prior to 2005 gold prices did not keep up with inflation
And since 2005.... Facts do get in the way don't they.
Originally Posted by MacLorry
I posted the last 5 years results on VIPSX, not TIPS. I get a laugh out of those who don't see the downside risk in current gold prices and want to tell others about investing.
Ironic isn't it? You don't even realize what type of fund you are suggesting or what it's invested in let alone the risks. I guess that's what happens when "investors" like yourself use articles you don't understand. Starting to see why so many others have you on ignore.
BTW Your TIPS fund (VIPSX) has returned a whopping 7.5% over the last ten years. Gold has increased 300+% over the last ten years. Inflation has averaged roughly 3% per year over the last ten years. I'd say Gold has had inflation beat a wee bit longer than 2005.
And since 2005...Facts do get in the way don't they.
Never said gold hasn't risen rapidly since 2005. In fact, the graph I posted shows this fast rise as well as gold's poor performance in the years prior to 2005. It's you who have the blinders on.
Originally Posted by Stetson
Ironic isn't it? You don't even realize what type of fund you are suggesting or what it's invested in let alone the risks. I guess that's what happens when "investors" like yourself use articles you don't understand.
Yes, VIPSX invests in TIPS, but the part you missed is that they have invested in them over 10 plus years, so you looking at current TIPS yields shows your beginner status as an investor.
Originally Posted by Stetson
BTW Your TIPS fund (VIPSX) has returned a whopping 7.5% over the last ten years. Gold has increased 300+% over the last ten years. Inflation has averaged roughly 3% per year over the last ten years. I'd say Gold has had inflation beat a wee bit longer than 2005.
BTW you don't know what you are talking about. Like the beginner you are you only looked at share price, you missed all the dividends that were paid out. In the last 10 years an investment in VIPSX has doubled so it has gained against inflation and will do even better if inflation increases. If you don't think inflation is going to be a problem why would you buy gold? If your goal is to maximize your return and don't mind taking risk you can do better buying Apple stock or investing in international funds. Maybe you think gold has no downside risk.
The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets. Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order. But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Sch�uble, the German finance minister, does not believe that any government would be able to implement them.
His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.
"He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he - and a growing group - are convinced it will not pull Greece out the hole," said a eurozone official.
While it is laudable for the Europeans to try to bail out Greece (they have a big stake in the success of the Euro as well), I'm afraid it is just a case of throwing good money after bad.
Gold is a commodity and its' volatility has been great (on the upside for the past few years). Adjusted for inflation, done well, but it is a commodity and the price can fall precipitously. Additionally, gold costs money to hold, store and sell (needs to be assayed plus there are commissions); these are costs that are generally not considered by buyers.
I looked at the actual yield as stated by VanGuard (pre-tax). I'm confident their numbers are accurate. But hey I'll agree, if you put 10K in VSPIX ten years ago you would have gained a whopping 10K Vs the 58K gain with the same investment in Gold over the same period. International funds huh. Maybe you should buy NBG. Let the guys know (at least those who are not ignoring you) how it works out.
Additionally, gold costs money to hold, store and sell (needs to be assayed plus there are commissions); these are costs that are generally not considered by buyers.
Most buyers don't consider those costs because to the vast majority buying bullion they don't apply. Most investors today who have larger positions in Gold use the GLD. They do have a small maintenace fee (.5% ?) that covers storage, insurance etc. It's pretty minor in either event compared to the tax for trading Gold Vs regular Cap gains tax.
I looked at the actual yield as stated by VanGuard (pre-tax). I'm confident their numbers are accurate. But hey I'll agree, if you put 10K in VSPIX ten years ago you would have gained a whopping 10K Vs the 58K gain with the same investment in Gold over the same period.
