Author Topic: Gold is a Terrible Investment - According to Dave Ramsey  (Read 86490 times)

Offline ModernSurvival

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Gold is a Terrible Investment - According to Dave Ramsey
« on: October 14, 2009, 11:20:44 AM »
My dad use to say "opinions are like ass holes, everyone has one and they tend to stink".  This is how I feel about most opinions when presented as absolute fact.  I answered the question today about Dave Ramsey's supposed "strong case" for why gold is a terrible investment.  Why don't we compare it to the Dow Jones and mutual funds tied to it, not with opinion with fact.  

First here are the tools I used as sources for this little project

1.  http://www.usagold.com/reference/prices/history.html  - Historical Gold Prices

2.  http://www.measuringworth.com/calculators/ussave/index.php  - Wealth Calculator that Determines investment value on the DJA among other things.

So using those I said hell I know I WILL GET BURNED by the gold spike in 1978-1982 but so what lets look at investing 10,000 dollars in the following round number years

1970
1980
1990
2000

And say fine 10K into both assets which one was the better play with each of these years as starting points.  That is about 40 years minus what 2.5 months left this year.  Fair game?  I sure don't think I am stacking the deck and I sure could if I cherry picked years.

So
<---------------------------------------------------------------------------------------------------------------------------------------------->

1970

On 10K invested the DJA would have returned the investor $149,295 a total profit of $139,295
On 10K invested in gold at 37 dollars an ounce the gold would be worth $285,930 today or a profit of $275,930

Results for 1970 as your initial investment Gold thumps the DJA with margin of an additional $136,635

Gold Wins!

<---------------------------------------------------------------------------------------------------------------------------------------------->

1980

On 10K invested the DJA would have returned the investor $126,764 a total profit of $116,764
On 10K invested in gold at 600 dollars an once the gold would be worth $16,944 today or a profit of $6,944

Results for 1980 as your initial investment The DJA thumps Gold with margin of an additional $109,820

Stocks Win!

<---------------------------------------------------------------------------------------------------------------------------------------------->

1990

On 10K invested the DJA would have returned the investor $41,962 a total profit of $31,962
On 10K invested in gold at 375 dollars an once the gold would be worth $27,300 today or a profit of $17,300

Results for 1990 as your initial investment The DJA out performs Gold with margin of an additional $14,662

Stocks Win!

<---------------------------------------------------------------------------------------------------------------------------------------------->

2000

On 10K invested the DJA would have returned the investor $10,479 a total profit of $479
On 10K invested in gold at 275 dollars an once the gold would be worth $37,800 today or a profit of $27,800

Results for 1990 as your initial investment Gold thumps the DJA with margin of an additional $27,321

Gold Wins!

<---------------------------------------------------------------------------------------------------------------------------------------------->

Thoughts

So is this highly scientific or a professional analysis, no, but isn't it a hell of a lot more honest then Dave Ramsey just claiming "gold is a terrible investment" or on the other side the gold salesman saying you "can never loose with gold"?  What we see is clear on the valuted 10 year scale and the longer 40 year scale gold was a better investment.  We see that in a 20 and 30 year time frame gold was totally blown away by the stock market.  We also see quite clearly that you can do poorly with either and we have seen that the better one does seems to damage the performance of the other.  IE when the market booms gold prices go down as investors chase faster profits and when the economy dies money runs to gold as a safe haven.

In other word when anyone says buy stocks and gold sucks they are advising you to avoid insuring your investments.  They are advocating that you risk 100% of your money in one investment vehicle.  There are also many things being ignored by the above figures.  Golds big spike around 1980 was created by a lot dismay in the economy (as bad as today honestly), the as recent as 1975 lunacy of removing the gold standard from our currency and an attempt that pinnacled in 1982 by the Hunt brothers to corner the silver market.   Remove the 1980 spike and gold is a lot better of a performer if we just looked at 70, 90 and 2000 as investment years.  If you were holding gold in 1980 it was a great time to dump it and buy a 5 year CD with an double digit interest rate that was guaranteed and insured.  

