On Sep 22, 2:13 pm, "Don " <d...[at]notvalid4.com> wrote:
- quote -


Yes and right now Bernanke, King, and Trichet are having a feast on my
funds...

They hurt the prudent investor...

All I do now is read http://www.banks-implode.com hoping for some new
insight...

Maybe the calculation error on Excel 2007 has something to do with the
subprime mess...

There is also an arbitrage opportunity that could of and might have
been exploited when the discount rate went below the Fed Funds
rate....

I suggest, for the time being, setup your TreasuryDirect account...
Buy some TIPS...
I it all goes to hell ACH your money out of your account...

frank
www.elitism.net

Tad Borek wrote:
- quote -

Two thoughts, perhaps obvious, but bear with me.
One poster mentioned the substitution effect. Yes gold is used in
electronics, but the amount in any system is so small that gold can rise
to $2000, and there would be little reason to seek an alternative. I can
find gold leaf selling for a few cents per square inch. Likely the gold
content of a $500 computer is measured in cents. So no issue there.

Second, as the price rises, two thing happen. People find old gold
jewelry they are not so attached to, as well as coins whose gold content
(value) now exceeds any numismatic value. So the supply rises that way.
Also, mines tend to have supplies that vary with cost. Huh? Well,
there's a cost to mining that has two large factors, yield (oz AU/ton
ore) and depth (cost to dig). So if I hit an area that yields 1 oz/ton,
and it costs me $800 to process, that area is noted and left unmined. At
$1000, it's reopened. This is oversimplifying, but not by much, it goes
back to supply/demand, explaining how supply literally increases when
the price is higher.

JOE

In article <5m4pl6FbstfnU1[at]mid.individual.net> ,
"Default User" <defaultuserbr[at]yahoo.com> wrote:

- quote -

Not true. Silver is a better conductor than gold. When the US Army
built the Y-12 plant during WWII, they needed the best conductor
they could get, and could choose anything they wanted. They picked
silver from the US Mint. You can look up the conductivity of metals
on line or in a reference book. When huge amounts of power are
transmitted, the power companies use aluminum.

- quote -

The reason that gold is used is that it is very inert. It will
not react with most chemicals that are in the air, and it does
not rust in reasonable temperature ranges. That is why it is often
used to plate electrical connectors.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

On Sep 28, 3:52 pm, "Default User" <defaultuse...[at]yahoo.com> wrote:

- quote -

It's a good start Brian, but you didn't think it through to the end.

All other things being equal, gold would be cheaper if it were more
plentiful (supply goes up => price decreases). I also agree the lower
price would entice people to use it to wire their homes (gold's price
would drop relative to substitute goods, like copper).

But what happens when everyone starts buying it for industrial/home
use? Demand goes up => price goes up!!! Price begins climbing until
the cost/benefit analysis once again favors (or at least equals)
copper and aluminum. Buying drives up the price, ceteris parabis! Just
because it falls to $10/oz. (hypothetically) doesn' t mean it wil stay
at that price nor does it mean people will continue buying ad
infinitum as price climbs.

Substitute goods will force equilibrium at some point lower than its
current value. Would you want to be holding gold when the price drops
and re-equalizes at a price lower than it currently is while things
like food, water, shelter, and safety become scarce and therefore more
valuable? I wouldn't. A doomsday scenario could easily cripple the
demand for gold as a decorative consumable and that would easily
trigger everything outlined above.

Tad Borek wrote:

- quote -

[picking out a tiny portion of a nice post]

- quote -

But that's only due to the cost. If gold were plentiful, and therefore
cheaper, industrial and home uses would rise. They don't wire your
house up with gold. That's not because it's not a good solution, it's
probably the best, but at current prices it's not a good cost/benefit
trade-off. Copper (or aluminum) is cheaper.





Brian

--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)

Default User wrote:
- quote -


When someone raises the question of investing in gold (client or
colleague) my response is: "without hitting google, describe the market
for gold -- major categories of supply and demand...GO!...." I have yet
to hear an answer that is anything close to correct. I don't have these
updated but they don't vary all that much - this is from 2005, in tons
of gold, as quoted in Barron's 1/06:

DEMAND
71% 2950 Jewelry (mostly US, China, India)
7% 300 Central banks & industry
6% 250 Hoarding
7% 300 ETFs
3% 130 Coins
5% 200 Hedging reductions
4130 Total Demand

SUPPLY
2500 Production
850 Scrap
500 Official sales

3850

(-280) Surplus (deficit)

So if you're considering gold as a valid "asset class" within a
portfolio, consider the market for it. Many of the rationales for
investing in gold break down when you look at it this way. Industrial
uses are a very small component of demand. It's all about jewelry and
similar "non-essential" demand components (contrast this to say oil or
copper which are essential commodities). Marginal demand from
speculators appears to drive short-term pricing to a large extent --
check out the price spike around the creation of the gold ETFs for
example. Marginal supply from central banks and exiting speculators can
easily supplement existing production to drive down price. Meaning its
"intrinsic value" is, in my view, a complete wildcard.

