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Strategies & Market Trends : Value Investing

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To: Mattyice who wrote (39387)	9/23/2010 2:05:44 AM
From: Spekulatius	4 Recommendations Read Replies (2) of 78704

The problem with Gold is that it's a "collectible" - it has been such for a couple of thousand years so it apparently does not go out of fashion like rare tulips or Pokemon cards. But what is gold really worth? Absent any cash flows, it's worth what someone else is willing to pay for it just like is the case with any other collectibles. So buying gold is a bet that there are fools that are willing a higher price for to when you decide to sell. Stocks or even farmland have a cash flow stream associated with it. As for mining stocks, their track record in earlier financial crisis (1987, 2008) has been abysmal. This does not mean that the next go around might not be different (they did survive the great depression well after all). the silver bug get's me even more so because silver was an industrial metal when it was used for photography. Now that use must have gone close to zero, so I assume the demand gap is also coming from the collectible side. While I agree that we have not seen a full blown retail mania yet, Gold has become a liquid asset (in ETF form) and you can trade futures (with 10% down). All those incarnations were not available many years ago and have made gold more tradable, which I think is sort of how a mania manifests itself. the danger is that this can all reverse very quickly if folks panic - ETF units could be liquidated and the asset pool shrink which means that physical gold would be sold. Futures, although they do not include a physical delivery do impact the real physical market too, because some players are the same in both (hedging etc.) and the psychological element. How will that turn out , it looks like near term there is nothing but up but when the tide turns the chart will probably look like 1981/1982. If we get hyperinflation gold will go up byut it's going to be hard to tell of the buying power really stays the same. Some stocks may work well or even better as a storage of value in such an environment. I just don't know how this is going to play out but it's sort of hard for me to make a value case for gold right now.

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