Gold Adjusted S&P

O

oldtime

I hate even posting on this forum because there is no talking sense to you goldbugs, but I saw an interesting chart on cnbc by Rickards who many of us forex traders respect as a "smart" man. It was the S&P over the last ten or twenty years in relation to gold.

Since most of us keep score in US Dollars we all know what the deal is and has been. But his chart showed the S&P if you were keeping score in gold and it is quite different.

To skip to the chase his idea is to always keep 10 to 20% of your portfolio in gold.

Like I said, there aint no talking sense to you goldbugs who think someday you will dig up the gold in your backyard and you will then be the big dog in the neighborhood.

But for those who realize that the USD can flucutate and gold at times can be more than a commodity and a good measure of true wealth, it is something to consider.
 
The reason we are "Goldbugs" is because we know that inflation is eating our dollars faster than we can make money in our investments. Even if there was no crash and the Dow kept going up for the last 12 years and today Dow was at 50,000, Gold STILL would've been a better place to put your money.
 
From '99 to March of '09 Gold has yielded the greater return and the "Goldbugs" have every reason to be pleased with themselves. But look at a S&P chart priced in Gold since 03/09 the chart flatlines at about 0.85 (exception is the 08/11 US budget and credit downgrade). Include dividends and Gold has not been as good an investment.

I suspect the reason for Golds subpar performance in the last 3.5 years is the result of global deleveraging as investors seek the safety of the US$. In order for Gold to be a better investment it has to in a sense, decouple from the US dollar. One scenario for this to happen would be for the global economy to pick up notably in China and Europe, and at the same time for the US economy to get hit by reality with a fall off the fiscal cliff or faced with realization of debt issues, either by a credit downgrade or fall in bonds, have to begin massive monetization of the debt by the Fed.

I'm starting to hear many people begin to compare the fiscal condition of the US with that of europe and how the US is in much worse shape. Debt equal to 100% GDP vs. 85% GDP or how europe at the coaxing of Merkel has adopted austerity for the long term benefit of each countries budget. Even today, I heard two separate opinions about how Ireland was an attractive place to invest because they have faced their fiscal problems.

I think the conditions are ripe for Gold/US$ to takeoff but the global picture compared to the US has to change. In other words, the US has to longer be the cleanest dirty shirt as Bill Gross puts it. I won't be surprised to see another leg down in the euro to test 1.2 or the aussie to move back to parity and Gold fall but it may be the last time anything falls against the US$.
 
The use of the pejorative term "goldbugs" ignores the millions and maybe billions of "paperbugs" who fail to question fiat currencies, and the policies of governments and central banks to use high levels of government debt and and the printing press as a means of promoting economic growth.

The US Dollar (and other paper currencies) are just a multi-decade experiment, and just like other failed fiat currencies they are unlikely to exist in their current form by the end of this century, if not sooner.
 
Quote from gtor514:

From '99 to March of '09 Gold has yielded the greater return and the "Goldbugs" have every reason to be pleased with themselves. But look at a S&P chart priced in Gold since 03/09 the chart flatlines at about 0.85 (exception is the 08/11 US budget and credit downgrade). Include dividends and Gold has not been as good an investment.

I suspect the reason for Golds subpar performance in the last 3.5 years is the result of global deleveraging as investors seek the safety of the US$. In order for Gold to be a better investment it has to in a sense, decouple from the US dollar. One scenario for this to happen would be for the global economy to pick up notably in China and Europe, and at the same time for the US economy to get hit by reality with a fall off the fiscal cliff or faced with realization of debt issues, either by a credit downgrade or fall in bonds, have to begin massive monetization of the debt by the Fed.

I'm starting to hear many people begin to compare the fiscal condition of the US with that of europe and how the US is in much worse shape. Debt equal to 100% GDP vs. 85% GDP or how europe at the coaxing of Merkel has adopted austerity for the long term benefit of each countries budget. Even today, I heard two separate opinions about how Ireland was an attractive place to invest because they have faced their fiscal problems.

I think the conditions are ripe for Gold/US$ to takeoff but the global picture compared to the US has to change. In other words, the US has to longer be the cleanest dirty shirt as Bill Gross puts it. I won't be surprised to see another leg down in the euro to test 1.2 or the aussie to move back to parity and Gold fall but it may be the last time anything falls against the US$.
More...
yeah, that's about the way I see it. I never actually figured out many of ounces of gold my house was worth in 1990 when I bought it, and in 2006 when it was appraised when I had to refinance it to payoff my divorcing wife, and 2011 when I finally sold it. I doubt the housing bubble would have been as severe if houses were appraised in gold.

as for goldbugs, my definition is someone who only buys and never sells they will ride it up and they will ride it right back down, they don't want a dollar at any price
 
Couldn't find the CNBC chart you are talking about, found this one if anyone is interested:

<img src="http://static6.businessinsider.com/image/4fbe9cc769bedd7c4f000002-590-/chart-of-the-day-sp-vs-gold-may-2012.jpg">
 
Quote from oldtime:


as for goldbugs, my definition is someone who only buys and never sells they will ride it up and they will ride it right back down, they don't want a dollar at any price
More...

OK, but the same complaint about "goldbugs" could be made about Zimbabwe citizens in recent years who held their gold and didn't want a Zimbabwe dollar at any price. It turned out that holding their gold and not selling was the right choice to make.

What about paperbugs who don't want a store of value such as gold (or similar alternative) at any price?
 
Quote from m22au:

OK, but the same complaint about "goldbugs" could be made about Zimbabwe citizens in recent years who held their gold and didn't want a Zimbabwe dollar at any price. It turned out that holding their gold and not selling was the right choice to make.

What about paperbugs who don't want a store of value such as gold (or similar alternative) at any price?
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I'll meet you 10 or 20% of the way, which is what Rickards reccommends every stock investor keep in gold in his portfolio
 
Quote from oldtime:

I'll meet you 10 or 20% of the way, which is what Rickards reccommends every stock investor keep in gold in his portfolio
More...

Today's post FOMC action is the type of thing I am talking about.

With the Fed taking increasingly extreme steps, I think paperbugs' obsession with paper money is irrational.

With regards to gold outperformance versus the S&P 500, if and when oil continues to rise (October brent over $117 earlier today), this will start to hurt the margins of many companies, starting with the transports, and in particular, the airlines:

http://www.elitetrader.com/vb/showthread.php?s=&postid=3066125
 
bought some gold today. Much to the chagrin of all you goldbugs who need to hold it and hoard it, and someday it's just you and your gold and your guns, for me it is just a hedge against the dollar so GLD is my preferred vehicle.

Sold all of it a few days ago at what was the recent high. Then got to thinking. This time it is a little more than 10% the stock portfolio. That is good enough for me. The days of holding stocks may soon be coming to an end.

Not really worried this time about getting a good price, I can ride it down. I wasn't making anything in the money market anyway. But I've been at this long enough to know that there always comes a time when you wish you just had money sitting in a money market making nothing.

I like Rickards idea of keeping 10 to 20% of your stock portfoloio in gold. So that is what I did. Not sure about this price, but over time I think it will even out. Really, it wouldn't surprise me if gold goes back to $35 an ounce where it started, or up to $2500 where everybody says it is going.

Like the man said, it's just a matter of adjusting the S&P to gold.

In otherwords, if it gets to be less than 10% I will probably buy some more, if it gets over 20% I will be a seller.
 
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