Gold is a Bubble

Think I’ll hang onto my gold, thank you.

http://usdebtclock.org/

OK the debt is rising.

Do you physically have your gold or some digital certificate that says you own so many ounces of gold?

How confident are you that you could get your hands on your gold if the economy truely collapses?

As I’ve said before on one of the threads - I bought a huge pile of gold coin when our idiot chancellor (British) sold off half our gold reserves back in 1997, at a knock down price.

I rationalised that as all previous Labour (socialist) governments had made a total hash of running our economy - if he thinks gold is worthless - the reverse must be the case.

I bought at about $300 an ounce - and I keep all my coins under the proverbial mattress in my home.

So, if the economy (and then society) goes to hell in a hand basket, what will this gold do for you? I am being serious when asking this question.

The only value that gold has is the value that investors make up for it. It is the very definition a bubble. Gold sitting in a bank vault 20 feet under ground has the same intrinsic value, the same productive capacity as a abandoned home in the Nevada desert.

Be realistic here. The value of a stock is (depending on whether you're a value or growth investor) either the discounted value of the assets owned by the company or the time-discounted value of future earnings flows. Either way, it is worth what supply-demand places on the asset.

The same thing applies to gold, oil, cotton, copper, or the US Dollar index.

So which would you rather have: GLD or AIG?

Markets go from extreme to extreme, and with the financial mess that has been created since Clinton left office (The US Dollar Index fell from 110 to 81 while GWB was in office), gold has taken on the value of a world reserve currency.

Remember the bond vigilantes?

The price of gold is saying something, just like the price of the Euro is saying something. It says that world governments need to get their spending under control, but it says that they won't (see the Republicans backing off on spending cuts just as soon as they got their tax cuts for the rich approved), so the value of certain assets will continue to move to extremes until enough pain is inflicted to cause a move to a sustainable equilibrium.

I'm not a bear, but a long term trend follower (see John Henry & Co.) long both stocks and gold, and I'm likely to sit tight holding both until the trends reverse.

Think of it this way, the market put a really high price on AIG and houses in the Nevada desert, but the prices they put on them were more than what they were "worth." Neither AIG nor Nevada houses could fill their productive capacity; they couldn't produce enough income to justify their really high prices. Their market prices fell as a result. The same is true for gold. The market puts a really high price on it, but it doesn't produce anything for the market. The only reason the market puts any value on it is because it irrationally believe that its value will continue to go up ad infinitum. Gold is the definition of a bubble. It is no different than AIG or Nevada houses or tulip bulbs. None are or were priced according to what they produced for their owner.

Too many numbers and too scary - I turned it off immediately.

coach d wrote:

So which would you rather have: GLD or AIG?

GLD wouldn't buy it, nor would I buy SLV for silver, only CEF or PHYS for IRA gold for me.

Everything is a bubble then.

High Frequence trading algs inflating everything, trillion dollar bailouts, Quantitative easing...

GO GOLD!

SILVER IS BETTER!

DO BOTH.

Humanity has used Gold and Silver as a currency as recently as 1970.

99.9% of the time Humans have been alive, they have used Gold or some other commodity to barter and trade with.

China experimented with paper currency, the result was a 100 year depression that weakened and collapsed their empire that stretched all the way from Africa to California. Look up Admiral Ma.

The French tried it:

http://en.wikipedia.org/wiki/Mississippi_Company

The English and American trading that followed were based on specie, ie GOLD and SILVER.

Since 1970 we have been off a defacto Gold Standard in the United States. 1970 as also the last year the Mint minted Silver into common U.S currency.

The World seems to do just fine under Gold and Silver. Things seem to go astray when we switch off the precious metals, and usually a few individuals are busy collected all the precious they can in exchange for paper they print for free.

Okay, let me put this another way. If I built a really powerful spaceship, loaded it with 20 tons of gold, and shot it towards the Andromeda Galaxy, would the value of my gold holdings change? How would that be different than holding it in a bank? The spaceship would be far more secure and a transfer of my holdings wouldn't be any different than it currently is, all I would do is handover the title to the spaceship. If you buy gold today, all you do is see a number change on your computer screen, you wouldn't know if it was on Earth or not. Gold is just as productive inside the Kuiper belt as it is outside.

X-Runner wrote:

It looks like it is a speculative hot potato.

It has no earnings. Pays no dividends.

You can't live in it or rent it.

Starting to sound like America, brother.

;^*

TCB wrote:

Okay, let me put this another way. If I built a really powerful spaceship, loaded it with 20 tons of gold, and shot it towards the Andromeda Galaxy, would the value of my gold holdings change? How would that be different than holding it in a bank? The spaceship would be far more secure and a transfer of my holdings wouldn't be any different than it currently is, all I would do is handover the title to the spaceship. If you buy gold today, all you do is see a number change on your computer screen, you wouldn't know if it was on Earth or not. Gold is just as productive inside the Kuiper belt as it is outside.

Gold is mined, its quantity is hard to change thus hard to control.

Paper is printed, its quantity is very easy to change thus easy control.

The big boys don't like little peons like yourselves owning Gold and Silver, so I suggest you turn it into numismatic pieces, or jewelry. I'm not saying buy numismatic pieces or jewelry (horrible markup), but 'turn' your Gold into Jewelry.

Look, if we want the money supply to grow at a really slow rate (<1%) then that is something we can do at a much lower cost without having a gold standard. Gold is just a middle step, a meaningless means towards an end. We don't have a gold standard because this country has goals other than price control, ie full employment, which is a much more serious issue than inflation is at this time. Milton Freedman encouraged us to get off the gold standard because it was extremely inefficient and destructive. If the government is going to lie to us about how much money they are printing, what would be there to stop them from lying to us about how much gold they have? Stop this paranoia and put your money into something that makes people's lives better.

Paper money is a great idea...

a really great idea and a great way to keep money supply growing at a slow rate.

The problem is the chimpanzees that run the printing presses printing a little extra for themselves and their friends.

Book cooking, skimming, corruption...

CNN, Flagpole, and most of you act like humans have stopped this activity, when in reality they haven't at all.

Well HELLO!