invests in diamonds.
roadrunner >>
Yeah, that's why I asked. I've heard that market is so manipulated that you can figure on paying 300-500% of value when buying, maybe more. I was just wondering if anyone had a source of actual knowledge. Some claim they have been a good investment, others say the bottom is about to drop away and leave a lot of people with pricey diamonds that will soon be worth 10 cents on the dollar.
I just don't know what to think there. Do we have a jeweler on the boards? >>
You rang?
Diamonds, like anything else including coins can be a good investment or a very poor investment. If you buy common, cheap coins, you probably won't make money. If you buy rare, expensive coins, they will probably increase in value. Large(>1 carat) high clarity(SI or better) , high color(H color or better) well cut diamonds have been an excellent investment in the past 10 years or so, going up 8-10% per year. Small, lower quality diamonds have depreciated significantly in the same timeframe. Average to low quality melee I used to pay $200/carat in the mid '90s goes for $30-40/carat now.
There is so much misinformation posted about diamonds by people who made bad investments or got burned on ebay or a high priced retailer. They are mad they lost money and will continually spout that diamonds are a horrible investment. They are just like people who buy coins from those horribly overpriced coin TV programs, sell them at a huge loss and forever proclaim that coins are a horrible investment.
DeBeers only controls 55% of the market currently. They have lost a lot of influence over the past few decades. The Russians want nothing to do with them. There are some mines in Australia that are not under DeBeers control. The new mines in Nunavut, Canada told DeBeers to get lost. There are some really high quality goods coming out of Canada. Strangely enough, prices keep rising as DeBeers continues to lose influence.
Whoa! I had read the first part of this account before, but I don't remember this last part. This rings eerily familiar with today's situation.
The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy
Q: Are You Printing Money? Bernanke: Not Literally
Comments
How many years of gold kicking the Dow's or S&P's a$$ will it take before the anti-gold crowd finally says, "ok, I guess gold wasn't such a bad play these past few years."
Gold has been a nice play...and by all indications should continue to be a nice play. Let's leave it at that. But then again....look at the 50 yr.
chart !
So what companies lost $1-$10 BILLION in derivatives this past week? Multiple choice quiz to follow.
roadrunner
RR -- I certainly agree with the statement, and I would not be at all surprised to see gold rise significantly over the next decade, but I don't feel at all confident making that prediction -- it is too dependent on political events.
So if I could pick a basket of top performing commodities every few years for the CRB then that would be a "fair" reflection of the commodities market....keeping up with the current economic forces
Now I think I finally understand all this stuff.
It's more a matter of selecting what item has the best chance of performing well over the next decade. Unless govt's can confiscate gold again, or tax it to kingdom come, it will perform.
roadrunner
Sure, if I kept my money in steel and railroads, I would not have done very well. I am slow, but not that slow.
With respect to commodities, if you wanted to invest in a basket of commodities that was changed periodically to reflect the importance of each commodity in the economy, and felt that passive investment in this type of a basket was better than actively choosing which commodities will excel, I would not consider your basket "manipulated". It would be a reasonable approach if you wanted to invest passively and broadly in commodities.
In the long term, everything is, of course, which is why long term economic forecasts are always wrong. (although they are nonetheless useful, an apparent paradox many don't appreciate)
However, my gut feeling (which is only as good as any one else's gut feeling!) is that we are at a point where political inputs could result in fairly large disruptions, and I don't have a clue where these may lead.
Higashiyama,
Well Sir, of course you are correct, and quite naturally no one could put a great deal of their money into one commodity and sit on it for 30 plus years.
RR’S point was that it makes no sense to keep posting long-term charts of one investment without posting the others; the variables are just too great.
So if one were a real gold bug and “ kept a portfolio” of U.S. uncirculated gold coins over the last 33 years what would that be worth? I mean you cannot buy a 33-year futures contract.
The point here is that many of the better companies that are now in the Dow were not even in existence in 1975, and many others are now bankrupt.