Enron is a bit of a red-herring. There are about 7,000 publicly traded
US stocks most people would consider investing in, perhaps 1,000 or so
on "the short list." The percentage of companies with Enron-level fraud
is very small and diversification easily addresses that specific risk.

-Tad

John A. Weeks III wrote:

- quote -

This is not correct. Gold is a superior electrical conductor, and more
ductile and corrosion resistant than copper. If it were plentiful, all
your wiring would be gold. As it is, many critical connections within
electronic equipment are gold. There are companies that make money
salvaging gold from old PCs.




Brian

--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)

John A. Weeks III wrote:

- quote -

This is flat wrong. Now admittedly I've seen purely or partially
decorative gold dental work, but gold is used in both of these
applications because of its wear properties (specifically its resistance
to corrosion) and malleability. There are options, some cheaper, but
not necessarily better. It is application-dependent. In any case, I
highly doubt that many people choose a computer monitor based on its
gold content, a gold content they cannot normally even see!

My point is that gold has legitimate uses beyond fashion, so it has
legitimate demand-driven value, though obviously fashion uses and gold
bugs drive the price today more than industry. But having value doesn't
make it a good investment.

-Will

John A. Weeks III wrote:

- quote -

"The October issue of Financial Planning has an article on this.
MFT (MPT) says each primary componant of a diversified portfolio should
have a posite expected return - and that only earnings growth can
generate expected return. To truly be expected to increase over time, an
asset has to have growth prospects."

Futher along, the author suggests that gold mining stocks can do this,
as they are an ongoing concern. I've not done huge analysis on this, but
I recall a longer term (20-30 yr) chart of gold mining mutual funds vs
the metal. The funds blew away the return of the metal.

(I don't know about your wood response. I have a wood framed home, and
used the accumulated dividends to build a guest house on my property.)

JOE

On Sep 28, 4:21 am, "Usenet2...[at]THE-DOMAIN-IN.SIG" <Usenet2...[at]THE-
DOMAIN-IN.SIG> wrote:
- quote -

Regardless of all the reasons why you believe gold SHOULD be valuable,
history has so far proven it to be an inferior investment. The S&P 500
has outperformed Gold hands down (whether looking at funds or the
actual price of an ounce of gold).

Most of the "gold funds" have standard deviations nearing 40%, and
sharpe ratios that are 1/3 that of the S&P, yet their expected returns
don't reflect the risk and volatility. Since 1900, gold (by the Troy
ounce) has a historical average return of less than 4% (according to
Global Financial Data). Admittedly the price was fixed by the gov't
until 1968, but giving gold the benefit of the doubt, it has still
only returned 7.7% since being allowed to fluctuate freely.
Historically inferior returns compared to the S&P 500 and much more
volatility/risk. No thanks!

Lastly, I admit gold has some uses; namely for its conductivity in
communications equipment, and its shielding properties in space.
However, Dr. Hobart M. King of Mansfield University reports that 78%
of all gold mined and recycled is still used for jewelry and/or
decorative purposes. I don't know about your wife, but mine isn't
going to be buying necklaces after the apocalypse! That's one hell of
a demand decline! Like Joe said, other things, like defense and food
stuffs, are likely to become more valuable. I'd rather have the only
gun and bottle of water in town than a couple ounces of Gold.
Economics dictates that it's all a matter of scarcity. For that very
reason salt was once more valuable than gold. In a doomsday scenario
all of the essentials for living would take precedence over gold.

In article <MPG.2166287494229593989d66[at]nntp.aioe.org> ,
"Usenet2007[at]THE-DOMAIN-IN.SIG" <Usenet2007[at]THE-DOMAIN-IN.SIG> wrote:

- quote -

Enron stock was actually worth billions of dollars at that
time. Stripping the criminal activity aside, Enron still
owned a huge array of legitimate energy companies. Those
assets are being sold off over time, and the money is being
used to pay off creditors. Several billion dollars has
already been paid back. That might not be everything that
Enron owes, but it is hardly in the class of the value of
a roll of paper.

