The goofiness of gold - help me understand.
ProofIt
Posts: 20
I listened to Peter Schiff on tv last night where he made the case that gold goes to $2000/oz in 2009 and higher in later years. I then went and bought one of his books last night and his reasoning makes sense. You know the US went from the largest creditor nation of the world to the largest debtor nation presently and that these imbalances are going to have a severe impact on our standard of living as we will either see a run on the dollar, which will cause high inflation or even hyper inflation.
He claims that between 2010 and 2020 Americans will have a drastically lower standard of living and then what? We will have all become a nation of savers once again we will have restored our manufacturing base wherein we will eliminate our current accounts deficits and we will be back on our way to prosperity? Folks what he describes and others who talk the same thing seem to be describing an apocalyptic type depression that will make the 1930's seem like fun. If this is the case then I see in no way that we would to turn the US around in ten years. In fact I believe after the depression of the 30's it was 25 years before you reached parity in the stock market prior to the crash.
So what if we have a Zimbabwe situation and lets say someone buys hook line and sinker that gold is going parabolic. In addition, lets say someone wealthy commits a $1 million to gold bullion so what based on today's price and let's just use an even $750 and oz so with a $ 1million you could buy 1333 1 oz bars or if you went the tenth ounce route it would be 13,330 pieces of course this is wrong because there is the buy premium which seems to be at least 10% so immediately you lose 10 percent of your doomsday stash and of course as your paper currency turns to the value of toilet paper and you turn your buillion hedge back into the paper currency you loose another 10 percent to your local dealer so now your down 20% in just fees. Ok I know I bought at 750 (really 825 with fees) and gold is now lets say $3K/oz (really $2,700/oz remember the sell fee) so what do I have to complain about I'm really up a lot still, right. Ok but the sell fees are in current stable times. What's to keep your local friendly dealer from raising his fee to 25% or higher after all, people will be redeeming for basic necessities such as food not for an Alaska cruise that they can say 'hey moron your not going to rip me off like this I'll put the cruise off till next year.' They have to be able to eat and I could easily see serious erosion of buying power coming from the dealers that transasct in gold.
In addition, in a hyperinflation scenario prices would be increasing so rapidly its conceivable that you would go and redeem your gold and buy the time you got to the store prices would have increased even more. Of course you could trade your gold directly at the grocery store maybe and avoid the ripoff buy/sell premiums at your local friendly dealer. So you go to the store load your cart up and the manager says that will be "X dollars" and I say but I have buillion you know the ultimate hedge against inflation and he says. "I'll take one ounce for everything, but you do some bartering and agree on .85 oz and you only have 1 ouncers on you - woops! Fortunately you brought your dremel tool with you, your 4 decimal place digital scale and ziplock bags to catch the gold dust as you cut away the bullion of course the store mgr would question my scales weight as maybe weighing heavy and so we put the decimated buillion on his scale where I would say his seems to be rigged to weigh light. What a friggin mess. You may say well why not just go back and get more groceries so that your only dealing in whole bullion? Sure you could do that but what about gas and other items where you have limited carrying options? Of course if its this bad do you really think you can just take a stroll out to the car and not be in a situaition where your going to be potentially robbed or whatever else to get the groceries for all the other desperate people who don't have gold?
Another scenario the gold crowd advocates is buying gold mining stocks and how liquid will they be for you to get money out if the whole monetary system is vaporized? Other suggestions are to invest in currencies that aren't printing money and who would that be? Not the UK, Canada, or Australia and isn't much of the Eurozone printing money as well? Any currencies still backed by a gold standard? Of course, the other scenario is to move to another country that is more fiscally responsible - now that's a practical solution (sarcasm intended). It just seems that this is a worldwide financial meltdown with many financially irresponsible contributors just not the US.
Ok I gave the million dollar rich man scenario but the reality is that most people who now live beyond there means simply don't have the money to buy gold or could buy only a small amount and soon run out and then be in the situation of the majority. Even if you have a warchest of a million plus in gold is it going to last 10, 15 or 20 years in this doomsday scenario?
I am not disregarding what Schiff is saying there has to be a reckoning for the financial irresponsibility it just seems that many people who are betting that this is going to happen is like one of the guys that was on tv last night with Schiff and that said, 'if your betting on the sun blowing up and your right what are you left with?' I just don't think its going to be much consolation that your gold is worth 3, 4, $5k/oz as society as we know it, will be a jungle.
