Five Reasons for the Recent Surge in Gold

[sunskyfan]

Re: Five Reasons for the Recent Surge in Gold

All excellent points as usual. My only point about "not being able to eat gold" was a cute way of saying that it is still a facilitating proxy and not a solution focused thing. I think we are still fooling ourselves thinking that our problems are mostly corruption and the vagueries of fiat money.

[Forrest]

Re: Five Reasons for the Recent Surge in Gold

"Housing does not meet the necessary criteria of fungibility, portability and intrinsic immutability."

No, it doesn't but people acted for a VERY long time that it did in a way.

I did not mean to make my points cryptic. Let me try again (I know that you are not dense).

When people look for certainty they look for correlations between people, ideas, and/or phenomena. That is why we form groups when under threat or stress with like minded people. It can be momentarily useful as it usually makes us feel better, and it helps us feel more comfortable about our present condition especially in a high-risk environment. It is one of the reasons we train soldiers to "think a-like" and why they were uniforms. It is the same phenomena that has almost all Wall Street guys wearing expensive suits. Unfortunately, it is not the way to solve problems. There is power for solving problems in establishing common protocols such as language, law and basic civility. Sometimes we confuse the two when trying to solve problems. How many times has a military force been sent in to solve a conflict that that stems from a lack of common language, law, and basic civility that creates nothing but disaster? Anyway, my thinking is that any surge to gold is just a desire to find a group of like minded people for the illusion of security and not because it solves any of our economic problems. I think people will recognize pretty quickly that going into gold gains them nothing. It doesn't solve any problems. It's value will be questionable. It will make you feel better for a while but you can't eat it. The modern chase for gold is no different than the chase for derivatives or credit-default-swaps and will be just as useful when it collapses.

Look for something functional to invest in.

Perhaps ... land.

SunSkyFan, I think you are looking at the currency gold market as if it were neither useful, nor functional. It's uses are only supposed to be to provide a real, permanant, portable, universally accepted and understood means of stored up savings. This is your real money, what you use as the basis for all value, so that there is a numeral one to compare a fraction against.

After one has a year's emergency cash sitting in CD's or treasuries, or something relatively stable, yet easy to cash in, one begines to need to store real wealth as currency that doesn't change value. Generally gold need only represent 10-15% of one's portfolio except in a time of crisis such as we face today, one needs to buy land, outright, or a house, preferably without mortgage, and with some land attached that can be used for the prodution of food...I do a little light farming, which is just heavy gardening with a plan of chickens, a few pigs, and a cow. You know, veggies, fruits, cheese, eggs to moderate the loss of the disappearing and exhorbitantly expensive imported foods.

I work from home, and mostly, living in California, don't actually own a suit anymore, preferring t-shirt and jeans. The money I save on suits and the hot car are perfect for investment vehicles, because my financial basics are taken are of. This way, I will have a paid for, food and wealth producing property that I plan to enjoy living in, and a place to bury the gold in.

With some cash, some gold & silver, a paid off house that can produce a few eats while you pull in a few more dollars by working in the way that suits you best, you achieve a modicum of success, some comfort, and if you profit highly in the markets, you can help those that are not as fortunate as you may be.

Guns, gold, cheese, wine and bread...and a lot of good books. All very functional, in their own way.

[kartius919]

Re: Five Reasons for the Recent Surge in Gold

Then of what is the problem mostly consist?

[kartius919]

Re: Five Reasons for the Recent Surge in Gold

Very interesting. Only disagreement is on usage of debt. So long as the dollar has value, America will continue to function. When these precautions become invaluable would be a time when your dollar would be worthless. Thus taking out debt that you can afford to maintain would be sensible.

[hayekvindicated]

Re: Five Reasons for the Recent Surge in Gold

I follow you. And I agreed with you until you said this:



I don't like a lot of company when I make serious investment allocations. I began buying Eagles and Maple Leafs in 1998 because I knew (1) gold was undervalued and almost universally derided as the investment for losers, and (2) a long-term chart of the U.S. Dollar was very overextended and in an area that should provide resistance. I certainly can't claim that I foresaw the assinine economic idiocy of "W", Trent Lott and Denny Hastert (I had known the Democrats were economic idiots since Carter). Neither am I capable of the original thinking and macroeconomic analysis of EJ, so I had no special insight.

Thirty years of trading and investing has taught me that the greatest percentage gains in the shortest period of time will occur near the end of a move, the "surge" into gold, if you will. That will be the time to sell 75% to 95% of ones gold: when most people are screaming and clutching to get their hands on it. But it should have increasing value until that time.





