How much Gold do you own and why?

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Forester
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Re: How much Gold do you own and why?

Post by Forester »

I am in the minority of goldbugs who can see that the price has similarly followed residential housing and largecap stocks. Yes it peaked with the commodity boom in 2011 and sold off, but gold is expensive today vs 2015. Can an asset offer much of a refuge if it is approximately 20% off the all-time highs from 1980, 2011 & 2020? Possibly gold is safer than long term bonds at least there's that.
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nigel_ht
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Re: How much Gold do you own and why?

Post by nigel_ht »

Forester wrote: Sat Oct 23, 2021 8:46 am I am in the minority of goldbugs who can see that the price has similarly followed residential housing and largecap stocks. Yes it peaked with the commodity boom in 2011 and sold off, but gold is expensive today vs 2015. Can an asset offer much of a refuge if it is approximately 20% off the all-time highs from 1980, 2011 & 2020? Possibly gold is safer than long term bonds at least there's that.
Now isn’t the time to buy gold (or ammo). It’s still too expensive coming off 2020 highs.

2018 wasn’t bad. Around $1200-$1400 seems like a good price to stock up on.

The 2020 cost to mine (AISC) is $600-1000/oz depending on the amount of capex spent in the year and how productive the mine is.

9mm used to run around $0.20 and is now still at or above $0.35 and at peak was a silly $0.70 a round. This is for the plinking stuff…

So the 2020 lesson learned for any hedge commodity is to not buy when you need it as some here suggest but to have what you want to have before things go pear shaped.

All that said, if you think the world is on the edge of another series of shocks…$0.35 and $1800 isn’t terribad…just bad. Most estimates have gold dropping back down to $1400 in a few years…
JackoC
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Re: How much Gold do you own and why?

Post by JackoC »

Forester wrote: Sat Oct 23, 2021 8:46 am I am in the minority of goldbugs who can see that the price has similarly followed residential housing and largecap stocks. Yes it peaked with the commodity boom in 2011 and sold off, but gold is expensive today vs 2015. Can an asset offer much of a refuge if it is approximately 20% off the all-time highs from 1980, 2011 & 2020? Possibly gold is safer than long term bonds at least there's that.
Could be. But, here's IMO a basic problem with a lot of discussions of gold. There's the 'if the US collapses I'll die anyway' side which dismisses gold. Thing is though, if more realistically the USD gradually loses its place as the world reserve currency, gradually gets much cheaper, the US gradually has much less leeway to run large fiscal and current account deficits than now (big net global appetite to hold USD reserves by definition means big US current account deficits), and the divided US society and political system prove not up to the task of adapting to that change...it's likely to be gradual, although probably with less than total meltdown crises along the way. But, markets look ahead, and the tendency will be for people who don't like gold at $1800 not to like it at $2000 even when there's no direct evidence $1800>$2000 has anything to do with fear of that long term outlook (just like it's impossible to say if $1400>$1800 has anything to do with it). Even *if* it goes to $2500 and you start to read press articles quoting market participants saying they think the long term USD outlook is part of the reason, if I'm inclined against gold odds are I'll then say to myself 'OK maybe there's something to this, I better load up when it goes back to $2k'. But then it goes to $3k. Saying you'll deal with that trend when (and if) it actually becomes visible is not realistic.

And the endpoint isn't necessarily (not very likely at all IMO) the US becomes like Venezuela, more like the US becomes somewhat like Argentina. One hundred+ yrs ago that country's GDP per capita PPP was higher than Canada's. And Argentina is still well above world average in that measure, well above China (which is right around world average now), but still a poster child for underperformance and a society/political system/economy that doesn't really work though it once did. You won't 'die' immediately if the US goes down that path, you'll just live in a crappier country, but most of the world's population lives in at least fairly crappy countries. But the USD price of gold could be much higher, though it's fair to point out the USD price of EUR and various other things could also be.

Although I'd reiterate if not obvious, it certainly *could* be that gold is a relatively bad buy now and will be a substantially better one in a few years. It varies widely over time for what turn out to be not very good reasons in hindsight. I don't pretend to know how relatively attractive it is right now.
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Re: How much Gold do you own and why?

Post by nigel_ht »

JackoC wrote: Sat Oct 23, 2021 10:43 am
Could be. But, here's IMO a basic problem with a lot of discussions of gold. There's the 'if the US collapses I'll die anyway' side which dismisses gold. Thing is though, if more realistically the USD gradually loses its place as the world reserve currency, gradually gets much cheaper, the US gradually has much less leeway to run large fiscal and current account deficits than now (big net global appetite to hold USD reserves by definition means big US current account deficits), and the divided US society and political system prove not up to the task of adapting to that change...it's likely to be gradual, although probably with less than total meltdown crises along the way.
Collapses tend to start gradual and accelerate rapidly.
abc132
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Re: How much Gold do you own and why?

Post by abc132 »

One More Thing wrote: Fri Oct 22, 2021 8:46 pm
abc132 wrote: Thu Oct 21, 2021 3:38 pm Venezuelan's would certainly benefit from owning a diversified international portfolio.
Wow.
The obvious and already clarified was that this was referencing those with significant assets prior to inflation issues, like the people here on Bogleheads. Those in the US with significant assets could handle such an event through international diversification without the need for gold. I made this statement because people are suggesting gold here without considering how easy it is to invest internationally and avoid most of the single country decline.

What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance. Arguments such as poor internet just strengthen the idea that people in Venezuela can still buy or sell gold when needed despite their situation, and by extension of the Venezuela example we can reasonably expect to be able to purchase gold if/when we need it as a currency. Holding a bit of gold/silver to have enough hard assets to to able to flee a situation or country in a hurry seems reasonable to me.

The price of the gold is largely irrelevant to using it as currency. If it is worth more it can buy more, so we simply don't care about the price when using it for short term transactions. We sell X worth of goods to get X gold, and purchase X worth of goods with that gold. Whether we get 0.01 ounce or 0.02 ounce of gold for X does not matter. Only those storing gold for longer term or timing the market should care about gold prices.
nigel_ht
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Re: How much Gold do you own and why?

Post by nigel_ht »

abc132 wrote: Sat Oct 23, 2021 1:24 pm
One More Thing wrote: Fri Oct 22, 2021 8:46 pm
abc132 wrote: Thu Oct 21, 2021 3:38 pm Venezuelan's would certainly benefit from owning a diversified international portfolio.
Wow.
The obvious and already clarified was that this was referencing those with significant assets prior to inflation issues, like the people here on Bogleheads. Those in the US with significant assets could handle such an event through international diversification without the need for gold. I made this statement because people are suggesting gold here without considering how easy it is to invest internationally and avoid most of the single country decline.

Given that vanguard shows a .86 correlation between US and ex-US in Sept 2020 that’s not likely true.

https://personal.vanguard.com/pdf/ISGGE ... Online.pdf

We’re also starting to lose the ability to invest in China which is the market most likely to benefit from a US decline.
halfnine
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Re: How much Gold do you own and why?

Post by halfnine »

abc132 wrote: Sat Oct 23, 2021 1:24 pm ...What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance...
What we learn from Venezuela is that cash in some form is typically used as a medium of exchange and is preferential to bartering. What we also learn from Venezuela is that contrary to what is typically portrayed on this forum gold can be used as medium of exchange before a Mad Max Scenario occurs. What we don't know before a crisis is what "cash" will be. In the beginning cash was Bolivars. At some point of greater inflation cash became US dollars. But, it is not just any dollars, often it will need to be recent print and the crisper the better. The benefit of gold is that one doesn't have to predict what the future currency will be; nor worry about exchange rate controls preventing one from getting any foreign cash at all or getting it at a devalued official rate; nor worry about whether the cash will age and become worthless if exchanged in advance, etc. So, the conclusion is not to exchange cash to gold when needed, but rather to own gold and exchange to cash when needed. If one waits to convert cash to gold ex post one will likely have either chosen the wrong "cash" or will have already experienced devaluation before conversion.
rockthisworld
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Re: How much Gold do you own and why?