Of course maybe I'm reading Schiff's predictions wrong, but I just cant see the scenario that he is proposing that suggests in ten years the US will be leaner and meaner and on our way back. I don't see how anyone is going to live if gas is $20/gallon, $30/lb for hamburger etc etc. even if you have gold. In these scenarios I think gold's close sister on the periodic table - lead will be equally if not more important if you understand what I mean.
He claims that between 2010 and 2020 Americans will have a drastically lower standard of living and then what? We will have all become a nation of savers once again we will have restored our manufacturing base wherein we will eliminate our current accounts deficits and we will be back on our way to prosperity? Folks what he describes and others who talk the same thing seem to be describing an apocalyptic type depression that will make the 1930's seem like fun. If this is the case then I see in no way that we would to turn the US around in ten years. In fact I believe after the depression of the 30's it was 25 years before you reached parity in the stock market prior to the crash.
So what if we have a Zimbabwe situation and lets say someone buys hook line and sinker that gold is going parabolic. In addition, lets say someone wealthy commits a $1 million to gold bullion so what based on today's price and let's just use an even $750 and oz so with a $ 1million you could buy 1333 1 oz bars or if you went the tenth ounce route it would be 13,330 pieces of course this is wrong because there is the buy premium which seems to be at least 10% so immediately you lose 10 percent of your doomsday stash and of course as your paper currency turns to the value of toilet paper and you turn your buillion hedge back into the paper currency you loose another 10 percent to your local dealer so now your down 20% in just fees. Ok I know I bought at 750 (really 825 with fees) and gold is now lets say $3K/oz (really $2,700/oz remember the sell fee) so what do I have to complain about I'm really up a lot still, right. Ok but the sell fees are in current stable times. What's to keep your local friendly dealer from raising his fee to 25% or higher after all, people will be redeeming for basic necessities such as food not for an Alaska cruise that they can say 'hey moron your not going to rip me off like this I'll put the cruise off till next year.' They have to be able to eat and I could easily see serious erosion of buying power coming from the dealers that transasct in gold.
In addition, in a hyperinflation scenario prices would be increasing so rapidly its conceivable that you would go and redeem your gold and buy the time you got to the store prices would have increased even more. Of course you could trade your gold directly at the grocery store maybe and avoid the ripoff buy/sell premiums at your local friendly dealer. So you go to the store load your cart up and the manager says that will be "X dollars" and I say but I have buillion you know the ultimate hedge against inflation and he says. "I'll take one ounce for everything, but you do some bartering and agree on .85 oz and you only have 1 ouncers on you - woops! Fortunately you brought your dremel tool with you, your 4 decimal place digital scale and ziplock bags to catch the gold dust as you cut away the bullion of course the store mgr would question my scales weight as maybe weighing heavy and so we put the decimated buillion on his scale where I would say his seems to be rigged to weigh light. What a friggin mess. You may say well why not just go back and get more groceries so that your only dealing in whole bullion? Sure you could do that but what about gas and other items where you have limited carrying options? Of course if its this bad do you really think you can just take a stroll out to the car and not be in a situaition where your going to be potentially robbed or whatever else to get the groceries for all the other desperate people who don't have gold?
Another scenario the gold crowd advocates is buying gold mining stocks and how liquid will they be for you to get money out if the whole monetary system is vaporized? Other suggestions are to invest in currencies that aren't printing money and who would that be? Not the UK, Canada, or Australia and isn't much of the Eurozone printing money as well? Any currencies still backed by a gold standard? Of course, the other scenario is to move to another country that is more fiscally responsible - now that's a practical solution (sarcasm intended). It just seems that this is a worldwide financial meltdown with many financially irresponsible contributors just not the US.
Ok I gave the million dollar rich man scenario but the reality is that most people who now live beyond there means simply don't have the money to buy gold or could buy only a small amount and soon run out and then be in the situation of the majority. Even if you have a warchest of a million plus in gold is it going to last 10, 15 or 20 years in this doomsday scenario?
