The Survival Podcast Forum

Finance and Economics => The Money Board => Economic News, the Global Economy and all Things Monetary => Topic started by: ModernSurvival on October 14, 2009, 11:20:44 AM

Title: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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 (http://www.usagold.com/reference/prices/history.html)  - Historical Gold Prices

2.  http://www.measuringworth.com/calculators/ussave/index.php (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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: KYdoomer 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
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: KYdoomer 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
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Cooter Brown 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
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: LvsChant 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Cooter Brown 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: NightOwl 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...
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: NightOwl 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...)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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"?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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 (http://www.abcs-of-gold-investing.com/gold-book-ch-1.html)

Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: NightOwl 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Spamity Calamity 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr 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 (http://news.silverseek.com/GoldIsMoney/1255044813.php) and http://news.silverseek.com/GoldIsMoney/1254883767.php (http://news.silverseek.com/GoldIsMoney/1254883767.php)

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

and this from a year ago:
http://dailyreckoning.com/a-bull-in-a-silver-shop/ (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 (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?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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.

(http://survivalpodcast.net/images/gold.jpg)

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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on October 14, 2009, 07:15:16 PM
And, since those charts ended, gold is 1064 [~12% up] and silver 17.92 [~20%up]
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: cohutt 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.  

(http://i107.photobucket.com/albums/m284/cohutt/goofy%20stuff/eating_popcorn.gif)


Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Red Dog 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Stein 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Stein 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: AFS2 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Stein 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.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: AFS2 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.




Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: NightOwl 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...
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: HelenWheels on October 15, 2009, 01:17:35 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...

I live in Nashville, the home of Dave Ramsey... and on the local radio station where his show is broadcast, he also does sales promos for a local jewelry company.

In fact, that company shows that "Dave Ramsey endorses us"...

http://berrysjewelryco.com/ (http://berrysjewelryco.com/)

And the markup on jewelry is astounding... in the triple digits, easily...
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: AFS2 on October 15, 2009, 01:20:22 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.
Telling people to buy gold jewelry to satisfy their desire to invest in gold is pretty much the equivalent of telling people to buy whole life insurance instead of  term life because whole life has an investment value. I bet Dave doesn't recommend that.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: evilphish on October 15, 2009, 01:45:15 PM
Quote
Telling people to buy gold jewelry to satisfy their desire to invest in gold

he makes statements like that as a sarcastic joke. 

but who cares what he thinks?  just do what feels right for you and your family
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on October 15, 2009, 05:55:26 PM
he makes statements like that as a sarcastic joke. 

but who cares what he thinks?  just do what feels right for you and your family

I think the problem comes in when we've followed his teachings through all 12 sessions of his Financial Peace University, realizing along the way that this is the best program of it's kind; even better than we expected. He covers more than we imagined, including things like insurance. Then, when we get to the end, we get some funds together to invest, and he says "stock market". Huh? Makes no sense, we know the stock market is going down the tubes. What gives? Well, he gets a paycheck, too, and he can't really come out so much against the overall powers that be, or, he'll be off the air.  (can you say "Derry Brownfield"?-the one who got booted for coming out against GMO food)

Maybe Dave should seize the opportunity, switch to podcasting, hold nothing back, and really start making some waves. [sounds like one of the answers that Jack gave about starting up a business  ;) ]
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ModernSurvival on October 21, 2009, 12:46:13 PM
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. 

Yea but I cherry picked nothing.  I had a buy date every 10 years and gold lost in 2 of the 4 measured decades.  But I will tell you this total BS that no one can time the market is nonsense.  Here is what you can time,

When a market is at an all time high and every ones says there is nothing to worry about just keep buying more, it is time to get out.  Again this is why I am not buying gold at over 1K an ounce right now.  I am also not just buying more mutual funds either.  The point is gold is a single commodity that at times makes sense to buy, at times makes sense to hold, at times makes sense to sell and at times should be left alone.  Just because an individual (no matter how wise about other topics) doesn't have the necessary knowledge to use gold as investment doesn't make him right to say it is terrible.

And yes we can time the market, come see me in about 2014, I am on record out that far, we can talk about me being right or wrong then.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Stein on November 02, 2009, 02:47:02 PM
Jack,
Two people can be opposite and correct about the same topic provided their viewpoint and assumptions are different.  If you look at gold in a 10 year paradigm and a 100 year paradigm you will see two completely different pictures.  Both you and Dave can be correct and opposite.  Pull up his stats and they are as correct as yours.  Both statistics paint an accurate picture given the assumptions.

By cherry-picking I meant that your analysis was not typical of the average investor.  How many people buy only four times in 40 years?  Most people invest small amounts monthly over 40 or more years.  The best analysis I have seen tracked 40 year trailing returns assuming fixed monthly investments indexed to inflation.  It was then graphed to show you what starting years produced what return.  The morale was that it totally depended on what year you entered the workforce.  Fate or whatever you call it - your return had more to do with when you were born then anything else given the same investment track.

The problem is that human beings aren't logical and nobody EVER gets the market return.  Who has the balls to short oil at $120 when it was skyrocketing?  Who is buying houses in Detroit for $6k right now?  They either act too soon or too late or don't act at all.  Right now, nobody knows what is going to happen, Congress' willingness to borrow hundreds of billions (or not) is just too big a ripple in the lake to know where I need to be.  My strategy is to find something that works reasonably well over long periods of time without requiring 100 hours of research a month.  I would rather go make $1 then spend 10 hours trying to get $1 in investment income.  Obviously, there are traders with the opposite viewpoint.

At the end of the day, I can't picture gold going up very far - relative to the dollar.  The suit story will always overlay the price to a certain degree.  Buying gold appears to be nothing less or more than getting out of dollars, which may be a good strategy at times.  The sad part is there are tons and tons of gold bugs that plan on buying gold and becoming very wealthy in a short period of time.  I know you aren't in that group, but many outside here are.  I'm not in gold because it doesn't have a track record of fitting my strategy, risk tolerance or goals.

The morale of the whole story is to look at what research has been done and figure out what you as an individual want to do.  Nobody has the same goals, circumstances, birth date, available funds and tolerance for risk.  Short of a Ponzi scheme, there really isn't an investment I can think of (within reason) that is a poor choice for 100% of the people 100% of the time.  Even with a Ponzi, you can get in and out and do well sometimes.  If that is your point with DR then we totally agree.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on November 02, 2009, 05:04:06 PM
Just look at the stock market from the late 20s through the 30s. There were 5 or 6 sucker rallies. If you want to try to time these things over the next couple of years, go for it. Those will be the times that the real stock players will clean the general public's clock. Short or long, they'll make money when it goes up AND when it goes down.

Wait till next year when Congress  does another bailout and steals some more trillions from your children and grandchildren. Some of the funds will finally be made available to make some businesses bottom lines look way better than they are, the market will pop up a couple thousand points, and we'll have another great election year rally. Enough to make you  puke  :P

This is a good deal more about the study of history than investment strategies. Never have we seen the forces at play in the economy as we have now. NO ONE knows where this will go, but it will definitely not be good. It will be something to tell your grandchildren about, hopefully without too much of an apologetic attitude.

There are people in the government and their banker cronies who will do anything to maintain, and, grow their power structure and money. Diddling the price of gold and silver, just so things will look better than they are, is all part of the method they use. "Gold and silver aren't that high, and neither is oil [that is, gas pump prices], so things can't be that bad, right?"

The DJIA is high, so business must be good, right? Never mind about the P/E ratio, which is currently at a ridiculous level, even though they use creative accounting techniques to boost the bottom line. How about asking, "Are your gross sales actually increasing? No? Didn't think so."

I'll stick with Jack and precious metals, matter of fact, I'll probably buy more; just picked up more silver eagles at $17.90.

See you in 2014.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on November 05, 2009, 05:10:40 AM
Hi Ho Silver!  http://news.silverseek.com/SilverSeek/1257346165.php (http://news.silverseek.com/SilverSeek/1257346165.php)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: redrum23 on November 19, 2009, 10:30:58 PM
i don't think there's any question that gold/silver is the way to go today.  you'd have to be a moron not to know/understand that the dollar is doomed and that the avg standard of living is going to drop in half.

Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: 13F10 on December 06, 2009, 09:56:09 AM
Bringing the thread up to date .... Friday was a heck of a day!  You want to buy on the dip, do it now.  IMHO, Gold will recover Friday's loss by week's end, next week max. Silver will test 19 again as well. Questionable timing on the dollar spike, Unemployment numbers on Friday, to say the least, Ben needs to be reappointed...

I've read with interest the posts in this thread and generally agree with most of them, will add a couple of thoughts.

1) As mentioned, the USD is done. At this point it's all about some time for those holding it to diversify.
2) The Treasury/Fed has NO CHOICE but to devalue the dollar, no way to pay-back our debt.
3) So far it's a fairly controlled devaluation, when the bottom does fall out, it will happen over night.
4) I can't see how this controlled slide lasts more than another 12-18 months.
5) The next major hit is the rumor that Japan will NOT be buying our debt at historic levels; ie., "we don't want your dollars anymore".

I'm way heavy in Silver with just a few ounces of Gold ... BTW, agree completely that Silver will likely continue out-perform gold in a big way.
I have everything from 90% to bars in Bank TerraFirma. Love the pre-65 coins. I keep very little cash in the bank... I trust none of them. I do miss the .00000025% they would pay me to keep it there though :)

Fiat currencies (competitive devaluation), hidden toxic assets, commercial real estate & unemployment will all have a huge impact during 2010.  It's going to be a bumpy ride. Beans, Bullets, BandAides & Bullion.




Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on December 06, 2009, 04:46:18 PM
13F10, I'm with you, up to a point. Silver will lead gold up, but there will a time when gold will take over and you should move the ratio in the opposite direction. Always keep the pre-64 for practical use, but for wealth storage, we have to be careful and watch. And watch. And watch.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: edgerider on December 07, 2009, 12:13:03 AM
Yes I feel confident they will go up too, and silver more so.  At the end of the day the coins will still be in our pockets and as Jim Rodgers once said, "Enron can go to zero, but your gold and silver can never go to zero"
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: hanzel on December 26, 2009, 10:53:45 AM
Just my personal opinion that I tell others.  One should never "invest" in gold and silver because they are not investments, gold and silver is money ( and a stable one at that).  In 1999 I purchased a Silver Eagle ( one dollar ) for about $5 FRN ( Federal Reserve Notes) today in 2009 you can look on Kitco and see the same Eagle listed at a little over $20 FRN.  Wow you would say, I "profited". You made 400% !!!  Look at it this way, with silver as the "money", in 1999, I had 31.1 grams of pure silver, in 2009 I have..... 31.1 grams of silver not 124.4 grams ( a 400% increase if as you say I profited in silver from my Silver Eagle ) In 1999 a barrel of oil cost 3.5 to 4 US Silver Eagles, in 2009 a barrel of oil cost ... 3.5 to 4 Silver Eagles.  An investment is something that increases ( or decreases ) in an amount.  I buy a US treasury bond for $1000 FRN and I expect to have an return of $1010 ( 1% interest ).  I buy a US Silver Eagle or US Gold Eagle that weighs 31.1 grams of silver or gold and I will have.... 31.1 grams of Silver or Gold, today, tomorrow, or 10  years from now.  No increase equal no return, no return ( either +/- ) equal no investment. I only have money.

 After they finish saying all their "but, but, but" I remind them, it is the US Constitution, and not me, that states " No State shall.. make any Thing but gold and silver Coin a Tender in Payment of Debts" ( ever notice that "T" is capitalized ? Seems like they were trying to emphasize that word).
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Son_of_the_Republic on January 16, 2010, 07:53:11 AM
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

I think Gold in 2010 will have some modest gains with a few interesting ups n downs to keep us on our toes.I do however see Gold as out performaing stocks by quite a margin over the next 3 years.We are no where near a genunine recovery which I suspect,given current events , could be many many years away.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: KYdoomer on January 16, 2010, 11:43:33 AM
Just my personal opinion that I tell others.  One should never "invest" in gold and silver because they are not investments, gold and silver is money ( and a stable one at that).  In 1999 I purchased a Silver Eagle ( one dollar ) for about $5 FRN ( Federal Reserve Notes) today in 2009 you can look on Kitco and see the same Eagle listed at a little over $20 FRN.  Wow you would say, I "profited". You made 400% !!!  Look at it this way, with silver as the "money", in 1999, I had 31.1 grams of pure silver, in 2009 I have..... 31.1 grams of silver not 124.4 grams ( a 400% increase if as you say I profited in silver from my Silver Eagle ) In 1999 a barrel of oil cost 3.5 to 4 US Silver Eagles, in 2009 a barrel of oil cost ... 3.5 to 4 Silver Eagles.  An investment is something that increases ( or decreases ) in an amount.  I buy a US treasury bond for $1000 FRN and I expect to have an return of $1010 ( 1% interest ).  I buy a US Silver Eagle or US Gold Eagle that weighs 31.1 grams of silver or gold and I will have.... 31.1 grams of Silver or Gold, today, tomorrow, or 10  years from now.  No increase equal no return, no return ( either +/- ) equal no investment. I only have money.