So you admit your "7.5% over the last ten years" number was wrong. Well that's a start. A 10k gain on a 10k investment is a doubling of money as I said. Invest the same 10k in gold 10 years ago and you say it would be worth 58K, but put the same 10k in Apple stock (AAPL) 10 years ago and it would be worth 410k today. Hindsight is fun game, but offers limited value for investing.
VIPSX and funds like it are a low risk way of hedging against high inflation that many are worried about without exposing themselves to the downside risk of gold. If you really believe the worst case scenario is coming, then buy the things you need to survive now rather than buying gold in hopes you can buy the things you need in the aftermath of a disaster.
ETF stands for Exchange Traded Funds. Unlike small time hoarders who buy physical gold in anticipation of an economic collapse, gold speculators go the gold ETF route so they can get in and out of the market in a flash come spike or crash. Those are the folks who will make money and leave the physical gold buyers holding the bag.
Originally Posted by Stetson
International funds huh. Maybe you should buy NBG. Let the guys know (at least those who are not ignoring you) how it works out.
I'll pick my own stocks, but if you think NBG (National Bank of Greece) is good, go for it.
whoa fellers, we're not talking about someone's wife or kids here, it's just investing and all the different ways to skin a cat.
true, some folks have some significant sums invested in different vehicles and with casting the die that heavy in one direction we can certainly get emotional about our investments as our loved ones are depending on us to take care of them in all types of economies.
just think this is a really useful discussion for me and perhaps others that don't think they've got it "nailed" on how to invest.
I'd hate to lose any participants in the discussion because it just gets too nasty to participate.
not telling anyone what to do mind you, just asking for civil behavior so we can find points we agree or disagree on without becoming disagreeable with each other.
with that said, MacLorry or others, if you'd be so inclined, I'd really appreciate how you think our economy grows or booms again especially in light of the ever increasing Fed debt (which I've noted I believe is understated)
the first thing that comes to mind for me is balls to the walls domestic energy extraction and production, it's an industry that requires white collar workers, i.e. engineers, and a highly skilled blue collar work force (often supplied by yes, dare I say it, UNIONS, lol)
that would help grow the economy significantly, add many jobs, add to the tax rolls without necessarily increasing taxes, or smaller increases if needed to start to whittle down our debt
but the debt is very, very large and we've lived in a large portion of a false economy based upon gov't spending of money they don't have
if we're to have serious debt reduction, we must both raise revenue at this point whether by increased economic activity, or higher taxes or some combo of both AND significantly cut gov't spending
it's all possible the above, but it will require real change from our current policies, not just sound bytes for a political campaign.
with change comes uncertainty for many folks
my analysis to date leads me to believe if we are to undertake the changes we need to seriously address our spending problem, then we'll see some of that uncertainty.
my best guesstimate is gold will indeed benefit from that uncertainty.
I never ever thought I'd consider buying gold at these levels.
but I am, though I'm always looking for another way to skin the cat, and the TIPS gig may have some merit, more due diligence is necessary on my part.
I'm lucky that my breakeven point on the small amount of gold I hold is very, very low by todays prices.
I can't tell you for certain if we've seen a top in gold though, it's had a bit of a parabolic rise these last few years which can be an indication of a top
but there's also a case to be made that it is indeed the next APPL.
guys that bought APPL not that long ago at <$30 probably thought they'd seen a top too, when AAPL hit $150, after all it went up 5 times or more in value much as gold has.
buy low, sell high is simple but not easy, first one has to figure is the price high or low, often a more difficult task than seen at first glance just based on the examples above.
it would surprise me not much at all to see gold pull back 2-400 points, but it also wouldn't surprise me to see it in the low 2000ish an oz. based upon fundamentals, either before or after a pullback from current levels.
the guy I've read that has been scary accurate about financial affairs for a very long time, has a vested interest in gold climbing.
he's done his analysis, and has been extremely accurate in his calls.
still I have to wonder, (just skeptical by nature I guess) if his real analysis leads him to dump everything at 2K an ounce even though he claims it may go much higher than that.
