Speculation & Gold

[Steve Netwriter]

Speculation (in a financial context) is the assumption of the risk of loss, in return for the uncertain possibility of a reward. Only if one may safely say that a particular position involves no risk may one say, strictly speaking, that such a position represents an "investment." Financial speculation involves the buying, holding, selling, and short-selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives, or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. Speculation represents one of four market roles in Western financial markets, distinct from hedging, long- or short-term investing, and arbitrage.

[Jumpin]

Yes it's all speculation, but a bet on growth without cashflow is generally regarded as inherently more speculative.

For those buying gold, are you expecting growth or are you just expecting less loss compared to other 'investments'?

[Steve Netwriter]

I think there is a wide range of views on that. IMO the basic attitude is to avoid losing wealth due to local collapses. Second comes coping with inflation/deflation. Lastly comes the insurance against total world financial collapse.

[outspoken]

I'll admit my naivety upfront, but I just don't get why people value gold. You can't eat it, it doesn't shelter you, and why would you trade it for food if food is more important and you were the one who had it?
Sure, gold doesn't perish, and you can make nice jewellery with it, but who the hell wants jewellery when you're looking for your next meal?

[Steve Netwriter]

This is such a common statement/view.
It is a fact that gold is valued, and has been for centuries. It has also been used as money for centuries.
Do you dispute that ?

IMO you should ask yourself "if those are the facts, any view I have that conflicts with that must be wrong, so I should find out why I am wrong".
Reading these might help:

FUNDAMENTAL REASONS TO OWN GOLD
BY: JOHN EMBRY, CHIEF INVESTMENT STRATEGIST OF SPROTT ASSET MANAGEMENT INC. &
SPROTT GOLD AND PRECIOUS MINERALS FUND.
http://www.sprott.com/pdf/reasons_to_own_gold.pdf

This is a HUGE read for anyone interested in gold.
http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

What's amazing is that not that long ago, people generally understood the value and use of gold. What's amazing is how that has been removed from the general learning process. It's almost like a whole generation 'forgetting' about wearing clothes, and not seeing the point.

[outspoken]

No I don't dispute that it has been used as money for centuries, nor that it is valued.
Yes those are facts, and I don't dispute them, but that doesn't make my or anyone's point of view wrong, it just means I and others value other things more highly.
My point is really that if there was a massive World event close to an armaggedon (or whatever) or a total World financial melt down, and I had an orchard of fruit, a stable of animals producing milk and meat, and that same stable providing shelter, I wouldn't give a rats arse about your truck-load of gold.

[Steve Netwriter]

My point is really that if there was a massive World event close to an armaggedon (or whatever) or a total World financial melt down, and I had an orchard of fruit, a stable of animals producing milk and meat, and that same stable providing shelter, I wouldn't give a rats arse about your truck-load of gold.

I don't disagree with your sentiment. I'm not suggesting gold/silver are the only forms of safe haven. Resources such as you describe are valuable/useful.

Don't forget the gun and amo to protect it though

[outspoken]

Good old 2nd ammendment (I think?) stuff! I like it!
As for my Garden of Eden sentiment, I read one of your links and agree.
We're hardly at a World Armageddon event, or total World financial melt-down stage. Well, not yet anyway that I know about.

[tricky]

I don't disagree with your sentiment. I'm not suggesting gold/silver are the only forms of safe haven. Resources such as you describe are valuable/useful.

Don't forget the gun and amo to protect it though

If you need guns to protect your gold then it's worthless.
Gold is only valuable when things are running smoothly.
Which defeats the purpose of holding gold?

An idle question which just occurred to me:
Is the price of gold manipulated?
Can the 'evil empire' control the price?
If so, isn't it risky to hold gold?

[Steve Netwriter]

If you need guns to protect your gold then it's worthless.
Gold is only valuable when things are running smoothly.
Which defeats the purpose of holding gold?

I was talking about "and I had an orchard of fruit, a stable of animals producing milk and meat, and that same stable providing shelter".

Do you think someone with no food will let you just keep your farm/orchard ?

[tricky]

Good point, Steve.

[67910241]

a closely related poll on www.nzherald.co.nz:

http://tinyurl.com/64aoyt

[Steve Netwriter]

I've just read these two articles.
If you hate gold, or want to ignore the lessons that history has to teach, then you will not read them, or reject the message they offer.

Gold Is Money - Deal with It!
[Remarks by Robert K. Landis to the Association of Mining Analysts, London, England, October 2, 2003]

http://www.goldensextant.com/LandisAMA.html

The Once and Future Money

http://www.goldensextant.com/LLCPostings4.html

Yikes !

[Steve Netwriter]

a closely related poll on www.nzherald.co.nz:

http://tinyurl.com/64aoyt

That's an absolute classic

It reminds me of the people in the US withdrawing their money from one bank, just to put it into another.
"Where else can we put it" they say.

That's how the message of gold/silver has been removed from all consciousness. Amazing.

(Thanks for posting about it )

[Steve Netwriter]

Good old 2nd ammendment (I think?) stuff! I like it!
As for my Garden of Eden sentiment, I read one of your links and agree.
We're hardly at a World Armageddon event, or total World financial melt-down stage. Well, not yet anyway that I know about.

It's not long ago I used to think the sky was blue, the sun was shining, and I had no thoughts of the possibility of the sky falling.
The more I read, the more naive I think I was

This one got me thinking (my red curve):



It's Always Darkest Before the Dawn........................................of a Depression

http://news.goldseek.com/GoldSeek/1216926180.php

This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk - and the collapse of many counterparties - will lead to a systemic collapse of this market.
.
.
.
Yes, not only are we are witnessing the asymptotic approach of the marginal effect of debt, but we are now seeing the dwindling market impact US Government market interventions are having. In a commentary just written by Ron Paul, titled "The Crisis is Upon Us," he writes, "There are reasons to believe this coming crisis is different and bigger than any the world has ever experienced." He is largely dismissed as a quack by the mainstream for being "Chicken-Little" and for not being as polished as our current crop of focus-group-driven politicians. He subscribes o an economic philosophy not taught in our American schools called Austrian economics. But after the final crisis plays itself out, the mantra "We are all Keynesians now," will be replaced by "We are all Austrians now." Referring to the chart below, also provided by Barry Bannister, we see the effects of 35 years of ultra-expansionary monetary policies:

That and the two recent articles I've read make me wonder whether we are getting rather close......