PMs vs Stocks- investing and the factors that sway their valuation

After some good discussion on a thread by @Jason.A I decided to start a thread to have a wider discussion on PMs vs Stocks - performance, relationship, environmental and other factors. I don't expect this to stick to any strict scope, but let's keep it to things that are causes and/or effects on the US and World economy, consumer sentiment, the Dow/S&P/Russel or any other gauges of the market, PMs and any other true investment products (no insurance products please, i.e. annuities). Lets stay away from "penny" (sorry guys and gals) and pot stocks as well.

I'd also like to add this- I am not an investment professional and any content I share or express, directly or implied, is my opinion only. I will not be held responsible for any gains or losses as a result to executing any investment ideas or strategies mentioned in this thread. Furthermore, the execution of any investment ideas or strategies shared in this thread are at the sole discretion of the executor only. None of the Stocks that I will mention are or will be held within 72 hours of the mention. As always, do your due diligence, don't run with scissors and drink milk. That should cover it.

PMs and The Market have an inverse relationship. When people are content with the political and economic environment stocks go up and PMs go down or find their floor, in general. At the time of any consumer discontent or fear of instability in the market or political environment the inverse may happen.

Do you think there is a logical explanation with the movement towards PMs in times of true or implied economical and/or political crisis?

How much do you think the industrial need for PMs truly effects their valuation?

What do you see happening with the valuation of PMs in the next 6mo, 1 year, 2 years, 5 years or 10 years and why? (You can pick one or run with a timeline)

 

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I totally disagree with this statement. People have no control over the stock market. It is control by the large players. They have enough control over things that they can make is go any way they wish until it gets so completely out of whack that huge corrections take place. Of course, by that time they are out of it. Any pretense that "people" have any control over the stock market is a pipe dream. Forget get rich quick schemes: for everyone who wins there has to be a loser.

 

Please read the rules before you lead yourself and other posters in the thread to infractions or worse! No politics, religion or world event discussions.

Thank you

 

The only thing I can agree with is your last statement. That's generally what happens, but sometimes someone came in much lower than your entry point and is selling as you're buying so, in that case, it's a win win. To think of what you "could have made" is a waste of energy and being ungrateful. You didn't make it, but you still made it out and made out.
As for people, yes, the big boys are still people, they do have influence on some of the flow, but how do you think they are doing it? Do you think they have a NYSE console on their mahogany desk and hit a key that drops or raises everything just before open, or in the middle of the day, or just before close? No, I don't think they do either. It's most likely sentiment that is broadcast and gobbled up, by people, that sell or buy on command when the big boys buy or sell huge quantities. It leads to the charters, which leads to more people following suit, creating a domino effect.
But that's not the whole picture. Anticipation of scheduled events can sway the valuation as well. Political regime changes, talk of recession, bailouts, FDA clinical trial stage approvals...such a broad statement as "the big boys control it all" doesn't blanket the entire economy that well. It's just too much to cover.
But back to my original opener, do you argue that PMs and Stocks don't work inversely?

 

Yes. The big boys have computers which are nanoseconds closer.

 

Are you saying that any discussion of politics or world events is an infraction or just speaking politics and world events as a discussion is an infraction. All due respect, it's kinda hard to talk about factors that effect PM and Stock valuation without mentioning politics or world events. If it's kept vague and macro would that be acceptable? I'm not looking for flag waving and such. Just pertinent content. I will adjust the opener accordingly.

 

Without a return (interest or dividends) you really need good timing and a good spike to make money on a PM investment. Industrial need is minor.
Good companies that pay a dividend (stocks). You get value several ways. The stock price can go up over time. The stock can split, which does not increase the value, but then if it continues to go up, it increases the value exponentially. You get a steady stream of income from the dividends, which over time pays for the entire stock purchase, and you still own the shares.
They often raise the dividend. A nickel here and there, and over time it adds up.
I am heavily invested in the stock market and only a very tiny fraction is in PM's.
You can't really do anything with PM's except buy and sell them. While the stock is a tangible part ownership in a company.
The reason I am in the stock market, is because the money market has been paying 0% for the last 8-10 years. I was in it for 30 years and very happy with my no risk return. But then I had to look for something that would pay me dividends on my money. As for the "big boys" it is more of a factor of investment banking doing computer trading. And that will drive the market. But the biggest factors are not earnings and fundamentals anymore. It is news (rumors), and fear and panic.
There isn't an inverse relationship from PM's and stocks because if that were true whenever the market was up, PMs would be down, and vice versa, and there are plenty of times when the market is up and PMs are up, or when the market is down and PM's are down.

