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Gold Margin Requirements


Parsad
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I never realized how dogmatic Jim Grant is about Gold (and the Gold standard).

http://www.valuewalk.com/videos-with-text-summary/james-grant-european-crisis-morning-cnbc/

 

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“Another thing I think should be avoided is extremely intense ideology because it cabbages up one’s mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out, what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very, very careful of this ideology. It’s a big danger.” ~ Charlie Munger

 

 

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“Another thing I think should be avoided is extremely intense ideology because it cabbages up one’s mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out, what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very, very careful of this ideology. It’s a big danger.” ~ Charlie Munger

 

Great quote, source?

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USC School of Law Commencement - May 13, 2007:  http://www.valueinvestingworld.com/2007/05/charlie-munger-usc-law-school.html

 

"Minds made of cabbage"...I love that!  Anyone have a cole slaw recipe? Prem!

 

More Munger gold!

 

"I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another and that is: I say that I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who support it. I think only when I’ve reached that state am I qualified to speak. This business of not drifting into extreme ideology is a very, very important thing in life."

 

"Of course the self-serving bias is something you want to get out of yourself. Thinking that what’s good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one’s self is a terribly inaccurate way to think. Of course you want to drive that out of yourself because you want to be wise, not foolish. You also have to allow for the self-serving bias of everybody else because most people are not going to remove it all that successfully, the human condition being what it is. If you don’t allow for self-serving bias in your conduct, again you’re a fool."

 

Plus, lots of other great lines!

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I never realized how dogmatic Jim Grant is about Gold (and the Gold standard).

http://www.valuewalk.com/videos-with-text-summary/james-grant-european-crisis-morning-cnbc/

 

**

“Another thing I think should be avoided is extremely intense ideology because it cabbages up one’s mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out, what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very, very careful of this ideology. It’s a big danger.” ~ Charlie Munger

 

 

 

Playing devil's advocate here and following Munger's prescription of "not [having] an opinion on [a] subject unless I can state the arguments against my position."

 

Isn't it more accurate that Jim Grant's views on gold are less ideological than those who uncomprisingly eschew gold because it is "simply silly." Grant has come to this view only because of his analysis; and, if the economic situation has not changed fundamentally since he came to this view, is it fair to say that he is being dogmatic or ideological?

 

On that other hand, the anti-gold crowd seems to hold the view that they would never buy gold "no matter what." This sounds more ideological imo. Shouldn't we be able to conceive of situations where buying gold might be justified - e.g. if you're Zimbabwean?

 

 

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I had that coming!  :D

 

I would own gold if I was a momentum investor or if I expected hyperinflation.

Gold does not generate cash, therefore I believe the burden of proof is on the owners of gold to explain their investment rationale.

There’s a good paper, “Hyperinflation - It’s More Than Just a Monetary Phenomenon”…that explores why hyperinflation occurs.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 (10 pages, see “one-click download”)

 

“While some of these ingredients exist in the modern day United States (to a very minor degree) I would argue that the United States is a long way from experiencing the type of environment and downfall that is consistent with past hyperinflations. The most important aspects of currency collapse simply do not exist in the United States today:

-We do not rely on the kindness of strangers (no foreign denominated debt).

-We are not experiencing any sort of extraordinarily unusual social circumstances or severe exogenous forces (losing war, regime change, government corruption, etc).

-We are not lacking confidence in the sovereign nation. If there is one thing that Americans are known for it is their resilience and borderline arrogance with regards to the strength of their country.

-We are not experiencing a collapse in the domestic economy (not yet at least).”

 

Is there something by Grant on gold that you’d suggest reading? I’d like to more fully understand his analysis.

 

My experience is that the line between analysis and ideology/dogma on Wall Street is not so clear! Grant has an incentive to sell newsletter subscriptions and go on CNBC with a lot of emotion and hyperbole. Bill Gross has an incentive to push for government cuts. We live in a political economy! Klarman has a great quote, Wall Street will always try to “rip out our eyeballs” on a trade.

 

 

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