Did gold "slump" during the 80s and 90s?  Yes, did the stock market do the same at different times in the same two decades?  Yes indeed!

What do we learn here as a whole, we learn the market is manipulated and our money has been devalued.  This began in 1913 but with some level of connection to a gold standard didn't go nuts until 1975 under Nixon and his devastation of the last vestiges of the gold standard.  

So should you buy gold at 1050 an ounce, honestly I don't know, perhaps some, perhaps wait for a retraction.  I think a fake recovery is on tap for 2010-2011 and you may see the opportunity to buy at 800ish again and you may not, I really don't know.  What I do know for a fact is that the Fed has printed TRILLIONS of dollars and it has all sucked value from our money.  I know that gold has not gone up enough to compensate for the devaluation yet, the key is will the fed reign in the money when the recovery starts?  Will they pull in enough of it?  Will other nations sit back and let use continue to devalue the world reserve currency and therefore trash their economies or will they respond to this?

Hence this is why I say 5-15% into metals and if you think Gold is high don't do it all at once do it a bit here and there over time.  Buy gold and silver when stocks are way up and buy stocks when they are way down.  This is not "trading" as looser advisers who don't know their ass from a hole in the ground call it as a cop out.  It is basic market timing over a very long term.  It is why I didn't loose my ass in 2008 and why people that listened to TSP in 2008 didn't either even if they bought zero gold.

My point?  When anyone makes an absolute statement research it.  On some levels I love and respect the hell out of Dave Ramsey but the absolute statements that "gold is a terrible investment" and "just buy good funds and hold them" are bullshit and a great way to put the majority of your wealth on a craps table they call the stock market with no "exit strategy".  Haven't we been told that no "exit strategy" is a big ass mistake, haven't we learned that is indeed the case?   You can't create diversity by buying diversified funds, you are still all in stocks.  You can't even do it with gold and stocks or even with just gold, stocks and bonds.  To build a strong set of investments you must build a portfolio of hard assets and paper assets that support your lifestyle and you never risk your lifestyle or your families future to any ONE thing, ever.  

So what is the perfect allocation?  There isn't one, you must decide how to break up and divide and therefore mitigate your risk.  You do that based on your life, you current situation, your future plan and your required cash flow to live the way you want. As you do that never let any talking head be it Dave (I denied the biggest market crash in history) Ramsey , Susie (the clueless one) Orman, Jim (I was wrong for 10 years but have it right this time) Cramer or even Jack (I told you so) Spirko ever box you into any 100% absolutes when it comes to YOUR wealth.
« Last Edit: October 14, 2009, 01:25:51 PM by ModernSurvival »

Offline KYdoomer

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #1 on: October 14, 2009, 12:08:30 PM »
Jack

I agree.

However, do you think now is the right time to buy gold?  I actually think we are at the top of a spike.  I think it will come back down to probably 850-900 before it begins the quick rise to probably 1500-1700 middle of next year.  I think gold moves with the value of the dollar but the false recovery as you call it will probably drive it back down a bit.

But yeah all those guys want a quick return with a risky investment.  Gold is wayyyyy safer.

Thoughts?

J

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #2 on: October 14, 2009, 12:20:56 PM »
@KYdoomer,  I gave that answer above,  ;)


So should you buy gold at 1050 an ounce, honestly I don't know, perhaps some, perhaps wait for a retraction.  I think a fake recovery is on tap for 2010-2011 and you may see the opportunity to buy at 800ish again and you may not, I really don't know.  What I do know for a fact is that the Fed has printed TRILLIONS of dollars and it has all sucked value from our money.  I know that gold has not gone up enough to compensate for the devaluation yet, the key is will the fed reign in the money when the recovery starts?  Will they pull in enough of it?  Will other nations sit back and let use continue to devalue the world reserve currency and therefore trash their economies or will they respond to this?


