Another ad correlation that makes sense to the Don Drapers of the world: It seems that lottery drawings have a lot of lawyers as sponsors. I guess the demo that buys lottery tickets also tends to need legal help.
Gold is all over the right wing Christian culture, if you listen to short-wave radio all the top people Bo Gritz, Peter J Peters, Alex Jones, Global Christian Radio all push gold. In fact they have a motto: all you need in life are The Three Bs.
Bible Bullets Bullion
Quoth Bricker:
OK, so how does one define “investment” in such a way that includes gold but excludes, say, lottery tickets? I presume that lottery tickets are not, in fact, considered an investment?
You could consider lottery tickets to be an investment, but the typical expected value of a lottery ticket is below the purchase price of a lottery ticket. That is, you pay $1 for the ticket, and have a 1 in 1 million chance of winning $500,000. That means the expected value of the lottery ticket is $0.50, or half what you paid for it.
That’s not a good investment strategy. Same as it’s not a good investment strategy to take all your money to Vegas, because just about every game in Vegas has negative expected value.
If you take a dollar and invest it in a savings account for a year at 1% interest, you’ll get back $1.01. That one cent might not seem like very much of a return, but you’re doing a lot better getting back $1.01 than you are getting back $0.50.
So the only difference between a lottery ticket and gold is that lotto tickets have a higher brokerage fee?
In all fairness, there’s an older distinction between investment and speculation, mentioned in Graham and Dodd among other places. Currently, I see the nomenclature “Speculative investment” every now and then.
“Gambling” consists of very high frequency trading where the expected return is negative, largely due to high transactions costs (in the form of a house take). In contrast investments typically have a positive expected rate of return (though they may have a negative inflation adjusted rate of return). That’s my take anyway.
“Speculation”: Answers - The Most Trusted Place for Answering Life's Questions
There are many definitions. I think Chronos was getting at the, “…practice of engaging in business in order to make quick profits from fluctuations in prices, as opposed to the practice of investing in a productive enterprise in order to share in its earnings.”
Incidentally, many finance textbooks don’t mention gold in their indexes. One that did (Sharpe, et al) devoted but a third of a page to it in the Appendix to the last chapter in the book. They quoted a 1984 study that said that gold amounted to over 6% of the world market wealth portfolio. I suspect much of that was in India and wonder whether they included central bank holdings in the estimate.
FWIW, I think gold can be speculation, consumption or investment depending upon the reasons for purchase. But if the buyer is unclear on the concepts of correlation, diversification or beta, methinks that they are not engaging in investment but rather something else.
Oh yeah, the OP
Talk radio tends to be highly emotional. Perhaps fear mongering gets the audience primed for a form of wealth that they can hold in their hands. Gold is reassuring in that way. More to the point, “The dirty little secret of conservative talk radio is that the average age of listeners is 67 and rising…” Old emotional white guys with even a small pool of assets to play with might be considered an attractive demographic for precious metal marketing.
Gold may be volatile, but I would expect it to at least keep up with inflation over the long run. So it’s a little different than horse racing.
Contrast with this type of stock trading
Those who engage in day trading based upon a 2-3 day seminar on the subject are probably just gambling, since the brokerage fees should exceed one’s expected returns, absent a systematic (and back-tested) strategy. If done rigorously though, it can arguably rise to the level of speculation, speculative investment or risk arbitrage. Professional trading desks engage in the latter.
Politico addresses the OP in “Right Wing Talkers Go For the Gold.”
[ul]
[li]Peter Epstein, president of Merit Financial Services, which advertises on Beck’s show, says gold retailers expect favorable coverage from commentators on whose shows they pay to advertise. “You pay anybody on any network and they say what you pay them to say,” said Epstein. “They’re bought and sold.” [/li][li]As Smerconish put it to POLITICO, “Those who are most concerned about government growth are increasingly dubious about the value of a dollar and look at gold as something they can see, feel, touch, appreciate.”[/li]
Financial analysts, investment advisors and precious metal experts warn that the collectibles market can be among the riskiest ways to invest in gold, and some blame aggressive advertising and the boosterism on conservative shows for helping push nervous investors into bad deals.