 After they finish saying all their "but, but, but" I remind them, it is the US Constitution, and not me, that states " No State shall.. make any Thing but gold and silver Coin a Tender in Payment of Debts" ( ever notice that "T" is capitalized ? Seems like they were trying to emphasize that word).

That's a very good summary!  Another way of saying that gold and silver are gold and silver long after the facade is gone from all else.

J
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: BIG-TARGET on February 16, 2010, 05:02:42 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

But gold was never meant to be a "quick return" type of investment. It is primarily a CYA, if you inbestment and /finances totally tank :-\
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: fndrbndr on February 16, 2010, 05:42:36 PM
Even with the discrepancy there is a strong corellation between the value of the two metals.

(http://survivalpodcast.net/images/gold.jpg)

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.

Jack, where did you get these charts? I would like to start keeping track of this stuff.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on February 16, 2010, 10:57:30 PM
You can make one up at www.stockcharts.com (http://www.stockcharts.com) . It's free. Where you input the stock symbol, just put in the gold and silver prices like this for the ratio:

$GOLD:$SILVER

It cracked the 70:1 line the other day; today it dropped back down to under 69. Pretty wild territory.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Rorschach on March 11, 2010, 10:01:11 PM
Gary North wrote an analysis of this on his web site: 'Paul Farrell vs. Dave Ramsey on How to Invest' (http://www.garynorth.com/members/6179.cfm (http://www.garynorth.com/members/6179.cfm)).  The most damaging point he makes, at least in my mind is that if you bought and held stocks from 1801 they would not exist today; there price would be worth nothing since few if any companies continue to exist over time. 
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Morgan96 on April 02, 2010, 05:54:29 AM
I listened to maybe 20 or so Dave Ramsey podcasts, and stopped after I heard his opinion on gold.  He dispenses good advice to his callers, but the message gets repetitive after a while.  Physical gold is a store of value, a hedge, an insurance policy, it is "cash" under the mattress.....  what it is not is an investment.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on April 02, 2010, 07:15:02 AM
I listened to maybe 20 or so Dave Ramsey podcasts, and stopped after I heard his opinion on gold.  He dispenses good advice to his callers, but the message gets repetitive after a while.  Physical gold is a store of value, a hedge, an insurance policy, it is "cash" under the mattress.....  what it is not is an investment.
Well said.

I'm not sure if he still does it or not, but the accusation that chased him away from his newspaper column and some of his early radio work was that his write-in questions and some of his call-ins are staged by his staff.
Either way, he does seem to be a one trick pony.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on April 02, 2010, 09:11:41 AM
Well said.

I'm not sure if he still does it or not, but the accusation that chased him away from his newspaper column and some of his early radio work was that his write-in questions and some of his call-ins are staged by his staff.
Either way, he does seem to be a one trick pony.

Fair enough, but it's a trick most people refuse to learn :).  I listen to his podcast on occasion when I feel the need to refocus on my finances.

Of course, I've heard him say, "Gold is a stupid investment."  And I agree.  Investments are things that produce value.  Gold stores value.

A chicken is an investment.  A small piece of gold to buy a chicken is a store of value that will later be converted to an investment.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Morgan96 on April 03, 2010, 05:48:25 AM
Fair enough, but it's a trick most people refuse to learn :).  I listen to his podcast on occasion when I feel the need to refocus on my finances.

Of course, I've heard him say, "Gold is a stupid investment."  And I agree.  Investments are things that produce value.  Gold stores value.

A chicken is an investment.  A small piece of gold to buy a chicken is a store of value that will later be converted to an investment.


No problem with him saying that gold is not an investment, is that his advice in this case is unbalanced and ill-informed.  But as you say, some of his ideas on personal finance are worthwhile to listen from time to time.  For our part, we're some ways down the road, we've straightened ourselves out to a large part, paid off all debts except mortage, watch our expenses, etc., so the need to listen is not there.   I used  to get some entertainment value in marveling at the financial pickles some folks got themselves into ("hee hee, what idiots"), but lately listening to stories of hardship, however ill-advised the protagonists were, just make me sad.   Folks like Dave Ramsey would not have had an audience a couple generations ago, when government-facilitated credit was NOT as easy to get as today.  just my $0.02.

H of C, I had not thought about some of Dave's calls being staged before.  In retrspect, it sure sounds plausible.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: koyote on April 30, 2010, 12:47:12 AM
I'd love a revisit of this now.

We've had the "strong dollar", which isn't strong- just the rest of the global economy is sucking vaccuum.

Save Haven moved haven't stopped.

Gold isn't at $800. Not even close.

Silver is still way below what it should be, but I'm honestly happy about that since I need time to get into the game. I have this ranch out in nevada to buy.....

Interesting datum:

The demand for gold bullion in coined form from the US mint is down this year, enough that they will be able to print proof sets.

But the demand for silver (ASEs, in this case) from the mint is still spiking, and they don't look like they'll be producing proof or other collectible sets of silver bullion coinage this year.

What this says to me isn't that gold is done, because I really think we'll see a few hundred more this year. WHat it is saying to me is that silver is undervalued (probably due to extreme off the wall short positions by market 'manager' firms) and that people who have money, got their gold- and people who don't have a lot of money- can't afford the gold but are buying the silver.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Son_of_the_Republic on April 30, 2010, 07:24:36 AM
Gold Hits 2010 High Amidst Debt Turmoil In Europe


  
Quote
Gold bullion reached a 2010 high today following concerns over euro zone sovereign debt levels after Greece, Spain and Portugal were hit with disastrous credit rating downgrades, with analysts now predicting that prices are set to move back towards their December high when gold peaked at $1,226.10 an ounce.


http://www.prisonplanet.com/gold-hits-2010-high-amidst-debt-turmoil-in-europe.html (http://www.prisonplanet.com/gold-hits-2010-high-amidst-debt-turmoil-in-europe.html)

Edited by SW, due to copyright issues -- please see here (http://thesurvivalpodcast.com/forum/index.php?topic=20714.0) for Fair Use info.
  
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on April 30, 2010, 07:51:03 AM
It's really nowhere near the end. I, too, am glad that the price is manipulated downward, so I can accumulate more.

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=11299:the-silver-price-spiral-part-i-today&catid=49:silver-commentary&Itemid=130 (http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=11299:the-silver-price-spiral-part-i-today&catid=49:silver-commentary&Itemid=130)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Son_of_the_Republic on April 30, 2010, 08:06:51 AM
The folks at GATA are adamant that Gold will hit 3/4000 in the not so distant future.Still a good time to buy.Silver margins are likely to be even better.

  http://www.gata.org/ (http://www.gata.org/)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: koyote on April 30, 2010, 08:32:53 AM
Just my personal opinion that I tell others.  One should never "invest" in gold and silver because they are not investments, gold and silver is money ( and a stable one at that).  In 1999 I purchased a Silver Eagle ( one dollar ) for about $5 FRN ( Federal Reserve Notes) today in 2009 you can look on Kitco and see the same Eagle listed at a little over $20 FRN.  Wow you would say, I "profited". You made 400% !!!  Look at it this way, with silver as the "money", in 1999, I had 31.1 grams of pure silver, in 2009 I have..... 31.1 grams of silver not 124.4 grams ( a 400% increase if as you say I profited in silver from my Silver Eagle ) In 1999 a barrel of oil cost 3.5 to 4 US Silver Eagles, in 2009 a barrel of oil cost ... 3.5 to 4 Silver Eagles.  An investment is something that increases ( or decreases ) in an amount.  I buy a US treasury bond for $1000 FRN and I expect to have an return of $1010 ( 1% interest ).  I buy a US Silver Eagle or US Gold Eagle that weighs 31.1 grams of silver or gold and I will have.... 31.1 grams of Silver or Gold, today, tomorrow, or 10  years from now.  No increase equal no return, no return ( either +/- ) equal no investment. I only have money.


I'm sort of in a state of agreement/disagreement here. It would seem that by this basic (fundamental, not base) logic, savings accounts, CDs, money markets and certain types of bonds are all not investments, as the interest paid can never exceed (for more than a very short period) the infationary losses of an interest (debt servicing) fiat money system.

But, even though a barrel of oil is roughly equivalent to x/ounce of silver or x/ounce of gold over time (there will be some variation due to supply and demand of oil)- the investment value of PMs cna be tracked in other ways.

The simple logic is that to be an investment in the pure sense you seem to be leading towards- you have to either make money from rental (I loan you 100 ounces of gold today to build a business or buy trade stock, you pay me 105 ounces in a year) - or you have in invest directly in something that increases wealth (research, manufacturing, etc).

But, but, but- If I buy a house and have payments of $800 a month, and my PMs "investment" growth outstrips the interest of the loan, then the metal is "turning a profit". And thus is an investment by some measure.

Additionally, while gold is a low use metal in terms of industrial applications, silver isn't. So silver, in addition to being a stable coinage, has a value fluctuation, like copper, based on supply and demand in the "market". It's a commodity on some level. People can and do invest in commodites, whether stored or futures.


so, while PMs are a store of value intrinsically, I think that in relation to other goods, services, and exchange methods (fiat money, currencies), the buying and selling can be timed and they can be invested in on that basis.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Morgan96 on May 01, 2010, 05:16:27 AM
Another way to consider, gold and silver are a medium of exchange *and* a store of value, no different than a money market fund account denominated in Australian dollars or Brazilian Reais (*) .  By purchasing gold and silver, we are engaging in a form of currency arbitrage.  Gold is money, and silver is money,  they are passive inert stores of value, same as a wad of cash.  But at the end of the day, we are betting that their  purchasing power , relative to other stores of value, will remain stable.  Not an investment as such, but a defensive strategy. 

One other great advantage of gold and silver as money is their limited supply, which can only grow as fast as they can be mined --- or, according to the good folks at GATA, as a fast as London traders and banksters can manufacture fraudulent contracts of deposit.    ;)

(*)  I know, who woulda thunk it that the Brazilian currency would be seen as a "hard" currency these days.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on May 17, 2010, 01:48:49 PM
OK, I decided to put my 2 cents worth into the pot.

First, I agree almost 100% with Jack.  So far, no body's commet in this post has convinced me otherwise.

Second, I, likewise, have listened to "King" Ramsey for a long time.  I agree 100% with his position on debt, but disagree with much of his other financial advise.  He has a tremendous cult following.  Unfortunately, as with all cults, there are a lot of members who never question their leader.  They just blindly do what they are told.  I don't fault Dave Ramsey for this.  He is a terrific entrepreneur and has found a way to make millions off telling people what they already ought to know concerning debt.  The problem is that many of his followers have gotten the extreme warm fuzzes for their leader and enjoy holding hands and singing kum-bah-ya instead of spending sufficient time educating themselves.

As of several months ago, I don't listen to Ramsey much anymore.  I finally got tired of listening to him say the obvious over and over.  I know what advice he's going to give before he gives it.  I would rather listen to Jack's podcast 6 or 7 times on how money works, because I'm actually learning something new, which is fundamental to the way the world's economy works.  As a matter of fact, he has inspired me to do some more reading and research on this issue.

