[Tail Gunner]

(11-25-2013 01:55 PM)Sawyer Wrote:  

Taleb may believe gold is fragile because there is a possibility that it becomes a remnant of a disappearing world.

When things really go south, they're not going to go south for the elite. They'll be getting richer, trading via inside deals, jetting to exclusive enclaves. They will become more untouchable than ever. In this respect, holding ancient stores of value, and therefore ancient beliefs about the meaning of value, can be a negative mental anchor, and therefore fragile.

For those stuck to the old ways, who will remain in District 9, physical gold makes sense. If nothing else it will be valuable for trade: staples, bullets, housing.

Taleb believes gold is fragile because he believes the elite have the infrastructure to pull away this time, and he doesn't plan on trading gold for beans and shitting in the woods.

That is actually a very thoughtful reply.

I myself am not expecting a "Road Warrior" scenario, but a temporary scenario such as another Great Depression or a world in which most countries have economies similar to Argentina and Greece. Or the most plausible and inevitable scenario, where the U.S. dollar loses its status as the world's reserve currency.

I think that gold and silver would do well in such scenarios. They always do. They also make many people wealthy.

Your idea, however, is one plausible hypothesis as to why Taleb might think about gold the way that he does. But it does not explain away what would happen to the price of gold if even a few percent of bondholders or equity holders flee to gold and silver, instead of the U.S. dollar and U.S. treasuries.

[j r]

I think that Sawyer is onto it. Taleb is saying that you can't make your portfolio anti-fragile, because you have no idea what asset prices will do in the aftermath of a black swan event.

Better to focus on preserving capital with slow and steady growth, while focusing on making yourself anti-fragile. In other words, if the shit hits the fan, better to have spent this time acquiring human capital, connections, reputation, experience, etc. than burying gold coins in the backyard.

I'll write more about my opinions on gold and the dollar when I am in front of a real keyboard, but my main problem with gold as an investment is that it's purely a bet on price. It doesn't compound and it pays no dividends.

[DVY]

East germans (USSR occupied) used barter system. True antifragility. Trade was often conducted in vodka bottles and eggs. Currency was worthless and depreciated by the day/week.

I would listen to WestCoast. That being said my net-worth is still low, as all my income is towards paying off debts (student loans).

[Barada22]

Best idea I've heard yet DVY. Buy and stock up on bottles of liquor if you think shit will hit the fan. Liquor stores will be the first places robbed and looted and it will be worth far more than gold.

[Tail Gunner]

(11-25-2013 02:16 PM)j r Wrote:  

I'll write more about my opinions on gold and the dollar when I am in front of a real keyboard, but my main problem with gold as an investment is that it's purely a bet on price. It doesn't compound and it pays no dividends.

Believe me, I know exactly where you are coming from. I thought just like you, before I read dozens of books and hundreds of articles on the topic -- and then studied the historical price charts from many financial eras.

______________________________

BTW: my advice to the OP, a prudent portfolio if you expect a serious financial crisis consists of placing your cash into four asset categories, at 25% each:

1. Gold and silver -- and the stock of gold-and-silver intermediate-size mining companies (not juniors, unless they are seriously producing and not just exploring). The major producers are alright, but not the best.

2. Cash (if serious deflation occurs or for buying assets at bargain basement prices when blood flows in the street).

3. A handful of cream-of-the-crop Blue Chip dividend-producing equities. Companies with the likelihood of surviving, and even thriving, in any financial maelstrom. A company such as Johnson and Johnson springs to mind. When I say a handful, I really mean a handful. Only that many exist. Any more than that and you need to buy Swiss or German cream-of-the-crop Blue Chip dividend-producing equities.

4. Productive farmland, preferably in a foreign country.

The next crisis will almost assuredly be caused by the poor fiscal mismanagement of the world's nation-states. So, capital flight will most likely be from the bond markets, which is why I have not included them.

[svenski7]

thedude3737 Wrote:

Nice post but I slightly disagree on buying into the company you work for. By all means run the same stock analysis and don't buy in just for team spirit, but I bought into Starwood http://www.google.com/finance?q=NYSE%3AH...FMi1iALHVQ when I worked at one of their properties and they were offering a fantastic employee discount on stock back in 2008. My only regret is not having enough cash to buy more.

I almost wrote:

"Don't invest additional capital into your company unless you are part of the C-suite and truly understand the financials."

For example: You are COO of Microsoft and know that the company is able to secure new low interest financing to pay off higher interest short-term bonds. In this situation, you would be more than justified in doubling down on your investment (40-hours a week, retirement stock options and now individual brokerage account). Of course this would probably qualify as "insider trading."

If you work in the higher echelons of a great company, investing in your own stock would be a great way to build a concentrated portfolio.

[svenski7]

As far as gold is concerned:

I come from a gold mining town. A lot of good jobs come from the local gold mine and there are a lot of independent miners. The local coin shops do a lot of business. I've seen independent miners walk in and sell 100 ounces. People regularly barter with gold and silver. I've heard of people paying drinking tabs with gold nuggets.

I worked with a guy who I would term a "gold bug." Every time I talk to him on the phone he is harping on the big banks, fiat currency, fractional reserve banking, QE to infinity, JPMorgan shorting gold to suppress the price, Goldman Sachs buying all the silver futures for 100 years in the future, etc... He's right about most of that stuff. Most of that messed up crap is really going on, especially the money printing and fractional reserve banking (AKA banking casinos).

My gripe with gold is that it really hasn't historically appreciated in value. Gold has intrinsic value but if you "invested" in gold a hundred years ago, you would have slightly more than your investment in today's purchasing power. This is also considering the recent price of 1,500+/ounce. Now that gold prices have fallen, the historical investment would have realized a loss.

