Interesting article on economics

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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 5:13 pm

Good luck with that investment strategy, Harry Browne. ;)
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 5:17 pm

columbia wrote:Good luck with that investment strategy, Harry Browne. ;)

As you clearly point out, it's beaten your strategy over the past 9 years.

And besides, for the umpteenth time, no one is advocating for a 100% gold based investment strategy. Gold is best held as insurance against financial catastrophe.
It seems that's a concept you just can't seem to grasp.
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 5:24 pm

ExPatriatePen wrote:
Gaucho wrote:Diversity is good, but what if I'm just looking for something that I don't have to worry about or look after? Would it be foolish to just buy gold and be done with it?

There's only one investment I think is safe enough to "buy and hold" and never worry about checking its performance.
Spoiler:
Bershire Hathaway


Nothing else, and I really mean that. LOok at a chart of Gold since say 1977. Tell me you'd be OK with not watching something that's fluctuated like that...
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 5:33 pm

columbia wrote:
ExPatriatePen wrote:
Gaucho wrote:Diversity is good, but what if I'm just looking for something that I don't have to worry about or look after? Would it be foolish to just buy gold and be done with it?

There's only one investment I think is safe enough to "buy and hold" and never worry about checking its performance.
Spoiler:
Bershire Hathaway


Nothing else, and I really mean that. LOok at a chart of Gold since say 1977. Tell me you'd be OK with not watching something that's fluctuated like that...

I don't understand what you're trying to twist this into.
I said in my prior post that Gold wasn't an investment, it was an insurance policy.
My response to Gaucho says the same thing, although Gauchos question was specific to "buy and hold". To not watching the investment over time.

So you're all over the map here Columbia. Can you share with us what specific point you're trying to make?
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 5:41 pm

Stop throwing your money at gold.
It has no internal rate of return and the opportunity cost in the LR is way too high.
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Re: Interesting article on economics

Postby Shyster on Tue Dec 31, 2013 6:00 pm

Factorial wrote:Make sure you read other information about the issue before believing this is "the truth".

Like this, for example:

The Case Against the Fed by Murray N. Rothbard.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:01 pm

ExPatriatePen wrote:You make it sound like there is no such thing as intrinsic value.


I have to dispute you here, EPP. There is no such thing as intrinsic value. Value is entirely subjective, and that is as true with currency as anything else.

It probably sounds a little contradictory on my part. ;)

Generally and historically speaking, the five characteristics which mark a good currency are:

1. stability in value

2. general acceptance

3. durability

4. divisibility

5. portability

Fiat currencies have proven time and again to be unstable in value, of course. General acceptance is, at least initially, imposed at the point of a gun. There is nothing durable about paper. But it is divisible and portable.

In contrast, precious metals have historically met all 5 criteria, with the possible exception of item 2, in cases where alternate currencies are forcibly imposed.

For whatever reason (outside of the difficulty in obtaining it, of course), humans throughout history have placed value on precious metals such as gold and silver... possibly because they do in fact meet these 5 criteria and therefore work very well as a medium of exchange; the fact that gold is so durable that it can rest in so caustic an environment as salt water for hundreds of years and resist corrosion, etc., probably adds to it's perceived value.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:03 pm

Shyster wrote:
Factorial wrote:Make sure you read other information about the issue before believing this is "the truth".

Like this, for example:

The Case Against the Fed by Murray N. Rothbard.


:thumb: :)
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 6:06 pm

Perceived is key to the discussion.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:13 pm

In order for one to understand why fiat currencies are so inherently flawed in relation to commodity currencies, one must understand that a currency is a medium of exchange; what is being exchanged, of course, is one's labor for other goods and/or services. To accept a medium of exchange which can be devalued at a whim is to allow that the value of one's labor is essentially worthless... it effectively undermines the entire foundation of human civilization. And that is no exaggeration.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:15 pm

columbia wrote:Perceived is key to the discussion.


I couldn't agree more. What makes a fiat currency so dangerous is that it's perceived value can be undermined with little more than the 'click' of a mouse.

I wouldn't dispute in the least that all value is 'perceived'. There is quite a bit more to the equation, however.
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 6:20 pm

Shyster wrote:
Factorial wrote:Make sure you read other information about the issue before believing this is "the truth".

Like this, for example:

The Case Against the Fed by Murray N. Rothbard.


I definitely hope that you're 100% in precious metals.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:23 pm

columbia wrote:
Shyster wrote:
Factorial wrote:Make sure you read other information about the issue before believing this is "the truth".

Like this, for example:

The Case Against the Fed by Murray N. Rothbard.


I definitely hope that you're 100% in precious metals.


Being 100% in anything is a mistake in a managed economy, unless you are the manager.

ETA: And there - being the manager - is the rub, isn't it?
Last edited by Guinness on Tue Dec 31, 2013 6:23 pm, edited 1 time in total.
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 6:23 pm

Guinness, we're going to have to agree to disagree on the intrinsic value of gold.

Gold does have uses in electronics, dentistry and even pharmaceuticals. Not to mention a wide spread use in Jewelery and awards (had anyone ever heard of the "Gold Medal"?)

Those are intrinsic. They aren't "faith based".

And that doesn't even count Golds history as a form of value store. Something that goes back to biblical times. Can anyone tell me what currency has a longer history?

Answer: None

Anyway, this whole thread has been derailed into Columbias diatribe against precious metals.

