Attention Gold Bugs

[thunderbolt23]

[quote]LIFTICVSMAXIMVS wrote:

So many flaws, so little time.[/quote]

I know, but keep reading, and you will find your flaws will continue to diminish. Have patience.

If capital is “parked” it is NOT, in fact, working. It must be consumed (given up) in order to increase production. We cannot hold petroleum and magically turn it into gasoline.

Correct, and no one said it was - not by itself. It is being allocated to higher rates of return, thus forcing other productive concerns to become more productive if it wants access to the capital.

Thus, parking assets forces capital-hungry concerns to do a better job of allocating resources to reduce costs, run more efficiently, etc…

That, definitionally, is the engine of productivity - even as “parked” assets earning a rate of return don’t “do anything”, their rates of return force better productivity out of competing consumers of capital.

Investors - people with cheddar, that is - park assets all the time. The easy example is when assets aren’t generating positive returns at all.

The short answer, of course, is that not all capital need be “working” all the time - it needs to be allocated to the most productive rates of return -

and if parking the assets generates better returns than allocating them to a concern that is actually making stuff, then that is the sounder investment. An asset is “working” when it is generating the best return possible, wherever it is.

As is, parking assets is investing them.

[Zap_Branigan]

[quote]Nominal Prospect wrote:
Zap Branigan wrote:
LIFTICVSMAXIMVS wrote:
Zap Branigan wrote:
Someone is drawing a false relationship for you to sell you gold.

The relationship is only historical and not theoretical.

Like anything else the values of gold and oil compared against each other will fluctuate. The point being it fluctuates up and down between certain values (historically) and doesn’t just lose value the way paper has.

Who keeps their money in paper? Hoarding gold is almost as bad an idea as hoarding paper money. Invest in something!!!

What do you invest in and how old were you when you started doing it?

I’d appreciate some sort of legitimate answer.[/quote]

A wide range of mutual funds and myself. I put myself through college with loans and scholarships. I paid them off as fast as possible. I bought a house and paid it off as fast as possibe. I own all my vehicles outright.

I have seen to many of my friends and associates lose their asses in various commodities to want to get involved in that. You really have to know what you are doing there and it is usually the various brokers that come out ahead.

I started putting money away when I was a teenager and 401K’s and mutual funds at 21.

[LIFTICVSMAXIMVS]

[quote]thunderbolt23 wrote:
LIFTICVSMAXIMVS wrote:

So many flaws, so little time.

I know, but keep reading, and you will find your flaws will continue to diminish. Have patience.

If capital is “parked” it is NOT, in fact, working. It must be consumed (given up) in order to increase production. We cannot hold petroleum and magically turn it into gasoline.

Correct, and no one said it was - not by itself. It is being allocated to higher rates of return, thus forcing other productive concerns to become more productive if it wants access to the capital.

Thus, parking assets forces capital-hungry concerns to do a better job of allocating resources to reduce costs, run more efficiently, etc…

That, definitionally, is the engine of productivity - even as “parked” assets earning a rate of return don’t “do anything”, their rates of return force better productivity out of competing consumers of capital.

Investors - people with cheddar, that is - park assets all the time. The easy example is when assets aren’t generating positive returns at all.

The short answer, of course, is that not all capital need be “working” all the time - it needs to be allocated to the most productive rates of return -

and if parking the assets generates better returns than allocating them to a concern that is actually making stuff, then that is the sounder investment. An asset is “working” when it is generating the best return possible, wherever it is.

As is, parking assets is investing them.[/quote]

Ok, I understand what you are saying and I think we are just arguing over terms. Economically, as I understand it, there are only four categories of action: saving, investing, producing, consuming. It is a necessary fact that in order to arrive at consumption we must follow the chain in the given order.

Saving is not investing; it is a separate activity. Yes, saving is directed at investment (or direct consumption) and investment is directed at production.

If I stash a bunch of cash in a mattress in hopes that all prices drop and they do in fact drop my “rate of return” has increased. Is that considered an investment? I did not do anything other than wait out prices. It is analogous to holding any asset in the hopes that its value increases.

(Also, I fail to see how something can be considered productive if it did not bring about a new unit of stuff.)

[on_edge]

[quote]Headhunter wrote:
Zap Branigan wrote:
Buying mining stocks is fine. Buying gold is as risky as buying any other commodities.

