The GOLD scream room

Discussion of the Gold portion of the Permanent Portfolio

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D1984
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 11:52 am

buddtholomew wrote:
Tue Dec 14, 2021 8:34 am
Cortopassi wrote:
Tue Dec 14, 2021 8:27 am
buddtholomew wrote:
Tue Dec 14, 2021 8:14 am

But why? Gold isn’t doing anything for you.
But it is. Peace of mind. I don't have to have the top % return in investing.
Your peace of mind is a false sense of security and built on quicksand. There is nothing special at all about the PP and it has proven once more this year that Gold is a useless diversifier. Anything tied to inflation (eg DBC) is beating the pants off the metal. Nobody cares about gold anymore and it shows.
And pray tell, how did gold do vs DBC (or rather its underlying index since DBC didn't exist that far back) all the way back to, say, 1985? The two were virtually identical; DBC would've provided a CAGR of 4.68% from 1-1-85 to 12 PM on 12-14-21 while over the same period gold would've provided a CAGR of just a hair over 4.57% (FWIW an annually rebalanced portfolio of 50/50 in both would've done significantly better than either and would've given a CAGR of just shy of 5.39% with a lower standard deviation of returns than either asset alone).

Before you say, yeah, but that's years ago....how has gold done vs DBC recently? Well, in 2021, not so hot....it lost 5.3% while DBC was up 37.62%. On the other hand, from 1-1-2006 to 12-31-2020 gold's returns absolutely KILLED the returns on DBC; as of today gold would've turned a thousand dollars invested on January 1st 2006 into $3518; DBC would've turned that same $1K into all of <<checks notes>> $540. DBC especially did badly vs gold during 2008 which if there was ever a year where diversification was called for when anything stock-related was getting pummeled....2008 was it

If you wouldn't write DBC off for that (and you shouldn't....the period from the mid to late 2000s to 2020 was by a large a period of low inflation where unexpected inflation repeatedly failed to materialize...exactly the sort of environment where DBC wouldn't shine and wouldn't be expected to come to the rescue of a portfolio; you don't hate on an asset class for not doing well in exactly the kind of environment it was never expected to do well in and where it wouldn't NEED to shine and do well in because in that kind of environment both stocks and bonds would be providing decent real returns--which is exactly what happened in this period--with the exception of 2008 when stocks sucked; DBC would instead be expected to shine in a period of moderate to high growth with high and/or accelerating inflation which was exactly what we've had in 2021) for its performance from, say, 2006 or 2008 to 2020 then why would you write gold off for having one (slightly and mildly) lousy year?
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 12:07 pm

buddtholomew wrote:
Tue Dec 14, 2021 11:39 am
I think it has to do with investors realizing that the economy is weak, the individual is struggling and any rate hikes will result in a catastrophic outcome. No one believes the FED’s bullshit and continue to buy LTT’s accordingly.

The economy is weak? Huh?!? Unemployment is at 4.2%, employers in most places are begging for more workers, real inflation-adjusted GDP is up 3.75% since the end of 4Q 2020, and the consensus estimates for annualized 4th Q GDP growth are between 4.9% and 7.8% annualized (which works out to between 1.22% and 1.95% just for this one quarter if you instead go by a quarterly basis).

How anyone can compare that with the feeble, lingering, slow, damn near jobless recoveries during the first couple of years after, say, the 1990-91 recession, the 2001-02 recession, and the 2007-09 recession and call it "weak" is beyond me.
Last edited by D1984 on Tue Dec 14, 2021 12:08 pm, edited 1 time in total.
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 12:08 pm

D1984 wrote:
Tue Dec 14, 2021 11:52 am
buddtholomew wrote:
Tue Dec 14, 2021 8:34 am
Cortopassi wrote:
Tue Dec 14, 2021 8:27 am
buddtholomew wrote:
Tue Dec 14, 2021 8:14 am

But why? Gold isn’t doing anything for you.
But it is. Peace of mind. I don't have to have the top % return in investing.
Your peace of mind is a false sense of security and built on quicksand. There is nothing special at all about the PP and it has proven once more this year that Gold is a useless diversifier. Anything tied to inflation (eg DBC) is beating the pants off the metal. Nobody cares about gold anymore and it shows.
And pray tell, how did gold do vs DBC (or rather its underlying index since DBC didn't exist that far back) all the way back to, say, 1985? The two were virtually identical; DBC would've provided a CAGR of 4.68% from 1-1-85 to 12 PM on 12-14-21 while over the same period gold would've provided a CAGR of just a hair over 4.57% (FWIW an annually rebalanced portfolio of 50/50 in both would've done significantly better than either and would've given a CAGR of just shy of 5.39% with a lower standard deviation of returns than either asset alone).