What is irritating to me is all these pundits continually telling everyone how the Dow has out performed all other investments, but they fail to tell the folks that like all investments you had to continually change your portfolio to make those gains.
The simple fact is that if you bought $10,000 worth of equal amounts of all the Dow stocks in 1975 most likely you would have lost money, since many of these companies went broke, and many of the great companies that now occupy Dow spaces did not even exist!
One more note of interest here. It has now been 3 months since I started my experimental stock account.
I am up only 9% as an annual percentage rate. Perhaps that is not to bad, but I have to work on this some every day, and dodging bullets in this market is not easy. If I had not invested in some of the short side of this market I would have lost a big portion of my money by now.
It would be interesting to calculate the real rate of return, including dividends (which I don't have info for) and time value of money against the POG since 1975.
Anyone want to take a shot?
Dow Jones History
This leverage benefit shows in the dow history from the 70s to after 2000. This large economic trend was acheived in large part due to the engineered increase in liquidity and money supply, along with the baby boomers reaching their peak productive years.
During upswings in the economy it is a rather ill informed things to have money in precious metals because they do not have any leverage.
Conversely if we take the same leverage and apply it in an economic downswing, we would lose much more money than by putting money in the metals. This is the value of precious metals and the only time you would want to own them is during economic hard times. They do not really "make" you money, they preserve at least most of the wealth you made during the good times via the stock market.
I believe we have entered another large economic trend, to the downside. This is for the opposite reasons that we had a large economic upswing for the past 30 years. The boomers are now retiring and becoming less productive and the liquidity expansion has about played out.
Now is not a good time to own stocks IMO nor has it been since 2001 as mentioned on this board. You should be in the PMs due to the lack of leverage they provide.
Crowing about the benefits of owning stocks during the last 30 years as a reason to own them now is comparing apples to oranges IMO.
Does any of this make sense to anyone?
“If you had kept a portfolio that broadly followed the index, you would have achieved a return that tracked the index.”
Not true for the Dow.
The Dow 30 index does not include dividends. A real investor in those stocks would obviously receive them, and over a 30 year period the benefit would be remarkable.
Changing the basket is not manipulation, it is a matter of keeping the index up with the nature of the current economy.
What was it, year 2000 or 2001 when the Dow dropped "big oils" and replaced them with Intel and Microsoft. It would be fun to see how high the Dow would have gone, if they had not updated themselves into a Tech bear market.
<< <i>Now is not a good time to own stocks IMO nor has it been since 2001 as mentioned on this board. You should be in the PMs due to the lack of leverage they provide. >>
Thank God, I'm not a fortune telling economist, nor do I listen to them. Since 2001 my stock mutual fund ( Heritage with American Century ) has more than doubled. It's up more than 30% year to date. I agree, that now (2007) may not be a good time to jump in, but for the long term, you can't beat the stock market for a decent return.
Let's face it, changing DOW stocks is usually done to better the DOW average. For every exchange that misses the mark, there are probably 10 others that are pure winners.
It would be interesting to calculate the real rate of return, including dividends (which I don't have info for) and time value of money against the POG since 1975. Anyone want to take a shot?
Again, not interested in what gold has done for 30 years, but rather the past 5-10 that influence the future trends. No doubt you will find that the 30 yr performance of dividend producing gold companies is not good. You'd probably find the same thing for most stocks from 1929-1954 and 1966-1987. Considering that gold producers in the 1990's were happy to hedge their future production
(i.e. cut their own throats) to participate in the gold carry trade what good is that dividend-adjusted data? The banks were happy to see the miners play their game, pocket the interest rate differential, and forego future production and capital investments, all the while keeping the dollar up and gold down. Looking back now, the mining infrastructures are years behind where they should be and many miners are not that profitable. Gold production has lagged demand for several years. Miners took the easy money in the 90's and are now losing out on the truly big money of today. Though with the PPT manipulation of the gold market, you are hard pressed to see much difference yet between prices of hedged vs. unhedged miners. It was estimated that Barrick (ABX) made $2 Billion in the gold carry trade during those 10 years. However today their hedge book is at least $2 billion (ie potential losses) and growing. They are "solving" their problem by swallowing up smaller miners with unhedged assets. While this won't solve the problem, it does delay the end game and keeps Barrick (thought to be a PPT favored son)
near the top of the market.