You're correct in saying that no one can eat gold. But neither can they eat other things that have great value. As long as society doesn't totally collapse there will be plenty of people willing to exchange various goods for gold. Always have and always will.
Yet in a "Mad Max" world gold will have little value; I'm not betting on a MadMax world.

And I have only 15% of my liquid assets in PMs. I might well double or triple that amount using CEF, GTU and Comex futures if I see a breakout and a likely upmove of 20%+. But it will be a hot money trade - not a long-term investment.

I prefer crude oil reserves as the major hedge against a continuously declining US Dollar, appropriately hedged at various times.
But should food and feed grains have a major bear market coincident with a big drop in equities, your idea of land (I'm assuming farmland) will become very interesting indeed. ;)

How do you buy oil? Are you long oil through oil companies' stocks or through ETFs?

[BlackVoid]

Re: Five Reasons for the Recent Surge in Gold

The problem is mostly diminishing returns on investment, considering not an individual or a company but the whole of society.
Any productivity gain and any gain of additional energy is costing more and more. We have already reached the point where any increase in complexity results in proportionally smaller and smaller gains. We may have reached the point where any increase in complexity results in a NET LOSS of productivity.

- Increasing agricultural yields is harder and harder and take more investment.
- Increasing oil production is harder and harder and costs more and more.
- Increasing life expectancy costs more and more.
- Increasing the level of education costs more and more.
- Increasing productivity in any area is harder and requires greater investment

We would need a large energy subsidy in the form of some kind of new energy SOURCE. Without it, complexity will decline and centralization will reverse.

Land is a good investment, provided you can defend it. Gold is also a good investment in this transition to a lower energy level. Out of all the real assets gold is the rarest and most easily transportable. Anything tangible and real is a better investment than paper. The bull market in paper is over. The bull market in resources and things has started. Unfortunately the great bull market in the value of life is also at the top.


See: Joseph Tainter - The Collapse of Complex Societies

This book is really a MUST READ if you want to know what is going on. Monetary fiddling - however clever - cannot fix diminishing return on investment, especially not in the field of energy.

A shortened version of Tainter's work can be found here:
http://dieoff.org/page134.htm

[sunskyfan]

Re: Five Reasons for the Recent Surge in Gold

Well said. I will have to check the book out.

I will say that there are potentially possibilities in better optimization. An idea that we have generally only focused on when it comes to convenience in our lives. Ironically also war making. If we brought optimization with similar fervor to housing, energy, and health care we might see some real gains.

The bottom line is that you are right-on-the-button: the "Get Real" era has started.

[ThePythonicCow]

Re: Five Reasons for the Recent Surge in Gold

The site which you linked to with the shortened version of Tainter's work has more interesting stuff along these lines. Go to that sites homepage at http://dieoff.org/

Tainter's book is on Amazon at http://www.amazon.com/Collapse-Compl.../dp/052138673X

[Raz]

Re: Five Reasons for the Recent Surge in Gold

How do you buy oil? Are you long oil through oil companies' stocks or through ETFs?

I own Canadian oil & gas producers with a RLI (reserve life index) of 7 to 11 years, but only the ones with strong finances, most of which haven't had to cut their dividends/distributions due to last years collapse in crude oil. They are also the ones replacing their reserves.
I also own a substantial position in two U.S. oil & gas producers.

I'll post research for the ones I own on the Stock Market Research thread.

[BlackVoid]

Re: Five Reasons for the Recent Surge in Gold

Well said. I will have to check the book out.

I will say that there are potentially possibilities in better optimization. An idea that we have generally only focused on when it comes to convenience in our lives. Ironically also war making. If we brought optimization with similar fervor to housing, energy, and health care we might see some real gains.

This is true, but do you see any serious effort towards this? I do not. As net energy available for society declines, more and more people drift towards extreme poverty. At the same time, government, existing infrastructure and the elite takes a proportionally greater share of energy and resources for itself. This creates severe instability in the system - because for the periphery the system itself is only a parasite that takes resources while returns nothing or very little. The book explains in detail how this lead to the demise of the Roman Empire.

Are you saying that warmaking has been optimized? I really do not think so. Multi-billion dollar equipment is used to wage war on rebels equipped for a pittance.

Better optimization - diminishing returns apply. First you optimize the obvious where you get big gains for little investment. As you optimize more, greater investment is needed for smaller gains. So optimization in itself is not a solution, but it could buy time - delay decline. We need a new energy source or really huge oil/gas discoveries, without it decline is inevitable and unavoidable.