Gold

[Bjauck]

Is gold an asset?? It doesn't provide an income stream. Traditionally it has been a store of value but like money if no one believes or has faith in gold it has little value.

I guess if it is accepted as a form of currency, it is not being brought out of the ground at a rate fast enough to keep up with the production of fiat currencies so logically gold gains value compared to the other currencies.

Ideally I will get a chance to invest in land or companies that provide a decent yield, but prices will have to drop first and that means fighting the fed (establishment/the man) so to speak which has been unsuccessful to date. Will keep looking for something to get rid of my cash on but nothing exciting at this stage.

It is difficult to know where to place one's savings at the moment.

I guess it is the purchasing power value of gold that is the key measure. Both land and gold have a finite supply (until such time that alchemy can find a way of producing gold cost effectively.) The Gold/Ave US Home value ratio is another gauge
http://danielamerman.com/va/GHratio.html

Do assets need to provide an income stream? Other countries levy tax on realised asset value appreciation whether or not income is produced. Precious metals may or may not be exempt from CGT. Of course in NZ, owner occupied housing produces no taxable income or taxable capital gain yet it has most definitely been an appreciating asset - often the de facto pension fund - for many people. Likewise investor real estate sometimes produces no net income after expenses are deducted, yet it is the main repository for much of NZ Household wealth with the expectation of capital gains or conservation of value invested at the least.

[Aaron]

How long have you been sitting on the sidelines again ??

Long enough to wait another year or two so I am not doing my usual buy high sell low. If I was more ballsy the recent surge in gold would have made a big impact on my financial wellbeing.

[Aaron]

Do assets need to provide an income stream? Other countries levy tax on realised asset value appreciation whether or not income is produced. Precious metals may or may not be exempt from CGT. Of course in NZ, owner occupied housing produces no taxable income or taxable capital gain yet it has most definitely been an appreciating asset - often the de facto pension fund - for many people. Likewise investor real estate sometimes produces no net income after expenses are deducted, yet it is the main repository for much of NZ Household wealth with the expectation of capital gains or conservation of value invested at the least.

Do assets need to provide an income stream? What a question, only in this day and age would it be a valid one, in my opinion.
A house may not provide an income stream but you would be paying rent if you didn’t have one.

A good definition of an asset is something that puts money in your pocket. This should be from providing a good or service of value to society. Such as renting accommodation.

Inflation (Capital gain) is a goal of central banks, an economic theory that we are better off with the price of everything increasing each year. In theory if rents, wages and prices all rise together it won’t make much difference and will help out people borrowing money. Inflation destroys the value of a dollar and if you aren’t compensated with an interest rate(yield) at least equal to the rate of inflation you are losing money.

The problem since 2009 is we have had massive inflation but only in asset prices, income has become almost a secondary consideration.
https://www.rbnz.govt.nz/monetary-po...ion-calculator

Per the reserve banks own calculations since 2009 Q4 to 2019 Q1 annual inflation has been as follows.

The bull**** CPI figure 1.6% or Wages 2.7% and Housing 6% when broken down.

The game is you buy a house that increases faster than wages and average inflation and what inflation you do get helps to clear the mortgage as the mortgage is valued in yesterday’s dollars which are in theory worth 1.6% less each year and you get a 6% tax free capital gain each year (4.4% in real terms).
I suspect the focus of a lot of property investors is capital gain rather than rental income from providing accommodation (and why not). Possibly that is why govt regulation has been required to force them to provide warmer healthier homes.

If we had price stability instead of targeted inflation all the negatively geared property investors would just be losing money instead of looking like financial geniuses.

Central bankers can’t stop the game now as all the geniuses will look like morons if it collapses. Sadly they are robbing savers with their push for inflation and suppressed interest rates and savers will also lose if it all falls over as they are unsecured creditors of the banks. You are penalised for saving and put yourself in a weaker and weaker position by depositing money in the bank. Young people saving a deposit to buy a house will see rises of 6.0% a year in housing while they get less than 1% interest on their savings. If house prices collapse, there is a good chance they will lose a chunk of their savings before they can benefit.

Sorry started rambling again and got of track. In my opinion yes an asset needs to provide an income stream or a financial benefit. How would you value an investment without a rate of return. Only in todays f**ked up world where we even have negative interest rates could a question like this be asked.

So ultimately you need to find a business or property that provides valuable goods or services to society that provides a decent income stream/yield/return on investment for the capital invested.

Currently you just need to buy a house and wait and this is not likely to change anytime soon.

[Aaron]

Here's the words of our esteemed reserve bank governor.
https://www.nzherald.co.nz/business/...ectid=12256731

A quote from the article.

The Reserve Bank estimated the average saver would be down around $10 a week but the average borrower would gain about $40 a week, he said.
"So there's a four-to-one gearing ratio there to say there will be an increase in aggregate demand. Not a reduction."

Orr described the belief that higher rates automatically translated to higher real returns as an illusion.
"You have to remember that the single biggest destroyer of savings is inflation. So it is quite ironic that we've now got stable inflation and this is the criticism," he said.


