Page 76 of 148

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 6:44 am
by sophie
Cortopassi wrote:
Thu Jul 05, 2018 8:05 am
Sophie, you know better than anyone that so much of this is psychology. "New record highs" are, and have been, touted so often on the news, and drops explained away with having isolated specific reasons, it leaves one with the fear of missing out. There is never a time to not be in the markets, according to 98% of any financial reporter and analysts, because it is their job to keep you in. Earning estimates get tweaked quietly along the way so companies rarely do not beat estimates. And so on.

You don't hear about the S&P dead period between 2000 and 2013. All you hear about is the incredible rise from the low point in 2009.

Conversely, you don't hear about the great run gold had from 2000-2011, you hear about it still being down from the peak in 2011.

If you think about it, it is amazingly one sided. Virtually any news outlet that reports market information as a short segment only ever shows Dow, S&P and Nasdaq. Completely ignoring bonds even though it is a much larger market, rarely touching the dollar and currencies, and almost never on precious metals.

Better to tune it out and stick with something you can live with!
+1!!!

I don't really know why stocks have been blessed as the "gold standard" of the investing world. Historically, gold and real estate have fulfilled that role, like the Talmud recommends. Maybe it's just because stocks are so much more suited to investing ADHD than gold or bonds, and lots more fun to report on the news.

In traditional societies like India, China, and the Middle East, gold is still the traditional store of wealth. I think part of gold's runup in the 2000's was due to increased wealth in those countries (probably largely from US importing and outsourcing) leading to increased gold purchases. A friend from Iran who maintains a very traditional lifestyle here in the U.S. will only invest in gold bars. She buys them from a dealer in an Middle Eastern ethnic neighborhood where everyone is doing the same thing. She says she doesn't trust the stock market, considers it something relatively new and non-traditional, and therefore not safe.

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 8:06 am
by buddtholomew
I’m waiting for investors to realize interest rates are going lower again and at that point I hope to see gold rally.

Until then bubkis
Just for the record, UUP -.44, gold -.08
Go SCV, make me rich while offsetting my gold losses.
Sad...

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 10:15 am
by Kbg
Stocks are the “gold standard” because in a free market system they flat out deliver better results. This is undisputed across all economies (that remained free) and long time periods. They enable participation in economic growth better than any other instrument and have baked in inflation protection to boot.

All the above does not mean stocks don’t suck at times which can last for quite a while and of course they come with a healthy dose of volatility.

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 10:44 am
by Cortopassi
Kbg, well, I'm not sure about that. See below. In the 51 years I have been alive, an investment in gold on my birth date would have been better...as it would have at various other start times, as expected. Blue is Dow, Red S&P

http://www.longtermtrends.net/stocks-vs ... omparison/

Image

-----------From the day I started working

Image

----------From the dot com bubble high

Image

---------From the 2009 market low

Image

--------And when you zoom out to 100 years, some disconnect seems to have happened since that 2009 low. Whether it is HFT, or some other process, the rise of stocks seems unprecedented.

Image

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 11:52 am
by Cortopassi
Desert wrote:
Fri Jul 06, 2018 11:26 am
That chart since 1967 is not correct. I'm guessing it doesn't include dividends. US stocks have absolutely crushed gold over the past 51 years.
Well dammit, more fake news. ;D

If you have another one, I'd be interested. In the meantime, this interesting article came up:

https://seekingalpha.com/article/405589 ... p-500-gold

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 11:54 am
by Tyler
I just checked, and sugar still tastes much better than flour, eggs, and baking powder. The backtesting is very consistent on this, and I'm pretty confident that trend will continue. My next batch of cookies will thus be made with 100% sugar. Wish me luck!

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 1:40 pm
by Kbg
I'm glad someone flagged the above as deceptive.

Let's try a reputable site (and note starting points make a BIG difference):

https://www.portfoliovisualizer.com/bac ... allocation

100% Gold vs. 100% US Total Stock Mkt (CAGR) through 5/31/18

1/1/72 Start: 7.47/10.37
1/1/82: 3.13/11.24
1/1/92: 4.84/9.55
1/1/02: 9.52/7.98
1/1/12: -3.23/14.92

Same as above, but cherry picking favorable dates for each asset class

1/1/72 - 12/31/80 (Gold Bull): 33.59/8.59
1/1/75 - 12/31/00 (Stock Bull): 1.45/15.73
1/1/81 - 12/31/99 (Gold Bear): -3.65/15.91
1/1/00 - 12/31/11 (Gold Bull): 14.77/1.18
1/1/00 - 12/31/02 (Stock Bear): 5.63/-14.31
1/1/08 - 12/31/08 (Stock Bear): 4.92/-37.04
1/1/11 - 12/31/15 (Gold Bear): -9.16/14.98
1/1/09 - 5/31/18 (Stock Bull): 3.82/14.95

So now that we have some unbiased and deliberately biased data points, what are our conclusions?

