Gold is not "psychological" it has been money since dawn of civilization... Ancient peoples were not stupid:
http://www.npr.org/blogs/money/2011/02/ ... insteinium
"the price of gold hit $850 per ounce on January 21, 1980. By March 19, 2002, gold had fallen to $293 per ounce."
It's easy to find a couple spikes on a historic chart and make anything look bad, it's called curve fitting.
Example: "In August 2000 SPY hit $152. By February 2009 SPY had fallen to under $74 losing over 50% in less than 10 years."
Gold crash
@Felix- It's the same old thing. Politicians just clipped coins and debased metal content "then".
Here's an example of what we have in mind when we call gold a store of value.
The Dutch government, as governments do, decided to make their money worthless yet again in 2007 when it closed exchange of their tokens.
So which is worth more?
1912 5 Guilder coin- http://www.ebay.com/itm/1912-NETHERLAND ... 3a7e73722f
1989 5 Guilder coin- http://www.ebay.com/itm/1989-NETHERLAND ... 5af063f163
Gold will go up and down, but unlike all previous fiat currencies (which also occasionally go through speculative bubbles), or even most S&P 500 companies, that ever were, it's never been valueless.
Here's an example of what we have in mind when we call gold a store of value.
The Dutch government, as governments do, decided to make their money worthless yet again in 2007 when it closed exchange of their tokens.
So which is worth more?
1912 5 Guilder coin- http://www.ebay.com/itm/1912-NETHERLAND ... 3a7e73722f
1989 5 Guilder coin- http://www.ebay.com/itm/1989-NETHERLAND ... 5af063f163
Gold will go up and down, but unlike all previous fiat currencies (which also occasionally go through speculative bubbles), or even most S&P 500 companies, that ever were, it's never been valueless.
My point was not that gold is worthless. My point was that gold is no longer money. Its current price consists of three pieces as far as I can see. First, its commodity price as a precious metal used for jewelry, second people who believe that it still is money and third, the speculation bubble component.
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secretwealth
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"Gold is not "psychological" it has been money since dawn of civilization..."
Well, just because something has been money since the dawn of civilization doesn't mean that it isn't psychological. That's a pretty clear non-sequitur.
""Ancient peoples were not stupid""
I say this as someone who spent over a decade studying history: yes. Yes they were. From animal sacrifices to thinking twins were a sign of adultery to stoning women with red hair, there are plenty of cases of ancient people being stupid. And even if they weren't, that's a pretty clear argumentum ad antiquitatem.
Well, just because something has been money since the dawn of civilization doesn't mean that it isn't psychological. That's a pretty clear non-sequitur.
""Ancient peoples were not stupid""
I say this as someone who spent over a decade studying history: yes. Yes they were. From animal sacrifices to thinking twins were a sign of adultery to stoning women with red hair, there are plenty of cases of ancient people being stupid. And even if they weren't, that's a pretty clear argumentum ad antiquitatem.
More arrogance... So you're going to pick a few examples of stupidity and say all our ancestors were subhuman fools? People that can survive using only encyclopedic knowledge of their environment for millennia are contemptible? They certainly figured out the best metals to use for currency without the periodic table... To me that's smarter than anything I've read on y! finance recently.
Plenty of modern people believe in fallacies as well. IE: http://usatoday30.usatoday.com/news/was ... iraq_x.htm
As far as religion it's not hard to find things that seem absurd, or even evil, in many or most... Regardless of the era.
"I am a red man. If the Great Spirit had desired me to be a white man he would have made me so in the first place. He put in your heart certain wishes and plans, in my heart he put other and different desires. Each man is good in his sight. It is not necessary for Eagles to be Crows. We are poor..but we are free. No white man controls our footsteps. If we must die...we die defending our rights."
~Sitting Bull (stupid?)
Plenty of modern people believe in fallacies as well. IE: http://usatoday30.usatoday.com/news/was ... iraq_x.htm
As far as religion it's not hard to find things that seem absurd, or even evil, in many or most... Regardless of the era.
"I am a red man. If the Great Spirit had desired me to be a white man he would have made me so in the first place. He put in your heart certain wishes and plans, in my heart he put other and different desires. Each man is good in his sight. It is not necessary for Eagles to be Crows. We are poor..but we are free. No white man controls our footsteps. If we must die...we die defending our rights."
~Sitting Bull (stupid?)
@Felix, gold has industrial usage, chiefly in electronics.