Those who follow rational rules of investing keep a well
diversified portfolio and never have more than 5% invested
in any one stock. People who invest like this were not
hurt by the Enron crime. In fact, the stock market is up
big since then.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <MPG.21662663dc5ac0cf989d65[at]nntp.aioe.org> ,
"Usenet2007[at]THE-DOMAIN-IN.SIG" <Usenet2007[at]THE-DOMAIN-IN.SIG> wrote:

- quote -

Gold has very few industrial uses, and even where it can
be used, there is nearly always a substitute. For example,
gold is sometimes used for dental work, but there are better
cheaper options. The gold is only used for show off. Gold
is sometimes used in electronics, but sliver is a better
conductor and is preferred except that consumers think that
gold looks better. In both of these cases, gold is used
only when irrational decisions are made.

- quote -

They dig the stuff out of the ground as fast as people care
to buy it. Mines in Canada haul it out by the truck load.
Most nations have huge warehouses of gold sitting around
doing nothing.

- quote -

How is that any different from copper or wood 2x4's?

- quote -

And there hasn't been any gold or metals scams out there?
Try doing a google search on "gold scams" and learn how
big of a problem this really is.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <john-89966D.22305122092007[at]sn-radius.vsrv-
sjc.supernews.net> , john[at]johnweeks.com says...
- quote -


Gold has industrial uses, which make it superior to other
substances.

Gold is in a limited supply (UNlike paper/fiat currency.)

Gold can, in some circumstances, be fully confirmed as real.
Meaning that you can own the physical metal.

All of those factors are radically different to, say, a share in
a company that is cooking the books. And just LOOKS like there
are enough real assets to cover the shareholders, and everyone
else.


--
Get Credit Where Credit Is Due
http://www.cardreport.com/
Credit Tools, Reference, and Forum

In article <john-92C3D2.18422723092007[at]sn-radius.vsrv-
sjc.supernews.net> , john[at]johnweeks.com says...
- quote -


- quote -


- quote -


What was the real, intrinsic value of a share of Enron stock, a
week after their shenanigans were publically disclosed? What
could you use it for, except maybe as toilet paper?


- quote -


That computer which you are using right now has gold in it. With
rational, physical reasons. Silver also has industrial uses.

And your, "making women look like hookers" comment is sexist.
Haven't you seen those male rappers with all those chains and
other bling, looking even more tacky? And remember "Mr. T"?


- quote -


As opposed to the physical difficulty level of lies and other
manipulations with stocks, currency values, exchange rates, etc,
etc?


--
Get Credit Where Credit Is Due
http://www.cardreport.com/
Credit Tools, Reference, and Forum


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

John A. Weeks III wrote:
[...]
- quote -

Gold -- always a fun topic. I think you are too easily dismissing the
last 5,000 years of human history. I also cannot eat or wear my stocks
and bonds. In fact these days often we don't have even a flimsy
piece of paper to show for these investments, just transient pixels on
display screen. Frankly I think you are misusing the term "intrinsic",
since a stock certificate is an intangible personal asset and has no
intrinsic value, but only the value of the rights it conveys. Tangible
personal property such as livestock, machinery, or furniture does have
intrinsic value. When you own stock you do not own these tangible
assets, but only some rights related to same.

I agree that gold as an investment compares poorly to other investments.
But physical gold as a hedge against massive collapse of current
political and economic systems is still a pretty good bet.

- quote -

Or to avoid prying eyes. And while there are transaction costs to
owning gold, how is that any different from the transaction costs of
owning food or guns (alternatives that joetaxpayer mentioned in the case
of a major depression). If you live in Iraq and only have two hours/day
of electricity, which do you think is going to keep its "intrinsic
value" longer: your gold or your perishable food?

- quote -

In my heart, I'm a gold bug (physical gold). But I've never bought any
and probably never will. But I still have a vague notion that some
(dooms)day all those old silver coins I have may serve a similar
purpose, and in fact maybe even better than gold as they come in smaller
denominations and are more familiar to many people.

-Mark Bole

joetaxpayer wrote:

- quote -

I think perhaps neither. But while I agree with your assessment of gold
vs. stocks, you did cheat a little bit. You used the gemometric average
return for gold, but you used the arithmetic average return for stocks
and then you ignored volatility when projecting returns forward from
1920. The geometric return over that time period would have been
something like 10.1%, closer to Bread's number (judging from the
volatility stated at moneychimp). But this is still way more than
adequate to support your point I think.