I believe the stock market is good for one thing, leveraging your money. During upswings in the economy it is advisable to leverage your investments and stay out of assets that have no leverage, such as precious metals.
Depends on how you classify "leverage." Gold has leverage to the USDX as it has gone up multiples of what the US dollar has dropped.
Sounds like leverage to me. Precious metal's miners (ie gold stocks) certainly have tremendous leverage, often exceeding the gains in gold by 5 to 10X (or 100X or more). Leverage comes from paper or debt. The leverage in the USEconomy since the end of the gold standard is basically due to a mountain of debt. You can call it leverage, or derivatives, or assets, or "economic trend," or whatever, it's still debt. And that debt leads to asset price inflation.
It's engineered alright...but not for the good of long term USE.
Conversely if we take the same leverage and apply it in an economic downswing, we would lose much more money than by putting money in the metals. This is the value of precious metals and the only time you would want to own them is during economic hard times. They do not really "make" you money, they preserve at least most of the wealth you made during the good times via the stock market.
Look back on strong inflationary times and you will see gold/silver performing. They made people lots of money in the late 1970's
and now since 2001. Due to the economic paper debt trends of 1981 to 2001, metals had no chance to participate. Don't use those 20 yrs as the only possible trend. Ironically, those strong inflationary times have occurred because of the loss of the gold standard. So we really only have 3 windows to chart (1971-1980,
1980-2001, 2001-present). It's not much of a track record. And imo we've never really played out the PM's to their end game. That's what's coming next. I do concur that 30 yrs of "king" equity paper is on the wane, with 15 or more years of "king" metals and commodities replacing it, regardless of the actions of the Fed, PPT, and "GS and "da boyz club."
Gold has done well the past 6 years so were those "recessionary" times or "inflationary" times or something else? This is a good question since neither the BLS, media, or the public in general feel we are in a recession or have any significant inflation. So gold must be doing good because of something else.....
roadrunner
The Dow Jones : Gold Ratio.
This chart will show you extremely well defined trends that occur in 20 to 30 year cycles.
Example:
1980 to 2000: definitely a 20 year Bull cycle for the stock market and a definite no-no for precious metals investments. We seem to only trust and remeber this trend as this trend happened in out lifetime. We don't put any trust in previous or future trends because we only 'trust' the 1980 to 2000 trend. Of course this was a major stock market bull trend. The largest ever. And gold really went in the dumper between these years. But this trend is OVER!!!! Look at the trend starting from the year 2000!!! A change has occurred and will continue for another 15 years. Presently., we are in a Precious metals BULL cycle trend. And it's only just beginning!!
but from 1965 to 1980: you would have done so much better investing in Gold as compared to stocks.
These major trends take 'turns' and now (since 2000) we are in a trend that definitely favors precious metals over stocks. We still have about another 15 years of this trend and it won't end until the ratio of the Dow:Gold is down to 3:1, 2:1 or even 1:1.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Rob has a habit of digging into the govt stats we often find so puzzling. He called the people that publish the PPI and asked where the crude oil input price comes from.
The answer: A one day data point on a Tuesday from various producers taken during the week of the month which has the 13th day in it. Solution: buy your oil stocks on the Monday or Friday before that Tuesday each month.
Curiously, the chart linked shows oil at a low during thay day in the previous few months....even though the monthly trend has been upwards. More top notch ciphering from our Bureau of Laughable Statistics.