I know of a wafer fab that used a, technically illegal, Krugerrand as a gold source for deposition on semiconductor wafers...that were then sold to the US government. LOL
The definition of "money" is an interesting thing. Take any paper money other than dollars to your local baker and try to buy a loaf of bread. Now try it with a gold Krugerrand. Gold is certainly usable as a currency or means of exchange. Beyond this, there are legal gold tender coins minted in both the US and Canada today, along with the Krugerrand.
US Gold Eagles- http://www.govmint.com/search/Gold-Eagles/02GCEA/62
Although unpegged and allowed to float in the 1980s, the Aus dollar is practically a gold backed paper currency. Due to this, exposure to Asia and a relative lack of MMT-style interventionalism by their government and Fed Reserve, it is one of the most traded currencies in the world despite a modest sized economy.
http://www.investopedia.com/articles/fo ... r-gold.asp
I know of a wafer fab that used a, technically illegal, Krugerrand as a gold source for deposition on semiconductor wafers...that were then sold to the US government. LOL
The definition of "money" is an interesting thing. Take any paper money other than dollars to your local baker and try to buy a loaf of bread. Now try it with a gold Krugerrand. Gold is certainly usable as a currency or means of exchange. Beyond this, there are legal gold tender coins minted in both the US and Canada today, along with the Krugerrand.
US Gold Eagles- http://www.govmint.com/search/Gold-Eagles/02GCEA/62
Although unpegged and allowed to float in the 1980s, the Aus dollar is practically a gold backed paper currency. Due to this, exposure to Asia and a relative lack of MMT-style interventionalism by their government and Fed Reserve, it is one of the most traded currencies in the world despite a modest sized economy.
http://www.investopedia.com/articles/fo ... r-gold.asp
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secretwealth
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- Joined: Mon Jun 27, 2011 3:31 am
"Plenty of modern people believe in fallacies as well."
Yes, such as non sequitur and argumentum ad antiquitatem fallacies.
However, that doesn't mean ancient peoples didn't. If I point out Group A believed X and you say Group B believed X too, that doesn't dispute that Group A believed X. That's another non sequitur fallacy, BTW.
Yes, such as non sequitur and argumentum ad antiquitatem fallacies.
However, that doesn't mean ancient peoples didn't. If I point out Group A believed X and you say Group B believed X too, that doesn't dispute that Group A believed X. That's another non sequitur fallacy, BTW.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
I wonder which of the things many people do or believe today will be looked back on such as the examples SW posted. There are certainly many. Every generation will do things that later ones recognize as or believe are stupid.
This doesn't mean that we are stupid. This doesn't mean that generations before us were stupid.
This doesn't mean that we are stupid. This doesn't mean that generations before us were stupid.
Interesting, no opinion on gold yet you were compelled to reply for some reason (step 1? 
.
The problem is I made no logical errors. You did, when you assumed as you like to do.
"However, that doesn't mean ancient peoples didn't."
See I never said they didn't... Your argument seems to be ancient people are stupid compared to modern, mine is that they are more similar than dissimilar. I'd consider mine defendable, yours not so much... But then it's easier to nitpick perceived errors in syntax and logic then to own a position like "ancient humans were stupid."
We disagree, that's fine. I'd rather end flame war, you can skip to step 4 or 5. Good day.
EDIT: Simplifying my position so sw can understand, or anyone else who was confused:
Not stupid = humans; ancient or modern.
y! finance = usually stupid, not pinnacle of modern human achievement.
Believe in fallacies: most people modern and ancient, does not mean their [or their culture's/civilization's] many accomplishments are moot.
.The problem is I made no logical errors. You did, when you assumed as you like to do.
"However, that doesn't mean ancient peoples didn't."
See I never said they didn't... Your argument seems to be ancient people are stupid compared to modern, mine is that they are more similar than dissimilar. I'd consider mine defendable, yours not so much... But then it's easier to nitpick perceived errors in syntax and logic then to own a position like "ancient humans were stupid."
We disagree, that's fine. I'd rather end flame war, you can skip to step 4 or 5. Good day.
EDIT: Simplifying my position so sw can understand, or anyone else who was confused:
Not stupid = humans; ancient or modern.
y! finance = usually stupid, not pinnacle of modern human achievement.
Believe in fallacies: most people modern and ancient, does not mean their [or their culture's/civilization's] many accomplishments are moot.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"Your argument is ancient people are stupid compared to modern, mine is that they are more similar than dissimilar."
I thought your argument was that ancient people were not stupid. Indeed, you said ""Ancient peoples were not stupid". I also thought you considered them smarter than modern people--indeed, you said "To me that's smarter than anything I've read on y! finance recently."
Now you're saying that ancient people are similar to modern people, plenty of whom "believe in fallacies as well".