I'm always glad to get others perspectives and analysis on current events, especially financial events.
tis evident to me MacLorry is no "novice" investor and I hope he'll continue to share his insights with us and his strategies for both wealth preservation and creation.
don't get me wrong, I've invested fairly heavily into pm's for my family's (hopeful) benefit, but I welcome the guys that poke holes in my analysis rather than just looking for guys that say "yeah buddy, sounds good to me" YMMV
I'm pretty certain when we sing our anthem and mention the land of the free, the original intent didn't mean cell phones, food stamps and birth control.
As long as you believe in a highly inflationary economy they do have a place for a small position. It's just not a good place to park with low inflation and will reverse course in a hurry if we approach deflation.
Originally Posted by 2legit2quit
MacLorry is no "novice" investor
From what I can see so far he's just another follow the pack type that lacks understanding for other strategies. That clearly "works" for some. No doubt he's one of the many that sold at the absolute bottom of the market a few years ago and parked his spoils in a "safe" fund while others were picking up on the buying opportunity of a lifetime. Most investors don't shun 300% gains and understand the rate of inflation. Probably the best indication we can see that McLorry is a "follower" is the suggestion to buy emerging market funds. Many if not most of which are heavily invested in foreign banks. Emerging Market funds are just the flavor of the moment for those who missed the US bank run over the last two months. Not every one with a 401K or IRA is an investor. In either event IMO one of the key aspects of investing is realizing that sometimes you have to make plays that are out of your comfort zone unless you are willing to watch many opportunities pass you by. With Gold some didn't just miss the boat. They never made it to the dock. They operate on the premise that no one could buy at the right time or sell at an opportune time. Nothing could be further from the truth. Many bought physical Gold or the GLD (Both sell quickly) just a few short years ago, made huge gains and then sold off enough that what they are left holding was paid for with capital gains. In essence their remaining investment cost them nothing. That's what an investor does, at least from my perspective. Some one asked why I buy Gold if I'm not worried about inflation- The answer is because the market doesn't always respond logically and I like investments that I can see are solid buys. To me it was a no brainer when Gold was under $400 an ounce. We had those discussions right here on the Fire several years ago with the same naysayers suggesting it was a poor move. They were the majority with that view.
whoa fellers, we're not talking about someone's wife or kids here, it's just investing and all the different ways to skin a cat.
If we were only talking about investing I doubt we would be 150 posts into this topic. There's a consensus among many 24hr members who post on topics such as this that the collapse of the U.S. dollar/economy is inevitable. For them this is not about investing, it really is about their wife, kids, and their own survival.
As I have pointed out before, in such a collapse food would be in short supply. This is because our complex agriculture, transportation and distribution system would cease to exist or at least suffer great damage. It's not like it was at the start of the Great Depression when small family farms were the rule and where draft animals were still a major part of the farming process. Modern farming needs chemical fertilizers, herbicides, pesticides, equipment, spare parts, and fossil fuel as does the transportation and distribution systems. How do you run that without a working economy?
Depending on the timing, extent and depth of the crises, food production and distribution could experience a 75% shortfall and many would die of starvation. If you find yourself in that situation, what would you rather have, gold or food? If you have the means to have both, then great. If you have the means and really want to be prepaid for the worst case then move to a farm and buy all the food, fuel, medicine, tools, spare parts, guns, ammo, and supplies that you'll need for many years.
If you don't have the means to prepare for every contingency and/or don't see the collapse of the U.S. dollar/economy as inevitable, what can a person do to protect their assets? I've suggested investing in TIPS through various funds as a relatively low risk way of protecting assets from any level of inflation. Yes, gold is another way to do that, but it's become apparent that there is a significant downside risk at current prices as explained by Jon Nadler in the links I have posted.
