Skeet shoot time

[aaron]

Re: Skeet shoot time

Gold may or may not go up in value, but you can be quite certain that the $USD will continue to lose value. It has done so for 100 years (or more) and the producers want it to continue that way.

It seems to me platinum may be a nice alternative. It is precious, useful, small, portable... It takes a lot of oil to produce. If the economy picks up and the shit never hits the fan, then it will go up. If all hell breaks lose, it will still hold some value. If inflation takes off, I do not see platinum suffering. But damn, I wish I bought it when it was half its current price.

[Master Shake]

Re: Skeet shoot time

Please help me understand why you think it is wise to buy gold at prices that are many multiples its cost of production in equilibrium with its productive uses? I.e., why buy it at prices that significantly exceed those that would prevail in the absence of "gold bugs" -- i.e., the prices that the market would establish based primarily on costs of production and industrial demand, as one currently sees in base, rare, and other precious metals?

A. You believe it is a stable store of value? If so, why is it a more stable store of value than any other commodity, or durable consumer good?

B. You believe it is a convenient store of value? Why is it more convenient than any other refined rare or precious metal?

C. You believe it is a "currency" -- i.e., a fungible and convenient means of conducting commerce? Where (and when) do you live that this is the case?

D. You believe it has unique properties that endow it with intrinsic value? What are those that justify its value in the hundreds of (current) dollars per ounce? (Yes it is the most malleable metal, but since the development of electroplating and CVD technologies many other metals have been substituted for gold in every functional capacity I am aware of.)

E. Because Greenspan, Loeb, Sennholz, Marx, Morgan, et. al., have endorsed it?

F. Is there some other reason I missed?

Note that an attack on fiat currencies is not an argument for buying gold. My question is why you would buy a commodity that you admit carries a speculative premium instead of any of the other alternatives suggested?

This article was posted here about a month or so ago. It's a presentation from Tudor Investments that documents that gold behaves as a currency, not a commodity. You may find it interesting.

http://www.lbma.org.uk/docs/conf2003...MAConf2003.pdf

It seems to me that we live in a world where all fiat currencies are at risk of collapse due to astronomical debt burdens. Exchanging your fiat for something that has functioned as currency and a store of value almost since the dawn of civilization and against which there are no claims seems to be a prudent and rational action.

[GRG55]

Re: Skeet shoot time

[/color]
My suggestions weren't directed towards you in particular. In fact, after reading through your links it appears that this forum enjoys the attention of many people who believe gold is worth holding at the present. I would welcome anyone's comments that might inform my question.



...

This is an excerpt from a post of mine from October 2007, a time when sub-prime was still officially "contained", and nobody was yet connecting the troubles at an obscure Newcastle upon Tyne mortgage lender, Northern Rock, with the coming storm at Bear Stearns, Lehman and the rest of Wall Street. It might provide some insight into gold's current attraction to those of us who have never owned the metal before and would not, even today, consider ourselves or former RBC Capital Markets Chairman Antony Fell as "gold bugs"...;)

Certainly the events subsequent to that post, the response and behaviour of officials to those events, and the facts that are now emerging - most recently in the Lehman examiner report - vindicates the views expressed in that post, and the holding of some gold as insurance.

...I am coming to the view there is perhaps something considerably more complex than simply a sequential chain of independent asset bubbles and collapses underway - a value shift that now permeates the upper echelons of our societies. A pattern of behaviour that used to be restricted largely to Latin American dictatorship and African banana republic elites. I was in downtown Houston, at the head office of my then employer, the day that Jeff Skilling announced his resignation as CEO of Enron, only 6 months after being promoted to the post. For those of us in the energy business that news was electrifying. We knew something was seriously wrong, but nobody had any idea exactly what. In the merchant energy trading implosion that followed the collapse of Enron, thousands and thousands of people around the world, most whom never had anything to do with Enron, lost their jobs and a good chunk of their savings - that's how far ranging the consequences of Enron's management corruption extended.

The slow-motion train wreck is still underway. I agree with EJ; some constructive ways to limit the damage might be appropriate.

But that won't fix the root cause(s). Therefore it seems the only prudent course of action is to embrace the iTulip philosophy of developing understanding and taking action to protect oneself. Here's someone else with the same view:

"Gold bullion is the only currency worldwide which is freely tradable and which is unencumbered by vast quantities of sovereign debt and prior obligations...

...Gold bullion is the one investment and long-term store of value which cannot be adversely impacted by corrupt corporate management or incompetent politicians -- each of which are in ample supply on a global basis."

This rather candid commentary is an excerpt from a talk given by Antony Fell, the Chairman of RBC Capital Markets (Royal Bank of Canada is the largest bank in the country) to an audience of predominantly institutional clients on January 18, 2007. Not often you'll hear the "blue bloods" of the business world saying these sorts of things.

[Glenn Black]

Re: Skeet shoot time

In the spirit of honing our marksmanship, here's an anti gold / gold bubble claim from Rick Bookstaber:

http://rick.bookstaber.com/2010/03/gold-bubble.html

Bookstaber's a smart guy and a good writer. (See "A Devil of our Own Design.") The flimsiness of the argument here kind of intrigues me as it sits kind of uneasily with the quality of his other work.

