What is the "store of value" in the PP

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Hal
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What is the "store of value" in the PP

Postby Hal » Mon Dec 04, 2017 4:05 am

Hello everyone,

After reading partially through a long email thread, ( http://www.usagold.com/goldtrail/archives/another1.html ) it has got me thinking as to what the "store of value" is in the PP.

To explain further.... both shares and bonds generate a return, so they can be considered investments.

but Cash and Gold ? Gold generates no return, and cash rarely delivers a "real, inflation adjusted" return of any significance,

Is Gold a store of value in the PP, and cash just a very poor yielding investment? Or is cash a store of value as well?

Do you value the PP's value in ounces of gold, or in dollars? After reading somewhere that the Bank of International Settlements books are all in ounces of gold and not USD, it has me wondering what reference financial holdings are, or should be, measured against.

Thoughts? Comments?

Hal

PS: And why would this question matter?

If the PP went up say, 20% in USD terms, but the USD devalued against gold by, say, 50%.....
Would you say you made a profit or a loss?
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europeanwizard
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Re: What is the "store of value" in the PP

Postby europeanwizard » Mon Dec 04, 2017 8:04 am

Please note that I'm relatively new to investing.

Hal wrote:and cash rarely delivers a "real, inflation adjusted" return of any significance,


Looking at this article: https://portfoliocharts.com/2017/05/12/ ... -investor/
I believe the author (username Tyler on this forum) shows that historically, cash definitely delivered returns equal or better than inflation. It's only in recent times that this changed.

As for gold, I'm not sure what you mean by "store of value". But it's in the PP so the overall portfolio shows low volatility. And for the capital gains when fear or inflation surges.
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Re: What is the "store of value" in the PP

Postby Hal » Mon Dec 04, 2017 9:07 am

europeanwizard wrote:Please note that I'm relatively new to investing.

Hal wrote:and cash rarely delivers a "real, inflation adjusted" return of any significance,


Looking at this article: https://portfoliocharts.com/2017/05/12/ ... -investor/
I believe the author (username Tyler on this forum) shows that historically, cash definitely delivered returns equal or better than inflation. It's only in recent times that this changed.

As for gold, I'm not sure what you mean by "store of value". But it's in the PP so the overall portfolio shows low volatility. And for the capital gains when fear or inflation surges.


Hi Europeanwizard,

Thanks for your reply and hope this makes my original post clearer

https://courses.lumenlearning.com/bound ... as-a-tool/

https://portfoliocharts.com/portfolio/heat-map/
Try typing in Cash 100% (cash in bank), then Cash 0% (cash in hand - under mattress)
Great website !

So both gold leasing (like what the bullion banks do) and cash in bank are investments in my opinion....

From link.
store of value: An asset such as money or gold that is purchased or accepted as payment for goods and services for its ability to purchase other assets in the future without rapidly losing its purchasing power.

So a bag of flour would be worthless in 100 years time, so too would be a bag of $100 notes. But a bag of gold coins still would be "a store of value" ie, maintain its worth.


The question is, what is the PP referenced against?
<snip>
PS: And why would this question matter?

If the PP went up say, 20% in USD terms, but the USD devalued against gold by, say, 50%.....
Would you say you made a profit or a loss?
<snip>
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Cortopassi
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Re: What is the "store of value" in the PP

Postby Cortopassi » Mon Dec 04, 2017 11:07 am

If the PP went up say, 20% in USD terms, but the USD devalued against gold by, say, 50%.....
Would you say you made a profit or a loss?
-------------------------------------------
Cash in the account, at least for me, has no "defined" value except when used. So if I have $10,000 in cash in the account and one day it can buy me 5 ounces of gold, but the next day it can only buy me 2.5 ounces, the conversion value has changed, but the PP bottom line $ number for cash has not changed.

If it costs me $5 for a gallon of gas instead of $2.50, sure the dollar has lost value, but is that trackable in a PP? If you don't drive a car, it doesn't matter. If food does the same thing, then yes, most all of us will perceive the loss of buying power.

It's a good question I don't have a clear answer to because everything is valued in dollars. But for the original question, I would "feel" like the PP went up and that I made a profit.

Maybe this is one of the reasons I have cash at 10%.
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Re: What is the "store of value" in the PP

Postby Hal » Tue Dec 05, 2017 1:39 am

Cortopassi wrote:If the PP went up say, 20% in USD terms, but the USD devalued against gold by, say, 50%.....
Would you say you made a profit or a loss?
-------------------------------------------
Cash in the account, at least for me, has no "defined" value except when used. So if I have $10,000 in cash in the account and one day it can buy me 5 ounces of gold, but the next day it can only buy me 2.5 ounces, the conversion value has changed, but the PP bottom line $ number for cash has not changed.

