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Gold is Not an Investment

Discussion in 'Investing Strategies' started by Tropo, 30th May, 2011.

  1. Tropo

    Tropo Well-Known Member

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  2. wdongli

    wdongli Well-Known Member

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    "Gold is not an investment. It’s a speculation.

    Investments are made by evaluating underlying value. Speculative bets are made by looking at the price of something and simply hoping the price goes up. Investing is about value; gambling is about price" said a certified financial planner in Park City, which should makes the modern financial and investment education feel shame!

    Is it gold noting? Don't need to say it is value store in history, thousands of years of history, as the only global reserve and medias. Just see how much gold in the vaults of the central banks around world, the answer about gold value is obvious. Wonder if no value for gold, why each government wastes so much money to guard the gold in the vault, let alone Gold price doesn't go up only and it also goes down too, especially it has gone up for a decade.

    [​IMG]

    Investment is not just about the value but the gap between the price and value, the margin of safety. Anything if has the price and is traded in the market, has its own value. Speculators and investors have a gap just in air and this financial planner could write perfectly in syntax but he put a equal sign between gamblers and speculators.

    That is not right even on the top of the ivory tower, let alone in the market reality, since speculator often tries to know about the macro-economy and the impact to the market price.

    It is ridiculous to say Gold has not value since it not only says the market players are crazy but also stupid. I agree most of market players are crazy time by time but they are not stupid. Why do they play gold, if it is nothing but shi*? I wonder his bosses and editors for his articles are the same who could twist the words but could not write for reasoning logically and irrationally! This planner seems not know what value is!

    No intention to provoke personally but it is good for your own money without following his ridiculous words. Making money is simple but should not sell the words with biases and irrationality for the butters and milks. It is shamed.
     
    Last edited by a moderator: 31st May, 2011
  3. Tropo

    Tropo Well-Known Member

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    No one can deny gold has had a tremendous run, but it is partly due to fast money trading firms (hedge funds etc),consistently bidding up shares looking for the quick buck.
    When these guys decide to start cashing in their profits, or they feel that there is a risk to their capital, they will liquidate mass quantities of shares and will push the gold market down in a hurry.
    They will also start piling on the shorts and that’s when things begin to turn nasty for the long term buy & hold investor.

    The most expensive per weight of the precious metals is Rhodium.
    Rhodium is a chemical element that is a rare, silvery-white, hard transition metal and a member of the platinum group.
    Rhodium is found in platinum ores and is used in alloys with platinum and as a catalyst. It is abbreviated to Rh and has atomic number 45. The primary use of this element is in automobiles as a catalytic converter.
    Rhodium's typical historical price is about $1,000/troy oz, but in recent years, it has increased to about $4500/troy oz. In 2008 the price briefly rose above $10,000 per ounce.
    Platinum has the rarest of all metals. Platinum comes in various stable isotopes; and being stable, and safe is critical to value.
    The platinum isotopes are 190, 192, 194, 195, 196, and 198. 190 is the rarest at about 5 parts per trillion in the earth's crust.
    There are very few specific uses for platinum 190, but it is estimated to cost $20-40 million per gram or $1 billion per troy ounce.
     
  4. wdongli

    wdongli Well-Known Member

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    Yes it is true. Actually what assets in the market could not be traded for the day traders to get the quick money, even in fact most of them could not get what they want?

    ***
    It seems that gold was serious under value(if it has any value to a individual or a lady at least) in 1999 when no big guns in the market would like to play it. IT bust and new economy hype broke up, which has driven too many people back to the old economies and houses under the low interest rate.

    Gold was the money or reserve for old money so that when old economy comes back into people's favor, gold comes back too. Anything if its price increases too long, would introduces bubble into itself. As the bubbles become bigger and bigger the risk too.

    ***
    So what could we do? Is it gold at its end of this booming cycle? No one could say so and actually no one really know exactly what will happen. However the life and market tell us it is true sooner or later that the higher the price the riskier the buying without discount.

    The problem is most of retail market players talk about the risks now since GFC ruins are still there not because they know how to manage the risks for future opportunities. If history could give any clue about gold ultimate bubbles, it seems need the moms and dads become crazy first. They are very cool now actually. It is not normal!

    ***
    The current market sentiment about the gold seemed as that in 1976/1977. All cried for the gold bubbles and gold did corrected but it reached red-hot in the beginning of 19980. For this new cycle of gold price movement, since 1992 actually DJIA has moved in much higher rate than gold.

