Gold

[FarmerGeorge]

Given the global money printing we might be on the verge of a global currency crisis and I'm not going to completely dismiss the idea.

However I also have in my little personal library and book called "You can profit from a monetary crisis" by a man named Harry Browne.
It was written in 1975 and helps give some context to a lot of the conversations happening now. Whenever I get the urge to go 'all in' on gold I read a few pages again and think of all the people who may have gone 'all in' in 1975 when they read this book.

Skol could prob give some stats on the relative performance of Gold and the Dow (incl. Divs) in that time but I suspect Gold would not look great.

[Silverlight]

I bought back into Gold today, after been out for almost 20 months, through shares in couple of companies and an ETF. Gold @ 1250.

[Skol]

Farmer George,

Actually gold hasn't done too badly since 1972, out of the the S&P500 and gold, gold is ahead, but given that the stockmarket is on the way up and gold is on the way down it could be completely different in a few months time.

In today's dollars since 1972,

S&P 500 (divs incl) up 2.76 times.
Gold up 3.8 times.
And JB's favourite, silver, up 1.7 times.

But long term, gold is one of the worst 'investments' on the planet.
--------------------------------

In his book Basic Economics, Thomas Sowell[68] argued that, in the long-term, gold's high volatility when compared to stocks and bonds, means that gold does not hold its value compared to stocks and bonds:
To take an extreme example [of price volatility], while a dollar invested in bonds in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in stocks that same year would be worth more than half a million dollars. All this is in real terms, taking inflation into account. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just 78 cents.

[FarmerGeorge]

Skol mate those numbers aren't what I expected - what's the data source?

[Skol]

Worked it out myself and adjusted for inflation.

In 1972 gold was $59 and S&P 118.

So using unadjusted figures gold up 21.1 times, S&P up 13.7 times and silver up 9.75 times.

But if gold drops to $700, which it very well might, then gold will be up 11.8 times.

And of course this doesn't take into account any storage costs for gold.

[Skol]

Also depends on the year you start from, say 1980.

Average prices for the year:

Gold $615
S&P 110
Silver $20.63.

So unadjusted since then, gold up 2 times, S&P up 14.6 times.

Silver, down $1.13 since 1980. Silver's the worst investment ever, unless you put your money in Enron or a pyramid scheme.

Best investment, a house in Auckland, unadjusted up 12.86 times since 1981. Of course there's rates, insurance, repairs etc.

Since 1990, gold up 3.2 times, S&P up 4.9 times, silver 3.9 times.

[Halebop]

...S&P up 13.7 times...

Including/Excluding dividends?

[FarmerGeorge]

Worked it out myself and adjusted for inflation.

In 1972 gold was $59 and S&P 118.

So using unadjusted figures gold up 21.1 times, S&P up 13.7 times and silver up 9.75 times.

But if gold drops to $700, which it very well might, then gold will be up 11.8 times.

And of course this doesn't take into account any storage costs for gold.

Ah ok thanks - I was thinking '75 when the book was published

[Skol]

Including/Excluding dividends?

No it doesn't include, I'll have a look around and see if I can find the total return index.

[Skol]

Ah ok thanks - I was thinking '75 when the book was published

OK,

since 1975, unadjusted for inflation, gold up 7.76 times, S&P500 up 20.2 times, silver (lucky you don't own any) up 4.5 times.

Inflation-adjusted:

S&P500 up 4.66 times
Gold up 1.8 times
Silver (OMG) up 1.047261 times. lol- only just breaking even.