The Golden Dilemma

[MachineGhost]

Here's an excellent paper that demolishes the arguments about why we hold gold, such as "gold is an inflation hedge", "gold is a currency hedge", "gold is an alternative asset to those with low returns", "gold is a safe haven/tail risk insurance", "gold is money/gold standard".

http://www.cfapubs.org/doi/pdf/10.2469/faj.v69.n4.1

This part tickled:

[Kriegsspiel]

I'm cool with the value of my gold being obliterated, if the trade-off is that we are able to mine asteroids.

[dualstow]

Interesting article. I skimmed. One thing it did not demolish is my drive to hold gold as part of a package. I mean, gold was a mystery to me when I got in, and it probably always will be.

The only thing that gets me down about gold is the markup, and on the non-physical side:

GLD does not generate any income, and as GLD regularly sells gold to pay for its ongoing expenses, the amount of gold represented by each Share will decline over time.

- https://www.spdrs.com/product/fund.seam?ticker=GLD

I'm cool with the value of my gold being obliterated, if the trade-off is that we are able to mine asteroids.

Same here.

[Dieter]

I'm cool with the value of my gold being obliterated, if the trade-off is that we are able to mine asteroids.

I'd hope I'd get out before 'obliterated', but yes.

[MachineGhost]

I didn't know that about GLD. That really sucks! But man, I'm sure the normal daily volatility of GLD dwarfs the tiny selling for the management fee.

One thing this paper (and another referenced paper) did was reinforce my belief in sticking to only semi-numismatic gold. I was going off the reservation lately, so I just nipped that in the bud. This is why:



Basically, you really don't want to own a commodity which are just cost inputs to capitalism. The risk of commodity gold losing "Greater Fool" lustre (pun intended) is high due to any of the previously mentioned illusions or asteroid mining. No one would melt down and/or confiscate semi-numismatic or numismatic gold, but buillion? A proverbial dime a dozen. The "value added" in coining made sense when gold was used as money but not now and the nil premiums reflect that pedestrianism.

[dualstow]

What do you mean here by going off the reservation? Starting to buy non-numismatic / bullion? That seems on the reservation. Or no gold at at all?
I'm always tempted by numismatic coins for a vp, although my dad just sold 95% of his coin collection because none of his kids or in-laws was interested.

I didn't know that about GLD. That really sucks! But man, I'm sure the normal daily volatility of GLD dwarfs the tiny selling for the management fee.

Oh, no doubt. I still hold more in ETFs than in coins (trying to change that) and there will always be expenses one way or another. I won't live long enough to really feel the bite of the shrinking amount of gold represented.

[MachineGhost]

What do you mean here by going off the reservation? Starting to buy non-numismatic / bullion? That seems on the reservation. Or no gold at at all?
I'm always tempted by numismatic coins for a vp, although my dad just sold 95% of his coin collection because none of his kids or in-laws was interested.

I was starting to accumulate common bullion bars because of the autoinvestment ease compared to the chore of having to update the prices and premiums every week to find the sweet spot coin to buy. Silly me!

What kind of coins did you dad sell?

Oh, no doubt. I still hold more in ETFs than in coins (trying to change that) and there will always be expenses one way or another. I won't live long enough to really feel the bite of the shrinking amount of gold represented.

But you may live long enough for that asteroid mining to kill your common bullion! That day won't be fun.

[dualstow]

Bars, wow. I want one, but my wiser half says that's only because it's fun in my case and we all know that's no reason to buy one. I might have to buy a silver bar just to get it out of my system.

What kind of coins did you dad sell?

Lots of historical US coins, nearly everything that wasn't gold. I haven't looked at the collection for a while, but there were a lot of St Gaudens coins, lots of coins from the 19th century, some pewter. It was very interesting to look at, but I wouldn't want to store it and worry about it. Glad he sold.

But you may live long enough for that asteroid mining to kill your common bullion! That day won't be fun.

I'm with kriegsspiel on that. Small price to pay for long life and/or that kind of technological innovation.
Currently at 9.74% gold.

[MachineGhost]

Bars, wow. I want one, but my wiser half says that's only because it's fun in my case and we all know that's no reason to buy one. I might have to buy a silver bar just to get it out of my system.

I agree with your wiser half. It's smooth, shiny and pretty, but vastly useless. No art value at all. No fungibility without assaying. It might as well be tungsten.

Lots of historical US coins, nearly everything that wasn't gold. I haven't looked at the collection for a while, but there were a lot of St Gaudens coins, lots of coins from the 19th century, some pewter. It was very interesting to look at, but I wouldn't want to store it and worry about it. Glad he sold.

That's a real shame. Those St. Gauden's are the most beautiful gold coins ever minted. I would have sold off everything but them and sent them in for grading. The common date St. Gauden's aren't worth much above spot but at least they're actually a piece of history. That's an intangible and irreplacable value.

I'm with kriegsspiel on that. Small price to pay for long life and/or that kind of technological innovation.
Currently at 9.74% gold.

Why so low? Are you not a PP believer? I 'm beginining to wonder if anyone around here ever actually does the 25x4. I imagine MT and Craigr are the only ones!

[dualstow]

I think he kept all the gold, so he has gold Gaudens.

Why so low? Are you not a PP believer? I 'm beginining to wonder if anyone around here ever actually does the 25x4.

I'm doing true blue 25x4. However, the Vp existed well before the pp and I have not done much to shrink it.
So, the pp is ~ 35% of my entire holdings. Lots of indie stocks paying dividends. Muni bonds, VCIT (corp bond index), etc.

