Buy and Hold SP500 Not A Good Idea Afterall....

[GCSICLRBC]

Quote from Ivanovich:

Ok, you want to ignore the comparison to real estate because it's not convenient, then what about oil? Oil rose for 7 years and then crashed, or is that also not a good comparison?

This is why folks consider people like yourself a goldbug. Because you ignore those comparisons/fundamentals/technicals that would indicate gold should go down, and focus only on those that would cause it to go up. Some call it convenient thinking.

I call it a goldbug.

Arguing with stockbugs is evidently pointless. You love stocks & don't see how, factoring in REAL INFLATION, holding stocks is a suckers' bet. That's fine. Neither of you are my clients so it's irrelevant.

I've sold GC short many times before, including near 1,000 resistance. Technicals? I mostly look at technicals, namely support & resistance.

sjfan, you don't own gold because of your strong emotions against it. You're obviously not thinking too clearly or else you'd want to be long AN ASSET (NOT SOMEONE ELSE'S DEBT) that's constantly appreciating.

I stick with my position: The fundamentals of gold remain positive (although in short term charts say it's going lower); real estate fundamentals are TERRIBLE (unless you buy a deep discount foreclosure), and the fundamentals for stocks are somewhere in between.

GL to all you "elite traders" who've lost $250k+ holding some dogsh*t stocks. As for me, I'm better served actively trading these markets without being married to a position.

The only thing that perturbs me, again, is the use of the word "goldbug." It's derisory & ignorant. GOLD BEATS STOCKS. Period. Look @ your charts.

And if you think stocks are going to the moon on this DECLINING VOLUME rally, buy some more. In fact, I hope you do.

You'll likely find me on the other side of your trades. GL!

 

[sjfan]

Excuse me? I'm being too emotional? I gave you my rationale for gold not being a good investment. Thus, I don't hold it.

You are the one who's making very emotional arguments.

Why is gold an "asset" other than the fact that it physically exists? What does it produce on its own?

Quote from GCSICLRBC:


sjfan, you don't own gold because of your strong emotions against it. You're obviously not thinking too clearly or else you'd want to be long AN ASSET (NOT SOMEONE ELSE'S DEBT) that's constantly appreciating.

 

[sjfan]

I don't disagree with you that stocks are not necessarily always good in the long term (that's why I allocate a good portion of my income to the ultimate inflation/crisis hedge: consumption; can't lose what I used and enjoyed).

That being said, the reason why we are calling you a goldbug is that you have some very correct arguments regarding the equity markets, but your reason for gold being awesome is, well, just that - it's gold, and gold isn't stocks.

The question we pose, I think, is - why is gold (independent of what you think of stocks) valuable? Can't there be an outcome where both gold and stock tank (even if stock tanks more?)

Quote from GCSICLRBC:




The only thing that perturbs me, again, is the use of the word "goldbug." It's derisory & ignorant. GOLD BEATS STOCKS. Period. Look @ your charts.

 

[GCSICLRBC]

Quote from sjfan:

That being said, the reason why we are calling you a goldbug is that you have some very correct arguments regarding the equity markets, but your reason for gold being awesome is, well, just that - it's gold, and gold isn't stocks.

The question we pose, I think, is - why is gold (independent of what you think of stocks) valuable? Can't there be an outcome where both gold and stock tank (even if stock tanks more?) [/B]

To address the latter first: There can CERTAINLY be situations where gold & equities decline simultaneously. My *opinion* is that gold should find a very good bid in the low $800s or high $700s. The S&P is vulnerable down to 510 support. (Sorry I can't copy + paste my charts...they have some very simple trendlines that I favor).

ANYHOW, yes they can both go down simultaneously.

BUT...

Gold should catch a very good bid. I'll explain. About three years ago I had the good fortune of meeting Steve Forbes. One thing I'll always remember is him saying "If you want to know what inflation's doing, look @ the price of gold."

Upon further investigation, I learned the following:

During the Roman empire, one gold coin (1 oz. approximately) could buy a man a fine robe, fine leather belt & nice sandals.

TODAY...thousands of years later...

A man could take one gold coin (valued at $895 approx.) and purchase for himself ONE FINE SUIT ($500), one leather belt ($75 and one pair of nice leather shoes ($200). ADDS UP TO: approx. $800...or the value of the coin.