Post by rockthisworld »

Gold is to protect you from fiat currency debasement. In a world of deep negative interest rates, ballooning debt, expansion of currency (M2) and credit which results in higher prices. Gold at 1800 still has a lot of room to run. I hold physical gold and silver for retirement. It beats having your currency sit in a bank earning next to nothing being eroded away from inflation. Can’t trust central planning and government. The federal reserve is in a tough spot. They can’t raise rates because of the debt. They can’t keep rates at zero or near zero look at what is happening around us. This inflation is far from transitory. Looming tax increases will negatively impact economy also. We are seeing growth stall and it is all due to inflation and poor policies eating away at the growth.
Personally I like gold and silver. Compared to us markets gold is at 15 year lows. Dow at 35k and sp 500 at 4500 are much more expensive. If you look at silver it is still the only asset class 50% cheaper than it’s nominal high in 1980 of $50. Currency although not earning anything sitting in an account is still needed to take advantage of any opportunity that presents itself.
The best thing you can do is enough research to where as you feel confident in wherever you put your fiat currency. Now I know this site isn’t a platform for gold and silver enthusiasts however may I suggest looking up Jim Rickards, Mike Maloney (Gold and Silver), Robert Kiyosaki. Some YouTube channels are also Kitco News and Stansbury Research. Also bogleheads provides you with great quality information. But do your own research. FRED Federal Reserve Economic Data.
Best of luck in your investments!
NiceUnparticularMan
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Re: How much Gold do you own and why?

Post by NiceUnparticularMan »

None. Well, almost none. We do have a very small allocation to a diversified commodities future fund, and that has a portion of its basket in metals, and a portion of that is in gold. And we own some gold objects. But I don't think of any of that as a deliberate investment in gold.

The reason I do not view gold as a worthy investment option is that the value of free-floating gold as a productive commodity (for industrial, decorative, and other such purposes) is a very small fraction of its current price. This is unlike real estate, company stock, bonds, or so on, where the value is tied in some way to assets capable of generating future income from productive activities.

Instead, almost all of the price of gold is purely speculative, meaning its only way of generating a positive real return would come from selling it to someone at a higher price. And without any sort of grounding in productive activities, the speculative value of gold could potentially mostly go away. As has nearly happened once before since gold started free-floating, although even at its 2001 low of around $400 (inflation-adjusted), it probably could have fell quite a bit further.

So personally, I have zero interest in investing in something which is so dependent on what is known as the greater fool theory. Far too risky, with no particular reason to expect compensation for that risk in the form of higher expected returns.

Note I like to emphasize we are now talking about free-floating gold--there are a lot of pro-gold arguments based on backtesting when the USD (or other currencies) were pegged to gold, or making the transition out of a gold peg. Obviously none of that data is relevant to predicting how free-floating gold will perform as an investment, and any arguments dependent on such data are invalid.

All the other arguments made for investing in free-floating gold anyway are also meritless, because there are always demonstratively better options for whatever purpose someone asserts an investment in free-floating gold can serve. Providing a hedge against USD devaluation, emergency travel funds, or whatever people come up with, gold is not in fact an optimal choice to serve that purpose. Again, not least because there are usually alternative investments available which serve those purposes AND also are based in productive assets.
Last edited by NiceUnparticularMan on Sun Oct 24, 2021 8:50 am, edited 1 time in total.
Da5id
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Re: How much Gold do you own and why?

Post by Da5id »

rockthisworld wrote: Sun Oct 24, 2021 6:40 am Gold at 1800 still has a lot of room to run.
I'm generally dubious about predictions about future returns. Do you have some reason to believe that your ability to predict future gold prices is better than most pundits ability to predict the future of anything?
rockthisworld wrote: Sun Oct 24, 2021 6:40 am I hold physical gold and silver for retirement. It beats having your currency sit in a bank earning next to nothing being eroded away from inflation.
Are you in the quoted portion presenting gold as an alternative to the "cash in a bank" portion of one's asset allocation? Other than very short term spending reserves or emergency fund type money I think most people in bogleheads don't have a "cash in a bank" allocation. I'd say a fairer comparison would be I-bonds" or "TIPS. Or something that most people actually *invest* in, not "cash".

I hold no gold, but just am following the thread to see the reasoning of those that do. I'm not convinced it is needed, but can see arguments about some amount of gold dampening portfolio volatility historically. I'm less convinced by the "US stocks go to 0 and gold is being used to buy haircuts" type arguments personally. If the aggregate value of US companies is $0 there are likely to be other problems with remaining here, though maybe physical gold in your house would get you out of country. Maybe. But gold in the house seems risky to me for other reasons.
NiceUnparticularMan
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Re: How much Gold do you own and why?

Post by NiceUnparticularMan »

Da5id wrote: Sun Oct 24, 2021 8:13 am If the aggregate value of US companies is $0 there are likely to be other problems with remaining here, though maybe physical gold in your house would get you out of country. Maybe. But gold in the house seems risky to me for other reasons.
Yeah, history is full of examples of people getting robbed of their gold, and often murdered in the process. Including while attempting to travel with it.

Broadly speaking, probably the best strategy to actually preserving wealth when everything in your home locality has completely gone wrong is simply to have a lot of that wealth not in your locality. Historically wealthy families had estates in many different places, and they could flee to a different estate if things got untenable in any one place.

As for the funds it takes TO flee--I am personally a bit skeptical of the scenario in which you are trying to catch the last airplane out of your locality, and trying to pay for your tickets at the desk with gold coins. At a minimum, I would think a mix of paper currencies should be your first level plan--wads of USDs, Euros, Yen, GBPs, CADs, Swiss Francs, AUDs, Kuwaiti dinar . . . maybe depending a bit on where you live, and what transportation options you think might be available to you from what sources in the event of a mass exodus scenario.

I realize some people also theorize a general collapse of fiat currencies globally, but at that point I am not sure how planes are even getting fueled and such.
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Re: How much Gold do you own and why?

Post by nigel_ht »

NiceUnparticularMan wrote: Sun Oct 24, 2021 7:16 am
All the other arguments made for investing in free-floating gold anyway are also meritless…
Lol, another declaration of victory by stating opposing opinion is “meritless” by virtue of simply saying so…
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Re: How much Gold do you own and why?

Post by nigel_ht »

Da5id wrote: Sun Oct 24, 2021 8:13 am
rockthisworld wrote: Sun Oct 24, 2021 6:40 am I hold physical gold and silver for retirement. It beats having your currency sit in a bank earning next to nothing being eroded away from inflation.
Are you in the quoted portion presenting gold as an alternative to the "cash in a bank" portion of one's asset allocation? Other than very short term spending reserves or emergency fund type money I think most people in bogleheads don't have a "cash in a bank" allocation.
Folks aren’t generally very specific when they say they hold cash so the assumption is HYS, CDs and other liquid holdings.

Otherwise folks tend to say bonds if they mean iBonds or TIPS…

Now gold is often very volatile…I wouldn’t hold it instead of cash if you need cash. While it went up in July 2020 it dropped in March…if folks need money and have to sell assets for whatever reason then all assets can drop right when you might need it.
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burritoLover
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Re: How much Gold do you own and why?

Post by burritoLover »

Like usual, it's all performance chasing - stocks have killed it in the last 10 years and so have bonds while gold has had greater volatility than stocks while returning like 1.5%. So, of course, a bunch of investors here aren't too keen on gold right now. Guarantee that if gold has a future killer run, a lot here will be much more receptive to including it in their portfolio, especially if experiencing a longer stock/bond bear market.
Last edited by burritoLover on Sun Oct 24, 2021 9:48 am, edited 1 time in total.
Da5id
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Re: How much Gold do you own and why?

Post by Da5id »

nigel_ht wrote: Sun Oct 24, 2021 9:37 am
Da5id wrote: Sun Oct 24, 2021 8:13 am
rockthisworld wrote: Sun Oct 24, 2021 6:40 am I hold physical gold and silver for retirement. It beats having your currency sit in a bank earning next to nothing being eroded away from inflation.
Are you in the quoted portion presenting gold as an alternative to the "cash in a bank" portion of one's asset allocation? Other than very short term spending reserves or emergency fund type money I think most people in bogleheads don't have a "cash in a bank" allocation.
Folks aren’t generally very specific when they say they hold cash so the assumption is HYS, CDs and other liquid holdings.

