Interesting, I had thought about it earlier to flip, I would never really hold on to it myself, at least at the moment. I had heard the same thing about Goldman, it wouldn't surprise me the least if it did.

 

i think its a sign we might go back to the gold standard and a return to a Bretton Woods style economic model.

 

This is a good thing. You cant run a successful economic system with a currency thats based on virtually nothing. What weve done is have our money based strictly on the flow of credit. And when has run dry weve tried to create credit out of thin air and of course that doesnt work.you have to actually make stuff too. we dont make anything anymore, at least were not leading many fields as we used to.

the government clearly cant create credit out of thin air. what the government can do is create demand. since we cant get banks to lend money, we can create jobs by providing services and investing in our infrastructure as well as many other things that lead to creating jobs. thatll put money into the economy and create demand for goods. In turn, the demand generated will help companies' bottom line and stock grow steadily, and as those business sell more stuff, credit will be created because demand for loans will increase and banks will have the deposits to cover them because business will open bank accounts to pay back those loans. Whola, econonic 101 in a nutshell.

 

problem is the private sector is not hiring because THERE IS NO DEMAND. once the government start hirings and people put money into the economy, private business will kick up and start producing more jobs once their profits begin to rise and loans will then be taken out and credit will be flowing again.

youre worried too much about inflation. funny thing is, with the dramatic drop in gas prices, inflation went way down with it, and were now down to historically low levels of inflation. i dont think inflation is going to be a problem for a while now, deflation is actually a much more serious problem, and could lead to a depression if we dont act to create jobs.

 

what about all those jobs the government created during and after world war 2?

didnt seem imcompetent to do so then, in fact, helped lead to the feldging middle class we have today.

unless you want to believe all that economic development during that time came out of the thin air.

 

I disagree. if it worked then, and still works for other countries, it should work here and now.

 

That too it risky... What happened was the people where living above their means and created HUGE amounts of debt. That was great for our economy then, but now people are trying to pay off their debt its killing our economy. That was a major problem with a previous stimulus package, a lot of people just used that money to pay of some of their debt and since they didn't buy a lot of stuff it had no real effect on the economy.

The problem is businesses and people have gotten used to living above their means and now that they are paying for that its killing our economy.

Anyways, As far as the buying gold part I told my parents to turn all of their money and free assets into Gold about 4 to 5 months ago. After I explained why they gave me that look like I was too smart for my own good and passively agreed that they "should" do that (but of course they didn't). If I was them I would have done it, but seeing as I am only 20 and only have about $2,000 in the bank (with no debt :up:) it wasn't worth it for me. Looks like they are going to regret it when the prices of gold skyrockets... or even more if our economy gets totally out of whack how it did in Germany many years back.

Looking to the future though (when [IF] our economy gets back in good shape) we could see a huge decrease in the price of gold when all these people stocking up on it decide to sell it. When that happens buy!!!

 

A lot of studies that have been done recently have shown that a lot of the programs and things FDR did in the Great Depression actually made the Depression last longer and more sever.

I honestly think the government should stay completely out of this. The Private Sector always sorts it self out in the end. In a free market the government is supposed to underspend in great economic times and then overspend their budgets during times of a slow economic. Problem is our gov't has been consistanly overspending they dont have much money to help us out now.

Padre31 is very right as far as the population being really high.

I hate to be a doom and gloom person, but the thing that brought us out of great depression before was a World War. I don't know if we have or will reached that point yet, but it is something to keep your mind on.

 

Problem is that last year Gold was over $1000 and not coming down, 4-5 months ago it was at its last high but then dropped to $750 just before the market correction, then bounced back up to around $900 and then in Oct it dropped to just over $700 and has now slowly gone back up to $941 where it is currently. Even today it started off at $915, went down and is now up to the $941 mark. Gold hasn't gotten back to where it was last year.

Now obviously neither has the stock market, not even close on that side but as an investment, gold doesn't pay dividends, you are liable for Capital Gains tax on it, though there is no sales tax on gold coins as they are legal tender. Though this is on the honour system, most legitimate sellers and buyers of gold will report the purchases and sales to IRS, so there is a loose tracking of your gold purchase.

I use for my mid term cash, vehicles like Ultra Short Muni bond funds, even if they are made up of multi state muni bonds they are still Federal Tax free. One I have used this last year has paid an average dividend of 4.2% fed tax free. Far better than cash and has returned more money to be reinvested than gold has and has a better value.

Now if we all had hindsight and made a long term purchase of gold back at the turn of the century in 2000 when gold was $300, then we would all be sitting pretty. I certainly wish I did.

So to think about making a long term purchase in gold, then you have to be convinced that Gold which is at its highest mark for over 20 years (was at aprox $400 in 1/89), is going to continue to gain better than inflation over the next 20 years. Usually when most people are buying, I am trying to sell, so I am hedging that gold will come down before it goes up like that.

In the short term Gold might be a good option, say 12-18 months but there are other options out there that I think will have better returns at less inflation risk and having all your money in gold is just plain foolish IMHO as diversification is the most important thing in a portfolio.

 

Of course that is timing, and that is why I said hindsight, market timing is next to impossible and left to gamblers. However if you purchased at 1000 last year or $950 last year you would still be showing a loss today.