Third, everyone in this thread, with the possible exception of dukekrtr, seems to think primarily in terms of long term buy-and-hold strategies.  The only question seems to be which investment -- gold, silver, stocks, etc.  And, that's just fine, as long as you're comfortable with it, and you KNOW what you're doing.  It's your damn money and you are free to reap the rewards or lose it the best way you see fit.  Likewise, my damn money is MY money, and I will accept full responsibility for it.  If I lose it all, that's my business.  At that point, maybe you guys could place an ounce or two of silver into my begging cup.  :)

My personal style of investing is shorter term for those moneys that are currently trapped inside a scam IRA or 401k.  As of the writing of this post, I am long gold, short the Euro, and short the S&P500 index in my self-directed IRA.  I used ETFs to construct this portfolio.  I have also been long silver, but took my profits.  I am waiting for another entry point on silver.  All positions are with a profit, and I will not give back much of that profit, because I know exactly when I will exit those positions (barring any catastrophic market event).  I have automatic stop loss orders placed with my broker.  So, for example, if gold starts falling, there is a point where I will get out of gold (with a profit).  I will not hold it long term.  However, if gold falls, and eventually reverses trend again, I will enter a gold position again, with the proper protective stops in place.  In addition, if the S&P500 trend reverses, I will close the short position (sell the inverse ETF) and go long the S&P500.  I have a strategy with proper risk management and protection of capital that is proven to work long term.  So, it does not matter to me what the long term prognostication of gold and silver is, at least with respect to my IRA.  I intend to be on the correct side of the trend.  My 401k is a little different because I don't have complete control of it.  I am forced into dumb ass mutual funds as the only alternative, although I have access to an extremely large selection of funds.  Currently, most of the account is in cash, but some of it is in a particular fund that has good exposure to gold, silver, and US treasuries.

Now, this strategy is not complicated, and it does not take much effort to do.  However, it does take some education to learn how, as well as having some self discipline.  In addition, this is strictly for my so-called tax advantaged IRA.  Strategies may vary in other environments.

The point of my post is not to convince anyone that what I'm doing is "right," and that they should be doing it the same way.  The point is that I don't just follow Dave Ramsey's (or anyone else's) advice without using my own brain.  However, I do try to have an open mind, listen to and weigh opinions against mine, and change my opinion from time to time when it makes sense to do so.  And, I would like to convince everyone that I am at least "right" about that part!  :)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: outdoorman63 on May 17, 2010, 03:05:27 PM
the only gold i have been attempting to buy are us "mid to late 1800's"1 dollar coins that were used in jewelry or just have lost there numasmatic value, have been getting them for under 75 each
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on May 17, 2010, 05:44:10 PM
wdrobins, I agree with your general approach. Personally, I employ weekly credit spreads with the dominant trend in various broad markets.  But that's just a matter of technique.

However, I'd add a bit of caution.  If the S hits the F suddenly, you could be exposed to tail-end risk if you're not hedged in gold/silver/oil at the time.  This is why I have a combination of short and long term positions.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on May 17, 2010, 07:48:56 PM
Thanks for the advice tamo42.  Your strategy is a good one. 

I assume what you mean is that you are using options to execute a vertical (credit) spread, whereby you sell an OTM (out of the money) option with a strike possibly close to the current share price, and simultaneously buy an option at a strike further away having the same expiration date.  You thus have a net credit to your account.

Unfortunately, I can't execute these types of option strategies in my cash IRA, which is not allowed to be a margined account.  About all I can do with options is buy calls and puts, and execute covered calls.  I actually tested my account one day by trying to do a spread, but the order was rejected (as I knew it would be). I'm not quite sure if not allowing a credit spread in a cash account is a function of this particular broker, or an SEC regulation.

Given these limitations, I am pretty much just sticking with basic trend following techniques using both long and inverse ETFs.  I manage risk by setting initial stops and position sizing based on maximum loss of 1 or 2% of my account in any one trade. Sometimes I might risk more if the conditions and expected return justify it.  I figured I'm getting additional security from trading relatively high volume ETFs (as opposed to single stocks), which are not as likely to have large overnight gaps due to bad news.

If you have any ideas on how I can do this better, given these limitations, I'm listening.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on May 18, 2010, 12:35:40 AM
wdrobins, you're right that I use vertical OTM credit spreads.  The limitations on your account are due to your broker, not the SEC.  I do these trades in Roth IRAs all the time (using optionsXpress as a broker).  Granted, you do need to have margin enabled to short anything even though you don't use the margin for the trade.

If you can only go long though, your strategy makes sense.  But that's all for another topic we can discuss somewhere else :).

More related to the topic, yes, Dave Ramsey is great at getting people out of debt, but his investment advice is definitely non-optimal.  I still listen occasionally and he very clearly believes in a general rising of markets over time.  This is the inflationary viewpoint that has been true for the last 100 years.

What it fails to consider is that the game can change.  Many of us here believe that the rules of the general society will be changing in the foreseeable future.  Maybe not today or tomorrow, but probably within our lifetimes.  In my opinion, this latest round of fiat currency has begun its death throes.  In reaction, we'll move back to sound(er) money.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: bkt on May 19, 2010, 05:27:53 AM
I'm confused. An investment -- particularly a long-term investment -- is made relative to the currency you use to buy stuff. If it is known, and it is, that our currency is overvalued and that inflation looks very likely, what is the argument for investing at all? That is, why dump cash into something that will return more cash if the cash itself is devalued significantly by the time you get it?

The benefit to buying precious metals is they hold their value relative to other commodities very well over time. Buying gold and silver isn't so much an investment as a hedge against the bottom dropping out of the dollar.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on May 19, 2010, 08:30:44 AM
bkt,

You make a good point. However, more cash after inflation is better than less cash after inflation.  Some of us have been suckered into things like 401k plans and IRAs, so it is wise to manage that cash for as long as we have it, and, of course, do all the other things, in regards to prepping as well.



Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on May 19, 2010, 09:38:50 AM
There are two other reasons to invest using USD.  First, if you can stay ahead of inflation, you come out better than you went in.  Second, it's very difficult to redeem anything for gold/silver because the official currency is USD.

And besides, I'd rather have the stuff than the USD in many cases :).
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: templar223 on May 19, 2010, 09:49:54 AM
The purchase of precious metals (PMs) always seems to arouse the passions in some folks.

Frankly, putting any form of passion in your investment decisions is a recipe to financial disaster.

Especially those folks who buy gold to "hedge" against inflation using borrowed money (thus earning them the privilege of paying interest on their hedge).


Consider gold dispassionately and I think you'll find it's only potential value is for the novelty and certain "niche" uses that could be better described as insurance against certain unlikely scenarios (unlikely being a kind way of putting it).

Frankly, I think Dave Ramsey is outstanding at offering plans to get people out of debt and staying out of debt.  I don't think his investment advise is nearly as good though, but in this case, another man I have the utmost respect for agrees with Ramsey, albeit for slightly different reasons.

Here's what Karl Denninger over at Market Ticker Forums wrote about gold.  I respect the man and his thoughtful analysis of gold as an "investment".

http://market-ticker.org/archives/134-The-Year-In-Review-And-a-Look-Ahead-for-2008.html (http://market-ticker.org/archives/134-The-Year-In-Review-And-a-Look-Ahead-for-2008.html)

This is from Dec 2007
There are also a number of people who believe, despite all the evidence above, that the government (or "The Fed") will "hyperinflate" to "save the economy" (or at least try.) Typically these people also believe that the rest of the world will fare better than we will, and will come in to snap up assets in America that are "dirt cheap" as our dollar is debased.

This is the central thesis of the "Gold Bug" paradigm; these folks all believe Gold is going to go to $1500 (or more) in the next year, and they urge you to buy some as a result.

The problem is that if their thesis is correct they're total idiots to buy Gold!

Here's why.

Let's say that the dollar is debased by 50% from here and Gold doubles in price (in dollars.) You make 100%, right? Wrong - you are subject to a 28% collectibles tax on the appreciation, so you in fact lose compared to inflation. Congratulations - you lost real purchasing power!

That isn't so good.

Well, what could you do if you believe that the government will "hyperinflate" that would stay ahead of it?

In a hyperinflation paradigm where the rest of the world "does better than we do" stock markets will do a moonshot as foreign money comes in to buy all the "cheap" assets. The Dow will likely double if the dollar gets cut in half. But let's say it doesn't double - it only goes up by 30%, to 20,000 by the end of the year in 2008.

Why would you not buy Index CALLs instead of Gold?

A LEAP January 2009 DIA $160 CALL was selling for $2.00 Friday (Bid x Ask at $1.94/$2.10).

Let's say you buy 100 of those contracts for $20,000 (each contract is 100 shares, so 100 x 100 x $2.00 = $20,000, plus commission of course)

If the Dow goes to 20,000 by the end of next year, your CALLs are worth $40 each! That is a 20x profit on your original investment; that $20,000 turns into $400,000!

Further, if the DOW DID double (ala China's Shanghai Market) your little $20,000 wager would turn into a staggering $1,400,000 in one year's time!

So tell me again - if you believe in "hyperinflation" - why do you want to buy the clear LOSER of an asset that metals represent, when you can buy index CALLs and, if your thesis is correct, you will make an absolute stinking FORTUNE!

(Of course if you're wrong and the DOW is under 16,000 by the end of the year, that $20,000 is totally flushed. That's the price of poker - but again - just how sure are you that "The Fed" is going to "hyperinflate"? And by the way, no, I don't think they are - in fact, I don't think they CAN.)

To those who go even further and are in “It’s the end of the world as we know it” camp, I will humbly suggest that you remove the tin from your hat. It not only isn’t now but also won’t be tomorrow.

America has faced Depressions in the past, and our nation has survived. Yes, I used the plural form of the word. Most think the 1930s was “Our Time”. Wrong. There is a long cycle in credit (typically 50-80 years) that is well-understood among those who study this stuff called the “Kondratiev Wave.” This economic theory posits that credit moves in long cycles, with the evils of “overexpansion” being repeated once the previous generation that experienced its effects are all (or mostly all) dead. America has gone through three of these cycles previously, and we are likely in “winter” of the fourth now.

The “winter” periods tend to be deflationary credit collapses.

==========================================


So, the bottom line is that if you REALLY are sold on the idea that the dollar is going to "collapse" and gold is going to the moon, there are market options you can buy which will make you a very, very wealthy person if this indeed comes to pass.

However, if you're wrong, you lose the entire amount that you have placed as a "bet" on this position.

So, again, how sure are you, dispassionately speaking?

John
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on May 19, 2010, 10:59:34 AM
templar223, the flaw in that analysis is that it assumes the general financial structure of world trade will remain intact.  That's entirely possible, and in such a case, I would agree that playing options that have exponential benefit with linear loss is a good move.

In a real SHTF scenario though, the whole market falls apart, but people will still need a commodity that is accepted universally in trade to purchase things they need and want.

Again, the primary function of gold is as a store of value.  The nominal gains it has made ever since it was $20/ounce up until 1933 to $1200/ounce now has not really made it more valuable.  It's just that the counting unit we're using (USD) have gotten smaller.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on May 19, 2010, 11:31:57 AM
Good point tamo42!
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on May 19, 2010, 12:04:16 PM
Recently I saw an interview where some CNBC brainless drone was asking Ron Paul about his faith in gold. She was yammering on about how Ron Paul had made these predictions about gold and the dollar since the '70s.
Ron Paul answered by saying something like, "Yea, I know. I foolishly began buying gold in the '70s when it was $35 dollars an ounce and now those same coins are selling for some $1200 an ounce, so I guess I look pretty silly."

So we can look at facts or we can go on believing a financial system based on fiat (aka, faith) will keep working forever.
There's a reason they USED to call it "cold hard cash". That's because cash used to be cold and hard. The dollar is neither. It is faith based financing.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Cowtown44 on May 19, 2010, 12:33:27 PM
Thanks for the advice tamo42.  Your strategy is a good one. 

I assume what you mean is that you are using options to execute a vertical (credit) spread, whereby you sell an OTM (out of the money) option with a strike possibly close to the current share price, and simultaneously buy an option at a strike further away having the same expiration date.  You thus have a net credit to your account.

Unfortunately, I can't execute these types of option strategies in my cash IRA, which is not allowed to be a margined account.  About all I can do with options is buy calls and puts, and execute covered calls.  I actually tested my account one day by trying to do a spread, but the order was rejected (as I knew it would be). I'm not quite sure if not allowing a credit spread in a cash account is a function of this particular broker, or an SEC regulation.

Given these limitations, I am pretty much just sticking with basic trend following techniques using both long and inverse ETFs.  I manage risk by setting initial stops and position sizing based on maximum loss of 1 or 2% of my account in any one trade. Sometimes I might risk more if the conditions and expected return justify it.  I figured I'm getting additional security from trading relatively high volume ETFs (as opposed to single stocks), which are not as likely to have large overnight gaps due to bad news.