I am not disregarding what Schiff is saying there has to be a reckoning for the financial irresponsibility it just seems that many people who are betting that this is going to happen is like one of the guys that was on tv last night with Schiff and that said, 'if your betting on the sun blowing up and your right what are you left with?' I just don't think its going to be much consolation that your gold is worth 3, 4, $5k/oz as society as we know it, will be a jungle.
Of course maybe I'm reading Schiff's predictions wrong, but I just cant see the scenario that he is proposing that suggests in ten years the US will be leaner and meaner and on our way back. I don't see how anyone is going to live if gas is $20/gallon, $30/lb for hamburger etc etc. even if you have gold. In these scenarios I think gold's close sister on the periodic table - lead will be equally if not more important if you understand what I mean.
0
Comments
siliconvalleycoins.com
<< <i> Dont take this the wrong way, but you seem a bit confused...so confused that I dont really know what you are asking. >>
Are you speaking to me or Honolulu Dude?
Yeah, those were barbaric times.
I knew it would happen.
<< <i>Isn't the question, if what Schiff is predicting is correct, what else would you rather own than gold? >>
He likes gold, but where he was dead wrong is resource stocks and foreign stocks. One of his clients is down half a million. Turns out the right place to be was to short the living crap out of everything. I don't think I ever heard Schiff recommend shorting.
roadrunner
<< <i>Isn't the question, if what Schiff is predicting is correct, what else would you rather own than gold? >>
Ultimately I think gold is going to be the right play, but it's a bittersweet payoff because for gold to hit $5k will mean we will have a 'scorched earth' economy it won't be like making a ton on Google and then you going out and celebrating with friends. 5k gold would probably be more like you have armed guards or family members keeping watch so nobody trespasses on your property and these are scenarios where nobody wins.
Kind of like buying the cigarette stocks great dividends, but for the stock to do well more people have to smoke and all the ramifications that those choices bring.
I would rather see the majority of Americans take more responsibility of just voting and like showering and brushing their teeth call their congressman daily and demand a constitutional change requiring a balanced budget and the associated govt downsizing and tax increases that would be required. It makes a difference (really) when we call Congress and let them know what's important otherwise we get the govt we deserve.
If I knew that Tulips would be the commodity headed to $5000 in 2 years, I'd be buying those too. It still comes down to protecting yourself and your loved ones. We the sheeple can have little effect on restoring the nation's ecomomic system that congress and the big banks and corporations have ruined. And please don't tell me donating all of our current assets and future labors to the "cause" is patriotic so that all those who failed to prepare can be bailed out.
roadrunner
my early American coins & currency: -- http://yankeedoodlecoins.com/
Well, you could pay your house note based on the 700 gold level so you could pay off most of your mortgage for a tube of saints had you been prudent on the dips. You could pay your car note off with a three or 4 700 saints bought in '07/8. You could buy some of those 8% or 10% CD's that should be around when gold is at 5000. Actually, you could do a lot of things with 5000 gold including a few bags of groceries.
Edited to add: Hey, maybe I could even afford one of those assay pieces on a swap for some $10 indians...hummmmmmmm. This might work out!
Love your ingots CGC
<< <i>FWIW: Schiff-- his predictions have been mostly correct over these past few years, but his investment advice has been horribly wrong. >>
This is the dirty little secret that rarely gets mentioned on this forum. That several high profile hard asset newsletters have terrible track investment track records. Harry Schulz, Jim Dines, Howard Ruff are some of the legendary names amongst the hard asset advocates. All three are also near the absolute bottom in terms for investment newsletter performance for calendar 2008, despite calling the macro economic story line as well as any. The forum filter doesn't let me link Market Watch stories, but there is a link is in my November 12 blog entry (click on my blog, search for November 12 and then click the link there).
>> From Market Watch November 11th:
... Harry Schultz. Or Howard Ruff. Or Jim Dines.
All three advisers, each of whom has been editing an investment newsletter at least since the 1970s, have built their investment careers by questioning conventional wisdom's trust in the soundness of the financial system. Not surprisingly, all three have been vociferous champions of gold and other precious metals.
You'd think that they would have cleaned up over the last year, since the disintegration of the financial system in recent months is almost exactly what they have been warning us about for decades. But you'd be wrong. Of the 181 newsletters on the Hulbert Financial Digest's monitored list, these three advisers' newsletters are in 173rd, 175th, and 176th places for year-to-date performances through October 31, with losses ranging from minus 64.9% to minus 70.0%.
