Open question - Financial

[Chris]

The people like yourself who save in pounds would have experienced the price of things getting more expensive. But the people who saved their wealth in gold have experienced everything getting cheaper.

I contest this, though. I'm not sure that's true as a blanket statement, because it of course is impacted by when people buy the gold, for how much and how much they then pay to convert the gold back into currency.

To you it might be the case that things are cheaper because you bought your gold at a time which happened to work out well, but that's not guaranteed to be the case at the point of purchase is it? Same with stocks and shares.

 

[HorseGuy]

I contest this, though. I'm not sure that's true as a blanket statement, because it of course is impacted by when people buy the gold, for how much and how much they then pay to convert the gold back into currency.

To you it might be the case that things are cheaper because you bought your gold at a time which happened to work out well, but that's not guaranteed to be the case at the point of purchase is it? Same with stocks and shares.

So long as governments keep over-spending by increasing the debt and the Bank of England continues printing more pounds via quantitative easing, the price of gold will keep going up when measured in those deflating pounds.

Gold is not really going up.
The pound is going down.

 

[Chris]

So long as governments keep over-spending by increasing the debt and the Bank of England continues printing more pounds via quantitative easing, the price of gold will keep going up when measured in those deflating pounds.

Gold is not really going up.
The pound is going down.

Though of course as that graph you posted shows, gold does also go down as well.

 

[HorseGuy]

Though of course as that graph you posted shows, gold does also go down as well.

Yes that is right. When measured against real things (like a car) it does fluctuate up and down over time depending on demand (at the moment demand for gold is going up due to global concerns about WW3 and down for flashy cars as most people are becoming poorer).

However even though it will fluctuate up an down when measured against real things it does always stay within a limited range. This is why for example a years worth of food or a house costs the same now (give or take) as it did a hundred years ago or a thousand years ago. Gold is the closest thing we have to a stable constant medium for holding your wealth in.

 

[HorseGuy]

Gold is super amusing now. It wasn't doing well until Covid and individual people started looking for comfort for their savings. Then up it shot - doubled pretty much.

You say "It wasn't doing well until Covid"

Twenty five years ago gold was £175.
In 2020 it was between £1,200 and £1,500.

Check the charts. Gold has been outperforming the S&P500 and all other stock markets for the past twenty five years. It was outperforming the S&P500 even before 2020 when covid happened. Even if you had consistently reinvested all of the dividends back into shares, gold would still have outperformed the S&P500 and all the other stock markets. Why do you think that this was not doing well?

 

[Billy-o]

Any no point in recorded history has there ever been a time ....

Well that may or may not be quite so. This is anecdotal, but I have friends, different ones, who have told me that they couldn't sell their gold when they wanted to in the early 2000s when the price dropped a bit. Just got faced with polite refusals by dealers who didn't want to fuel a decline. Sure, you'll always be able to sell it to someone. I mean, I'd buy it. You just may not get what you are counting on. Nothing is sure fire. We thought we were in permanent growth before 2008. Then, oops! We know that property goes up over the long term, but I know plenty of people that got caught in equity traps in the late 80s, early 90s. It's the confidence that will kill you.

 

[HorseGuy]

Well that may or may not be quite so. This is anecdotal, but I have friends, different ones, who have told me that they couldn't sell their gold when they wanted to in the early 2000s when the price dropped a bit. Sure, you'll always be able to sell it someone. I mean I'd buy it. You just may not get what you are counting on.

Your friends may not have been able to get as much as they wanted or hoped for it but there would have been a buyer at the spot price. This is what the spot price is.

It is a global market. Whenever there are no buyers at the current spot price then the price immediately drops down until there are buyers and that price sets the new spot price.

We thought we were in permanent growth before 2008. Then, oops!

Anyone who follows Keynesian economics thought there would be permanent growth before 2008. Everyone who understands Austrian economics knew otherwise.

 

[Keith_Beef]

An interesting long video. If you're interested in the topic , worth a watch imo.

( Somewhat political in the last 15mins - feel free to skip if desired )

I've not yet watched this to the end, but the author flogging his book seems to be a bit of a one trick pony.

