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Can't the big brokers just give a little recognition to gold's 10 year performance?
roadrunner
Posts: 28,303 ✭✭✭✭✭
My brokerage sent a nice investment newsletter to me yesterday. An article on long term investing strategies struck me immediately because of the S&P 500 vs. Gold chart covering the last 28 years. All I initially could see was one line on the chart going parabolic and nothing else. And that wasn't the gold line. So where in heaven's sakes was the gold trend? This wasn't a comparison or was it?
Well it wasn't exactly a gold chart, but a comparison of how $100 invested in either option on 12/31/80 would have worked out over the next 3 decades. No surprise that the S&P is now at $1500 while gold is at $150. The gold market was still going to fall another 50% from the Dec. 31st 1980 level. A $2500 scale was used to contain the S&P prices so only a tiny fraction of that range was needed to contain gold which ranged from $100 at the start, to $50 at the bottom, to $150 in 2009.
This particular gold chart itself is a broker's dream and I have to tip my hat to the analyst who dreamt it up because the gold line is nearly completely flat. If you weren't looking for it you'd have thought they left it off. It might as well be the x-axis....lol. A small little bend up from 2002-2009 is hardly noticeable. It's amazing that you can hide a 4X increase in the pog in such a chart. But they did it.
The 28 yr. S&P chart ironically looks somewhat like the gold chart of the past 10 yrs....and maybe the author should have placed that in the footnote...lol. It has a strong parabolic shape from 1981 to 1999, a sharp 38% correction into 2003 and then another sharp move up into 2007. Even with the drop over the past 2 years the S&P chart still looks to be uptrending with higher lows. But had this chart been printed last fall, stocks would have been shown to be headed down over the past 10 years (ie lower lows). And gold would have still been on the X axis. The net effect: The $100 invested in the S&P in Dec. 1980 is now 15X greater than gold. What it doesn't tell you is that the dollar lost 36% of it's purchasing power between the 1999 and 2007 peaks. Hence, the 2nd peak is not really a true all time high but a lower inflation-adjusted high. Showing 10 yr charts would have lead to totally different conclusions. Does anyone really think that the credit/lending/valuation/derivative practices that drove the 1982-2007 SM will continue on the same? It took 25 years from the 1929 crash for the DOW to reach its previous high. And that's with tossing out bankrupt or non-performing DOW companies along the way. Let's see 2007 peak + 25 yrs = 2032. Yikes! Even using 2000 as the inflation adj. peak and it's 2025.
The brokerage discusses gold in the 1970's an one of several "alternative" investments. They did not discuss that this alternative investment increased in price at least 10X during the 1970's if you consider spot market pricing or 25X if you went by USTreasury fixed price. That's some 10 year alternative! Nor did they mention that the "old alternative" did the same thing a second time over the past 10 years. What "luck" for lightning to strike twice in the same place! The stock market was basically flat from 1966-1982 losing 70% of its value to inflation in the process. It gyrated wildly but it's average was flat. It took a 16 year correction and 6 tries for the DOW to finally break $1000 and leave it behind. The 1999-2009 period was not much different that the 1970's in terms of SM vs. Gold/dollar performance. Stocks lost ground to inflation once again during that time effectively wiping out all real gains. And shareholders still had to pay taxes on those imaginary gains.
With analysis like this, it's no wonder J6P isn't touching gold. And if he saw that brokerage chart, he won't be touching it anytime sooner either. Maybe, instead of focusing so much on anchoring all gold performance data from 1980, why not choose 1971? or 2001? 10 years is still a long time to earn nothing. Not everyone's retirement years coincide perfectly with a 20-25 yr stock market cycle. What if you're retirment coincides with the 15-20 yrs on the downside? I'm not surprised these guys want us to forget the gold performance of the 1970's and now the 2000's. But how long will they have to wait next time to be able to show a 30 yr non-performing gold chart that doesn't include 1999-2009?
roadrunner
Well it wasn't exactly a gold chart, but a comparison of how $100 invested in either option on 12/31/80 would have worked out over the next 3 decades. No surprise that the S&P is now at $1500 while gold is at $150. The gold market was still going to fall another 50% from the Dec. 31st 1980 level. A $2500 scale was used to contain the S&P prices so only a tiny fraction of that range was needed to contain gold which ranged from $100 at the start, to $50 at the bottom, to $150 in 2009.
This particular gold chart itself is a broker's dream and I have to tip my hat to the analyst who dreamt it up because the gold line is nearly completely flat. If you weren't looking for it you'd have thought they left it off. It might as well be the x-axis....lol. A small little bend up from 2002-2009 is hardly noticeable. It's amazing that you can hide a 4X increase in the pog in such a chart. But they did it.