I can tell you I am NOT buying gold at the moment I am buying about 100 a month in silver as I see it as a safer play.  My gut is you and I are correct on gold short term.  I am not sure so I leave it open to others to allocate their investments as they see fit.  I am sitting on about 6 ounces I paid under 500 dollars for and I am not selling it.  So there is both my opinion and my actions.

Offline KYdoomer

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #3 on: October 14, 2009, 01:02:55 PM »
Sorry, somehow I missed that paragraph. 

I agree with you about silver.  When you look at how it kept check with gold for so long.  Gold is starting to pull away which either means gold comes back down or silver goes up or a combination of both.

J

Offline Cooter Brown

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #4 on: October 14, 2009, 01:14:42 PM »
I think it will come back down to probably 850-900 before it begins the quick rise to probably 1500-1700 middle of next year.  I think gold moves with the value of the dollar but the false recovery as you call it will probably drive it back down a bit.

I agree.

However, Gold is a different animal than almost any other investment vehicle, and especially stocks. I find it slightly disconcerting that Gold continues at record highs, while the market and many of the talking heads are indicating that the "correction" is over. What are the hard-core gold bugs thinking? Is this a sideways indicator of inflation? These are indeed strange times with mixed signals.

I'm with Jack on the silver; I think there's more upside, less risk, more versatility and, frankly, gold is for the big dogs who won't give a hoot about a $100-$150 an ounce correction in the short term.

YMMV

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #5 on: October 14, 2009, 01:22:04 PM »
Cooter,

Jim Rodgers and I agree with a few things

1.  The dollar is banana'ed long term (banana-ed is a conversion of the F word on our forum by the way) the damage is done it can't be fixed unless we get people like Ron Paul in charge and even if we do we have to burn things down to fix it.

2.  The world will dump the dollar

3.  When that happens we will see 2,000 dollar gold (at least)

4.  It will happen in our lifetimes

5.  We don't know when

There is a lot of "play" yet before the end game but in the end I truly believe the dollar is fatally wounded now.  The key is you have to eat and stay in a home while the "play" continues.  If you are a billionaire buying a few million in gold and setting it aside is a no brainer if you are a typical middle class individual you have to be a lot more strategic because you have so much less to work with.
« Last Edit: October 14, 2009, 01:27:16 PM by ModernSurvival »

Offline LvsChant

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #6 on: October 14, 2009, 01:27:20 PM »
we bought gold in the 1990's at a little over $300/ounce... but at that time didn't buy any silver. So, we started buying silver this summer when it was around $13/ounce... seems to me the silver still is pretty reasonable.

Offline Cooter Brown

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #7 on: October 14, 2009, 01:48:04 PM »
If I was sitting on a spare million right now, I wouldn't hesitate to slap about $300k in to Gold. As I don't, I'm sticking with Silver.

Jack; I think your analysis of the world (China & GB in particular) divesting themselves of dollar debt as soon as it is possible without major damage to themselves is right on, and it will be a terrible thing to behold.

We are like a speed freak on a run; the longer we keep doping up so much the harder will the crash be.

Offline NightOwl

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #8 on: October 14, 2009, 03:34:41 PM »
Dave definitely has strong opinions about investing, but he also warns people not to invest in anything just because someone else said so.  Even himself.  In other words, don't put any serious money into any investment until you understand it backwards and forwards.  (He'll happily point you to a professional investment advisor "with the heart of a teacher" who happens to agree with him.)

His view of gold makes perfect sense from a certain angle.  Up until Nixon, so-much gold equalled so-many dollars and vice versa.  (In Dave-speak, it "kept up with inflation" as they revalued the dollar in terms of gold a few times since 1792.)  And for a lot of that time it was impractical or illegal for most people to actually own any physically.  After Nixon, there's less than 40 years of actual history.

