Why should I invest in Gold coins?

Seems to me there is an inconsistency between the treatment of stocks vs that of PMs.

People say to invest in stocks because they have always gone up historically. Yet, over the last 15 years, the net result of investing in this manner has yielded almost no returns, and a loss if inflation is factored in. 15 years is 1/2 the investment lifetime of most adults. Yet we still hear that since historically, stocks have done well, then thou shall continue to buy them.

On the other hand, with regards to PMs, the advice is the potential investor should beware. It's either, PMs are an archaic relic, or that PMs are in a bubble. Yet over the last 15 years the returns have been spectacular and have beat almost everything else. During this entire period, from the day that gold crossed the $300 mark, we've heard that PMs are in a bubble and will soon crash back down to reality.

Both lines of reasoning are faulty because they ignore the reasons on why investments go up and down. However there is one thing to absolutely count on. History is irrelevant. Economies change and the events from 20 - 50, 60, 70 years ago have no bearing on what is going on now. It's easy to cherry pick dates to make yourself feel comfortable, but this is putting on a blindfold. It amazes me there are constant recommendations to put money in stocks yet the very important fact that laws on the books needed to protect those investments are being perverted, ignored and broken. Any investor has to consider this yet it's never even mentioned in these schemes to put money in stocks.

 

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If you believe history is irrelevant, then you must confine yourself to buying only what has been performing well recently. I think history is very relevant. Gold has performed well for ten years. To me this is an indication that it may be time to sell some because it is no longer a bargain. Stocks have performed badly for ten years. To me this is an indication that it may be time to take a second look. Those who believe history is irrelevant, like the tech stock investors in the 1990s, will miss the turn. They always do. People were pretty convinced that the stock market was dead in 1980 after waves of inflation, falling dollar, poor returns, skyrocketing oil prices and gas lines. But it was precisely at the time when things looked worst for stocks that they presented the greatest bargain. The same was true in the depths of the Great Depression. I know Japan has had a rough time, and it was pointed out that our markets may be headed for the same, but as you point out, we have had inflation and they have not, and that alone will boost stocks at some point. Also, most large cap stocks operate worldwide today, and that changes their prospects.

Everyone has to decide for themselves.

 

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as usual you got what I was saying completely wrong...
Central banks and governments are run by people...people with their own interests...if they can manipulate something in their favor...they will do it!
also if you were to sell your gold/silver today...how would that go? I don't exactly see the prices for them spiking upward...
seems to me it would be a loss...
I will say my point one more time and hope you get it
if your worried about protecting "value" you really need to be protected by a basket of investments that counter everything...


meaning if Gold/silver go down you have an investment that counters any losses you might get if you had to sell


if the stock market tanks then you have an investment that counters any losses you might get if you had to sell


if...ect......


maybe instead of seeing pm's as the best thing since sliced bread...you come back to reality and see they are only tools...and eventually tools break or need to be resharpened or reshaped...

 

You expect inflation alone to keep our markets up?, yes there are other strategies you can use to make $$ even if US economy is following a similar trend as Japan. But most people who invest are in thru 401k which give very few choices when it comes to investing even the single emerging market fund offered by my provider has underperformed terribly.

Most of the funds offered barely even beat the S&P500 returns and if S&P500 continues moving side ways most retirement accounts are going to do the same.

 

You are taking too much responsibility for your posts as I didn't read whatever it is you are referring to. While I try to read everything here, I have to weed out the less important ones due to lack of time. My response, which didn't quote anyone, was in reference to what other forumers had posted.

Answering your question, if I were to liquidate my PM holdings right now, I would make a considerable windfall. If I had listened to the "common wisdom" I wouldn't own any PMs at all. PM ownership requires the party to cast off the notions of mainstream society because beyond the numismatic appeal, bullion ownership is disparaged. Even the chairman of the Federal Reserve said under oath to congress, that gold was not money. We are supposed to forget the 7000+ tons of it sitting in the basement of his bank and the additional 7000 tons he holds on account. This is the same liar who determines the worth of the USD. IMO, and it is an opinion, you don't listen to their words, you watch what they do. Talk is cheap.