[MachineGhost]

I'm doing true blue 25x4. However, the Vp existed well before the pp and I have not done much to shrink it.
So, the pp is ~ 35% of my entire holdings. Lots of indie stocks paying dividends. Muni bonds, VCIT (corp bond index), etc.

Did anyone ever go broke practicing diworsification?

[dualstow]

Yes, but not from the instruments above. They went broke from bars, silver & numismatic coins.

[Libertarian666]

I'm not worried about asteroid mining. That won't be practical until long after I'm gone.

Now if I were 20 years old, I might possibly be worried about this happening in my lifetime.

[curlew]

I'm not worried about asteroid mining. That won't be practical until long after I'm gone.

Now if I were 20 years old, I might possibly be worried about this happening in my lifetime.

How long are you planning on living?

NASA has a project that may put astronauts on an asteroid in under a decade

http://www.nydailynews.com/news/world/a ... -1.1525967

Doesn't include bringing any minerals back to earth however so we will probably both be dead by then.

[Libertarian666]

I'm not worried about asteroid mining. That won't be practical until long after I'm gone.

Now if I were 20 years old, I might possibly be worried about this happening in my lifetime.

How long are you planning on living?

NASA has a project that may put astronauts on an asteroid in under a decade

http://www.nydailynews.com/news/world/a ... -1.1525967

Doesn't include bringing any minerals back to earth however so we will probably both be dead by then.

My retirement analyzer calculates that according to my insurance rating (preferred best) and my current age, my 90th %-ile remaining lifespan estimate is 33 years. My remaining life expectancy (50th %-ile) is 21 years.

[MachineGhost]

My retirement analyzer calculates that according to my insurance rating (preferred best) and my current age, my 90th %-ile remaining lifespan estimate is 33 years. My remaining life expectancy (50th %-ile) is 21 years.

Yeah, buit its not a fixed countdown clock. Each year longer you live, the higher your remaining lifespan goes. And acturial tables are conservative and don't take into consideration life extension methods or other breakthroughs until long after it is evident and finally mades an impact in the pokey slow Titanic-like averages.

[Libertarian666]

My retirement analyzer calculates that according to my insurance rating (preferred best) and my current age, my 90th %-ile remaining lifespan estimate is 33 years. My remaining life expectancy (50th %-ile) is 21 years.

Yeah, buit its not a fixed countdown clock. Each year longer you live, the higher your remaining lifespan goes. And acturial tables are conservative and don't take into consideration life extension methods or other breakthroughs until long after it is evident and finally mades an impact in the pokey slow Titanic-like averages.

I actually know quite a bit about actuarial science. In fact, I could play an actuary on TV.
(I wrote the retirement analyzer that I was referring to. It uses insurance rates to figure out life expectancy and related values.)

[MachineGhost]

I actually know quite a bit about actuarial science. In fact, I could play an actuary on TV.
(I wrote the retirement analyzer that I was referring to. It uses insurance rates to figure out life expectancy and related values.)

Well, fom my point of view, the tables haven't been "Moneyballed" yet beyond the banal basics of age, weight, cholesterol levels and smoking. What's taking so long???

[Libertarian666]

I actually know quite a bit about actuarial science. In fact, I could play an actuary on TV.
(I wrote the retirement analyzer that I was referring to. It uses insurance rates to figure out life expectancy and related values.)

Well, fom my point of view, the tables haven't been "Moneyballed" yet beyond the banal basics of age, weight, cholesterol levels and smoking. What's taking so long???

The probability of death in the next year of the best-rated person is roughly half of the probability of death in the next year of an average-rated person, and there are two more ratings between those two; they are very good at slicing and dicing. Premiums reflect those probabilities quite well, due to competition among companies.

BTW, I have licenses to sell life insurance and fixed annuities in 9 states.

[curlew]

I actually know quite a bit about actuarial science. In fact, I could play an actuary on TV.
(I wrote the retirement analyzer that I was referring to. It uses insurance rates to figure out life expectancy and related values.)

I played around with the life expectancy calculator that came with the now defunct Microsoft Money program when my first wife was 53. It said I had a long way to go but that my wife had already reached her life expectancy (she had diabetes, was obese, had arthritis that already resulted in the replacement of both hips, had a history of cancer on both sides of her family, her parents and grandparents had all died young, and she was a long term smoker).

Didn't pay much attention at the time but they turned out be right. She died that same year of lung cancer.

[Libertarian666]

I actually know quite a bit about actuarial science. In fact, I could play an actuary on TV.
(I wrote the retirement analyzer that I was referring to. It uses insurance rates to figure out life expectancy and related values.)

I played around with the life expectancy calculator that came with the now defunct Microsoft Money program when my first wife was 53. It said I had a long way to go but that my wife had already reached her life expectancy (she had diabetes, was obese, had arthritis that already resulted in the replacement of both hips, had a history of cancer on both sides of her family, her parents and grandparents had all died young, and she was a long term smoker).

Didn't pay much attention at the time but they turned out be right. She died that same year of lung cancer.

I was referring to life expectancy from a person's current age, not life expectancy at birth.

Life expectancy from the current age will always be higher than life expectancy at birth, because the person has already survived to their current age.

So it was basically a coincidence that your wife died that year. Of course her health habits and family history would have indicated a shorter life expectancy from her age at that time than for someone without those negative factors, but her life expectancy at that time would not have been zero.