War on Gold and the Financial Endgame

[Reub]

You can buy a bag of junk silver.  I've tried to have silver replace gold in the PP but it just doesn't work.

Year Silver Gold
1928 -1.03% 0.00%
1929 -15.42% 0.00%
1930 -32.38% 0.00%
1931 -7.88% 0.00%
1932 -16.45% 0.00%
1933 72.05% 56.36%
1934 24.49% 8.29%
1935 7.35% 0.00%
1936 -22.26% 0.00%
1937 -3.52% 0.00%
1938 -2.28% 0.00%
1939 -18.22% 0.00%
1940 -0.57% -1.43%
1941 0.86% 2.90%
1942 27.64% 0.00%
1943 0.00% 0.00%
1944 0.00% 2.11%
1945 58.04% 2.76%
1946 22.46% 2.68%
1947 -14.07% 12.42%
1948 -6.04% -2.33%
1949 4.71% -3.57%
1950 9.14% -0.62%
1951 10.00% -0.62%
1952 -5.34% -3.25%
1953 2.40% -8.27%
1954 0.00% -0.70%
1955 6.10% -0.28%
1956 0.99% 0.14%
1957 -1.75% 0.14%
1958 0.11% 0.00%
1959 1.67% 0.00%
1960 0.00% 3.55%
1961 13.02% -2.74%
1962 16.07% -0.42%
1963 7.84% -0.28%
1964 0.00% 0.28%
1965 0.00% 0.42%
1966 0.00% -0.28%
1967 59.32% 0.28%
1968 -5.49% 22.54%
1969 -8.01% -5.75%
1970 -8.82% -5.12%
1971 -15.31% 14.65%
1972 46.85% 43.14%
1973 60.32% 75.83%
1974 37.38% 66.15%

MG, it didn't work because there is only so much silver that can fit in one's mouth.

[bedraggled]

PS,

Good point.

MG,

Thanks for the info and the effort.  You do seem tireless.

You are appreciated.

[bedraggled]

MG,

Looking at your posted numbers, silver didn't do half bad.

What am I missing?

Thanks and remember this IS heresy!

[l82start]

there are "silver bugs" and they do have some predictions of humanity remembering silver was once money and returning to it in some SHTF economic future "coming soon"....  i personally believe the idea its ok to buy a small chunk of junk silver or 1 OZ bullion as a emergency set aside.. but i suspect as a VP play it requires a pretty deep and comprehensive understanding of the silver market (which has had some convoluted events and movements) and as a part of the PP it is a no fit..

[MachineGhost]

MG,

Looking at your posted numbers, silver didn't do half bad.

What am I missing?

Thanks and remember this IS heresy!

Silver doesn't act like gold when it needs to act like gold because it is too much of an industrial metal now; same with platinum and palladium (they are both interexchangeable for use in catalytic converters).  In other words, silver gets totally whacked in a deflation.  And there's no guarantee silver will respond in the same way as gold will when confidence in government is lost.

OTOH, back in the day, silver was the common man's currency whereas gold was mostly just sitting in bank vaults to settle bank to bank transanctions, nonwithstanding Wells Fargo and trains.  However, I did do many backtests with silver in place of or alongside gold and could not come up with a portfolio that didn't increase the risk beyond just gold.  So I think a single bag of $100 or $1000 face value junk silver coins is all that is prudent.  After legalization:

Year Silver Gold
1975 -6.57% -24.80%
1976 4.21% -4.10%
1977 9.21% 22.63%
1978 26.60% 37.02%
1979 434.79% 126.55%
1980 -51.86% 15.19%
1981 -47.39% -32.60%
1982 33.31% 14.94%
1983 -18.03% -16.31%
1984 -29.43% -19.38%
1985 -7.76% 6.00%
1986 -8.94% 18.96%
1987 26.89% 24.53%
1988 -9.72% -15.26%
1989 -13.78% -2.84%
1990 -19.63% -3.41%
1991 -7.93% -8.27%
1992 -4.94% -5.73%
1993 39.39% 17.68%
1994 -5.18% -2.17%
1995 6.02% 0.98%
1996 -6.70% -4.59%
1997 24.96% -21.68%
1998 -16.51% -0.48%
1999 6.49% 1.06%
2000 -14.17% -5.64%
2001 -1.42% 0.75%
2002 3.10% 25.57%
2003 28.17% 19.89%
2004 14.09% 4.65%
2005 29.56% 17.77%
2006 46.31% 23.92%
2007 14.51% 31.15%
2008 -26.90% 4.32%
2009 57.46% 25.04%
2010 80.28% 29.24%
2011 -8.00% 8.93%
2012 6.28% 8.26%
2013 -34.89% -27.33%
2014 -18.10% 0.12%

2008 is very telling.  The CAGR for silver since 1975 is 4.19% and for gold it is 4.07% but with half the risk.  Even back to 1928 the CAGR was 3.88% for silver and for gold was a theoretical 4.78% despite all the numerous flat periods of the latter.

[bedraggled]

MG,

Thanks.

Very helpful.

[yankees60]

Yeah, I've always really liked him.  I enjoyed his book with Kotlikoff, Spend 'til The End, in 2008.  I don't always totally agree with him, but he always seems to exude decency and common sense.  I'm really glad to see he is still kicking as I know he is getting up there in age.

