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   Investment Thoughts - Markets in History

Gold in Perspective
"There is no doubt that violating Federal Law and holding gold would have underperformed a diversified portfolio of stocks. However, the appropriate comparison is what cash, net of income tax, would have returned over this period. And here again calculating that is trickier than one might expect, because hundreds of banks failed in the 1930's and there was no FDIC insurance. And the Treasury didn't begin auctioning Tbills until 1929!"

 

 

 

I see I can buy a 1924 mint condition GOLD double eagle for $1,300 on ebay.

Had I invested that $20 in 1924 until now at 5% I would have $2,060…at 7% 12,373..

 

Rocky Humbert writes:

 

I rarely post these days, but I think Larry's post need a rebuttal.

 

On January 22, 1924, the constituents of the Dow Jones Industrial Average were: American Can, Anaconda Copper, Studebaker, American Car & Foundry, Baldwin Locomotive Works, US Rubber, American Locomotive, Central Leather, US Steel, American Smelting, GE, Utah Copper, American Sugar, Mack Trucks, Western Union, AT&T, Republic Iron, Westinghouse Electric, American Tobacco, Sears Roebuck.

 

There was no way to invest in the index in 1924, and commissions were fixed and were likely to be more than 2% of the investment value. So, the odds of investing in a company that went bankrupt over the ensuing 90 years was significantly more than 50%. Additionally, it was illegal to hold gold from about 1933 to 1974….

 

There is no doubt that violating Federal Law and holding gold would have underperformed a diversified portfolio of stocks. However, the appropriate comparison is what cash, net of income tax, would have returned over this period. And here again calculating that is trickier than one might expect, because hundreds of banks failed in the 1930's and there was no FDIC insurance. And the Treasury didn't begin auctioning Tbills until 1929!

 

My point is not that gold was a good investment. My point is that the actual realized after-tax return that you would have gotten with the alternatives is also entirely unclear — except with 20/20 hindsight!!! So the best comparison would be, what is today's purchasing power of a US $20 bill that you stuck in a drawer versus the purchasing power of that gold coin… and I suspect the answer is that the gold coin did better than the $20 bill.

 

There is only one free lunch and that is diversification.

 

What? I can't use hindsight?? You spoil sports.

 

My one assumption is I would have rolled into all the new DJIA 30 stocks as they were added and subracted

 

 

Daily Speculations, March 6, 2019-Larry Williams, Rocky Humbert

06.03.2019


 

Themes

 

Asia

Bonds

Bubbles and Crashes

Business Cycles
Central Banks

China

Commodities
Contrarian

Corporates

Creative Destruction
Credit Crunch

Currencies

Current Account

Deflation
Depression 

Equity
Europe
Financial Crisis
Fiscal Policy

Germany

Gloom and Doom
Gold

Government Debt

Historical Patterns

Household Debt
Inflation

Interest Rates

Japan

Market Timing

Misperceptions

Monetary Policy
Oil
Panics
Permabears
PIIGS
Predictions

Productivity
Real Estate

Seasonality

Sovereign Bonds
Systemic Risk

Switzerland

Tail Risk

Technology

Tipping Point
Trade Balance

U.S.A.
Uncertainty

Valuations

Yield