Northwestern Mutual Makes First Gold Buy in 152 Years

[jpeyton]

Originally posted by: GeezerMan
One thing there are no stats for is the relation of gold and the U.S. dollar during hyperinflation. Hopefully, we don't get to find out.

Currently, the monthly inflation rate in the US is near zero or slightly negative. It's forecasted to increase steadily over the next few years to the 1.5-2.5% range, which is a fairly normal range of inflation for our country.

Hyperinflation, like the kind Zimbabwe is facing, is around 231,000,000% per month.

A lot of the "financial gurus" that urge you to buy gold and warn about hyperinflation are trying to do one thing: create a run on gold prices that will drive up their portfolio values. "Fear" is a great tool for driving up the value of goods; look at the price of ammunition after the right-wing warned gun owners about Obama, or the price of gas last year. The people who benefit are the industries fanning the fire: the ammunition suppliers and oil companies.

 

[jpeyton]

Originally posted by: LegendKiller

Originally posted by: GeezerMan
One thing there are no stats for is the relation of gold and the U.S. dollar during hyperinflation. Hopefully, we don't get to find out.

Because we've never had a period of hyper inflation, nor will we.

The only times we've seen hyperinflation were during times of war, when we didn't have a unified currency. During the Revolutionary War with the continental currency (which fell in value because we had no unified government to back it, and it was incredibly easy to counterfeit), and during the Civil War with the Confederate dollar (which fell to zero as the war drew to an end and the Confederacy lost).

 

[BoberFett]

Hyperinflation just seems to be a buzzword casually thrown around. Hopefully nobody is silly enough to think we'll truly see Zimbabwe style inflation.

However to a lot of people Carter style inflation would be a shock to the system after years of nearly free money, and is a real possibility.

 

[bamacre]

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: jpeyton
his new strategy is to hide money under the mattresses (which is essentially what buying gold is).

In times of coming inflation, no matter to what degree, it's always better to have gold under your mattress than cash.

Hyperinflation seems to be a worse-case scenario, but high inflation looks to be around the corner.

Actually, it has been shown that gold is a horrible hedge against inflation. If you had an ounce of statistical knowledge in your body it'd be pretty easy to explain why, but you don't, so I won't even try.

Maybe you should go back and read exactly what I said and what I was replying to. Or perhaps you are suggesting someone actually stuff cash under their mattress.

 

[imported_Lothar]

Gold has proven time and time again to be a worse investment than stocks.
If gold was such a great investment, why are Bill Gates, Warren Buffett, and Carlos Slim the richest people in the world?
The fact that he has stocks in his portfolio that lost 90% of it's value makes him more of an idiot.

And why the hell do people keep bring up "gold" when silver and platinum are even better metals? Makes absolutely no sense.

 

[GeezerMan]

Originally posted by: LegendKiller

Originally posted by: GeezerMan
One thing there are no stats for is the relation of gold and the U.S. dollar during hyperinflation. Hopefully, we don't get to find out.

Because we've never had a period of hyper inflation, nor will we.

Yeah, I would think that most people know we have not had hyperinflation in the U.S.
The Carter years were bad enough.

 

[Appledrop]

I do think that gold has the potential to go up a lot, especially given the $1000 psychological barrier it has wrestled with for the last year and a half.
you point out that over the years, the price of gold has fallen relative to inflation.
does this mean that gold is a bad investment for the future? Obviously not - past performance is not indicative, and if anything it would prove that gold has some "catching up" to do

 

[boomerang]

Originally posted by: Skoorb
I think a lot of hedge fund managers, investors, and bum pickers do think that some gold in a portfolio is good, but I suppose they argue about what percentage is. I plan on buying gold bullion. The bars will be next to my shotgun shells and canned goods because when the bombs drop it won't matter if I'm holding shares of GLD anyway. I need the real thing to barter for bandaids and non-ecoli-infected water.

You'll want a way to melt it down too. You'll want to be able to break it down into the smallest quantity that's reasonably possible.

Silver dimes would be even better.

If our country, or the world for that matter, reaches a point where we're forced to barter with precious metals, the investment value of those precious metals will be gone.

Disclaimer: I own no Gold or Silver.

 

[glenn1]

Originally posted by: GeezerMan

June 1 (Bloomberg) -- Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company?s 152-year history to hedge against further asset declines.

This is almost the textbook definition of a top for a bull run. When someone goes long on an asset that they've never previously owned in 150+ years, it means that there are no futher "reserve buyers" with uncommitted funds to continue the advance in prices for that asset.

 

[LegendKiller]

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: jpeyton
his new strategy is to hide money under the mattresses (which is essentially what buying gold is).

In times of coming inflation, no matter to what degree, it's always better to have gold under your mattress than cash.

Hyperinflation seems to be a worse-case scenario, but high inflation looks to be around the corner.

Actually, it has been shown that gold is a horrible hedge against inflation. If you had an ounce of statistical knowledge in your body it'd be pretty easy to explain why, but you don't, so I won't even try.

Maybe you should go back and read exactly what I said and what I was replying to. Or perhaps you are suggesting someone actually stuff cash under their mattress.

Or perhaps you should quit being an obfuscating retard and admit that you were wrong about gold. Any sane person would buy a shit-ton of stock certificates and shove them under the mattress.

 

[StageLeft]

Originally posted by: jpeyton
Text

The correlation between gold and the US dollar index (DXY) (the average of six major currencies vs. the USD) is minus 0.42 over the last two years, minus 0.44 over the last nine years and minus 0.28 over the last 17 years. A +1 correlation means perfect correlation (gold goes up, dollar goes up), a -1 correlation means perfectly anti-correlated (dollar goes up, gold goes down), and a 0 correlation means no correlation whatsoever. What the above tells you is that the widely held belief that gold goes up when the dollar goes down is not supported by the statistics: a -0.28 correlation is a weak correlation at best and is certainly within the normal volatility that these two date series exhibit.

So, in the US, M3 has gone up by something like 207% over the last 20 years while gold has gone up in USD terms by 58%. So has gold been a hedge against inflation over this time frame? Of course not - stocks have been a better hedge against inflation than gold, and property even more of a hedge than that.

I recall that when the last big inflation was in stocks didn't go up as much as they should have. I don't know why. Gold may not superbly hedge inflation, but it would hedge hyperinflation because at that point the dollar is worthless. I know many people in zimbabwe are back to trading in gold after the destruction of their currency.

If our country, or the world for that matter, reaches a point where we're forced to barter with precious metals, the investment value of those precious metals will be gone.

Sadly, you're probably right. It really will go toward things like medical supplies and food, even more than weapons, because it's just not going to do to go gallivanting around stealing/killing because you'll end up killed yourself.

BTW I don't own gold, either. I do have food, though. My main hedge against hyperinflation is my youth, health, and my house, which I would own free and clear if it happened, so it's not quite the end of the world.

 

[BoberFett]

Originally posted by: LegendKiller
Or perhaps you should quit being an obfuscating retard and admit that you were wrong about gold. Any sane person would buy a shit-ton of stock certificates and shove them under the mattress.

I agree.

GM is probably a good bet right now.