Otherwise folks tend to say bonds if they mean iBonds or TIPS…

Now gold is often very volatile…I wouldn’t hold it instead of cash if you need cash. While it went up in July 2020 it dropped in March…if folks need money and have to sell assets for whatever reason then all assets can drop right when you might need it.
Maybe? I might interpret "cash" as you do above (Portfolio Visualizer does "cash" asset as short term treasuries). But "cash in a bank" I really can't see as other than a checking or savings account, which even if high yield is mostly around 0.5-0.6%. Which I don't think most people have in their asset allocation.

And mostly sounds like you agree with me, in that gold is not a substitute in a portfolio for "cash" by even your interpretation of cash.
Da5id
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Re: How much Gold do you own and why?

Post by Da5id »

burritoLover wrote: Sun Oct 24, 2021 9:41 am Like usual, it's all performance chasing - stocks have killed it in the last 10 years and so have bonds while gold has had greater volatility than stocks while returning like 1.5%. So, of course, a bunch of investors here aren't too keen on gold right now.
I think this may not be a fair analysis. I believe gold has always been fairly niche in bogleheads.
Obviously can't quantify it, but based on what people post I doubt a significant percentage here buy gold even when it is doing very well. I think the argument about widespread performance chasing applies to asset classes people are more inclined to tinker with, US vs Int'l, large caps vs SCV or value investing, shifting bond holdings, etc.
Last edited by Da5id on Sun Oct 24, 2021 9:54 am, edited 1 time in total.
Activesloth
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Re: How much Gold do you own and why?

Post by Activesloth »

I made an earlier post about investing in gold back in 2014. The one thing I remember is that on several occasions, the spot price of gold would bottom after midnight, then shoot back up before the opening bell. It was frustrating to watch because you couldn’t join the party. Someone was obviously playing with the spot price to buy his next yacht. I don’t think this is an isolated phenomenon.
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burritoLover
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Re: How much Gold do you own and why?

Post by burritoLover »

Da5id wrote: Sun Oct 24, 2021 9:46 am
burritoLover wrote: Sun Oct 24, 2021 9:41 am Like usual, it's all performance chasing - stocks have killed it in the last 10 years and so have bonds while gold has had greater volatility than stocks while returning like 1.5%. So, of course, a bunch of investors here aren't too keen on gold right now.
I think this may not be a fair analysis. I believe gold has always been fairly niche in bogleheads, Obviously can't quantify it, but based on what people post I doubt a significant percentage here buy gold even when it is doing very well. I think the argument about widespread performance chasing applies to asset classes people are more inclined to tinker with, US vs Int'l, large caps vs SCV or value investing, shifting bond holdings, etc.
Before being banned here, how many he-who-should-not-be-named currency topics were posted daily here? Quite a few and quite a few long threads about it as well. It wasn't just a bunch of noobs coming on here for the first time and asking questions. There's a lot of performance chasing that occurs here and you really don't get a fair and balanced look at asset classes that have performed poorly recently including international, small cap value, etc.
nigel_ht
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Re: How much Gold do you own and why?

Post by nigel_ht »

NiceUnparticularMan wrote: Sun Oct 24, 2021 9:06 am
Da5id wrote: Sun Oct 24, 2021 8:13 am If the aggregate value of US companies is $0 there are likely to be other problems with remaining here, though maybe physical gold in your house would get you out of country. Maybe. But gold in the house seems risky to me for other reasons.
Yeah, history is full of examples of people getting robbed of their gold, and often murdered in the process. Including while attempting to travel with it.

Broadly speaking, probably the best strategy to actually preserving wealth when everything in your home locality has completely gone wrong is simply to have a lot of that wealth not in your locality. Historically wealthy families had estates in many different places, and they could flee to a different estate if things got untenable in any one place.
Requires a level of wealth above HNW and lower end VHNW to be reasonable.

The only time this reasonable at normal BH wealth levels is if at least one spouse has family ties in another country and often it’s more helpful if they retain dual citizenship.

As far as being robbed on the way, folks attempting to escape have made the assessment that it is more dangerous to stay than to run.

There are also many stories of folks who figured they were unimportant enough to get targeted only to find out something as innocuous as selling SIM cards got them on a list.

Simple land ownership could put you into a targeted class where many died in re-education camps. 500K to 2M died in the cultural revolution. That’s on top of the 30M famine deaths.

The largest problem in this scenario is the US is where most people want to run TO and it’s unlikely that Canada will be untouched if we have the same kind of catastrophic outcome.
As for the funds it takes TO flee--I am personally a bit skeptical of the scenario in which you are trying to catch the last airplane out of your locality, and trying to pay for your tickets at the desk with gold coins.
That’s not generally how it works. It’s the ability to get to the airport that is the hard part if you can legally travel at all.

If you’re at the point of using gold to get on a plane you don’t need tickets…you need someone willing to wave you aboard the aircraft. As it turns out my father was on one of these last flights.

Be skeptical all you want but your opinion isn’t based on fact or experience.

As a note, planes get fueled in those scenarios because the pilots also want to get out of there and so do the ground crews. Payment doesn’t matter as the owners of the fuel left on a previous flight if they were smart or dead if they weren’t.
At a minimum, I would think a mix of paper currencies should be your first level plan--wads of USDs, Euros, Yen, GBPs, CADs, Swiss Francs, AUDs, Kuwaiti dinar . . . maybe depending a bit on where you live, and what transportation options you think might be available to you from what sources in the event of a mass exodus scenario.
There is often significant risk of being caught with a large wad of foreign currency for either the refugee or the smuggler.

We can’t delve too deeply here about hypothetical US failure cases so let’s stay with historical cases like Afghanistan, S Vietnam and China which saw regime changes.

Gold has the virtue of being compact and not necessarily associated with an enemy power or ideology.

Folks with parents and relatives who have first hand knowledge of at least the latter two can tell you that gold had significant value in these scenarios.

While gold may have had limited value in getting you into Kabul Airport where external high level contacts made much more of a difference; it likely has more value in escaping today than any currency.
diabelli
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Re: How much Gold do you own and why?

Post by diabelli »

The tyrannical posts demanding that none of the respondees disagree with a certain premise remind me of a comedian or commentator I'd heard in the past -- forget exactly who said it but to paraphrase: "What in your opinion is the most annoying band ever, and why is it Nickelback?"
nigel_ht
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Re: How much Gold do you own and why?

Post by nigel_ht »

Da5id wrote: Sun Oct 24, 2021 9:46 am
burritoLover wrote: Sun Oct 24, 2021 9:41 am Like usual, it's all performance chasing - stocks have killed it in the last 10 years and so have bonds while gold has had greater volatility than stocks while returning like 1.5%. So, of course, a bunch of investors here aren't too keen on gold right now.
I think this may not be a fair analysis. I believe gold has always been fairly niche in bogleheads.
Obviously can't quantify it, but based on what people post I doubt a significant percentage here buy gold even when it is doing very well. I think the argument about widespread performance chasing applies to asset classes people are more inclined to tinker with, US vs Int'l, large caps vs SCV or value investing, shifting bond holdings, etc.
When gold is doing well isn’t when you want to buy gold if you use one of the portfolios where it exists in significant portion (permanent, butterfly, etc).

In theory you are balancing out of it and into the depressed asset classes…or more often in practice just HODLing…

It’s one asset class I’m just as happy losing money on. Unlike VXUS…not so happy on red days when VTI manages green.
nigel_ht
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Re: How much Gold do you own and why?

Post by nigel_ht »

Da5id wrote: Sun Oct 24, 2021 9:42 am
nigel_ht wrote: Sun Oct 24, 2021 9:37 am
Da5id wrote: Sun Oct 24, 2021 8:13 am
rockthisworld wrote: Sun Oct 24, 2021 6:40 am I hold physical gold and silver for retirement. It beats having your currency sit in a bank earning next to nothing being eroded away from inflation.
Are you in the quoted portion presenting gold as an alternative to the "cash in a bank" portion of one's asset allocation? Other than very short term spending reserves or emergency fund type money I think most people in bogleheads don't have a "cash in a bank" allocation.
Folks aren’t generally very specific when they say they hold cash so the assumption is HYS, CDs and other liquid holdings.