Before you say, yeah, but that's years ago....how has gold done vs DBC recently? Well, in 2021, not so hot....it lost 5.3% while DBC was up 37.62%. On the other hand, from 1-1-2006 to 12-31-2020 gold's returns absolutely KILLED the returns on DBC; as of today gold would've turned a thousand dollars invested on January 1st 2006 into $3518; DBC would've turned that same $1K into all of <<checks notes>> $540. DBC especially did badly vs gold during 2008 which if there was ever a year where diversification was called for when anything stock-related was getting pummeled....2008 was it

If you wouldn't write DBC off for that (and you shouldn't....the period from the mid to late 2000s to 2020 was by a large a period of low inflation where unexpected inflation repeatedly failed to materialize...exactly the sort of environment where DBC wouldn't shine and wouldn't be expected to come to the rescue of a portfolio; you don't hate on an asset class for not doing well in exactly the kind of environment it was never expected to do well in and where it wouldn't NEED to shine and do well in because in that kind of environment both stocks and bonds would be providing decent real returns--which is exactly what happened in this period--with the exception of 2008 when stocks sucked; DBC would instead be expected to shine in a period of moderate to high growth with high and/or accelerating inflation which was exactly what we've had in 2021) for its performance from, say, 2006 or 2008 to 2020 then why would you write gold off for having one (slightly and mildly) lousy year?
I just used DBC as an example but I don’t hold the ETF.
I write gold off because I hold it for unexpected inflation which we now have and gold’s response it to decline even with stocks down handsomely too. Even if it went up 100% from here it would still have been a mistake to hold it for 10 years. I used to feel smart about holding gold but now I feel dumb and duped by so called experts on this forum.

The PP investor is living on a healthy dose of hopium with 25% allocated to an asset that no one cares about anymore.

Someone defend gold and its response to these inflation figures...I bet you can’t and deep down you feel the same way about gold that I do.

Keep in mind I have almost a 100% gain in gold since I bought in 2011 and I still feel this way.
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 12:14 pm

buddtholomew wrote:
Tue Dec 14, 2021 12:08 pm
D1984 wrote:
Tue Dec 14, 2021 11:52 am
buddtholomew wrote:
Tue Dec 14, 2021 8:34 am
Cortopassi wrote:
Tue Dec 14, 2021 8:27 am
buddtholomew wrote:
Tue Dec 14, 2021 8:14 am

But why? Gold isn’t doing anything for you.
But it is. Peace of mind. I don't have to have the top % return in investing.
Your peace of mind is a false sense of security and built on quicksand. There is nothing special at all about the PP and it has proven once more this year that Gold is a useless diversifier. Anything tied to inflation (eg DBC) is beating the pants off the metal. Nobody cares about gold anymore and it shows.
And pray tell, how did gold do vs DBC (or rather its underlying index since DBC didn't exist that far back) all the way back to, say, 1985? The two were virtually identical; DBC would've provided a CAGR of 4.68% from 1-1-85 to 12 PM on 12-14-21 while over the same period gold would've provided a CAGR of just a hair over 4.57% (FWIW an annually rebalanced portfolio of 50/50 in both would've done significantly better than either and would've given a CAGR of just shy of 5.39% with a lower standard deviation of returns than either asset alone).

Before you say, yeah, but that's years ago....how has gold done vs DBC recently? Well, in 2021, not so hot....it lost 5.3% while DBC was up 37.62%. On the other hand, from 1-1-2006 to 12-31-2020 gold's returns absolutely KILLED the returns on DBC; as of today gold would've turned a thousand dollars invested on January 1st 2006 into $3518; DBC would've turned that same $1K into all of <<checks notes>> $540. DBC especially did badly vs gold during 2008 which if there was ever a year where diversification was called for when anything stock-related was getting pummeled....2008 was it

If you wouldn't write DBC off for that (and you shouldn't....the period from the mid to late 2000s to 2020 was by a large a period of low inflation where unexpected inflation repeatedly failed to materialize...exactly the sort of environment where DBC wouldn't shine and wouldn't be expected to come to the rescue of a portfolio; you don't hate on an asset class for not doing well in exactly the kind of environment it was never expected to do well in and where it wouldn't NEED to shine and do well in because in that kind of environment both stocks and bonds would be providing decent real returns--which is exactly what happened in this period--with the exception of 2008 when stocks sucked; DBC would instead be expected to shine in a period of moderate to high growth with high and/or accelerating inflation which was exactly what we've had in 2021) for its performance from, say, 2006 or 2008 to 2020 then why would you write gold off for having one (slightly and mildly) lousy year?
I just used DBC as an example but I don’t hold the ETF.
I write gold off because I hold it for unexpected inflation which we now have and gold’s response it to decline even with stocks down handsomely too. Even if it went up 100% from here it would still have been a mistake to hold it for 10 years. I used to feel smart about holding gold but now I feel dumb and duped by so called experts on this forum.

