Do you think it would be wise?

[jonmulzer]

My opinion about gold.....it will be one of the next bubbles to burst. The price increases far outpace demand, inflation, weakening of the dollar, etc. It is all artificial. In the past few years some brokerage firms sensing the uneasiness with the financial markets started pushing gold with catch lines such as, "unlike paper assets, gold has never been worth zero" and other scare tactics. The historical evidence is that gold has over a thousand years increased in value in lockstep with the average of major worldwide currencies. With exception to the past decade it has retained its purchasing power. It has not gained, it has not lost. In the long-term it has an ROI just a bit less than your average CD. That is not to say that you cannot make money investing in gold, you can. I just hesitate to cause it investment, it is speculation and therefore gambling.

This growing demand for gold is purely artificial. It is very close to being like the open bridge financing schemes that hit the markets twenty years ago. There is nothing driving demand other than the brokers with their snappy sales pitches. They push gold, demand goes up, prices go up, they push it more, cycle repeats. It is as pure of a bubble as you can get, and it will pop. It is just a matter of when. My bet right now is that gold will continue to go up until we reach the bottom of this market. At that point, those who are ill-informed and heavily invested will have to sell off their gold to cover living expenses. It is likely to hit lots of people all at the same time and the last person standing when the music goes off will lose their butt.

That is my two cents. Perhaps a bit more.

[BobSch]

Had a chance to buy some gold in the early '70s when it was just a bit less than $100/oz. Anybody got a time machine...

[TB Roye]

Both LOML and myself have our CA state retirement(which is safe for now) and our Social Security + a small saving account and my Woodworking Credit Card. Both of us are a little worried but there isn't much we can do but ride it out. Of course if the Economy goes belly up, the we will be like everybody else, standing in the bread line.

Tom

[Rand]

A conversation with a friend this morning reminded me of this old post of mine.

How I wish I would have bought gold back then.

[pelligrini]

New construction 4br home in League City TX (Average, not my house as an example, but data from real estate research in my town...) Similar neighborhoods, schools, features, etc... In 1984 $40,000.00, current value of THAT house if kept up, $160,000.00, new construction of similar home in same area averages $200,000.00 (cost of living is one reason I put up with hurricanes). A casual glance shows that is 4-5 X higher...

I wonder what the 1984 $40K house is valued at today.

[Black wallnut]

A conversation with a friend this morning reminded me of this old post of mine.

How I wish I would have bought gold back then.

Where the heck did that "Like" button go!

[chopnhack]

Rand, the American economic engine, i.e. the corporations are doing really well. I believe someone else on this forum even mentioned recently that apple's net worth is more than the U.S. government's. Many companies are sitting on stockpiles of cash from having several great quarters of profits. You have to remember that many companies have learned how to trim their expenses to return to profit levels enjoyed prior to the recession, however, they are really not helping out our recovery much, IMHO because we haven't seen large increases in the work force or increase in pay which would stimulate the heck out of the economy (forget QE's and the failed marxist admin.) I will temper that with this, some companies are merging or making acquisitions, so that is a great sign. Keep the faith, if you sell out now, which I believe to be a temporary blip, (check out the oversold indicator of the sp500!) you stand to lose out on whatever profits you had. Unless of course your time horizon is near to use this money :-) GL

[sparkeyjames]

Speaking of economics, and gas prices and such silliness. I was watching the music video for the old song "Cruel Summer" by Bananarama recorded in 1984. The opening scene the girls are working in an old style full service gas station, and the price of regular unleaded gasoline was $1.489 (why the 9/10 anyway?). Let's look at this in perspective shall we?

This morning, gasoline at the Chevron station by my office, for regular unleaded was $3.699. Doing a little math comes up with...

$3.699 / $1.489 = 2.48... Rounded up 2.5. So effectively we are paying 2.5 times the 1984 cost... Do the math with other items that were new in 1984.

1984 Mazda 4cylinder SE5 regular cab pickup, MSRP $4,999.00
2008 Mazda 4cylinder SE5 regular cab pickup, MSRP $18,200.00

18200.00 / 4999.00 = 3.69..

Just some odd ponderings...

That's like comparing apples to oranges.