Otherwise folks tend to say bonds if they mean iBonds or TIPS…

Now gold is often very volatile…I wouldn’t hold it instead of cash if you need cash. While it went up in July 2020 it dropped in March…if folks need money and have to sell assets for whatever reason then all assets can drop right when you might need it.
Maybe? I might interpret "cash" as you do above (Portfolio Visualizer does "cash" asset as short term treasuries). But "cash in a bank" I really can't see as other than a checking or savings account, which even if high yield is mostly around 0.5-0.6%. Which I don't think most people have in their asset allocation.

And mostly sounds like you agree with me, in that gold is not a substitute in a portfolio for "cash" by even your interpretation of cash.
Well, if you follow the adage (and you don’t need to because the OTHER side is “Cash is King”) not to hold more cash than you need for immediate needs then yeah. Yeah, and short term treasuries fit the bill (lol).

Folks hope that if Stocks and Bonds both zig rather than bonds zagging like they can in a downturn that Gold will do…something different. That’s not a sure enough bet to replace part of your six month EF with either bonds or gold.

When you get to the point of “bonds are my EF” then holding some gold isn’t a bad diversification.

If you are sitting on 2X worth of cash equivalents…a little gold isn’t bad then either. That’s probably a lot of cash…
Patzer
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Re: How much Gold do you own and why?

Post by Patzer »

I have 5% gold, but I have been running some numbers lately, and think 4% is actually more efficient, so I will probably let it drift down to 4% as my other assets grow.

Gold is an inflation hedge. Uncorrelated with Bonds and Stocks.
Gold is a flight to safety asset. Uncorrelated with Stocks.

Sure stocks will probably perform over infinite years, but most of us don't live infinite years, so we care about performance in shorter time frames.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio.
Therefore, at least in my own research a portfolio with at least 3% Gold has a significantly better SWR than a portfolio with no gold.
As someone that wants to retire and not stress about my returns, having a higher SWR is more valuable to me than having a higher total return.

My long-term expectation from gold is a 0% inflation adjusted return, but it will do better when other stuff is doing poorly and worse when other stuff is doing well.
Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
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Re: How much Gold do you own and why?

Post by JackoC »

nigel_ht wrote: Sat Oct 23, 2021 12:33 pm
JackoC wrote: Sat Oct 23, 2021 10:43 am
Could be. But, here's IMO a basic problem with a lot of discussions of gold. There's the 'if the US collapses I'll die anyway' side which dismisses gold. Thing is though, if more realistically the USD gradually loses its place as the world reserve currency, gradually gets much cheaper, the US gradually has much less leeway to run large fiscal and current account deficits than now (big net global appetite to hold USD reserves by definition means big US current account deficits), and the divided US society and political system prove not up to the task of adapting to that change...it's likely to be gradual, although probably with less than total meltdown crises along the way.
Collapses tend to start gradual and accelerate rapidly.
Either way, once the market gets a whiff of it you're really unlikely to get out ahead of it. Because you can never tell if the beginning of the trend is just that, or a false alarm, and if you don't like the hedge now, you'll probably like it less when it gets more expensive but before things really go downhill, whether or not things get rapidly worse from there, it takes years, or they never get really bad. The basic flaw of 'OK if that kind of problem does become possible I'll deal with it' is it assumes being able to get ahead of the market, an assumption at odds with the basic idea of this forum. Basically you either put on your hedge now and live with it (perhaps in case of gold, definitely in case of eg. SPX put options) costing you if things are good, or you don't and live with no hedge if your optimism turns out excessive. 'OK I'll consider that if things start getting bad' is basically unrealistic IMO. I accept all kinds of opinions about gold pro and con, but not that one.
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Re: How much Gold do you own and why?

Post by NiceUnparticularMan »

nigel_ht wrote: Sun Oct 24, 2021 9:32 am
NiceUnparticularMan wrote: Sun Oct 24, 2021 7:16 am
All the other arguments made for investing in free-floating gold anyway are also meritless…
Lol, another declaration of victory by stating opposing opinion is “meritless” by virtue of simply saying so…
Actually, the part you cut out in order to quote me out of context is a complete argument, albeit stated in a very summary form.
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Re: How much Gold do you own and why?

Post by NiceUnparticularMan »

nigel_ht wrote: Sun Oct 24, 2021 10:37 am
NiceUnparticularMan wrote: Sun Oct 24, 2021 9:06 am
Da5id wrote: Sun Oct 24, 2021 8:13 am If the aggregate value of US companies is $0 there are likely to be other problems with remaining here, though maybe physical gold in your house would get you out of country. Maybe. But gold in the house seems risky to me for other reasons.
Yeah, history is full of examples of people getting robbed of their gold, and often murdered in the process. Including while attempting to travel with it.

Broadly speaking, probably the best strategy to actually preserving wealth when everything in your home locality has completely gone wrong is simply to have a lot of that wealth not in your locality. Historically wealthy families had estates in many different places, and they could flee to a different estate if things got untenable in any one place.
Requires a level of wealth above HNW and lower end VHNW to be reasonable.
I don't know what those acronyms stand for, but these days it is quite easy to own shares of things in other countries for very little initial investment. You can also store records in other countries cheaply.
That’s not generally how it works. It’s the ability to get to the airport that is the hard part if you can legally travel at all.
I am not sure what you are imagining. If you have a vehicle with fuel and live within driving distance of an airport, I don't see why you would need additional funding to get to the airport.
If you’re at the point of using gold to get on a plane you don’t need tickets…you need someone willing to wave you aboard the aircraft. As it turns out my father was on one of these last flights.
Again, it depends on the scenario in question. You seem to be sketching a scenario in which you don't need any funds at all to successfully flee, so that's nice and moots the question.
Be skeptical all you want but your opinion isn’t based on fact or experience.
Well, since we are making predictions about a hypothetical future which hasn't happened, no one's opinion is actually based on experience.

We can, though, look at historic cases and see what happened. But as always, it is important to make sure to account for survivorship bias. For example, gold proponents will trade anecdotes of individuals who in some way used gold to escape a dire situation. But, they often then fail to account for all the many people for whom that failed. Nazi gold is a rather dire accounting of all the many people whom gold did not help escape.
As a note, planes get fueled in those scenarios because the pilots also want to get out of there and so do the ground crews. Payment doesn’t matter as the owners of the fuel left on a previous flight if they were smart or dead if they weren’t.
Again, this seems to be imagining a scenario where funds are irrelevant.
There is often significant risk of being caught with a large wad of foreign currency for either the refugee or the smuggler.
Correct, as is true with gold. This isn't a solvable problem--if you are in a dire extralegal situation, trying to pay for passage or anything else, there is a good chance once you offer payment it will just be stolen from you, and you might get killed in the process.
Gold has the virtue of being compact
There are more compact stores of value, and again gold has the massive vice of not normally being accepted as currency.
and not necessarily associated with an enemy power or ideology.
This is getting very strained. But that is why you should have multiple currencies. If all the places I named are considered enemies by whomever you are trying to pay for travel, I doubt that ends well for you.
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Re: How much Gold do you own and why?

Post by suemarkp »

Activesloth wrote: Sun Oct 24, 2021 9:53 am I made an earlier post about investing in gold back in 2014. The one thing I remember is that on several occasions, the spot price of gold would bottom after midnight, then shoot back up before the opening bell. It was frustrating to watch because you couldn’t join the party. Someone was obviously playing with the spot price to buy his next yacht. I don’t think this is an isolated phenomenon.
Sure you can. Online gold buyers and sellers have 24 hour website pricing 7 days a week. The price you pay doesn't match spot, as there are premiums. On a sharp drop in spot price, the online store will begin to reduce their "spot" price, but the premium may increase. The longer the downward price stays down, the closer to true spot the online store "spot" price will be and the premiums may shrink. I prefer to buy gold on weekends as the price tends to remain steady. I sometimes wait until Sunday afternoon to see where things are going and either buy or delay longer.

