Is Gold Really a Good Investment?

[septimus]

@Algorithm

He has “up to $15,000” in the ultrashort treasury fund. He’s hardly bet the farm on it. It’s probably a very small portion of his undoubtedly very large portfolio.

Let’s be clear. This is the sort of investment that pays off hugely when it wins. He may be risking only $15k, but stands to win much more than that. And it’s quite possible that his portfolio contains other investments, also calculated to profit from his own sabotage.

Do we know Cantor’s net worth or total investments? I don’t know, but you can’t have it both ways. Either $15,000 is a significant investment or it’s not, and if not why did he bother with such an obviously immoral bet?

Given the circumstances
[ul][li] He’s a public figure charged with defending U.S.A. from enemies.[/li][li] He’s actively working to sabotage U.S.A.'s credit rating.[/li][li] He’s invested in securities that will pay off big, if his sabotage succeeds.[/li][/ul]
I find such an investment dastardly whether it’s big or small and am amazed and saddened that anyone (especially an intelligent Doper) would feel differently.

[wmfellows]

@septimus

Let’s be clear. This is the sort of investment that pays off hugely when it wins. He may be risking only $15k, but stands to win much more than that. And it’s quite possible that his portfolio contains other investments, also calculated to profit from his own sabotage.

Err, or it is rather more likely his overall investment portfolio would take a massive hit from an economic crisis. This person may or may not understand that, but it is rather more likely.

Do we know Cantor’s net worth or total investments? I don’t know, but you can’t have it both ways. Either $15,000 is a significant investment or it’s not, and if not why did he bother with such an obviously immoral bet?

???

How is anyone having anything both ways? US$ 15k isn’t a large investment.

I don’t know US rules in this, but it seems entirely plausible that the investment is simply an ordinary hedging strategy.

I find such an investment dastardly whether it’s big or small and am amazed and saddened that anyone (especially an intelligent Doper) would feel differently.

Presumably as they see it for what it is, a small thing of little import. Of course for partisan political argument one does see the value from an oppositional standpoint, but that’s politicking.

[Trom]

It does seem wrong that a US legislator is positioned to profit if US bonds were hit hard. But, I’m guessing whoever manages his money simply has the position on as some sort of hedge. However, due to the path dependent nature of 2x daily return funds, it’s a really stupid hedge and might not perform at all…

As far as members of Congress engaging in insider trading:

Last week a study of some 16,000 stock transactions carried out by House members was published in the journal Business and Politics. This detailed analysis showed that the investment portfolios of House members beat the market by about six points a year. (Democrats did especially well, outperforming by some nine points a year, while Republicans topped the average investor by only two percent annually.) Senators apparently do even better: “their portfolios show some of the highest excess returns ever recorded over a long period of time, significantly outperforming even hedge fund managers,” noted the journal, citing a previously published study.

Insider Trading Rules That Don't Apply To Congress

and

Even so, concerns about members of Congress enriching themselves based on inside information has prompted at least one House bill, the Stop Trading on Congressional Knowledge (STOCK) Act, which would limit the ability of lawmakers to buy and sell stock shares.

First introduced in 2006, the bill has yet to reach the House floor. Its sponsors, Reps. Louise McIntosh Slaughter, New York Democrat, and Timothy J. Walz, Minnesota Democrat, reintroduced the bill in March.

“This is a matter of equality under the law,” Mr. Walz said at the time. “The same standards we have established for Wall Street should apply to Congress. The potential for abuse is obvious and troubling, and there is simply no good reason Congress should get to play by a separate set of rules in the stock market.”

http://www.washingtontimes.com/news/2011/may/25/house-members-stock-market-success-questioned/

[Bricker]

@Susanann

Even more recently, most people, even most people here on Straight Dope, did not buy Mircosoft in 1975, they instead bought stock in all the others that went out of business.

Most people anywhere didn’t buy Microsoft stock in 1975, inasmuch as their IPO wasn’t until 1986.

[/nitpick]

[Bricker]

@septimus

I find such an investment dastardly whether it’s big or small and am amazed and saddened that anyone (especially an intelligent Doper) would feel differently.

Is such an investment dastardly no matter who does it?