Perhaps some data will help...50/50 split between the two assets added to the end of the first table.

1/1/72: 7.47/10.37/10.24
1/1/82: 3.13/11.24/7.89
1/1/92: 4.84/9.55/7.93
1/1/02: 9.52/7.98/9.56
1/1/12: -3.23/14.92/6.34

If one runs the site's Monte Carlo simulation using the default values (the main thing is an annual 4.5% withdrawal rate) and the 10 percentile (bad luck) results you will note the following:

There is a 100% chance of running out of portfolio with a 100% stock or gold portfolio.

Best performance is 50/50 stock gold
Safest is the PP or 1/3rd each to Stk/Gld/LTTs

And for a slight twist...a simple dual momentum approach works quite well and beats a 50/50 port

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 2:32 pm
by Tyler
Desert wrote:
Fri Jul 06, 2018 2:24 pm
That's the agnostic recipe. All other recipes are making a bet that one of those ingredients is more important.
Ha! Touche. 8)

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 5:04 pm
by dualstow
Everyone keeps telling me the flavor boost is already baked in, and yet I see no option other than to participate.
Tyler wrote:
Fri Jul 06, 2018 11:54 am
I just checked, and sugar still tastes much better than flour, eggs, and baking powder. The backtesting is very consistent on this, and I'm pretty confident that trend will continue. My next batch of cookies will thus be made with 100% sugar. Wish me luck!

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 8:09 pm
by eufo
I thought the most important ingredient in cookies was love. :P

I dig the cookie analogy.

Re: The GOLD scream room

Posted: Fri Jul 06, 2018 8:51 pm
by buddtholomew
Who adds the same amount of sugar as flour?

Might as well learn to live with it since it’s staying put.

Re: The GOLD scream room

Posted: Sat Jul 07, 2018 4:38 am
by dualstow
buddtholomew wrote:
Fri Jul 06, 2018 8:51 pm
Who adds the same amount of sugar as flour?.
https://www.allrecipes.com/recipe/7820/ ... heet-cake/

Re: The GOLD scream room

Posted: Sat Jul 07, 2018 5:53 am
by ochotona
Gold bullion is to sugar as a gold ETF is to ... (complete this analogy)

Re: The GOLD scream room

Posted: Sat Jul 07, 2018 6:27 am
by dualstow
ochotona wrote:
Sat Jul 07, 2018 5:53 am
Gold bullion is to sugar as a gold ETF is to ... (complete this analogy)
A(u)spertame?

Re: The GOLD scream room

Posted: Sat Jul 07, 2018 6:34 am
by Kriegsspiel
Sugar-based demurrage currency?

Re: The GOLD scream room

Posted: Sat Jul 07, 2018 7:13 am
by buddtholomew
dualstow wrote:
Sat Jul 07, 2018 4:38 am
buddtholomew wrote:
Fri Jul 06, 2018 8:51 pm
Who adds the same amount of sugar as flour?.
https://www.allrecipes.com/recipe/7820/ ... heet-cake/
Haha...maybe sheet cake and the PP have more in common than I imagined...

Re: The GOLD scream room

Posted: Sun Jul 08, 2018 11:32 am
by sophie
Weird how in the past two pages there are three different sets of numbers for gold vs stocks since 1967. The chart that shows gold beating the pants off stocks over a 51 year period, by the way, DOES include dividends.

The original point is that you don't want to get hung up watching any particular asset slide, like stocks at various times OR gold in the past 7 years. Because, the slides can last a LONG time for either asset. This is why you want to own both even if one asset is in the crapper. It's because the duration of those slides is very large compared to your investing time horizon.

In other words and continuing this awesome Tyler analogy - bake your cookies with the oven light off and go take a walk or something instead of watching them! The antidote to short investing time horizons isn't to brood over which type of chocolate chip is melting the fastest, it's to hold more cash (storebought cookies?) so you can avoid digging into your cookies for long periods if necessary.