If you have any ideas on how I can do this better, given these limitations, I'm listening.

wdrobins,

Where did you get your education to set up this system? I'm returning back to running our portfolio after a 10 yr absence. I have traded options in the past so I'm familiar with that part. Thanks.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: bkt on May 19, 2010, 01:59:29 PM
templar223, the flaw in that analysis is that it assumes the general financial structure of world trade will remain intact.  That's entirely possible, and in such a case, I would agree that playing options that have exponential benefit with linear loss is a good move.

In a real SHTF scenario though, the whole market falls apart, but people will still need a commodity that is accepted universally in trade to purchase things they need and want.

Again, the primary function of gold is as a store of value.  The nominal gains it has made ever since it was $20/ounce up until 1933 to $1200/ounce now has not really made it more valuable.  It's just that the counting unit we're using (USD) have gotten smaller.
Yes, exactly right.

Buying gold or silver is not done (by me, anyway) in anticipation of cashing them in again later.

If there is no SHTF scenario then hey -- I've got gold and silver to pass on to my kids. That doesn't suck.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Pathfinder on May 19, 2010, 02:34:09 PM
Recently I saw an interview where some CNBC brainless drone was asking Ron Paul about his faith in gold. She was yammering on about how Ron Paul had made these predictions about gold and the dollar since the '70s.
Ron Paul answered by saying something like, "Yea, I know. I foolishly began buying gold in the '70s when it was $35 dollars an ounce and now those same coins are selling for some $1200 an ounce, so I guess I look pretty silly."

So we can look at facts or we can go on believing a financial system based on fiat (aka, faith) will keep working forever.
There's a reason they USED to call it "cold hard cash". That's because cash used to be cold and hard. The dollar is neither. It is faith based financing.

Sorry - on a roll here. Last night I had to correct the 6 candidates for the 2 City Council positions that ours is not a democracy (as the HS senior (!!!) running for one of the positions announced - and the rest agreed), it is a constitutional republic. So, Hare, you're next.

Fiat does not mean faith, fides is Latin for "faith". Fiat means "is commanded" as in the US gummint commands us that the value of the dollar is X, rather than the value being tied to some standard.

I think the confusion comes in with the phrase "full faith and credit of the US gummint" when talking about backings for t-bills etc.

Just trying to be helpful . . .    ;D
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on May 19, 2010, 02:39:39 PM
Well, Pathfinder, I didn't intent to infer that to be a direct Latin translation, although I could get particular and point out both words come from the same root.
To understand not only the meaning of fiat currency but to also understand my statement above, I would recommend this thread.
http://thesurvivalpodcast.com/forum/index.php?topic=14938.0 (http://thesurvivalpodcast.com/forum/index.php?topic=14938.0)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on May 19, 2010, 02:56:30 PM
Cowtown44,

Is your question about how I do the trend following strategy, coupled with risk management?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on May 26, 2010, 07:22:38 PM
Ramsey is an optimist with a financial education and makes the fallacy of relying on past history to predict future performance.
Prior to 2001 you could say it is impossible for terrorist to fly two jumbo jets into the world trade center, it has never happened.

The US economy is a mere blip in history, slightly more than 200 years. It has never failed, but that doesn't mean it can't.
BUT I do believe gold is a terrible investment, why? because it provides no output. Same as most so-called growth stocks.

I want my investments to produce something for me, generally that something is cash flow, but I will accept real output or
even avoided cost. To me real investments produce, generally in a short period of time if not immeadiately. IF you have
to rely in the value increasing you are speculating in my mind. IF you buy a business you should expect cash flow in the form
of dividends on owners draws, etc. This goes for a small business, real estate, or even a stock.

Gold to me is a hedge. A valuable hedge like silver, but I would not consider it an investment. It is either a hedge or speculation.

For me I don't like to speculation so its a hedge. Next year when my income goes up, I plan to try and buy either 25 ounces of silver or
1/2ounce of gold a month (since the historical average cost ratio is about 25:1) If it goes down I may buy more
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: beachwalker on June 04, 2010, 05:07:22 PM
My feelings are these. Gold/silver is an awefully big egg in a single basket. Certainly a consideration but I'm not comfortable owning substantail amounts.

As far as Dave... I love Dave but he is clueless. He preaches to give every dollar a name, save money, and use common sense until it's time to invest. Then Dave's investment advice consists of paying a broker 5% sales load for an "easy" 12% return.

Very contradictory IMHO... and it's because he gets paid to push these brokerage products.

The risk involved to achieve 12% is severe.





Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on June 05, 2010, 07:56:06 AM
Quote
Then Dave's investment advice consists of paying a broker 5% sales load for an "easy" 12% return.

beachwalker,

I'm curious to know where the 5% load and 12% return numbers come from.  I have to admit I haven't been following Dave Ramsey.  Are these numbers that Dave Ramsey is using to convince people to invest according to his "classical" methodology?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on June 05, 2010, 01:11:01 PM
wdrobins, you're right that I use vertical OTM credit spreads.  The limitations on your account are due to your broker, not the SEC.  I do these trades in Roth IRAs all the time (using optionsXpress as a broker).  Granted, you do need to have margin enabled to short anything even though you don't use the margin for the trade.

I want to add a second for optionsxpress as a broker. I have used them and love them.

I currently have my money tied up elsewhere and am saving for a relocation but will go back to them.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on June 05, 2010, 01:19:05 PM
chrisdfw (or anyone else),

I suppose we're getting a little off topic here, but do you have any experience with Interactive Brokers.  I believe their rates are better than optionsXpress?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: beachwalker on June 05, 2010, 02:30:51 PM
Give kudos to Dave Ramsey for getting people out of debt. He gives very sound advice.

But when he says to invest thru his ELP's it seems an inherent conflict in interest.

Why not tell people to simply invest the most cost efficient manner via index funds?

Why not tell people to find a fee based advisor?

He gets a check for any referral sent to his ELP.

The American Family of funds which the ELP/broker directs the referral to invest charge any number of front end or back loads which go to the ELP/broker... every time he tells you to change investments he gets a fat cut.

A broker has no fiduciary duty to their clients, and that is why the bad ones give the good ones a bad name.

A fee based investment advisor does have a fiduciary responsibility and is probably closer to the heart of a teacher that Dave tells investors to seek. Yes they make 1% or a little more off the top but they are far better than a broker IMHO.

Just my 2 cents



Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on June 05, 2010, 07:56:36 PM
I also give Dave Ramsey big kudos for helping people get out of debt.  In addition, he is given big time kudos for learning from his mistakes, getting off his back end, and starting his own business as an entrepreneur - something that most people under the same circumstances would not have done.  Anyone who can make millions just giving common sense advice is to be admired.  We should all learn from these types of people.  It has been said that you should not give advice on how a man should run his business unless you are making a lot more money than he.  This is good advice, but at the same time we don't leave our brains on the door mat either.

I personally don't put much faith in Ramsey's long term investment advice aimed at the masses.  Most other financial advisers (fee-only or not) act according to the same set of basic assumptions about long term investing, of which I find flawed.  Therefore, as a somewhat free American, I willing choose to actively manage my own money.  One day, when I get some time, I intend to write an article proving mathematically why most financial counselor investment techniques are not optimal.  But, in the mean time, I am perfectly happy not conforming to the average statistic.  I am what you might call an outlier on the bell curve.  ;)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RightArmOfWyoming on July 02, 2010, 01:15:52 PM
I've heard Ramsey say he stockpiles ammo instead. Not for protection (!) but to use as ammo. Boston T. Party makes the same recommendation, but also recommends it for protection, and also recommends gold.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: hanzel on July 18, 2010, 02:39:49 PM

The US economy is a mere blip in history, slightly more than 200 years. It has never failed, but that doesn't mean it can't.
BUT I do believe gold is a terrible investment, why? because it provides no output. Same as most so-called growth stocks.


You forget the first US currency, the Continental, did fail, that is why the Constitution mandated the only Gold and Silver could be money.  You are correct that gold ( and silver ) provides no output, that is because it is not an investment, it is money.  You take money and invest it into something in the hope that you will get more money back. The Federal Reserve has spend almost 100 years trying to convince us that debt is money and gold and silver are some sort of investment instead of the truth, it is the Federal Reserve Note that is the investment ( a debt based note ).
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RationalHusker on July 29, 2010, 11:31:02 AM
I listened to maybe 20 or so Dave Ramsey podcasts, and stopped after I heard his opinion on gold.  He dispenses good advice to his callers, but the message gets repetitive after a while.  Physical gold is a store of value, a hedge, an insurance policy, it is "cash" under the mattress.....  what it is not is an investment.


Here's what Dave Ramsey had to say about Peter Schiff (and his father, Irwin).  In hindsight, this makes Ramsey look a little silly.  But like most, I do appreciate his message about debt. 

Dave Ramsey calls Peter Schiff an idiot (http://www.youtube.com/watch?v=S98_eMax9xo#normal)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: dudekrtr on July 29, 2010, 10:15:02 PM
It's really too bad that such a presumably gifted financial writer, or, more accurately, performer, is losing so much money for his followers. Since he can't really argue his points, he has to twist what the other person is saying and call him an idiot. The stock market can certainly crash to 6000, or 4500, or even 1000; but, sure, it IS literally impossible for it to go to zero. Schiff never said anything like that. Since those who have taken his advice have lost so much already, while Schiff's followers have not only preserved their wealth (which is the purpose of gold, it's not an " investment" like Ramsey and his ilk insist on calling it. An "investment" would be, for example , a gold MINE. Why is it so hard to get the "experts" to understand something so simple? Or, do they really understand and just can't say what the truth really is without losing their sponsors?), they have managed a 20 or 30 percent gain in the same time frame.

It pretty much comes down to the bankster gangsters having yet another shill to get folks to part with their hard-earned money for some investment vehicle, headed down the wrong way on a one-way street. The bankers win, Joe Lunchbucket loses. Again. Fight back, Joe; get some gold and silver.

Hey, maybe Dave can run for the Senate, too, and he and Peter can duke it out on the Senate floor.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on July 30, 2010, 09:09:31 AM
Here is Dave's advice:

"Put your retirement money in growth stock mutual funds with a track record of at least five years of consistent returns (12% average). Divide your portfolio equally among growth, growth and income, international and aggressive growth funds."

I did a quick search at Fidelity on no-load mutual funds, which included non-Fidelity funds, for returns averaging 15% or less.  I then sorted the search results by 5 year and 10 year returns, highest to lowest.  Guess what.  All funds having at least 12% on a 5 year basis were PRECIOUS METALS funds and foreign emerging markets type funds.  If you sort on a 10 year basis, the only fund that achieved a 12% return that was not totally specialty focused and contained a significant percentage of U.S. stocks was the Yacktman Focused fund (which does not meet Dave's 5 year requirement) with the following results:

YTD: -4.77%  1 Yr: 20.06%  3 Yr: 5.88%  5 Yr: 7.26%  10 Yr: 12.49%

If you try to construct a portfolio of a mixture of growth, growth and income, and international and aggressive growth funds, I doubt very seriously that you will come up with an historic average return of 12% based on 5 year returns, or even 10 year returns.  No matter how you construct a portfolio based on most financial liars advice, keep in mind that historic numbers "are not indicative of future results" as most financial small print is quick to point out.

Dave seems to be very trusting of the U.S. stock market and economy.  As I have heard him say, "Politicians come and go, but the markets will always be there."  In other words, what has always been, will always be.  This optimistic faith reminds me of the Roman Empire, where the leaders convinced themselves and the people that Rome was eternal.  It would always be there. 

In my opinion, Dave is trapped in a baby boomer time warp, where his assumptions are somewhat rose colored with regard to the economy.  Since the year 2000, we have entered an unprecedented time in American history on an economic front.  Globalization, the destruction of capitalism and free markets, toxic assets, and the threat of sovereign debt default, amongst other things, both here and abroad is taking us into uncharted waters.

I think it is time to quit listening to leaders who are paradigm deficient, and think mostly of their own interests.  The people who are going to survive are the ones who can think for themselves, use common sense, and follow the Boy Scout motto -- Be Prepared!
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Morgan96 on July 31, 2010, 06:13:47 AM
heard a Dave Ramsey show recently. Now he's pimping for goldstashforstash.com.   "Get rid of that useless gold, trade it in for (mostly green) paper coupons".

Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on August 03, 2010, 07:00:45 AM
Great video RationalHusker!
+1 for you!

Well worth the 9 minutes it takes to watch it.
Take special note of the part when Ramsey starts listing huge companies and says the only way the stock market could crash is if huge companies "closed their doors" at the same time the video shows huge companies that DID close. Then he talks about how the resignation of Nixon and the attack on 9/11 didn't bring on a crash. This indicates he has absolutely no idea what causes a stock market crash. He then says that we can't have a crash because our markets and our banking is structured differently than before the great depression and it can't crash now. At that point he is either intentionally lying to deceive people or he has no idea how the market works. There is no third choice.
Listen to what he says about gold. This was when gold was around $600 an ounce. Its running around $1200 an ounce right now. Again, either he doesn't understand that gold is not a commodity like corn, or he is lying.
If someone took Schiff's advice in January 2008 and dumped their stocks and bought gold, not only would that have saved their investment from being cut in half, they would have doubled their money.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Castle6 on September 08, 2010, 05:53:33 PM
I wrote this today before I found this thread.  Keeping in mind that gold is not an investment, but is instead a hedge, I have the following example to offer (especially for use with reluctant spouses on why hedging with gold (or silver, but I'm trying to keep this simple) makes sense even at current prices):


So I'm listening to my favorite "gold bug" radio show* this morning and it started me thinking about inflation and the declining purchasing power of the dollar.  I decided to jot down my thoughts to demonstrate the ravaging effects of inflation on the dollar compared to the literal "gold standard" and to address the "is gold heading for a bubble and crash" talk that's all the rage these days.  While I'm certainly not the first to address this topic in this fashion, I'm trying to do it in a "layman-friendly" and brief manner.

------
 
There have been a lot of "experts" talking lately about the rise in the price of gold and whether gold is in an "overvalued" situation.  You know, one of those dreaded "bubbles" we keep hearing about?  Well, let's take a quick look at the numbers and see how the experts' theory actually pans out.
 
Let's say you currently make $100,000 a year.  That sounds pretty good, doesn't it?   A lot more than your grandparents or maybe even your parents made.  But, just how much is that $100,000 worth in inflation-adjusted 1913 dollars (1913 being when the Federal Reserve was created and our "modern money" born)?
 
Adjusting out the last 97 years of inflation, your $100,000 salary today would have earned you $4,506 in 1913 dollars (according to the Federal Reserve**).  Sounds pretty good, especially since we all know that "everything was cheaper back then", right?  In 1913, gold and silver coins were still in common daily use by the average American.  You could take twenty $1 bills to the bank and walk out with a shiny new $20 US gold coin.  So, if you had been paid your $4,506 salary in $20 gold coins it worked out to 225 $20 gold coins for your 1913 salary. 
 
Today, those same $20 US gold coins are going for about $1,400 apiece***.  Multiply those 225 gold coins you earned in 1913 by $1,400 and you get $315,000.  So, in gold terms, you currently earn 32% of what you would have earned in 1913 ($100,000/$315,000).  Or, to put it another way, $68,254 of your current $100,000 salary has vanished into the thin air of inflation, leaving you with only $31,746 in inflation-adjusted salary. And that's before taxes take a third or more of that amount.  How's that $100,000 salary paid in federal reserve notes holding up now?
 
And the "experts" say gold is "overvalued", headed for a "bubble" and not worth spending your "real money" on....  You come to your own conclusions.  Then act on them.

Semper Gumby,
Castle6
 
 
References:
*     http://patriotarchives.blogspot.com/ (http://patriotarchives.blogspot.com/)
**   http://www.minneapolisfed.org/ (http://www.minneapolisfed.org/)
*** http://www.apmex.com/Category/227/2000_Double_Eagles_Saint_Gaudens_1907_1933.aspx (http://www.apmex.com/Category/227/2000_Double_Eagles_Saint_Gaudens_1907_1933.aspx)
 
 
© All rights reserved by Castle6.  No distribution without attribution.   :P
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on September 08, 2010, 08:34:32 PM
^ I think you just made the argument that gold is overvalued. If Gold has maintained its value and not shot up, if you converted your 4506 to gold and then took it forward to present and converted back to gold, then you should get exactly 100,000.

Your argument supports the fact that gold has shot up faster than inflation and therefore might be in a bubble. You are saying gold is good
because it had a great run up since 1913. That is akin to saying tech stocks were a great deal in 1999 because they performed so good for the
last 10 years.

I don't know if gold is overvalued or not. But your argument makes the case that it is overvalued. if your 1913 equivalent salary converted to gold and then back to cash in the present time was undervalued the gold would be worth less than 100,000. If that was the case I would be a buyer again. I was a buyer around 380/ounce.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Mr. Bill on September 09, 2010, 10:26:08 AM
...Your argument supports the fact that gold has shot up faster than inflation and therefore might be in a bubble. ...

Either that, or it supports the official inflation statistics being way too low.  Hard to know which is true -- both, would be my guess.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on September 09, 2010, 04:38:32 PM
Either that, or it supports the official inflation statistics being way too low.  Hard to know which is true -- both, would be my guess.


True, but since he used it to deflate the income it is a relevant measure for comparison when you reinflate the gold prices. As long
as you use it for both sides it doesn't really affect my argument.

But I actually think the inflation measures are all wrong, but not because they are too low, because they include things that didn't exist
when they started. We think that we need a computer now. We think we need a phone, you can't compare the cost of those things
because they didn't even exist then. If you look only at the cost of living, that would be a fair comparison.

Good job picking up on the issue though.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: endurance on September 09, 2010, 04:48:56 PM
Why is it that the CPI, the primary number that the government uses to measure inflation, fails to account for the two things you really don't have a choice in buying (food and energy)?  Easy, if the CPI were an accurate measure of inflation, they're have to pay more interest on Government bonds, particularly on TIPS (treasury inflation protected securities).  They want the number to lie so they can inflate at a greater rate than they have to pay on the interest.  It's a brilliant scam, but if you tried it in the private sector you'd be arrested for fraud.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on September 09, 2010, 05:00:10 PM
Don't forget inflation adjusted social security payments.  Yes, the gov is heavily incentivized  ( by itself ) to downplay inflation
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Castle6 on September 09, 2010, 11:00:40 PM
Apparently in my desire to be brief I failed to flesh out my example sufficiently.

If $1.5 trillion dollars was created from the birth of our nation through 1980 (which it was), and that moved gold from the old pegged price of $35 to $850 per ounce, what will the price of gold be once we wake up and take into account the $12 trillion dollars we created between 1980 and 2008, or the additional $10+ trillion dollars we've created in 2009 and 2010?  The more they dilute the currency, the higher gold has to go to keep up with it.  

My main point is that if you held paper dollars all this time, you'd only have 1/3 the value you would have if you had put those paper dollars into gold.  In short: Gold holds its value over time, paper money does not.  To hedge the loss of the value of paper dollars due to inflation, buy gold.  People are realizing these things and bidding gold higher.  Unless the Fed stops printing dollars, this trend is likely to continue.

Also, I agree that the inflation numbers put out by the Gov't are pure BS.  "Core" inflation doesn't include food and energy.  Sure, take out the 2 things we all use every day so we don't see the real effects.  No, I never eat or drive so I shouldn't be worried about those prices.   ::)

PS - If you think your gold is overvalued, I'll be glad to buy it from you at the old historic pegged price of $35.  I'll buy up to 300 ounces at that price.  Drop me a PM so we can make arrangements.   :P
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on September 10, 2010, 08:43:39 AM
PS - If you think your gold is overvalued, I'll be glad to buy it from you at the old historic pegged price of $35.  I'll buy up to 300 ounces at that price.  Drop me a PM so we can make arrangements.   :P

I'd buy it at that price too.... I was a buyer at $380, seller at $850. I'd buy all that is available at $35, to sell at current market immeadiately. I'd buy it at $1100 to immeadiately sell at $1200, but that doesn't mean I don't think it is over-valued. :)

Gold has been a great investment compared to paper, but nobody would hold paper, it would be invested in something. Even Bonds have had an incredible bull market over the last 30 years. Which makes them over-valued in my opinion, but we might have deflation and that means the bull market
in bonds could continue for a while, and gold could fall. Or inflation and gold could rise and bonds could fall. I just don't know. 2-3 years from now if we haven't had deflation it will become clear whether gold is the way to go or not. Eventually gold should be a good investment, but if it falls in half between now and then, I would prefer to hold twice as much. What happends between now and then is important for people like me that aren't wealthy.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Castle6 on September 10, 2010, 09:14:54 PM
Not intended to "seal the deal", but check out this chart:

(http://www.marketoracle.co.uk/images/2010/Sep/GoldMonthlySpotSept32010.jpg)

http://www.netdania.com/Products/live-streaming-currency-exchange-rates/real-time-forex-charts/FinanceChart.aspx (http://www.netdania.com/Products/live-streaming-currency-exchange-rates/real-time-forex-charts/FinanceChart.aspx)

The parallel price channel must also be determined by human interaction. What we are trying to do is the LEAST ARBITRARY thing for our analysis. ...

Edited due to copyright issues -- please see here (http://thesurvivalpodcast.com/forum/index.php?topic=20714.0) for Fair Use info.  See following post for article link.

So, in summary:  You can say that gold is either overvalued or undervalued.  Take your pick.  With the gummint printing money faster than at any time in our country's history, I'm betting on undervalued.  I've put my money where my keyboard is.  What you do depends upon what you believe.  I'm not psychic nor did I stay at a Holiday Inn Express last night so I can't for sure what's next.  But I've made my decision.  Time for you to make yours.   Either way, if one or both of us is wrong..... don't sue me.   ;D



Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Castle6 on September 10, 2010, 09:24:55 PM
Forgot to attach the attribution to the above post.  It's from: http://www.marketoracle.co.uk/Article22435.html (http://www.marketoracle.co.uk/Article22435.html)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: tamo42 on September 10, 2010, 10:12:19 PM
If you a going to do long term charting that covers a wide variety of prices, it should be in semi log format.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on September 11, 2010, 12:36:47 AM

So, in summary:  You can say that gold is either overvalued or undervalued.  Take your pick.  With the gummint printing money faster than at any time in our country's history, I'm betting on undervalued.  I've put my money where my keyboard is.  What you do depends upon what you believe.  I'm not psychic nor did I stay at a Holiday Inn Express last night so I can't for sure what's next.  But I've made my decision.  Time for you to make yours.   Either way, if one or both of us is wrong..... don't sue me.   ;D

Its all matter of when not if, I am sure at some time gold will be lower and at some time gold will be higher. Everyone will be right eventually I bet.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Castle6 on September 11, 2010, 01:54:11 PM
If you a going to do long term charting that covers a wide variety of prices, it should be in semi log format.

Feel free to tell Robert Prechter.  It's his chart and analysis that I posted (and gave attribution to).  Since the excerpt I posted has been pulled by the moderators, here is the link to the full article:  http://www.marketoracle.co.uk/Article22435.html (http://www.marketoracle.co.uk/Article22435.html)

Snip from Wikipedia:  In 1979 Prechter left Merrill Lynch and published the first subscription issue of the Elliott Wave Theorist. The 1970s had been very bullish years in the gold market but mostly bearish for stocks, yet his Elliott wave analysis called for a long-term reversal lower in gold (February 1980) and a long-term "super bull market underway" in stocks (October 1982). Because these forecasts proved mostly correct—especially for the stock indexes—Prechter's following grew.   

http://en.wikipedia.org/wiki/Robert_Prechter (http://en.wikipedia.org/wiki/Robert_Prechter)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hraz on September 29, 2010, 01:19:01 PM
Wow, this post is almost a year old now. I wonder if Dave is still against gold? I haven't listened to him in a long time.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: LJH on September 29, 2010, 01:37:17 PM
Wow, this post is almost a year old now. I wonder if Dave is still against gold? I haven't listened to him in a long time.

Yup, he's still railing against gold as an investment but I can't help but think that, even though he would never admit it, he wishes he'd put some $$ in gold a few years ago and could cash it out now. He says he's buying up real estate as fast as he can right now while prices are so low, also still in the market big-time.

