Category: gold

[21]long trough: Nsdq(17Y), SP500(7Y),gold,,

Posted on by tiger40490

 

Xp: equity mutual funds — about 3 out of 10 funds get stuck for 5Y+
Xp: Majestic Village

Q: how long was the longest trough in the Nasdaq100?
A: 17Y according to https://www.investopedia.com/timeline-of-stock-market-crashes-5217820 and https://www.macrotrends.net/1320/nasdaq-historical-chart. Corresponding trough was 7Y in SP500.

On the basis laid out in big-ticket items pre55, here’s a follow-up question:

Q: if the amount of money is not-neded (i.e. I don’t have a need for the amount sunk in), then Why did I hate long trough in a liquid asset like stocks and gold?

This quesiton underlies my deep-rooted subconscious resistance to long-term commitments such as endowments.

A: I need the sunk-in fund to provide more current disposable income (for better commute, enrichment programs etc), higher brbr buffer, exclub(?), windfall profit(?). I hate to have my fund locked up while giving up these optial but “nice” things

Reality check — most of the time the “not-needed” condition is not 100% satisfied i.e. I do have something of a “need” for the amount. This reminder is very relevant for gold, and also (not for long-trough) HDB home upgrade.

compare gold products #ETF

Posted on by tiger40490

Choices

  • ETF ..?
  • gold futures on Oanda .. daily costs eroding the position, so probably not designed for holding 60Y.
    • Around 1~1.5% pa daily cost. 11 Dec 2020 email has illustration.
  • coin .. default choice
  • bar — minimum 50g
  • jewelry — has some practical value if you wear it safely
  • gold certificate .. erosion : monthly costs

— mark-up for physical gold
Smaller amounts seem to have worse mark-up.

You can ignore the spread and focus on the ask price. You can always sell your gold somewhere else 🙂

Actually, for 1% – 10% mark-up, over the long term it doesn’t matter.

— bid/ask spread for in-house products (can’t be sold on the street)

— safe storage:
Physical gold is a challenge. See current income<0 i.e. rent

Non-physical gold products always involve some carry cost … inevitably.

zero-sum games, Productive_Asset[def] #bccy,gold

Posted on by tiger40490

I still believe that on the secondary market, stocks and bonds ain’t zero-sum games, because each of these products generate new wealth/profit out of thin air — NZSG[non-zero-sum games]

  • In contrast, I believe options and futures do not have such trends and therefore zero-sum. I would say for all of these derivatives, there’s no income generated out of thin air like bond coupons.
  • long-dated oil futures .. inflation-based growth asset. ZSG.
  • casino game .. Classic zero-sum game
  • bccy ..  speculative growth asset, related to inflation and FOMO. ZSG.
  • Rental rEstate .. productive asset. Also a speculative growth asset based on FOLB. People’s desire for better home is insatiable mostly due to FOLB.

A related concept is productive_asset — assets that generate  net-positive current payout

  • div stocks
  • rental rEstate having positive cash flow
  • coupon bonds, and short duration zero bonds
  • bank deposits

— stocks .. There’s a general trend of long-term appreciation. We can see the trend based on official closing price (fair valuation).

Many early stage hot tech stocks are not productive. They are speculative assets, driven by FOLB.

Dividend cashcows, are productive_asset. They can also be growth assets. Utility stocks, oil stocks, tobacco stocks, eReit.

Value stocks are still growth assets, (in theory) based on earnings growth.

— bonds + bond mufu .. NZSG. They are suitable for insurers, foreign reserves,

If, hypothetically, the bond coupon is so low as to be wiped out by transaction costs, then between the buyer and seller, this is a zero-sum game.

— How about physical gold coin? If you keep it at home for 50Y, then it is likely to appreciate. This likelihood is the same if the gold coin changes hands over the 50Y. Therefore, trading gold is not zero-sum game.

Fundamental reason behind the NZSG —  accounting_currency (denomination currency) inevitably loses value against gold. If two school boys trade marbles and cards it’s clearly a zero-sum game, but now they receive one point for each game and those points give them special privilege . Counting by the points the trading is NZSG.

gold .. inflation-based growth asset. ZSG.

Now, bbcy also generates no income, but is it an inflation hedge like gold?

 

 

Buffett favors stocks over gold/BTC

Posted on by tiger40490

— gold

  • “I have no views as to where it (gold) will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money, and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.”
  • “You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

— bitcoin:

  • “Bitcoin has no unique value at all,”
  • “You’re just hoping the next guy pays more. And you only feel you’ll find the next guy to pay more if he thinks he’s going to find someone that’s going to pay more. You aren’t investing when you do that, you’re speculating.”
  • “Stay away from it. It’s a mirage, basically…The idea that it has some huge intrinsic value is a joke in my view.” — However, the market, the regulations are changing.

gradually grow→.5→1%@NAV allocation2gold

Posted on by tiger40490

I keep track of the couple NAV. 5% probably means 100k.

