Bullion VS Stocks

Discussion in 'Bullion Investing' started by SCFY, Jul 2, 2013.

Thread Status:
Not open for further replies.
  1. medoraman

    medoraman Supporter! Supporter

    I understand where this hyperbole comes from, (pm dealers), but never understood how people can accept this argument.

    First, most stocks are not Enron. Heck, I have always actively avoided stocks where a simpleton like me cannot clearly see how they make money. Opacity is the last thing you want in investing.

    However, to say "over 5,000 years pm holds its value", um yeah ok, so does land. What is stock though? Its the factories, the offices, the company that makes a profit. SOME stocks can be almost all assets you cannot lay your hands on, I do not like investing in those either. What about GE though? They have tons of factories, R&D centers, television networks, etc etc. These create profits every year. How the blazes do you compare this firm in the same breath as Enron? Talk about throwing 10,000 babies out with the bathwater.
    mikem2000 likes this.
  2. Avatar

    Guest User Guest

    to hide this ad.
  3. Blaubart

    Blaubart Melt Value = 4.50

    I'm not trying to be overly nit picky, but do you see what you did there? He did not say "99% of stocks/fiat", nor did he place the "that you would consider investment worthy" condition on there...

    I don't know if the number is quite 99%, but how many world currencies from 100 years ago are still legal tender today? Some transitions allowed for the transfer of money from the outgoing currency to the incoming, but not all have, and some of them that did went through hyperinflation first.

    I wanna buy a cheeseburger. Can I pay for it in German Marks? How about Mexican Pesos from 1990? Italian Lira? Zimbabwe Dollars? Pre 1998 Russian Rubles? There's a long list of obsolete currencies out there, and I wouldn't be surprised at all to see the US Dollar among them within my lifetime.
    SilverForLife likes this.
  4. Blaubart

    Blaubart Melt Value = 4.50

    Every place I have ever stood on this planet, and that list is much larger than the average person, gold and silver had value. Had I been standing in a place where it didn't, I'm sure there was somewhere nearby where it would.

    Even in those remote places where you think they might not officially have value at the time, I'm sure it was possible to find a person that would want them, even if it was your fellow traveller and not a local.
  5. mikem2000

    mikem2000 Lost Cause

    Not as much as you may think, there have been whole cultures of folks who placed no value in Gold, not just a few exceptions. The last time we went down this road, Jim, (Desert Gem) made an excellent post that showed even the Mayans (who most assume praised Gold highly) did not really value it that much. Seems they placed a higher value on shells and cacao beans, that were used as currency, than Gold. Who would of thunk, they liked fiat better than Gold.

    That though is really not the point when folks use the line that Gold has always had value for 5000 years. What they are really saying that Gold has some sort of inherent intrinsic value that was always valued and always will be. That is just not the case, valuing gold is something that is learned, and going through the history does prove that.
  6. PeacePeople

    PeacePeople Wall St and stocks, where it's at

    Beans and shells are fiat? whodathunkit??
  7. Blaubart

    Blaubart Melt Value = 4.50

    True, but when I invest in land, how much value can I store in my pocket? How easy is it for my government, or a foreign government for that matter, to take that land? Of course they can take whatever they want, but land is very difficult to hide.

    What about MCI WorldComm? They had lots of assets, and leases, and contracts, and revenue. Too bad it required an accountant with inside info to see how they were cooking the books. My wife owned a couple thousand dollars in that company and wasn't paying close attention to her portfolio. That was the only stock we've ever owned that went all the way to zero.

    My wife likes to pick and choose stocks. I own a couple different sector funds. I don't have much concern that my sector funds are going to drop all the way to zero.
  8. mikem2000

    mikem2000 Lost Cause

    C'mon Blaubart,

    You understand the spirit the post, no one on this forum has EVER recommended holding fiat currencies. Whether the Greenback is around 100 years from now is really immaterial. You use today's $'s to purchase things of value to hold, build, and grow wealth. Stocks, which represent value in the form of current assets and future earnings is what the bet is on, not the fiat itself. What currency you convert these things back to is just not germane to the conversation.
  9. Blaubart

    Blaubart Melt Value = 4.50

    I do understand the spirit of the post. NorthKorea went out of his way to say that SilverForLife was wrong, and then misquoted him to support his point of view. Not cool...