[Bricker]

As I mentioned back in 2007, I keep a supply of gold coins in my emergency supplies, although i sold a few when their purchase price more than doubled. Now, of course, I’m sitting on… er… a gold mine, if you’ll forgive the expression, but I don’t want to sell any more of them because their purpose is to have in case of some huge disaster.

Every couple of months as I’m rotating out consumables, I stare at them. They mock me.

[septimus]

Two misconceptions persist in the discussion about Cantor’s betting that his sabotage of U.S. Treasury credit succeeds.

@wmfellows

US$ 15k isn’t a large investment.

TBT (Cantor’s investment) is a volatile investment. The webpage for TBT itself says

Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily.

From a quick reading of its prospectus, it’s goal is -200% of a T-Bond index. In other words, when T-bonds are down 5%, TBT will be up 10%. If, unfortunately for Cantor, T-bonds are up 5%, his investment will be down 10%. Obviously he’s not hedging a $30,000 investment in T-bonds: he could achieve the effect of that by just leaving the whole $45,000 under his mattress. He could have hedged that tech stocks would go down, he could have hedged that commodity prices would move, etc. etc. As far as we know, he didn’t do any of that. He bet specifically that T-bonds would go down in price.

Leveraged short-sell investments like TBT present a different risk profile. A $15,000 bet in TBT represents a bet similar in risk to, perhaps, a $50,000 bet on a stock index. If this isn’t clear to you, start a GQ thread on Investment Volatility or just ask yourself whether betting $15,000 on a horse at the track is a risk of no less magnitude than buying $15,000 of stock in Exxon.

Now, even if we stipulate that the TBT bet is akin to an ordinary $50,000 investment in risk, $50,000 may itself be small for Cantor. Whatever. But let’s do not conflate the risk of TBT with a more ordinary investment.

@Bricker

Is such an investment dastardly no matter who does it?

Did I suggest it would be? It may be a foolish lost cause, but in my Utopia, public servants serve the public.

Although this isn’t BBQ Pit, I think it’s fair to call you a lawyer. As such I don’t know if you can distinguish any semantic difference between “legal” and “moral.” I’ve no idea (and don’t care) if Cantor betting his sabotage will succeed is legal. I know it is immoral.

[Bricker]

@septimus

Did I suggest it would be? It may be a foolish lost cause, but in my Utopia, public servants serve the public.

No, you didn’t make any suggestion, one way or other other, which is why I ask. I could point out that every citizen presumably has some interest in the economic stablity and wlefare of the country, and thus the same reasoning might be applied to him.

And for the record, you still haven’t said if it’s dastardly for anyone to do. Is it?

Although this isn’t BBQ Pit, I think it’s fair to call you a lawyer. As such I don’t know if you can distinguish any semantic difference between “legal” and “moral.” I’ve no idea (and don’t care) if Cantor betting his sabotage will succeed is legal. I know it is immoral.

Got it. So I’m asking you: is it immoral if I do it?

[septimus]

@Bricker

Got it. So I’m asking you: is it immoral if I do it?

Some people view tobacco shares as immoral and might think an anti-U.S. bet immoral, but I wouldn’t. I’m not sure I would disapprove if the short-seller were a mid-level member of the U.S. Executive branch; it’s the fact that he’s a key legislator that makes it hideous.

It’s against the rules for a professional athlete to bet on his sport, but it wouldn’t bother me. It sure would seem dastardly though if he bet against his own team.

Could we agree that it would be immoral for a U.S. soldier to bet on the enemy?

We are talking about a leader in Congress who is actively working to direct the U.S. Government to a state of bankruptcy or, at a minimum, loss of credit ranking. I don’t know why Republicans think this is a good idea; perhaps some of them believe default would somehow be best for their country. Cantor, whether he believes it best for his country or not, seeks to profit from it personally.

I’ve answered your question. Will you tell me if you find Cantor’s bet immoral?

[SteveG1]

@Dewey_Finn

I think the fact that they’re advertising (i.e., pushing) gold as an investment should tell you something. And that is that you shouldn’t be buying it.

