Options
A History lesson in gold
jpkinla
Posts: 822 ✭✭✭
Many of us remember what happened in 1979-1980 but do we really remember? Here is a little help I found fascinating. First a chart of 1979 showing a breakout. Would you have really held on beyond the initial spike?
Gold Chart 1979 period
So now you see the 1979 period.....Look what happened AFTER that year....We all know what occurred BUT would you have had the stomach to hold on?
Gold Chart 1980 period
I believe we are in that "1979" period with the initial breakout.....We are a year or two away from the "1980" period......
I was blown away by this and have been studying these charts to teach myself the power of "buy and hold"......
Gold Chart 1979 period
So now you see the 1979 period.....Look what happened AFTER that year....We all know what occurred BUT would you have had the stomach to hold on?
Gold Chart 1980 period
I believe we are in that "1979" period with the initial breakout.....We are a year or two away from the "1980" period......
I was blown away by this and have been studying these charts to teach myself the power of "buy and hold"......
0
Comments
My Auctions
"The silver is mine and the gold is mine,' declares the LORD GOD Almighty."
<< <i>In historical terms I read and I quote, " In 1900 you could go to a store and with a $20.00 goldpiece, buy a new Colt revolver. Today you still can." >>
I've often thought in these terms. If not a Colt revolver, there are a number of other items you could use as an example. It's all relative.
(I'm sure there are plenty of exceptions, too.)
And by bailing out too early after making 5-10% on a gold move, and missing the one that goes up 30-50% will not make you better off either.
The gold market is starting to getting volatile enough where trying to trade in and out may beyond the skill level of 99% of the buyers out there. Holding tight on the right coins (and gold) at the right time is usually far better than settling for 10-20% at the wrong time.
It's more than making a profit....it's about maintaining what you have today at the least amount of risk. That's what gold can do...esp if you bought it at $300-$400 an ounce.
roadrunner
<< <i>no one ever lost any money taking a profit ......nor made any by selling way to early.
And by bailing out too early after making 5-10% on a gold move, and missing the one that goes up 30-50% will not make you better off either.
The gold market is starting to getting volatile enough where trying to trade in and out may beyond the skill level of 99% of the buyers out there. Holding tight on the right coins (and gold) at the right time is usually far better than settling for 10-20% at the wrong time.
It's more than making a profit....it's about maintaining what you have today at the least amount of risk. That's what gold can do...esp if you bought it at $300-$400 an ounce.
roadrunner >>
For my 1000th, I'll say:
Although I don't think he's stupid at all...
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
yes, you can't lose taking a profit, but sometimes settling for peanuts when inflation has far exceeded that peanut profit, it a waste of your time. I've made 1-10% profits on coins bought 3-5 years ago, that frankly are losses vs inflation. Coins are cyclical and waiting for the right cycle (not the first one you can profit on) is a better alternative.
roadrunner
Gold in Yen and Euros.....WOW!
$20 Saint Gaudens Registry Set
<< <i>In historical terms I read and I quote, " In 1900 you could go to a store and with a $20.00 goldpiece, buy a new Colt revolver. Today you still can." >>
I've heard the same saying except with "a fine mens suit".
Worry is the interest you pay on a debt you may not owe.
Right now it is hard to go against the momentum. Momentum in investing is a dangerous word. Gold has had a strong run-up in the past month - going up almost everyday.
It's fall will be just as fast.
Times are WAY different then 1979, 1980. For some reason, that "author" with those charts only talks about the Russia invasion. The BIG factors were inflation and interest rates. THEY WERE IN DOUBLE DIGITS, AND BY FAR THE HIGHEST ON RECORD EVER IN OUR HISTORY. Tangible assets ARE the haven when inflation is high. Inflation is NOT at 14% today!!!!. 30-year bond are at 4.69, NOT over 13%!!! We are still in a low inflation, above-average low interest rate environment.
And the stock market ain't too shabby. My clients accounts have gone up 6% in the past month, at least. I still get the feeling most savers/investors in the U.S. don't trust the markets, yet they keep trucking - funding their 401k's.
P.S. Don't forget the Hunt brothers trying to corner the silver market. Don't you think this may have pressed the "tangible asset-gathering" panic button???
That should be saved for the idiots out there who still think of gold as "EVIL" and stocks as "GOOD."
It's fall will be just as fast.
Don't bet on it. Momentum investments usually fall faster than they rose.
Today's CPI uses imputed rent or what you or I could rent our house at. Rents have been stable for years, even going down as homes escalated at 10-15% per year. No, we can never reach the CPI numbers of 1980 because of the new methods used today. What was 14% back then is probably the equivalent of 8% today.