    As for the discussion on fiat currency, it does matter. Sometimes, when a currency tanks, there is a little time to get out. However, that is not true with money in a 401k or an IRA, which can only be withdrawn for certain purposes and only after incurring a hefty penalty. Or even with savings accounts as we saw in Cyprus.

    If the economy starts to really tank here in the US, and seeing how our trusted legislators have already found it necessary to tap into social security for extra cash, do you really think for a second they won't go after 401k's and IRAs? Or maybe just those accounts with over $1 million? That's fair right? Because nobody needs that much money for retirement when unemployment is at 25%. It's easy too, since it's all electronic. A few mouse clicks is all it takes. You don't even have to kick anyone's door down.

    As for stocks, yes, they do "represent value in the form of current assets and future earnings", but there are also liabilities. When a company goes under, who gets paid first? Shareholders? Nope... Not even preferred shareholders.

    Lawyers - The first to get paid are the lawyers who manage the bankruptcy. (Can you say "bloodsucker"?)

    Secured Creditors - Loans that were secured with physical assets of the company as collateral.

    Unsecured Creditors - Basically any sort of debt that wasn't secured with collateral - Loans, bonds, utility bills, etc.

    Shareholders - Preferred shareholders first of course.

    That's it. There's nobody in line after shareholders. Considering that most companies declaring bankruptcy weren't doing so well, when companies go bankrupt, shareholders usually get nothing.
  10. mikem2000

    mikem2000 Lost Cause

    I am not exactly sure of what you are trying to say, but if you are saying shells are commodity currency, I will admit there is some wiggle room for an argument, but many folks, myself included, view things like Wampum (shells) to be fiat currency.
  11. mikem2000

    mikem2000 Lost Cause

    HUH? As many times as I read this, I can't help thinking we are in total agreement. This just says to me there is a reason to have a balanced diversified portfolio. I agree.
  12. Blaubart

    Blaubart Melt Value = 4.50


    My main arguments in this thread are:

    1. Bullion can be an "investment".
    2. There is a certain value in PM as an insurance of sorts that separates it from cash, stocks, bonds, real estate, etc.
  13. coleguy

    coleguy Coin Collector

    As is the world we live in today...all of us. Not a single country on earth uses gold or silver as a currency as I type this. What does that say? Could say a lot for those that aren't blinded by shiny things.
  14. NorthKorea

    NorthKorea Dealer Member is a made up title...

    Given that the US has NEVER invalidated legal tender status on currency, I highly doubt it will happen in your children's lifetimes. As for the 99% of fiat currencies and investment grade stock comment, I merely did what the original poster did:

    1) Limit argument to silver/gold (precious metals) as opposed to all metals.
    2) Define "worthless" as not technically worthless. (People still pay for defaulted stock certificates and defaulted fiat.)

    If we opened the argument to all precious metals, we would have the situation of rhodium:

    January 2000 - $1198.33 per ounce
    June 2008 - $9745.71 per ounce
    July 2013 - $1025 per ounce

    The argument would be "but it has never been 'worthless'!" That would be technically true, but an 89.5% drop in value over the course of five years is still nothing to sneeze at.

    Another thing that isn't being accounted for with respect to gold/silver: storage costs. The argument is constantly made to hold physical metal, as opposed to SLV/GLD. If one were to invest their entire portfolio ($3mm) into silver, you'd have to store 157,895 troy ounces of the stuff. Then you'd have to insure it. Of course, for gold, that number would be significantly lower (2400 troy ounces), but still not an easy task. Gold also takes up around half the space of silver, with a specific gravity ~45% lower, so gold storage would be less of a cost concern. However, the increased portability would result in higher insurance costs.

