Comments on: Albert Edwards: Gold is Cheap http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 19:46:13 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: RodgerMitchell http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238823 RodgerMitchell Wed, 02 Dec 2009 19:03:28 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238823 Since the end of Bretton Woods in 1971, gold has had no relationship to the monetary base, so any comparison is meaningless. Further, gold is mostly a useless element, having no real value. The spike in price has nothing to do with utility or with money. It is a classic example of the "greater fool" theory. Eventually, people again will realize this stuff pays no interest and costs money to store, insure and ship -- a wasting asset. Would anyone like to buy some tulip bulbs? Rodger Malcolm Mitchell Since the end of Bretton Woods in 1971, gold has had no relationship to the monetary base, so any comparison is meaningless. Further, gold is mostly a useless element, having no real value. The spike in price has nothing to do with utility or with money. It is a classic example of the “greater fool” theory. Eventually, people again will realize this stuff pays no interest and costs money to store, insure and ship — a wasting asset.

Would anyone like to buy some tulip bulbs?

Rodger Malcolm Mitchell

]]> By: I made my bet Monday; the risks are just too high - Steve Cook on Disciplined Investing - InvestorsInsight.com | Financial Intelligence, Advice & Research / Investment Strategies & Planning for Individual Investors. http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238755 I made my bet Monday; the risks are just too high - Steve Cook on Disciplined Investing - InvestorsInsight.com | Financial Intelligence, Advice & Research / Investment Strategies & Planning for Individual Investors. Wed, 02 Dec 2009 14:40:01 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238755 [...] take on the value of gold--relating it to the US monetary base (chart):    http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/Politics  Domestic    My favorite liberal blogger on the latest CBO accounting [...] [...] take on the value of gold–relating it to the US monetary base (chart):    http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/Politics  Domestic    My favorite liberal blogger on the latest CBO accounting [...]

]]> By: Gregor http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238728 Gregor Wed, 02 Dec 2009 12:33:26 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238728 The conclusion is that gold is cheap, which does not neccessarily mean you should buy some. Maybe it will only get cheaper. Gold is also insanely expensive when compared to 1MB of computer storage, but that does not imply that the price of gold will fall. The conclusion is that gold is cheap, which does not neccessarily mean you should buy some. Maybe it will only get cheaper.

Gold is also insanely expensive when compared to 1MB of computer storage, but that does not imply that the price of gold will fall.

]]> By: IvoZ http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238712 IvoZ Wed, 02 Dec 2009 09:36:26 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238712 To all the "gold is a psycho play" guys: What about other "real" investments like equities? No effect of "con"-fidence there? How much of the moves are due to fundamentals? What is the role of perverse short-termism and myopia? How about predictable crashes vs. real discounting as mentioned by John Hussman? Any investment is at least 50% psycho play anyway and has become almost 100% based on "confidence building" and fake "green shoots" or "GDP growth" recently. Gold has had the role of bank reserves. When reserves are more than doubled in a short time, then be no surprised if gold doubles. I have seen studies that if gold is to be priced according to the level of reserves it could easily reach anything between $3000-$10000. This is not the first fiat money experiment in humany history, so be not surprised if it fails again. To all the “gold is a psycho play” guys: What about other “real” investments like equities? No effect of “con”-fidence there? How much of the moves are due to fundamentals? What is the role of perverse short-termism and myopia? How about predictable crashes vs. real discounting as mentioned by John Hussman? Any investment is at least 50% psycho play anyway and has become almost 100% based on “confidence building” and fake “green shoots” or “GDP growth” recently.

Gold has had the role of bank reserves. When reserves are more than doubled in a short time, then be no surprised if gold doubles. I have seen studies that if gold is to be priced according to the level of reserves it could easily reach anything between $3000-$10000. This is not the first fiat money experiment in humany history, so be not surprised if it fails again.

]]> By: RW http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238689 RW Wed, 02 Dec 2009 03:53:22 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238689 Try redacting the period from 1900 to 1971 when gold price parity with the dollar was strictly regulated by government (1971-75 floating but still pegged to gold) and then normalizing the entirely anticipated spring-back from restraint for the decade thereafter to 1985. Not a particularly impressive chart regardless of how you define "cheap." Gold is a psycho-play: If enough folks come to fear fiat currencies then more money can be made on the play but there is not enough gold mined in all of human history to settle a fraction of yearly global trade transactions much less global debt burden so any notion of gold-as-currency is simply absurd: It's a play, that's all; keep it tactical and keep it smart (oh hell, okay yeah, stash some coin in the locker along with the shotgun shells, beef jerky, sterile water and ky-jelly - things are getting weird out there). Try redacting the period from 1900 to 1971 when gold price parity with the dollar was strictly regulated by government (1971-75 floating but still pegged to gold) and then normalizing the entirely anticipated spring-back from restraint for the decade thereafter to 1985. Not a particularly impressive chart regardless of how you define “cheap.”