First there was a major run-up in price...  Followed by a crash.  Then it didn't do anything serious for almost 20 years.  Then it tripled over a decade.  In many ways the current situation looks a lot like the previous one.  Thus, the way he sees it, you're about to buy at the top and then watch it crash and languish for another 20 years.

I'm not saying that Dave is right.  Just that he has a really good point.  There's a real chance that he's wrong, considering how the gov't is screwing things up even worse this time and there doesn't seem to be another Reagan waiting to take over.  But we won't know for sure until after the fact.

I know on today's podcast Jack talked about gold & silver.  I'll go listen to it now...

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #9 on: October 14, 2009, 03:44:30 PM »
Uncle Charlie all that says to me is Dave is full of shit. So gold is not worth buying now because it is at the top of the market, that is what I get out of that.

Really?  So when the Dow was raging at 14K and every indicator of a crash was blinking red, just where was that advice from him in relation to stocks.  His advice was still buy, buy, buy.  Buy stock today, buy it tomorrow, buy it all the time.  When it goes down it is on sale.  Been listening to that dude for 4 years as I say I really like him on many issues just not this one.

His song on gold was the same 4 years ago too.  You know when it was 400 an ounce.  The way you just described it on his behalf is his cop out when pressed hard.  The way he says it day to day is simple, "gold is a terrible investment".   That advice is in this man's opinion an ostrich answer that fails to look at reality. 

Oh and you most certainly could own gold even after FDR stole it from the people.  Plenty of people did just that, smart people.

Offline NightOwl

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #10 on: October 14, 2009, 04:05:45 PM »
Didn't say he was right.  Just that it makes sense given his assumptions.  As for not applying the same risk analysis standard to stocks and real estate...  You'd have to ask him about that directly.

I like Dave, but of course he isn't perfect.

Gold and silver make more sense to me if considered outside of returns.  More as an extended emergency fund that isn't at risk from bank closure and won't be inaccessible in case of power grid failure.  In that case all they have to do is keep up with inflation.  But that might be another subject.

(Still haven't got around to listening to today's episode.  Maybe while I cook supper...)

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #11 on: October 14, 2009, 04:20:09 PM »
I understand what you are saying I also understood it when you said of Dave,

"Just that he has a really good point."

My point is no, he doesn't.  His point has been that gold has always been a bad choice, not that it is too high right now.  You see he can't say "it is too high right now" because it is totally inconsistent with his just buy funds all the time advice.  If you read the entire thread you will see I am not buying gold right now at this price point myself.  I think it is a bit high (short term) right now, I think (don't know) it will fall over the next 18 months in the bliss of the ass clowns spendulous program (the 700 billion is being spent in the election year not this one, shocking I know).

At the end of the next bubble though (a big and rather short one) is a lot of pain.  If you don't use some level of gold or silver to hedge for it I personally think you are missing a great chance to buy what could be the smartest insurance you ever purchase.

Dave is just plain wrong on this, I personally think he should stick to dealing with debt and stay out of investing.  His investment advice is actually terrible because it is one dimensional.  The only cash he advises is the 90 day emergency fund (which is good but not part of asset allocation in his world) and he recommend after that all stock based investments and all of it into 401s, IRAs etc.  So you get full exposure to the market and all the risks, nothing to hedge against something like what we are in now and will be in again.  Your wealth is all tied up until you are 59.5 or older, no real liquidity is preserved.

To those that have followed it over the past 10 years in Dave's own words, "how's that working out for you"?