They do need to buy what they are selling you even though they hedge, so a short duration spike is just a side effect of someone buying or selling a large quantity (or manipulating prices...). No one is going to sell at market spot price during one of those skinny price plunges. But the price will move with those spikes with some lag time.
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Re: How much Gold do you own and why?

Post by 000 »

Forester wrote: Sat Oct 23, 2021 8:46 am I am in the minority of goldbugs who can see that the price has similarly followed residential housing and largecap stocks. Yes it peaked with the commodity boom in 2011 and sold off, but gold is expensive today vs 2015. Can an asset offer much of a refuge if it is approximately 20% off the all-time highs from 1980, 2011 & 2020? Possibly gold is safer than long term bonds at least there's that.
I don't think you're a goldbug or even a gold bull.

All the past highs were false alarms (i.e. things got back to normal) so they are not indicative of a what a fundamental ceiling might be.
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Re: How much Gold do you own and why?

Post by HanSolo »

Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. Jack Bogle and Benjamin Graham both recommended maintaining allocations to both stocks and bonds, and I don't recall either of them saying anything about suspending that strategy during any particular economic condition (inflation or otherwise). Some people do 100/0 and some don't. It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
rockthisworld wrote: Sun Oct 24, 2021 6:40 am Now I know this site isn’t a platform for gold and silver enthusiasts however may I suggest looking up (snip)
Some of your recommended sources have been thoroughly discredited.
NiceUnparticularMan wrote: Sun Oct 24, 2021 7:16 am Instead, almost all of the price of gold is purely speculative, meaning its only way of generating a positive real return would come from selling it to someone at a higher price. (snip) So personally, I have zero interest in investing in something which is so dependent on what is known as the greater fool theory.
Of course, that's fine as a choice. I'm just curious to know, how large does the speculative component of an asset price have to be in order for you to rule it out as desirable? 50%? 75%? Or 99%?
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Re: How much Gold do you own and why?

Post by nigel_ht »

NiceUnparticularMan wrote: Sun Oct 24, 2021 12:23 pm
nigel_ht wrote: Sun Oct 24, 2021 9:32 am
NiceUnparticularMan wrote: Sun Oct 24, 2021 7:16 am
All the other arguments made for investing in free-floating gold anyway are also meritless…
Lol, another declaration of victory by stating opposing opinion is “meritless” by virtue of simply saying so…
Actually, the part you cut out in order to quote me out of context is a complete argument, albeit stated in a very summary form.
Nope. There was a series of unsupported assertions that something else was always better than gold…you can call it a “summary” if you like but I don’t think that is “correct”.
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Re: How much Gold do you own and why?

Post by nigel_ht »

NiceUnparticularMan wrote: Sun Oct 24, 2021 1:32 pm
nigel_ht wrote: Sun Oct 24, 2021 10:37 am
Requires a level of wealth above HNW and lower end VHNW to be reasonable.
I don't know what those acronyms stand for, but these days it is quite easy to own shares of things in other countries for very little initial investment. You can also store records in other countries cheaply.
High net worth. Very High Net Worth.

Okay, if it’s quite easy provide some examples.
That’s not generally how it works. It’s the ability to get to the airport that is the hard part if you can legally travel at all.
I am not sure what you are imagining. If you have a vehicle with fuel and live within driving distance of an airport, I don't see why you would need additional funding to get to the airport.
Yes, just driving to the Kabul airport got you in.

Now gold didn’t get you in either in this case simply because of the chaos…although you never know…
If you’re at the point of using gold to get on a plane you don’t need tickets…you need someone willing to wave you aboard the aircraft. As it turns out my father was on one of these last flights.
Again, it depends on the scenario in question. You seem to be sketching a scenario in which you don't need any funds at all to successfully flee, so that's nice and moots the question.
I didn’t say you didn’t need money. I said you don’t need tickets as much as someone to let you aboard. Paying that someone or someone else to get you on the right list is something gold might be able to do for you.

In the case of Vietnam it was to pay off the right folks to approve you to leave (with gold), pay off the boat owner (with gold) and maybe payoff the pirates (with gold) to not kill you all.
Be skeptical all you want but your opinion isn’t based on fact or experience.
Well, since we are making predictions about a hypothetical future which hasn't happened, no one's opinion is actually based on experience.

We can, though, look at historic cases and see what happened. But as always, it is important to make sure to account for survivorship bias.
The Vietnamese experience was well documented.
For example, gold proponents will trade anecdotes of individuals who in some way used gold to escape a dire situation. But, they often then fail to account for all the many people for whom that failed. Nazi gold is a rather dire accounting of all the many people whom gold did not help escape.
Between 1933 and 1937 130,000 Jews left Germany. In 1938 and 1939 another 120,000 Jews left despite it being very difficult to do so. Even after the war started another 18,000-20,000 manage to escape.

Image

Gold, if they had it, facilitated escape.

The problem was many couldn’t run far enough or thought they were safe where they managed to get to and didn’t spend more to get farther.

France probably looked pretty safe in 1935.
As a note, planes get fueled in those scenarios because the pilots also want to get out of there and so do the ground crews. Payment doesn’t matter as the owners of the fuel left on a previous flight if they were smart or dead if they weren’t.
Again, this seems to be imagining a scenario where funds are irrelevant.
No. Funds are very relevant to get you on the airplane. You questioned how planes got fueled if money stopped having value.
There is often significant risk of being caught with a large wad of foreign currency for either the refugee or the smuggler.
Correct, as is true with gold. This isn't a solvable problem--if you are in a dire extralegal situation, trying to pay for passage or anything else, there is a good chance once you offer payment it will just be stolen from you, and you might get killed in the process.
Gold is gold while a dollar is a symbol of America.

It isn’t an unsolvable problem given the millions of refugees that have managed to escape and survive.
Gold has the virtue of being compact
There are more compact stores of value, and again gold has the massive vice of not normally being accepted as currency.
and not necessarily associated with an enemy power or ideology.
This is getting very strained. But that is why you should have multiple currencies. If all the places I named are considered enemies by whomever you are trying to pay for travel, I doubt that ends well for you.
There are historical examples of where gold have helped people trying to escape where western currency would mark you as a collaborator with foreign hostile powers.

It’s not “strained” if family members have live through those events.
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Re: How much Gold do you own and why?

Post by Patzer »

HanSolo wrote: Sun Oct 24, 2021 4:05 pm
Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. Jack Bogle and Benjamin Graham both recommended maintaining allocations to both stocks and bonds, and I don't recall either of them saying anything about suspending that strategy during any particular economic condition (inflation or otherwise). Some people do 100/0 and some don't. It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
I also own bonds. Currently 85 Stocks 5 Gold 10 Bonds, and in the accumulation phase. My bonds will rise to 28% as I get closer to retirement.
I am not against bonds, even if they have a negative real return, because of the stability and diversification they provide.
My point was more along the lines that bond holders that say they don't hold gold, because it is a non-producing asset are making a very questionable argument given the current state of bond yields.
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Re: How much Gold do you own and why?

Post by halfnine »

nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...Between 1933 and 1937 130,000 Jews left Germany...
Of course many many more Jews wanted to leave than this. The problem was that countries had quotas and frankly weren't interested in having penniless immigrants. As the Jews could only leave with minimal assets, the ones that were most successfully able to emigrate had foreign assets or relatives abroad who were willing to sponsor them. Gold was likely of little help at this point in the crisis. Foreign assets were key.
nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...In 1938 and 1939 another 120,000 Jews left despite it being very difficult to do so...
I believe around the point countries finally got onboard that this was a humanitarian crisis. Countries stretched farther to accomodate more immigrants and more countries opened their borders. Gold was probably still fairly irrelevant at this point. There was probably a lot of luck involved in the sense as to whether the country one had ties to had decided to allow more immigrants.
nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...Even after the war started another 18,000-20,000 manage to escape...
At this point gold surely helped getting out of the country.

I have no problems with owning gold. But if I have waited until that is the last remaining option to leave I have screwed up.