I like listening to his podcasts and have learned a lot from them. His basics are sound; you can't go wrong getting out of debt and living below your means, but I look at the house he just built and wonder if even he could maintain such a spread in the event of a total crash. Sure, it's paid for, but hell, just heating and cooling that place probably takes more money than I make in a year. And having thousands of rental units won't do you much good if half your tenants can't pay the rent. In a worst-case scenario I think Jack and a bunch of the rest of us will be better off than Dave.


http://virtualglobetrotting.com/map/dave-ramseys-house-1/ (http://virtualglobetrotting.com/map/dave-ramseys-house-1/)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: endurance on September 29, 2010, 04:18:15 PM
I like listening to his podcasts and have learned a lot from them. His basics are sound; you can't go wrong getting out of debt and living below your means, but I look at the house he just built and wonder if even he could maintain such a spread in the event of a total crash. Sure, it's paid for, but hell, just heating and cooling that place probably takes more money than I make in a year. And having thousands of rental units won't do you much good if half your tenants can't pay the rent. In a worst-case scenario I think Jack and a bunch of the rest of us will be better off than Dave.
Good lord, what a rediculous spread!  I checked the history for my new little place.  Highest gas bill in the last 5 years: $240 Highest electric bill in the last 5 years $110.  That's with single pane windows, 1.5 inches of vermiculite insulation (probably R10), and doors that don't even close properly, but that's what you get with 891 square feet to heat.  With the new high efficiency boiler, on demand hot water heater, R60 blown in insulation, new windows and new doors, and wood stove that I plan on putting in, I'll be surprised if I ever get over $100 combined.  Square footage is incredibly expensive, now and later, whether it's paid for or not. 

I'm glad Dave has done well.  He's done a great deal to help a lot of people, but a prepper, he is not!
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RationalHusker on October 02, 2010, 01:59:34 PM
I thought I'd expand on Jack's original analysis in some more detail.  Jack calculated the return on the investment by putting in $10,000 at the beginning of each decade.  I went through and dollar-cost averaged on a monthly basis.  I'm not trying to show whether or not gold is currently overvalued.  Just showing how it's "performed" as an investment since January, 1975 (roughly 4 years after any kind of gold backing was removed from the dollar).  I thought it was appropriate to start in 1975 because by that time the impact of a former gold-dollar tie was completely unwound.  My methodology was as follows:

I assumed that an "investor" bought $100 worth of gold at the closing price (US dollars) on the first day of each month since January 1975.  In other words, I dollar-cost averaged $100 per month, regardless of gold or stock prices, on the first day of the month for 35 years.  I did the same thing for the DOW, assuming our hypothetical "investor" bought 100 shares of the DOW at the closing price on the first day of each month since 1975.  The only thing that's unrealistic about this is that it's likley that a real investor would increase the amount of his/her investment, in dollars, over time.  It seems to me that since the past 10 years have obviously favored gold, that would benefit our gold investor, not our DOW investor.

If our investors both started on January 1, 1975, our investors would have accumulated the following number of dollars invested, ounces (gold) or shares (DOW), and total worth (price of ounces/shares in US dollars) by each of the following dates:

By January 1, 1980:
The gold investor has invested $6,000, owns 35.85 oz of gold, and his/her gold is worth $20,058.  The DOW investor also invested $6k, owns 7.01 shares of the DOW, but his/her shares are only worth $5,875.73.  The DOW investors actually lost $124.27 in this 5 year period.  Most people know this was a very good period for gold, so this should be no surprise.

By January 1, 1985:
By this time the 1980 gold bubble had deflated.  The investors had both invested $12,000.  The gold investor owned 49.92 oz of gold.  His/her gold was worth $15,249.10.  The DOW investor owned 13.07 shares that were worth a total of $15,830.86.  So from 1975 to 1985, the investor that dollar-cost averaged into the DOW had accumulated about $580 more than the gold investor

By January 1, 1990:
We know the mid to late 80s included a very good stock market run, so it should be of no surprise that by 1990, the DOW investor had outperformed the gold investor with their $18,000 of investments to date.  The gold investor has 65.69 oz of gold worth $26,210.54.  The DOW investor has 16.26 shares worth $44,763.46.  From 1975 to 1990, the DOW investor has increased his/her wealth 1.7 times more than the gold bug.

By January 1, 2000:
This period includes the dot com tech bubble and a very depressed period for gold.  The gold investor has invested $30,000 in 100.32 shares of gold worth a total of $28,293.95.  The DOW investor has turned his $30,000 into 19.06 shares of the DOW worth $219,177.73.  Very impressive for the DOW.

By October 1, 2010:
This is essentially where we are today, after 35 years of dollar-cost averaging.  The gold investor has accumulated 129.2 oz of gold at $1316.25.  His total amount invested would have been $43,000  His gold would be worth a total of $170,054.  Our DOW investor would have also invested $43,000, and his 20.32 accumulated shares would be worth a total of $160, 528.94.  Gold wins for the long term investor!

What if you haven't been investing since 1975?  Next I'll compare how our two hypothetical investors would have done through October 1, 2010, if they'd started investing at various starting points.

Started investing on January 1, 1980:
Let's say you got in right about the peak of the gold bubble in 1980 and kept on dollar-costing up to the present.  The gold investor would have 93.35 shares of gold worth a total of $122, 866.94.  The DOW investor would have 13.31 shares worth a total of $143, 664.47.  The DOW investor wins here, which isn't surprising since the gold but started buying in at the peak and the stock investor got in when stocks had experienced a major downturn in the mid-late 1970s.

Started investing on January 1, 1985:
Gold Guru has 79.28 ounces worth a total of $104, 353.43.  Dr. DOW has 7.25 ounces worth $78,268.15.  Both did well with their $31,000 of investments, but Gold Guru is much better off.

Started investing on January 1, 1995:
Gold Guru owns 47.09 ounces worth $61,983.94.  Dr. DOW owns 2.17 shares worth only $23,451.13. 

Started investing on January 1, 2000:
The gold investor owns 28.88 ounces worth $38,014.23.  The DOW investor owns 1.26 shares worth $13,643.54 - nearly 3 times less than the gold investor. 

Conclusions:
Pretty much the same as Jack.  Unless you started buying one or the other at a major peak, it's hard to say which has been better.  But for the last 35 years you can say gold has outperformed the DOW index.  I have a coworker with an MBA that was just regurgitating something one of his elite profs said...basically that over any prolonged period, stocks have outperformed any other investment.  This guy also said commodities in general were poor long term investments.  My take is any recognized investment is a good one if you buy and sell at the right time.  If you're not a trader but invest for the long haul, just don't sell at a low if you don't have to, and odds are it will come back.  Of course, like many on this board, my thoughts about the viability of our current economy and currency make this a bit more complicated.  The most bitter thing for me?  I started investing in 2001, and thought it was great that stocks were "on sale" with the recession and 911.  I knew nothing of gold.  Somebody tipped me off to gold investing in 2003, but I didn' listen.  Wow, if I had even invested just 20% of my saving in gold I'd be sitting very well today.  Hindsight is always so painfully clear, isn't it? 

My gold price info came from www.kitco.com (http://www.kitco.com), and the DOW prices are widely available.  If anybody is really interested in this analysis, let me know and I'll email you my Excel spreadsheet so you can review or manipulate the data further. 
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Mr. Bill on October 02, 2010, 09:30:08 PM
I thought I'd expand on Jack's original analysis in some more detail. ...

Excellent post!  Thank you. :)

I do think a key issue is that, as of 2010, gold has (depending on your viewpoint) returned to a rational price, or been driven up by an investment bubble.  Whatever the reason, gold is valuable now, and it was way less valuable (and dropping) for a very long period after 1980.  If you redid your analysis with, say, 2000 as the endpoint, gold wouldn't look so good.

I'm not meaning to criticise either your analysis or gold.  But I do think that there's no single way to store your wealth that is reliable under all circumstances.

Thank you for giving me an excuse to recommend DIVERSIFYING YOUR INVESTMENTS -- I have to post something about that every few months, otherwise I feel I'm not doing my duty here. ;D

"Markets can remain irrational a lot longer than you and I can remain solvent."  (Attributed to Keynes -- possibly one of the few things he got right, along with his famous last words "I should have drunk more champagne.")
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RationalHusker on October 03, 2010, 06:23:20 AM
Mr. Bill,

You're absolutley correct!  I thought about that, but figured my post was already too long and I had already spent too much time on it.  Timing is important, and timing doesn't necessarily mean trading on a short term basis.  Just undestanding the rationale behind allocation (i.e., diversification).  I read and respect a lot of experts that are 75-100% into gold and silver assets, be it bulion or mining shares.  That's just to big a gamble for me.  I'd still feel better about that than the 75%+ I had in U.S. stocks 3 years ago, but you just never know what the currency manipulators...er, I mean, managers...are going to do.  If there is an allout currency war and race to devalue, the extreme gold bugs will come out better than anybody else.  But they could be wrong, too.  Thanks for your comments.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on October 03, 2010, 12:23:25 PM
But I do think that there's no single way to store your wealth that is reliable under all circumstances.
.....
"Markets can remain irrational a lot longer than you and I can remain solvent."  (Attributed to Keynes -- possibly one of the few things he got right, along with his famous last words "I should have drunk more champagne.")
Approximate percentages for new investment
25% in cash
25% in silver
50% in businesses that cash flow - Here is what I mean by this. I am investing money back into my own business, but also setting aside cash to invest in others businesses and rental real estate (I like real estate at current prices as it has two components, the cash flow from rent, and the asset)
I am not currently putting anything into the stock market, but may in the future.
I have invested in the stock market in the past and may again, the point is that this changes. There have been points where I was as much as 75% into the stock market, and as much as 50% into gold (loved gold at 380 per ounce)




I think these three things about say it all.
What works on one period will not work at all times and in all places.
Don't second guess the markets, you can get bankrupted before being proved right.
We should have more fun.. because we will all die.

Here is what I am doing with my money right now: (your mileage may vary)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: endurance on October 04, 2010, 01:19:04 PM
Thank you for giving me an excuse to recommend DIVERSIFYING YOUR INVESTMENTS -- I have to post something about that every few months, otherwise I feel I'm not doing my duty here. ;D
My latest form of diversification is destined to yield close to 200% per year after taxes.  I just had new insulation put in my attic, upgrading from R14 to R60 (mountain property).  It cost $840.  The local utility company will give me a 20% rebate.  The state will give me a 40% rebate.  I get to write off 30% on my federal income tax.  After that, I'll save roughly $10-20/month in heating and cooling costs for the next 20 years.  Now that's a better investment than gold!

I think that if I've learned anything from Jack and the forum it is that investments in the homestead is a great place to put your money and sweat equity to work.  If it saves you future expenses or produces something you need on a regular basis, in the end you'll get a great ROI.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: 2mommas on November 17, 2010, 11:04:36 PM
You can't eat Gold, and can't buy food if it is not available in the stores.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Taylor3006 on November 17, 2010, 11:44:51 PM
You can't eat Gold, and can't buy food if it is not available in the stores.

Not sure what kind of preparedness minded individual would buy only gold and not storage food but my guess is that they would deserve to starve to death for sheer stupidity's sake. On the flip side, I paid for a root canal with a 1/2 oz gold eagle that had cost me about $190 back a few years ago. How many chickens, or beans, or pounds of rice would you have to pay the dentist for a similar procedure considering the bill was close to $700? Could you imagine having to pay for an emergency appendectomy with storage food?

Financial preparedness is more than having food and toilet paper put away for when the shelves are empty. It is also about being able to pay for services or items you can not store away in mylar bags and buckets. There is nothing wrong with putting your money in metals after you have put up everything else you may need, pretty damn silly not to IMHO.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: LvsChant on November 18, 2010, 06:41:19 AM
good point, taylor! I love the bartering idea... good "when times get rough, or even if they don't"
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on November 18, 2010, 09:41:36 AM
You can't eat Gold, and can't buy food if it is not available in the stores.
You can't eat that extra 5 gal. of gas in the garage.
You can't eat $2000 in emergency cash you have in the fire proof box, especially after it gets devalued by the fed and a loaf of bread is selling for $1.2 trillion.
You can't eat the stack of fire wood you have to back up your main home heating.
You can't eat the extra blankets you put in the trunk of your car.
You can't eat a box of ammo.
You can't eat a solar panel.
You can't eat the extra lock you put on your front door to secure it.