[li]Though Epstein’s firm has advertised on CNN, he said gold resonates more with Fox’s viewers “because it’s the angry white man audience - it’s the conservative audience. … They are distrustful of the government, of the regime.”[/li][li]Bill Haynes, president of CMI Gold & Silver, a Phoenix-based precious metal dealer believes prominent endorsers “are absolutely doing a disservice to their viewers, listeners, fans and supporters. There’s a little bit of paranoia in all of us who like gold – a lot of paranoia in some people, a little bit in all of us – and they pander to people who are really afraid.” [/li][li]Mary Sisak of New Castle, Pa., wrote in August that she contacted Goldline because she saw a television ad featuring Beck, and online endorsements from Levin and Thompson. After spending $5,000 on Swiss Francs, Mary said she learned she could have purchased the same number of coins for $1,600 less.[/li]
“How could I be mislead by Glenn Beck, Fred Thompson and Marvin [sic] Levin?" she wrote.[/ul] Caveat Emptor.
Today, the spot price for gold is over $1,700 per ounce.
Anyone who read this thread in 2009 and decided to buy gold as a result should be happy with this outcome.
Yes, if they’re selling it today. If they’re so happy that they decide to hold onto it for a little while longer, maybe not. How much longer is a little while? I don’t know exactly, and don’t feel like gambling money on the answer.
Exactly Bricker. If they bought gold on Dec 7, 2009 they’d be happy because the value of that gold, if sold today, would be greater than the price they bought it at. But should they sell that gold today? Or buy more gold today?
Gold is clearly in a bubble right now. That doesn’t mean I think gold is going to collapse tomorrow, or the day after tomorrow, or next year. The market can stay irrational longer than you can stay solvent.
Meh. They’d be happier if they invested in Apple Computer.
IMHO the best response would be, if your purchase is in the database chances are the government will eventually confiscate it and pay you some change [del]you can believe in[/del]. As far as I can tell, there is some evidence online that some purchases are indeed tracked. Certainly as long as purchases are by mail and not in person for cash they can be reconstructed from a history of associated financial transactions.
So perhaps people ought to invest in things that are less “stigmatized”, less likely to be liable for confiscation by presidential order.
:rolleyes:
You need to keep your political potshots out of GQ. Feel free to take it to GD or the Pit.
These two statements are contradictory. If you can’t identify a short opportunity then gold isn’t “clearly in a bubble”.
[quote=“Gary “Wombat” Robson, post:55, topic:517433”]
You need to keep your political potshots out of GQ. Feel free to take it to GD or the Pit.
[/QUOTE]
what part of it is a “potshot”? The thread is about arguments against the wisdom of keeping assets in the form of gold. Isn’t the threat of confiscatory purchase a good argument here? While Gary “Wombat” Robson, let’s say, might view this to be as valid as the “threat of Martians transmuting our gold into lead” argument, many of those actually listening to the pro-gold marketing may be more sympathetic.
I also don’t see how it is a political pot shot. Some people think that gold is better than cash because the government can ruin the value of the dollar by hyperinflation, but the government can take the gold by fiat as well, and has, so it’s not like gold has always remained a reliable investment in the past few centuries.
It seems to me that one of shock jocks’ stocks in trade is sowing fear, uncertainty and doubt. There is a lot of talk about how new fangled ideas and changes are going to destroy the world. This is a good fit with gold investment because gold (rightly or wrongly) has an aura of stability and certainty.
Not so. Part of the financial literature emphasizes the practical difficulties of shorting in the midst of a bubble. I’m having trouble with a cite, but here’s a flavor of the argument.
I think code-grey was alluding to FDR’s confiscation of gold and Nixon’s termination of the gold standard. I disagree with him though, as I see gold as a marginal commodity today, a side-show, a small industry.
Bricker’s argument upthread is a little silly. If you choose your endpoints you can make any investment look great over a 1.5 year interval. The stock market has had a seizure over the past 2 days and in such times there’s often (not always) a flight to gold and oddly enough Treasuries. But even with this perfect storm, the 30 year return on gold is dismal.
Gold, Aug 1981: About $600
Gold, today, 1700
Multiple: 2.8
CPI, Aug 1981 : 92.3
Today: 218.4
Multiple: 2.4
S&P, 8/11/1981: About 131
Today, after market turmoil: 1172
Multiple: 8.9
Gold beats inflation: the S&P destroys inflation. Note that the S&P index vastly understates total returns as it does not reflect dividends or reinvested dividends. Hey, gold might be a terrific investment going forwards. But it sure has been a clunker in the past.