[Vision2020] 7-25-2011: Gold hits fresh record high at $1, 623.49/oz overnight

[Andreas Schou]

Not quite. I'm simply arguing that a lot of people believe gold to be
the source of value, independent of its actual, practical uses. But
it's not. It's a good conductor, and it's pretty, and that's pretty
much all it's good for.

I mean, if the point you're trying to make is that if you buy
something before a bubble, you'll have made money when the bubble
reaches its peak, then I suppose I can't disagree with that. But if
you'd bought houses in 2003 and sold them in 2007, you'd have made a
tremendous amount of money, too. That doesn't mean that buying houses
is a good idea independent of market fundamentals.

-- ACS

On Wed, Jul 27, 2011 at 12:31 PM, Ted Moffett <starbliss at gmail.com> wrote:
> Schou is arguing, if I understand correctly, that gold is not a
> commodity like many others, with "intrinsic worth."
>
> He offers examples of investments he considers more wise than gold,
> pork bellies or molybdenum, and states "The problem is that the
> underlying belief leading people to purchase gold is false: it does
> not have intrinsic worth."
>
> I was merely pointing out the fact, which Schou did not refute, that
> investing in gold in 2008 and selling now in 2011, would give a "nice
> return."  I was not giving advice on current best investment
> options... Gold price could collapse next month, for all I know...
>
> Schou wrote:
>
> "Instead of being in a market where the price is determined by a herd
> of panicked, mattress-stuffing idiots, ..."
>
> If money can be made off a herd of panicked idiots, some will jump at
> the chance and laugh all the way to the bank...
>
> The examples in history are too numerous to bother listing...
> ------------------------------------------
> Vision2020 Post: Ted Moffett
>
> On 7/27/11, lfalen <lfalen at turbonet.com> wrote:
>
>> I tend to agree with you, although I am a neophyte as far as the markets are
>> concerned. Except for the hype, I do not see where gold is any different
>> than any other commodity.
>> Roger
>> -----Original message-----
>> From: Andreas Schou ophite at gmail.com
>> Date: Tue, 26 Jul 2011 13:56:56 -0700
>> To: Ted Moffett starbliss at gmail.com
>> Subject: Re: [Vision2020] 7-25-2011: Gold hits fresh record high at
>> $1,623.49/oz overnight
>>
>>> Ted --
>>>
>>> It's still not wise. There are a lot of people who will tell you that
>>> gold is a commodity of "intrinsic worth," which will retain its value
>>> even when the value of fiat currencies depreciate. That's not the
>>> case. But this widespread belief about the value of gold has led to
>>> its somewhat unusual pricing structure. Think about it this way:
>>>
>>> Because people believe that gold has "intrinsic worth," the price of
>>> gold as a commodity is essentially the sum of hedge positions against
>>> fiat currencies worldwide. When people are concerned about the value
>>> of fiat currencies, the value of gold goes up. When people are less
>>> concerned, the value of gold goes down. In that framework, then,
>>> purchasing gold is essentially just a hedge against fiat currencies.
>>>
>>> The problem is that the underlying belief leading people to purchase
>>> gold is false: it does not have intrinsic worth. Consequently, the
>>> value of gold is largely determined by people with a mistaken belief
>>> about what they're buying, and people who believe that others will
>>> mistakenly hold that belief. If you think the dollar will drop in
>>> value (and I don't think this will be the case, unfortunately),
>>> short-sell dollars rather than buying gold. Or buy something boring,
>>> like pork bellies or molybdenum.
>>>
>>> Instead of being in a market where the price is determined by a herd
>>> of panicked, mattress-stuffing idiots, you'll be in a market full of
>>> people who, wisely or unwisely, are trading on the market value of the
>>> good itself rather than their subjective beliefs w/r/t other peoples'
>>> subjective beliefs.
>>>
>>> -- ACS
>>>
>>>
>