Not quite sure I understand your point or position either on ancient economic or modern day economic theories, but that may be because I lack your towering intellect.
I thought your argument was that ancient people were not stupid. Indeed, you said ""Ancient peoples were not stupid". I also thought you considered them smarter than modern people--indeed, you said "To me that's smarter than anything I've read on y! finance recently."
Now you're saying that ancient people are similar to modern people, plenty of whom "believe in fallacies as well".
Not quite sure I understand your point or position either on ancient economic or modern day economic theories, but that may be because I lack your towering intellect.
Hands-down, the worst aspect of following the permanent portfolio is that practically every discussion of gold turns into an argument for some reason.
From over here, a lot of this thread sounds like instances of the hasty generalization fallacy ( http://www.logicalfallacies.info/presum ... alisation/ ). I.e. "Element x of set S has property P, therefore all elements of S have property P."
What we *can* say is "Just because element x of set S has property P does not imply that all elements of S have property P."
Filling in the blanks:
Just because some people that own gold are kooks, does not imply that all people that own gold are kooks.
Just because some ancient beliefs are wrong, does not imply that all ancient beliefs are wrong.
Just because some ancient beliefs are right, does not imply that all ancient beliefs are right.
...
From over here, a lot of this thread sounds like instances of the hasty generalization fallacy ( http://www.logicalfallacies.info/presum ... alisation/ ). I.e. "Element x of set S has property P, therefore all elements of S have property P."
What we *can* say is "Just because element x of set S has property P does not imply that all elements of S have property P."
Filling in the blanks:
Just because some people that own gold are kooks, does not imply that all people that own gold are kooks.
Just because some ancient beliefs are wrong, does not imply that all ancient beliefs are wrong.
Just because some ancient beliefs are right, does not imply that all ancient beliefs are right.
...
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secretwealth
- Posts: 1948
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"Just because some ancient beliefs are wrong, does not imply that all ancient beliefs are wrong.
Just because some ancient beliefs are right, does not imply that all ancient beliefs are right."
Yeah, that's what I was getting at. Past performance isn't indicative of future results.
Like I said, I'm really on the fence about gold.
On the one hand, proponents of gold seem to make the classic semiotic mistake of confusing the signifier with the signified. Since few goldbugs have studied linguistics, such an error isn't too surprising.
On the other hand, it has one hell of a track record and natural scarcity. It's hard for me to imagine something that was valued for thousands of years suddenly becoming permanently cheap.
So, on the fence. But I must say that the pro-gold arguments tend to have more logical flaws than anti-gold, which keeps me away from the metal. I wouldn't short it, though.
Just because some ancient beliefs are right, does not imply that all ancient beliefs are right."
Yeah, that's what I was getting at. Past performance isn't indicative of future results.
Like I said, I'm really on the fence about gold.
On the one hand, proponents of gold seem to make the classic semiotic mistake of confusing the signifier with the signified. Since few goldbugs have studied linguistics, such an error isn't too surprising.
On the other hand, it has one hell of a track record and natural scarcity. It's hard for me to imagine something that was valued for thousands of years suddenly becoming permanently cheap.
So, on the fence. But I must say that the pro-gold arguments tend to have more logical flaws than anti-gold, which keeps me away from the metal. I wouldn't short it, though.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
All investments which are not tangible like commodities, land and real estate do not have any intrinsic value. The value of everything including the tangibles is determined by the perception of others - how much others are willing to pay for it.
The only way to isolate your investment from the opinions of others is to take it off the market - invest in something which you are willing to hold on forever due to the intrinsic value it has for you such as a family home, land, art...
So investing is a bet - what you think other people will think and what you think other people will think that other people will think... http://en.wikipedia.org/wiki/Guess_2/3_of_the_average
http://en.wikipedia.org/wiki/Keynesian_beauty_contest
Therefore, arguing about it does not make sense, it would be the same as arguing whether the next Wednesday would be rainy or sunny.
The only way to isolate your investment from the opinions of others is to take it off the market - invest in something which you are willing to hold on forever due to the intrinsic value it has for you such as a family home, land, art...
So investing is a bet - what you think other people will think and what you think other people will think that other people will think... http://en.wikipedia.org/wiki/Guess_2/3_of_the_average
http://en.wikipedia.org/wiki/Keynesian_beauty_contest
Therefore, arguing about it does not make sense, it would be the same as arguing whether the next Wednesday would be rainy or sunny.
My position is that, to varying degrees, people value tangible physicality and tradition. Gold is the epitome of an asset that is valuable solely because it is physical, tangible, and traditional. Everything is watered down a bit relative to gold. When those virtues are fashionable gold does well and when they are unfashionable gold does poorly. IMO the drive to value them is instinctive and will never go away entirely, ergo gold will always hold some value.