Imputed rent takes up about 40% of the CPI. Gee, a number that doesn't change locks up half the index. Then toss in other factors like quality factors, geometric averaging, and substitution criteria, and hedonics.....and you have effectively locked up 50% or more of the CPI in things that DON'T change or are very resilient to change by design.
ex. If half the CPI goes up by say 10%, and the other half stays fixed as it tends to do, then the CPI ends up at 5%. If we tossed in housing to today's CPI the numbers would be far more dramatic when a 10-15% increase occurs in 40% of the weighted index.
Apples to oranges my friend. If we ever hit 10% on the CPI you'll know we are in very deep doo doo...as bad as it got in 1980.
What also didn't happen in 1980 was a 4X increase in M3 in the previous 25 years (we've done that by 2005). We didn't have $300 TRILLION in world wide derivatives in 1980 either (we have that today though, most of it unregulated and unbacked). We also didn't actively manage the gold price for 20 years from 1960-1980 (we did do this from 1985-2005). Yes lot of differences from 1980 vs 2005....and not all of it good today either. Also compare savings rates, debt, etc which rivals the 1929 depression.
roadrunner
The cost of energy is signifigantly higher than last year. In fact if I remember, gas was 99cents a gallon 4 years ago.
Bedding and furniture is 30-70% higher than 12 months ago if it involves heavy use of foam rubber.
Commercial rents in southern california are considerably higher than 24 months ago. We just looked at 1200 sqaure feet near alta loma in a strip center and they wanted 4 bucks a month.
I purchase nickle, copper, chromium, and various chemicals for my core business and the cost has gone off the scale in the last 24 months.
.
.
So ...really....I do not care what the govt says inflation is.....it is outrageous right now. It is at least as significant as the late 70's if not more so.
IMHO....today....the purchasing power of the dollar-- with respect to hard goods-- has declined significantly in the last 24 months. The only factor that has kept the cost of labor down in southern california is the influx of south of the border people who are streaming into this country. Other wise, we would have a huge runup in labor costs.
If I am to rely on Govt statistics...the inflation is below 5%. Bravo Sierra.
<< <i>just to give a little perspective on inflation........from my humble experience..
The cost of energy is signifigantly higher than last year. In fact if I remember, gas was 99cents a gallon 4 years ago.
Bedding and furniture is 30-70% higher than 12 months ago if it involves heavy use of foam rubber.
Commercial rents in southern california are considerably higher than 24 months ago. We just looked at 1200 sqaure feet near alta loma in a strip center and they wanted 4 bucks a month.
I purchase nickle, copper, chromium, and various chemicals for my core business and the cost has gone off the scale in the last 24 months.
.
.
So ...really....I do not care what the govt says inflation is.....it is outrageous right now. It is at least as significant as the late 70's if not more so.
IMHO....today....the purchasing power of the dollar-- with respect to hard goods-- has declined significantly in the last 24 months. The only factor that has kept the cost of labor down in southern california is the influx of south of the border people who are streaming into this country. Other wise, we would have a huge runup in labor costs.
If I am to rely on Govt statistics...the inflation is below 5%. Bravo Sierra. >>
I'm still with Roadrunner and Streeter on this... I like Lloyd's posts but his "facts" beg the cooked Gov't reporting issues - heck, M3's not even going to be reported any longer as it is "irrelevant."
Bravo Sierra for sure... 1980 was a LOT different than today. Our cheap money supply along with the derivative overhang makes this a much more volatile economic time. PM's, long oil and a fixed rate mortgage - that's my motto.
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
Yeah but it was $1.60 in the 1980 era. Experts then were predicting $100/bbl oil by 1990.
<< <i>How much did a computer cost in 1900? (Yes, they did exist then!) >>
I'm not sure to what end you ask this, or if it is even germane to the discussion. Computer in 1900? Equivalent manpower to achieve the same goals? Non sequitur.
One or the reasonable arguments for increasing money supply is increased productivity. There is no doubt that the advent of computers has increased economic productivity. But basing an argument on 1900 computers makes no sense, any more than, had I been around in 1900 I could have driven my 2005 automobile. The industrialization of the early 1900's, and concommitant evolution from an agrarian based barter economy, changed the monitiztion needs of the world. This need for increasingly complex forms of monitization have evolved (some might argue devolved) our monetary system into one based on fiat money. So long as the government can hold the control of the printing presses above political expediency and institutional greed, a low rate of inflation and gradual money supply increase are possible. But that's not human nature, certainly not capitalist nature. And for the masses? Panem et circenses. Keep the people fed and entertained.
No more rant. I'll close with this:
I'm a capitalist, and gold is one of my best defenses against overproductive printing presses. Low personal debt is another one.