An "invisible" hand indeed.
roadrunner
Not sure if this will load or be legible but I had made a couple of models around May 05 while I was attempting to understand all the economic theory i was reading as it relates to gold/silver.
I am attaching it so if it works, the 'S's signify a direct impact and the O's signify an inverse one. I had to convert these to GIF files to load.
These are "10,000 foot" models (if they load) and I do not entirely agree with all of what is in these now that i have learned a bit more. But overall it describes my interpretation of what i read.
<< <i>I've mentioned it before, but one only needs to look at one chart if you're investing for the long haul.
The Dow Jones : Gold Ratio.
This chart will show you extremely well defined trends that occur in 20 to 30 year cycles.
Example:
1980 to 2000: definitely a 20 year Bull cycle for the stock market and a definite no-no for precious metals investments. We seem to only trust and remeber this trend as this trend happened in out lifetime. We don't put any trust in previous or future trends because we only 'trust' the 1980 to 2000 trend. Of course this was a major stock market bull trend. The largest ever. And gold really went in the dumper between these years. But this trend is OVER!!!! Look at the trend starting from the year 2000!!! A change has occurred and will continue for another 15 years. Presently., we are in a Precious metals BULL cycle trend. And it's only just beginning!!
but from 1965 to 1980: you would have done so much better investing in Gold as compared to stocks.
These major trends take 'turns' and now (since 2000) we are in a trend that definitely favors precious metals over stocks. We still have about another 15 years of this trend and it won't end until the ratio of the Dow:Gold is down to 3:1, 2:1 or even 1:1. >>
Just wondering what your basis is for making such a definate prediction that the current gold/dow ratio will continue down for another 15. If this was a chart of GOOGLE then one would could just as easily write this this current downtrend is merely a correction and that the upward trend will soon resume. As my weather geek buddies say, this sounds like wishcasting.
When I see this chart I see about a 6 month time period in which the gold/dow ratio was about 1.5. I dont really think you can take such a short time moment in time and say that history will repeat. I read the chart as saying that 1.5 and 40 are extremes that should probably be thrown out. To my untrained eye it looks as though 10 may actually be a better long term ratio.
The greatest thing about trends is that they are until they arent. Sounds simple but most people dont understand.
Knowledge is the enemy of fear
<< <i>Well, if the Shlt goes down, at least I have a big bag o' gold and silver coins, and plenty of ammo
as well as a ton of rice and beans.
The chart I showed earlier was just a part of this one.
Below is a chart of the Dow/Gold for a very long period of time. There are many well defined 'long cycles' that show up.
Interpretation of this chart: when the chart goes up means you should be in stocks (dow) rather than gold.
when the chart goes down: Gold definitely outperforms the Dow.
If the chart is 'true', then gold will outperform the Dow in the next 10 to 15 years.
Note: we are presently at a value of "17" on this chart as the Dow is approx 13500 and gold 800. So 13500/800 = 17.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Microsoft Corporation, Intel Corporation, SBC Communications and Home Depot Incorporated replaced Chevron Corporation, Goodyear Tire & Rubber Company, Union Carbide Corporation and Sears, Roebuck.
Since then -
Microsoft share price lost 20%.
Intel share price lost 30% at least.
Home Depot is cut in half (must have not paid a big enough bonus to their CEO).
SBC share price lost 20%.
Chevron shares are up 100% not including a decent dividend.
Goodyear shares are up 50%.
Union Carbide was purchased by Dow Chemical. Dow stock is flat, but dividends return is notable.
Sears - heck I can't tell, it's too complicated. Up 100%?
As we all know the Dow changes on a constant basis, in fact of the 30 stock that make up the current Dow there have been 50 changes in the last 75 plus years.
Naturally all of these stock charts showing the price of gold compared to 30 different, and changing stocks, is a shell game promoted by those blue shoes salesmen on Wall Street. So what we need to figure out here is would it have been better to have been in a group of 30 commodities in the last 35 years. Or would it have been better to have been in the ORIGINAL Dow stocks for 1970.