Has anyone here ever seen an anti-gold argument that they found, even in part convincing? I'm always looking but never find it. Maybe we should construct one.

If I were to give my fears a voice it would go something like: as the premiere ironic asset, gold is literally in the sites of every market player that has learned to love the world that state-sponsored support of ever-increasing, system-wide leverage has made. Debt-money cannot run in reverse, deflation cannot be allowed by the world's currency issuing governments and the traders know it. It's like a corrupted emperor (governments) whose house slave (bankers) has got the goods on him: emperor in name only.

Gold in this telling could be either the terminus of the trade, how the bet pays off for the bankers - see, for instance, the notion that CDS contracts referencing gold are cropping up in Jesse's recent post here:
http://jessescrossroadscafe.blogspot...t-default.html - after the "bust out" (see Goodfellas) phase is over with. It could be that gold's beyond any power block's control at this point and thus will act as a shock absorber for the cataclysms to come (and consquently have a bid underneath it for years as the huge global imbalances are slowly unwound: sort of the world's only neutral currency.)

Given the stakes it's not crazy to say that's a hard bet to call.

I have considered gold as early as 2001, but rejected it unfortunately. My concerns were that central bankers and gold miners hold all the cards. Their self-interests, while opposite most of the time, can align into a unholy alliance. It is a common statistical challenge:

Estimate the size of the bankroll needed if there is no house limit, so that you can double your previous bet if you lose. How big of a bankroll do you need for X% guarantee of eventually winning?

With a limited stake by a private investor, the Central Banks & miners hold all the cards. The only way you can play is to ride the momentum. When "they" decide the price is going up, you go long. When it starts to go down, you sell. For those who want to live dangerously, short the market as it starts to plunge. Due to the volatility, it's fine for day traders & brokers, but I have a full time job.

If you want to play the market for limits, the traders regularly calculate based on current trends where people should have placed their stochastic stop loss limits. If they go just beyond that for one trade, they've got you out of the game. GS is doing the exact same thing today with their high frequency trading. The GS algo model knows about all the other algo models and where everybody should be sitting. They pick them off, dozens at a time.

It's like playing the Hasbro game Battleship, except one side has a hidden camera viewing the opponent's side of the board:

Q: C3 ?

A: "Oh no! You've sunk my battleship!" I wonder how his very first guess was right?

Lucky guess? HA!

"Find quality, invest, and wait" has been sacrificed long ago on the rigged game of Las Vegas of Wall Street.

Gold is no different. Play momentum or lose.

[shiny!]

Re: Skeet shoot time

Posted by GRG55: "...Gold bullion is the one investment and long-term store of value which cannot be adversely impacted by corrupt corporate management or incompetent politicians -- each of which are in ample supply on a global basis."

But let us not forget corrupt politicians. They won't try confiscation. But what if they decide to impose, for example, a 90% luxury tax on gold transactions? If you tried to sell your ounce of gold to the coin dealer for cash, and had to lose 90% in taxes? For small holders just trying to preserve their wealth, wouldn't that make gold useless as a store of value, as an alternative currency to fiat money?

Now silver, I think they could not tax it like that. Silver is used mainly by industry so a luxury tax would not fly.

Any opinions on this?

[GRG55]

Re: Skeet shoot time

Posted by GRG55: "...Gold bullion is the one investment and long-term store of value which cannot be adversely impacted by corrupt corporate management or incompetent politicians -- each of which are in ample supply on a global basis."

But let us not forget corrupt politicians. They won't try confiscation. But what if they decide to impose, for example, a 90% luxury tax on gold transactions? If you tried to sell your ounce of gold to the coin dealer for cash, and had to lose 90% in taxes? For small holders just trying to preserve their wealth, wouldn't that make gold useless as a store of value, as an alternative currency to fiat money?

Now silver, I think they could not tax it like that. Silver is used mainly by industry so a luxury tax would not fly.

Any opinions on this?

Governments can tax anything. Your argument as to why they would tax gold and exclude silver has a logic gap...if a 90% tax is placed on gold think about how that changes silver usage patterns...and then ask yourself what the government is likely to do given that predictable outcome...

[shiny!]

Re: Skeet shoot time

Governments can tax anything. Your argument as to why they would tax gold and exclude silver has a logic gap...if a 90% tax is placed on gold think about how that changes silver usage patterns...and then ask yourself what the government is likely to do given that predictable outcome...

I'm not as smart as you assume. What do you see as the predictable outcome?

A large tax on gold won't have much impact on industry, but the same tax on silver would increase costs for manufacturing in a lot of different sectors, e.g. military, appliances, electronics, medicine, green development...

I think industries would scream bloody murder about a tax like this. From a politician's standpoint, it's one thing to villify "the rich" and tax "luxuries", but another thing to heavily tax a component of the industries that paid to get you elected, especially if that tax reduced job growth in times like this.

Or do you think the increased cost of silver wouldn't have much of an impact on manufacturing?

[dbooksta]

Best answer so far!