I agree with you that you need to diversify, what you call "basket of investments", but everyone here should know that. I'm not here to talk about basic investing. I'm here to talk about gold and silver. I have never said that one should ONLY hold gold, but anyone with open eyes also should realize the status quo of investing doesn't hold water anymore. i.e. Diversification doesn't mean buying into corruption no matter how many will tell you otherwise. Until a few years ago, people constantly ranted on to purchase the most expensive house that you can finance. This worked, until it didn't. The complete lack of understanding of that dynamic means there is now a river of crocodile tears from underwater homeowners.

 

Corporate revenue and earnings generally at least match inflation, so stock market averages will move up over time even if the companies are not growing in real, after inflation terms. Most 401k plans offer something similar to an index fund or large cap fund. Most large cap companies operate in emerging countries, and matching the S&P500 is a fairly good result from an investment program.

I don't know anybody's personal situation here, and I am not offering specific investment advice. My only point is that after a decade of gold moving up 6X in price and stocks going nowhere, the probability is pretty high that stocks will outperform gold over the next ten years, in my opinion. Some folks here completely rule out the stock market as an investment vehicle because of recent past performance, and historically this has been a mistake.

 

But once again same can be said about Nikkei 225 which posted from 1970 to 1988 consistent gains. I don't think historical analysis is no longer valid due to issues i highlighted before the markets have changed and so have the demographics. Nor can we expect consistent GDP growth like in last century. Let me ask you think do you believe US economy will grow at 3-4% for rest of this decade?

 

The best advice I can give you is Don't. Secondly stay away from the paper market. 5% of all ins on paper market make it big, the other 95% end up sleeping on park benches.

 

If you don't believe history is valid, then you are forced to use some other analysis. Japan suffered mild deflation combined with no growth. If this is the case in the US, you will be correct. Yes, I do believe the US economy will grow 3-4% in nominal terms, but not necessarily in real terms. The stock market over the very long run tends to track the nominal increase in GDP. If you think about it, it can't really be any other way.

 

Why ask why it is Gold that what John Q Public wants.
1 There finding less world wide each year
2 Were using more Gold to make our CPU&cells phones and other toys each year.
3 Our planet only has so much then it Gone.

 

The absolute failure of "economic theory' as taught and practiced in the USA/Anglo Saxon world is that it can't deal with an economy that doesn't grow. i.e. Contemporary theory does not believe that a successful, stable, well run economy that provides for society is possible unless it is constantly growing. Furthermore that growth always has to occur on a % basis and not on an absolute basis. The thought of anything different, anything that would suggest there are other alternatives is so alien to this entrenched mentality, that it simply can't be accepted or tolerated.

As always, very simple mathematics says this contemporary thinking is wrong. Any system grown at a constant linear percentage basis ends up with exponential growth. The math can't be ignored, but we still have people who claim that we can continue to grow economies on a percentage basis. Exponentially growing systems always end with two possibilities. Growth abruptly stops or they continue on until there is a violent collapse.

Since economists, governments and most investors ignore this, they end up looking for the government to get involved to "fix" the math when the real economy gets maxed out. They do this by creating money. It works for a while but it results in booms and busts that continue to get larger and more frequent until a system wide collapse comes. (when this happens paper promises get broken) When this no longer works, they start breaking laws, telling lies, and changing rules to protect the status quo.

These events take generations to work out and that is why I say history is irrelevant UNLESS your history includes a long enough timeline to take this into account. The prudent investor needs to figure out where they with their life relative to this. Just because one's granddad did well by buying stock, doesn't mean your will. One HAS to understand what is driving the market today and not what drove it in 1950. Advice that stocks will always go up or house prices will always go up because they always have is just nonsense.

 

As per dictionary.com:
intrinsic
adjective
1. belonging to a thing by its very nature: the intrinsic value of a gold ring.

The only thing that belongs to a stock by its very nature is the paper it's printed on or the iron on the hard drive its data is stored on. If you want to explain further why this is incorrect I will need details, not baseless assertions. And you are correct, I don't know how to calculate the intrinsic value of something that has no intrinsic value. Division by zero gives an error.

 

One reason and one reason only ... to offset the devaluation of your dollars.


