If someone is interested here is an article How to Invest in, Buy, Sell, Store and Insure Precious Metals in Canada (4 parts)
A report how to invest in physical and paper precious metals
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Good article. But what is the gray area between say numismatics bought for investment, which is taxable when you sell it and numismatics bought for personal pleasure/property which is not?
Also, for anyone else interested in the arcana of numismatics, I'm wondering if the discrepancies between the Charlton and the Krause numbers Mr. Smith notes in his article is that one is the announced mintage number and the other is the actual population number, ie, the mint intended to mint 50,000 but demand only equalled 45,000 so they didn't mint the extra 5,000 units. Just my guess anyway.
Also, for anyone else interested in the arcana of numismatics, I'm wondering if the discrepancies between the Charlton and the Krause numbers Mr. Smith notes in his article is that one is the announced mintage number and the other is the actual population number, ie, the mint intended to mint 50,000 but demand only equalled 45,000 so they didn't mint the extra 5,000 units. Just my guess anyway.
a contrarian indicator
It is fascinating to watch this forum from the contrarian point of view. The stock market was down 50% twice in the last 14 years and people still invest in stocks. Now is it flashing red everywhere. Most of Canadian Real Estate in absolute bubble and people are rushing to buy it. Precious metals are up 4 times since 2000 and people still do not pay attention to it. It is really interesting, every post about Real Estate or stock/bond market attracts tens of replies however a post how to invest in real money has only one reply! It is a great contrarian indicator that shows where you should invest you money.
Last week I did a presentation about different types of investments and one of the topics was precious metals. Everybody knew I would speak about this topic. However when I pulled out 10 silver cents minted in 1967 nobody could answer what was so special about the coin. Only after 3 minutes of different guesses someone asked if the coin was silver. (I had a presentation for 12 people).
What should it tell you? For me it is a perfect investment because nobody else wants it or knows about it.
In Gold We Trust
It is fascinating to watch this forum from the contrarian point of view. The stock market was down 50% twice in the last 14 years and people still invest in stocks. Now is it flashing red everywhere. Most of Canadian Real Estate in absolute bubble and people are rushing to buy it. Precious metals are up 4 times since 2000 and people still do not pay attention to it. It is really interesting, every post about Real Estate or stock/bond market attracts tens of replies however a post how to invest in real money has only one reply! It is a great contrarian indicator that shows where you should invest you money.
Last week I did a presentation about different types of investments and one of the topics was precious metals. Everybody knew I would speak about this topic. However when I pulled out 10 silver cents minted in 1967 nobody could answer what was so special about the coin. Only after 3 minutes of different guesses someone asked if the coin was silver. (I had a presentation for 12 people).
What should it tell you? For me it is a perfect investment because nobody else wants it or knows about it.
In Gold We Trust
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The problem is, gold's buying power tends to remain stable. What you could buy for 10 cents back in 1967 you could probably still buy today if you sold the silver value of that coin.
True, today's money won't keep it's buying power, but if you owned silver or gold, aside from a couple of years of irrational exuberance, you'd probably not find yourself further ahead.
I also noticed your comment about how real estate postings attract tens of replies...what you fail to mention is most of those replies are along the lines of "don't buy you fool, real estate is in a bubble"...from what I've read of most stocks is "it's overpriced, but if it falls I'm interested".
I own some gold and silver, but I also can read the charts...go back a few years to when gold was under $300 and look how long it was there for...about 20 years. Had you bought right at the end, you look like a genius, if you bought over $2000 or back in the 80's...well not so much.
True, today's money won't keep it's buying power, but if you owned silver or gold, aside from a couple of years of irrational exuberance, you'd probably not find yourself further ahead.
I also noticed your comment about how real estate postings attract tens of replies...what you fail to mention is most of those replies are along the lines of "don't buy you fool, real estate is in a bubble"...from what I've read of most stocks is "it's overpriced, but if it falls I'm interested".
I own some gold and silver, but I also can read the charts...go back a few years to when gold was under $300 and look how long it was there for...about 20 years. Had you bought right at the end, you look like a genius, if you bought over $2000 or back in the 80's...well not so much.
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Truth is, price of any market-traded thing fluctuates. You can experience gains or losses in stocks, bonds, commodities, whatever.