 

It is hard to answer your question without examples that are not allowed for even me to post. Rules:

The rules can be found as the second forum on the main menu list.

Jim

 

Dividend paying stocks are an important part of every portfolio. The drip is a great supplement, especially if you can capture the stock in a dip when it's closer to gushing.
There's just one part of your statement that doesn't jibe. The fact that stocks and PMs haven't moved inversely. I'm not saying that it is an immediate and definite shift, but if you look at an overlay of any index vs silver or gold over time you'll see what I'm saying. They may climb or fall together, but it's never for an extended period and if one is climbing, more times than not, the other is sitting on a floor if not falling. Here are two charts I hijacked from an earlier discussion on another thread, originally posted by @Clawcoins
Gold

DOW

 

It has been cleaned.

 

If PMs and stock were inversely related, since stocks are at an all time high,
PMs should be at all time lows. And we know that is not even close.

 

@Michael K I apologize for not being as thorough as I wanted with my earlier reply so I'll expand here. I do agree with your reasoning. I sit in a higher risk bracket because of my age and goals. I also like tinkering with things so having an active management role in my portfolio suits me. I took a few investment classes and really dove in head first. At the time I moved into stocks it was at a point of decent correction and I felt lucky about the timing. At the time I didn't understand what correction was, how it worked and why it happened. I learned about that while starting to understand placement and calculating good entry points into positions I wanted to hold. I got into some of the big Buffett picks, domestic oil, but where I took off what's orphan pharma. A friend of mine had been doing it for years and when we started talking about me getting into investing it started him on sharing his years of experience and understanding in that arena. It was fascinating and knowing that I was making money while my money invested was actually helping people with real medical issues have a chance at a treatment that would improve their quality of life or even cure their disease...sweet icing on the cake. But that same friend had, years earlier, mentioned PMs and how, at that time, it was a great investment opportunity. I brought it up to him while talking Stocks one day and he gave me the same look that my investment instructor (who is a leading broker) gave me when I asked him about it. I figured since my instructor was there to talk about his field, and my friend was so focused on stocks that I'd take a detour and start learning trends and factors for PM valuation movement. The ONLY things that really stuck out and were easily grasped were the inverse movement to the indexes and that fear and sentiment really effect the valuation. That being the case I acted on my knowledge just before and after brexit and did pretty well with it. Once I was out of what I intended to do I placed the whole thing back into my portfolio ahead of where I would have been had I left it there. I do understand that this is a very risky and speculative move, but I would never go over what I am willing to see burn up into this type of playing.

 

But in my clarification I stated that they do move inversely, but not an absolute obverse relationship. When one is climbing, if the other isn't falling it is flat. There's pressure applied that keeps it from climbing for some reason. What? My only guess is that it is because the factors for each work inversely. When people are happy the market climbs and metals drop or hold stagnant. When they get scared the market drops and metals go up. Please see charts posted above for my example.
Edited to add- Also, if it truly had an absolute inverse relationship no one would ever hedge with metals. It would probably be more fun to go to your bank, withdraw straps of dead presidents and have a bonfire. Since the stock market has an overall incline, the medals market would have an overall decline. It may sound like I'm arguing against my original point but I'm really just trying to amend it with my actual meaning of inverse relationship. The points at support increase over time with both arenas, but their fluctuations are inverse. One goes up other goes down to a higher resting point than the last or stays flat. Then it goes up and the other comes down finding support higher than the last resting point or stays flat.

 

They very well may have been if it wasn't for the PM stocks. At this point they can't exactly be entirely separated since they are a part of the stock market now too. There does appear to be some relationship since the run up in PMs was when stocks went down, and now they have been declining for the most part as stocks rose. That said most people would have been better off not panic selling most things during the stock decline as a large percentage of those stocks have more than recovered

 

Yes, I'm familiar with high performance trading machines and the need for a massive data pipe to feed them. But now you're talking about changes that only affect micro-trigger, day trading and charters. Things that don't require any real knowledge about the market as a whole or what effects it in the long term. That's more an application of studied historical events in valuation movement that attempt to predict what will happen next. It's mapped with a list of quasi-yoga named constellations that sound more logical that the use of a crystal ball. The type that bury you in tax paperwork. I studied and tried it and it just seems like the wrong approach to trading, to me anyway. I'm talking bigger than that (and not how millions of calculated hyper-short positions can sway the market). I'm looking at the events that shift the market as a whole through social interaction and how the reactions to this effect index and PM valuation. Because not everybody that plays the market stares at a screen all day or lets an algorithm make their calls.