The time to buy gold was years ago. Now the Fed is concerned about inflation and will take steps to limit it. I suspect we are going to see gold fall even more.

Certainly gold can fall more. It is not a medium term play and you have to pick your spots. If you look at the first chart I provided, you can see that gold had reasonable support at $720 and major support in the $500s. Simply follow the support lines.

Gold had a bubble, as the chart shows. That’s why I look for it to meander down to the first line, about $720. Now, at that price, many mining companies will produce less because they are marginal there. If it costs $720 to mine and process one ounce, they make no money.

In the 500s, virtually no one will be mining or exploring. This is why those are good buy ins, especially if the worst happens (for gold) and the price drops into the 500s. That’s when mines actually begin CLOSING.

If gold got into the low 500s, I’d put at least 30% or more into mining shares and perhaps even bullion. (In this chart, you can see that we should get a bounce in Feb 2009, then a sell-off, with a new bull market beginning in late 2010.)

[/quote]

Wow! That chart just proved it!

[The_Mage]

When Beanie Babies started dropping, I saw my opportunity, and dumped my entire net worth into them.

My investment should be turning around any day now, then it’s back to tulips.

[Varqanir]

Real money for real people.

Talking about gold, a real asset with intrinsic value, always gets a little ridiculous when speaking in terms of its “price” in US dollars, which have no intrinsic value.

So let’s not speak in terms of dollars. I had a piece of land that I sold just after 9/11, and put the proceeds into gold. The land has appreciated in value since then, but at nowhere near the same rate as the gold, which climbed from under 300 dollars to its current position at over 800.

In 2001, a certain amount of gold was the equivalent of a certain acreage of land. Today it’s the equivalent of even more land in the same region. I would say that in real terms, this investment (in gold) appreciated.

Similarly, one of my Maple Leafs will buy around nine barrels of light sweet crude, about the same as it would have bought in 2001.

Physically, neither the gold, the land, nor the oil has changed (well, all right, the pines and oaks on the land have gotten a bit taller) The only thing that has changed is the value of the dollar in terms of gold, land, and oil.

[lixy]

[quote]Headhunter wrote:
Americans are heavily taxed (second highest corporate in the world after Japan), [/quote]

Come again?

[Headhunter]

[quote]lixy wrote:
Headhunter wrote:
Americans are heavily taxed (second highest corporate in the world after Japan),

Come again?[/quote]

The corporate tax rate in the United States is the second highest in the world, with Japan being first.

Places like Venezuela actually have 100% tax rates, where the thug-in-charge simply confiscates your investments, but I’m looking at civilised countries only.

[orion]

[quote]Headhunter wrote:
lixy wrote:
Headhunter wrote:
Americans are heavily taxed (second highest corporate in the world after Japan),

Come again?

The corporate tax rate in the United States is the second highest in the world, with Japan being first.

Places like Venezuela actually have 100% tax rates, where the thug-in-charge simply confiscates your investments, but I’m looking at civilised countries only.

[/quote]

A corporate tax-rate of 40?

I hope you have a shitload of tax loopholes or else this is just ridiculous.

[lixy]

[quote]Headhunter wrote:
The corporate tax rate in the United States is the second highest in the world, with Japan being first. [/quote]

That must be one small world you live in.

[The_Mage]

[quote]Varqanir wrote:
Real money for real people.

Talking about gold, a real asset with intrinsic value, always gets a little ridiculous when speaking in terms of its “price” in US dollars, which have no intrinsic value.[/quote]

And this is where people make their mistake in understanding. Money is only a medium of exchange. It is better described as a measure then anything. Gold has 2 measures, value and weight. One doesn’t fluctuate, and one does.

So let’s not speak in terms of dollars. I had a piece of land that I sold just after 9/11, and put the proceeds into gold. The land has appreciated in value since then, but at nowhere near the same rate as the gold, which climbed from under 300 dollars to its current position at over 800.

Right now I would recommend reversing that decision. Gold is now going down, and there are deals in real estate. The successful speculators in gold have sold out to the late comers. (These are the people who will always lose their shirts.) You will not see gold at $1G again for at least a decade.

But if you really want to invest in gold, watch the chart. You will see when gold breaks the downward trend, and that may be a good time to get back in. And again watch the chart to see when to sell. (I do admit I am still learning about charting.)

