Gold will go down to $700 in the next 5 years?

I was almost going to include 4 out of 5 with the model 360, but that is less dramatic. I like yours better.

 

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Or you could get very unlucky 1 out of 1 times. Hit that number and you don't really care that you have 5 more chances.

 

Pessimist.

 

Nah. My recommendation is that one play the version of the game that uses 5 bullets. It's more exciting that way.

 

You don't point it at your head! You want to make sure you have the other 5 chances.

Get it? Smart and smart $ = $$$$$$$$

 

Very exciting. You go first! :devil:

 

While I will agree it skews probability in their favor, I will also point out there is almost always smart money (or so called smart money) on either side of a trade. And I use John Corzine as an example of very smart money who can still get caught. Personally I would also be curious why people would play physical silver or gold if they are timing or playing volatility instead of paper silver or gold. But those are just my thoughts and worth what you paid for them. They are definitely not investment advice.

 

Corzine wasn't managing money so I don't consider what he did or does to be investing in the sense used by individuals. He isn't the competition. One of the nice things about investing, as Warren Buffett pointed out, is that it isn't a game where a higher IQ player will do better than a lower IQ player. The investor who will do well is the one with a sound investment philosophy [value investing is a good one], the skill to know how to use it, and the discipline to stick with it. I have no problem owning paper PMs in the form of ETFs and closed end funds. I've owned SLV and GLD in the past, and I currently own CEF. You just have to be careful with the tax reporting rules for SLV and GLD and the PFIC reporting requirements for CEF. Own physical is more for long term holdings, so it depends on a person's goals and expected holding period.

 

This is so true. Value does not exist outside the human conscoiusness. However, one thing PM (all metals really, but nothing else in existence) have going for them is that they fulfill the 4 requirements of a unit of account: fungible, divisible, durable, portable. There is a reason people believe in it besides tradition and visual appeal.

I have not read it, but I am aware that credit based systems were in use before gold and silver ever became money. However, metals have always been a store of value. Whether or not they return to money, they always inevitably return to fair value when the credit systems fail.

 

The definition of smart money is losing billions and billions of dollars by making naked bets on sovereign debt? I'd hate to see what dumb money is.

 

That is just a fancier way of repeating what I already posted.

 

There is no "smart money", there are smart/lucky/knowing investors that make the smart bet. And it is all a bet. There is no sure thing in financial dealings. Even those who accumulate PM are making a bet. But in the end it might prove false also. Yes you can argue it has lasted millinums, but that is past history and need, it is not predictive of the future. One may sneer at fiat money, but I believe one should use it to further one's financial situation. If you want to buy Pm or a new house, that is your choice, but if you buy PM and never sell it, you are playing with paper wealth also. Your gains/losses are only on paper until they are realized.. The "dumb" money , IMO, are those who buy PM, stocks, land, patent rights, bonds, etc. and then let them be ignored, thinking they will go up in time, no worries, ....They have to be maintained like your livestock, pets, relationships, health, or the result may be very bad, and many accumulators do not do this, they believe the PM mantra so strongly.

Jim

 

I am probably taking you too literally, but by your statement, walking into your bathroom each morning is a bet. Everything we do during the day is a bet. However, there are good business/life decisions that go bad and bad business/life decisions that turn out rosy. The difference between betting and making a good decision is the reasonable gathering of information and use of that information.

 

I think by "bet" he meant there is a probability of gain or loss in every investment decision, and the "smart" investor is the one who can use available information to determine whether the probability of gain outweighs the probability of loss or not.

 

I guess we agree, except for the use of the word bet. Bet implies a high level of uncertainty whereas "smart" investors make informed decisions.

 

On the one hand, it's a good idea to use the word bet as a reminder of the uncertainty. The difference is that in the stock market [less so for commodities like PMs] the odds favor the investor instead of the house. But just as the house may lose in gambling, the investor may lose in investing if it is done carelessly.

 

I agree.

 

There is no "house" in the stock market so the analogy isn't the same. Instead, your "bet" is entirely the actions of other investors at the time you decide to liquidate your stock.

Unlike a "house" at any given instant the equities market is a zero sum game.

 

This is a good baseline argument, but it's even more extreme than that. Most of the mid-major miners rely upon sustained gold prices above $1085 to not lose money. From what I recall, below $1200, it's cheaper for them to acquire gold on the open market than explore/extract new sources.

 

Wouldn't the stock market be a perfect example of a negative sum game? Transaction costs affect both sides of the trade, which would create a negative expected value relative to the zero sum definition...

Also, while a single trade (ex expenses) in equities is a zero sum game, I think most people view it in the same vein as a fixed security. Yes, the two aren't remotely comparable, but to the average investor/saver, the bottom line is whether it's worth more in "X" years than it was "Y" years ago. By that definition, the equities market is anything but zero-sum.

Lastly, there technically IS a house in the stock market. Brokerages are allowed to lend shares to cover short trading out of client accounts. That, coupled with the interest rates structure of short-selling, makes the brokerage effectively a "house." The inclusion of options into the definition of an equities market would further include market makers into the concept of a house.