    If you were to store your gold, the storage fees work out to around 1% per year. That's $30,000. After 10 years, you'd have increased your cost basis by 10% (for simplicity, we assume gold's price to be fixed). After 100 years, you'd have paid 100% over your initial investment, thereby making your original investment "worthless." Silver, taking up significantly more space, would costs even more to store. Unlike stocks/fiat currency, silver/gold held in quantity for investment is guaranteed to be "worthless" when comparing apples to apples and accounting for storage/insurance costs.
    medoraman likes this.
  15. medoraman

    medoraman Supporter! Supporter

    I get back to my original assertion that the main argument in this thread is treating "stocks" as a single asset class is hopelessly wrong. If you wish to compare pm to "stocks", then its 2 PM's, (maybe 3 or 4), versus thousands of investment grade stocks, each of which are as unique from each other as silver or gold is. On its face stocks will always win since there are literally thousands of more options.

    Btw, I know we bandy the word around, but always remember by definition buying pm is speculation, not investment. Stocks can be speculated in as well, look at day traders, but analyzing cash flow projections, margin histories, product pipelines, etc are the hallmarks of real investment, and not just speculating. Nothing at all is wrong with speculation, I own pm as well, its just not quite the same as as investing.
  16. Blaubart

    Blaubart Melt Value = 4.50

    If you go back just 50 years, I bet most of the people then would never even begin to imagine the kinds of things that are happening with our economy and our government today.
    No, what you did was take his statement: "stocks (enron) and 99% of all fiat currencies " and turned it into " 99% of stocks/fiat (that you would consider investment worthy)"

    He didn't say 99% of stocks, and he didn't issue a condition of "that you would consider investment worthy".

    I'm not necessarily disagreeing with what you wrote, but rather how you wrote it.

    But, I do find you're being biased in your analysis. You mention that with precious metals, you "have to insure it". Why is that? Are your stocks insured? Even with a savings account, would the FDIC cover a Cyprus like raid? With your IRA/401k, would the FDIC cover fraud on the part of your investment firm?

    In a different thread, people are discussing going "all in". This thread isn't necessarily about that, and even if it were, I would never recommend doing that. 90% of the value of my PM fits inside a small safe deposit box that we were already renting to store physical and electronic documents. The way I see it, I have no cost associated with the storage of my PM.

    I think a lot of these arguments stem from an "all or nothing" attitude. If you put all of your money into PM, or into Enron, or into real estate, or whatever, chances are good that you won't fare so well. But 5-10% PM, for whatever reason a person wants to put it in their investment portfolio, why not? If one expects to be able to retire from any appreciation in value on their PM, then they might be in for a disappointment.

    There are other benefits to PM as well. Benefits that are hard to put a dollar value on, but they exist nonetheless. Peace of mind and enjoying shiny things come to mind.

    There's also the possibility of actively managing your bullion stacks. I've flipped bullion quite a few times. I've sold bullion locally for just under what the dealers charge (which is quite a bit lately), and then I order replacements the same day through Provident. I can't do that with stocks. I pay a commission to my broker every time I buy and sell, and I can't make a profit on the spread like I can with PM.

    The bottom line for me is stocks and precious metals are different, and that's what attracts me to both of them as investments, based on their own unique strengths.
  17. NorthKorea

    NorthKorea Dealer Member is a made up title...

    No. The SIPC would cover fraud in both cases, however.
  18. SilverForLife

    SilverForLife Member

    99% of all World fiat currency in history did become worthless. I said some stocks (like Enron) if you pick the bad companies do also become worthless.
  19. NorthKorea

    NorthKorea Dealer Member is a made up title...

    Where did you get the 99% figure from? If we only account for the 30 actively traded currencies in the world, that would mean you need 2970 failed fiat (non-intrinsic based) currencies that must have failed just to off-set the current ones. Please cite at least 500 failed fiat currencies. Also, for every Enron, there is a Chinese counterfeit Trade Dollar.
  20. SilverForLife

    SilverForLife Member

    Two American paper currencies in history have become worthless. The Continental Currency and the Confederate Currency. If they used PMs for their currency they would have value. Paper became worthless to both.
  21. NorthKorea

    NorthKorea Dealer Member is a made up title...

    I'll do you a "favor" and trade you US dollars for Continental Currency, dollar for dollar... y'know, since it's "worthless."
Thread Status:
Not open for further replies.

Share This Page