long term investment

MrMalkin

sabretoothtigger wrote: »

I think thats about as close to an endorsement or warning as he is going to give

That's the best quote from a recognised investor you can do? Seriously?

sabretoothtigger wrote: »

Gold peaked in the eighties so yes... :laughing: If you want to include the seventies that'd be less biased
I'll get the figures in a sec but buying gold regularly should have shown a 'profit' by now even after then.
Probably the same stands for technology where most of it is half the price of the peak still

Gold peaked in 1980, not 'the eighties', it spent most of the 80s hovering around $400/oz nominal, then declined lower from there during the 90s before it began to run up in the early 00s. Anybody who bought gold between 1982-2000 received no protection from inflation during that period due to that purchase.

Anyone who bought at the absolute peak in 1980 still hasn't turned a profit from that particular investment, but I doubt that many people with an above room-temperature IQ took that course of action.

sabretoothtigger

Thats the best quote I can get from someone who says gold is useless. Gold is better then cash longterm is my read. Yep its ambiguous but WB is supporting a candidate in an election year so you wont find anyone perfectly unbiased


I think this is a fair view. It definitely had poor performance but its not been half as bad as the tech bubble was because it is a relatively solid investment long term




I like how it lets people change the currency, it definitely matters where you were in the world. Theres good reason the Indians love their gold so much

http://www.gold.org/investment/statistics/gold_price_chart/

The peak now to me is a repeat of that extreme rise from 70 to 80's. So a warning 'its a bubble' is not totally unfair its just cash is so flawed now I dont think it is risky to hold 10% gold

Anyone who bought at the absolute peak in 1980 still hasn't turned a profit from that particular investment, but I doubt that many people with an above room-temperature IQ took that course of action.

A peak price usually involves not many people. If you look at a listed stock, you can view how many people bought at the highest price but it peaks and declines with only a few having paid the very highest price.
If we took the average or lowest price in 1980 we'd be closer to the truth of what the average gold buyer and holder experienced.

I dont take your argument because it requires picking out a specific case and ignoring that gold rose just beforehand. Gold is very long term and when the Fed chairman raised rates to 15% it fell badly but if you ignored events like that you deserve to lose money.
Right now ignoring the current Fed actions also will end badly and its cash which is weakest not gold


The seventies gold bubble
I think this matches our current dynamic, an aggressive rise and a bad buy to some?

gadgetmind

sabretoothtigger wrote: »

It definitely had poor performance but its not been half as bad as the tech bubble was because it is a relatively solid investment long term

Your chances of total loss are less, but your chances of a serious roasting are still very high.

I'm avoiding gold and gilts. Neither am I buying beans and guns.

MrMalkin

sabretoothtigger wrote: »

Gold is very long term

Gold is terrible long term because it has a close to 0% expected returns. Stocks, bonds, property and cash saved at the prevailing interest rate all beat gold over the longest time periods in terms of expected returns. All of those other investment classes provide an income through which most long term returns are achieved, whilst gold does not, which was Buffett's point.

Gold makes no sense as an investment, it only makes sense as a speculative play or a hedge against armageddon. I'm sorry that you don't appear to be able to understand this.

lvader

My issue with gold is that I think a major price correction over the next 10 years is unavoidable and if 1980 is anything to go by it will take a very long time to recover. I still have quite a lot of money in gold related stocks and funds but the closer we get to around $2300 I'll be pulling out of those as well.

sabretoothtigger

Gold is terrible long term because it has a close to 0% expected returns

Cash has worse then 0% returns hence why for hundreds of years we fixed the worth of money to gold. Since 1971 this has not been the case and since 1971 our money has greatly depreciated.

Cash with interest from a bank would be fine if it rose faster then inflation, sometimes this is possible but on average cash loses money. This is why gold at 0% can be good, otherwise it is a rubbish investment I agree

lvader wrote: »

My issue with gold is that I think a major price correction over the next 10 years is unavoidable and if 1980 is anything to go by it will take a very long time to recover. I still have quite a lot of money in gold related stocks and funds but the closer we get to around $2300 I'll be pulling out of those as well.

Check again Ivader. Forget gold and just look at cash, bonds and where rates will go.
Like a see-saw, for a major correction in assets we need the value of cash returns to go up greatly but this is not the case.

Ironically the fastest rises in gold or any fixed asset is when interest rates are rising .
The reason being is that rates rise far slower then inflation hence the real returns are negative making anything of fixed worth rise faster in price.
Are interest rates going to rise ?

MrMalkin

MrInvestor wrote: »

Not true. It is the perfect hedge against inflation which is a constant.

It is true. It is not the 'perfect hedge' against inflation because as I have already pointed out, it has trailed inflation for almost 20 year periods in the past.

Inflation is not a constant. It is highly variable, indeed we can and have had deflationary periods.

MrInvestor wrote: »

Oh pleeeease stop talking about armageddon!! Economy collapse is not armageddon. If armageddon actually happened, you wouldn't give a stuff about any of your investments. Therefore it is irrelivent in this thread. Gold, as any sensible investor will tell you, is the perfect hedge against economy collapse or hyperinflation.

I should have thought it was clear that by 'armageddon' I was referring to the typical gold bug predictions of economic collapse and hyperinflation, for neither of which gold is a particularly good hedge against - and no 'sensible investor' would say such a thing.

MrMalkin

sabretoothtigger wrote: »

Cash has worse then 0% returns hence why for hundreds of years we fixed the worth of money to gold. Since 1971 this has not been the case and since 1971 our money has greatly depreciated.

Hence why I said 'cash saved at the prevailing interest rates'. Saying cash doesn't hold it's value in an of itself is stating the bloody obvious.

sabretoothtigger wrote: »

Cash with interest from a bank would be fine if it rose faster then inflation, sometimes this is possible but on average cash loses money.

No, it doesn't. Periods of negative real interest rates are actually quite rare, so cash on average over the longer term has had a positive real return, including over the period since the gold standard ended. See this article, which shows that cash has had a real return of about 1.9% over the last 50 years:

http://monevator.com/2010/03/10/uk-historical-asset-class-returns/

and the US version which shows a lower but still positive return for cash:

http://monevator.com/2010/03/10/us-historical-asset-class-returns/

sabretoothtigger

Gold sovereigns are 1 pound coins. In 1900 1 sovereign was one pound, in 2012 1 sovereign is 250 pounds or 250% 'growth'

lvader

sabretoothtigger wrote: »

Check again Ivader. Forget gold and just look at cash, bonds and where rates will go.
Like a see-saw, for a major correction in assets we need the value of cash returns to go up greatly but this is not the case.

Asset bubbles happen because they don't follow the value of money. Gold could easily hit it's all-time high adjusted for inflation over the next few years. If that coincides with interest rates going up then there is only one way gold is going and that is down.