The GOLD scream room

[sophie]

Yes, the point of gold is not about returns, it's about stabilizing portfolio value over the short term. Which can be quite long from the point of view of an individual investor.

My original point wasn't about cherry picking dates, it was that there have been long stretches where stocks perform very poorly. The typical response to this of "but look at how well the S&P 500 performs over a 50 year period!" is not helpful, unless your investing time horizon is that long. For most people, a 5 year time horizon is about as good as it gets.

I still don't get the return #s you're all quoting though. 10% CAGR over the long term for stocks sounds great, but it ignores a lot of realities. There is a huge boost from inflation that gold was unable to participate in by definition, prior to 1972 - sort of like how your crappy salary in the 1970s provides an outsize contribution to your social security calculation because it includes an inflation factor. You'll note that CAGR in more recent times is lower than that (~5-6%) because it doesn't get to benefit from inflation. I think ~6% is frankly a more realistic expectation for stocks.

[Kbg]

Hopefully everyone has figured this out...the posts showing gold beating stocks when measured by total return are wrong. End of story. A free market in gold did not exist in the US from the Great Depression to the early 70s (and due to gold's tie to the US dollar and its economic dominance in the world at the time the gold market was controlled and warped similar to how fiat currencies are today).

I think my post on 7/6 was/is very helpful to anyone who will spend the time to study it. There are a lot of good lessons to be learned from it. Sophie's point is exactly correct...there are long stretches of time when gold out performs (but they are reasonably rare when compared to stocks). However, there are long stretches of time when any asset will underperform. The investor has three basic strategies to deal with this fact of life. Assume you can't predict the future and diversify (PP being one option for this), use momentum or use value (which is really mean reversion at its root).

Advanced investors will normally implement any of the above with a significant does of negative or non-correlation when picking assets. The PP is very much in that mode.

Side note: Meb Faber (with good reason) refers to what he calls the 5/2/1 rule which is basically over the long haul you get 5% real from stocks, 2% real from bonds and 1% real for bills. Gold is also in the 1% category but with a whopping larger dose of volatility over bills.

http://mebfaber.com/2016/09/27/the-521-rule/

[sophie]

Wha?

I completely agree that for money that you will stash away and not look at, access, or otherwise deal with for at least 20-30 years, 100% stocks is a great choice. If that were compatible with the human condition, there would be no need for the Permanent Portfolio, or indeed any stock/bond portfolio mixture. All I was trying to say is that any asset - gold included - can have multi-year losing streaks, where "multi" can reach into double digits. Reading between the lines, I *think* your response to that is that in the case of stocks it's irrelevant because of the performance of the S&P 500 over the last 50+ years.

And I think all this started when buddtholomew posted something about gold having a losing streak of 7 years and asking what other asset could do that. So I answered.

[Kbg]

I think the horse has been beaten down to glue now.

[buddtholomew]

Wha?

I completely agree that for money that you will stash away and not look at, access, or otherwise deal with for at least 20-30 years, 100% stocks is a great choice. If that were compatible with the human condition, there would be no need for the Permanent Portfolio, or indeed any stock/bond portfolio mixture. All I was trying to say is that any asset - gold included - can have multi-year losing streaks, where "multi" can reach into double digits. Reading between the lines, I *think* your response to that is that in the case of stocks it's irrelevant because of the performance of the S&P 500 over the last 50+ years.

And I think all this started when buddtholomew posted something about gold having a losing streak of 7 years and asking what other asset could do that. So I answered.

Thats not what I said.
I said it has performed the “worst” of all assets over the 7-year timeframe I have been invested.
You manipulated to make your point which was wrong.
Stocks outperformed Gold when including dividends.

Oh by the way, wholesale inflation jumps and your precious gold declines. Remarkable really, stocks and bonds are outperforming gold even today...trade et al.

[Cortopassi]

Conversely, tariffs kick in and stocks jump. Yeah, down a little today, but looking like they'll probably end green.

Nothing makes a lot of sense.

From Slope of Hope: "In a normal, rational market, a United States President openly declaring a trade war on the biggest economy on the planet and ratcheting it up with tariffs on $200 billion in goods would be a LIMIT-DOWN situation (followed by similar limit-down days, day after day, until he backpedaled). In this insane asylum, however, the NQ has already bounced 50 points off its panic low, and the ES is cheerfully healing itself."

Tell me stocks make sense in their reactions. About as much as gold.

[buddtholomew]

Conversely, tariffs kick in and stocks jump. Yeah, down a little today, but looking like they'll probably end green.

Nothing makes a lot of sense.

