Looking for intelligent articles on why NOT to buy PMs

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Tycer's picture
Tycer
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Looking for intelligent articles on why NOT to buy PMs

I'm feeling a bit gold buggish and need to be slapped around.

Johnny Oxygen's picture
Johnny Oxygen
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Re: Looking for intelligent articles on why NOT to buy PMs

er....can't think of any.

Ayala's picture
Ayala
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Re: Looking for intelligent articles on why NOT to buy PMs

This isn't an article, but an observation. In our extremely complex and interconnected world, it's very hard to predict how things will play out. I certainly think owning a good chunk of precious metals is wise, but I also think holding on to a lot of cash is important. All you need to do is look back at late 2008. Who would have thought that a housing collapse and financial crisis in the US would have led to a strengthening USD and falling precious metals prices? All I'm saying is that - as is the case quite often in investing - diversification is warranted. I think I recall Chris saying in a podcast that he was heavily weighting cash and precious metals. That combination makes sense to me and you're covered whether we go into a deflationary or inflationary spiral. So buy gold, but don't go broke doing so...

 

Davos's picture
Davos
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Re: Looking for intelligent articles on why NOT to buy PMs

Good luck!

Doug's picture
Doug
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Re: Looking for intelligent articles on why NOT to buy PMs

Keep in mind, the USD has lost about 5% of its value in the past few weeks while PMs are going up like crazy.

Doug

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apismellifera
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Re: Looking for intelligent articles on why NOT to buy PMs

 

See http://finance.yahoo.com/news/Charlie-Munger-on-Communism-fool-193965025... for a short summary of a speech Charlie Munger gave recently.  (Just search for "gold" to find the relevant section, but the others are just as entertaining, I think.)

He even casts his anti-gold position in moral terms.  Wish he'd fleshed out the idea a bit more, but he sure is one great capital allocator and evidently can't stand the idea of being a gold hound

Quote:

On investing in gold: I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

I think what he's objecting to is the idea of just sitting on money, not actively investing it and making it work. (Almost echoes a New Testament parable, come to think of it).   If I had Munger's  eye for finding quality underpriced stocks, I might follow his advice.  But I don't, and I'm more concerned about avoiding permanent loss of capital.  Some PMs seem an easy way to get that, for me.

 

Nate's picture
Nate
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Re: Looking for intelligent articles on why NOT to buy PMs

The current gold run sure feels overdone.  The braintrust around me is thinking of selling half to reduce debt on their home.  Since we don't have debt and adequate cash, selling makes no sense for us. 

I do have one nagging doubt.  Gold is only worth something if someone else thinks it is.  I ran the numbers a couple of months ago and there is about 0.80 ounces of gold per human on this planet.  Most in this world are not going to be willing to 'buy' gold with paper if critical needs are not met first.  My bet is that productive farmland (under your control) and localized energy production will trump everything.

Nate

littleone's picture
littleone
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Re: Looking for intelligent articles on why NOT to buy PMs

First, let me start out quoting a compelling reason for Gold as currency:

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." -- Alan Greenspan, 'Gold and Economic Freedom' in 1966.

 

 

Seems sound, right? Yet, I realize Alan Greenspan is not concerned with natural law. So, this is only partially or relatively true(right, but for all the wrong reasons).

Fractals are a very important exponential. I would classify the above quote as fractally wrong.

fractally wrong: Being wrong at every conceivable scale of resolution. Zooming on every part of one's world view finds beliefs exactly as wrong as one's entire world view.

Now, the burden to prove otherwise...I offer wisdom from a true master, Khalil Gibran.

This short quote is from the masterpiece KHALIL THE HERETIC by Khalil Gibran...please read this story in its entirety for full clarity and context.

 

Note:

When first published in the original Arabic, this book aroused considerable agitation and intrigue. It was burned publicly in the Beirut market place by furious church and state officials, who denounced it as poisonous and dangerous to the peace of the country. ..." [from front dust jacket flap.]

