Is GOLD (/silver/etc) a bubble?
- Thread starter scriabinop23
- Start date
We've been through this before - bubbles have a very high likelihood of crashing within 1-3 years of the parabolic blowoff portion. Normal markets are far less likely to experience a 50% downmove over the same period. That information gives an edge to anyone trying to make money trading a market, because long gamma and downside-biased trading approaches will have a far higher than normal return when the bubble crashes.
From an investment perspective, long-term returns from investments made at bubble valuations are historically very poor and often negative. Therefore knowing it's a bubble helps you avoid making poor long-term investment decisions, thus boosting long-term returns and reducing risk.
Paulson's investigation into whether housing was a bubble was worth approximately $15 billion. Maybe you should write to him and tell him it was a waste of time?
If you think avoiding losses, reducing risk, and increasing profits don't matter, then that's your prerogative, but there is no point in continually interrupting discussions on the subject to ask why other people don't share your views.
People going long gold 5 or 10 years ago did not have the benefit of hindsight.
Also, doesn't the "hindsight bias" argument apply to your mystical belief in the outperformance of technical trading systems? Since it is based purely on past market behaviour and system performance, after all.
We have had this specific discussion before (bubble, asymmetric option approaches, Paulson, market timing, edge). We've had all this. It's just quite obvious to me you have no intention of understanding the points I made.
If you believe that "normal" markets don't correct 50% very often then I only suggest to you to devote time and effort studying historical commodity charts (not commodity indexes but individual markets). Over the last four decades, 50% corrections did happen and do happen all the time across different markets and most of them would not fit the popular burst bubble description you are so fond of.
I explained in detail why I believe you are wrong with your assumptions how spotting bubbles constitutes an edge. Yet you constantly choose to ignore all points I made (without counterarguments) and reply as naively as if that prior discussion never took place. So why bother replying to me? Put me on your ignore list so we both don't waste our time.
So was the binary decision of either going long gold vs. investing in hedge funds an "edge" at that point in history? Probably you don't think it was, but that's what the discussion was about.
Mystical... belief... outperformance
If you were trying to make a point then possibly we could argue. But you failed to make one.