Unfortunately, I do not think any one on Wall Street wants anyone to look at a comparison of these charts.
Below is an interesting chart comparison of hard assets against paper assets. Lets let our readers decide. Lets take the Dow as it was in 1970 with its 30 components and compare them to a chart of 30 commodities and decide if it was indeed better to own Dow stocks.
Lumber
Sugar
Gold
Light sweet crude
Wheat
Corn
Copper
Coffee
Platinum
Titanium
Diamonds
Coal
Natural Gas
Steel
Rubber
Cement
Aluminum
Sliver
Tin
Zinc
Lead
Nickel
Palladium
Uranium
Cocoa
Soybeans
Palm Oil
Emeralds
Rhodium
Iridium
Sears up around 100%? Hardly.
While a Sears and Goodyear may have just recently performed in past years their most recent year is hardly laudatory. I doubt very much if retailers and service companies aren't already on the down swing. If the consumer is not buying, the retailers will suffer. Sears has been tanking for the past 3 quarters and has erased all the gains since Dec. 2004. Some investment. Home Depot just got hit earlier since they are a more a direct representation of the housing market than the regular retailers. Goodyear benefited from the China and US "expansion" since 2003 but has faltered this year giving back all the 2007 gains.
If one had purchased Goodyear in 2001 you'd be even on paper. It's last split was in May 1993.
Wonder how long before Wall Street plops a major mining or commodities company into their index...... and dumps some more losers? Or maybe bring Chevron back? Citigroup is as close to bankrupt as you can be. And to make matters worse just assumed $49 BILL in already downgraded sub-prime junk loans. Those loans should be winners! And JPM looks not so healthy carrying about $100 TRILL in derivatives at 50 to 1 leverage. And since their performances will sour for years to come, why not dump them? Or how about GMC who is very deep into derivatives risk as well? All will have a tough time surviving the fallout.
roadrunner
This is written by a doctorate of economics, but don't hold that against him...
China's Great Depression
<< <i>As we all know the Dow changes on a constant basis, in fact of the 30 stock that make up the current Dow there have been 50 changes in the last 75 plus years.
Naturally all of these stock charts showing the price of gold compared to 30 different, and changing stocks, is a shell game promoted by those blue shoes salesmen on Wall Street. So what we need to figure out here is would it have been better to have been in a group of 30 commodities in the last 35 years. Or would it have been better to have been in the ORIGINAL Dow stocks for 1970.
Unfortunately, I do not think any one on Wall Street wants anyone to look at a comparison of these charts.
Below is an interesting chart comparison of hard assets against paper assets. Lets let our readers decide. Lets take the Dow as it was in 1970 with its 30 components and compare them to a chart of 30 commodities and decide if it was indeed better to own Dow stocks.
Lumber
Sugar
Gold
Light sweet crude
Wheat
Corn
Copper
Coffee
Platinum
Titanium
Diamonds
Coal
Natural Gas
Steel
Rubber
Cement
Aluminum
Sliver
Tin
Zinc
Lead
Nickel
Palladium
Uranium
Cocoa
Soybeans
Palm Oil
Emeralds
Rhodium
Iridium >>
Someone is just as likely to buy each of these commodities as they are to buy every stock in the SP500. A better comparison would be the CRB index VS SP500.
A stock market VS gold arguement is pointless in this thread. Each asset class has its day in the sun. Right now gold is outperforming the broader markets, however there are hundreds, if not thousands of stocks that are grossly outperforming gold. To compare a single asset to a basket is both irresponsible and misleading. Did you know that when MSFT went public in 1986 until it peaked in 2000 that it had an average return of 1% per WEEK for 15 years!!!! Now before you all jump on me and say this this is an isolated event, first I could post 1000's of such examples, and second to use a "manipulated"--as some say--asset to make a point is even more eggregious.
And to base future predictions based on such phantom entities as PPT, ponzi schemes, et al, is very unfortunate.