KHALIL THE HERETIC

Part 7

 

This is the life of the poor; this is the perpetual cry I hear. This is what makes my spirit revolt against the oppressors and despise their conduct. When I asked the monks to have mercy upon you, they thought that I was an atheist, and expulsion was my lot. Today I came here to share this miserable life with you, and to mix my tears with yours. Here I am now, in the grip of your worst enemy. Do you realize that this land you are working like slaves was taken from your fathers when the law was written on the sharp edge of the sword? The monks deceived your ancestors and took all their fields and vineyards when the religious rules were written on the lips of the priests. Which man or woman is not influenced by the lord of the fields to do according to the will of the priests? God said, 'With the sweat of thy brow, thou shall eat thy bread.' But Sheik Abbas is eating his bread baked in the years of your lives and drinking his wine mixed with your tears. Did God distinguish this man from the rest of you while in his mother's womb? Or is it your sin that made you his property? Jesus said, 'Gratis you have taken and gratis you shall give. . . . Do not possess gold, nor silver, neither copper.' Then what teachings allow the clergymen to sell their prayers for pieces of gold and silver? In the silence of the night you pray saying, 'Give us today our daily bread.' God has given you this land from which to draw your daily bread, but what authority has He given the monks to take this land and this bread away from you?

~Khalil Gibran

 

-littleone

Note: The variation in the spelling Gibran's first name is due to the cited sources...I commonly see it spelled either way.

green_achers's picture
green_achers
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Posts: 205
Re: Looking for intelligent articles on why NOT to buy PMs

Good call on the Greenspan quote.  A quote from Greenspan in favor of gold has the be the best argument against it there can be.  Still, he was talking about the gold standard, not holding gold, so I doubt it answers the OP's question.

gallantfarms's picture
gallantfarms
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Re: Looking for intelligent articles on why NOT to buy PMs

I think the biggest argument against buying gold is that our corrupt government has the power to either make it illegal to own

or to tax it at some outrageous rate.  

Davos's picture
Davos
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Re: Looking for intelligent articles on why NOT to buy PMs
gallantfarms wrote:

I think the biggest argument against buying gold is that our corrupt government has the power to either make it illegal to own

or to tax it at some outrageous rate.  

Right now that is NOT a given. Possible? YES. 

Right now our dollar going to a value below 0 IS a given.

Right now gold IS acting as a safe store of value.

If I'm falling I'll put my hands out.

Jager06's picture
Jager06
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Posts: 395
Re: Looking for intelligent articles on why NOT to buy PMs

Well said Davos.

If ten loaves of bread are equal to $25 or an ounce of silver and the cost of the loaves goes to $100 each, how many loaves of bread will an ounce of silver buy?

The same goes for gold. If you can answer this, and you know the current true rate of inflation, you will have answered the reasons to own.

If the government prints to default, and a trillion dollars buys an egg (see Zimbabwe) then they will have to roll out a new currency. If you turn in 10 trillion of the old currency, you will get one unit of the new currency. An ounce of Gold will buy 100 units of the new currency.

Still want equities with that?

Just hypothetical scenarious b ased on historical facts and a mathematical judgement on our current deficit/ printing/ bailout situation.

Did anyone else see the black swan today? (mortgages and foreclosure fraud). I cant think of a better reason to get my money out of the bank now. RIght now. I mean, since the mark to market of the debt has been destroyed and the 10% fractional reserve has just gone to a negative.

Best of luck.

TNdancer's picture
TNdancer
Status: Silver Member (Offline)
Joined: Aug 20 2008
Posts: 127
Re: Looking for intelligent articles on why NOT to buy PMs
gallantfarms wrote:

I think the biggest argument against buying gold is that our corrupt government has the power to either make it illegal to own

or to tax it at some outrageous rate.  

 

 

They only have the power that you grant them.

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