Unknown Unknowns

[Lone Wolf]

A more appropriate question is, "given a 30 [or 40 or 50] year time horizon, would you rather own $100 of global index fund or a $100 gold coin?"  I can imagine scenarios in which one would be better off with the gold coin, but at least 50% of the time (if not 90% of the time), $100 of global index fund is going to beat $100 of gold coin over a "short" period of a few decades.

This is why you're both right.

We don't know exactly where our 50-year time horizon falls on history's windy, pothole-riddled road.  Are we in the middle of a century of uninterrupted prosperity?  If so, who would want to hang on to a lump of shiny metal?  Stocks will provide the far better return.

Or are we about to travel over a bumpy, chaotic decade where promises will be broken left and right?  In times like these, stocks, bonds and cash are just more promises, and throughout history, the value of so many promises has fallen to 0.  You want to have a real, objective store of value, and you want to have it before everybody else is stampeding for the exits.

If we knew where we were on the path of history, investing would be easy.  (Thus the desire to believe we can predict the future.)  Unfortunately, I don't believe that it's possible to reliably tell whether we will be entering dark, rocky times... or whether we are on the cusp of a golden age.  History is filled with both.

[MediumTex]

Lone Wolf's comments are what I was getting at.

History is full of irregular transitions and in retrospect it becomes obvious just how unpredictable the world really is.

If I sat you down in 1900 with a pencil and paper and asked you to tell me about the next 100 years, how many good calls do you think you would have made?

Would you have predicted the Wright Brothers and manned flight?

Would you have predicted manned landings on the Moon several decades later?

Would you have predicted two world wars (as opposed to one or three)?

Would you have predicted the largest disease-related human die off in history in the form of the Spanish Flu pandemic?

I enjoy reading H.G. Wells' writing. He made some great predictions about the future in his works.  What is noteworthy, though, is how off the mark some of Wells' predictions were.  Technological progress has not followed an uninterrupted upward path, world government has not occurred, and the flaws in collectivist political thinking have been exposed time and again.

At any point in time, countless very long term trends are in the process of beginning and ending.  Even a 500 year trend has a not insignificant chance of beginning or ending during an average investor's time horizon of 40 or 50 years.

The thing I like about the PP is that it protects one against upheavel, while also allowing one to participate fully in the prosperity that may come along during periods of stability.

[dualstow]

Interesting thread. I'm still fairly new to gold, but this discussion reminds me that I may be willing away more than I spend. It'll be nice to leave some shiny metal in the will in addition to stocks for many reasons stated above.