Oil is pumped out of the ground with essentially the cost of drilling a hole and running a pump. Hence oil is a raw commodity and are priced on the commodities market via bids for delivery contract for proscribed amounts. The price is also effected by just how much deliverable oil is currently in the market.
Cars are not a commodity. It takes far more man power and energy to design and make a car. Cars have become far more complex since the 80's as well. Adding substantially to the cost. Look at it this way todays cars and trucks are like rolling living rooms compared to the cars and trucks of the 80's.

[woodturner]

Hence oil is a raw commodity and are priced on the commodities market via bids for delivery contract for proscribed amounts.
...
Cars are not a commodity.

Just wanted to comment on the term "commodity". A commodity is a product that is priced largely based on supply and demand, with minimal regard for brand. A product does not have to be traded on the commodities market to be a commodity.

Oil is a commodity, as well as most consumer electronics. For example, one of the challenges Apple faces is trying to differentiate their product and sell at a premium in comparison to the commodity PC market - they have to convince the customer that their product offers measurable benefit in some way and is more than just a non-competitive commodity product. Computer memory is a definitely a commodity. Cars could be considered a commodity, at least for many people, but that's probably a little harder argument to make.

[ironhat]

How do you spend precious metals?

This is the question that has always haunted me. You might have a pretty tough time convincing the carpenter that your Krueggerand is worth what ever the going rate might be. How would anyone know that it isn't counterfeit? Or, should you go to a bank and have them assay it for you and exchange it for the current currency at the going rate of exchange for gold? Oh yea, a better scenario yet. You have some scrap silver, US coins. The rate of exchange is say, $3.25 for a quarter. Try to get Joe six-pack to go for that deal. I see the bank as the best deal, but that would probably stimulate a report to the Fed that there's a guy out there exchanging silver. So, did I cover it all or not?

[jackellis]

Rand,

I'm not sure I can add much other than to also suggest you not panic. Leave your money in the bank, or perhaps use some of it to buy stock in good, solid companies.

It's likely to be pretty wild when the market opens tomorrow (then again it may not). Just turn off the TV. Whatever the talking heads say, a credit downgrade isn't the end of the world.

[Rand]

I'm not panicking. The gold thing is just one of a list of things I thought might be good and didn't act on at the time. I thought that buying stock in Novell, Intel and Microsoft in the late 80's would be a good investment. I didn't do it and the Novell thing would have been a loser but oh how I would have liked to have had Intel and Microsoft. Woulda, coulda shoulda. Them's the breaks.

My strategy lately is to try to keep my portfolio at 50% cash/bonds and 50% stocks. Whenever it gets about 5% out of balance I sell or buy stocks to maintain the balance.

So when stocks go down I buy a little. When stocks go up I sell a little. This strategy is a built in way to buy low and sell high. It doesn't make as much money as timing the market perfectly but I (and most other people) am not good at that. It also gives a bit of protection because normally, when stocks go down bonds go up.

In this crazy market I'm thinking straddle options might be a good way to make some dough. Basically that's buying puts and calls on the same stock. If it goes up sell the call, if it goes down sell the put. If it stays flat you are screwed.

[parnelli]

A conversation with a friend this morning reminded me of this old post of mine.

How I wish I would have bought gold back then.

Arrrgh! Got all the way down here before I caught the date...

[parnelli]

Oil is a commodity, as well as most consumer electronics. For example, one of the challenges Apple faces is trying to differentiate their product and sell at a premium in comparison to the commodity PC market - they have to convince the customer that their product offers measurable benefit in some way and is more than just a non-competitive commodity product.

On that topic- I'm always amazed by the gas stations by my house. Shell, BP, Mobil all right next to each other. Nothing special about the location. There's another of each brand within say a mile at most. And the prices at these three are typically 20 cents minimum more than the ones down the street yet are always busy.

And yet people complain...

Crazier is that I've seen them vary by 20 cents from each other often as well. Yet it seems to have no impact on purchasing.

Good marketing leading to brand loyalty I suppose...

[cabinetman]

Given the turmoil and uncertainty in the financial markets do you think it would be wise to pull enough cash for a few months expenses out of the bank and stash it in a safe?

I would. What might happen is there will be a new printing of money, and you turn in five old dollar bills, and then you're given one new updated fresh one.

.