In 2001, a certain amount of gold was the equivalent of a certain acreage of land. Today it’s the equivalent of even more land in the same region. I would say that in real terms, this investment (in gold) appreciated.

True, but the fundamentals have changed. Gold is no longer as good an investment as it was.

Just like saying your investment in pumpkins climbed the whole month of October doesn’t mean you should hold it well into November. (10 points for anyone who knows what television character I am referencing.)

Similarly, one of my Maple Leafs will buy around nine barrels of light sweet crude, about the same as it would have bought in 2001.

Oil follows similar fundamentals as gold. They will be falling together.

Physically, neither the gold, the land, nor the oil has changed (well, all right, the pines and oaks on the land have gotten a bit taller) The only thing that has changed is the value of the dollar in terms of gold, land, and oil.

Your starting to catch on. Some people have made a lot of money simply by switching between these investments. Move from the overvalued one to the undervalued one, and as things reverse, switch them again. (Ok, it is a little more complicated then that.)

Here is a more advanced way to think of money. After a little low quality research, I believe I saw that iron ore is ~$1.40 a ton. And I found 1,000 paper clips for $7.99. Again like I said, low quality research, but assuming about a gram of iron makes a 1 gram paper clip, then $7 worth of iron makes $36,000 worth of paper clips. (And after the recent big jump in iron prices.) Just turning it into steal drives that ton up to (I believe) $517.

Take a little time and think about this. It is an important key to truely understanding wealth.

[orion]

[quote]lixy wrote:
Headhunter wrote:
The corporate tax rate in the United States is the second highest in the world, with Japan being first.

That must be one small world you live in.[/quote]

And all you had to do was google “corporate tax rate”.

But clinging to your preconceived ideas, however wrong they may be, was just that much easier, huh?

[Headhunter]

[quote]The Mage wrote:

Right now I would recommend reversing that decision. Gold is now going down, and there are deals in real estate. The successful speculators in gold have sold out to the late comers. (These are the people who will always lose their shirts.) You will not see gold at $1G again for at least a decade.

[/quote]

Why did gold rise in the first place? Have the issues that caused its rise been resolved?

The Fed in essence guaranteed the $5 trillion dollar mortgage holdings of Freddie and Fannie. Did this resolve the issue? Well, yes, in the sense that the Fed guarantees to create new dollars to give to mortgage holders in the event of another credit crunch. The Fed is telling all investors that, no matter what, it will print enough dollars to pay you off.

They basically agreed to hyperinflate the currency, in order to rescue the banking system. Does inflating away the peoples’ savings and giving it to bankers really solve anything? Unfortunately the answer is ‘No’. Capital formation in countries that debase their currency is weak at best, since no one trusts the currency any longer. That means that only by increasing inflation at ever higher rates is required as a source of capital.

This has been happening in the USA for at least the last 10 years. The savings rate of Americans is abysmally low, yet interest rates are low. The Fed is pumping currency like crazy (which is why they stopped publishing M3 data). If not for cheap imports, other prices would have risen on the magnitude of oil, which is why our government loves China btw — cheap Chinese products prevent the price hikes in consumables and durables.

In summary, we are truly fucked. We could recover, if we had sound money, like in the 1930’s. Now, no one will want or trust dollars. Government spending will be next to worthless and we’ll all be tapped out. We’ll get a fascist state, like Hitler’s 1930’s Germany.

[Zap_Branigan]

[quote]Varqanir wrote:
Real money for real people.

Talking about gold, a real asset with intrinsic value, always gets a little ridiculous when speaking in terms of its “price” in US dollars, which have no intrinsic value.

So let’s not speak in terms of dollars. I had a piece of land that I sold just after 9/11, and put the proceeds into gold. The land has appreciated in value since then, but at nowhere near the same rate as the gold, which climbed from under 300 dollars to its current position at over 800.

In 2001, a certain amount of gold was the equivalent of a certain acreage of land. Today it’s the equivalent of even more land in the same region. I would say that in real terms, this investment (in gold) appreciated.

Similarly, one of my Maple Leafs will buy around nine barrels of light sweet crude, about the same as it would have bought in 2001.

Physically, neither the gold, the land, nor the oil has changed (well, all right, the pines and oaks on the land have gotten a bit taller) The only thing that has changed is the value of the dollar in terms of gold, land, and oil.[/quote]

Time to sell the gold and buy a nice undervalued piece of property.