The bottom line is every dog has its day. The past 7 years have been relatively good for gold. No one knows what the next 7 years will bring but I have a feeling that those who prognosticate with blind faith have a very good chance of being blindsided.
Knowledge is the enemy of fear
it's anything but faith:
Weak dollar, weak UST long bond, negative deficits for current account, TIC, and budget, lack of trust in USA paper, bullish general commodity trends. When one of these goes away, then it will be time to reassess the major trend. Until then, it's hardly blind faith.
However there are hundreds, if not thousands of stocks that are grossly outperforming gold
No doubt true. And those stocks are probably owned by < 1 out of 1,000 people in the general population. So small as to make it an insider's play. The odds of Joe Public being invited to participate are only when those stocks are peaking, so Joe can bail out those who helped run them up.
The CRB, HUI, XAU indicies have kicked the keister of the DOW and S&P over the past 6 years. Now those are all well-diversified funds covering many different items. A fair comparison. Gold or even gold stock indicies have probably out performed 90-95% of all stocks out there. Any anyone could have easily picked them. I'm sure a fairly large % of forum members have some gold, silver, and other PM's.
I like the veiled concept of PPT, Ponzi, etc as if it only applies to the metals markets. Hint: It's all manipulated, very much so. The FED/PPT is in the stock and bond markets daily massaging things.
Some days worse than others. They are bolstering up your favorite beaten down stocks just as John Q. thinks he should own some. "Ponzi" scheme is quite apropos to the derivatives market or possibly even to the long term hold in stocks. If one thinks the stock market (esp the major financials) are not rotten to the core, their eyes will be opened in the near future. The average guy has made very little in stocks now over the past 10 years. He held the Nasdaq until under 3000 (or even 2000) and will do the same elsewhere.
roadrunner
I might start eating beans again.
Camelot
<< <i> And to base future predictions based on such phantom entities as PPT, ponzi schemes, et al, is very unfortunate.
The bottom line is every dog has its day. The past 7 years have been relatively good for gold. No one knows what the next 7 years will bring but I have a feeling that those who prognosticate with blind faith have a very good chance of being blindsided. >>
Very well put Cohodk. No one would deny that those who bought gold around 2000 / 2002 have done very well. Congratulations are in order to them. But the only question I care about is "where do we go from here?" I am not convinced that gold will be a good investment in the next few years.
While the past shows gold acting inversely of the DOW, in today's world wide market and with currencies being devalued left and right, I think it's going to stand on it's own as real value. Regardless of the paper manipulators.
I don't see this PM bull market going on for another 10-15 years, my gut says 6-7 more with only silver having the possibility of continuing to move on past that time frame as it's shortages are going to have to be felt. They already have, but there's more to come and the outlook for the shortages are only going to get worse.
Time will tell.
Speaking of commodities that aren't really used up, but are continually recycled, does anybody know what has happened to diamonds and/or other precious gems over the last 7 years?
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I'm not sure who invests in diamonds.
Rob Kirby on 12 month TIC data
See Rob's TIC data which shows how the UK has singlehandly purchased approx $235 BILL of US financial paper over the past year. Without this UK infusion (or confusion?) the TIC would be NEG for the year. Just this past month they pumped in another $30 BILLION to give one of the strongest TIC monthly reports in a years. No doubt this has indicated to the financial powers to be that things have turned around. But on closer inspection it's more a sign that the UK is covering our a$$ in the banking liquidity mess. The only question is how many Billions will they lose after helping us out? How much sub-prime sewage did they unknowingly take in over the past year? But, this also could just be the FED buying for themselves to liquify our markets. Any way you look at it, it smells funny.
roadrunner
Knowledge is the enemy of fear
<< <i>I tried searching for some basic diamond investment track record but got fed up with all the scam artist links listed. If you can find one that makes sense, good luck. Diamonds are good for DeBeers, the Queen of England, and Elizabeth Taylor. Outside of those three
I'm not sure who invests in diamonds.
roadrunner >>
Yeah, that's why I asked. I've heard that market is so manipulated that you can figure on paying 300-500% of value when buying, maybe more. I was just wondering if anyone had a source of actual knowledge. Some claim they have been a good investment, others say the bottom is about to drop away and leave a lot of people with pricey diamonds that will soon be worth 10 cents on the dollar.
