The Barbarous Relic

[Eldad]

22 minutes ago, Spooky said:

 

Seconded. Stocks for the long run.

It’s insurance. 1930s, 1970s, Europeans that lived through WW2, etc. The upside was more than worth whatever they lost not being fully invested in stocks during the good times. 
 

In the US your gold would be included in you taxable estate. As long as you were below the exclusion (13.6 M per person) you would pay no estate tax on it. The basis of the gold would step up to the FMV at your date of death for your kids. But I’m guessing you are Canadian. 

[Spooky]

55 minutes ago, Eldad said:

It’s insurance. 1930s, 1970s, Europeans that lived through WW2, etc. The upside was more than worth whatever they lost not being fully invested in stocks during the good times. 

 

If you have a long enough time horizon (i.e. leaving money for grand kids per the original post) then stocks are still the place to be. Over a 200+ year period (1801-2014) gold had a 0.5% annualized real return. Basically you preserved your purchasing power. Meanwhile over that period US stocks had an annualized real return of 6.7%. This is after inflation! This includes both periods of the 1930s and 1970s. Even if you were in Europe and survived WW2, the place to be was in stocks. In Stocks for the Long Run by Siegel he has data from 19 other countries showing that, despite many disasters visited on these countries, such as war, hyperinflation, and depression, every one of these countries exhibited substantially positive after-inflation stock returns. This includes Germany, France, Italy, Belgium after WW2. The place that you don't want to be in cash and government bonds!!

[Eldad]

15 minutes ago, Spooky said:

 

If you have a long enough time horizon (i.e. leaving money for grand kids per the original post) then stocks are still the place to be. Over a 200+ year period (1801-2014) gold had a 0.5% annualized real return. Basically you preserved your purchasing power. Meanwhile over that period US stocks had an annualized real return of 6.7%. This is after inflation! This includes both periods of the 1930s and 1970s. Even if you were in Europe and survived WW2, the place to be was in stocks. In Stocks for the Long Run by Siegel he has data from 19 other countries showing that, despite many disasters visited on these countries, such as war, hyperinflation, and depression, every one of these countries exhibited substantially positive after-inflation stock returns. This includes Germany, France, Italy, Belgium after WW2. The place that you don't want to be in cash and government bonds!!

I hear you but there is something to be said for it being counter-cyclical. Gold miners went up for years in the great depression while everything else went down. Gives you some serious optionality. 
 

Sometimes you don’t have the ability to wait 10 years for your stocks to come back and having gold under the bed might be helpful to bribe a border guard or get some food during times of extreme scarcity. 
 

Since QE it has performed better. 30% this year!

[Eldad]

6 minutes ago, Eldad said:

I hear you but there is something to be said for it being counter-cyclical. Gold miners went up for years in the great depression while everything else went down. Gives you some serious optionality. 
 

Sometimes you don’t have the ability to wait 10 years for your stocks to come back and having gold under the bed might be helpful to bribe a border guard or get some food during times of extreme scarcity. 
 

Since QE it has performed better. 30% this year!

Not to mention half of Europe went to permanent 0 (Soviet Union). Don’t by the dip when dealing with Bolsheviks haha. 

[UK]

3 hours ago, Eldad said:

Not to mention half of Europe went to permanent 0 (Soviet Union). Don’t by the dip when dealing with Bolsheviks haha. 

 

This is a type of risk I am very sensitive to, but I think to deal with it, you do not need gold at all, just some common sense rules and housekeeping, e.g. to think about jurisdictions of your investments (never owned stocks in countries like Russia, except a few for a brief period in China:)) and perhaps even of financial intermediates you use. I think I have moved to IBUK from my local banks the same year Russia took Crimea from Ukraine, because it was way better and cheaper, but I remember joking at the time, that well, at least my capital is safe, if Russia is about to nullify some 500-1000 km of territory to the west from it again. Some 10 years past and such jokes are not very funny anymore:)

 

Edited September 25 by UK

[brobro777]

In the early 1990s I got a bunch of pre-1964 silver quarters (circulated condition, as early as 1930s) from someone who was spending them at face value and I held on to these quarters over the years