From Slope of Hope: "In a normal, rational market, a United States President openly declaring a trade war on the biggest economy on the planet and ratcheting it up with tariffs on $200 billion in goods would be a LIMIT-DOWN situation (followed by similar limit-down days, day after day, until he backpedaled). In this insane asylum, however, the NQ has already bounced 50 points off its panic low, and the ES is cheerfully healing itself."

Tell me stocks make sense in their reactions. About as much as gold.

Agree that nothing makes sense at all...
But the one common denominator is stocks +, gold - or stocks -, gold -.
That is clear as day.

[Cortopassi]

Conversely, tariffs kick in and stocks jump. Yeah, down a little today, but looking like they'll probably end green.

Nothing makes a lot of sense.

From Slope of Hope: "In a normal, rational market, a United States President openly declaring a trade war on the biggest economy on the planet and ratcheting it up with tariffs on $200 billion in goods would be a LIMIT-DOWN situation (followed by similar limit-down days, day after day, until he backpedaled). In this insane asylum, however, the NQ has already bounced 50 points off its panic low, and the ES is cheerfully healing itself."

Tell me stocks make sense in their reactions. About as much as gold.

Agree that nothing makes sense at all...
But the one common denominator is stocks +, gold - or stocks -, gold -.
That is clear as day.

You yanking my chain? Back to Sophie's point about long periods. Budd, what would you have been saying about the 6 year period I show below? You think it can't/won't happen again?

If anything, these excursions seem to get greater as time goes on. So I'd fully expect for the next stock downturn to be worse than 2008.



Or this even much longer period (I forgot I could use SPY). Actually this chart is likely wrong, GLD only goes back to late 2004, so gold would be higher.



Here's Kitco from 2000 to now. Gold blew the pants off stocks for 11 years.

[buddtholomew]

dupe

[buddtholomew]

Conversely, tariffs kick in and stocks jump. Yeah, down a little today, but looking like they'll probably end green.

Nothing makes a lot of sense.

From Slope of Hope: "In a normal, rational market, a United States President openly declaring a trade war on the biggest economy on the planet and ratcheting it up with tariffs on $200 billion in goods would be a LIMIT-DOWN situation (followed by similar limit-down days, day after day, until he backpedaled). In this insane asylum, however, the NQ has already bounced 50 points off its panic low, and the ES is cheerfully healing itself."

Tell me stocks make sense in their reactions. About as much as gold.

Agree that nothing makes sense at all...
But the one common denominator is stocks +, gold - or stocks -, gold -.
That is clear as day.

You yanking my chain? Back to Sophie's point about long periods. Budd, what would you have been saying about the 6 year period I show below? You think it can't/won't happen again?

If anything, these excursions seem to get greater as time goes on. So I'd fully expect for the next stock downturn to be worse than 2008.



Or this even much longer period (I forgot I could use SPY). Actually this chart is likely wrong, GLD only goes back to late 2004, so gold would be higher.



Here's Kitco from 2000 to now. Gold blew the pants off stocks for 11 years.

If I was invested in the PP over that timeframe I would have been posting in the Stock Scream room.

[Cortopassi]

Budd, no worries about having to post in the stock scream room anytime soon.

I think there should be another gold topic called the 5 stages of owning gold. Somewhere between depression and acceptance right now...

[buddtholomew]

Yes, I am at acceptance now Corto.
At some point you are just beaten into submission.

[ochotona]

I don't think we've really hit the bottom of sentiment. Honestly... a goodly fraction of Baby Boomers who hold gold are going to have to die, and then their Millennial heirs are going to sell it off when they inherit. Gold may go lower.

Someday we will hit a geological peak gold scenario, and then the US budget and debt problem will eventually flare up.

That's why I only hold 10%. Because it will be hard to hold onto through crap like we are going through now for year after year, but it could really take off, we just don't know when. Could be in 10 years. Then you won't be able to get physical when you need to. My 10% will rise to 25% of my portfolio, then I'll have a PP.

[barrett]

I don't think we've really hit the bottom of sentiment. Honestly... a goodly fraction of Baby Boomers who hold gold are going to have to die, and then their Millennial heirs are going to sell it off when they inherit. Gold may go lower.

Ocho, Do you have any good links on what percentage of his or her wealth the average Boomer has in gold? I would think it would be quite low (and that some of it might be stashed in long-forgotten hiding places!).

I found this little bit of terrible investing advice while searching for the answer to the above:

http://www.wyattresearch.com/article/wh ... -buy-gold/

For those of you uninterested in reading the link, it's a short article from late 2011 saying that one should hold off on buying stocks until an ounce of gold is worth roughly the same as the level of the Dow Industrial Index ("So for instance, if the Dow drops to 5000 and gold rises to $5,000 an ounce, I would sell my gold and buy the Dow.").

Ouch!!!

