Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: dvdw© who wrote (702)	5/5/2003 4:04:31 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 4912

Have you ever read Zachariah Sitchen? no, what did he say? but in comparison with for instance patents issued ahead of products, which will soon yield real therapies or useful innovation to process or objects, their asset values are far more compelling than any case for gold i think you're comparing apples and oranges. what does "far more compelling" mean? if a drug is expected to make $1 billion discounted to today before it goes off patent, then one can say the patent is worth $1 billion today. why is $1 billion in the form of a patent more valuable than $1 billion in the form of gold? they are just different forms and different asset classes. what you are really stating, but perhaps don't realize, is that you prefer the asset class of patents or patent producers over the asset class of gold or gold producers. who holds such opinions? the market does, investors do. do these opinions last long? only as long as other fashions that come into and go out of style. this is the history of modern portfolio analysis. if you study the history of financial markets, you will see that different asset classes have their own bull and bear markets. these classes correlate historically with each other to varying degrees, and a central tenet of Modern Portfolio Theory is to allocate assets such that the covariances produce the highest possible expected return for the accepted level of risk over the given time horizon. the collection of these optimal portfolios is called the Efficient Frontier. (incidentally, one problem with this approach is that future covariances may be different from past ones, so in reality the efficient frontier can only be known in retrospect, in the history books. but of course rear-view-mirror drivers rely on it anyway.) if you go back to my post which you quoted, you should again read the line where i speak of speculation on an increasing (re)acceptance of bullion as a legitimate asset class. you said you thought the same thing in the 1970s. this is impossible. why? because in the 1970s gold WAS A LEGITIMATE ASSET CLASS, UNLIKE TODAY. gold was the CSCO/MSFT/IBM/INTC etc. etc. of the 1970s. back then tech stocks, or potential producers of the patents you think are so compelling in their valuation, were looked down upon as a waste of capital because there were no moats around their businesses. today, gold stocks are looked down upon as destroyers of capital because people think gold will never become valuable again. as it was so shall it ever be. these things are cyclical. Gold metrics are too small to allow for this, and further the carrying costs of holding such a scarce physical commodity such as gold, actually lessens its value as a medium of exchange, what is the carrying cost? today money market funds have negative real rates, even before taxes. thus the carrying cost of gold is very low. low interest rates are bullish for gold. check out the history of gold. read Peter Bernstein's book on the subject. people have been using gold for thousands of years as a store of value. its popularity waxes and wanes, but people come back to it. its last period of exceeding popularity was just a couple decades ago. this isn't ancient history. do you think the human nervous system has evolved so much that the thing people have found valuable for all of recorded history, and which they found extremely valuable just two decades ago, can never again be held valuable? that outlook strikes me as not very imaginative. fortunately, the markets, in their reliance on only the recent past, lack imagination and are thus always laid low by the unexpected. therein lies opportunity.

To: dvdw© who wrote (702)	5/5/2003 11:53:32 PM
From: LLCF	Respond to of 4912

<The fiat currency argument is diminished in the main by demand expansion for the purpose of liquidity. A desire to hold value as a medium of exchange, that can meet the needs of the widest numbers of transactions. > Of course it depends on 'hold value', which the dollar may or may not do. Anyone buying gold expects history to continue to repeat itself... ie. fiat currencies have a tendancy to lose value. <partly a speculative bet on an increasing (re)acceptance of bullion as a legitimate asset class> Well, it can't get much less acceptable, so I certainly would't be that way. DAK