Gold retains its value as measured against fiat government money. Over 3,200 currencies have existed since the beginning of time & all have ultimately fallen into disuse or FAILED.

Gold has intrinsic value because it's not easily taken from the earth (you need machinery & labor!), is malleable, fairly dense & BEAUTIFUL!

The point, hombres, is that gold RETAINS ITS VALUE OVER TIME.

If a person parks cash in stocks or bonds, inflation WILL Ravage them over time.

At a minimum, gold retains its value, which is why it's caught a bid these past seven years.

Think about what's gone up or DOUBLED in price during that time.

And YES, it's not somebody else's debt. It's an asset that's nobody else's liability. Even Gartman speaks about this constantly.

Give it about 18 months. If we don't fall into a depression (1/4 chance we will) then gold should SOAR well into the $1,000 - $1,500 range. Commodities should rise concomitantly as this money printing will eventually catch up with us.

--Harold

 

[Ivanovich]

Quote from sjfan:


You are the one who's making very emotional arguments.

Yet another defining characteristic of a goldbug. Get emotional and insulting when someone disputes gold in any way at all.

Heh..."stockbug".

 

[GCSICLRBC]

Quote from Ivanovich:

Yet another defining characteristic of a goldbug. Get emotional and insulting when someone disputes gold in any way at all.

Heh..."stockbug".

::SMILES::

 

[Cutten]

Quote from Pa(b)st Prime:

One flaw in your reasoning. Historically the best returns in stocks come from being long during those "over valued" times.

Only in the short-term e.g. 1-3 years. The long-run returns (a typical buy & holder is in for 10-30 years) from high valuations are very poor on average. For example the top 10% of valuation range (measured by price to cyclically-adjusted earnings) has an average historic return inferior to t-bills, with massively bigger drawdowns. An indexer can't get the upside without suffering the later downside. If the S&P rallies 100% in 3 years, then falls 50%, your return is diddly squat. Even if you rebalance, that will only capture some of the momentum - the risk to your remaining allocation is still large.

Also bear in mind that the majority of the returns from stocks come from dividends & dividend reinvestment, not capital gains. If you buy when the P/E is high and dividends are 1 or 2%, then you are facing very poor odds based on history, theory, and common sense.

Yes I agree that you can play momentum at high valuations, but that is trading and buy & holders and indexers operate on 10 year timeframes or greater, by which time the valuation almost always corrects itself. The late 90s is a great example, so is the mid to late 1960s, and the late 20s - 3-4 years of great paper performance at the end of the bubble, but the 10 year returns were dreadful in each case.

Also bear in mind that opportunity cost is not a capital loss. Going into bonds in 1996 or 1997 (i.e. badly timed, when stocks were not yet close to bubble valuations) would have provided a perfectly satisfactory 1, 2, 3, 5 or 10 year return with much lower risk than stocks.

Risky assets need a good reason to buy them, to compensate for the risk. They should not be bought automatically, one ought to be enticed into investing them by prospects for attractive returns combined with low risk of suffering permanent long-term loss of capital.

 

[riskfreetrading]

There is another class of assets you seem to have missed: options! Passage of time is one of the few certainties in the world, and options allow you to bank on it. Wasting assets are good.

I love options, just like Ed Thorp loved warrants. I am suprised he did not see what he should have seen.

 

[sjfan]

This is the point that's in dispute here. I disagree with this.

First, there has been periods of high gold-based inflations. The Spanish conquest of the new world was the most well known one.

Second, gold was once the obvious form of money used in international trade. It's no longer the case. And the world is no longer disconnected like it was. An economic failure in one part spreads via contagion.

Finally, so what if gold is beautiful and hard to mine? So is a LOT of things - some that are far more useful today than gold. Look at it this way, if the world goes Mad Max tomorrow, ammos, tin cans of food, and women will be currency. What is a gold bar going to do then? no one has any use for it.

All money is fiat.

(I also find your example of the roman coin a little off; but I'm not an expert in the composition of roman gold coins, do I'll just demur).

Quote from GCSICLRBC:



The point, hombres, is that gold RETAINS ITS VALUE OVER TIME.

 

[Ivanovich]