 

I'm familiar with PM ETFs but don't fully understand how they function. I feel they give the illusion of owning PM but are kind of like buying a star and having it named after your girlfriend. It's a nice thought, but what are you really buying? Is each share backed by an equal or fractional amount of the PM or is it just a numbers game that you're buying into? And what is that money actually doing on the back end while in your mind it's a piece of PM? But if you don't think that way and don't care I guess it's irrelevant. I just like to know where my money really is and what it's doing. Like helping patients gain a better quality of life or a startup with a good story, goal and purpose get off the ground. I just feel that I had to earn my money the hard honest way so any control over making sure it stays that way that I have I'd like to exercise. I digress. To your point, you're not really playing the stock market you're placing your money into metals (or the illusion of) pricing. You may obtain the ETF as if it were a stock, but it's still living it's life as a piece of gold or silver. It won't find its way into the S&P, DOW, Russel X, or any other market gauge so we won't see it's performance truly effect what we see as the market, so there is still the disconnect of their travels.

 

Too much to write right now.
But to me there is not a direct inverse relationship. Though there is an short term inverse correlation when the economy is "stable". Let's just look at the last 10 years for an instance of Gold vs DOW


In the 2008 timeframe everything went into stagnation.
No one was buying anything to put generically.
PMs down, stocks down, car sales down, jobs way down, etc etc.
Cash was king as it was the common denominator that people wanted .. if they had a job.

As the economy started coming back, money started flowing again, people started investing again it perked up not only the stock market but also the PM market.

In this case they were directly correlated.
Of course we had gold hoarding by China and India too, becoming more globalized.

Shocks such as one country who gets most of their silver from Mexico stating there's going to be a 20% import tax ... a sudden jump in Silver.

"safe haven" is a normal nonmenclature for PMs. It's a place to put one's money without losing (or gaining) much. Many investment mgrs for some reason do not want people in cash (because they make no money on it) so they always have to move investments somewhere. I always convert stuff in waiting into cash .. I never lose a dollar that way in price variations and fees.

But I'll delve more into specific examples such as:
GE dividend paying stock in a drip vs pure stock appreciation such as FB or SQ.
Bond Funds such as a Fidelity FNMIX which gives monthly dividends which is a low price per share vs a high price per share example vs Nasdaq index, or S&P index.
Corporate Bonds such as from Coca-Cola paying 7.5% or more.
and I looked into PM ETFs before but decided against it.

Of course these would be specific examples and there are winners, losers and stagnate stocks, funds, etc out there.

Of course, what would happen if the supply chain were to partially shut down ==> https://www.bloomberg.com/news/arti...llion-tax-bill-it-would-take-centuries-to-pay

 

There is too much in this thread to read it all, but I would have to say that the basic premise is wrong. The title "PMs vs Stocks- investing ...." does not make sense. PMs should never be used as an investment tool and so cannot be compared to stocks. PMs should be used only as a hedge to maintain wealth. Stocks should be used as one possible investment to increase wealth. I have enough to survive on for the rest of my days as long as I am able to maintain it and so hedging is more important to me than investing. True, by increasing my position in the stock market I may increase my wealth, but bad investments also can reduce it. The stock market is overdue for a drop so right now I have reduced my position in it and am investing in other things - buy stuff which I know I will need at some point in the next ten years and which will be a lot more expensive in the future.

 

That's exactly the way I look at it too.
PMs are a storage of wealth / hedge. Sure, there are spikes where one can make money. But waiting 5 or 10 yrs between big spikes is not something one wants to do as an investment.

Compare that to buying certain stocks .. I recently bought into starting at $17 SQuare corporation. Now around $27/share. Even Ferrrari stock IPOd at $40 now over $100. There are stagnant stocks, and GE was one of them. I bought at $24, slowly went to $30 ... and decreased to $25 or something now. I got out at $28 on the way down. Of course this was a DRIP, but a slow, really slow DRIP. Not worth it looking back. My New Markets Bond Fund on the other hand gives Monthly dividends and is basically looking to be at 10+% this past year.

Compare those to PMs and PM are too volatile and difficult to understand by various influences. A stock is easy by comparison .. competition, markets, revenue & profitability, p/e ratios etc which are all numbers you can look at.

 

"PMs vs Stocks- investing ...."
Both stocks and PMs have a place in one's investment portfolio, but to me they complement each other and should not be thought of in the "vs" sense. With stock ownership, we have a slice of the pie of corporations that hopefully generate profits. PMs on the other hand do not generate profit, they are lumps of metal that fluctuate in value for many reasons, but mostly they change price as currency gains or loses value. For someone who is young and has many years ahead, stocks have shown to be a great way to invest for the long run. An investment into the S&P 500 right before the crash of '87 still has you way ahead today. If you purchased silver at a certain time in the 1980's, you may now be underwater.