[ochotona]

I am sure the "average" Boomer has way less than 1% in gold, but what I mean is that many gold investors are grey haired. This is an asset class that most Millenials bypass. It's too old fashioned.

[dualstow]

(barrett wrote)
For those of you uninterested in reading the link, it's a short article from late 2011 saying that one should hold off on buying stocks until an ounce of gold is worth roughly the same as the level of the Dow Industrial Index ("So for instance, if the Dow drops to 5000 and gold rises to $5,000 an ounce, I would sell my gold and buy the Dow.").

Ouch!!!

ha!

[Cortopassi]

I found this little bit of terrible investing advice while searching for the answer to the above:

http://www.wyattresearch.com/article/wh ... -buy-gold/

People get married to an idea or position and have a hard time letting go, with pretty much anything. Here is a guy (who I used to read) who has been haranguing against Amazon for years... you can go go back to 2015 posts about him talking about shorting Amazon, and him doing it, and being underwater, but not worried. AMZN was $350. It is what, over $1800 now? And he still talks about their fraud and ponzi accounting (I assume waiting for the day they do crash, and then claim he was right).

http://investmentresearchdynamics.com/t ... rt-amazon/

From Apr 28, 2015: "Although shorting AMZN requires the ability and willingness to actively manage your risk exposure, it will ultimately be a grand-slam home run trade. "

But I am sure somehow it is justified in his mind that if it did go down a couple % for a short while after he posted his article, he was right.

[ochotona]

Look out below! $1231 now. Please touch $950 sometime in the next couple of years.

[buddtholomew]

Garbage, trash, whatever you want to call it.
Thank god for the anti-PP assets (SCV).
That’s right, Budd is an idiot don’t listen to his whining while gold steals all your hard earned money.

[Cortopassi]

Kind of sad, the angst this still causes.

My PP for the year has ranged from -1.85% to 2.66%, currently at -0.79%

Why on earth I still even look is beyond me. 2018 will likely be a lost year, whatever.

[buddtholomew]

Kind of sad, the angst this still causes.

My PP for the year has ranged from -1.85% to 2.66%, currently at -0.79%

Why on earth I still even look is beyond me. 2018 will likely be a lost year, whatever.

I have nothing left to say either.
Can’t help but feel like a lemming although I only have 7.5% total portfolio in Gold.
Could be worse thinking about other posters here.

[eufo]

Definitely looking forward to some more pain in gold. I don't have a particular target for spot that I'm wanting, but downward for now will help me accumulate.

MOAR GOLD!

A good friend of mine said I should get a parrot and be a pirate because of my gold (and now silver) coin interest.

ARRRRRR!!!! I BE TAKIN' ALL YER GOLD!

Admittedly, it's becoming a little bit of an obsession.

[Cortopassi]

Definitely looking forward to some more pain in gold. I don't have a particular target for spot that I'm wanting, but downward for now will help me accumulate.

MOAR GOLD!

A good friend of mine said I should get a parrot and be a pirate because of my gold (and now silver) coin interest.

ARRRRRR!!!! I BE TAKIN' ALL YER GOLD!

Admittedly, it's becoming a little bit of an obsession.

I'm sure I don't have to tell you, I still hear way too many people talking about it being on sale, backing up the truck, stacking more, etc. I still think gold deserves a darn good percentage, but don't get obsessed! It is a harsh mistress.

[portfolyness]

I'm seeding a portfolio for the first time right now with non-retirement-account money (i.e. money to either spend a couple years not working or eventually buy a home with in a few years), and from my perspective gold feels like the lagging asset to be focused on lumping into first - so I've just been watching the GLDM price and buying via robinhood for the moment and buying more as things dip (e.g. bought more today @ GLDM~12.29, though have also been screaming since I bought some PHYS/goldmoney back when gold was being marketed heavily (and wasn't financially organized) in 2011).

Any reason one should be doing otherwise? I'm still keeping most money in cash/treasuries and trying to finally coerce myself into seeding my stocks allocation (VTSAX/VSIAX/some VTMGX).

Having a hard time seeing gold crash to 950 again, but do remember the days when it was valued at 800 during the '08 election / recession.


EDIT: I should've read the other posts in this thread first - there's no good call on timing. Eh,finding myself buying small amounts anyway and watching where things go.

[eufo]

I'm sure I don't have to tell you, I still hear way too many people talking about it being on sale, backing up the truck, stacking more, etc.

Really? That hasn't been my experience. I hear FAR more calling gold a relic with no dividend or just not talking about gold at all. It is a hated asset right now, which makes me like it all the more.

I still think gold deserves a darn good percentage, but don't get obsessed! It is a harsh mistress.

Indeed, but still worth that dance.