Q1: So how many percent of that can be held in gold before age 50?
A: 1->2-5%. Remember gold ≠ a growth asset or an income source

— Q2: how would it change after that?
A: It can grow to 10% as I shift my focus to safer assets such as

  • HDB flat — is a safe asset despite the lease hold. I might downgrade after kids grow up, to increase gold allocation. At that time, will I find any motivation to do so?
  • blue chip dividend stocks — are safe assets but not as safe as CPF-life.
  • CPF-life? I still want to max out but not at 55, but at 65, despite the diminishing bequest

When we adjust our allocation, it’s important to keep an exposure to gold.

flight2safety #2021 stock crash

Posted on by tiger40490

— gold crash vs stocks crash
Current stock valuation is high, but gold is also high… not sure why.

If you fear stocks may fall, then you may buy some gold now, hoping for it to give you some profit in the anticipated equity crash.

— in a flight2safety, gold is stronger, more sought-after than USD
In covid19 pandemic, USD lost value against gold and other currencies, partly due to printing money.

gold∉Productive asset,but what@@

Posted on by tiger40490

http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart shows gold price for last 100 years, denominated in USD. Better disable logScale and inflation-adjustment. The TotalReturn chart is dubious because dividend reinvestment is not always possible. See my blogpost on compound return.

https://www.longtermtrends.net/stocks-vs-gold-comparison/compares DJ. Clearly gold isn’t a growth asset comparable to stocks. Gold underperformed U.S. stocks only in that country and over specific periods.

  • over 50Y, gold matched U.S. stocks
  • over 30Y, gold underperformed U.S. stocks
  • How about Japan stock index? Europe index?

Therefore, Gold can be considered a

  • wealth preservation asset …. a.k.a…. legacy asset
  • defensive asset … a.k.a….. crash-proof asset
  • defensive against long-term inflation and currency depreciation
  • long-term inflation-hedge asset
  • diversification asset

But gold is not a growth asset as properties and U.S. stocks. You are unlikely to grow massive wealth using gold. Few people expect to make money when buying insurance. If you by gold, don’t keep looking at its market value. Put it aside just as you would do with an insurance policy.

 

gold: CB holdings, production rates: some numbers

Posted on by tiger40490

 

— Central banks hold gold mostly as a supplement to OFR [official foreign reserve]. These assets are owned “ultimately” by citizens (not “taxpayers” [3]), but strictly owned by the central government. See other bposts.

[3] some tax payers are foreign nationals; some citizens have insufficient income and never pay tax, such as my kids and my dear wife.

  • CB of US: 8133 tonne, highest in the world [1]
  • CB of Germany: 3358 tonne, 2nd highest in the world
  • IMF: 2810 tonne, 3rd among CBs
  • CB of China: 1948 tonne[1], The IMF and gold.org data shows both total reserve and gold holdings of each country (excluding IMF). China is #1 in total reserve, #6 in terms of gold holdings. (myth: “China CB has the highest gold holding??”)
  • CB of SG holds about 153 tonne of gold as reserve [1]. See every S’pore dollar is backed by hard asset #
  • my two pieces of gold jewelry : 9.15 g + 1.85 g
  • most of the 5580 tonnes of gold held in the Bank of England vaults is held in custody, on behalf of central banks
  • LBMA vaults held 3870 tonnes at end of 2020
  • GoldChartsRUs.com chart shows ETFs held 2575 tonnes in LBMA vaults.

[1] according to 2022 data on gold.org

As of 2019, Out of aggregate total of 190,000 tonnes, 32,000 tones were held by top 40 central banks. S$80k * 190 Million kilos = S$ 15 trillion.

— allocation by industry.. Using earlier data, https://en.wikipedia.org/wiki/Gold_holdings estimated that out of the 187,000 tonnes,

  1. 49% is in jewelries,
  2. 19% in financial investments (bar/coins, excluding CB holding),
  3. 17% by CB (i.e. central banks) as supplement to ORF, around 32,000 tonnes
  4. 12% for industrial use of gold.

— US government site https://www.usgs.gov/faqs/how-much-gold-has-been-found-world?qt-news_science_products=0#qt-news_science_products

  • About 244,000 metric tons of gold has been discovered (not “produced”) to date
  • .. 187,000 metric tons historically produced, but some might be damaged beyond repair.
  • .. current underground reserves of 57,000 metric tons
  • All of the gold discovered thus far would fit in a cube that is 28 meters wide on every side.

— production rate: 3500 tonne/Y, excluding secondary sources (old scrap)

https://www.northernminer.com/news/global-gold-production-will-average-2-5-annually-from-2020-2029/1003821667/ cites a Fitch forecast.