As I always write, show me the real time audited track record for the newsletter, not empty and vague 100% correct calls. Those without track records I categorize as entertainment newsletters, not financial ones. Anyone can be 100% when they don't report trades in real time (vs. only in hindsight after they have a winner), and don't make real money trades (vs. making empty predictions or using strategies that require near infinite capital such as doubling down on losers again and again). Readers can make of them what they will.
Some might excuse a down 70% year saying they will prove right in the end. That may or may not be true, but for someone who put their real money down, they need about a 200% gain after a 70% whipping to get to break even. ($100 becomes $30 after 70% down, 200% up from $30 gets that person back to $90. 70% up from $30 only gets you to $50). Again, readers make of it what you will.
Isn't the primary goal to get the macro story right first? From that point it's up to each one of us to deploy our money to take advantage of those macro calls. I'd like to see who did the performance ratings on those guys. While I don't typically read any of them I can't believe that holding gold even in 2008 was all that terrible a move. Let's see, stocks are down 40-50% across the board in 2008 (Buffet alone down 45%) and gold is down 5%. To use 2008 as the "proof" of investing prowess when we've had 7 years in hard assets to play with is skewing the data. One of the worst years for gold so far since 2001 and it's down a measly 5% YTD....big deal. I suspect it will end 2008 up.
Surveys always give results to prove their thesis. There must be a 1000 hard asset advisers out there, yet we should believe that the results of 3 old dogs from the 1960's and 1970's is typical of sector performance? Those 3 get little to no play on this forum. Names that I respect more include Polha, Russell, Kirby, Middleton, Degraaf, Willie, Hamilton, Shedlock, Puplava, Nichols, Saville, Rosen, Gnazzo, Droke, Saxena, Schmidt, Katz, Orlandini, Guild, Schiff, and even he of "this is it" fame: Jim Sinclair. None of them get it right all the time, especially in 2008 where all the major banks, Paulson, Bernanke, and J6P got it wrong big-time. I doubt anyone here takes everything each of these guys puts out as gospel, but more to get a flavor of the ideas available and then make your own decision.
Schiff was big in overseas stock investments, I wasn't. Many of us like the safety of being able to "hold/direct" our investments. What Schiff and others have said on the metals has pretty much played out with the exception of the crushing of the miner stocks. Even with the collapse of paper silver prices, the actual metal brings a stiff premium in the more collectable formats (eagles, maples, libertads, etc.). It's notable that SLV and GLD both have inventory levels near their all-time highs regardless of paper prices. Gold vs the Canadian dollar is now at an all-time hold over $1000/oz. as it is with several other major currencies. A MLB batter hits .333 and we call them exceptional. A "gold-bug" gets 80-90% of their calls right and we hang 'em high.
Judging the last 7 years by 2008 alone negates about everyone around except Shedlock and a couple of other die-hard deflationists like Gary North and Robert Prechter. It just happened they got it right at the right time, and in some cases years late. But they've been equally wrong before. I rarely see anyone pounding the drums around here for Mish, North, and Prechter.
Dirty little secret? How about we add up the number of mainstream stock guru results over the past couple of years, and especially in 2008. Now that would be dirty! 95% or more of Americans followed this "dirty" advice, and at great expense to their futures.
roadrunner
silver maybe for now.... but
compare GOLD to almost anything else that one "bought and held" for a year.....
ask anyone who is in the market today if their stocks holdings now are with +/- 5% of a year ago...and IF they were....they might be drinking champagne to celebrate their "good fortune or good luck"
A lot of advice predicted the event but few had correct advice on how to survive or prosper. My biggest screw was that my IRA/401s would not allow me to short and balance some of my risk.
At this moment, my new investment money is being guided by Congress, Wall Street, Big Business, Big Banking and Big Labor.
Every significant decision that they make that I don't like - I vote my discontent and disagreement with another chunk of my assets. I bought gold yesterday. I bought some more gold today. Maybe some day, I'll buy a stock again. But not until I see what's getting taxed and how much.