This is the same “take” I have. “They” bought gold back when it was less expensive. Now “They” want to sell. That means some rube has to be the buyer at this new higher price. If gold was such a great deal, if it was such a wonderful thing, “They” would not be looking to sell, would they? No, “They” would still be quietly buying it all up. :dubious:

[An_Gadai]

@Bricker

As I mentioned back in 2007, I keep a supply of gold coins in my emergency supplies, although i sold a few when their purchase price more than doubled. Now, of course, I’m sitting on… er… a gold mine, if you’ll forgive the expression, but I don’t want to sell any more of them because their purpose is to have in case of some huge disaster.

Every couple of months as I’m rotating out consumables, I stare at them. They mock me.

Again though, if a disaster were really that big, wouldn’t something like weapons or long-lasting food be more useful for barter?

[Bricker]

@An_Gadai

Again though, if a disaster were really that big, wouldn’t something like weapons or long-lasting food be more useful for barter?

Did you read the linked thread?

[Bricker]

@septimus

I’ve answered your question. Will you tell me if you find Cantor’s bet immoral?

No, I don’t find it immoral, although that conclusion rests on what I believe Cantor’s state of mind to be.

If I believed, as you do, that Cantor seeks ruin for the US economy, then I would agree this bet was immoral.

[septimus]

nm

[Dewey_Finn]

@SteveG1

@Dewey_Finn

I think the fact that they’re advertising (i.e., pushing) gold as an investment should tell you something. And that is that you shouldn’t be buying it.

This is the same “take” I have. “They” bought gold back when it was less expensive. Now “They” want to sell. That means some rube has to be the buyer at this new higher price. If gold was such a great deal, if it was such a wonderful thing, “They” would not be looking to sell, would they? No, “They” would still be quietly buying it all up. :dubious:

Elsewhere in this thread, Duke linked to an ABC News story about complaints about Goldline (one of the companies advertising gold on Fox News). The story said that Goldline promotes “collectible” gold coins, which sell at a premium to the bullion value. The coins aren’t really collectible of course, and so the customers would have been better off buying plain gold coins (US Eagles, Canadian Maple Leafs, etc.). But there’s really little profit in selling gold that way.

[SteveG1]

@An_Gadai

Again though, if a disaster were really that big, wouldn’t something like weapons or long-lasting food be more useful for barter?

In the event of a global catastrophe, if I have the weapons I can get or take the food. If that happens, congratulations to me, I just got promoted to Merciless Warlord. So if you want my food or my protection, you must pay me. Or, being Merciliess Warlord, I can just kill you and take whatever you have (including YOUR food and gold).

Yeah, if it gets bad enough, only weapons and food really matter. You can’t eat gold.

[SteveG1]

@Dewey_Finn

Elsewhere in this thread, Duke linked to an ABC News story about complaints about Goldline (one of the companies advertising gold on Fox News). The story said that Goldline promotes “collectible” gold coins, which sell at a premium to the bullion value. The coins aren’t really collectible of course, and so the customers would have been better off buying plain gold coins (US Eagles, Canadian Maple Leafs, etc.). But there’s really little profit in selling gold that way.

It’s like Franklin Mint. Just because they say it is valuable, don’t make it so. In the final analysis, gold is only really worth the melt value, and even then, is only worth what someone else is willing to pay. There is no intrinsic value, as I understand it to be.

[septimus]

@septimus

Although this isn’t BBQ Pit, I think it’s fair to call you a lawyer. As such I don’t know if you can distinguish any semantic difference between “legal” and “moral.”

This was probably quite rude, and I do apologize. I get very VERY frustrated at people who equate “legal” with “moral” but it’s probably unfair to assume that correlates with the legal profession, and certainly unfair to impute it to any particular lawyer.

[Chronos]

Did you read the linked thread?

I did, and I still don’t understand the premise behind keeping gold in an emergency stash. In any situation where it would make more sense to stockpile gold vs. cash, it would also make more sense to stockpile commodities (nonperishable food, ammunition, etc.) vs. gold.

[Kobal2]

@Bricker

As I mentioned back in 2007, I keep a supply of gold coins in my emergency supplies, although i sold a few when their purchase price more than doubled. Now, of course, I’m sitting on… er… a gold mine, if you’ll forgive the expression, but I don’t want to sell any more of them because their purpose is to have in case of some huge disaster.

Every couple of months as I’m rotating out consumables, I stare at them. They mock me.

Define huge disaster ? 'Cause if we’re talking WW3 disaster, gold won’t be worth much in the nuclear wasteland. Nuka Cola will