    No any country should put their fate onto other paper moneys. If it is true what a nation could hold as reserves? No too many options. US dollar and Euro Yuan are papers. So how about emerging economies want to diversify some of their reserves to gold?

    ***
    Gold could be used as a way as insurance in my view. You may be not able to make more money but if you pay low enough it could be value protector! All in all are what price you pay for your insurance.

    Is gold for you as investment? If you paid $300 it was investment. If you would pay $2000 you may be gambling or not which depends on how much paper money in the circulation in future!

    Value is just value but how to play the value make the winners and losers in my view.
     
    Last edited by a moderator: 31st May, 2011
  5. Tropo

    Tropo Well-Known Member

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    No...there is another option such as CHF.
    CHF has not lost the role of the safe haven currency against USD, EUR.
    It is very likely to rise against both, so with time CHF may become strong again.
     
  6. wdongli

    wdongli Well-Known Member

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    Tropo, would you please give out more words about CHF? Thank you!
     
  7. Tropo

    Tropo Well-Known Member

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  8. wdongli

    wdongli Well-Known Member

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  9. Tropo

    Tropo Well-Known Member

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    What's the difference between buying a lottery ticket and buying a penny stock?
    In the first case, you help finance your local community swimming pool.
    In the second case, you help finance the stock promoters home pool.
     
  10. wdongli

    wdongli Well-Known Member

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    Quite different fundamentally.

    You buy lottery in a game you have little chances to win even if you win, the consequence is great. So nearly all of the gamblers lose the money in the Casino.

    You could buy dirty-cheap fishes as you buy lottery and then you would gamble to lose your shirts sooner or later.

    You could buy the remaining value after the whole market burn them on the fire with some expertise to identify the future beauties from the ugly in the ruins, who are sold in discount! Could you be sure you could get 75% winning odds for all of your buying of dirty-cheap fishes? If yes, you are the owners of some little Casino houses in the market. If not, you are the customers of some little Casino houses in the market!

    The questions are not what they are worth but how much discounts you could get much lower than their value.

    ***
    1. If your buying all are falling knifes, you deserve to lose your shirts since you don't have the expertise to do the good job!

    2. If 10% of your buying are 10 baggers, 10% are 5 baggers, 50% keeps break-even, 20% lose 30-50%, 10% are falling knifes, you would get quite good profit as value investors.

    3. Both of 10 baggers and falling knifes are not normal matters in Australia stock market since the tradition of the mining investment. Pennies are the tradition of the mining sector. Most of the pennies always find ways to be survival at least since 1980 based on my statistical calculation!

    4. How could we leverage the 10 bagger effects and deleverage the effects of the falling knifes? You have to get enough margin of safety or fail safe!

    I started to get 50% return for my portfolio, slowly increased to get 80% return, 100%, and fortunately passed the acid test of GFC and ride the V-shape recovery in full.

    ***
    I still made some mistakes but I did do much better than I expected. I am working on how to extend the performance into next financial year.

    It requires the understanding of macro and micro economies and much more. It require the mind changes, behavior changes, and actually personality changes. Market is not pure science and art but the mixture of both. Could we be the masters of the market in our circles no more and no less? Very difficult and actually I have spent nearly a decade to change my mind...since 2002, the terrible year of the new market generation from the IT and internet!

    If we fail, it is not because we play the swans of dirty-cheap fishes but how we play with them. We fail or success over ourselves. We get our enemies already in the market, which are ourselves!

    ***
    By the way I bought in some AEX today, around which there are too much money bloods from the old shareholders. Discount only comes from some great failures due to systematic or local troubles.

    Friendly remind: don't buy dirty-cheap fishes if you don't understand the statistics and probabilities!; don't buy dirty-cheap fishes if you don't understand the "black swans" in the market!

    ***
    What's the black swan theory in the market?

    The theory was developed by Nassim Nicholas Taleb to explain:

    • The disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology

    • The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)

    • The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

    The "Black Swan Theory" (capitalized) refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.

    For example, BKP hit a hole with the oil reserve as Bakken Shale Oil Field in next month, which would turn $10,000 at $0.001 to $100,000 at least. I was hit by a black swan when I played SSN which was working in Bakken and I just only got 6.5baggers. What if it is not so, forget it and wait for another black swan.
     
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  11. Tropo

    Tropo Well-Known Member

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    YouTube - 333 Nina Salerosa
     
  12. wdongli

    wdongli Well-Known Member

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