On the other hand, a solid portfolio in the stock market, or even just a SP 500 index fund, would have increased in value exponentially. This includes factoring in the Great Depression.

The gold bugs counter this by saying "gold is not an investment, its an insurance policy." Okay, I'm down with that. So let's talk about who ought to be buying this insurance policy.

Most Americans have some level of debt. We now have over $1 trillion dollar in student debt. Student debt never disappears, even after bankruptcy. In my opinion, debt is the modern form of slavery. As Einstein said, "compound interest is the most powerful force in the universe."

So why are so many people with car loans, mortgages and student debt looking at amateur investing with a brokerage account or buying ounces of gold? They have no business considering either of these.

Pay off all outstanding debt!

If you have a loan with a 9% APR, why would you buy a shiny gold metal that yields no dividends and gives no interest on account? I contend people want to stroke their coin and hold it tight, throw it in the safe and talk about it fondly around the water cooler.

You exclude 99% of the population when you disqualify those with debt. Those folks need to follow Dave Ramsey and start hammering away at those credit cards. Personally, I wouldn't buy into gold if my liquid assets were less than 50k. That excludes another 9/10% of the remaining 1%. So really only about .1% of the population ought to spend anytime thinking about shiny rocks.

Some contend that gold is safe from gov't hands. You might wake up and check your bank account to see that the bank defaulted or gov't withdrew all your money but the gold will be in your safe. Well, gov't has confiscated gold in the past (1933). Gold coins such as double eagles are technically US currency and can be recalled by the mint. If you are dead-set on gold, buy bullion without a gov't logo -- its cheaper and its not "issued" by any legal authority.

[johnwu]

This reminds me of someone I knew who was an asset manager for some eccentric millionaire. The millionaire just messed around all day, he inherited his fortune. The asset manager just happened to meet the guy some day. A good friend of mine became involved with them, who has excellent connections in industry.

Over 50+ good deals directly from his contacts found their way into their meeting rooms, not every idea is going to succeed, but out of 50 private deals from a connected source, you have to be able to find something in there.

To this day i'm not sure of any projects they've taken on, except funding their nearest pizza store.

The asset manager was so focused on not having any risk that he completely missed out of the opportunity to make a profit.

The only rule to investing is this:
Do not invest more than you are willing to lose.

[malc]

Why would anybody invest in developed government bonds now with interest rates being close to non-existant? Any bonds issued now can pretty much only go down in value interest rates are so low.

[Bill]

Is now coming the time to invest in Turkey?. Lira is getting cheaper.

[cardguy]

For the past couple of years the smart money has been buying worthless Cuban government debt.

http://www.cnbc.com/id/49437343

The idea being that when they renormalise relations with the rest of the world - they will settle their debts. Resulting in big profits.

It is my favourite investing idea. I first heard about it in The Spectator magazine about 2 years ago.

Apparently the US bought up Iraqi government debt before the Iraq war. And then made a big profit when the new government settled the debt. Seems an ingenious way of profiting from war.

[Tail Gunner]

(12-27-2013 12:43 PM)cardguy Wrote:  

Apparently the US bought up Iraqi government debt before the Iraq war. And then made a big profit when the new government settled the debt. Seems an ingenious way of profiting from war.

That sounds interesting. Do you have a web link?

People have been applying the logic to the Iraqi Dinar without any luck. I am curious whether debt is different.

[cardguy]

Check out the link I gave before.

http://www.cnbc.com/id/49437343

Below is an excerpt from above:

Quote:

Leadership change is frequently good for deadbeat sovereign bonds.

Iraqi debt, for example, traded at 10 cents for years during the period of U.S. sanctions against the country. After the U.S. invasion, a debt settlement was negotiated, and with past-due interest, bond holders received 32 cents on the dollar.

Liberian debt traded at 3 cents on the dollar in the 1990s. When former World Bank economist Ellen Sirleaf became president, the country bought back the debt at 21 cents—the high price due to substantial past-due interest.

When the U.S. embargo against Vietnam was lifted in 1993, Vietnamese debt appreciated 500% in five years. In Yugoslavia, after Milosevic was deposed and the embargo lifted, the country's debt skyrocketed almost immediately in September of 2000.

When holders of bonds make claims against countries for unpaid debt, they aren't just asking for the payment of the principal, they also make a claim for past-due interest or PDI. The longer the bond is unpaid, the more the PDI grows, through the power of compounding.

[cardguy]

The above seems like an interesting angle in terms of how the US might try and fund (and profit from) its wars. I am surprised that I have never heard liberals mention it.

[Closer68]

90% cash, 10% highly speculative........ So what would/could/should we do with the 10%?

[LeBeau]

For those who are interested in Taleb, barbell strategies, volatility plays, etc. check out interviews and writing by fund manger Jerry Haworth.

[cerodragon]

In my experience(still young but started since I was 14) thus far luck is a great factor in the stock market. Due diligence is good but I've doubled my money in the last 2 years from investing into people . Of course it small money compared to im sure people on here with 20k +. But I read that that average return a year is 11% but i've done 100% twice . Of course the game changes when you have more money and treat it as "your" money. I've learned from my father in his company; he invest company money and doesn't factor in this "self" factor and isn't as careful as this other manager and in the end his decisions ALWAYS work out better in the long run. You can say i'm doing the same and in a sense being reckless but results are results. I'm reading tons of books on stocks/ international stocks / short selling. Its helpful but so far none of its useful till I have a career or make a solid pay check where im satisfied with "11%".