Actually, I just did a quck search which popped up this which is consistent with what I have read before. It's how it worked out back then and it's generally how it works out now. Not much has changed.
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Re: How much Gold do you own and why?

Post by rockthisworld »

HanSolo wrote: Sun Oct 24, 2021 4:05 pm
Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. Jack Bogle and Benjamin Graham both recommended maintaining allocations to both stocks and bonds, and I don't recall either of them saying anything about suspending that strategy during any particular economic condition (inflation or otherwise). Some people do 100/0 and some don't. It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
rockthisworld wrote: Sun Oct 24, 2021 6:40 am Now I know this site isn’t a platform for gold and silver enthusiasts however may I suggest looking up (snip)
Some of your recommended sources have been thoroughly discredited.
NiceUnparticularMan wrote: Sun Oct 24, 2021 7:16 am Instead, almost all of the price of gold is purely speculative, meaning its only way of generating a positive real return would come from selling it to someone at a higher price. (snip) So personally, I have zero interest in investing in something which is so dependent on what is known as the greater fool theory.
I think that the market will clear higher gold prices due to irresponsible policies of central banks. The biggest movers for gold are real interest rates and the USD. And I like silver as being the only asset class that is 50% of it’s all time nominal high. I guess time will tell eventually. But I do see the importance of diversification.
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Re: How much Gold do you own and why?

Post by nigel_ht »

halfnine wrote: Sun Oct 24, 2021 11:43 pm
nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...Between 1933 and 1937 130,000 Jews left Germany...
Of course many many more Jews wanted to leave than this. The problem was that countries had quotas and frankly weren't interested in having penniless immigrants. As the Jews could only leave with minimal assets, the ones that were most successfully able to emigrate had foreign assets or relatives abroad who were willing to sponsor them. Gold was likely of little help at this point in the crisis. Foreign assets were key.
nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...In 1938 and 1939 another 120,000 Jews left despite it being very difficult to do so...
I believe around the point countries finally got onboard that this was a humanitarian crisis. Countries stretched farther to accomodate more immigrants and more countries opened their borders. Gold was probably still fairly irrelevant at this point. There was probably a lot of luck involved in the sense as to whether the country one had ties to had decided to allow more immigrants.
nigel_ht wrote: Sun Oct 24, 2021 8:35 pm ...Even after the war started another 18,000-20,000 manage to escape...
At this point gold surely helped getting out of the country.

I have no problems with owning gold. But if I have waited until that is the last remaining option to leave I have screwed up.

Actually, I just did a quck search which popped up this which is consistent with what I have read before. It's how it worked out back then and it's generally how it works out now. Not much has changed.
From what I’ve read Germany had significant capital transfer limitations in addition to huge taxes on wealth and income. You had to liquidate at a loss and put your money into a transfer account that would suffer further from an unfavorable rate of exchange if it was released at all (starting at around 80% in early years to almost nothing by 1939).

So yes, family connections in other countries was most useful but if you got out with anything later on it was probably by smuggling…and gold is, relatively speaking, easier to smuggle than most things. If you had any beyond personal jewelry.

The key takeaway from all of these examples is to leave early while you can and be happy you got away at all with whatever assets you managed to save whether it’s from Germany, China, Vietnam or Afghanistan.

Things start slow and avalanche quickly. One day the army is still (sorta) fighting and you think you still have some time. The next day it evaporates and Paris/Saigon/Kabul falls and you realize everyone important is sitting in Taipei with the nation’s gold reserves and it’s too late to run…
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Re: How much Gold do you own and why?

Post by HanSolo »

Some problem in the quote... this part wasn't from my post...
rockthisworld wrote: Mon Oct 25, 2021 4:52 am
I think that the market will clear higher gold prices due to irresponsible policies of central banks. The biggest movers for gold are real interest rates and the USD. And I like silver as being the only asset class that is 50% of it’s all time nominal high. I guess time will tell eventually. But I do see the importance of diversification.
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Re: How much Gold do you own and why?

Post by JackoC »

Patzer wrote: Sun Oct 24, 2021 11:21 pm
HanSolo wrote: Sun Oct 24, 2021 4:05 pm
Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. ...It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
I also own bonds. Currently 85 Stocks 5 Gold 10 Bonds, and in the accumulation phase. ...
My point was more along the lines that bond holders that say they don't hold gold, because it is a non-producing asset are making a very questionable argument given the current state of bond yields.
'Non producing asset' has never been a strong argument IMO. If you believe 'producing' assets are fairly valued in a basically efficient market, why can't the same market put a fair price on 'non-producing' assets? The 'non-producing' argument as voiced by BH's implies a duality of accepting the market's valuation of stocks (and considering my subjective valuation irrelevant) but then using my subjective valuation (it's worth nothing, because it's 'non producing') for gold and saying the market's valuation is irrelevant.

That said, I doubt the expected return of gold, difficult as it is to estimate, is independent of real bond yields. It would seem strange if gold had become a 2.7% pa or so more attractive asset relative to US govt bonds in the time period where the 5 yt TIPS yield went from ~+1.0% (early 2019) to -1.7% (now). It would seem more plausible that the run up in gold prices since then implies a lower expected return for gold now than then, since competing investments, like TIPS, earn less. Anyway the focus with gold would always be more on tail events and less on what happens at the centroid of the future return distribution, aka the expected return.
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Re: How much Gold do you own and why?

Post by nigel_ht »

JackoC wrote: Mon Oct 25, 2021 9:42 am Anyway the focus with gold would always be more on tail events and less on what happens at the centroid of the future return distribution, aka the expected return.
Yes. Which is why I'm not in one of the gold heavy portfolios. 3-5% in GLDM seems reasonable.
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Re: How much Gold do you own and why?

Post by willthrill81 »

I don't believe it's been mentioned so far in this thread, but Karsten Jeske from Early Retirement Now found that a 15% allocation to gold would have significantly boosted the historic 30 year SWR.

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Re: How much Gold do you own and why?

Post by abc132 »

halfnine wrote: Sun Oct 24, 2021 2:04 am
abc132 wrote: Sat Oct 23, 2021 1:24 pm ...What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance...
What we learn from Venezuela is that cash in some form is typically used as a medium of exchange and is preferential to bartering. What we also learn from Venezuela is that contrary to what is typically portrayed on this forum gold can be used as medium of exchange before a Mad Max Scenario occurs. What we don't know before a crisis is what "cash" will be. In the beginning cash was Bolivars. At some point of greater inflation cash became US dollars. But, it is not just any dollars, often it will need to be recent print and the crisper the better. The benefit of gold is that one doesn't have to predict what the future currency will be; nor worry about exchange rate controls preventing one from getting any foreign cash at all or getting it at a devalued official rate; nor worry about whether the cash will age and become worthless if exchanged in advance, etc. So, the conclusion is not to exchange cash to gold when needed, but rather to own gold and exchange to cash when needed. If one waits to convert cash to gold ex post one will likely have either chosen the wrong "cash" or will have already experienced devaluation before conversion.
I will own I-Bonds and TIPS and exchange to whatever the currency is when needed.

These are alternative to gold that can actually guarantee real value, unlike gold.

You only need gold if you want to speculate on price and/or correlation, or if you don't have access to some other inflation protected instrument.
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Re: How much Gold do you own and why?

Post by secondopinion »

JackoC wrote: Mon Oct 25, 2021 9:42 am
Patzer wrote: Sun Oct 24, 2021 11:21 pm
HanSolo wrote: Sun Oct 24, 2021 4:05 pm
Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. ...It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
I also own bonds. Currently 85 Stocks 5 Gold 10 Bonds, and in the accumulation phase. ...
My point was more along the lines that bond holders that say they don't hold gold, because it is a non-producing asset are making a very questionable argument given the current state of bond yields.
'Non producing asset' has never been a strong argument IMO. If you believe 'producing' assets are fairly valued in a basically efficient market, why can't the same market put a fair price on 'non-producing' assets? The 'non-producing' argument as voiced by BH's implies a duality of accepting the market's valuation of stocks (and considering my subjective valuation irrelevant) but then using my subjective valuation (it's worth nothing, because it's 'non producing') for gold and saying the market's valuation is irrelevant.

