Retirement

[82CardsGrad]

Owning gold is like a referendum on where you think we are headed. During times of uncertainty and crisis, gold is a great investment.

During good times, not so much.

So $1000 an ounce is just relative. If it were priced in 1980 dollars, it would be half the price it is today. If you had filled your safety deposit box in 1980 with equal value amounts of both cash and gold, which one of the two would you be happier to own today?

JTS

I hear you Jeff... I guess I believe that, while we are still in store of a great deal of sub-par economic performance, I just can't believe things will get much worse than what we have seen thus far. I say that of course, knowing full well that sustained trillion dollar deficits will eventually come home to roost in a very ugly way. However, I still can't get on board with buying Gold and holding versus the many other options out there... $1,000 per ounce?? Not me...

 

[jefftheshark]

Was 1980 a random choice? If you had filled your safety deposit box in 1980 with gold and emptied it in 1990, or worse yet 2000, you'd have felt some serious pain.

1980 was the last great gold bubble, which shows that even if you bought at the top of the bubble, when you adjust for inflation, you would still be ahead today when you consider the huge loss in purchasing power the dollar bill in the box has lost over the years. Of course, as you say, even that ratio would not have made much of a difference in 2000.

So again in relative terms, gold would have to be somewhere around $2,700 an ounce to be equivalent to what it would have cost in 1980 dollars. One way to look at it is that gold never changes in "value", but what changes is the value of the currency needed to buy it.

But is every opportunity to buy gold followed by an equally good time to sell it? No.

And do there exist long stretches of time where gold is a not a good investment? Yes.

But over the long run, has gold been a better store of value than fiat currencies? I think I'd have to say yes.

JTS

 

[Russ Smith]

And there is true decay to any ETF, or mutual fund for that matter. When your doing your DD you have to take this into account before you decide where to invest. If the potential gains do not offset the costs of the investment vehicle, then it's probably not a very good investment.



JTS

I was going to point out the decay angle too. For example there are 2 3X financial ETFs from Direxion, FAS is the bull, FAZ is the bull. They are supposed to be complete inverses, FAS is long on financial sticks, FAZ is short on it. Yet BOTH stocks are actually down for the year. They're complete opposites but both are down because of the decay factor. Essentially those stocks should not be held overnight because you start losing when you do that.

 

[DWKB]

1980 was the last great gold bubble, which shows that even if you bought at the top of the bubble, when you adjust for inflation, you would still be ahead today when you consider the huge loss in purchasing power the dollar bill in the box has lost over the years. Of course, as you say, even that ratio would not have made much of a difference in 2000.

But isn't this a situation of hindsight being 20/20 of timing any market?

So again in relative terms, gold would have to be somewhere around $2,700 an ounce to be equivalent to what it would have cost in 1980 dollars. One way to look at it is that gold never changes in "value", but what changes is the value of the currency needed to buy it.

Doesn't this make the fact that you could have purchased gold in 1980 @ $800 in 1980's dollars and sold at a much lower value of $350 at 2001's dollars show you've even lost more on your gold investment? If gold was a hedge on inflation then you should expect to at least break even when inflation is taken into consideration, not perform worse, right?

But is every opportunity to buy gold followed by an equally good time to sell it? No.

And do there exist long stretches of time where gold is a not a good investment? Yes.

But over the long run, has gold been a better store of value than fiat currencies? I think I'd have to say yes.

JTS

I'm not saying gold is a poor investment, but I see it really as a hedge on financial crises as opposed to a hedge on inflation. Gold goes up, like it did in 1980 and is now, based on demand often correlated with financial uncertainty. When the financial markets are stable, like we saw in the 1990's, then gold is seen priced lower. Per this trend, you should be buying gold in stable financial markets like the 1990's and selling it in the crisis era's like 1980 and today.

The reasons to buy gold now are because you either think things will get worse than they are today (i.e. this is the relative financially stable time compared to future times) or you expect a total economic collapse of the currency you're hedging against, the U.S. dollar. Which if true, having anything but bullion/coins on hand isn't going to do you much good.

 

[jefftheshark]

I'm not saying gold is a poor investment, but I see it really as a hedge on financial crises as opposed to a hedge on inflation. Gold goes up, like it did in 1980 and is now, based on demand often correlated with financial uncertainty. When the financial markets are stable, like we saw in the 1990's, then gold is seen priced lower. Per this trend, you should be buying gold in stable financial markets like the 1990's and selling it in the crisis era's like 1980 and today.

This is exactly what I'm saying (and I guess not very well ).

And since I'm of the mind-set that we are still in the early innings of the "crisis" period, I don't see gold as being over-priced as 82 has stated. I still think that there is room to run on this forming "bubble", but that isn't to say that I know that gold will still be a great investment 5 or 10 years from now (but it might be).

And when we are speaking about retirement savings and asset protection/preservation, as opposed to swing trading, I still stand behind my assertion that gold is a good hedge against inflation. But hopefully I didn't imply that it should be someone's sole investment strategy.

JTS

 

[jefftheshark]

I was going to point out the decay angle too. For example there are 2 3X financial ETFs from Direxion, FAS is the bull, FAZ is the bull. They are supposed to be complete inverses, FAS is long on financial sticks, FAZ is short on it. Yet BOTH stocks are actually down for the year. They're complete opposites but both are down because of the decay factor. Essentially those stocks should not be held overnight because you start losing when you do that.

Unless the return you get on holding offsets the loss from decay.

But your average "buy and hold" investors shouldn't use these vehicles. (but I personally feel that one shouldn't be a "buy and hold" investor anyway, because if recent events have shown us anything, it is that our money is way to hard to grow even when we're paying attention, let alone when we ignore it altogether).

I was reading recently that the average length of time an ETF is "held" is about 22 seconds, so time decay doesn't matter to the HFTs of the world. But if your timeline is over months and years, then mutual funds are a much better vehicle.

JTS

 

[Zeno]

Make sure that when you retire, whatever the age, your home is paid off, you don't want to have a mortgage. Those of you who have extra income, now, and uncertain where to invest it, use it to pay down the mortgage principal in your property.

For example, if you have a 30 year mortgage and make one extra mortgage payment on the principal each year, you will pay off your mortgage in less than 20 years. Imagine, 10 years or more with no mortgage payments.

I've lost much of my 401K, IRA's and stock market investments over my working lifetime because of market crashes beyond my control. However, my one saving grace is that my home is paid off. I have a small pension and my wife and I have our SS and we live quite comfortably here in Sun City. The fact that we own our home outright was the key. You can overcome all kinds of money issues if you fully own your own home.

I may do that if I ever find the last place I plan to live, Memphis isn't it. I don't plan to be here more than a couple of years if I can help it. When I do find my dream place (both location and house) I hope we can make those extra payments and have the mortgage paid off early.