The PP investor is living on a healthy dose of hopium with 25% allocated to an asset that no one cares about anymore.
I don't hold anywhere near 25% gold but I do hold some.

I just don't understand why you are complaining that gold is down today while US stocks are down too. Indeed it is...and guess what? So are TLT, BND, DBC, VXUS, and most other portfolio diversifiers. One of the few things that (as of right now) still is up for the day is deep value stock ETFs like RPV....but knowing you my guess is that if you held one of them you'd have been complaining during all the times during 2007 to 2020 that they underperformed both the broad US market, the S&P 500, and LCG growthy tech ETFs like QQQ.
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buddtholomew
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 12:20 pm

D1984 wrote:
Tue Dec 14, 2021 12:14 pm
buddtholomew wrote:
Tue Dec 14, 2021 12:08 pm
D1984 wrote:
Tue Dec 14, 2021 11:52 am
buddtholomew wrote:
Tue Dec 14, 2021 8:34 am
Cortopassi wrote:
Tue Dec 14, 2021 8:27 am
buddtholomew wrote:
Tue Dec 14, 2021 8:14 am

But why? Gold isn’t doing anything for you.
But it is. Peace of mind. I don't have to have the top % return in investing.
Your peace of mind is a false sense of security and built on quicksand. There is nothing special at all about the PP and it has proven once more this year that Gold is a useless diversifier. Anything tied to inflation (eg DBC) is beating the pants off the metal. Nobody cares about gold anymore and it shows.
And pray tell, how did gold do vs DBC (or rather its underlying index since DBC didn't exist that far back) all the way back to, say, 1985? The two were virtually identical; DBC would've provided a CAGR of 4.68% from 1-1-85 to 12 PM on 12-14-21 while over the same period gold would've provided a CAGR of just a hair over 4.57% (FWIW an annually rebalanced portfolio of 50/50 in both would've done significantly better than either and would've given a CAGR of just shy of 5.39% with a lower standard deviation of returns than either asset alone).

Before you say, yeah, but that's years ago....how has gold done vs DBC recently? Well, in 2021, not so hot....it lost 5.3% while DBC was up 37.62%. On the other hand, from 1-1-2006 to 12-31-2020 gold's returns absolutely KILLED the returns on DBC; as of today gold would've turned a thousand dollars invested on January 1st 2006 into $3518; DBC would've turned that same $1K into all of <<checks notes>> $540. DBC especially did badly vs gold during 2008 which if there was ever a year where diversification was called for when anything stock-related was getting pummeled....2008 was it

If you wouldn't write DBC off for that (and you shouldn't....the period from the mid to late 2000s to 2020 was by a large a period of low inflation where unexpected inflation repeatedly failed to materialize...exactly the sort of environment where DBC wouldn't shine and wouldn't be expected to come to the rescue of a portfolio; you don't hate on an asset class for not doing well in exactly the kind of environment it was never expected to do well in and where it wouldn't NEED to shine and do well in because in that kind of environment both stocks and bonds would be providing decent real returns--which is exactly what happened in this period--with the exception of 2008 when stocks sucked; DBC would instead be expected to shine in a period of moderate to high growth with high and/or accelerating inflation which was exactly what we've had in 2021) for its performance from, say, 2006 or 2008 to 2020 then why would you write gold off for having one (slightly and mildly) lousy year?
I just used DBC as an example but I don’t hold the ETF.
I write gold off because I hold it for unexpected inflation which we now have and gold’s response it to decline even with stocks down handsomely too. Even if it went up 100% from here it would still have been a mistake to hold it for 10 years. I used to feel smart about holding gold but now I feel dumb and duped by so called experts on this forum.

The PP investor is living on a healthy dose of hopium with 25% allocated to an asset that no one cares about anymore.
I don't hold anywhere near 25% gold but I do hold some.

I just don't understand why you are complaining that gold is down today while US stocks are down too. Indeed it is...and guess what? So are TLT, BND, DBC, VXUS, and most other portfolio diversifiers. One of the few things that (as of right now) still is up for the day is deep value stock ETFs like RPV....but knowing you my guess is that if you held one of them you'd have been complaining during all the times during 2007 to 2020 that they underperformed both the broad US market, the S&P 500, and LCG growthy tech ETFs like QQQ.
Easy answer...none of the other holdings I own are supposed to respond to unexpected inflation like Gold. All the other assets I own are up > 20% YTD except for ITT’s so why would a single day bother me at all. They are meeting my expectations while gold is NOT!!

