someone asked me about gold, and wondered if they should buy some metal from you, or where ever you get those things. i said the following:
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i think gold, first and foremost, is something that is tailored uniquely to each person's situation. i don't think it is a black and white investment per se.
for example, if you had all of your free cash invested in gold since the bottom at 252/oz in 1999/2000, over the next ten years roughly speaking, the return on investment is, more or less, around 5 times the original purchase. aside from the face value price, no dividends, no splits, no nothing.... but a great wealth holder all the same compared to the spx or even cash in most currencies. the spx in the same time period, has gone absolutely no where. completely flat.
if you had bought gold mining stocks well, and could handle the gyrations over the last ten years, using an equal amount of money from the first example, you probably would have, on average, made 10-20 times your money even net of taxes, plus received some dividends, stayed completely liquid (flexible), and able to instantly trade out of it or into it.
so, lets say.. one guy had his money in gold he bought at 252 and he bought one oz. now his one oz. is worth 1200.
another guy bought 840 shares of drooy at .30, even with all the junk that happened in that stock, his shares have now gone from being worth 252.00 to 5754.00 plus dividends, but gross before taxes, say long term taxes, so net net: 4891.00 (drooy's closing price of this date was 6.85)
let's compare: one guy went from 252.00 to 1200.00 and is illiquid, and has all his free cash tied up in the investment.
the second guy went from 252.00 to 4891.00
if the second guys wishes, he can now buy 2 oz. of gold and still have liquid cash left over, and is way ahead, if one is counting, of the guy who only owns 1 oz. of gold.
if the currency loses its value over nite, or even over time, the guy with the first gold, will probably do well, or his children will, or his grandchildren will in regard to preserving the original wealth.
in the same scenerio, the guy with the stock, might end up with physical gold and also keep the stock... in which case, he is still not in the currency. how the stock will behave, is unknown, but when the currency of zimbabwe was debased to nothing, they enjoyed the all time performing stock market of the last 50 years or more.
the trick is do not be in currency on the day of reckoning, and be prepared to buy with both hands all good things that may be on sale when/if the currency dies... the transition for such a transaction will be tricky when/if the time comes.
i think you can see what the dilema is, according to the above...... but you can also see the possibilities. if you are super liquid, and locking some money in metal doesn't hurt you in that regard, why not? however, it will be locked until the day of doom arrives... and no one knows when that will be...therefore you are storing wealth for a rainy day that could occur after your lifetime. no way to know.
etc etc etc.
there is no single approach to any of this. shares in other going concerns that will continue to function regardless of the currency, are also hedges against debasement and default. any thing that is not printed by the government, is safe from confiscation, will not be diluted by more printing of shares, is just as valid as gold in my opinion....and sometimes pays a cash divvie on top.
you merely have to find the right and most comfortable fit, from where you sit. no one else can do that. |