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #12 on: October 14, 2009, 04:22:21 PM »
Oh and all should read this!  This is what gold/silver can do that no other investment can.  We do try to live that better life if times get tough or even if they don't, BUT we also accept that tough may be an understatement.  Gold and Silver give you options, options like this,

http://www.abcs-of-gold-investing.com/gold-book-ch-1.html


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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #13 on: October 14, 2009, 04:24:57 PM »
Just to interject one thought.
Gold hasn't actually increased or decreased in value.
This has been said by a lot of people but in 1810 an ounce of gold would buy you a fine hand made man's suit.
In 1910 an ounce of gold would buy you a fine hand made man's suit.
In 2010 an ounce of gold will buy you a fine hand made man's suit.
In all likelihood, in 2110 an ounce of gold will buy you a fine hand made man's suit.

Gold is wealth protection. Its a way to store money that inflation can't touch.
This is not a history since Nixon or FDR, its a history of suits and gold since technology allowed the mass production of cloth.
Temporary market fluctuations can go in any direction. Gold remains the safest way to protect wealth.
Kings come and go. Nations rise and fall.
Gold remains.

Offline NightOwl

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #14 on: October 14, 2009, 04:35:24 PM »
OK I got to listen to the relevant part of today's podcast.  In it you pretty much said what I've been thinking.  Good job as usual!

I've read the story about the vietnamese couple before.  That alone is almost a good enough reason to have some gold on hand.  Even at half its current market price, a pocket full of gold would be enough to evacuate a family to another country.  Or keep that family fed for a long time in case of non-famine hyperinflation.

Offline Spamity Calamity

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #15 on: October 14, 2009, 04:38:59 PM »
At 1000+ an ounce I simply do not have that kind of spare cash to buy even an ounce of gold. Ive heard of of 1/5th of an ounce coins. I might be able to start there but for right now Im buying the much cheaper silver. In the short term (under 2 years) I think gold would be a bad buy because I expect the price to drop again. Long term I think it would be silly to not have at least some of your savings in gold.

Offline dudekrtr

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #16 on: October 14, 2009, 06:50:54 PM »
What the gold "bugs" are saying is be careful, there may be a bit of a correction, but, soon after we're looking at $1200-$1600. The magic $1000 figure is now the floor. You won't see much of a retreat below that. That is bunch of bucks for an ounce of yellow metal, but, you will one day think that it was a bargain.

Silver isn't really a "safer" play, as it is actually a more volatile commodity, due to the variations in industrial demand. The real reason for going into silver is the price is so currently depressed, that the upside is nothing short of astonishing. Just look at the inflation-adjusted all time highs: gold: $2350 silver: $135 Yikes!

There is LESS silver available world-wide than gold (a billion ounces vs 2-3 billion ounces)  :o :o There are those who speak (albeit very softly, for fear of being branded too crazy) of price parity of the two metals. [my mortgage will get paid off that day!]

In two parts: http://news.silverseek.com/GoldIsMoney/1255044813.php and http://news.silverseek.com/GoldIsMoney/1254883767.php

http://news.silverseek.com/SilverSeek/1254150488.php

and this from a year ago:
http://dailyreckoning.com/a-bull-in-a-silver-shop/

Now, the real kicker: How can there be $110 billion of silver investments when the annual silver investment demand is $1 billion?    ??? ???
http://silverstockreport.com/2009/tiny-silver-II.html

Bottom line for Dave, I love the financial principles, the way he teaches them, everything. Great teacher; great investor. The problem is, he doesn't understand MONETARY POLICY, neither do the talking heads on mainstream media, and that's what this is all about. Our money is being taken to the cleaners, and the bankers, and the government are in it together. More money=more power=more money = more power.

Now, you can call this stuff tinfoil hat-like if you want, but the math is there. It HAS to happen, we just don't know when. I really hope Jack is right in his time frame, but I fear that the economy doesn't have the strength to withstand the pressure, so it might be sooner than later. One thing he may not be counting heavily enough is just that; how weak is our economy, really? How badly are the government numbers fudged? And, how badly does the rest of the world want to take us down?

Offline ModernSurvival

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #17 on: October 14, 2009, 07:04:43 PM »
There is LESS silver available world-wide than gold (a billion ounces vs 2-3 billion ounces)  :o :o There are those who speak (albeit very softly, for fear of being branded too crazy) of price parity of the two metals. [my mortgage will get paid off that day!]