He brushes off productivity increases as being marginal, he uses a comparison of wage increases compared to house price increases without mentioning the much easier access to mortgages (instead of lending 3 times the husband's income, a bank will lend a higher multiple of the entire household income, meaning that there is more money chasing a limited stock of housing)... there are many other instances of this cherry-picking of numbers that I would be able to quote (and I'm sure will be able to, when I've struggled through to the end).

tl;dr
he's a gold bug promoting his book...

 

[Tengu]

It would be grand to be able to afford gold.

 

[HorseGuy]

It would be grand to be able to afford gold.

Silver is your friend.

 

[Keith_Beef]

I've not yet watched this to the end, but the author flogging his book seems to be a bit of a one trick pony.

He brushes off productivity increases as being marginal, he uses a comparison of wage increases compared to house price increases without mentioning the much easier access to mortgages (instead of lending 3 times the husband's income, a bank will lend a higher multiple of the entire household income, meaning that there is more money chasing a limited stock of housing)... there are many other instances of this cherry-picking of numbers that I would be able to quote (and I'm sure will be able to, when I've struggled through to the end).

tl;dr
he's a gold bug promoting his book...

OK, now that I've watched it to the end, he mentions in passing how easier access to credit led to house prices rising more quickly than wages and prices of other goods with the exception of cars...

Towards the end he complains that all political parties in the UK are as bad as each other, that he's "praying for a Milei for the UK". And then right near the end he talks about demographic crisis, the government allowing mass immigration and ends up mentioning the Great Replacement Theory.

 

[GreyCat]

Thank you for watching so I don't have to

GC

 

[Tengu]

 

[HorseGuy]

Open question to see where and what people would invest in at THIS current time with all that has gone on in the last 12 months.

Before investing I spent a considerable amount of time and effort learning as as much as I could about about every aspect of money and finance as possible. This covered Austrian economics, Keynesian economics, banks and other financial institutions (and their laws), banking investments, bonds, pensions, stocks/shares, crypto-currencies and precious metals.

In my experience most financial advisors and other financial professionals tend to be very knowledgeable in their own niche of products which they sell or earn a fee on but almost all of them have very little to no understanding about fundamental economics and how money and the financial system actually works. For this reason I have compiled a list of four questions which I ask any financial person I meet to ascertain how deep their financial knowledge really goes. These questions are:

1. What is the difference between currency and money?
2. What is the difference between a bank bail-out and a bank bail-in?
3. What is your opinion of the changes made to UK laws regarding bank and financial institution bail-ins?
4. What does it mean when a bank or financial institution describes their customer as an ‘unsecured creditor’ in the small print of their paperwork?

As a side-note (and I have never actually tried this) I expect AI would probably give some interesting answers to those four questions.

 

[TeeDee]

Before investing I spent a considerable amount of time and effort learning as as much as I could about about every aspect of money and finance as possible. This covered Austrian economics, Keynesian economics, banks and other financial institutions (and their laws), banking investments, bonds, pensions, stocks/shares, crypto-currencies and precious metals.

In my experience most financial advisors and other financial professionals tend to be very knowledgeable in their own niche of products which they sell or earn a fee on but almost all of them have very little to no understanding about fundamental economics and how money and the financial system actually works. For this reason I have compiled a list of four questions which I ask any financial person I meet to ascertain how deep their financial knowledge really goes. These questions are:

1. What is the difference between currency and money?
2. What is the difference between a bank bail-out and a bank bail-in?
3. What is your opinion of the changes made to UK laws regarding bank and financial institution bail-ins?
4. What does it mean when a bank or financial institution describes their customer as an ‘unsecured creditor’ in the small print of their paperwork?

As a side-note (and I have never actually tried this) I expect AI would probably give some interesting answers to those four questions.

So what would your answer to the same question be now ?

 

[HorseGuy]

So what would your answer to the same question be now ?

Disclaimer - These answers are personal opinion and are not intended to be taken as legal advice.

Well crikey TeeDee! That’s could be a very long answer indeed but here is my short short version (without using AI):

1. Currency is a convenient, fungible, divisible medium of exchange for goods and services. Money is a permanent store of wealth and purchasing power.