 

I understand I should have invested in SPX or WMT stock, but these quarters are about $7+ now on ebay and that's not bad baby, not bad

 

 

[UK]

5 minutes ago, brobro777 said:

In the early 1990s I got a bunch of pre-1964 silver quarters (circulated condition, as early as 1930s) from someone who was spending them at face value and I held on to these quarters over the years

 

I understand I should have invested in SPX or WMT stock, but these quarters are about $7+ now on ebay and that's not bad baby, not bad

 

 

 

Well, it is also possible to buy new limited colectible silver or gold coins (but only a few pet person) issues and to basically sell them for 2x the next day, but does this has anything to do with gold or silver itself:)?

[Spooky]

11 hours ago, Eldad said:

Not to mention half of Europe went to permanent 0 (Soviet Union). Don’t by the dip when dealing with Bolsheviks haha. 

 

Yes this is the big risk that we need to be sensitive to - use multiple brokers, be globally diversified, etc.. Having a small amount of Bitcoin or gold for piece of mind makes sense, it's a crazy world and anything can happen.

[UK]

17 minutes ago, Spooky said:

 

Yes this is the big risk that we need to be sensitive to - use multiple brokers, be globally diversified, etc.. Having a small amount of Bitcoin or gold for piece of mind makes sense, it's a crazy world and anything can happen.

 

Actually if I was pressed hard to insure for something really bad by owning something like this, I think my choice would be Bitcoin Vs gold

[Jaygo]

I fully realise that the past performance of the S&P beats gold. A successful business is there to make money, the metal is there to be money, so obviously the entity who's goal is to actually produce should do better over time. That said Gold has done admirably considering it just sits there and does nothing. I look at it like a insurance policy to government stupidity.

 

On the tax side. How and why would taxes ever be paid on something like this. If my dad had left a roll of 100's in a drawer for me would that ever see the tax man? The relationship I expect to have with my children is nothing short of love and trust, we can live outside a lawyers agreement ment for a few oz of gold to each child.

[Eldad]

10 minutes ago, Jaygo said:

I fully realise that the past performance of the S&P beats gold. A successful business is there to make money, the metal is there to be money, so obviously the entity who's goal is to actually produce should do better over time. That said Gold has done admirably considering it just sits there and does nothing. I look at it like a insurance policy to government stupidity.

 

On the tax side. How and why would taxes ever be paid on something like this. If my dad had left a roll of 100's in a drawer for me would that ever see the tax man? The relationship I expect to have with my children is nothing short of love and trust, we can live outside a lawyers agreement ment for a few oz of gold to each child.

Yes if you hand your kid a roll of hundreds or a bag of coins it would be very easy to do off books. I was just telling you the official IRS (US) rules. 

[Jaygo]

6 minutes ago, Eldad said:

Yes if you hand your kid a roll of hundreds or a bag of coins it would be very easy to do off books. I was just telling you the official IRS (US) rules. 

 

Appreciate it Eldad. They just cant help themselves I guess.

[gfp]

We are all in different countries with different rules.  But generally in practice, undeclared precious metals, art, jewelry and furniture / antiques is a way that wealth is passed confidentially to the next generation.  Art is particularly subjective to value.  What the rules say and what is generally done in practice are different things and I have no idea what the official rules or tax rates are outside the USA.  I assume Jaygo is in Canada.  In the United States we currently have a decently high lifetime exemption to gift taxes (which may expire / be reduced) so there are a lot of ways to get assets legally out of your estate - confidentially or on the books - and there has always been a lot of subjective valuation of private assets - illiquidity discounts, absence of an observable market, etc.  

 

In my experience the problem with physical gold is that true gold bugs tend to be conspiracy minded old men buying it and hiding it on their property and if they don't map it out properly and then they lose their marbles, they lose the gold, and the next generation has no idea where it might be or how much should be out there.

 

Some gold is fine if it makes you feel better or safer.  It's never going to be a good investment.  It certainly has new-fangled competition.  I prefer a valuable artwork passed down that I can enjoy every day but not everybody has the same taste and a small fraction of the art market is actually investment caliber.