Even with the discrepancy there is a strong corellation between the value of the two metals.



Interesting isn't it, notice how you never see them presented this way, I had to use my jedi MS paint skills  ;D to create this one.

Offline dudekrtr

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #18 on: October 14, 2009, 07:15:16 PM »
And, since those charts ended, gold is 1064 [~12% up] and silver 17.92 [~20%up]

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #19 on: October 14, 2009, 07:23:14 PM »
Adjusting my foil hat as I speak...

I think several governments are dumping their silver for paper right now in an attempt to support their currency.
I think this is holding silver down.
I strongly expect silver to suddenly correct and shoot to +30 or more.
At least I hope.

Offline cohutt

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #20 on: October 14, 2009, 07:46:45 PM »
( years ago I swore I'd never ever post in any threads that involve investing.  oops.)

When comparing historical performance of investments, a couple of quotes come to mind:

"There are three kinds of lies: lies, damned lies, and statistics".
"History never repeats itself, but it does rhyme."  

Both by Mark Twain

Only thing I'd add:

You are going to be right sometimes, you are going to be lucky sometimes
Don't confuse luck with skill.

Beware anyone who has it all figured out and will argue with you about how they "are" right; they are usually just looking for someone to agree with them for their own confidence.   This being said, debate is healthy and can be valuable in opening your perspective up and removing your built in biases.   I guess I am saying beware of the closed mind, whether yours or the other person's.

Build your own investment plan and philosophy from the inside out.   Never ever start with a product or investment and work backwards; remember how good we all are at justifying things.

Most of the really good long term investments that have allowed me to build wealth were those that I had some of the lowest expectations on along the way- you know,  the "diversifications" vs the ones I was certain were going to be a big hit.  

So what will be the best over the next few years?

Gold?  IHNFI
Silver? IHNFI
Stocks? IHNFI
Cash? IHNFI
Land? IHNFI
(and neither do any of you)

Therefore I avoid debt, maintain the ability to make decisions and invest in all of the above at times, and then some.  And I stick with it.

Carry on, and thank you all for the debate.  





Offline Red Dog

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #21 on: October 14, 2009, 09:36:48 PM »
I hope i didn't just miss this in all the posts above, but I don't view precious metals as an investment. I view them as a hedge. Assuming by "good" investment we mean a vehicle for our money which has a return greater than inflation, I'm not sure there are any investments that qualify as good all the time. One of the nice things about precious metals is that they are independent of your national currency and thus allow you to remove wealth from the vagaries of your countries currency. In an environment where your currency is likely to lose value compared to the world economy PM's become an attractive way to retain or even gain comparative value. In these situations they are a "good" investment. In a deflationary economy or one which is seeing the strengthening of your currency in relation to the over all economy they become less attractive. The primary reason I view PM's as a hedge is that I am holding them as a long term vehicle. Good or Bad, (and I've seen both) they hold the real value of your money. There have been times as Jack noted above where I could have received a better return by selling the  metals and buying something else. But over the long run they have proven to be a safe way to hold the value of my savings and to "hedge " my bets.

Offline Stein

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #22 on: October 14, 2009, 11:17:36 PM »
First, we should at least be fair with the guy.  DR hasn't suggested one puts all their money inside of 401(k)s.  In fact, he suggests you only put in up to the match and then into a Roth IRA - which is in now way "locked until retirement."  No matter what the investment, why wouldn't he suggest putting it into a Roth to avoid all taxes on earnings?

On several shows, he has mentioned he is personally 75% real estate, 25% mutual funds.  That is probably lighter on stocks than even several of the people posting here. 

The gold/no gold argument will go on forever.  One can cherry-pick dates to make a point either way.  For example, I could bring up that someone who bought for $800 an ounce in 1979 would be pretty unhappy selling at $300 twenty years later. 