My vote for best answer yet:

The fact that productive use of gold is relatively unimportant, paradoxically enhances its usefulness as a store of value. Its ability to store value depends only on a global unspoken and un-legislated convention, something that is very difficult to break and has lasted for thousands of years. It is not dependent on demand for consumer goods, and will not be affected by techological change.

The convention that gold is currency is global, it is well-established, and even as we speak governments are actively intervening to prove once again its historical truth.

[MulaMan]

Re: Skeet shoot time

Paper money is not going away. Paper money was invented by China back in the 5th century.

Gold is not going away either.

Gold, silver, copper has intrinsic value, paper money does not.

Trust and stability is required for paper money to have value. In times where there is no trust and no stability, paper money is worthless until things swing back again.

So Gold is an investment choice but it is a very poor investment choice currently in America. It is much better investment choice if you are in China which is still much more corrupt and unstable.

Sell your gold and buy real estate.

[aaron]

Re: Skeet shoot time

So Gold is an investment choice but it is a very poor investment choice currently in America. It is much better investment choice if you are in China which is still much more corrupt and unstable.

Sell your gold and buy real estate.

Are your being sarcastic? America is not corrupt? Real estate is a good investment right now?

[GRG55]

Re: Skeet shoot time

I'm not as smart as you assume. What do you see as the predictable outcome?

A large tax on gold won't have much impact on industry, but the same tax on silver would increase costs for manufacturing in a lot of different sectors, e.g. military, appliances, electronics, medicine, green development...

I think industries would scream bloody murder about a tax like this. From a politician's standpoint, it's one thing to villify "the rich" and tax "luxuries", but another thing to heavily tax a component of the industries that paid to get you elected, especially if that tax reduced job growth in times like this.

Or do you think the increased cost of silver wouldn't have much of an impact on manufacturing?

Come now, let's apply a little experience and common sense...it's not that difficult to figure out.

When governments impose a tax, invariably there is a resulting behaviour change. Tax cigarettes, people smoke less. Tax gasoline, people drive less.

So we can be quite certain that your 90% tax on gold will undoubtedly have the desired effect and change buyer behaviour, and gold will be out of favour. So where does the money go? If silver does not have an equivalent tax to your 90% tax on gold, it would be a pretty safe bet that a lot of investors that would have purchased gold will buy silver instead.

So what has the government accomplished...other than driving the price of silver up [and thereby increasing input costs for manufacturers that use silver]?

Quite obviously the government will be unable to place your so-called luxury tax on gold unless it also places a comparable tax on every other alternative [silver, platinum, diamonds, etc] that gold buyers are likely to turn to as an alternative.

And such a tax would be rather simple for governments to implement because it's not that difficult to differentiate between buyers of precious metals, including gold, that use it as an input to manufacturing versus those that use it for investment purposes.

But a steep tax on gold while silver is exempted, as you suggest, is completely out of the question...

[jpatter666]

Re: Skeet shoot time

Come now, let's apply a little experience and common sense...it's not that difficult to figure out.

When governments impose a tax, invariably there is a resulting behaviour change. Tax cigarettes, people smoke less. Tax gasoline, people drive less.

So we can be quite certain that your 90% tax on gold will undoubtedly have the desired effect and change buyer behaviour, and gold will be out of favour. So where does the money go? If silver does not have an equivalent tax to your 90% tax on gold, it would be a pretty safe bet that a lot of investors that would have purchased gold will buy silver instead.

So what has the government accomplished...other than driving the price of silver up [and thereby increasing input costs for manufacturers that use silver]?

Quite obviously the government will be unable to place your so-called luxury tax on gold unless it also places a comparable tax on every other alternative [silver, platinum, diamonds, etc] that gold buyers are likely to turn to as an alternative.

And such a tax would be rather simple for governments to implement because it's not that difficult to differentiate between buyers of precious metals, including gold, that use it as an input to manufacturing versus those that use it for investment purposes.

But a steep tax on gold while silver is exempted, as you suggest, is completely out of the question...

I could easily see the government mandating the tax -- but "legitimate" industries can then rebate it.

That way *no* one can avoid the tax.

And you can be sure the penalties for avoidance will be extremely stiff.....

[shiny!]

Re: Skeet shoot time

So if they were to institute a big luxury tax, I guess the next "predictable outcome" would be a booming black market.

[medved]

Re: Skeet shoot time

So if they were to institute a big luxury tax, I guess the next "predictable outcome" would be a booming black market.

Definitely. And, it will apply to everything, not only to gold.

E.g., there will be a lot of trade barriers, therefore high customs fees. So, there will be a big black market for the smuggled stuff. Also, when you need some medication which is in tight supply, you will be able to bribe your pharmacist to get it etc. Many people think the gov’t can take care of every step of our lives, and it is supposed to prevent these black market activites. The reality will be very different.

The only consolation is, inflation will not be too high. :rolleyes:

[GRG55]

Re: Skeet shoot time

So if they were to institute a big luxury tax, I guess the next "predictable outcome" would be a booming black market.

Perhaps. But more likely money goes offshore to buy and hold it there.