The 28 yr. S&P chart ironically looks somewhat like the gold chart of the past 10 yrs....and maybe the author should have placed that in the footnote...lol. It has a strong parabolic shape from 1981 to 1999, a sharp 38% correction into 2003 and then another sharp move up into 2007. Even with the drop over the past 2 years the S&P chart still looks to be uptrending with higher lows. But had this chart been printed last fall, stocks would have been shown to be headed down over the past 10 years (ie lower lows). And gold would have still been on the X axis. The net effect: The $100 invested in the S&P in Dec. 1980 is now 15X greater than gold. What it doesn't tell you is that the dollar lost 36% of it's purchasing power between the 1999 and 2007 peaks. Hence, the 2nd peak is not really a true all time high but a lower inflation-adjusted high. Showing 10 yr charts would have lead to totally different conclusions. Does anyone really think that the credit/lending/valuation/derivative practices that drove the 1982-2007 SM will continue on the same? It took 25 years from the 1929 crash for the DOW to reach its previous high. And that's with tossing out bankrupt or non-performing DOW companies along the way. Let's see 2007 peak + 25 yrs = 2032. Yikes! Even using 2000 as the inflation adj. peak and it's 2025.
The brokerage discusses gold in the 1970's an one of several "alternative" investments. They did not discuss that this alternative investment increased in price at least 10X during the 1970's if you consider spot market pricing or 25X if you went by USTreasury fixed price. That's some 10 year alternative! Nor did they mention that the "old alternative" did the same thing a second time over the past 10 years. What "luck" for lightning to strike twice in the same place! The stock market was basically flat from 1966-1982 losing 70% of its value to inflation in the process. It gyrated wildly but it's average was flat. It took a 16 year correction and 6 tries for the DOW to finally break $1000 and leave it behind. The 1999-2009 period was not much different that the 1970's in terms of SM vs. Gold/dollar performance. Stocks lost ground to inflation once again during that time effectively wiping out all real gains. And shareholders still had to pay taxes on those imaginary gains.
With analysis like this, it's no wonder J6P isn't touching gold. And if he saw that brokerage chart, he won't be touching it anytime sooner either. Maybe, instead of focusing so much on anchoring all gold performance data from 1980, why not choose 1971? or 2001? 10 years is still a long time to earn nothing. Not everyone's retirement years coincide perfectly with a 20-25 yr stock market cycle. What if you're retirment coincides with the 15-20 yrs on the downside? I'm not surprised these guys want us to forget the gold performance of the 1970's and now the 2000's. But how long will they have to wait next time to be able to show a 30 yr non-performing gold chart that doesn't include 1999-2009?
roadrunner
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I wonder if he knows anyone who bought right at the top of the gold spike and has ignorantly held on until today.
Prolly not.
Certainly, there will be a time when it's NOT a good idea to be buying gold. There will be such a time, but now isn't one of them.
But hey, i guess if you gotta sell stock paper in order to collect a paycheck, you do what you gotta do.
I knew it would happen.
It's not at all surprising they pick 1980 to compare gold. They're trying to make a point. But ironically, that kind of chart makes me even more skeptical of stocks. Stocks had a big run from 1980 to about 2008, with a few breathers in between. The odds of another 28 year+ big run like that coming immediately afterwards for stocks is pretty unlikely. More likely that other asset classes (e.g., gold) will have a big run first.
We haven't seen gold's big run finish. Once inflation takes hold - that's when the wild ride will begin.
Money magazine, about 10 years ago, had an article on the subject. Someone who retired comfortably in 1967 was out of money by 1975.
So you don't even need a 15 year bear.
Gold hasn't always had these 10 year bullish runs. These pretty much began following the August 1971 closure of the gold window. What has followed ever since in the economy is no coincidence.
roadrunner
Gold buyers usually are long term holders who do not generate much commission.
Every asset class has its day in the sun. Now the sun is shining on gold. Someday it will again be on stocks. Looking back 15 years from today a long term holder would have said, "I'm gonna buy gold cuz one someday it will shine.". Perhaps today a long term equity holder is saying the same about equities.
Knowledge is the enemy of fear
<< <i>Your broker only makes money if you buy/sell stocks. Of course he's not going to recommend gold! Nor will he recommend that you sit in cash, even though during short periods like fall 2008 it would've been better to sit in cash rather than almost anything. There's an innate conflict of interest here.
It's not at all surprising they pick 1980 to compare gold. They're trying to make a point. But ironically, that kind of chart makes me even more skeptical of stocks. Stocks had a big run from 1980 to about 2008, with a few breathers in between. The odds of another 28 year+ big run like that coming immediately afterwards for stocks is pretty unlikely. More likely that other asset classes (e.g., gold) will have a big run first.
We haven't seen gold's big run finish. Once inflation takes hold - that's when the wild ride will begin. >>
Couldn't have said it better myself, these clowns are interested in one thing only and that's taking as much money from you as they legally can in the form of commisions. If they were any good at all they would advise their clients to remove a percentage of their money and place it into fixed income or for the riskier types possibly suggest using some of the etf's that short the Dow, S&P, Nasdaq, financial stocks, etc. when the market is trading at historically high level's.