That said, I doubt the expected return of gold, difficult as it is to estimate, is independent of real bond yields. It would seem strange if gold had become a 2.7% pa or so more attractive asset relative to US govt bonds in the time period where the 5 yt TIPS yield went from ~+1.0% (early 2019) to -1.7% (now). It would seem more plausible that the run up in gold prices since then implies a lower expected return for gold now than then, since competing investments, like TIPS, earn less. Anyway the focus with gold would always be more on tail events and less on what happens at the centroid of the future return distribution, aka the expected return.
But how much can a non-producing asset actually return? At long-term best, it gives inflation protection and protection against the ultimate collapse of society as we know it. In short, the positive skew could be rather high in reality for gold.

If you believe in risk neutral markets, then stocks should be no better in expected returns. If you do not, then the productiveness backs a premium of taking the negative skew that stocks have as a composite (not individually obviously). You could be paying for the skew of gold for all intent and purpose.

Either way, the market is indeed efficient.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: How much Gold do you own and why?

Post by Pu239 »

So OP, what did you decide to do?
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot
halfnine
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Re: How much Gold do you own and why?

Post by halfnine »

abc132 wrote: Mon Oct 25, 2021 11:40 am
halfnine wrote: Sun Oct 24, 2021 2:04 am
abc132 wrote: Sat Oct 23, 2021 1:24 pm ...What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance...
What we learn from Venezuela is that cash in some form is typically used as a medium of exchange and is preferential to bartering. What we also learn from Venezuela is that contrary to what is typically portrayed on this forum gold can be used as medium of exchange before a Mad Max Scenario occurs. What we don't know before a crisis is what "cash" will be. In the beginning cash was Bolivars. At some point of greater inflation cash became US dollars. But, it is not just any dollars, often it will need to be recent print and the crisper the better. The benefit of gold is that one doesn't have to predict what the future currency will be; nor worry about exchange rate controls preventing one from getting any foreign cash at all or getting it at a devalued official rate; nor worry about whether the cash will age and become worthless if exchanged in advance, etc. So, the conclusion is not to exchange cash to gold when needed, but rather to own gold and exchange to cash when needed. If one waits to convert cash to gold ex post one will likely have either chosen the wrong "cash" or will have already experienced devaluation before conversion.
I will own I-Bonds and TIPS and exchange to whatever the currency is when needed.

These are alternative to gold that can actually guarantee real value, unlike gold.

You only need gold if you want to speculate on price and/or correlation, or if you don't have access to some other inflation protected instrument.
You've moved the goalposts so far I can't even see them anymore. We are talking about Venezuela here and the lessons learned from an extreme event :oops: TIPs are like Level 5 protection. When you get to something like Level 9 the government has long abandoned any realistic official government representation of real inflation. You'll get what the government says inflation is and it won't be anywhere near reality.
secondopinion
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Re: How much Gold do you own and why?

Post by secondopinion »

halfnine wrote: Mon Oct 25, 2021 12:05 pm
abc132 wrote: Mon Oct 25, 2021 11:40 am
halfnine wrote: Sun Oct 24, 2021 2:04 am
abc132 wrote: Sat Oct 23, 2021 1:24 pm ...What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance...
What we learn from Venezuela is that cash in some form is typically used as a medium of exchange and is preferential to bartering. What we also learn from Venezuela is that contrary to what is typically portrayed on this forum gold can be used as medium of exchange before a Mad Max Scenario occurs. What we don't know before a crisis is what "cash" will be. In the beginning cash was Bolivars. At some point of greater inflation cash became US dollars. But, it is not just any dollars, often it will need to be recent print and the crisper the better. The benefit of gold is that one doesn't have to predict what the future currency will be; nor worry about exchange rate controls preventing one from getting any foreign cash at all or getting it at a devalued official rate; nor worry about whether the cash will age and become worthless if exchanged in advance, etc. So, the conclusion is not to exchange cash to gold when needed, but rather to own gold and exchange to cash when needed. If one waits to convert cash to gold ex post one will likely have either chosen the wrong "cash" or will have already experienced devaluation before conversion.
I will own I-Bonds and TIPS and exchange to whatever the currency is when needed.

These are alternative to gold that can actually guarantee real value, unlike gold.

You only need gold if you want to speculate on price and/or correlation, or if you don't have access to some other inflation protected instrument.
You've moved the goalposts so far I can't even see them anymore. We are talking about Venezuela here and the lessons learned from an extreme event :oops: TIPs are like Level 5 protection. When you get to something like Level 9 the government has long abandoned any realistic official government representation of real inflation. You'll get what the government says inflation is and it won't be anywhere near reality.
Yes, at that point, gold (or other commodities) or some other countries currency (or stocks/bonds) are the only things to save you.

But it is far from that right now.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
abc132
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Re: How much Gold do you own and why?

Post by abc132 »

halfnine wrote: Mon Oct 25, 2021 12:05 pm
abc132 wrote: Mon Oct 25, 2021 11:40 am
halfnine wrote: Sun Oct 24, 2021 2:04 am
abc132 wrote: Sat Oct 23, 2021 1:24 pm ...What we learn from Venezuela is that the economy continues. Even though gold is being used it can be bought and sold when it is needed. The barber was able to convert cash to gold on a daily basis. By direct example there is no need to store it in advance...
What we learn from Venezuela is that cash in some form is typically used as a medium of exchange and is preferential to bartering. What we also learn from Venezuela is that contrary to what is typically portrayed on this forum gold can be used as medium of exchange before a Mad Max Scenario occurs. What we don't know before a crisis is what "cash" will be. In the beginning cash was Bolivars. At some point of greater inflation cash became US dollars. But, it is not just any dollars, often it will need to be recent print and the crisper the better. The benefit of gold is that one doesn't have to predict what the future currency will be; nor worry about exchange rate controls preventing one from getting any foreign cash at all or getting it at a devalued official rate; nor worry about whether the cash will age and become worthless if exchanged in advance, etc. So, the conclusion is not to exchange cash to gold when needed, but rather to own gold and exchange to cash when needed. If one waits to convert cash to gold ex post one will likely have either chosen the wrong "cash" or will have already experienced devaluation before conversion.
I will own I-Bonds and TIPS and exchange to whatever the currency is when needed.

These are alternative to gold that can actually guarantee real value, unlike gold.

You only need gold if you want to speculate on price and/or correlation, or if you don't have access to some other inflation protected instrument.
You've moved the goalposts so far I can't even see them anymore. We are talking about Venezuela here and the lessons learned from an extreme event :oops: TIPs are like Level 5 protection. When you get to something like Level 9 the government has long abandoned any realistic official government representation of real inflation. You'll get what the government says inflation is and it won't be anywhere near reality.
I am okay with you choosing gold for some level 9 situation. I'm just curious why guns and ammo are not also a good idea at level 9. This was vehemently argued against earlier in the thread. I am okay with people speculating on gold. It would be nice if they knew they were speculating. I am looking for rational matched with action, regardless of the choice made. The goal posts have not moved even one inch.

The choices with respect to Venezuela are to equate Venezuela to our own situation and come up with misguided solutions, or to apply what we can learn from Venezuela to our own situation.

I have previously stated what we can learn from Venezuela
- gold is available on a daily basis to exchange with nominal currency
- nominal currency is required by law to be accepted

For a situation like Venezuela but for those of us with significant assets here in the US, we have other instruments such as international diversification, I-Bonds and TIPS that will retain value. Gold would not be necessary in such a situation here in the US. If gold becomes the currency of exchange, we can always buy it as needed.

When we get to the situation where the economy no longer works, gold, goods to meet our basic needs, and guns to protect those goods will be needed. I agree with others here that fleeing said country is the best option, and having enough gold to flee a situation is a good way to prepare for the level 9 situation.

Gold as a speculative play is just fine. I'm really curious about all the talk about the past for a speculative play which should be focused entirely around the future.
Last edited by abc132 on Mon Oct 25, 2021 12:37 pm, edited 5 times in total.
JackoC
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Re: How much Gold do you own and why?

