A salient lesson for those jumping onto financial bandwagons

MFW_ASAP

I read this interesting article in the Wall Street Journal about Gold. It made me think about the frantic Gold rampers we used to get in here that have now been replaced by a certain Bitcoin ramper (who I'm slightly convinced is an ex-gold ramper).

http://online.wsj.com/news/articles/SB10001424052702303843104579167642475787628

"To its fans, gold is an inflation-fighting, economy-hedging, dollar-busting superhero asset class. Lately, it has just been a dud. The precious metal this year is on track to record its first yearly fall since the year 2000. On Friday, it closed at $1,313.10 an ounce, down 22% for 2013."

"The performance of other assets during gold's recent slump just makes the sting worse. Large U.S. stocks are up big time so far this year, with the S&P 500 returning 25%, including dividends, through Thursday. Small-company stocks, as measured by the Russell 2000, have done even better, returning 31%.

Even U.S. bonds, which are vulnerable to the threat of rising interest rates, have lost only 1.1%, as measured by the Barclays U.S. Aggregate Bond Index.

That has left gold nearly alone in its misery.

John Pierce, an 80-year-old retiree in Haddonfield, N.J., bought a few thousand dollars' worth of American Eagle gold coins in November 2011, hoping they would protect him from inflation and potential disruptions from continuing squabbles in Washington over the debt ceiling and spending cuts.

Mr. Pierce, who has belonged to stock investment clubs for a quarter-century, had never before invested in gold.
"I heard all the stories about how gold has gone up in the last 10 years," he says. "I thought it was time to get my feet wet."
Since then, Mr. Pierce's investment is down about 20%. "

I remember we used to warn them about buying into bubbles, and even when the Gold price started falling they claimed it was a "Buying opportunity". It's fine to buy into a rising asset class, jumping onto a bandwagon. You just need to know when to get off it!

Those enjoying the bitcoin 'boom' would do well to learn from recent history.

mayonnaise

One difference. At the end of the day, the gold and silver investors who stayed in still sit on a valuable asset - although down considerably from peak.
The bitcoin apostles will be left with nothing, nada...zilch.
Of course our resident bitcoin ramper will claim he sold his 5 bitcoins at peak.

dryhat

So a man buys gold coins at the all time peak price and their value has dropped.

Wow, that's an amazing story. I'm glad you posted that.

I have indeed been warned.

Thankyou.

ruggedtoast

When Main Street follows Wall Street you've missed your chance. I suspect its already too late for new Bitcoin investors.

MFW_ASAP

Wasn't bitcoins at their all time peak a week ago at something like 900 and now they are at 600. I feel sorry for anyone who listened to your ramping last week.

dryhat

ruggedtoast wrote: »

When Main Street follows Wall Street you've missed your chance. I suspect its already too late for new Bitcoin investors.

I don't think it's too late for newcomers.

Yes the massive gains that we've seen this year may never be seen again but there is still huge potential for growth.

The big difference is the nominal amounts required.
At the start of the year a modest amount of money (say 2-3K) would buy you a lot of bitcoins whereas now, much larger amounts are required to hold the same positon.

grizzly1911

Surely bit coin is really for a small minority specialist interest group.

The vast majority of potential investors/speculators couldn't really care.

CLAPTON

dryhat wrote: »

At the start of the year a modest amount of money (say 2-3K) would buy you a lot of bitcoins whereas now, much larger amounts are required to hold the same positon.

that's normally the case with bubbles

spacey2012

I did here, the new secret nobody knows about shush investment is vintage American guitars .
Turning over not less than + 15% per annum.
Anyone know anything about them ?

Generali

Surely something is either money or an investment.

Money is:

- A unit of exchange
- A unit of account
- A store of value

An asset is something that produces an output. If an asset is a bond or a share that means a stream of income. If an asset is a house that means rent, either imputed rent if you live in it or rent from a tenant if you don't.

If you buy quasi money like gold or bitcoins then you're neither owning money nor an asset.

dryhat

Generali wrote: »

Surely something is either money or an investment.

Money is:

- A unit of exchange
- A unit of account
- A store of value

.

In its short history, bitcoins have been all three and proven to be very good at all of them.

The Bitcoin technology (remember this is a brand new, revolutionary invention which was never possible before) has fascinating and ingenious possibilities which go way beyond a mere payment system.

On these technological grounds alone, it is something worth celebrating.