Each different thing we do is for a different purpose.
We buy and save precious metals, not because anyone thinks you can eat them, but because they hold their value no matter what happens. Its been that way for at least 5000 years that we know of. There's no logical reason to think things will change.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on November 18, 2010, 11:12:22 AM
Good point, Hare of Caerbannog!
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: LJH on November 28, 2010, 03:04:28 PM
Just as I suspected, I could almost live on what Dave Ramsey paids for his monthly utilities! The phrase "If ya got it, flaunt it!" comes to mind. And no mortgage either.

Personally, I think the place is hideous and if I had that kind of money I'd keep my snug little house and buy up all the surrounding land (and a new tractor), but if that monstrosity is what floats his boat, more power to him.

http://www.coolsprings.com/news/dave-ramseys-house/ (http://www.coolsprings.com/news/dave-ramseys-house/)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: endurance on November 28, 2010, 06:33:20 PM
Just as I suspected, I could almost live on what Dave Ramsey paids for his monthly utilities! The phrase "If ya got it, flaunt it!" comes to mind. And no mortgage either.

Personally, I think the place is hideous and if I had that kind of money I'd keep my snug little house and buy up all the surrounding land (and a new tractor), but if that monstrosity is what floats his boat, more power to him.

http://www.coolsprings.com/news/dave-ramseys-house/ (http://www.coolsprings.com/news/dave-ramseys-house/)
"We checked with Middle Tennessee Electric and for the last 12 months, the average monthly electric bill at Dave Ramsey’s house was $1,285 per month."
Errrm, seems like it might be time to spend a little money on a few solar panels.  Actually, he probably doesn't have enough south facing roof for an electric bill that sized.  I just don't get it.  My electric bill last month was $26 with another $12 on natural gas (prior to the onset of winter).
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: wdrobins on November 29, 2010, 02:19:34 PM
That's quite phenomenal.  Of course Dave can do whatever he wants with his money.  But, for some reason, I just didn't picture Dave as being quite that lavish of a person, regardless of whether he can afford or not.  I guess if I had that kind of money, that certainly wouldn't be the way I would spend it.  But that's just me.  I wonder if he will have maids and butlers to care for the place?  I can't imagine his wife cleaning the house.  :)

For some reason, I have this silly notion that people who spend that lavishly are trying to make a statement or maybe impress someone other than themselves.  Maybe if I had that kind of money, my thinking about a lot of things would change.  But I can only speculate.  As the old saying goes (paraphrased), "Don't judge someone until you've walked in their shoes."
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: 2mommas on November 30, 2010, 12:11:24 AM
I was not knocking gold, at all.  The point I was making was that food should be number one prep, in the case of actual EMERGENCY.
I have talked to a lot of oldtimers who nearly starved during the depression.  I asked them, if they had to do it over again, what would they do?  They said food was best way to prep and then ammunition.  Having and flashing around gold would get you robbed/killed .  If  it was an actual situation ,  many times worse than Katrina.   Of course I understand that fuel, gold and many things are important   , and should be considered if you are capable.  If you don't have a lot of resources.  Food can be used for barter .  Doctors have to eat too.   The only point I was trying to make is that Food is one barter item that everyone needs.   I guess I have heard too many starvation stories about eating dried peas for months . ;)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Hare of Caerbannog on November 30, 2010, 06:20:08 AM
All prepping that we talk about on this forum is pretty much assuming what Jack has covered about a thousand times in his podcast, that is to set priorities according to the disaster matrix. First we try to have preps for a week, then two weeks, then a month, etc. Assuming a personal emergency is the most likely to strike, we prepare for that first, then we prep for a family level emergency, then neighborhood level, then community level, etc, etc.

As has been stated on this thread over and over, gold is a long term storage of wealth. Gold holds its value over the long haul.

...so, assuming you have ALREADY been prepping and ALREADY paid down or paid off your debt and are ALREADY comfortable with your food storage, gold, among other investments is a way to protect wealth LONG TERM. It is compact, can be easily hidden, easily transported, universally recognized, durable, and has held its value for the last 6000 years that we know of. That's about 5900 years longer than any fiat paper money that has ever existed.

No post on this thread that I have read advocated "flashing around gold". Additionally if people are starving and you are "flashing around" an apple and are unable to protect yourself, you could get killed.

As for the great depression, it lasted from 1929 until roughly 1945. Who has 16 years of food in storage? Who has room for 16 years of food storage? My mother and father lived through the great depression because they grew their own food, not because they had 16 years of food preps.

No one on this thread is saying to buy gold and do nothing else.

Anyone not sure about the content and intent of this thread should read the first post.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: metaforge on January 10, 2011, 04:09:06 PM
@RationalHusker - thanks for the great expanded analysis of the original post!  Very valuable as time averaged purchasing is more likely the way most of us invest rather than buying a large lump sum at some point and letting it ride.

Another main conclusion I draw from this is just legitimacy: that gold is a comparable place to put your wealth.  Always better than the DOW? No of course not.  But it's a legitimate peer that should be considered.  We seem to think so much of the gold bugs who say the DOW is garbage, buy gold, and wonder how accurate they are... but let's not forget that far outnumbering them are the "DOW bugs" of the mainstream investment industry who say gold is a useless barbaric relic, doesn't even pay interest/dividends, and that therefore the DOW is where it's at - the only game in town.

You analysis proves gold should be considered a 1st tier peer of the other places to park your wealth, not a bastard stepchild for kooks, crackpots, and conspiracy theorists as mainstream thinking would have us believe - and it proves Dave Ramsey wrong.

I really enjoyed this chart posted by APMEX, I think in it you can see the major economic storylines of the entire past decade.  It's too bad it doesn't show silver - if it did, we'd see silver up 6x over the past 10 years, compared with "only" 4.5x for gold.

(http://sphotos.ak.fbcdn.net/hphotos-ak-snc6/hs077.snc6/168784_482031475806_160528490806_6493676_5384129_n.jpg)

PS - you can't eat bonds or shares of stock either.  ;)
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Taylor3006 on January 10, 2011, 04:53:28 PM
I was not knocking gold, at all.  The point I was making was that food should be number one prep, in the case of actual EMERGENCY.
I have talked to a lot of oldtimers who nearly starved during the depression.  I asked them, if they had to do it over again, what would they do?  They said food was best way to prep and then ammunition.  Having and flashing around gold would get you robbed/killed .  If  it was an actual situation ,  many times worse than Katrina.   Of course I understand that fuel, gold and many things are important   , and should be considered if you are capable.  If you don't have a lot of resources.  Food can be used for barter .  Doctors have to eat too.   The only point I was trying to make is that Food is one barter item that everyone needs.   I guess I have heard too many starvation stories about eating dried peas for months . ;)


Just the opposite here, listened to the stories my folks and grandparents went on about during the Depression. No one went hungry, my family were all country folk who raised and hunted for their food. No starvation, but everyone complained that there was no money and no jobs to make any money. Ya couldn't see the doctor or dentist, you had to make due with old tires on the vehicles, getting car parts cost too much,  and replacing something or buying something new was almost unheard of. My grandmother complained most about getting clothing and shoes for her children. My father actually complained about food, not the lack of it but the lack of variety and the homemade clothing they had to wear. They ate venison, goat, and fish mostly. Chickens where considered a special meal and having beef for dinner was rarely seen (this was the hill country). In season you would eat whatever was available ALL THE TIME until it was all put up or gone. My grandpa also said about the only thing brand new that would ever get purchased was shoes, everything else was "preowned". He also said the "normal" people that did best (where he was) was the women who could sew decent looking clothing and the men who reload ammo.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RationalHusker on January 10, 2011, 07:08:37 PM
@metaforge:

I think you understand and articulated my point very well (in fact, we even used the same chart in trying to make this point to others).  Lots of people still trumpet stocks and dismiss metals (and most commodities) as relics and underperforming stock indices.  Case in point - check out the article my dad's financial advisor gave him when my father told him that I (his son) encouraged him to buy some gold/silver. 

Most humorous to me is that fact that it was written in Sep. 2007.  Gold and silver have so dramatically outperformed stocks since it's publication that this guy should have no credibility whatsoever (but probably manages hundreds of peoples savings).  Just another example of an "expert" being blinded by mainstream propaganda. 

Here is my response to my father after I read this article (I apologize for the sloppy nature of my response - it was a weekday and I had other things to do).


Article:  http://www.fool.com/investing/mutual-funds/2007/09/28/gold-vs-the-sp-500.aspx (http://www.fool.com/investing/mutual-funds/2007/09/28/gold-vs-the-sp-500.aspx)

My response:

I would like to ask the author of this article several questions:

1.  Why choose a 200 year time-frame?  Not even people on the Hallelujah diet live 200 years.

2.  Hmmm..I wonder why he would choose 2001 as last year in the comparison? Did you know that the S&P 500 Index was at 1,350 in January of 2001, and today it's at 1,276?  So in the last 10 years it's had a negative 5.5% return.  During the same 10-year span, gold has gone from $265 per ounce to over $1,400 per ounce.  The author purposely chose 2001 as the end of his 200 year period so as to ignore the last 10 years, where stocks have done horrible and gold has done extremely well.

3.  Why did he/she not mention that our money actually used to be gold or silver (i.e., not worthless paper)?  Even our paper money was backed by gold until 1971.  So before 1971, holding gold or silver was more similar to holding cash, so of course there wasn't as much gain as other investments.

Given the fact that we left the gold standard in 1971, the last 30-40 years would be a better time frame for a comparison than 200 years.  Look at the pictures I've attached.

The attachment titled "gold vs dollar since 2001" shows that since 2001, gold has gone up 125%, while the value of a dollar has declined 30%.
(http://i838.photobucket.com/albums/zz307/HuskerBucket/goldvsdollarsince2001.gif)

The attachment titled "SP and DOW vs. dollar since 2001" shows that while gold has gone up 125%, the S&P and DOW have risen a modest 15%.  But remember, the dollar has decreased 30% during that time, so if you invested $1 in the S&P in 2001, today you'd have $1.15, but it would only buy you what $0.85 would have bought you in 2001.  If you bought $1 worth of gold in 2001, today you'd have $2.25, and it would buy you what $1.58 would have bought in 2001.
(http://i838.photobucket.com/albums/zz307/HuskerBucket/SPandDOWvsdollarsince2001.gif)

The attachment called "Performance since 1977" shows the inflation-adjusted increase in four investments since 1977 (gold, real estate, oil, and the NASDAQ).  The NASDAQ is a stock index similar to the DOW and S&P.  Guess what?  From 1997 to today, gold has outpeformed oil, real estate, and stocks.  That's a 33-year period, which I would say is a pretty long-term period.  (Look familiar, metaforge?)
(http://i838.photobucket.com/albums/zz307/HuskerBucket/Performancesince1977.jpg)

I'm not saying that you should put all your money in gold or silver.  But you have to understand that when people write articles like this, it's likely that they sell mutual funds and are cherry-picking only the statistics that say what they want you to believe.  Some people that sell gold would do the same thing.  Bottom line is this:  Do you trust the stock market today?  It's much different than it was in 1970, with most of the trading being done by computer programs that manipulate stock prices and screw the little guy that can't use programs like that.  Second, do you trust your government and it's ability to not spend more than it takes in?  Do you think that the dollar will continue to loose value or hold or increase in value?  If you don't want to buy any more gold or silver, that's OK.  If you want to sell what you have, I'll buy a little back from you over time - I'd buy it all from you today if I had the money.  But I do think you need to have at least 20% of your cash holdings in gold and silver.  There are ways to buy it and have it stored somewhere else.  Or you can put some in a safe deposit box. 

Finally, note that the article was published on September 28, 2007.  The S&P500 index on that date was 1,526.75.  Today it is 1,275.61 (a loss of 16.4%).

On September 28, 2007 gold was $740 an ounce.  Today it is $1,375 (a gain of 186%).
On September 28, 2007 silver was $13.60 an ounce.  Today it is $29.15 (a gain of 214%).

So, if you had read this article the day it came out and followed his advice, you would have lost 16.4% of your money, while somebody that bought gold or silver would have made 186%-214%. 
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: chrisdfw on January 10, 2011, 07:37:00 PM
the market can remain irrational longer than you can remain solvent.

Many thought the nasdaq was overpriced at 3000 or so in the late 90;s... they were right, but it went to 5000 before it
crashed back down, so if you bet short at 3000 on the way up, you were right and maybe bankrupt.