Post by JackoC »

secondopinion wrote: Mon Oct 25, 2021 11:43 am
JackoC wrote: Mon Oct 25, 2021 9:42 am
Patzer wrote: Sun Oct 24, 2021 11:21 pm
HanSolo wrote: Sun Oct 24, 2021 4:05 pm
Patzer wrote: Sun Oct 24, 2021 11:03 am I have 5% gold,
Me too.
Gold creates creates greater diversification in a portfolio and raises the worst case scenario returns for almost any portfolio. (snip) Some people say that gold is a non-producing asset and they will never own such a thing, BUT many of those same people are comfortable owning bonds that have a lower yield than inflation. Their bonds have a negative inflation adjusted return, which is worse than a non-producing asset.
The above are interesting points. That being said, I still own bonds. ...It's a choice, and that's fine... different strokes for different folks. But I agree that the "non-producing asset" argument seems incomplete, within the context you mentioned.
I also own bonds. Currently 85 Stocks 5 Gold 10 Bonds, and in the accumulation phase. ...
My point was more along the lines that bond holders that say they don't hold gold, because it is a non-producing asset are making a very questionable argument given the current state of bond yields.
'Non producing asset' has never been a strong argument IMO. If you believe 'producing' assets are fairly valued in a basically efficient market, why can't the same market put a fair price on 'non-producing' assets? The 'non-producing' argument as voiced by BH's implies a duality of accepting the market's valuation of stocks (and considering my subjective valuation irrelevant) but then using my subjective valuation (it's worth nothing, because it's 'non producing') for gold and saying the market's valuation is irrelevant.

That said, I doubt the expected return of gold, difficult as it is to estimate, is independent of real bond yields. It would seem strange if gold had become a 2.7% pa or so more attractive asset relative to US govt bonds in the time period where the 5 yt TIPS yield went from ~+1.0% (early 2019) to -1.7% (now). It would seem more plausible that the run up in gold prices since then implies a lower expected return for gold now than then, since competing investments, like TIPS, earn less. Anyway the focus with gold would always be more on tail events and less on what happens at the centroid of the future return distribution, aka the expected return.
But how much can a non-producing asset actually return? At long-term best, it gives inflation protection and protection against the ultimate collapse of society as we know it. In short, the positive skew could be rather high in reality for gold.

If you believe in risk neutral markets, then stocks should be no better in expected returns. If you do not, then the productiveness backs a premium of taking the negative skew that stocks have as a composite (not individually obviously). You could be paying for the skew of gold for all intent and purpose.

Either way, the market is indeed efficient.
Nobody said anything about 'risk neutral markets' or stock expected return being the same as gold. The 'non producing asset' gambit IMO implies not just that gold would have lower expected return than stock (which I think all but very hardcore gold bugs would agree, it's a kind of knocking over a straw man to say stock expected return should be higher than gold) that it's just not a 'good' asset at all because of that basically semantic designation 'non producing'. Or more specifically that gold is strictly inferior to bonds even when they 'produce' a return clearly lower than inflation. I don't think the 'non producing' theme is of any value.

It doesn't mean I propose a high allocation to gold, or necessarily any. I can see arguments against it (I personally have only a couple of %) but 'it doesn't produce anything' isn't one of them.
halfnine
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Re: How much Gold do you own and why?

Post by halfnine »

abc132 wrote: Mon Oct 25, 2021 12:26 pm ...When we get to the situation where the economy no longer works, gold, goods to meet our basic needs, and guns to protect those goods will be needed...
I think that is the point that are many are trying to make. At a high enough disaster gold works well as a store of value and as a currency of exchange. There are many on this forum that are opposed to either one or both of those statements. For many either TIPs and foreign assets work and if they don't then it is a Mad Max scenario. But the reality is that there many levels in between both of those events.
abc132 wrote: Mon Oct 25, 2021 12:26 pm ...I agree with others here that fleeing said country is the best option, and having enough gold to flee a situation is a good way to prepare for the level 9 situation...
And I am going to keep stating by then it is too late. Unless your ethnicity, culture, religion is on the chopping block you either have better odds of living by staying home or the country you end up at will just send you packing back home. Quotas by then will have long been filled and refugee status would generally allocated to those who face imminent death on their return not because of economic hardship.
seajay
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Re: How much Gold do you own and why?

Post by seajay »

Some like 10 year treasury central bullet for bonds, others might prefer a 1 year/20 year 50/50 (STT/LTT) barbell. Stocks and gold are polar opposites similar to short and long dated bonds, so some broaden their 'bonds' to 25% each in stocks/gold/STT/LTT

Image

Image

Pondering whether to include or exclude gold, or looking at it in isolation, is akin to looking at inclusion/exclusion of LTT or at LTT in isolation.

LTT under recent low yields/interest rates has seen similar chants as thrown at gold, since 2009 some have suggested such bonds only had one way to go (lose money), yet since 2009 LTT has provided near 5% nominal, 2.8% real (whilst to recent gold has yielded 3% real over the same period). TBIlls/cash has yielded -1.6% annualized.

Consider also 1986 to 1989 inclusive when interest rates were up at relatively high levels, 10 year T earned 10.5% as did 25% each in stocks/gold/STT/LTT (10.8%). Assume you held stock that paid no dividends, nor does gold pay any interest/dividends, so instead of 20% tax on 10% type amounts, 2% taxation, the four way saw tax reduced down to 1%. Some might even have preferred to just Stock/Gold 50/50 barbell that also earned 10.8%, and maybe held non dividend stock and avoided the 2% taxation altogether.

Include/exclude gold as you prefer, focus more often is akin to fleas arguing which flea owns the dog.
abc132
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Re: How much Gold do you own and why?

Post by abc132 »

halfnine wrote: Mon Oct 25, 2021 1:26 pm I think that is the point that are many are trying to make. At a high enough disaster gold works well as a store of value and as a currency of exchange. There are many on this forum that are opposed to either one or both of those statements. For many either TIPs and foreign assets work and if they don't then it is a Mad Max scenario. But the reality is that there many levels in between both of those events.
I made a similar statement with ~25% of golds value being fundamental.
I also argued the fundamental value of gold doesn't matter for use as short term currency and used our barber in Venezuela as supporting evidence.
We have other assets that can guarantee keeping more than 25% of their value, so what is the argument for gold?

The answer is that which people have trouble saying. They expect people to continue to flee to gold when stocks/bonds are underperforming.

The key is to provide a rational for this to continue in the future, such that your belief is not simply past=present.

Why?

If gold does A historically and you believe past=present, when we go through a long enough period where gold now does B historically, you can no longer rationally have the same belief that gold will continue to do A. Those that believe past=present will be required to sell gold if it is down enough to break the past trend. Those that have fundamental reason(s) will have a much better chance of extracting any potential gains. In a poor sequence, those that believe past=present will abandon gold in larger numbers and simply move on to the new past=present misconception that trended well over the next sequence of years.

A thread about gold that is actionable should focus largely on the fundamental reasons why gold should be expected to do well in the future. What are it's properties that make this likely?



halfnine wrote: Mon Oct 25, 2021 1:26 pm And I am going to keep stating by then it is too late. Unless your ethnicity, culture, religion is on the chopping block you either have better odds of living by staying home or the country you end up at will just send you packing back home. Quotas by then will have long been filled and refugee status would generally allocated to those who face imminent death on their return not because of economic hardship.
All I can say is historically, rich people can and do find a way to get out. A basic search will show this is a leading indicator.
Da5id
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Re: How much Gold do you own and why?

Post by Da5id »

abc132 wrote: Mon Oct 25, 2021 2:34 pm A thread about gold that is actionable should focus largely on the fundamental reasons why gold should be expected to do well in the future. What are it's properties that make this likely?
I don't own gold, but think the thread is somewhat interesting. But this statement seems unreasonable to me as a guideline for threads about gold or anything. Doesn't seem to me to be correct. I think a thread on <foo> should present reasons why <foo> may do well, and why <foo> may not do well. Why investing in <foo> may be wise, and why it may be a bad idea or not needed. No reason for threads to "focus largely" on the positive sides of <foo>, whatever the topic may be.
Last edited by Da5id on Mon Oct 25, 2021 2:59 pm, edited 1 time in total.
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