Gold is a psycho-play: If enough folks come to fear fiat currencies then more money can be made on the play but there is not enough gold mined in all of human history to settle a fraction of yearly global trade transactions much less global debt burden so any notion of gold-as-currency is simply absurd: It’s a play, that’s all; keep it tactical and keep it smart (oh hell, okay yeah, stash some coin in the locker along with the shotgun shells, beef jerky, sterile water and ky-jelly – things are getting weird out there).

]]> By: Adult Franklin411 http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238550 Adult Franklin411 Tue, 01 Dec 2009 22:09:26 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238550 Better Tralfamadore than Cthulhu. Course, the Vogons might show up at any minute so have your towels handy. Better Tralfamadore than Cthulhu. Course, the Vogons might show up at any minute so have your towels handy.

]]> By: How the Common Man Sees It http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238531 How the Common Man Sees It Tue, 01 Dec 2009 20:16:02 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238531 Why is it that gold haters almost always have more zeal (but not necessarily correctness) in their arguments than gold bugs? That is a puzzle of human nature that I'm going to spend many years thinking upon BTW, I finished reading the Sirens of Titan this weekend and what I said about this market being a Vonnegut market became even more so by the end of the book. Somehow I think this market is serving someone on Tralfamadore in some way or another ;) Why is it that gold haters almost always have more zeal (but not necessarily correctness) in their arguments than gold bugs? That is a puzzle of human nature that I’m going to spend many years thinking upon

BTW, I finished reading the Sirens of Titan this weekend and what I said about this market being a Vonnegut market became even more so by the end of the book. Somehow I think this market is serving someone on Tralfamadore in some way or another ;)

]]> By: superman2 http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238529 superman2 Tue, 01 Dec 2009 20:14:39 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238529 useless garbage-- gold is allways cheap acording to this. hard assets really has the momo useless garbage– gold is allways cheap acording to this. hard assets really has the momo

]]> By: Adult Franklin411 http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238510 Adult Franklin411 Tue, 01 Dec 2009 18:48:53 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238510 <i>One of the fascinating aspects of the past few months is <b>the lack of equilibrium thinking with respect to what happened to the trillions of dollars in government money that has been spent to defend the bondholders of mismanaged financial companies. Almost by definition, money given to corporations will show up most quickly as improvements in corporate earnings</b>, and then slightly later, as executive compensation. A few pieces came across my desk last week, hailing the ability of the corporate sector to bounce back from the recent economic downturn even though revenues have continued to suffer and employment has been steeply cut. Why is this a surprise? Where else could the money have gone? Labor compensation? It is truly mind-numbing that a moment after a temporary surge of trillions of dollars, borrowed and tossed out of a helicopter (though to specific corporations and private beneficiaries), analysts would hail a subsequent improvement in corporate results as evidence of “resilience.”</i> John Hussman, http://www.ritholtz.com/blog/2009/12/reckless-myopia/ One of the fascinating aspects of the past few months is the lack of equilibrium thinking with respect to what happened to the trillions of dollars in government money that has been spent to defend the bondholders of mismanaged financial companies. Almost by definition, money given to corporations will show up most quickly as improvements in corporate earnings, and then slightly later, as executive compensation. A few pieces came across my desk last week, hailing the ability of the corporate sector to bounce back from the recent economic downturn even though revenues have continued to suffer and employment has been steeply cut. Why is this a surprise? Where else could the money have gone? Labor compensation? It is truly mind-numbing that a moment after a temporary surge of trillions of dollars, borrowed and tossed out of a helicopter (though to specific corporations and private beneficiaries), analysts would hail a subsequent improvement in corporate results as evidence of “resilience.”

John Hussman, http://www.ritholtz.com/blog/2009/12/reckless-myopia/

]]> By: Clem Stone http://www.ritholtz.com/blog/2009/12/albert-edwards-gold-is-cheap/comment-page-1/#comment-238507 Clem Stone Tue, 01 Dec 2009 18:28:59 +0000 http://www.ritholtz.com/blog/?p=45090#comment-238507 Reminds me of those ads on TV: "The more you spend, the more you save!" Reminds me of those ads on TV: “The more you spend, the more you save!”

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