All the discussion about overpriced, underpriced is very futile without a crystal ball.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: RationalHusker on January 10, 2011, 07:56:21 PM
the market can remain irrational longer than you can remain solvent.

Many thought the nasdaq was overpriced at 3000 or so in the late 90;s... they were right, but it went to 5000 before it
crashed back down, so if you bet short at 3000 on the way up, you were right and maybe bankrupt.

All the discussion about overpriced, underpriced is very futile without a crystal ball.

I agree.  I'm not arguing for gold being undervalued.  I'm arguing that it is not a "terrible investmestment" as Dave Ramsey has said.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Crash on February 06, 2011, 11:44:43 AM
I didn't get to read all the posts, but wanted to mention the fact silver is way undervalued right now. It's thought that JP Morgan is manipulating the silver prices through short positions. Basically, what they're doing is selling paper saying you own silver they don't have, driving the price down due to "supply and demand". Problem is, the supply isn't there. When the SHTF on this thing, silver will spike to where it should be.

The ratio of silver to gold should be around 16:1, meaning you should be able to buy 1 oz of gold for 16 oz of silver. Right now it's 46.5:1 or 46.5 oz of silver to buy 1 oz gold. Given that figure, I'm sticking with silver and copper, as copper is outperforming both right now. Gold is nice, and it makes a good diversification metal, but we have to be realistic. Besides, who can afford $1350 an oz for gold when silver is at $29 and should be somewhere near $80 an oz?

Copper is even better right now. Remember what happened during WWII? Copper pennies were discontinued in 1943 and they were made from zinc due to a shortage of copper. That scenario isn't out of the question today either. Pennies made after 1981 are zinc with copper plating. BTW, did you know there is the equivalent of 435 US pennies' worth (1982 and newer) of copper in each TSP copper round? (plug for the Gear Shop) Kinda makes the TSP rounds inexpensive at $1.35 each when they have $4.35 in copper in them, doesn't it?

BTW, if anyone finds a real 1943 copper penny? They're worth a LOT. Maybe over $100,000. A few did make it out.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Mr. Bill on May 23, 2011, 12:48:48 PM
Gold is a wonderful investment - according to the Chinese private sector. 8)

Wall Street Journal: China Is Now Top Gold Bug (http://finance.yahoo.com/banking-budgeting/article/112783/china-top-gold-bug-wsj?mod=bb-budgeting)
Quote
...China's investment demand for gold more than doubled to 90.9 metric tons in the first three months of the year, outpacing India's modest rise to 85.6 tons, the World Gold Council said in its quarterly report on Thursday. China now accounts for 25% of gold investment demand, compared with India's 23%.

The report underscores the rising appetite for gold among the growing middle-class in China. Fears of the country's soaring inflation, as well as a search for new investments, is luring investors to gold, and marketing of the precious metal has also increased in recent months. ...

Thursday's report covers only private-sector demand, but one wild card for the world's gold market is how much gold China has been adding to its foreign reserves. ...
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: XtraBright on January 04, 2012, 05:38:43 AM
Hello.

I think the mistake people make when it comes to gold is actually: seeing it as an investment that has "return"

Which is not the case in the long run.

But gold did very well as storage of value and i can explain this with a personal example:

While doing some renovations i found a dozen "20 Kronen" bills printed in 1917.
It´s value at that time in "stuff one Krone buys" would be ap. 4Euros or ap. 5$ today.

The Krone was a gold-backed currency (until some years before it´s end) and coins were in gold and silver.

Here is a picture of one (wikipedia commons, hosted on skitch.com)
(https://img.skitch.com/20120104-81mi7x67dm79qa6quu9xg4cdds.jpg)

This note was actually a request to get "metal" at anytime or as the translated text says:

"The austrian-hungarian bank pays against this bill at her seats in vienna and budapest immediately 20 Kronen in official metal coin"

There was also a gold 20 Kronen coin.

And now comes the interesting part:

The Krone was removed from it´s gold cover, money was created (printed) and just 6 years later (1924) every Krone was devalued by 1/10.000 !

10.000 Kronen became 1 Schilling.

This Schilling was destroyed in the Great Depression and was converted (at loss in value) to "Reichsmark"

Which got pretty worthless (for reasons well known) and was converted back to Schilling.

Which was converted at an (unofficial loss) of 30% to Euros in 2002 and who is a currency in deep troubles today.

Short: Those paper Kronen are worthless, a dozen of them is traded (in good condition) on ebay for 1 Euro.

So 200 Kronen (that were worth 800 Euros at their time) only buy 1 Euro today (if there is a collector bidding..)

If my ancestors had their 200 Kronen in 20 Kronen coins (made out of gold)

Each coin (nominal 20 Kronen = 80 Euros) trades for 230Euros today (Buy: 249 Sell: 233)

Even when gold was low this 20 Kronen gold coin bought pretty much the same stuff in value as it did back in 1917.

And today it´s value in Euros (230) is even almost 3 times the value it bought in 1917.

Great investment ?

200% in almost a hundred years ?

Not really.

But store of value without counterparty risks (and i consider stocks paper with counterparty risk) ?

Absolutely.

Not to mention that at anytime in this hundred years the 20 Kronen gold coins could buy stuff (and in some cases freedom ..) , no matter what was the actual currency, no matter the value of the actual currency and no matter what kind of government under.

Well within 100 years the 20 Kronen coin has survived so far:

The Emperor and the assassination of his follower.
WW I
The collapse of the former state and it´s division into two countries (austria / hungary)
National fascism and civil war
Greater depression
Anarchy and civil war
Dictatorship
WW II
Russian occupation
Democracy (and it´s swings from socialist to market oriented, and back and forth)
Energy crisis
Diverse collapses of the stock markets
The Collapse of the former eastern block.
And so far the EUSSR (and i bet it will outlive that too while still holding it´s value)

Not too bad for a piece of metal which has no use except make Cinch-connectors and women like shiny  ;)


Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ResidentCelt on December 19, 2014, 07:29:28 AM
the market can remain irrational longer than you can remain solvent.

Someone has read Soros... Good book by the way. Explains a lot about market behavior.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Dentoro on February 12, 2015, 12:34:26 PM
In some cases up to 75 tons of rock have to be moved and pulverized for 1 oz gold. EAsy gold is gone.  Some mines are way deep now and have low grade ore.  What does this mean?  It takes a lot of work/ energy to get.  Somebody has to work and it will never lose all value. Yes we need currency to survive.  BUT...  Currency is created by button pushing. As Celente says...not worth the digital paper it's not printed on anymore.  In 3-7% of the total time....thousands and millions can be printed by cutting down a tree.  So the store of value in gold is real...it can't be argued.  As for investment....case can be argued.  But as of the last six years, I'd rather had the gold than the 0.025% interest on a CD.  Gold has trounced that in that time.  As far as stocks, who really knows?  We know gold is pushed down while stock is floated by FEDRES.  IF WE HAD KNOWN BOTH WERE GOING TO BE MANUPLATED FOR SO LONG....stocks would have been a no brainer.  But those of us who invested in Gold in 1999 -2000 are doing ok still, and will make back any gains lost when the market does go bust. 
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ResidentCelt on February 12, 2015, 02:23:46 PM
But those who bought gold in 2011 or 2012 are doing horribly... My rifle I bought in 2012 is worth a bit more than I paid for it. My gold is worth much less. Which was the better investment?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: bigbear on February 12, 2015, 08:01:11 PM
In some cases up to 75 tons of rock have to be moved and pulverized for 1 oz gold. EAsy gold is gone.  Some mines are way deep now and have low grade ore.  What does this mean?  It takes a lot of work/ energy to get.  Somebody has to work and it will never lose all value. Yes we need currency to survive.  BUT...  Currency is created by button pushing. As Celente says...not worth the digital paper it's not printed on anymore.  In 3-7% of the total time....thousands and millions can be printed by cutting down a tree.  So the store of value in gold is real...it can't be argued.

Just because someone works for it does not give it value.  Someone has to want the output of that work for some reason to give it value.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Dentoro on March 20, 2015, 02:17:09 PM
Resident Celt, I feel your pain as im sitting on a mountain of $23 silver.  But I also bought @ 3, 5,6,9,11 and 14 and 18.  However I still think it is better than a government ran 401 that we all know they will be taking. 

Bigbear you are right, to a point, but if it is not coveted or valued, why do so many work so hard to get it and why do governments keep so much of it?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: endurance on March 20, 2015, 03:17:10 PM
Resident Celt, I feel your pain as im sitting on a mountain of $23 silver.  But I also bought @ 3, 5,6,9,11 and 14 and 18.  However I still think it is better than a government ran 401 that we all know they will be taking. 

Bigbear you are right, to a point, but if it is not coveted or valued, why do so many work so hard to get it and why do governments keep so much of it?
What countries keep silver reserves?
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: bigbear on March 21, 2015, 07:39:52 PM
Bigbear you are right, to a point, but if it is not coveted or valued, why do so many work so hard to get it and why do governments keep so much of it?

It is valued.  It's valued more or less every day.  It's valued like anything you can trade your work for (or whatever you're given for your work).  People are working hard to get to it because there's a market for it.  Just like the supermarket or stock market, there's a market for gold.

To your point though, the market/consumers/investors allows companies to employ lots of people and still make it profitable for companies.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: Carl on March 22, 2015, 05:18:48 AM
Gold and silver are a lot like measuring peoples height with a yardstick
people are taller and shorter ,but the yardstick remains the same.
Gold and silver are that yardstick.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: R_Morgan on March 22, 2015, 07:20:56 AM
If you goal is to "make" money as an investment then yes its not the best.  You aren't going to see 8% returns everyear that you aim for with traditional investments in stocks, bonds etc. So dave ramsey isn't wrong but he's not right either. As jack had mentioned he also told people to buy into housing as it was going down since "its on sale". Dave has great advice for getting rid of debt and budgeting. For those two things I recommend him 100%. For "investing" and wealth preservation not so much.  And my two cents are. When you buy metals you should never even check the prices to see how much you've "made". Only time is if you know you'll need to sell it because you want to buy house/land etc and want to hit higher price than lower, etc. Other than that stick it away
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: ResidentCelt on March 25, 2015, 06:30:54 AM
Gold and silver are a lot like measuring peoples height with a yardstick
people are taller and shorter ,but the yardstick remains the same.
Gold and silver are that yardstick.

Kinda. There are industrial uses for both, and that affects the actual real value of both.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: David in MN on March 25, 2015, 08:40:35 AM
I think what people miss is that precious metals, being a "store of wealth", necessitate "wealth". In less gentle terms, people with no money have no wealth to preserve. It makes no sense to scrimp on food just to get a small piece of something shiny in the closet. On the other hand, it is nice to have a little metal to offset the fat tail risk of being 100% dollar denominated (supposing you have the capital to invest).

I use metals 2 ways:

Every year in August I rebalance my portfolios. I transfer a portion of my high-risk trading gains into low risk vehicles like gold, silver, platinum, bonds, CDs, etc. (this is called a barbell strategy). I know there is still some risk there but far less than my usual routine of betting on biotech startups, options trading, rare venture capital projects, forex, Bitcoin, and commodities.

The second method may disappoint... In a lot of ways, metals aren't an investment. I have no intention of ever selling or using them (I do try to use silver to barter from time to time but it's more of a political statement). If my goal is to fill a safe with metals (it is) and never sell, it's not really an investment. And it's sure not putting money in my pocket like a dividend. It becomes money that disappeared.
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: spud on November 12, 2015, 10:08:39 PM
I think of metals not as an investment but a means of currency, that is, back up currency when current currency loses fancy and/or value.  Jack talks about value of a country's economy in terms of what it produces and that is it's value.  I kinda agree but also disagree because currencies are traded and your coconuts that are exported have the same value but could be traded in more or less value on whatever your currency is traded at or manipulated. 
Title: Re: Gold is a Terrible Investment - According to Dave Ramsey
Post by: DWSDVSE on March 02, 2016, 10:26:21 AM
I get Nick Murray's newsletter at work and his March Newsletter has it's main article titled "The Idiocy of Gold." Wow, the man hates gold and thinks that only idiots have it. Makes Ramsey and the old man from Omaha look like regular Gold Bugs. His terms prevent any quoting of the article, and it's really not worth quoting, but it just shows the violent hatred for gold that some advisors have.

I just don't get it. Such sweeping asset class rejection seems the heights of irrationality.

/rant off