I just don't know what to think there. Do we have a jeweler on the boards?
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
$500 BILLION - now that's almost real money!
roadrunner
was spread around to the members of the Forum?
Camelot
Knowledge is the enemy of fear
<< <i>Now, just how much of that 500 billion dollars
was spread around to the members of the Forum? >>
I always wonder where the hell my cut is.
I suppose bears and pretenders have to be content with not having the sky fall.
“Fed loans banks $20 billion
AP
WASHINGTON - Cash-strapped banks took the Federal Reserve up on its offer of $20 billion in short-term loans to help them overcome credit problems, but the interest rate wasn't as low as some had hoped.
The central bank said Wednesday that it had received bids for $61.6 billion worth of loans, more than three times the amount that was made available. The loans carried an interest rate of 4.65 percent, which is slightly less than the 4.75 percent the Fed charges banks on emergency loans through its "discount" window. Banks have been reluctant to use the Fed's discount window because of the fear that investors will believe they are having trouble getting funds.
There were 93 bids for the loans, the Fed said. Each bank could submit up to two bids. The auction for the 28-day loans was conducted on Monday, and the results released on Wednesday.
The European Central Bank on Tuesday opened its credit tap wide, pumping a record amount of cash — more than $500 billion — into markets to keep banks from Finland to France flush with the cash they need to operate.
monetary flush every once in a while. It
helps to clean out a constipated economy.
Camelot
"By July 1922, the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923, it was at 1,100,000 to $1. It reached 2! 5 trillion marks to $1 in mid-November 1923, varying from city to city. So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. Dr. Havenstein, the president of the Reichsbank, did not get his new suit. A factory worker described payday, which was every day at 11:00 a.m.: "At 11:00 in the morning a siren sounded, and everybody gathered in the factory forecourt, where a five-ton lorry was drawn up loaded brimful with paper money. The chief cashier and his assistants climbed up on top. They read out names and just threw out bundles of notes. As soon as you had caught one you made a dash for the nearest shop and bought just anything that was going." Teachers, paid at 10:00 a.m., brought their money to the playground, where relatives took the bundles and hurried off with them. Banks closed at 11:00 a.m.; the harried clerks went on strike. “The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning."
Ouch!
Morale of the story: slab 2 coins at once, don't wait for fees to go up.
roadrunner
I've been in the Gemstone business since 1982 and don't ever buy diamonds for investment purposes. If the Debeers monopoly failed to exist anymore, the price of Diamonds would fall 90%. Diamonds are very plentiful and there is a huge stockpile of them.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
aluminum was once considered special and expensive. fine jewelry
was made out of it and presented to queens. then it was mined in
larger quantities.
now diamonds can be produced in a lab.
a monopoly and lab produced stones.... can it get any worse for a
diamond investor? screw debeers. i will ask my future wife if she will
consider 10 ounces of gold instead of a diamond and then see if a
simple band of gold will do for a wedding ring ;0)
Another CPI analysis thread - why the CPI is not a price index
The author makes some great points. But I like his definition of what the index now represents:
The Consumer Moribund Lifestyle Until Absolute Poverty Index
roadrunner
The market is a complete fake with huge hoards of stones slowly leaked to the public . The big fear in the diamond industry is that the Russians will break away from the cartel and flood the market ....the Russians are not stupid so the game goes on . There are a few "Top Pop" diamonds the same way there are few "top pop " coins that have a rarity value , but unless you are the Queen of England or Elizabeth Taylor you wont even see those.