REITs are down 1.7% and I expect them to do well during inflationary periods and guess what I’m up 37% still in my real estate fund.
Last edited by buddtholomew on Tue Dec 14, 2021 12:22 pm, edited 1 time in total.
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 12:20 pm

buddtholomew wrote:
Tue Dec 14, 2021 12:08 pm
D1984 wrote:
Tue Dec 14, 2021 11:52 am
buddtholomew wrote:
Tue Dec 14, 2021 8:34 am
Cortopassi wrote:
Tue Dec 14, 2021 8:27 am
buddtholomew wrote:
Tue Dec 14, 2021 8:14 am

But why? Gold isn’t doing anything for you.
But it is. Peace of mind. I don't have to have the top % return in investing.
Your peace of mind is a false sense of security and built on quicksand. There is nothing special at all about the PP and it has proven once more this year that Gold is a useless diversifier. Anything tied to inflation (eg DBC) is beating the pants off the metal. Nobody cares about gold anymore and it shows.
And pray tell, how did gold do vs DBC (or rather its underlying index since DBC didn't exist that far back) all the way back to, say, 1985? The two were virtually identical; DBC would've provided a CAGR of 4.68% from 1-1-85 to 12 PM on 12-14-21 while over the same period gold would've provided a CAGR of just a hair over 4.57% (FWIW an annually rebalanced portfolio of 50/50 in both would've done significantly better than either and would've given a CAGR of just shy of 5.39% with a lower standard deviation of returns than either asset alone).

Before you say, yeah, but that's years ago....how has gold done vs DBC recently? Well, in 2021, not so hot....it lost 5.3% while DBC was up 37.62%. On the other hand, from 1-1-2006 to 12-31-2020 gold's returns absolutely KILLED the returns on DBC; as of today gold would've turned a thousand dollars invested on January 1st 2006 into $3518; DBC would've turned that same $1K into all of <<checks notes>> $540. DBC especially did badly vs gold during 2008 which if there was ever a year where diversification was called for when anything stock-related was getting pummeled....2008 was it

If you wouldn't write DBC off for that (and you shouldn't....the period from the mid to late 2000s to 2020 was by a large a period of low inflation where unexpected inflation repeatedly failed to materialize...exactly the sort of environment where DBC wouldn't shine and wouldn't be expected to come to the rescue of a portfolio; you don't hate on an asset class for not doing well in exactly the kind of environment it was never expected to do well in and where it wouldn't NEED to shine and do well in because in that kind of environment both stocks and bonds would be providing decent real returns--which is exactly what happened in this period--with the exception of 2008 when stocks sucked; DBC would instead be expected to shine in a period of moderate to high growth with high and/or accelerating inflation which was exactly what we've had in 2021) for its performance from, say, 2006 or 2008 to 2020 then why would you write gold off for having one (slightly and mildly) lousy year?

Someone defend gold and its response to these inflation figures...I bet you can’t and deep down you feel the same way about gold that I do.
Gold doesn't ALWAYS do well in years of high inflation (why would you think that it always would?). It lost money in 1969, 1975, 1976, 1981, 1988, 1989, and 1990. If you wanted an asset guaranteed to do that (be guaranteed to go up when inflation was up), you should've been looking into I-Bonds or inflation swaps.

Gold is held as a non-correlated asset (non-correlated to both stocks and bonds) that TENDS to rise when inflation is high and real rates are low or negative. It tends to do this just like stocks tend to go up most years. Having a tendency to as a general rule perform a certain way doesn't mean it will perform that way each and every year.
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 12:25 pm

It’s unexpected inflation, not high inflation that according to the PP Bible motivates investors to buy gold.

Inflation readings are higher than ever and real rates are negative. What else does gold need to move? Should I wait until inflation is at 10% and bonds <1% to catch a bid. If that’s the case then gold is even more pathetic as an inflation hedge than I could have ever imagined. Real estate kicks it’s butt up and down the street all day.
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 12:38 pm

buddtholomew wrote:
Tue Dec 14, 2021 12:25 pm
It’s unexpected inflation, not high inflation that according to the PP Bible motivates investors to buy gold.

Inflation readings are higher than ever and real rates are negative. What else does gold need to move? Should I wait until inflation is at 10% and bonds <1% to catch a bid. If that’s the case then gold is even more pathetic as an inflation hedge than I could have ever imagined. Real estate kicks it’s butt up and down the street all day.
But here's the thing....we printed a bunch of money in 2019 and 2020 and still inflation was low and yet gold turned in two excellent years (18.43% and 24.61% which beat the pants off of inflation)...did it ever occur to you that perhaps people bid gold up those two years in anticipation of inflation from said money printing and that you got some of your "gold will probably do well in times of high inflation, negative real rates, and rampant growth of the money supply" gains in those two years instead? If you look at gold's returns from 1-1-19 to today (or even 1-1-20 to today) it has handily beaten inflation; if you held gold during this time period you did fine.

