spierce Wrote: ------------------------------------------------------- > Sweep the Leg Wrote: > -------------------------------------------------- > ----- > > bchadwick Wrote: > > > -------------------------------------------------- > > > ----- > > > Aren’t Treasurys essentially fiat? > > > > Sure, but I was thinking more along the lines > of > > in the short term you have to make certain > asset > > allocation decisions. Long term you hold gold > > because, in extremely simplistic terms, fiat > goes > > to zero. > > That would make sense, if no other asset accounted > for fiat depreciating, yet most do and they are > also more useful. Gold’s long term correlation to > inflation isn’t even that great relative to a > basket of consumer staples stocks. > > As the poster above said, I think the recent runup > in gold has far less to do with fundamentals than > it does with tens of billions of dollars flowing > into paper gold allowing far more access and > leverage. Remove that and I think you’d see a > pretty quick deflation of gold. Well that’s the whole trick. I’m fairly confident the paper gold holders will be in for a painful experience one of these days, hence why I don’t invest in GLD (or SLV). As I stated above, the fiat arguement is extremely simplistic; there’s quite a bit more to it than that. It would be interesting to see where the flows are coming from. Retail investors still aren’t allocating to gold, so it’s not “dumb” money (actually it’s mostly hedge funds). Anyway, I’m more interested in how the physical that’s coming out of the ground gets allocated. There’s been a huge shift in demand from emerging markets on the industrial/jewelry side of the biz. Then you have countries buying gold (and silver) to diversify away from the dollar. Bottom line, the metal coming out of the ground is being bought faster than it can be mined. That’s not someone in their Roth IRA doing that.
Sweep the Leg Wrote: ------------------------------------------------------- > It would be interesting to see where the flows are > coming from. Retail investors still aren’t > allocating to gold, so it’s not “dumb” money > (actually it’s mostly hedge funds). GLD has roughly the same AUM as SPY. That’s not hedge funds. Cramer advocated 20% portfolio weight in gold. (Clearly a top if I’ve ever seen one.) Also, gold is the only asset that has a negative Beta that retail investors understand. Ever try explaining to a non-finance person that treasury bond prices go down when yields go up?
justin88 Wrote: ------------------------------------------------------- > Ever try explaining to a non-finance person that > treasury bond prices go down when yields go up? Amazingly I still have to explain that to advisors. The retail space is still very under-allocated to gold though, despite Cramer. If you’re familiar with different managed account platforms at the major BDs and wirehouses, you’ll notice that pretty much none of them have a gold fund on their platform. In fact, they’re just now beginning to come around to adding commodities in general, but nothing gold specific. Right now GLD has $71B in it. Sure, it’s a gigantic ETF by itself, but considering that makes up most of the investable gold market, it’s actually a tiny amount of the overall pie. Edit: To put it another way, how big do you think GLD would be if retail investors put just 5% of their money in it? $71B doesn’t seem that large when put into context.
Sorry for the double post, but a quick search of hedge funds’ 13F filings reveals as of 6/30/11 they held just over 200,000,000 shares of GLD. At that same point in time there were approximately 430,000,000 shares outstanding. That doesn’t include any mutual funds, pensions, or any other institutional investors. Edit: That includes some institutional investors. Anyone that has full discretion and manages over $100M.
Interesting… this discussion has made me less of a gold fan. Not because I think my previous analysis was wrong, but more because it made me realize that deflationary policy pressures are building in the US and already reasonably strong in Europe. My assumption was that political actors would choose to print money to ease the situation, which they have, essentially, but increasingly it looks like the Fed has decided it’s out of bullets and the Congress wont pass stimulative measures. The ECB’s single inflation-targeting mandate suggests that it won’t pursue those policies either. The threats now, are starting to look deflationary more than inflationary, and deflation is bad for gold, bad for stocks, and reasonably good for bonds/fiat. It may be time to reduce (but not eliminate) exposure. There are some other reasons to hold gold (jewelry use in emerging markets, increasing use as a diversifier in retail portfolios, etc., but the printing presses look like they may be put on hold for a while, so that motor is out, implying a smaller allocation is warranted).
bchadwick Wrote: ------------------------------------------------------- > […] Always important to be constantly questioning and reassessing one’s assumptions/analysis and incorporating new information. There is real chatter that many EMs are in trouble…
justin88 Wrote: ------------------------------------------------------- > There is real chatter that many EMs are in > trouble… On that topic I recommend selling pretty much anything that China has been hoarding or using as inputs in their property construction binge. Gold/cotton/base metals/etc. Other EMs and Australia are dependent on China for most of what they export, so those are also overvalued.
Bubble call accurate in hindsight? Or just a big correction?
deflation deflation deflation. that is all.
Dwight! Good to see you again.
If you were a buyer of gold @ 1600 you should def. be a buyer at $1300. I’m a gold bull (not bug i hate that term) and will be doing some heavy buying of fizz this weekend with my local gold dealer.
Hey BChad! Good to see you as well. I need to check this forum more often… my involvement trailed off significantly after finishing the exams.
Hope all is well.
This was a good discussion - I remember it was one of the discussions that made me change my mind on gold. I didn’t stop holding it, but I did reduce my exposure, which definitely looks like a good thing in retrospect.
Right now the question is whether the asset price collapse + sequestration will be enough to push employment down again, and whether that is likely to stimulate more printing. However, I’m happy to wait and see on that.
Ask not what the AF community can do for you, but what you can do for the AF community. You should give back to the newbies.