Originally Posted by 2legit2quit
with that said, MacLorry or others, if you'd be so inclined, I'd really appreciate how you think our economy grows or booms again especially in light of the ever increasing Fed debt (which I've noted I believe is understated)
I have posted before that there's this thing known by some as the Brazilian plan. It's how Brazil got out of their mess, which was to institute high inflation (it got up to 5,000%), but allow citizens to protect their assets through special accounts. The plan basically erases the debt without a technical default.
The Treasure only started issuing TIPS in 1997 and would stop issuing new TIPS around the time the Brazilian plan is put into high gear, so you have to be invested before high inflation hits in order to make out. The other means Brazil used was to allow citizens to place money in overnight accounts that gained enough interest in one night to offset the average daily inflation rate, but deposits had to be made in person each day, which meant long lines at the bank, but that requirement filtered out foreign investors.
Given a choice between monetizing the debt or allowing the dollar/economy to collapse, guess which choice the American people will pick? Some think the people will choose mass suicide, but I don't.
It seems China and Russia realize the U.S. is in the process of monetizeing the debt and are reducing their exposure to the dollar. Myself, I'm investing in TIPS funds, real property, and other known anti-inflation investments along with 25-year shelf-life food just in case people do choose mass suicide over inflation. I do have gold and silver, but I bought it when it was cheap, so I have no downside risk of holding it.
Wow that last paragraph was telling Mac, thank you for candidly discussing your positioning and thoughts on these matters.
unless I'm missing something here, your earlier advice is more towards folks just now beginning to smell a rat or that didn't have the means to protect their savings or possibly no savings to protect 10 years ago.
don't expect you to follow my posts, but I mentioned awhile back if anyone told me I'd be buying gold at $1550 versus selling what I'd purchased I'd have laughed at them.
but times change and hopefully so do our strategies to adapt to those changes.
right now it looks like it was an okay move to buy a little more at 1550, but it has driven up my b/e point to almost $450 an oz.
but we were sitting on too much cash, (yes I know what a blessing it is to have that problem in this day and age) and I was worried about the US$ declining even more in the years to come, so yes we did indeed move some more to PM's
I too have farm land, but it's a long ways away from where I sit.
a real long way, we just lease the land out to real farmers.
While we have food stuffs and a place to retreat to, that would be extremely difficult for other folks to get to with a little judicious use of a chainsaw, I take some comfort if in the event the "mass suicide" you mention takes place we'd have a place to sit out the confusion in relative peace.
thank you for the links provided, I hope you don't feel I'm chewing upon your ankles, but do you have any links to where one purchases foodstuffs with a 25 year shelf life?
I've mostly got the cans of MH stuff which I believe is a 10 year shelf life.
as I've mentioned here before, oz's of gold are not to buy a loaf of bread, but to buy a bakery or a field of wheat when the dust settles.
silver will/would be used to purchase basic necessities that are available (if any)
but the best resource in truly dire times is to be as self sustainable as possible without much need to purchase much of anything. Believe it's called preparation. I call it insurance.
lest anyone think I'm subscribing to the doom and gloom prophecies, I'm not, we're continuing to expand our businesses, to hopefully rake even more US$'s.
but these times seem to me to certainly call for some prudence in a "what if" scenario. More so than I've ever witnessed in my adult life of half a century.
really appreciate all you guys sharing your strategies, it just confirms my view that the campfire is filled with guys with above average intelligence
and I personally find these types of conversations useful in my positioning to do the best I can for my family.
my hat goes off to all you gents. Thank you for your additions to this conversation.
I'm pretty certain when we sing our anthem and mention the land of the free, the original intent didn't mean cell phones, food stamps and birth control.
food, lead, will be far more valuable than gold if things went really south.
but things don't stay south forever
that's when gold plays a role in wealth creation and preservation imo.
I'm pretty certain when we sing our anthem and mention the land of the free, the original intent didn't mean cell phones, food stamps and birth control.