Yes, over the very long-term REITs, real estate, and stocks will likely beat gold but then again that's what most reasonable investors expect. You don't hold gold for its ability to produce huge expected real returns you hold it for:

1. A potential flight-to-safety asset

2. An uncorrelated asset to rebalance stocks and bonds and REITs and other assets against

3. An asset that USUALLY will TEND to do well in times of negative real rates and unexpected high/rising inflation ( "usually" does NOT mean "always"! )

If your total portfolio is up year to date then why are you complaining about one component of it?

Just curious---how long have you held gold?
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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 12:39 pm

That is my gripe ..real returns which are supposed to be what gold really seems to respond to as per Tyler’s article ,has been awful as real returns grow worse and worse on cash instruments.

I mean if not now , when for gold ? At least show us something in a move up ,right ?

I mean dbc commodities up 38% ytd , gbtc bitcoin up 11% ytd after a 31% drop , and gold is still down about 7% ytd despite the highest rise in inflation in 50 years
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 12:45 pm

mathjak107 wrote:
Tue Dec 14, 2021 12:39 pm
That is my gripe ..real returns which are supposed to be what gold really seems to respond to as per Tyler’s article ,has been awful as real returns grow worse and worse on cash instruments.

I mean if not now , when for gold ? At least show us something in a move up ,right ?
Exactly, the economic climate is primed for Gold to move upward. No one else but us will agree on this as they’re too invested in believing the 4 assets somehow protect you more than the conventional BH portfolio. The PP is more lost than it ever was.

@D1984, I have been holding since 2011 and selling over the last year or so. It’s quite possible that gold moved in advance of current unexpected inflation readings and if that’s the case there’s even less reason to hold it now.
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 1:12 pm

buddtholomew wrote:
Tue Dec 14, 2021 12:45 pm
mathjak107 wrote:
Tue Dec 14, 2021 12:39 pm
That is my gripe ..real returns which are supposed to be what gold really seems to respond to as per Tyler’s article ,has been awful as real returns grow worse and worse on cash instruments.

I mean if not now , when for gold ? At least show us something in a move up ,right ?
Exactly, the economic climate is primed for Gold to move upward. No one else but us will agree on this as they’re too invested in believing the 4 assets somehow protect you more than the conventional BH portfolio. The PP is more lost than it ever was.

@D1984, I have been holding since 2011 and selling over the last year or so. It’s quite possible that gold moved in advance of current unexpected inflation readings and if that’s the case there’s even less reason to hold it now.
Ok, now I can see how you might be a bit frustrated. You bought into gold near the very peak in 2011.

I don't think anyone expects that the PP (or indeed any portfolio with only 25% stocks) will do as well as a classic 60/40 or 70/30 or 100/0 stock/bond portfolio. That's absurd. One would of course expect that the portfolio with a higher percentage of "risk assets" like equities would do better over the long run.

What a portfolio like the PP (or GB, or Wellesley + 10% gold, or a barbell portfolio, or the Larry Portfolio) does that a classic 60/40 or 70/30 or 100/0 doesn't is protect you from steep drawdowns (which can be especially important if one is the type who might panic and sell in despair at what turned out to have been near the exact bottom) as well as minimize bad-sequence-of-return risk for someone who is retired and drawing down their portfolio.

I don't know if gold will do good or great or horribly next year in response to any inflation we do get; on top of that, I can't predict even if inflation itself will moderate or will stay at 6.9% or will increase; presumably if people begin to see inflation as truly "not transitory" and as likely to become embedded and stay then yeah, if real rates stay highly negative gold should eventually do well. I do know, however, that US stocks--especially the LCG ones that dominate the cap-weighted indices--have had a truly glorious run in the past eleven or twelve years and are now as richly valued as they were at any time other than right before the 2000 crash. Vanguard, JPM Chase, and Bank of America (none of which are alarmist permabears on US stock valuations like GMO or Hussmann are) are all predicting essentially nil to 1% in real returns for the S&P 500 over the next 7-10 years. On top of this, US bonds are at their lowest yields--and thus lowest expected forward real returns--almost ever. I don't know if the PP (or any other portfolio containing gold) will do well going forward; I do know that a classic BH 60/40 or 70/30 is about as richly priced as it ever has been and thus may have a few rough years ahead.
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 1:31 pm

vincent_c wrote:
Tue Dec 14, 2021 1:16 pm
D1984 wrote:
Tue Dec 14, 2021 12:38 pm
buddtholomew wrote:
Tue Dec 14, 2021 12:25 pm
It’s unexpected inflation, not high inflation that according to the PP Bible motivates investors to buy gold.