Re: The GOLD scream room

Posted: Sun Jul 08, 2018 11:46 am
by l82start
Image

Re: The GOLD scream room

Posted: Sun Jul 08, 2018 12:12 pm
by dualstow
O0
sophie wrote:
Sun Jul 08, 2018 11:32 am
...
In other words and continuing this awesome Tyler analogy - bake your cookies with the oven light off and go take a walk or something instead of watching them! The antidote to short investing time horizons isn't to brood over which type of chocolate chip is melting the fastest, it's to hold more cash (storebought cookies?) so you can avoid digging into your cookies for long periods if necessary.
Cash is the flour. Hey, at least I didn't say dough.

Re: The GOLD scream room

Posted: Mon Jul 09, 2018 8:16 am
by Cortopassi
desert,

If you look at the underlying data on those charts, there is no data for gold before 12/31/1968 (that I could see). Don't know if that is inferred because it was static, but anyway, my chosen start of 5/17/1967 is close enough to the 1/1/1968 when the data started.

If I look at the prices then and now:
---------------------
Gold: 1968: $35.18, 2018: $1254, gain of 35.64x

S&P: 1968: 95.04, 2018: 2633, gain of 27.7x
----------------------
So assuming that underlying data is correct, gold still is ahead (unsure of whether dividends are added in)

https://www.quandl.com/data/MULTPL/SP50 ... e-by-Month

https://www.quandl.com/data/LBMA/GOLD-G ... don-Fixing

Re: The GOLD scream room

Posted: Mon Jul 09, 2018 10:34 am
by Cortopassi
desert, thanks.

Yeah, it is quite annoying/frustrating when you run into a website touting gold that has selective dates on the charts they show, especially around the 2011 peak, and then not continuing forward to current day, even though the articles are "current." If that sucks people in, it is unfortunate.

Re: The GOLD scream room

Posted: Mon Jul 09, 2018 11:37 am
by Kbg
Desert wrote:
Mon Jul 09, 2018 10:36 am
Cortopassi wrote:
Mon Jul 09, 2018 10:34 am
desert, thanks.

Yeah, it is quite annoying/frustrating when you run into a website touting gold that has selective dates on the charts they show, especially around the 2011 peak, and then not continuing forward to current day, even though the articles are "current." If that sucks people in, it is unfortunate.
Yeah, I agree. Thanks.
There is a a lot of this out there...single starting point (date) analysis is really a useless exercise in self-deception. I stopped banging this drum a while back, but what the heck...one more bang. It's not the asset class you should be focusing on...its the portfolio.

Re: The GOLD scream room

Posted: Mon Jul 09, 2018 5:11 pm
by Pet Hog
I've done a bit of sleuthing about the S&P 500 and whether it includes dividends or not. The Longtermtrends site claims that the S&P 500 is a total return index with dividends included:
Also, the S&P 500 is a total return index, in which all resulting cash payouts (including dividends) are automatically reinvested back into the fund itself.
That's somewhat true, depending which S&P 500 data you look at. If you visit the quandl site they provide as their source of S&P 500 data, you'll see that the latest value is 2633.45:
Latest Values

Date
2018-04-01
Value
2,633.45
That's the "price return" (PR) value of the S&P 500: the commonly quoted value. It's not the "total return" (TR) value, including dividends. From the "Methodology" pdf available from the S&P website:
S&P Dow Jones Indices calculates multiple return types which vary based on the treatment of regular cash dividends. The classification of regular cash dividends is determined by S&P Dow Jones Indices.
 Price Return (PR) versions are calculated without adjustments for regular cash dividends.
 Gross Total Return (TR) versions reinvest regular cash dividends at the close on the ex-date
without consideration for withholding taxes.
 Net Total Return (NTR) versions, if available, reinvest regular cash dividends at the close on the ex-date after the deduction of applicable withholding taxes.
Also, from wikipedia:
The "S&P 500" generally quoted is a price return index
The total return value of the S&P 500 is, according to the factsheet available at the S&P website, 5350.83, as of June 29, 2018 (price return value is 2718.37). So, pretty much double the return, since inception, with dividends reinvested. In other words, the S&P 500 beat gold handsomely over the last 50 years and those charts at Longtermtrends should be trusted only with the knowledge that the stock data do not consider dividends.

Re: The GOLD scream room

Posted: Mon Jul 09, 2018 7:44 pm
by Cortopassi
This is the kind of stuff I wish I had someone around to teach me when I was 22. Sigh.

Re: The GOLD scream room

Posted: Tue Jul 10, 2018 6:52 am
by 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.