It seems China and Russia realize the U.S. is in the process of monetizeing the debt and are reducing their exposure to the dollar. Myself, I'm investing in TIPS funds, real property, and other known anti-inflation investments along with 25-year shelf-life food just in case people do choose mass suicide over inflation. I do have gold and silver, but I bought it when it was cheap, so I have no downside risk of holding it.
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MacLorry - It seems that our actual investment mix is more similar than I would have guessed. With the exception of the TIPS and the 25 yr shelf-life food, the remainder is very similar. My real estate investment is in a substantial number of farms, which gained 34% in value last year. I can thank the Fed for QE which is why farmland has proven to be a great place to invest. IMO I would stay away from residential realestate, as I believe that the correction in prices still has substaintial downside yet. You and I agree that the Fed is likely to continue to monetize the debt. The more money that is created, the higher commodities and thus farmland should rise. So as the price of land in dollars rises, real estate taxes will rise also. History has seen farms that were without any mortgage, lost to taxes. With that being said, precious metals are a hedge against inflation, and thus having some PMs in an investment portfolio provides insurance against rapidly rising real estate taxes. The 34% gain I saw in the falue of my farms last year can be expected to produce 34% more in real estate taxes next year. The income produced by the farms can not always be expected to rise with the value of the land.
I disagree on one key point. I don't believe there will be massive starvation in an economic crises. In a worst case scenario Marshall Law and govt takeover of critical infrastructure could avert this. However, it would require fast action by the govt but as long as measures could be implemented prior to the springtime growing season we could produce more than enough food.
The US has more than ample ability to feed the population. We're a net exporter of food. The large agricultural corporations capable of producing vast quantities of basic foods make this even more viable than in the days of small family owned farms. The corporate systems of transportation, wholesalers and supermarkets limits the number of entities that would need to be regulated, subsidized or given priorities to in order to remain functional. Think Walmart, General Mills, Kraft Foods, Tyson Foods, etc.
There would be disruptions in distribution and even chaos for a limited time but the problems could be sorted out. The US govt will never disappear and if all the resources of the govt are brought to bear almost anything can be overcome.
I fully understand the concept of "too big to fail" but the last industries to fail would be food suppliers and their related infrastructure. No matter how bad things get, people will continue to buy food. That will keep these businesses from going under ... for awhile ... at least long enough for ...
But ... What will actually happen and could the govt accomplish this? Who knows for sure.
There are two main problems with TIPS as a good inflation hedge in my opinion. First is the utilization of the CPI-U. I am not convinced it is anywhere close to the accurate figure for real inflation thus the crediting to the TIPS' principal is limited.
The larger problem of buying TIPS in the current interest rate environment is the uber long duration of these bonds. The duration (duration is not the same as maturity) of these bonds is so long due to the low to virtually no interest they are paying. If and when interest rates really kick up, then these bonds will be slaughtered in price.
The CPI adjustments won't be enough to compensate. You will have to hold them to maturity and I bet you won't feel they were such a good deal when all is said and done.
I agree 100%. Your first paragraph says alot! I just can't bring myself to lock in rates at this level for such a long term. There are too many things that are changing far to fast for me to be comfortable with TIPS. Some will say they are buying them for the same reason. They have their place, but not for me at this time.
My real estate investment is in a substantial number of farms, which gained 34% in value last year. I can thank the Fed for QE which is why farmland has proven to be a great place to invest.
I have to give a hat tip to you for having the brass tacks to invest in land of any sort over the last few years. While completely unrelated I was "lucky" enough to sell a parcel of hunting land right before the collapse. That October day just a few years ago was right at the same time the market was tanking. I will never forget going to deposit the check and people were lined up at the bank with gym bags, brief cases, just about any thing they could stuff money in. It truly is amazing how our Government put the lid on that because every bank around here that day had lines of people wanting their money and not a peep of that made the news. Ag stocks have always been a favorite but lately I've been hearing farm land has shot up so high there is fear of a bubble there. Any thoughts on that? BTW any one catch the move on the rails today?