If it costs me $5 for a gallon of gas instead of $2.50, sure the dollar has lost value, but is that trackable in a PP? If you don't drive a car, it doesn't matter. If food does the same thing, then yes, most all of us will perceive the loss of buying power.

It's a good question I don't have a clear answer to because everything is valued in dollars. But for the original question, I would "feel" like the PP went up and that I made a profit.

Maybe this is one of the reasons I have cash at 10%.



Thanks Cortopassi for helping me work this out.
You are correct, it all depends on what you are buying.

So using food as something everyone buys, then by following the original question about profit/loss, the PP would have experienced a loss as less food can be purchased.

Check out this link
http://pricedingold.com/food/

It would seem to me then, at least for a long term perspective, it would be more accurate to value the PP in ounces of gold.

An analogy.....

There was a ferry service here where you had to buy tokens. Giving the tokens to the attendant, allowed you on the ferry.

Suppose.... they said you need to give the attendant twice as many tokens to get on the ferry, BUT, the token price changed. You could now buy twice as many token with your five AUD note.

Priced in tokens, the ferry charge has doubled in price
Priced in AUD, the ferry charge is the same

Seems like the USD is the worldwide "token" and Gold is the "store of value"
Am I missing something here?
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Cortopassi
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Re: What is the "store of value" in the PP

Postby Cortopassi » Wed Dec 06, 2017 9:32 am

Hal,

"It would seem to me then, at least for a long term perspective, it would be more accurate to value the PP in ounces of gold."
------------------------------
Makes sense on the surface, but life is lived in whatever currency you use on a daily basis, so for me it makes sense to value in USD. I'm guessing most PPers would take that position. So if I have your location as Australia, you'd value the PP in AUD.

The token analogy hurts my brain right now but seems right.

There are other insidious ways inflation gets us, here in the US at least. Drives me nuts at the grocery store. Whenever I see an item whose packaging now says something like "New Look, Same Great Taste!" you can nearly 100% bet it is because they have shrunk the amount in the package, but keep the price the same. Pint of ice cream, 16oz, almost impossible to find now, usually most in the 13-15oz range. Toilet paper, same # of sheets, but x/y dimensions have been reduced. For the most part, we eat natural, so it is impossible for a butcher to say one pound of meat is something less, or sell less than a dozen eggs, but I would bet that the size rating of eggs, if vendors have the capability, would decrease in weight from what they were originally to hide cost increases.
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Re: What is the "store of value" in the PP

Postby whatchamacallit » Wed Dec 06, 2017 10:19 am

This Wikipedia article helps with thinking about it.

https://en.wikipedia.org/wiki/Store_of_value

For the long run I would definitely want gold over physical cash. The question is whether gold is actually a better store of value than cash that is earning interest. I think ultimately all of the PP assets could be a store of value but we don't know which will be best.
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Re: What is the "store of value" in the PP

Postby Hal » Thu Dec 07, 2017 4:46 am

whatchamacallit wrote:This Wikipedia article helps with thinking about it.

https://en.wikipedia.org/wiki/Store_of_value

For the long run I would definitely want gold over physical cash. The question is whether gold is actually a better store of value than cash that is earning interest. I think ultimately all of the PP assets could be a store of value but we don't know which will be best.



Just wanted to say thanks to whatchamacallit and everyone else.

Your insights have helped me see the obvious.

At the end of the day, it is all about what you can trade the PP for.
If your PP can be exchanged for the same or more goods in the future, then the PP "AS A WHOLE" is a store of value.
Hence HB's focus on the PP working in all economic conditions and having little volatility.

The only issue I see is that if the currency in use totally collapses, then you can say goodbye to half of your portfolio.
It would be up to individual judgement as to when to unload the cash/bonds denominated in a "risky currency" but a very high debt to GDP ratio would be a warning.

Thanks again,

An enlightened Hal
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Cortopassi
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Re: What is the "store of value" in the PP

Postby Cortopassi » Thu Dec 07, 2017 8:00 am

Did I mention gold as a store of value sucks quite a lot of the time, like now? >:(
Hal
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Re: What is the "store of value" in the PP

Postby Hal » Thu Dec 07, 2017 8:31 am

Cortopassi wrote:Did I mention gold as a store of value sucks quite a lot of the time, like now? >:(


Hope this makes you feel a bit better
https://www.youtube.com/watch?v=xRcWal1kKXo

But then you could have bought silver like me - a super suck ;)

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