What is the best way to save money?
- Thread starter Arcadio
- Start date
Gold? It's true it rise and falls, just like any commodity or currency, but it's looking good long term. I'm not talking about making a profit, just as ONE hedge against inflation.
Holding on to a range of foreign currencies (physical or forex) might be a good bet, as well.
Holding on to a range of foreign currencies (physical or forex) might be a good bet, as well.
dullard
Elite Member
- May 21, 2001
- 26,119
- 4,766
- 126
Most currencies inflate. So, just dropping dollars for another currency might not do anything for you. Of course, currencies inflate at different rates, so yes, there is a theoretical optimum currency. It is just that we can't predict that optimum very well. Also, the differences in inflation are usually minor and you'll be playing more with exchange rates than with inflation. And with the dollar being pretty low at the moment, you'll be buying foreign currency at a really bad time. Yes, you can always profit if you buy high and sell higher. That is just a lot harder to do than buy low and sell high.
That said, why do you think the dollar will be inflating? Historically, there has been very little correlation between government debt (even massive debt) and inflation. But, lets look at more recent data too. The year-over-year CPI (consumer price index) has recently DROPPED for the first time in 54 years. The drop last month was the biggest drop in 59 years. Dropping CPI is a sign of deflation, not inflation. If you look at a bigger picture, the 2-year gain in the CPI (from May 2007 to May 2009) was the smallest gain since the year 1965. While that isn't yet enough to show that deflation is happening, it certainly doesn't point towards inflation.
I don't have a crystal ball. But my best estimate is that the US dollar will have very little inflation (barely staying away from deflation) in the next 12 months. Heck, if we have deflation, you really want your money in US dollars.
Gold can be good, but on average you have to hold it for 30 years (gold moves on a 30-year cycle). Right now, you would be buying high and there is not much chance of it going strongly higher. It certainly may drift higher, but probably not by very much.
That said, why do you think the dollar will be inflating? Historically, there has been very little correlation between government debt (even massive debt) and inflation. But, lets look at more recent data too. The year-over-year CPI (consumer price index) has recently DROPPED for the first time in 54 years. The drop last month was the biggest drop in 59 years. Dropping CPI is a sign of deflation, not inflation. If you look at a bigger picture, the 2-year gain in the CPI (from May 2007 to May 2009) was the smallest gain since the year 1965. While that isn't yet enough to show that deflation is happening, it certainly doesn't point towards inflation.
I don't have a crystal ball. But my best estimate is that the US dollar will have very little inflation (barely staying away from deflation) in the next 12 months. Heck, if we have deflation, you really want your money in US dollars.
Gold can be good, but on average you have to hold it for 30 years (gold moves on a 30-year cycle). Right now, you would be buying high and there is not much chance of it going strongly higher. It certainly may drift higher, but probably not by very much.
I've concluded Australian Dollars will perform the best against US dollar inflation. You can buy through ticker FXA.
HardcoreRobot
Lifer
- Nov 7, 2000
- 16,403
- 3
- 81
iranian pesos
definitely not double cheeseburgers though, they recently had like a 20% inflation
definitely not double cheeseburgers though, they recently had like a 20% inflation
Correct. The R^2 for gold vs inflation is very poor compared to stocks vs inflation or other commodities vs inflation.
I think the biggest problem with gold is that it doesn't have any value, it doesn't represent anything at all. It has effectively no intrinsic value, no industrial value, no real-world value. It is nothing more than a momentum based market value bauble. If people suddenly woke up tomorrow and decided that shit was the new gold, gold would become worthless, it wouldn't even be worth as much as shit. At least you can burn shit for energy, something which you can't do with gold. Shit is also a good nutrient, unlike gold.
See what I am saying? The only thing gold has going for it is that it is relatively rare and people have prized it through history. However, there are more rare items on the earth that are valued less, mainly because nobody needs them.
Which is why gold is prone to boom/bust periods, the last time it was this high was in the early 1980s, when it reached about 900. Now it's back there, more than 25 years later, but guess what? Inflation adjusted that sucks.
When it comes down to it, invest in stocks that produce goods that people need and that have an inelastic demand curve. Goods that people will pay for no matter the price (low substitutions and high need). Those will be the ones that can pass on all of the inflation to consumers, keeping profit margins.
Whoa, gold definitely has value. Jewelry, for one, is valuable just because people value it but gold is also widely used in electronics.
And what exactly is jewelry? Nothing more than a bauble with no real value, it's a market based price set through psychological value. It's pure perception with nothing real to back it up, more or less like diamonds. (although diamond supply is constrained through artificial means)
Widely used in electronics? I'd hardly use "widely". The most that it extends to usually is for anti-corrosive coating to avoid oxidation and degredation of signal quality.
The vast majority of gold production (~89%) is taken up by jewelry (depending on source), the small fraction towards industry is tiny (~4%) and really not needed.
As someone mentioned earlier, treasury inflation protected security bonds are probably the best way to go if you just want to keep up with inflation.
Repeating what LK says, Gold does not have that much value. To me, the only reason why I would buy gold is if I think that is the mechanism fearful investors will run to in the case we do have massive inflation. But I would rather buy Ag related stocks.
nerp
Diamond Member
- Dec 31, 2005
- 9,865
- 105
- 106
Gold has been on a decline for a while now. My recommendation to begin shorting gold in February would have made you a tidy sum if you had the balls and the cash to make that play. Now it's time to watch the oil longs get stopped out by the floor traders. If anything, the air coming out of the oil speculation (until those parked barges start moving, this is just a bubble) is strengthening the dollar.
SunnyD
Belgian Waffler
The best way to SAVE money is simply not to spend it.
What you're asking is what's the best way to INVEST money. Totally different question, because technically you're still SPENDING it (albeit with the goal of a return on investment). Given an economic situation where we're at, if you truly want to SAVE money... DON'T invest it. Sack your greenbacks away in your mattress.
What you're asking is what's the best way to INVEST money. Totally different question, because technically you're still SPENDING it (albeit with the goal of a return on investment). Given an economic situation where we're at, if you truly want to SAVE money... DON'T invest it. Sack your greenbacks away in your mattress.
TRENDING THREADS
-
Discussion Zen 5 Speculation (EPYC Turin and Strix Point/Granite Ridge - Ryzen 9000)- Started by DisEnchantment
- Replies: 25K
-
Discussion Intel Meteor, Arrow, Lunar & Panther Lakes + WCL Discussion Threads
- Started by Tigerick
- Replies: 23K
-
Discussion Intel current and future Lakes & Rapids thread- Started by TheF34RChannel
- Replies: 23K
-
-
Facebook
Twitter