The way I look at it is that:

1.  I'm not going to time any market correctly - metals, stocks, commodities or real estate
2.  I'm not going to spend the rest of my life studying charts - that isn't worth it for me
3.  I don't care how big my nest egg is or how much it swings up or down until I need it - 20 or more years from now

I do have some silver and gold, but the part that keeps nagging me is that I see it as an "all-in" type of investment.  Say I have a nest egg of $250k and I put 10% into gold - $25k.  Say SHTF like the gold-bugs predict and the value of the dollar goes to zero, so do stocks.  So, I now have $25k.  Am I better off than the guy with $0?  Absolutely.  Is it enough to support me for more than 6 months?  Probably not.  It's like buying $25k of term life.  Sure, it beats zero but it doesn't offer much protection from the rain.

So, if I want to be "insured", I have to put all the chips into that type of investment.  Otherwise it doesn't really move the needle.
The problem I have with gold is also that we are sitting at the all-time peak, just like $140 oil and Dow $14k.  Sure it could continue to go up, but at some point I would be betting against the dollar and the market can stay irrational for much longer than I can hold out.  The people that make money always are buying something that scares the shit out of the rest of the population.  Right now, I suppose that would be REO property in Detroit or something.

Like you, I don't have any answer other than bounce Congress out so at least the game is once again fair.  CD's paying 0.5% are a huge tax on savers.  A guy should be able to save money relatively safely at 2-4% over inflation without having to buy stocks or gold if he doesn't want to.  That is how this country used to operate.

Offline dudekrtr

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #23 on: October 15, 2009, 06:50:58 AM »
I think we can time the markets well enough to get 60-70 or even 80% of the trend. It doesn't take a lot of study. Right now, any investment may be looking better than it really is, since the dollar  is taking a dive. That is where any increase in the DJIA is coming from, not from an economic recovery. The "gold bugs", who are very good at what they do, where in gold when it hit 850, they were getting out at 650-675, and letting the general public throw their money at the dying market. They likewise were in a major buy mode until gold was around $200, almost 10 years ago. They were in stocks in between. It may sound like a lot of money for their newsletters, but, they cheaper than the daily newspaper, and worth many times over the price. As this thing rolls on down to the bottom, they will be picking stocks again. I personally get Bob Chapman's The International Forecaster and Howard Ruff's The Ruff Times. They cover WAY more than just investing; they are very much into prepping, food storage , weapons, etc.

Also, I think having only 10% in metals is like saying you think the stock market has a 90% chance of doing well. It doesn't make sense. I would think you would want 30% at least at this stage of the game. I would onlu put about 10% in very selected stocks, like mines, oil, infrastructure, energy.

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #24 on: October 15, 2009, 07:18:00 AM »
Right now, any investment may be looking better than it really is, since the dollar  is taking a dive. That is where any increase in the DJIA is coming from, not from an economic recovery.

Observation of the week I will be talking about that tomorrow on my follow up on the economy show.  This is one thing people don't get if a stock is trading at 20 dollars today and over the next week the stock stays solid but the dollar drops by ten percent the stock will "go up" to 22 dollars, and wow look the market is great.  All we see there is inflation!  It now takes 22 dollars to buy what you could buy for 20 a month ago.

Also, I think having only 10% in metals is like saying you think the stock market has a 90% chance of doing well. It doesn't make sense. I would think you would want 30% at least at this stage of the game. I would onlu put about 10% in very selected stocks, like mines, oil, infrastructure, energy.

No that would only be true if the other 90% were fully  in the stock market.  The reason I recommend 5-15% is it allows the individual a large margin to custom tailor the investment to their need.  Remember I don't say 5-15% of your investments either in the way looser advisers do, I am talking about your total wealth.  This includes equity in land/real property, cash, investments both inside and outside of "retirement accounts", etc.