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
<< <i>
<< <i>In historical terms I read and I quote, " In 1900 you could go to a store and with a $20.00 goldpiece, buy a new Colt revolver. Today you still can." >>
I've heard the same saying except with "a fine mens suit". >>
And 20 of them would buy a brand new Ford
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
It's the supposed "low" rate of 2-3% per year since 1913 that has got us into our current predicament. We could never have survived this far either without owning the world's reserve currency. We pulled a fast one over on the rest of the world. Now that they are wising up, and growing up, we won't be allowed to continue in the same manner.
roadrunner
Rents haven't gone up much because it has become AFFORDABLE to choose home ownership vs. renting! Thus - rental demand lowered. LOW interet rates!!! Housing (national average) has not skyrocketed like many think. And once you own your home, the fixed mortgage at low rates DOES NOT CHANGE YEAR TO YEAR.
The Rental housing index they use for inflation can be misleading if they use NY. Your rent can not go up but a small yearly percentage if you DO NOT MOVE. You could technically be paying a much lower monthly having been there for years and protected from high increases vs. someone that just moved into your "complex". New Yorkers tell me a different story about rents than what ROADRUNNER is telling us. They think they have had major increases in the past 5 years. BUt maybe the gov't is hiding it, making us assume no high rent increases for inflation???
30-year fixed mortgage rates averaged around 13.25% 1980-1985
Don't tell me housing was more affordable 20 years ago.
<< <i>A low or acceptable rate of inflation? What's that? We did fine for our first 120 years up to 1913 w/o even a low rate of inflation.
It's the supposed "low" rate of 2-3% per year since 1913 that has got us into our current predicament. We could never have survived this far either without owning the world's reserve currency. We pulled a fast one over on the rest of the world. Now that they are wising up, and growing up, we won't be allowed to continue in the same manner.
roadrunner >>
Make no mistake - 2% to 3% inflation isn't what I'm talking about.
0.2 to 0.3 is more like it - just enough to stay ahead of deflation. Equilibrium is the Holy Grail, essentially unachievable. Err slightly towards liquidity.
Do you really believe that true demand created the housing boom? Artificially created demand through cheap money looking for a home, more like it.
False demand creates higher asset prices as more dollars seek less supply.
When your brother -in-law Joe Lunchbucket decides that buying a rental property is a good idea with 5% down and a variable rate interest only mortgage... Be afraid
Be very afraid.
OTOH, gold is now the safe haven beneficiary of excess liquidity. More dollars (and Yuan, and Euros) seeking scarce resources.
JMHO
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
<< <i>30-year fixed mortgage rates average around 6.50% 2000-2005
30-year fixed mortgage rates averaged around 13.25% 1980-1985
Don't tell me housing was more affordable 20 years ago. >>
OK, then, explain how we have approached an inverted yield curve?
It's a different world, with different metrics (dammit
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
What ever happend to the good old days when Clinton was actually paying down the national debt or at least breaking even?
<< <i>
What ever happend to the good old days when Clinton was actually paying down the national debt or at least breaking even? >>
Ask Monica - he came, they went.
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
Ask Monica - he came, they went.
AND......It left a stain on our country that they are still trying to address......Or was that a stain ON A DRESS?
$20 Saint Gaudens Registry Set
But....
At what price would you look to SELL generic gold bullion coins?
The national debt is not a major catalyst. A turnaround could happen overnight, the debt erased, and another president will again be in the right place at the right time.
Moral of the story is watch your aim to avoid that stain. Don't get caught and being President sucks. (No pun intended)
That was smoke and mirrors. It would be no different than a corporation spending all of its pension inputs on production
and leaving an IOU behind. No planning for future retirees. Yet when our govt does it, we call it a surplus (lol)
We've not really balanced the budget anytime in recent history.
roadrunner
1) It's important to understand the difference between an increase in money supply (inflation) and an increase in price unrelated to monetary policies (as is nowadays the case for oil, steel, and other commodities, due to the demand from China and a few other factors). Price increases due to supply & demand readjustements have not much to do in a discussion about inflation. It's is mistaken to say "oil price increases have an inflationary impact". Inflation is the devaluation of fiat money due to over-printing (or similar policies on national debt).
2) An increase in money supply is *always* inflationary, even if the increase is on par with, or lower than, productivity growth. There never is a rational justification for printing more money as it *always* results in someone in the general public being shafted. Not that it might be convenient, once in a hundred year maybe, to convert the money to a new standard, but that's a separate issue.
Robert A. Heinlein
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< 30-year fixed mortgage rates average around 6.50% 2000-2005
30-year fixed mortgage rates averaged around 13.25% 1980-1985
Don't tell me housing was more affordable 20 years ago. >>
In my neighborhood the houses were $50,000 in 1980 because rates were high. The same house is now $400,000.
The 400K at 6.5% is about 4 times as much payment as the 50K at 13%.