Inflation readings are higher than ever and real rates are negative. What else does gold need to move? Should I wait until inflation is at 10% and bonds <1% to catch a bid. If that’s the case then gold is even more pathetic as an inflation hedge than I could have ever imagined. Real estate kicks it’s butt up and down the street all day.
But here's the thing....we printed a bunch of money in 2019 and 2020 and still inflation was low and yet gold turned in two excellent years (18.43% and 24.61% which beat the pants off of inflation)...did it ever occur to you that perhaps people bid gold up those two years in anticipation of inflation from said money printing and that you got some of your "gold will probably do well in times of high inflation, negative real rates, and rampant growth of the money supply" gains in those two years instead? If you look at gold's returns from 1-1-19 to today (or even 1-1-20 to today) it has handily beaten inflation; if you held gold during this time period you did fine.

Yes, over the very long-term REITs, real estate, and stocks will likely beat gold but then again that's what most reasonable investors expect. You don't hold gold for its ability to produce huge expected real returns you hold it for:

1. A potential flight-to-safety asset

2. An uncorrelated asset to rebalance stocks and bonds and REITs and other assets against

3. An asset that USUALLY will TEND to do well in times of negative real rates and unexpected high/rising inflation ( "usually" does NOT mean "always"! )

If your total portfolio is up year to date then why are you complaining about one component of it?

Just curious---how long have you held gold?
I don't know how you have so much energy to keep trying to debate those two. I think there is a lot of confusion about what drives the price of gold and I think you do understand when you say "usually" and not "always". The way I think about it is that gold's role in the PP allows the entire portfolio to capture the average effect of gold that over time tends to respond to negative real rates.

Again, I don't think those two will ever understand these things.
“Usually”, “sometimes”, don’t you mean “never”.
You’re right, we’re so dumb that we can’t digest these wishy-washy terms even though I’m retired at 46 after investing in equities for the last decade.

Gold is about as useless as I thought it was and unfortunately I listened to people like yourself (who I thought were experts) and invested. Funny they didn’t use terms like “usually” and “sometimes” when explaining the PP’s construction. Easy cop out.
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Re: The GOLD scream room

Post by D1984 » Tue Dec 14, 2021 1:58 pm

buddtholomew wrote:
Tue Dec 14, 2021 1:31 pm
vincent_c wrote:
Tue Dec 14, 2021 1:16 pm
D1984 wrote:
Tue Dec 14, 2021 12:38 pm
buddtholomew wrote:
Tue Dec 14, 2021 12:25 pm
It’s unexpected inflation, not high inflation that according to the PP Bible motivates investors to buy gold.

Inflation readings are higher than ever and real rates are negative. What else does gold need to move? Should I wait until inflation is at 10% and bonds <1% to catch a bid. If that’s the case then gold is even more pathetic as an inflation hedge than I could have ever imagined. Real estate kicks it’s butt up and down the street all day.
But here's the thing....we printed a bunch of money in 2019 and 2020 and still inflation was low and yet gold turned in two excellent years (18.43% and 24.61% which beat the pants off of inflation)...did it ever occur to you that perhaps people bid gold up those two years in anticipation of inflation from said money printing and that you got some of your "gold will probably do well in times of high inflation, negative real rates, and rampant growth of the money supply" gains in those two years instead? If you look at gold's returns from 1-1-19 to today (or even 1-1-20 to today) it has handily beaten inflation; if you held gold during this time period you did fine.

Yes, over the very long-term REITs, real estate, and stocks will likely beat gold but then again that's what most reasonable investors expect. You don't hold gold for its ability to produce huge expected real returns you hold it for:

1. A potential flight-to-safety asset

2. An uncorrelated asset to rebalance stocks and bonds and REITs and other assets against

3. An asset that USUALLY will TEND to do well in times of negative real rates and unexpected high/rising inflation ( "usually" does NOT mean "always"! )

If your total portfolio is up year to date then why are you complaining about one component of it?

Just curious---how long have you held gold?
I don't know how you have so much energy to keep trying to debate those two. I think there is a lot of confusion about what drives the price of gold and I think you do understand when you say "usually" and not "always". The way I think about it is that gold's role in the PP allows the entire portfolio to capture the average effect of gold that over time tends to respond to negative real rates.

Again, I don't think those two will ever understand these things.
“Usually”, “sometimes”, don’t you mean “never”.
You’re right, we’re so dumb that we can’t digest these wishy-washy terms even though I’m retired at 46 after investing in equities for the last decade.