Kotlikoff is still going strong.

https://kotlikoff.net/

Finished reading his latest book Money Magic yesterday. Which led me to reading the Bodie book I referred to earlier tonight. Also, led me to pulling off my shelf the above Kotlikoff book (Spend...) for near future reading.

[seajay]

MG,

Looking at your posted numbers, silver didn't do half bad.

What am I missing?

Thanks and remember this IS heresy!

Silver doesn't act like gold when it needs to act like gold because it is too much of an industrial metal now; same with platinum and palladium (they are both interexchangeable for use in catalytic converters).  In other words, silver gets totally whacked in a deflation.  And there's no guarantee silver will respond in the same way as gold will when confidence in government is lost.

OTOH, back in the day, silver was the common man's currency whereas gold was mostly just sitting in bank vaults to settle bank to bank transanctions, nonwithstanding Wells Fargo and trains.  However, I did do many backtests with silver in place of or alongside gold and could not come up with a portfolio that didn't increase the risk beyond just gold.  So I think a single bag of $100 or $1000 face value junk silver coins is all that is prudent.  After legalization:

Year Silver Gold
1975 -6.57% -24.80%
1976 4.21% -4.10%
1977 9.21% 22.63%
1978 26.60% 37.02%
1979 434.79% 126.55%
1980 -51.86% 15.19%
1981 -47.39% -32.60%
1982 33.31% 14.94%
1983 -18.03% -16.31%
1984 -29.43% -19.38%
1985 -7.76% 6.00%
1986 -8.94% 18.96%
1987 26.89% 24.53%
1988 -9.72% -15.26%
1989 -13.78% -2.84%
1990 -19.63% -3.41%
1991 -7.93% -8.27%
1992 -4.94% -5.73%
1993 39.39% 17.68%
1994 -5.18% -2.17%
1995 6.02% 0.98%
1996 -6.70% -4.59%
1997 24.96% -21.68%
1998 -16.51% -0.48%
1999 6.49% 1.06%
2000 -14.17% -5.64%
2001 -1.42% 0.75%
2002 3.10% 25.57%
2003 28.17% 19.89%
2004 14.09% 4.65%
2005 29.56% 17.77%
2006 46.31% 23.92%
2007 14.51% 31.15%
2008 -26.90% 4.32%
2009 57.46% 25.04%
2010 80.28% 29.24%
2011 -8.00% 8.93%
2012 6.28% 8.26%
2013 -34.89% -27.33%
2014 -18.10% 0.12%

2008 is very telling.  The CAGR for silver since 1975 is 4.19% and for gold it is 4.07% but with half the risk.  Even back to 1928 the CAGR was 3.88% for silver and for gold was a theoretical 4.78% despite all the numerous flat periods of the latter.

yankees60's post enticed a neco-bump post.

"The CAGR for silver since 1975 is 4.19% and for gold it is 4.07% but with half the risk" to me reads as similar geometric achieved in a independently different volatile manner, higher arithmetic. Blending multiple assets with the same/similar geometric expectancy but individually with high volatility - and combining multiples of such assets in around equal measure is inclined to see the collective total return of a higher geometric due to reduction of volatility (standard deviation). Seems reasonable/viable to include both gold and silver in a portfolio.

Consider equal amounts of land (house/home, price only), silver, gold, stocks (price only). Each of those might broadly be expected to yield 0% real, but each individually doing so in a volatile manner. Perhaps 0% real geometric with a 15% standard deviation, that implies a 1.1% arithmetic average. Equally blending all four is inclined to see the collective geometric (actual rewards) rise closer to the arithmetic average (1.1% real). Draw a 1% SWR from that and additionally you have imputed rent benefit from owning a home (the rent you'd otherwise have to find/pay), along with stock dividends, both of which were around 4% yields historically, so 1% each when weighted to 25% of the total portfolio value each. Multiple assets that help smooth down portfolio volatility, multiple sources of 'income' (imputed rent, dividend yield, SWR).

Doesn't seem unreasonable to me to include both silver and gold. Both after all used to be money. Gold one Pound sovereign coins combined with silver shillings in the UK for instance. Indeed you could even add copper to that (penny coins).

I see a historic higher annualized (reward), similar volatility (risk) from 50/50 silver/gold than the individuals alone. The 50/50 middle-roads for a while between the two, but then as deviations occur that tends more towards the upper (better) line of the two, and if extended out long enough that rises further to being above both the two individual lines.

For the PP however and gold is specifically selected for its economic correlations to the other assets economic conditions. Invalidates the warranty/insurance if some/all of that gold is replaced with alternatives such as silver. Backtesting (century+) however and I see broadly similar PP with the gold replaced with 50/50 gold/silver ratio to the standard PP. Comparable rewards. The version with silver/gold instead of just gold did up-step in 1979 due to a exceptional gain in silver that year (400%) but otherwise the ratio tended to broadly flat-line. On a portfolio volatility measure however and the gold/silver based version was less volatile than the standard PP. 7.7% versus 9.7% standard deviation differences. Such that the PP with gold/silver instead of just gold alone had the better risk adjusted reward.