You can have horrible timing in stocks too. If you bought the Nikkei in 1989, you still have horrible losses today 25 years later. How about if you bought the NASDAQ near its peak? You still have a loss today. There are many people in these situations. Retail investors have a knack for buying stocks near their peak.
One quality of physical precious metals that has value for me personally is the unique aspect that its value cannot evaporate to zero. Provided it's physical, and it's not a fake, then it will always have a value greater than zero.
The same can't be said for stocks or bonds. A bond can default. A stock can crash to zero (many big stocks have). A stock or ETF can also turn out to be nonexistent if a brokerage commits a certain kind of fraud, or something goes awry in securities lending, or a failure to segregate funds, etc.
If you're willing to wave aside brokerage, middlemen, and securities lending concerns, a stock index is also pretty safe; it won't go to zero. The index itself would never collapse to zero of course. That's why an index ETF is also a good long term investment.
But with all the fraud and trickiness of middlemen, I still see physical assets (like gold and silver) as somewhat safer because your physical asset isn't nullified simply due to bookkeeping fraud of a middle man.
That's a beautiful thing about gold. It sits there and exists, independent of the games and systemic frauds committed by banksters. That's very different from paper assets (stocks/bonds)
You can have horrible timing in stocks too. If you bought the Nikkei in 1989, you still have horrible losses today 25 years later. How about if you bought the NASDAQ near its peak? You still have a loss today. There are many people in these situations. Retail investors have a knack for buying stocks near their peak.
One quality of physical precious metals that has value for me personally is the unique aspect that its value cannot evaporate to zero. Provided it's physical, and it's not a fake, then it will always have a value greater than zero.
The same can't be said for stocks or bonds. A bond can default. A stock can crash to zero (many big stocks have). A stock or ETF can also turn out to be nonexistent if a brokerage commits a certain kind of fraud, or something goes awry in securities lending, or a failure to segregate funds, etc.
If you're willing to wave aside brokerage, middlemen, and securities lending concerns, a stock index is also pretty safe; it won't go to zero. The index itself would never collapse to zero of course. That's why an index ETF is also a good long term investment.
But with all the fraud and trickiness of middlemen, I still see physical assets (like gold and silver) as somewhat safer because your physical asset isn't nullified simply due to bookkeeping fraud of a middle man.
That's a beautiful thing about gold. It sits there and exists, independent of the games and systemic frauds committed by banksters. That's very different from paper assets (stocks/bonds)
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The same could be said for real estate...
really james, "sitting there and existing" makes it a good investable asset ?
it doesn't pay anything, you can't earn anything
so you think the demand for gold will be greater than the demand for toilet paper, butter, soap, bread, batteries, antibiotics, shoes, pants, potatoes and bicycles just to name a few things at random ... gold has more value than these things ?
i think human beings will take bread and butter and antibiotics over gold anyday and the companies that make them will do just fine
proctor and gamble, johnson and johnson and 3M for example have been paying steady dividends for over 50 years because they make things people not only want but really need
as warren buffet has proven all too well, buy companies that make things people really need and use
but you want to own something that "sits there and exists" ?
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Well, gold does fit that definition of companies that make things people really need and use
There is undeniably a demand for gold.
And there are companies that "produce" gold.
So, by that definition, it does fit Buffet's criteria.
However, unlike other companies that "make things people really need and use", gold producers have been a singularly bad investment over the years.
Except for a period of few months during 2010 - 2011 when gold was going gangbusters and went from $1,200 to $1,900.
During that time, the gold producer stocks did well.
But outside of that, gold producers have (by and large) been dead money.
The XGD has lost 40% value in the last 5 years, and lost 17% value in past 10 years.
IMO, Buffet's rule doesn't apply in this case.
well yes, gold bugs will always get their day in the sun and i agree, there is a demand for gold, but it is mostly elastic since most of the demand by far, comes for jewelry and jewelry will always take a back seat to toilet paper (so to speak !) soap and bread for which the demand is inelastic (relatively)
it certainly is fine investment for active investors and stock pickers since you can often get a feel for the way the wind is blowing and jump in and out of the metal and the producers
but i disagree with you that is fits buffets criteria, since he has stated many times that he wouldn't buy anything he couldn't walk away from 10 years if he had to ... you can do that with gold but as you and andrew have both pointed out, it is a risky and potentially flat and non-productive asset
gold bugs are perfectly named since there is something about gold that makes people irrational or buggy
This discussion only confirms my theory that gold is under-owned and cheap relative to stocks.