Gold is about as useless as I thought it was and unfortunately I listened to people like yourself (who I thought were experts) and invested. Funny they didn’t use terms like “usually” and “sometimes” when explaining the PP’s construction. Easy cop out.
I believe this was addressed to vincent instead of to me directly but:

1. If you are retired at 46 (and/or were able to save up and invest enough to retire that early) presumably you either had a very high salary, ran your own business and it took off like a rocket, or else you were investing in something besides plain vanilla mutual funds/ETFs (i.e. you lucked out with some individual stock picks or with cryptos). As such, you already "won" and don't necessarily need an equity-heavy portfolio (not that you can't and shouldn't have one if that's what you want, though); given this, why do you come in here all the time to complain about gold?

2. If we get the scenario I outlined here ( viewtopic.php?f=1&t=12328&p=234431#p234431 ) which basically is that both bonds and US stocks do very poorly over the next 13-15 years, will your portfolio and your retirement still be OK? Because if US LCB equities return, say, 1.4% real annually on average (CAGR) for the next 15 years and bonds return, say, 0.3% real annually for that same next 15 years (which would leave a 65/35 returning around 1% real per year for this time frame on average) then it doesn't matter how well the thing does over the next 15-20 years because if you are withdrawing, say, 4% real per year then you will have withdrawn enough that when the eventual recovery does come there won't be a whole lot left to recover. This is especially true for a relatively young retiree like yourself; a 66 or 67 or 70 year old can perhaps roll the dice and chance that they will expire before their portfolio does even if they do get a bad sequence of returns the first decade and a half; a 46 year old has no such luxury. If you are withdrawing less than 2.8% or 2.9% or 3% real a year you will probably be fine and SORR is a lot less of a threat (as long as the next decade or so doesn't have a truly severe 50% plus down in real terms bear market like 1929-32, 1937-38, 1973-74, and 2008-09; having a vicious bear early in retirement can seriously hurt your SWR...especially if you quite possibly have 40-45 years or more left to live because you are an early retiree; likewise, if the "equity" portion of your portfolio isn't all in US LCB or LCG that might help as well.
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 2:40 pm

Gold >5% is unique to the PP as other portfolios hold a combination of stocks and bonds as well. Why would I complain about stocks and bonds when they continue to deliver, year after year?

The PP was selected for unexpected inflation protection and unfortunately it hasn’t delivered on those expectations. That’s why I complain about gold.

I do have a diversified portfolio but the $ I need to bridge the gap between now and 59-1/2 is in a taxable account with all of my Gold. That’s why it pains me so much to see it languishing and not keeping up with the inflation we are experiencing.

It’s almost laughable, but everything I track is beating gold today.
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 3:26 pm

vincent_c wrote:
Tue Dec 14, 2021 2:54 pm
buddtholomew wrote:
Tue Dec 14, 2021 2:40 pm
The PP was selected for unexpected inflation protection and unfortunately it hasn’t delivered on those expectations. That’s why I complain about gold.
Why do you not think it has worked then?

March 2020 we got a huge unexpected deflationary shock which initially hit gold negatively. Then afterwards the markets quickly repriced for all the inflation that it was expecting. Prior to the markets reacting, this pricing in of future inflation was unexpected to us investors.

The markets also started to price in the disinflation at a time when it was unexpected to us investors. I think your problem is a fundamental misunderstanding of the timing of when markets price in these things because I know you understand that gold reacts to unexpected inflation because that causes lower real rates if nominal rates aren't rising faster. Can you agree with this?
If Gold has already priced this in then that’s a pretty anemic response don’t you agree?
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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 3:29 pm

You would think with commodities dbc up 37% ytd , and oil , uso up 56% , gold would at least have turned positive ytd and not be down about 8%
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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 3:47 pm

Markets are telling us real returns on cash are growing more and more negative each month and only getting worse .

That is supposedly when gold shines ….no way should gold be negative ytd ….i can see it not going to the moon but certainly it should have had positive returns.

We have 50 year highs in inflation, a labor market getting insane wages , covid chaos , supply chain shortages on more and more and gold is down.

Like i said , if not now , then when ?
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Re: The GOLD scream room

Post by buddtholomew » Tue Dec 14, 2021 4:03 pm

It just falls on deaf ears MJ.
You’re right Vincent, it is what it is and right now gold is pathetically down 8% YTD.
Until that changes it will remain in the doghouse where it belongs.
We don’t have infinite investing horizons to wait for gold to respond and I don’t need gold when stocks and bonds are performing well.