I guess that makes the NZ reserve bank the single biggest destroyer of savings in NZ by his own admission. We've now got stable inflation???? Over the last year maybe, what about the last decade?

https://www.rbnz.govt.nz/monetary-po...ion-calculator

[Bjauck]

Do assets need to provide an income stream? What a question, only in this day and age would it be a valid one, in my opinion.
A house may not provide an income stream but you would be paying rent if you didn’t have one.

A good definition of an asset is something that puts money in your pocket. This should be from providing a good or service of value to society. Such as renting accommodation.
....

Sorry started rambling again and got of track. In my opinion yes an asset needs to provide an income stream or a financial benefit. How would you value an investment without a rate of return. Only in todays f**ked up world where we even have negative interest rates could a question like this be asked.

So ultimately you need to find a business or property that provides valuable goods or services to society that provides a decent income stream/yield/return on investment for the capital invested.

Currently you just need to buy a house and wait and this is not likely to change anytime soon.

Interesting topic and relevant too for a thread on gold!

I don't agree with your requirement that an asset needs to provide income. There are various types of assets. Some assets are held with the expectation of deferred benefit. Through the ages gold and other items have been desired and treated as valuable assets. Today's land bankers would also treat as assets their undeveloped land even though it would actually be held at a loss each year. They hold with the hope that they will be able to sell at a capital gain. Likewise investors in gold hope their asset will eventually be sold with a capital gain.

Of course, you also need to have assets or employment that provide an income from which your daily living expenses can be met to enable you have the luxury of owning assets that do not provide actual (as opposed to imputed) regular income and provide gains only when the asset is sold.

NZ Owner occupied houses have imputed income (untaxed) and capital gains (untaxed) so they have been very good assets for those who could afford ownership and for whom ownership was suitable.

[digger]

I think that the last days posters are so off beam as to why we are in a gold rally I thought I would take on the arrogant position of putting you on track. In short it is the big issues and not the small details. All the last posters are saying have been around for a long time and gold did not rally. It is heading up now because of the China ---Us economic war. China had some hope of replacing the US as the reserve curriency---or at least an alternative reserve currency. The trade war has stuffed that up for China,and now even more so with China lowering the value of their currency.
So in an obvoius way China and to an almost equal extent Russia can now only turn to gold as a value against the US dollar. Gold has gone up as the trade and currency war widens.
amen

[Aaron]

I think that the last days posters are so off beam as to why we are in a gold rally I thought I would take on the arrogant position of putting you on track. In short it is the big issues and not the small details. All the last posters are saying have been around for a long time and gold did not rally. It is heading up now because of the China ---Us economic war. China had some hope of replacing the US as the reserve curriency---or at least an alternative reserve currency. The trade war has stuffed that up for China,and now even more so with China lowering the value of their currency.
So in an obvoius way China and to an almost equal extent Russia can now only turn to gold as a value against the US dollar. Gold has gone up as the trade and currency war widens.
amen

Sounds reasonable, no point in holding US debt if you are having economic conflicts with them. Gold is seen as a safe haven in times of conflict.

You don't think Ray Dalio suggesting a paradigm shift and having some gold as an insurance policy would have helped. I guess we would need to know who is buying gold to understand why they are buying it. I don't think it is the end of days, but something needs to change or we just get more of the same which at some point becomes farcical. For example negative interest rates seem nuts to me.

[FXTrader]

Personally I've had gold since I got very concerned about the world in 2007. It been 10% of my investment portfolio ever since (other than getting to 15% up to 2011), and in NZD terms its risen 6% p.a. and provided me with a hell of alot of comfort over those years, indeed as it is again currently as those concerns come back. I have plenty of income earning investments and gold sits amongst that mix of investments doing an important job

[airedale]

There are many views on buying or avoiding gold or gold stocks. People have written hundreds of books about it. I went in to the ASX competition on this site with the view that the US$ index will peak this year. When that index decreases then gold will increase. I think that it has already started to happen. So far my gold picks are up by 39.5%, 106%, and 52%. My other 2 picks are not gold stocks but one is an explorer with nickel and gold prospects. I am still hoping to catch Toulouse.

[Aaron]

I think that the last days posters are so off beam as to why we are in a gold rally I thought I would take on the arrogant position of putting you on track. In short it is the big issues and not the small details. All the last posters are saying have been around for a long time and gold did not rally. It is heading up now because of the China ---Us economic war. China had some hope of replacing the US as the reserve curriency---or at least an alternative reserve currency. The trade war has stuffed that up for China,and now even more so with China lowering the value of their currency.
So in an obvoius way China and to an almost equal extent Russia can now only turn to gold as a value against the US dollar. Gold has gone up as the trade and currency war widens.
amen

Possibly this is why gold has some value.
https://www.zerohedge.com/news/2019-...e-out-mortgage

If currency not only has no value it becomes a liability as when you hold it you have to pay for the privilege. A 4% dividend yield on the Port of Napier IPO doesn't seem too expensive if this is the way the world is going.