The next obvious question is "How do I figure out if and when the dollar will devalue?"

Well, that's a little bit tougher. But in general terms, the theory is that as long as they keep printing money the dollar will go down and gold will go up. That doesn't mean the dollar won't go up intermittently. This chart shows how the dollar and gold usually work in an inverse pattern.

If you really want to understand what influences the gold market you'll need to study monetary policy, money supply, how politics influences markets, who's doing what in the precious metals market, human psychology, interest rates, and COMEX policies.

The easy way is to just be a gold trend follower and get out when the trend changes. Pure trend followers tend to be wrong a lot near market turning points, and they can get whipsawed out of their position easily, especially in markets as volatile as precious metals, but can hit it big when they join the trend at the right time.

Personally, I've bought and held gold for the past 4 years. I'm not going to try to time this volatile commodity. However, I will keep buying a small amount of gold on the dips (depending upon what's influencing the dips) until interest rates peak.

 

The intrinsic value of a stock is the value of the business. Lets start with something close to your heart, a silver miner. Lets say the company owns the land, and the equipment to mine silver. They produce $10 million profit a year, the land and equipment is worth $30 million, and have 1 million shares of stock.

Are you saying this stock is valueless? If not, what would the value of each share be? Many who believe in "hard assets" would say $3 a share, (its physical assets). However, its real value is making $10 million a year, if its expected to continue to do this. Rough math I would value this firm at around $8 a share. This is the rough value of this money coming in every year forever.

So, what is your opinion of this admittedly simplistic scenario Inflexion?

Chris

 

This isn't a baseless assertion. A share of common stock is a share in a business with revenues, assets, earnings and dividends. If one share of, say, Exxon has no value, then it sounds to me that you are saying all of the outstanding shares combined have no value. If this isn't obviously incorrect to your way of thinking, then I agree you should stay away from the stock market. Others who see the value should act differently. Now, the price of one share of Exxon can change depending on the actions of market participants; but the underlying value of the company will normally change at a much slower pace. This results in a situation where the price of the common stock of Exxon will periodically sell or more, and sometimes less than the value of the company. For those who can estimate this value, it can be very profitable to buy the common stock when it sells for a price significantly lower than the value of the company.

I hope that helps. Not everyone has an interest in the stock market or the training and that is okay. They should move on to other investments such as bonds, PMs, real estate, etc... But there is no need to assert that common stocks have no intrinsic value.

 

2006-W Buffalo Proof?? This is safe one set that could got up no matter what Gold spot $$$ is due to mintage.
Saints in a few key dates are good tooff-topic:.

******Palladium is were I would be buying Now.

 

This one is easy. Common stock holders are considered lower than creditors of the company,and not owners of the company This is why the stock has no intrinsic value.

A company claims bankruptcy. Common StocK goes to $0. The company still has hard assets, it may still have a viable business that makes money, but the common stock goes to $0. Common stockholders are considered lower "creditors" of the company not "owners" by the bankruptcy court. This distinction is very important because normally in a bankruptcy it's the unsecured creditors and common stock holders who take all the hit.

This is directly from SEC.GOV

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution. ​

Thus, if something can be made worthless with the stroke of a pen, then it has no intrinsic value beyond the paper and ink that make it up. (or a few electrons)

 

Well who said anything about using debt to leverage returns? I never said there was any debt in the above scenario. All that is needed to answer the question is given, and outside assumptions shouldn't be brought in. Given those simple facts, do you and Inflexion still say the company's stock is valueless?

 

Stock has value until it doesn't. You said this:

"The intrinsic value of a stock is the value of the business."​

In order for this to be true in regards to intrinsic value, then the stock would have to have a non-negotiable claim on this value. Clearly it doesn't due to the bankruptcy laws. Hence, it has no intrinsic value.

 

Again sir, who said anything about debt? Absent debt, the shareholders ARE 100% the owner of a firm. So:

1. I never said one word about debt. Please stop interjecting your own thoughts on the scenario.
2. I never said anything about bankrupty. I simply do not know whay you are even bringing it up, as the firm I described is making healthy profits.

Given what was given in the scenario, the question still stands. Do you and Inflexion still maintain the stock has no value?