Does Picasso painting pay anything? Does any collectible item pay anything?
There two types of investments, investments that can appreciate in value and investments that pay income
I am not a gold bug, i want to invest in cheap assets, I do not care how gold performed in the last 30, 100 or 300 years. I want to buy something that has potential to grow. I see no value in stocks (except of mining/energy sector) or real estate.
As james4beach, gold has value and always will. I can take it with me to another country if I need. Tell people in Ukraine, Cyprus or Greece about stocks/bonds and ask them if they want to hold gold....Guess the answer
If you ask Canadians what their biggest asset they would say it is their home. Does it pay anything?
Does Picasso painting pay anything? Does any collectible item pay anything?
There two types of investments, investments that can appreciate in value and investments that pay income
I am not a gold bug, i want to invest in cheap assets, I do not care how gold performed in the last 30, 100 or 300 years. I want to buy something that has potential to grow. I see no value in stocks (except of mining/energy sector) or real estate.
As james4beach, gold has value and always will. I can take it with me to another country if I need. Tell people in Ukraine, Cyprus or Greece about stocks/bonds and ask them if they want to hold gold....Guess the answer
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While not my biggest asset my home value has tripled in the past 20 years so I guess it will pay, eventually.
could be ... but there needs to be a reason, there needs to be something that will drive gold up relative to other assets
you appear to want to own gold merely because it is ... gold ... your argument is rather closer to a spiritual conviction than a reasoned argument for gold ownership versus other assets
gold has a very tumultuous and inferior track record against other asset classes and i see no reason for that to change
Platinum is probably the best to own, followed by silver because of their industrial uses. Silver is underpriced to gold and unlike gold a lot gets used up where as most gold is stored somewhere.
Gold looks underpriced because of global money printing and has taken the opposite direction to the stock market over the last few years even with the printing presses going into overdrive. This is where the price discovery could take place if gold were to catch up to this over printing of money.
Gold over the last 100 years has kept its value over paper money and this is really why one would hold it as opposed to paper money. Over the course of history however we have seen no fiat currency survive and gold has, so over time paper always loses.
Today we are facing the possible end to the US dollar as a reserve currency as it is only being held up by the US military. The military threat however is starting to weaken as Russia, China and Iran are starting to use other means to settle trade and the US isn't able to do much about it. This is making gold valuable to hold as the dollar slowly loses its grip and influence over the world.
Gold looks underpriced because of global money printing and has taken the opposite direction to the stock market over the last few years even with the printing presses going into overdrive. This is where the price discovery could take place if gold were to catch up to this over printing of money.
Gold over the last 100 years has kept its value over paper money and this is really why one would hold it as opposed to paper money. Over the course of history however we have seen no fiat currency survive and gold has, so over time paper always loses.
Today we are facing the possible end to the US dollar as a reserve currency as it is only being held up by the US military. The military threat however is starting to weaken as Russia, China and Iran are starting to use other means to settle trade and the US isn't able to do much about it. This is making gold valuable to hold as the dollar slowly loses its grip and influence over the world.
Money supply is the reason. Read The Death of Money: The Coming Collapse of the International Monetary System or listen to this interview with the author.
I like cheap assets (relative to other assets). Buy low, sell high. Everybody knows, nobody does.
Stocks and real estate are expensive that's why I avoid them
he is quoted on Amazon as saying
i would argue that holding shares in corporations that produce useful goods and services are better stores of value than gold, art, land or currency ... they may lose value in a correction but will always come back
that human beings need bread, soap and shoes is a truth about human beings that is more enduring than our love of gold (don't get me wrong, gold is inherently beautiful, history shows this)
the dollar may well "collapse" (though not in my lifetime i think) but the demand for bread, soap and shoes is highly predictable ... the value of gold is highly unpredictable, even volatile
it is very likely to tank in a depression along with equities as it did in 2008
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Another point about real estate, the price you buy it at is sort of fixed...the cost can be inflated away in a hyper inflation scenario, which is what is being predicted.
