Explain please

General Discussion on the Permanent Portfolio Strategy

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fishdrzig
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Explain please

Post by fishdrzig » Sun Mar 22, 2015 8:44 am

"So, even though gold doesn’t generate interest or dividends, it can produce capital appreciation (price goes up) and those profits can be harvested and used in a balanced and diversified portfolio to produce real returns."

Could someone explain this quote to me like am a second grader please?
Thank youy
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buddtholomew
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Re: Explain please

Post by buddtholomew » Sun Mar 22, 2015 11:38 am

This is the argument for a rebalancing premium...in other words, selling an appreciated asset to rebalance results in a positive return for that asset.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Kriegsspiel
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Re: Explain please

Post by Kriegsspiel » Sun Mar 22, 2015 11:54 am

fishdrzig wrote: "So, even though gold doesn’t generate interest or dividends, it can produce capital appreciation (price goes up) and those profits can be harvested and used in a balanced and diversified portfolio to produce real returns."

Could someone explain this quote to me like am a second grader please?
Thank youy
Every once in a while, a lot of people want to buy gold (or a couple people want to buy a lot of it). When lot of people wanting something, the people who have it can charge more for it. Like when you have a soda, and everyone else at the lunch table wants it, you can get a couple bags of chips + a cookie. But if your class had just been force-fed 2 gallons of water due to your parents' political disloyalty, you might only get a pretzel for it. You also go to second grade in North Korea.
You there, Ephialtes. May you live forever.
mukramesh
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Re: Explain please

Post by mukramesh » Mon Mar 23, 2015 12:48 pm

2nd Grade explanation: You buy a toy for $5. A little while later, the toy is worth $10 so you decide to sell it. You have made $5 in profit which you can now use to buy other toys.

Now realize toys = gold and profit = capital appreciation

Hope that helps :)
fishdrzig
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Re: Explain please

Post by fishdrzig » Mon Mar 23, 2015 8:19 pm

AHHHHHHH  yes,  now I get it.  Thanks
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