Offline Stein

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #25 on: October 15, 2009, 09:18:39 AM »
I think we can time the markets well enough to get 60-70 or even 80% of the trend.

If this is true, you can be a very, very wealthy man.  I thought I could do this for twenty years before I realized I am much better of taking the average.

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #26 on: October 15, 2009, 09:24:23 AM »
I do have some silver and gold, but the part that keeps nagging me is that I see it as an "all-in" type of investment.  Say I have a nest egg of $250k and I put 10% into gold - $25k.  Say SHTF like the gold-bugs predict and the value of the dollar goes to zero, so do stocks.  So, I now have $25k.  Am I better off than the guy with $0?  Absolutely.  Is it enough to support me for more than 6 months?  Probably not.  It's like buying $25k of term life.  Sure, it beats zero but it doesn't offer much protection from the rain.

What you may be overlooking here is that if the dollar goes to zero, $25K worth of gold (in today's prices) will make you fairly wealthy when compared to those that had their wealth dollar denominated. As such, I suspect you will be able to live on your $25K investment far longer than six months.

Offline Stein

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #27 on: October 15, 2009, 09:32:41 AM »
What you may be overlooking here is that if the dollar goes to zero, $25K worth of gold (in today's prices) will make you fairly wealthy when compared to those that had their wealth dollar denominated. As such, I suspect you will be able to live on your $25K investment far longer than six months.

That's what I wonder.  The big gold argument is that an ounce of gold will always buy you a suit.  How many times is this said?

I don't see an ounce of gold having dramatically larger purchasing power.  Look at Argentina or Zimbabwe, an ounce of gold still buys what it did before.

To me, the most likely use for gold is to try to preserve wealth against an unstable currency.  The dollar can't be unstable forever it will either fall or become more stable.

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #28 on: October 15, 2009, 10:16:02 AM »
That's what I wonder.  The big gold argument is that an ounce of gold will always buy you a suit.  How many times is this said?

I don't see an ounce of gold having dramatically larger purchasing power.  Look at Argentina or Zimbabwe, an ounce of gold still buys what it did before.

To me, the most likely use for gold is to try to preserve wealth against an unstable currency.  The dollar can't be unstable forever it will either fall or become more stable.

I think the suit discussion is valid over the long run in stable (not during an discontinuity) economic times. If you look at what an ounce of gold will buy today and compare it to what it will buy say twenty years after the dollar fails, the suit discussion will probably hold true.

One needs to consider what the business climate will be if when the dollar falls.  What will the opportunities be to earn enough money in hyper inflationary  times  to purchase an ounce of gold? Who will tailors be selling their suits to if, for the most part, no one has anything of value? During the turmoil of a major failure of the world's economic system, I would expect to be able to buy several suits for an ounce of gold, or even three acres of rich farm land per ounce  like my grandfather did in earlier times.

The trick is to use your gold during the turmoil of the failure, at bargain prices, to acquire the types of assets that Dave Ramsey touts. I don't know why anyone would buy those assets now, when we are on the cusp of the breakdown.





Offline NightOwl

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Re: Gold is a Terrible Investment - According to Dave Ramsey
« Reply #29 on: October 15, 2009, 01:05:50 PM »
One thing occurred to me the other day.  Dave tells people that it's OK to buy jewelry and have hobbies after everything is paid off.  In fact he tells people that if they want some gold, why not save up for a nice gold watch and some good cuff links?  Just be sure to pay cash.

Okay, so we have zero debt and a reasonable emergency fund...  I checked prices on gold watches.  Dang expensive.  Also useless to me, since my $20 watch tells time just fine and is less of a mugger magnet.  Don't need any cuff links right now either.

What if I just put the same kind of money into gold and silver coins and call it a hobby?  Cheap and low-key, too, compared to boats and Harleys and jet skis.  No reason for Dave to offer any complaint there.  If it was any of his concern in the first place.

Just a thought...