2. A bail-out is when an insolvent bank or financial institution is effectively funded by public tax payers to make them solvent again. A bail-in is when an insolvent bank or financial institution is funded by taking the funds from their own customers (aka unsecured creditors or depositors) accounts or investments without their permission (aka stealing) to make them solvent again.

3 and 4. Often the funds that people hold in their own bank accounts and financial investments are legally the property of the bank or financial institution which they are held with. The customer who credited or deposited the funds into the account or investment which is in their own name has no legal recourse if/when an insolvent bank or financial institution takes their funds to make themselves solvent again.

 

[HorseGuy]

 

[TeeDee]

Disclaimer - These answers are personal opinion and are not intended to be taken as legal advice.

Well crikey TeeDee! That’s could be a very long answer indeed but here is my short short version (without using AI):

1. Currency is a convenient, fungible, divisible medium of exchange for goods and services. Money is a permanent store of wealth and purchasing power.

2. A bail-out is when an insolvent bank or financial institution is effectively funded by public tax payers to make them solvent again. A bail-in is when an insolvent bank or financial institution is funded by taking the funds from their own customers (aka unsecured creditors or depositors) accounts or investments without their permission (aka stealing) to make them solvent again.

3 and 4. A large portion (often all) of the funds that people hold in their own bank accounts and financial investments are legally the property of the bank or financial institution that they are held with. The customer who credited or deposited the funds into the account or investment which is in their own name has no legal recourse if/when an insolvent bank or financial institution takes their funds to make themselves solvent again.

No sorry ,. possibly my bad - I meant more what is your answer to where to stick money ( to invest ) NOW?


I posed the initial OP question in 2021 - we are 5 years later and situations have changed , PM's are now in a Bull run of sorts , that may or may not be a reason to allocate funds there or maybe best in other places.

 

[TeeDee]

Open question to see where and what people would invest in at THIS current time with all that has gone on in the last 12 months.

So hivemind - If you had , lets say £20k in funds , and you HAD to invest it ( not pay down the mortgage, not clear any outstanding debts , not give it away - the taxman man can wait... )

WHERE would you invest it in todays world and a quick justification of why please.

TIA.

THIS question @HorseGuy

 

[HorseGuy]

THIS question @HorseGuy

Disclaimer - This answer is my personal opinion and is not intended to be taken as legal advice.

I have always felt that being risk averse is the most sensible method for increasing wealth so five years ago I would have suggested that it was best to put most of the £20k into precious metals for safe keeping. Split about 50% gold, 20% silver and 10% platinum if that mix floats your boat. Back then I would have also thought that putting the other 20% of the £20k into either cryptocurrency and/or stocks and shares for high-risk/high-gain speculation purposes but only if you are willing to put time and hard work into educating yourself first before investing and then regularly and consistently following the markets while trading the specific stocks or crypto coins you have selected (I thought BTC, ETH, ADA and XRP looked promising five years ago as well as commodity and mining stocks. ADA has struggled a bit lately but the other three crypto coins were really good calls).

Today I still think that it would be best to put the bulk of the £20k into precious metals for safe keeping but now I consider holding a higher proportion of silver. Split about 50% silver, 40% gold and 10% platinum would be a better mix now. Crypto seems more risky than it was five years ago but I still think it could be worth considering holding a very small portion (no more than 5% max) of the £20k split equally between XRP and ETH as a risky but potentially high gains option for a speculative hedge.

In my opinion stocks and shares are too risky at the moment and best avoided for the next few years until the global financial crash has passed. I do like stock and shares in principle but just not yet. Wait until the global financial crash has passed and you’re 100% confident the bottom has been reached. I suggest waiting for at least two years of continuous gains after the crash appears to have finished before gradually dollar averaging some wealth out of a portion of the precious metals and repositioning it into the stock markets. The reason to wait for at least two years of continuous gains before slowly reinvesting back into the stock markets is to be sure of avoiding any big bull trap drops which will likely happen several times before the bottom is truly reached and will catch many people out.