Where were all the gold bugs telling me to buy years ago? They were buying and doing it quietly!

Now they are selling and shouting gold’s praises from the treetops.

That is why I have been so down on gold the last year.

Congrats if you made money on it but now is not the time to get in.

[Headhunter]

[quote]Zap Branigan wrote:
Varqanir wrote:
Real money for real people.

Talking about gold, a real asset with intrinsic value, always gets a little ridiculous when speaking in terms of its “price” in US dollars, which have no intrinsic value.

So let’s not speak in terms of dollars. I had a piece of land that I sold just after 9/11, and put the proceeds into gold. The land has appreciated in value since then, but at nowhere near the same rate as the gold, which climbed from under 300 dollars to its current position at over 800.

In 2001, a certain amount of gold was the equivalent of a certain acreage of land. Today it’s the equivalent of even more land in the same region. I would say that in real terms, this investment (in gold) appreciated.

Similarly, one of my Maple Leafs will buy around nine barrels of light sweet crude, about the same as it would have bought in 2001.

Physically, neither the gold, the land, nor the oil has changed (well, all right, the pines and oaks on the land have gotten a bit taller) The only thing that has changed is the value of the dollar in terms of gold, land, and oil.

Time to sell the gold and buy a nice undervalued piece of property.

Where were all the gold bugs telling me to buy years ago? They were buying and doing it quietly!

Now they are selling and shouting gold’s praises from the treetops.

That is why I have been so down on gold the last year.

Congrats if you made money on it but now is not the time to get in.[/quote]

Correct. Let it drift lower into the low 700’s and buy some. If it gets down into the mid 500’s THEN buy like crazy. The next bull market should take it easily into $1200s by 2012, especially if the ‘Messiah’ gets elected.

All this is premised on there NOT being another major meltdown in the banking sector. The Fed played its last Ace by guaranteeing trillions in mortgages. God help us if it has to make good on those promises! We’ll have $10,000 gold but it’ll cost you $200 for a hamburger at Wendy’s.

[pookie]

[quote]Varqanir wrote:
Real money for real people.[/quote]

Can’t believe you actually went and removed the bacon.

[LIFTICVSMAXIMVS]

[quote]The Mage wrote:
And this is where people make their mistake in understanding. Money is only a medium of exchange. It is better described as a measure then anything. Gold has 2 measures, value and weight. One doesn’t fluctuate, and one does.
[/quote]

Value is not a meaningful measurement. It shows itself in the act of preferring one thing to another. Whereas weight can be measured and is attributed to the intrinsic property known as density value cannot be measured because is not an intrinsic property at all. It is a subjectively held belief. At best it can be ordinally described by the actor. For example, today I prefer to have an apple to a banana. Also, it is not merely the thing itself that I value but rather specific quantities of that thing – it might be that I prefer two bananas to one apple. It makes no sense to say I value apples over bananas. At some point my desire for apples is satisfied.

Money also has value which is why we complain about prices being too high.

[rainjack]

[quote]LIFTICVSMAXIMVS wrote:
Value is not a meaningful measurement. [/quote]

Value is a measurement you use every time you enter into a trade, or make an investment.

It is the only possible reason you would agree to a trade. Both parties are willing because they perceive the value of the trade to be fair.

It is the only reason you would make an investment. You believe that the investment will wither increase in value, or not decrease as fast as the next best choice.

[LIFTICVSMAXIMVS]

[quote]rainjack wrote:
LIFTICVSMAXIMVS wrote:
Value is not a meaningful measurement.

Value is a measurement you use every time you enter into a trade, or make an investment.

It is the only possible reason you would agree to a trade. Both parties are willing because they perceive the value of the trade to be fair.

It is the only reason you would make an investment. You believe that the investment will wither increase in value, or not decrease as fast as the next best choice.

[/quote]

Measurements have units. Value does not have a unit of measurement. It is subjective. It is intuitively obvious that two individuals only enter into exchange because it is perceived that both will benefit more than they would have had they not enter into exchange.

For brevity’s sake we say they both valued what was received more than what was given up. Nothing new is gained from this information – hence it is meaningless.

I didn’t mean to imply that it is meaningless to the individuals doing the exchanging.

[Varqanir]

Bump.

Stocks down, gold up. How 'bout that.