When I perceive the deck to be stacked, I try very hard not to play. I can't remember when it's been more stacked against Joe Public than it is today. And unfortunately, that doesn't mean that it can't get worse.
I knew it would happen.
www.AlanBestBuys.com
www.VegasBestBuys.com
Paying with FRN's is acceptable. I seem to remember some guy with a show out in LA always saying you can't buy anything with gold. Best to keep your gold dust for another time and place.
roadrunner
www.AlanBestBuys.com
www.VegasBestBuys.com
<< <i>I would think that if the gold bugs who are selling gloom and doom really believed in what they wrote, they would want to be paid in gold coin or dust....
I'm sure they can convert the FRNs to gold or silver with ease.
Actually, goom and doom sells well. Be it financial or otherwise. People seem to thrive on it for some reason.
I think there is more goofiness in the authors of the goings on of gold and such than there is in gold itself.
The few who have a real handle on these things are too difficult to read and understand for the masses anyway.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
The major banks are insolvent and many will go under.
The big three auto makers would be in financial peril and may go bankrupt.
The stock market will fall 50%
Fannie and freddie are insolvent and will be taken over by the fed.
The federal budget will baloon by trillions.
How can they expect anyone to believe such nonsense.
can't function or even that there is a recession. Indeed, if the crops
don't get planted it won't really matter what price gold is at unless
it can buy passage to somewhere there is food.
Don't worry about high gold prices and don't bet on a collapse.
When bread hits $5 a loaf gold will be $5000 an ounce. Everyone
will eat unless everyone panics.
<< <i>Don't worry about high gold prices and don't bet on a collapse. >>
While I don't see an imminent collapse, everything depends on continued belief in the perceived "value" of government paper by the gullible. The connected few continue to raid the Treasury, with one scheme after another. Citibank was bailed out for $25B, then short sellers drove its stock price down. Paulson to the rescue, with another $20B, and a $300B "guarantee" of junk paper it's stuck with.
Pure insanity, and a transparent raid. These people have no shame, and make the Somali pirates look like amateurs. A house of cards is being built that cannot be propped up forever. Gold may not be the answer, but I can't think of anything better at the moment.
my early American coins & currency: -- http://yankeedoodlecoins.com/
So, maybe Texas gets it's independence after all. Gold is good, silver is good too.
The Somali pirates ARE amateurs.
What's worse, is that nobody's calling them (Paulson, Bernake, Bush, Franks, Dodd, Cox et al.) on it. Who's the Attorney General these days? Oh, he reports to the President anyways. Never mind.
Maybe a Special Prosecutor. Nah, it'll never happen.
So, you work for a living, do you? It's all relative, I guess.
I knew it would happen.
Stock bulls? Or gold bulls?
A year ago, nobody knew that we had a "financial crisis". We knew that there was a "mortgage bubble", but we didn't anticipate that the whole ****'ed banking industry was insolvent, even though we should have.
And we didn't know that all of these financial houses would be given a free pass, courtesy of the taxpayers. Are you saying that you don't think that there will be an inflationary impact from this?
I knew it would happen.
<< <i>Interesting tidbit
So, maybe Texas gets it's independence after all. Gold is good, silver is good too. >>
"we could claim Alaska - it was only granted on lease, after all."
Now this is pure Russian Propaganda, better known as BS.
On March 30, 1867, the United States reached an agreement to purchase Alaska from Russia for a price of $7.2 million.
At the tme it was often called Seward's Folly or Seward's Icebox.
Time has shown it to be an outright steal of a deal. Still, it was purchased, lock, stock and barrel.
Granted on lease my butt!
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
It appears that they are ready to start making lots of claims. I wonder if Obama is going to declare the Monroe Doctrine null and void as Russia and Venezuela conduct joint naval exercises in the Caribbean.
I knew it would happen.
<< <i>"we could claim Alaska - it was only granted on lease, after all."
It appears that they are ready to start making lots of claims. I wonder if Obama is going to declare the Monroe Doctrine null and void as Russia and Venezuela conduct joint naval exercises in the Caribbean. >>
I believe he would have to, or be in violation of it.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>The two that come to mind for me are Battipaglia and Kaultbaum, who I had always believed to be permabulls. >>
<< <i>Stock bulls? Or gold bulls? >>
Former long time stock bulls who turned bearish.