Of course that CGT occurs on a sale, but to make money on it, you have to sell at sometime and you said Gold is Tax Free, but it is not tax free either.
Is gold going to keep up with inflation? It is at a 20 year high and has shown huge volatility the last 12 months, and to put your money in and hope that it is going to keep rising is a big risk too. It is only in the last 3 years that gold has had its meteoric rise. The 18 years before that it hovered around $350, so it was severely trailed inflation and suffered huge infaltion risk. No one knows that gold is going to keep rising, it could stay at $1000 for the next 18 years and pay no dividends and lose once again to inflation, or it could go up another 20% and then tumble once the market picks up and cash gets moved back into stocks. Guess what I bet no one will sell before it goes down, just like all the 50 yr olds and older I see daily who still have 80% and more in equities and are wondering whay they are being hammered.

Ahh, Muni Bonds are federal tax free,so a 4.2% return at a 30% tax bracket is equavalent to a 5.46 return. Right now Cash is paying on a 6 month CD, 1.3% (special initial rate renews at .65%!!), even brokered 5 year CDs are only paying 3.5% and they are fully taxable.

I didn't think you were selling it? :D

Why is there cap gains, only get that if the bond fund appreciates.

My Math :D: 4.2% on 100,000 =104,200, less 6% MN state income tax= $103,948. So you are getting an after tax return of 3.948%, which is far better than cash and if you live in a no state income tax state like Florida, GO DOlphins, even better! Also who the hell thinks inflation is 2.2% :chuckle:

So depending on how you timed the market you have done well or not even met inflation.

Merrill and others have had gold way above 1000 for over a year, and that was before it crashed last fall. The housing market was indestructible and was on its way up in 2008 said most analysts in Dec 2007, same was said for dotbomb stocks before the big pop.

Side note, Merrill Investment Failure Bank and their analysts are seperate, some really good analysts there.

The thing is, gold like any other investment, be it commodities, securities, bonds etc are all subject to market and maybe even inflation risk. My point to this, is right now puttin all your money into gold especially when it is at its 20 year peak, has risk. Now am not saying that part of your portfolio shouldn't be in gold or similar investmetns, that is part of a good diversified portfolio.

and the only way to get a good portfolio, is to sit down and find out what are you trying to do, what are you trying to accomplish in 5, 10 and 20 years etc, and build a plan for that, so that it takes the appropriate risk and not too much and not too little, you got to have risk. Otherwise in 5 years if gold is beaten all expectations and you are 90% invested in gold and the bubble breaks and you are holding it still, you will be ****ed.

**** if it is less than 12months then you had better get out of gold before too long. I personally I see the market recovering in 9-12 months and the exodus into cash to continue for about 3-6 months after it, when after we have seen the market rise 30%, all of the amateur investors come flooding back to it as they do predictably too late.

Now I really need to get back to work, before I have to convert all my money oil so I can pay the heating bill lol!

 

gold is a horrible long term investment. That's all I'm going to say about that.

My mom bought a bunch at $300 btw.

 

It's already appeared.

 

yeah, she would have if she sold at the top like I told her. but nope, she going to keep it lol.

But as I said, gold is a horrible long term investment. In order to reach its 1980 high, it would have to reach over $2,000. Name any investment with such a horrible long term performance??? Sure you can pick a small pocket here and there (a few years ago being one of them) where gold was a good investment. But that's with anything. Gold is still below its high of a couple of years ago.

If you have a little bit of cash and want to time the gold market, fine, only if you have enough money in your portfolio for a sleeve for risky investments.

 

Nope, they won't. But who can argue, she bought it at $300. Plus, in vietnam for any large purchases you dont' talk money, you talk gold bars. Seriously. When speaking of a house, or car, it's always 50 gold bars, or 6 gold bars, etc. That's what she is used to, and she sticking with it.

Not one stock, but the stock market. You can invest in a variety of stocks, a few thousand actually, but most gold proponents say Buy Gold. One common promotion is that it's an inflation hedge, when historically it's been shown to be a horrible inflation hedge.



Gold is a crisis hedge. That's for certain. If you want to hold it for when you think a crisis coming, well ... you can make a ton of money if you know when a crisis is coming.

 

First off, if you look at the unemployment numbers, youll see unemployment declined from 1935-1936 from 14% to 9%, a rapid decreased in unemployment. During that time, GDP shot up simultaneously. The government was spending and juicing the economy with the New Deal programs. In 1938 FDR made deep budget cuts to stave off overspending, but unemployment shot up to 12%(+3%) thereafter. FDR's advisers saw this and told Roosevelt not to balance the budget and resume spending, and sure enough unemployment dropped to 8%(-4%) in 1941 just before the US entered WW2, so the economy was just beginning to recover before the US went to a command economy with full employment when the war started. PEople begun to move gradually out of the slums and into new suburbs/planned communities and farmers got rich from the government subsidies and moved off the land into the cities. Suddenly America had an aspiring middle class and its government was working for the people, by investing in them, and by investing in its infrastructure.

there is a reason why the Keynesian model was considered the main remedy for economic stablity and why so-called "free market policy" was abanadoned during the Great Depression and thereafter until Milton Friedman and his like pushed for influence on policy and got their wishes once Nixon was in office and dismantled the way the economy was set up after WW2.(See Bretton-Woods system).

Thats only part of the problem, a symptom even. The problems lies within the structure of the economy post-Vietnam.