Comments on: Get a Life Loser

By: Ned S

Ned S — Thu, 09 Jul 2009 00:07:55 +0000

Ah, with Aussie RE you are hitting me where it hurts Julian - Smile! I have a personal bias towards that asset class. Although, yes, I think it is overpriced too. But then, as you say, just about everything does seem overpriced right now - Except credit maybe? And I don't personally want any of that. I guess I haven't set my own personal financial goals too high regarding this GFC thing - If I can limp out the other end of it (whenever that might be) with about 80% of my inflation/deflation adjusted income earning potential from assets intact (as opposed to even the $ value of the assets themselves) I'll regard myself as having done very well. I can certainly understand others hoping to do way better though. A lot of it comes back to one's appetite for risk. And what their real goals are.

By: Julian Tonti-Filippini

Julian Tonti-Filippini — Wed, 08 Jul 2009 15:47:42 +0000

Hi Ned, yes, 'relative' is a heavily hedged word. Relative to what? Relative to real estate in Australia, gold is cheap. Relative to history, gold is a little overvalued. Relative to the future? Then it depends on whether or not you think the worst is behind us (I do not).

I expect another crisis and another round of global deleveraging before this is over. In that case all assets (including precious metals and stocks of precious metal miners) are overvalued right now, relative to the future bottom.

Still, precious metals have an intrinsic value that is rarely factored into the price by markets and allows gold bugs to comfortably ignore valuation. Insurance. Precious metals can't go bankrupt. The same cannot be said for companies, currencies and governments.

By: Ned S

Ned S — Wed, 08 Jul 2009 13:37:53 +0000

You summed it all up very nicely Julian T-F. I'm not at all sure myself that precious metals are relatively cheap though - I certainly don't think gold is. 20% overpriced maybe? Rhodium and Platinum could be different. But these are very uncertain times. And gold CAN be expected to carry a bit of premium. If one had been acquiring it for a decade or two I can't see why they should be too panicked about adding a tad more on any significant dips though. That's hardly likely to break the bank. I'm even quite happy to sit on the little bit I bought as recently as 2005 - Which is comparatively high risk. But I wouldn't like to be converting the sum total of my worldly wealth into bullion right now - Smile!

By: Lachlan

Lachlan — Wed, 08 Jul 2009 11:15:19 +0000

The way I see things a hyperinflation is likely to be set off in a deflationary depression by people who have shown a preference in the past for inflationary policy (as is the case in the US). I'm sure thats the sole reason B.B thinks it likely. At this stage however its anybodies guess as to when this would likely happen. I reckon unlikely in the near term due to mortgage defaults and stocks depreciation.
The talk of increased QE measures is back again with deflation fears running amock. So there is no sign of a change in the mindset of the powers that be (US).
I would prefer a deflationary outcome to prevail free of any hyperinflation. From what I can see gold/silver is helpful for either scenario. However a hyperinflation will likely leave us all wretched and anything but rich.

By: Julian Tonti-Filippini

Julian Tonti-Filippini — Wed, 08 Jul 2009 11:06:43 +0000

While I am a gold bug, I don't follow the logic that we'll see a huge run-up in precious metal prices due to inflation. We *might* but it's no guarantee. Firstly, I see no clear evidence that there is any significant inflation risk in the short term. Long term, definitely, but in the short term, the inertia of credit destruction (debt defaults) exceeds the inertia of quantitative easing. It's hard for me to see serious global inflation before Q2 2012. Secondly, I see no guarantee that - in an inflationary environment - money will take flight to precious metals. Some will, but why not some other tangible asset? Tulips, bricks and mortar, stocks, deck chairs, who cares? A lot depends on what the media chooses to spruik. If you put your money in a bubble that is inflating faster than net inflation, great! A gold price bubble would be no different to any other bubble. We have had inflation non-stop for decades and gold wasn't the favoured inflation hedge. So why do people think it will be any different in the future? Why should precious metals become THE next big thing? Maybe it will, maybe it won't. I don't know because I can't predict the future, I'm just saying that people screaming "IT WILL GO TO THE MOON" and then crying about conspiracies by the BIS, IMF, Fed, etc, when it doesn't, should be a bit more realistic. I still recommend precious metals as a store of wealth, mainly because the quantity in the world is known and there is a definite floor to the price. They're safe and relatively cheap. But I have been a gold bug for years, long enough to see it as a lifestyle choice. Maybe I can even convince the Mighty Mogambo to see it this way one day...maybe.

By: Biker Pete

Biker Pete — Wed, 08 Jul 2009 10:50:18 +0000

Yep, I'm with Greg and Ned on this. The Zimbabwean analogy is something to think about... ! :0

By: Ned S

Ned S — Wed, 08 Jul 2009 10:44:42 +0000

Sam - Apart from my usual Yeh, I doubt it, Maybe, But thoughts I was going alright with your comment until I hit the last 6 words. Seriously! There is no way that holding bullion during a hyperinflation can make you wealthy - Trading it a lot when other people are panicking about one just could - If you are a skillful trader. But holding it, No, it doesn't work like that - At best you might be able to hope to swap it for a similar amount of useful stuff to what you could have bought with it before the hyperinflation hit. (Even that is real doubtful - In hyperinflations there typically isn't much useful stuff around.) But just assuming that you can, that hardly equates to some sort of wealth creation scheme.

By: Greg Atkinson

Greg Atkinson — Wed, 08 Jul 2009 07:46:05 +0000

Well Sam they pumped a lot of money into the Japanese economy over many years and hyperinflation was never a problem. By the way if hyperinflation does become a problem who exactly do you think will buy your gold? Do you think people in Zimbabwe have been using their precious wealth to buy gold?

By: Sam

Sam — Wed, 08 Jul 2009 06:03:14 +0000

Inflation, Deflation and the next thing to expect would be hyperinflation due to the trillions of dollars being printed out of thin air and pumped into the economies. Yep, I am also glad I'm into gold and silver because if an economic collapse turns hyperinflationery gold and silver are going to the moon and those holding gold and silver then could become very very wealthy indeed.

By: harry

harry — Wed, 01 Jul 2009 14:11:28 +0000

couple of points id like to make ,
yes big ticket items may fall in price food i dont think will but one thing i know for sure charges for utilities are going up and fast .also the cost of council rates and the like , just paid my mooring fees increase from last year 25% plus .local and state govenments are broke and going to come after you for the short fall whether it be through rates or things like speeding fines etc ...the reason i cant see food going down is fuel costs and the greed of the multi national companies greed . our $ sits at around 80c to the us $ yet petrol is $1.30 a litre .all the counties we export to are cutting back or going through major downturns that equates to less exports from here and lower prices for what we export so less income for the govenment .so before you cheers for the little aussie battler ( bleeder)think again.
on the topic of bullion it getting harder to find and more expensive to get out of the ground ... bullion doesnt change at all the currencies fluctuate . paper trading of bullion keeping the price suppressed but the day will come when people will realise that we rely on bullion for many everyday things and there aint enough to go around .till that happens i sleep well knowing i have the stack i do. its certainly doing better over the last 10 years compaired cash in the bank .or the stock market for that matter . cheers for taking the time to read this.. Harry