Government Shutdown equals Gold Decline?

[sophie]

These were questions not comments, but I do believe that gold is manipulated. Perhaps I am the only one and something unforseen is driving the price lower.

Aren't all the assets manipulated? I mean, we're talking about investing in a mixed economy with multinational corporations, heavy government regulation, and a central bank.

I apologize for trying to guess your state of mind. But my point remains, and I just don't think there's a good reason to be so distraught by gold's downward price movement today. You can't let day-to-day price movements drive you nuts.

If by chance the original question was meant to spur discussion in a different direction:

I don't believe the specific assets are being directly manipulated, for the simple reason that no one person or institution has the power to do so.  Even the Fed can't directly control Treasury yields.  Large institutions can, however, interfere with the economy to a degree that can influence prices, but what the results turn out to be, even they don't have any way to know.

It's part of the genius of Harry Browne that he chose four "pure" (meaning universal, large-scale) assets.  No matter what the manipulation attempt is, the portfolio will work exactly as intended - I truly believe that.

So I'm not too worried about the government shutdown, except that my submitted grant won't get reviewed on schedule and I'm REALLY glad I got back from my overseas trip yesterday :-)

[MediumTex]

If you figure the government spends about $1 trillion or so a year, that comes out to $2.7 billion per day.

What would you expect to happen to prices if you pulled $2.7 billion per day out of the economy when the supply of goods and service stayed the same?  Wouldn't you expect prices to fall, and by extension the price of inflation hedges to fall as well?

I predict that when (and if) interest rates start falling again, gold will start drifting higher as the "negative real interest rates" trade resumes.

We can say whatever we want about the role of the government in the economy, but when you've got $1 million+ people no longer receiving a paycheck that's going to take a bite out of consumption, which will create downward pressure on prices (depending on how long it continues), which is obviously not good for gold.

If 1 million federal employees lose one week of paychecks and their average annual pay is $50,000, that translates into around $1 billion of consumer spending every week that simply won't happen.  That's not a lot in an economy the size of the U.S.'s, but it's not insignificant either.

[smurff]

Stop watching the news for a month or two.  Don't check your portfolio for the rest of the year.  Just let some time pass and stop worrying so much about your investments.  I think you'll be pleasantly surprised to see that the PP works as advertised.

I calculate out my PP at the end of every quarter, and was pleasantly surprised to find that I had a nice gain on September 30 (even better on October 1) compared to June 30.  Some assets up, others down, as usual.  That was after doing what AdamA just suggested:  Ignored most of the news, quit peeking, stopped worrying.

There is a lot to be said for setting up and adding to the best portfolio you can think of and LEAVING IT ALONE.  (Meaning:  No trading in and out, no dumping/selling low on fear and backing up the truck/buying back high while under the influence of euphoria, no liquidating all to buy a Bentley, etc.)

[buddtholomew]

http://www.peaktotrough.com/hbpp.cgi

Returns for the PP are negative YTD. Do you have a different result?

[smurff]

The gain I reported was comparing the end of the 3rd Q to the end of the 2nd Q.  The peaktotrough.com site shows a +1.73 gain for an investment July 1 through September 30 (3rd Q).  And my PP is about 29% stock and 19% LTT--which has an effect on my outcome.