Eh whatever man, continue to defend your investment philosophy, I know I did when I first invested in the PP. Maybe you should revisit it once more to identify the role gold plays in your portfolio.
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Re: The GOLD scream room

Post by Cortopassi » Tue Dec 14, 2021 4:09 pm

How about when the world loses confidence in the dollar and/or the Fed's ability to control things anymore? I know they have done a bang up job of kicking that can down the road for decades.

I am pretty sure we should bookmark this thread for 1/2/3 year review when, not if, the market finally drops more than a few percent. Will gold respond then? Probably not as you guys would want, i.e. overcoming all of the losses in stocks.

But if gold held steady, or lost 10-15% while stocks lost 50%, would you consider that a win for gold?

Or would you consider that crap for gold and a buying opportunity in stocks?
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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 4:13 pm

Cortopassi wrote:
Tue Dec 14, 2021 4:09 pm
How about when the world loses confidence in the dollar and/or the Fed's ability to control things anymore? I know they have done a bang up job of kicking that can down the road for decades.

I am pretty sure we should bookmark this thread for 1/2/3 year review when, not if, the market finally drops more than a few percent. Will gold respond then? Probably not as you guys would want, i.e. overcoming all of the losses in stocks.

But if gold held steady, or lost 10-15% while stocks lost 50%, would you consider that a win for gold?

Or would you consider that crap for gold and a buying opportunity in stocks?
If gold didn’t perform the function better than cash instruments did then yeah I would still call it a waste if stocks tumbled .

It seems to have this little niche window where it may react only we don’t exactly know what that window is .

Which is why I cut my gold to 5% of total liquid investments and went 5% into commodities and 5% bitcoin so about 250k in each riding herd over the rest which is in a conservative conventional portfolio. So I still hold quite a lot of gold in dollars but it is a low percentage of invested assets

So far commodities and bitcoin carried my golds sorry ass across the finish line this year making that group of hedging assets positive ytd as opposed to if I just owned gold
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Re: The GOLD scream room

Post by Cortopassi » Tue Dec 14, 2021 5:34 pm

Say you were a 50/50 gold/stock investor, starting in 2005. Really, just assume that.

What's your attitude on stocks and gold at the points I arrowed below? If it's not stocks are trash, gold is awesome, than what is it?

While I am cherry picking a timeframe (only because this is all the data Yahoo has) so are you guys! And you are generally picking micro length timescales. "If gold does not react 1:1 with inflation on a 24 hour timescale, it sucks!" kind of timeframe!

For a 16 year span, gold is almost even with SPY. And it looks volatile enough that you probably were able to rebalance a few times along the way and pull some profits off the table.

What am I missing?

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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 6:32 pm

Tyler did A nice article on the link between negative real returns and gold
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Re: The GOLD scream room

Post by mathjak107 » Tue Dec 14, 2021 6:35 pm

a
Cortopassi wrote:
Tue Dec 14, 2021 5:34 pm
Say you were a 50/50 gold/stock investor, starting in 2005. Really, just assume that.

What's your attitude on stocks and gold at the points I arrowed below? If it's not stocks are trash, gold is awesome, than what is it?

While I am cherry picking a timeframe (only because this is all the data Yahoo has) so are you guys! And you are generally picking micro length timescales. "If gold does not react 1:1 with inflation on a 24 hour timescale, it sucks!" kind of timeframe!

For a 16 year span, gold is almost even with SPY. And it looks volatile enough that you probably were able to rebalance a few times along the way and pull some profits off the table.

What am I missing?

Image
You said it , to find a time frame gold beat equites over the long term would take finding a specific year or years close to it . I mean that really would have to be the exception .

You could throw a dart and find starting years stocks beat gold it would be that easy.

Gold is not a growth vehicle…. It really takes an unusual circumstance. You may have a year here or there gold won but over many years it is so rare that moving a year or two away would change the entire time frame …

It is like gold beat equities the last 20 years but move a few years away and all other 20 year periods are equities winning.

To me it is like vegas odds for gold surpassing stocks over longer periods of time
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Re: The GOLD scream room

Post by Kriegsspiel » Tue Dec 14, 2021 7:01 pm

I wouldn't have wanted to bet on gold vs stocks back then. I think owning gold, stocks, and Treasuries at the same time works pretty good. Confidence that the PP will chug along with no curb stomps makes a VP of stocks/crypto/real estate no sweat.
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Re: The GOLD scream room

Post by dualstow » Tue Dec 14, 2021 8:27 pm

mathjak107 wrote:
Tue Dec 14, 2021 6:32 pm
Tyler did A nice article on the link between negative real returns and gold
Do you have a link? I saw this - https://portfoliocharts.com/2020/08/21/ ... #inflation
but I don’t think that’s it.

it does have the line,
But when real rates are very low or negative, gold does well because investors prefer not to lose purchasing power on a “safe” investment.
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