$20 Saint Gaudens Registry Set
<< <i>I believe we are due for a short term pullback lasting a day or so >>
so what your really saying is i'm back in the hunt for the markglicker giveaway
back more cheaply or what I already have goes higher.
roadrunner
STOCKS: 1) RIGHT NOW, (Nov 2005), The Bearish Investor Sentiment indicates stocks in their biggest bearish sentiment since August, 2002, when stocks were near their basement from the big drop. 2) Valuation of stock earnings yields vs. 10-year treasury yields are still undervalued 34% as of October, 2005. THIRTY FOUR %!!! Since early 1970, stocks got more overvalued than anytime in history in early 2000 and then got more undervalued similarily in late 2002.
At 34%, this alone would suggest that stocks at fair value should be at 14,000 to 15,000 on the Dow. 15,000 is a 25% return, and H.S. Dent, well know Economist/Prognasticator using Demographics, feels this should happen by end of summer 2006.
The only two incidences since 1970 where the stock/10-year valuation was over 30%, (most recent one was late 1994), the Dow and SP 500 had returns of over 25% - in less than 9 months.
Everyone thinks the U.S. is falling apart. BUY GOLD AND GET OUT OF STOCKS.
These are two of the largets BULLISH stock signs our firm has seen since August, 2002. (Since then the SP 500 has gone up over 50%)
Buy gold, sell stocks. It is the opposite of what you should be doing TODAY. You watch.
IMHO, gold is used best as a store of a percentage of your assets. When it becomes the vehicle of choice for joe6pack.....watch for a correction.
For God sakes don't follow me, I'm lost.
Good time to study the past and learn from it.....
$20 Saint Gaudens Registry Set
BTW thanks for re-posting these charts. They are a great reminder of what could happen given the right circumstances.
My charting ability is somewhat better than it was in 2005. If you look at the charts closely you can visualize the channels formed by the longer term up moves. The upward move in 1979 doesn't seem like a top at all but just a mini-cycle. We've seen a few of those in the past 2-3 years. The movement in 1980 not only jumps the channel but flys almost straight up over several days. It is not normal channel movement. I think many of the bigger traders at the time profited handsomely on this. But as usual 95% of investors had no clue what was going on and hung in there for $2000 gold.
It's hard to say how any of us today would react if placed in a similar situation today. Would we recognize it for what it was and cash out at least a portion of our positions? 5-10% moves in one day is pretty big stuff, but 15% or more is unconscious.
Go ahead you guys. FOLLOW THE HERD. American investors look for the quick buck. Right now they think it's gold. EVERYONE is pushing gold. Listen to the coin vault, and they are already talking about the returns on gold and "they're just gonna get better".
The above comment by Lloyd is rather striking today. There is no such HERD in the gold community at the moment. The amount of interest in gold world-wide is a pimple in the investing world.
It's of little consequence yet. The small following for gold right here in the coin hobby which is linked hand in hand with PM's is living proof. We hobbyists are closer to gold than most people and probably less than 10% of our group has any exposure to gold. The average guy may have read about gold's rise in the news, but he hasn't yet considered buying any. The real HERD is still buying the remainder of the housing market or indexed stock funds. And where the HERD is as markets start to stall, is precisely where you don't want to be. A HERD in gold? Not yet. Maybe a few rogue bulls running around but certainly no heard.
The price of gold peaked at $850 but quickly fell back to a more realistic $500-550. To me, that is the real starting point of 25 year gold. And it took 25 years to get back to $550. So regardless of a quadrupling of our money supply since then, and an overall huge inflationary effect since 1980, gold remained basically unchanged
in price. Ponder that. It would be no different than being able to buy real estate, stocks, cars, houses, diamonds, rare coins, and other commodities at their 1980 prices. I for one would love to get into a $4,000 new car again or pick up a nice house for $50K.
Post 1980 coin prices were attractive too....many top coins were available for a song in late 1980 to early 1982. One of the pieces I picked up post 1980 crash fell to 30% of its former high. Today, it has gone up 8X since then....all the while gold has remain nearly unchanged. So which has the real value here: a gem seated quarter or an ounce of gold? How many wordly uses are there for a gem better date seated quarter for which maybe there are <100 people in the world who would even have interest in owning it?
What are it's uses other than sticking it in a safety deposit box to look at. It can be used to pry open a bottle cap or to flip for deciding a bet (heads or tails). It can be spent towards a soda too.
How many people should be or are interested in 1 ounce of gold or its potential uses in banking, investment, jewelry, manufacturing, science, etc.? I think we know where the HERD still is...and it's not
in gold.
roadrunner
I'd modify that as follows: The amount of interest in gold in the USA is a minature compared to the rest of the investing world.
I am posting a poll to gauge gold ownership on CU. I bet it's less than 10oz.
The dynamics of gold right now are so compelling. High energy costs makes extraction expensive, environmental/political costs causes more risks, lack of cap markets/knowledge of cap markets [China/India/Asian Tigers] means wealth migrates to hard assets not paper ones.
the people who ran the companies.
until there is more transparency, i will continue to buy gold.