For example, you buy a property for $100,000 today and rent it. Let's say it cost you a further $25,000 down payment, but we'll have a 100k mortgage. Suddenly hyperinflation starts...rents go up with inflation...you go from charging $1000/month to $2000, then $10,000...what happens to your loan? It stays at $100,000...the interest rate is locked in at a low rate...until renewal but, with charging $10,000/month, even with hyper inflated expenses, you can probably save up a large portion of your principle owing (if not you still only owe $100k not an inflation adjusted amount)...not to mention the fact that the property value has increased with hyperinflation...It should still be worth about $125k of buying power adjusted for inflation, and $1000/month of buying power adjusted for inflation.
Now, for the gold bug solution...I buy $25k worth of gold...or I margin it and buy $75k (I believe you can margin gold about 3 for 1). Now I sit on it paying interest out of my own pocket until hyperinflation hits...I need to pay off the margin loan out of my own pocket, but save a ton because of hyperinflation...at the end I have $75k of buying power sitting there...I can't live in it should a crisis hit, nor can eat it or generate monthly income from it.
The difference between gold and real estate is, real estate can generate income while protecting you from inflation. True, the majority of real estate is overpriced right now, but not all of it. Unlike gold, I can still find cheap real estate in today's market...gold's price is fixed at a significantly higher price today than it was.
Next thing to look at is the dollar adjustment. Those of you who bought gold earlier this physical year, when the dollar was at par, lost about $10% of your investment as the dollar fell...not to mention the drop in the price of gold???Canadians lost twice.
The "profits" from gold during it's run from $250-$2000 were hit quite hard from the dollar going from $0.55 to par over the same run. Half your profits were eaten up by the exchange rate.
Like ANY investment, gold has it's problems...nothing is the perfect investment, that's why you should diversify and own a little of everything...however, most people feel diversify means holding stocks.
For example, you buy a property for $100,000 today and rent it. Let's say it cost you a further $25,000 down payment, but we'll have a 100k mortgage. Suddenly hyperinflation starts...rents go up with inflation...you go from charging $1000/month to $2000, then $10,000...what happens to your loan? It stays at $100,000...the interest rate is locked in at a low rate...until renewal but, with charging $10,000/month, even with hyper inflated expenses, you can probably save up a large portion of your principle owing (if not you still only owe $100k not an inflation adjusted amount)...not to mention the fact that the property value has increased with hyperinflation...It should still be worth about $125k of buying power adjusted for inflation, and $1000/month of buying power adjusted for inflation.
Now, for the gold bug solution...I buy $25k worth of gold...or I margin it and buy $75k (I believe you can margin gold about 3 for 1). Now I sit on it paying interest out of my own pocket until hyperinflation hits...I need to pay off the margin loan out of my own pocket, but save a ton because of hyperinflation...at the end I have $75k of buying power sitting there...I can't live in it should a crisis hit, nor can eat it or generate monthly income from it.
The difference between gold and real estate is, real estate can generate income while protecting you from inflation. True, the majority of real estate is overpriced right now, but not all of it. Unlike gold, I can still find cheap real estate in today's market...gold's price is fixed at a significantly higher price today than it was.
Next thing to look at is the dollar adjustment. Those of you who bought gold earlier this physical year, when the dollar was at par, lost about $10% of your investment as the dollar fell...not to mention the drop in the price of gold???Canadians lost twice.
The "profits" from gold during it's run from $250-$2000 were hit quite hard from the dollar going from $0.55 to par over the same run. Half your profits were eaten up by the exchange rate.
Like ANY investment, gold has it's problems...nothing is the perfect investment, that's why you should diversify and own a little of everything...however, most people feel diversify means holding stocks.
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One should not be borrowing to buy stocks at this time or into PM's because that is the best way to get into trouble even if you end up being right. I have heard this advice from every gold bull expert I have read and almost all of them also say hold 25 percent in gold and keep it outside the banking system. They also say that you must not see this as an investment but instead as a store of value to preserve your wealth. The other 75 percent will be to invest in investments like PM stocks or solid companies that one sees value in.
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