-Will

joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

Hrm. Ibbotson's 10.7 is from 1926-2000 and is pretty
widely quoted. I didn't see Shiller's but I have seen
a couple of others noting the 1937-1999 performance
at mid 11% range. Careful selection of starting and
ending points, of course, can make substantial differences.

- quote -

There have been pooled investments for a long *long* time,
but the modern mutual fund structure really took form in
the twenties (1924 Mass Investors Trust was started and
it went public in 1928, just in time for the crash!).
Some closed-end funds were earlier by a couple of
decades, but pooled investment trusts of various sorts
go back at least a hundred years earlier. Now, there's
a world of difference in the transparency and efficiency
of, say, a modern well-managed open-ended mutual fund
(or especially something like an ETF) as compared to
some of the earliest stuff.

- quote -

Fair enough, though, as we both know, "history" and
selection of actual starting and ending points make
it easy to tweak stuff...

- quote -

I'm really not sure - in a couple of moments of poking
around, I didn't see Shiller's data. It seems a little
high to me, but I'm generally pretty skeptical. I'd
rather be surprised more on the upside than on the
downside. Anyway, Ibbotson and Shiller are, of course,
both Yale guys, so who knows. But Ibbotson's data is
probably the most widely quoted I've seen. Shiller's
been talking more about real estate lately anyway.

Talk about another asset class about which folks
expectations are often out of whack with historical
reality...


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

BreadWithSpam[at]fractious.net wrote:

- quote -

The moneychimp site using "Robert Shiller and Yahoo finance" data for
S&P showed 12.2% for 1919-2005. I anticipated some objection and rounded
down to 12%, knowing that a .20% expense was on the low side, although
mutual funds weren't invented back then, were they? But for these
discussions don't we use raw data, anyway and disclaim "after fees and
taxes, you'll see less"?

- quote -

Wait - the Gold hucksters used the past data to make these claims, and I
reply with past data, I think I'm on the record as subscribing to the
"waiting for average" belief that the next 10 years will center around 8%.

- quote -

Is Shiller's data wrong? Or is chimp's math? The site shows 9.2% return
after inflation over the stated period. Either was BWS, we agree on
approach, and I think your $125,000 makes the point no less dramatically
than my $340,000.
JOE

joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

In fairness, 12% is optimistic. Ibbotson's data, over the
20th century (which included some phenomenal advances in
productivity - vastly more than in most of the centuries
prior) - the broad US Equity market got more like 10.7%
Over 86 years, that's actually a huge difference:

- quote -

Of course, at 10.7% over 86 years, that $20 goes to 6261x
the original value - to over $125,000. That's still a
hell of a lot of suits...

Nevertheless, if we assume that we won't get the same
level of p/e expansion (p/e expansion accounted for
approx 1.25% of the historical 10.7%), it becomes: 9.45%,
after 86 years you get a multiple of about 2358, so
the $20 becomes $47161, still, a lot of suits.

Anyway, yes, stocks are likely to be vastly better
in the long run than gold. But I think suggesting
that folks have even a vague expectation of 12% is
overdoing it. (and, frankly, I hate to see these
things done in nominal terms, too - I'd much rather
talk in real terms - in which case gold seems to
follow inflation almost precisly in the long run,
while equities beat it (or at least have beaten it)
by something more like 7%.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

John A. Weeks III wrote:
- quote -

In a real depression, I'd think food and guns would be valued above
gold. I can understand the fear of a bout with hyperinflation, that
might render the dollar pretty worthless, but you are right, a share of
a company producing a good or service still has intrinsic value.

I enjoy the copy of some of the advertising promoting gold:
"in 1920 a man could buy a suit with a $20 bill or $20 gold coin. But in
2006, $20 won't buy a shirt, and a gold coin, now worth over $500 will
buy a suit."

So what? At 12%, your money will double every 6 years. Over 86 years,
that's more than 14 doublings, or over 17,000 times your investment,
$340,000 for your $20 bill.

Someone tell me how an ad can make an 'investment' that will grow from
$20 to $500 in 86 years, an annual return of 3.8%, look good when the
alternative (the S&P) would return 680X as much.

From the 1980 peak, gold would have to exceed $4800 to outperform
stocks over the same period. I look at the 35 year chart at
http://www.gold-eagle.com/charts/33yeargold.gif
and I'm no technician, but 'down' looks far more likely than up, for all
the reasons you stated.
JOE