If he doesn't see a need for hedging his investments against currency fluctuations and the possible collapse of the dollar (or even just massive inflation), that's up to him. I just hope anyone listening to him applies the appropriate filter.

:pop:
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:30 pm

ExPatriatePen wrote:Guinness, we're going to have to agree to disagree on the intrinsic value of gold.

Gold does have uses in electronics, dentistry and even pharmaceuticals. Not to mention a wide spread use in Jewelery and awards (had anyone ever heard of the "Gold Medal"?)

Those are intrinsic. They aren't "faith based".


;)

We don't really disagree. "Intrinsic", to me, implies a value of it's own accord, beyond human interpretation... it's a quibble, I admit.

And that doesn't even count Golds history as a form of value store. Something that goes back to biblical times. Can anyone tell me what currency has a longer history?

Answer: None


It most certainly meets the standards for a medium of exchange better than anything else that has ever been proposed, absent the point of a gun. :thumb:

Anyway, this whole thread has been derailed into Columbias diatribe against precious metals.

If he doesn't see a need for hedging his investments against currency fluctuations and the possible collapse of the dollar (or even just massive inflation), that's up to him. I just hope anyone listening to him applies the appropriate filter)

:pop:


I don't see columbia's objections as derailing the thread. The ZH article attacked the inflationary currency regime. He is attacking the viable, logical alternative.

I definitely agree with you that anyone reading his advice should do so with the utmost caution. :)
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 6:30 pm

Warren Buffett wrote:1. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

2. “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”

3. “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything."

4. “I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (NYSE:XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”

5. “The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”

6. “What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As 'bandwagon' investors join any party, they create their own truth — for a while."

7. “I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (NYSE:KO) will be making money, and I think Wells Fargo (NYSE:WFC) will be making a lot of money and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 6:34 pm

columbia wrote:
Warren Buffett wrote:1. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

2. “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”

3. “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything."

4. “I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (NYSE:XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”

5. “The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”

6. “What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As 'bandwagon' investors join any party, they create their own truth — for a while."

7. “I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (NYSE:KO) will be making money, and I think Wells Fargo (NYSE:WFC) will be making a lot of money and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."

Which AGAIN supports the comment that Gold is insurance against financial calamity, not an investment strategy.

AGAIN, What's your point?
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:38 pm

ExPatriatePen wrote:Which AGAIN supports the comment that Gold is insurance against financial calamity, not an investment strategy.

AGAIN, What's your point?


Being very wealthy and understanding how a currency works are mutually exclusive?

Being very wealthy and being very well connected are very strongly correlated?

Just because Warren Buffett says it, doesn't mean it's important.
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Re: Interesting article on economics

Postby columbia on Tue Dec 31, 2013 6:39 pm

I hope you all buy as much gold as possible.
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:42 pm

columbia wrote:I hope you all buy as much gold as possible.


Again being "all in" in any particular vehicle is a mistake in a managed economy.

That's the heart of the matter.
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 6:42 pm

columbia wrote:I hope you all buy as much gold as possible.

Dude, relax, have another drink and have a happy healthy and prosperous 2014!

I wish everyone on LGP only the best of outcomes!
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Re: Interesting article on economics

Postby Guinness on Tue Dec 31, 2013 6:51 pm

ExPatriatePen wrote:
columbia wrote:I hope you all buy as much gold as possible.

Dude, relax, have another drink and have a happy healthy and prosperous 2014!

I wish everyone on LGP only the best of outcomes!


:lol: Agreed. I'm heading out. Happy New Year!
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Re: Interesting article on economics

Postby Shyster on Tue Dec 31, 2013 7:21 pm

columbia wrote:I definitely hope that you're 100% in precious metals.

I'm still primarily focused on retiring some debts, so I'm not actually saving all that much for retirement at the moment. In addition to buying gold and silver (I actually slightly prefer silver to gold) as a form of asset protection, in the new year I plan to open an account with Peter Schiff's Euro Pacific Asset Management, roll over a conventional IRA I have with a bank to a Euro Pac Roth IRA, and then make that my primary investment vehicle. Gold and silver, of course, are not investments. They are merely alternate stores of value.
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Re: Interesting article on economics

Postby King Sid the Great 87 on Tue Dec 31, 2013 10:56 pm

ExPatriatePen wrote:Equities are not a bad asset (I hold a much higher percentage of stocks than I do of Gold) but to completely discount Gold as speculative... Well it's just, just, unfathomable.


Hmmm, interesting investment strategy for someone who has been calling for a market "correction" for the last several years. Figured you for one who would be shorting everything, given your speculation. Or have you finally admitted the failure of that prediction?
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Re: Interesting article on economics

Postby ExPatriatePen on Tue Dec 31, 2013 11:17 pm

King Sid the Great 87 wrote:
ExPatriatePen wrote:Equities are not a bad asset (I hold a much higher percentage of stocks than I do of Gold) but to completely discount Gold as speculative... Well it's just, just, unfathomable.


Hmmm, interesting investment strategy for someone who has been calling for a market "correction" for the last several years. Figured you for one who would be shorting everything, given your speculation. Or have you finally admitted the failure of that prediction?

There have been a couple of corrections during that period, did you miss them?

A five percent move is all that it takes to make significant money.

Did you miss my call to go LONG BRK/A when ot dropped below $115K? That was over 60K ago.

I was recommending Heinz before the buyout and have been long PPG just to mention some Pittsburgh issues.

I'm still waiting for a major market correction but
I don't see it coming without a significant catalyst.
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