The Motley Fool Discussion Boards

Previous Page

Social Clubs / Deranged Monkey Criticism

URL:  http://boards.fool.com/okay-last-time-around-the-gold-merry-go-round-i-30685952.aspx

Subject:  Re: Poll: Technical Analysis Date:  5/15/2013  5:30 PM
Author:  EightTrack3 Number:  17148 of 21596

Okay, last time around the Gold Merry-Go-Round. I think what I find so infuriating about this thread is the total lack of conditional statements, which I believe is central to superior investing.

Gold is valuable, is not money, costs money to store and insure, is significantly more common and slightly overpriced compared to platinum which has more usefulness both industrial and jewelry, and has *not* been a store of value the past 30 years.

For the 313 million Americans, yes. There are 6,919 million (7 billion) in the world. Gold is going to under-perform long-term priced in local currency in locations with superior monetary policy, strong property rights, stable governments, free markets, and the rule of law.

There are billions of people who live in conditions without these rights, which is why Chinese brides and Indian brides and Islamic brides demand gold, not stock certificates.

Even in many first world countries, gold is a respectable choice. Think of gold priced in yen. Has gold been a bad investment versus Japanese stocks in recent decades? Given the massive government debts in Japan, poor demographics, and unknown effects of quantitative easing, would you feel free to recommend AGAINST gold in Japan?

I own term life insurance ... even if I don't use doesn't make it a bad investment. It pays off under certain circumstances, as does gold.

Not long enough? Ok, I take your criticism and raise you 80 years of data. The S+P 500 is up 796% in real terms. Gold is up about 130%.

I can't find a quote for the Vanguard S&P 500 index from 80 years ago. Index funds didn't exist 80 years ago. Gold coins did. And that is part of the problem underlying your thinking, Naj. Gold serves a different master than stocks, especially 80 years ago.

Gold historically is not a tool of an "upper class." Even today, American stock market ownership is dominated by high income or high wealth families and individuals. Gold, similar to real estate (which demands decent property rights) is a tool for what Marx would refer to as the "proletariat."

Why is it so hard for educated, intelligent financial advisers that dominate this board to understand this point? Why is it so hard to view gold as a hybrid security? Why is so hard to view gold (after all, an internationally traded commodity) through a wider, worldly viewpoint?

The same phenomenon drives the American $100 bill. Roughly 2/3 of all $100 bills are outside the USA. There is a tremendous demand for respectable stores of value. If and when America cleans up her balance sheet (which may be occurring right now) the dollar should strengthen and modest wealth foreigners will trade - on the margin - their gold for American dollars.

If events occur such that your only hope is that people are requiring gold instead of currency, you will have most definitely have wished you instead invested in food, water, rifles, ammo, and farmland instead.
Not gold.


In large part because of my background, I know people (or know people who know people) who survived the horrors of WWII. Some of them were saved because of their small gold holdings. You can trade it easily and quickly. Not food, not water, not ammo, not farmland.

Other relatives of mine, Japanese-Americans, were removed from their homes and locked up for many years during WWII. All their food, water, rifles, ammo and farmland did them no good. California Governor Earl Warren, later the "great" liberal Supreme Court Justice, was supportive of internment.

That was only 70 years ago. In America. Gold does not protect against Armageddon. It protects against selective bouts of human insanity and tyranny. These bouts sadly occur too often in South America, Africa, and many countries in Asia and the Middle East.

Benjamin Franklin said, If you want to convince, appeal to interest not morals. In difficult times, gold is appealing.

*******

I am very confident that this country and indeed the world is moving in the right direction. But I think gold is a great investment for many people in the world over their realistic alternatives. As such, when gold insurance is cheap it may be worth buying, even for Americans.

ET
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us