Stick with the PMs until the dollar turns around
<< <i>Bear's $500B flush leads right into an excerpt from the Weimar Republic. See the Sinclair site for more....
"By July 1922, the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923, it was at 1,100,000 to $1. It reached 2! 5 trillion marks to $1 in mid-November 1923, varying from city to city. So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. Dr. Havenstein, the president of the Reichsbank, did not get his new suit. A factory worker described payday, which was every day at 11:00 a.m.: "At 11:00 in the morning a siren sounded, and everybody gathered in the factory forecourt, where a five-ton lorry was drawn up loaded brimful with paper money. The chief cashier and his assistants climbed up on top. They read out names and just threw out bundles of notes. As soon as you had caught one you made a dash for the nearest shop and bought just anything that was going." Teachers, paid at 10:00 a.m., brought their money to the playground, where relatives took the bundles and hurried off with them. Banks closed at 11:00 a.m.; the harried clerks went on strike. “The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning."
Ouch!
Morale of the story: slab 2 coins at once, don't wait for fees to go up.
roadrunner >>
That story is amazing, could that ever happen to the dollar?
Knowledge is the enemy of fear
This is a great point, because everybody is keying on only the US dollar and how it is being printed at incredible rates and losing value everyday (which is true).
But the truth is, EVERY currency in the world is doing the same thing.
Look at the Canadian dollar. It has gained so much ground on the USD in the past two years. Why? I guess because most of the world looks at us (Canada) as a natural resource rich country (true) with slightly better economic outlook than the US and plows all their money into the Canadian $. But I think, Canada is printed money at a faster rate than even the US (which should lead to greater inflation for the CDN $).
And look at the Euro. Gaining big ground on the USD. But many economists think the Euro is worse off than the USD.
My personal belief is IF the USD loses a lot more value in the short term ( 20 to 40% in the next 3 years), the light bulb will go off for everyone else in the world and they'll look in their wallets and see worthless pieces of paper and perhaps then, the only SAFE asset in inflationary times (Gold and Silver) will truly take off in price.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>
<< <i>I tried searching for some basic diamond investment track record but got fed up with all the scam artist links listed. If you can find one that makes sense, good luck. Diamonds are good for DeBeers, the Queen of England, and Elizabeth Taylor. Outside of those three
I'm not sure who invests in diamonds.
roadrunner >>
Yeah, that's why I asked. I've heard that market is so manipulated that you can figure on paying 300-500% of value when buying, maybe more. I was just wondering if anyone had a source of actual knowledge. Some claim they have been a good investment, others say the bottom is about to drop away and leave a lot of people with pricey diamonds that will soon be worth 10 cents on the dollar.
I just don't know what to think there. Do we have a jeweler on the boards? >>
You rang?
Diamonds, like anything else including coins can be a good investment or a very poor investment. If you buy common, cheap coins, you probably won't make money. If you buy rare, expensive coins, they will probably increase in value. Large(>1 carat) high clarity(SI or better) , high color(H color or better) well cut diamonds have been an excellent investment in the past 10 years or so, going up 8-10% per year. Small, lower quality diamonds have depreciated significantly in the same timeframe. Average to low quality melee I used to pay $200/carat in the mid '90s goes for $30-40/carat now.
There is so much misinformation posted about diamonds by people who made bad investments or got burned on ebay or a high priced retailer. They are mad they lost money and will continually spout that diamonds are a horrible investment. They are just like people who buy coins from those horribly overpriced coin TV programs, sell them at a huge loss and forever proclaim that coins are a horrible investment.
DeBeers only controls 55% of the market currently. They have lost a lot of influence over the past few decades. The Russians want nothing to do with them. There are some mines in Australia that are not under DeBeers control. The new mines in Nunavut, Canada told DeBeers to get lost. There are some really high quality goods coming out of Canada. Strangely enough, prices keep rising as DeBeers continues to lose influence.
The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old. The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy
I knew it would happen.