[moneyball]

The value proposition for gold comes from its position as a diversifier within a portfolio. Holding it as its own portfolio seems suboptimal. My belief is that given current fiscal/demographic picture in US having allocation to inflation hedges (gold, real estate, bitcoin) is a good idea as a part of an overall portfolio. 

[Spooky]

 

3 hours ago, moneyball said:

The value proposition for gold comes from its position as a diversifier within a portfolio. Holding it as its own portfolio seems suboptimal. My belief is that given current fiscal/demographic picture in US having allocation to inflation hedges (gold, real estate, bitcoin) is a good idea as a part of an overall portfolio. 

 

Gold in a portfolio only really works to smooth out volatility - so unless you are re-balancing to take advantage it just hurts your returns over time and you are subject to market timing risks and transaction costs. For this purpose you are also better off holding T-bills since at least they generate some interest. Also, the real risk to your portfolio is not volatility but rather permanent loss of capital or not having enough assets to fund your desired lifestyle in retirement after inflation.

 

[Gregmal]

Yea the only way gold makes sense is as a timing trade and using futures options lol. Its worthless. 

[JRM]

1 hour ago, Gregmal said:

Yea the only way gold makes sense is as a timing trade and using futures options lol. Its worthless. 

 

You sound like me 5 years ago on the Bitcoin threads.

[thowed]

The GLD ETF started in late 2004 - and basically over 20 years, it is basically neck and neck with SPY (though in a different pattern).  So it has been a pretty awesome diversifier for that period.

 

I get it's not for everyone, especially the smart people here, but if I was doing a basic 60/40 tracker portfolio for someone, I would make 20 of the 40 gold, no problem.

 

I think it also depends what country you're in.  The US$ has held up pretty well over time, but apart from the Swiss Franc, the long-term exchange rate charts against Gold are quite something.

 

However it's not impossible to imagine that in the next year or so it gets to a 2011 excitement level, and then comes back down for a while.

[mattee2264]

Yeah that is the problem really. The insurance premium can vary depending on how scared market participants are. And also because there is no intrinsic value then there will be a lot of performance chasing. 

 

The gold price has basically doubled from pre-COVID levels. To some extent that reflects inflation as the price level and the money supply is around 30% higher. But offsetting that inflation has come down significantly which diminishes its value as an inflation hedge and interest rates are a lot higher so the absence of any income becomes more of a negative factor. Understandably there are concerns about the path of US government debt but difficult to know to what extent such concerns are already priced in and whether if governments finally decide to address the problem whether that will hurt the gold price.

 

To me the gold miners look more interesting. You are essentially buying gold at a discount so there are two ways to win (the discount closes or gold price increases). The industry is consolidating and the gap between costs and prices allows for some mismanagement. 

[thowed]

1 hour ago, mattee2264 said:

mismanagement. 

 

Always been my problem with Gold Miners - so many disappointments over the years.  But no doubt that if you get the timing right (I can't) then there will be some aggressive profits to be made.

[UK]

1 hour ago, mattee2264 said:

Yeah that is the problem really. The insurance premium can vary depending on how scared market participants are. And also because there is no intrinsic value then there will be a lot of performance chasing. 

 

The gold price has basically doubled from pre-COVID levels. To some extent that reflects inflation as the price level and the money supply is around 30% higher. But offsetting that inflation has come down significantly which diminishes its value as an inflation hedge and interest rates are a lot higher so the absence of any income becomes more of a negative factor. Understandably there are concerns about the path of US government debt but difficult to know to what extent such concerns are already priced in and whether if governments finally decide to address the problem whether that will hurt the gold price.

 

To me the gold miners look more interesting. You are essentially buying gold at a discount so there are two ways to win (the discount closes or gold price increases). The industry is consolidating and the gap between costs and prices allows for some mismanagement. 

 

Perhaps some (or much?) of recently increased demand is also because of all these sanctions and diversification away from USD/EUR/etc by CB of Russia, China and the likes?

[mattee2264]

True. Then again when gold has a good decade it can increase many multiples in price and for most of  the last 15 years or so it has been trading in a range of $1000-$2000 only breaking out over the last year or two.