Some individuals assign zero value to tangibility, physicality, and traditionalism. Starting from that premise it is natural to conclude that gold is an inappropriate investment. The premise seems to be integral to a strong faith in modernism, national stability, or the doctrine of managed economies. Which I think is why some people seem personally offended by other people owning gold, and fundamentally why these threads turn into flame wars. As stated I don't grant this premise, but those that do are free to invest differently, and godspeed.
Gold is the PP asset I'm least comfortable with. I'm glad that it's a small minority of my portfolio.
Some individuals assign zero value to tangibility, physicality, and traditionalism. Starting from that premise it is natural to conclude that gold is an inappropriate investment. The premise seems to be integral to a strong faith in modernism, national stability, or the doctrine of managed economies. Which I think is why some people seem personally offended by other people owning gold, and fundamentally why these threads turn into flame wars. As stated I don't grant this premise, but those that do are free to invest differently, and godspeed.
Gold is the PP asset I'm least comfortable with. I'm glad that it's a small minority of my portfolio.
One interesting alternative to gold is silver. It does not only have a value because we think it is valuable, silver is being used in electronics, solar panels etc. So it is a scare commodity which is being transformed to something else..
I have not bought any silver yet.. been thinking about it for some time.. prices are low. But if you look back 5 years ago.. prices are still high.
http://www.bullionvault.com/gold-price-chart.do
I have not bought any silver yet.. been thinking about it for some time.. prices are low. But if you look back 5 years ago.. prices are still high.
http://www.bullionvault.com/gold-price-chart.do
@Tylerr
"I see you are chasing the market and trying to be one of the heard, which is going to kill your profits in the long term. You are going up and down psychologically with the market and that's who loses in the end.
The smart investors see opportunity where you see loss. The smart investors get ready to sell when you're buying.
Why did you buy Gold at the top of a huge historical run? You might look at the long term trend of something before you buy it.
When you were buying Gold, most savvy investors were selling and locking in their profits after a huge run up.
Try to do things differently than the large heard following the experts on CNBC."
Hi Tylerr, I can reassure you that I don't listen to the CNBC talking heads.
I only had the possibility to invest from 2008 on. I gradually built up a gold position in 2009, 2010 and 2011 until I reached a percentage that I didn't want to exceed. The general public wasn't interested in gold, so I didn't think the end of the bubble was near. Gold went up a lot.
My preliminary plan was to get into stocks and bonds when they became a good buy and turn at least part of my portfolio into a PP (I know, risky and definitely against Harry Browne's advice, Browne says to buy all assets at the same time, so you start out with a diversified and balanced permanent portfolio).
But I was very busy with other stuff, stocks & bonds didn't become a screaming buy, in my country setting up a PP is difficult and I lacked the time to finish my research... and today I'm still only in cash & gold. I took a big risk and realize that my current situation is dangerous.
If you knew how much yellow metal I owned, you'd probably agree that I probably shouldn't buy more during the current "buying opportunity".
I appreciate the advice and agree that it seems a good idea to buy assets when they're historically cheap.
"I see you are chasing the market and trying to be one of the heard, which is going to kill your profits in the long term. You are going up and down psychologically with the market and that's who loses in the end.
The smart investors see opportunity where you see loss. The smart investors get ready to sell when you're buying.
Why did you buy Gold at the top of a huge historical run? You might look at the long term trend of something before you buy it.
When you were buying Gold, most savvy investors were selling and locking in their profits after a huge run up.
Try to do things differently than the large heard following the experts on CNBC."
Hi Tylerr, I can reassure you that I don't listen to the CNBC talking heads.
I only had the possibility to invest from 2008 on. I gradually built up a gold position in 2009, 2010 and 2011 until I reached a percentage that I didn't want to exceed. The general public wasn't interested in gold, so I didn't think the end of the bubble was near. Gold went up a lot.
My preliminary plan was to get into stocks and bonds when they became a good buy and turn at least part of my portfolio into a PP (I know, risky and definitely against Harry Browne's advice, Browne says to buy all assets at the same time, so you start out with a diversified and balanced permanent portfolio).
But I was very busy with other stuff, stocks & bonds didn't become a screaming buy, in my country setting up a PP is difficult and I lacked the time to finish my research... and today I'm still only in cash & gold. I took a big risk and realize that my current situation is dangerous.
If you knew how much yellow metal I owned, you'd probably agree that I probably shouldn't buy more during the current "buying opportunity".
I appreciate the advice and agree that it seems a good idea to buy assets when they're historically cheap.