Gold traded above $800 an ounce for only, exactly, just “2” days in 1980. Do you know how many actual people in the entire world, who never bought gold before, nor ever again bought gold since, bought gold ONLY in those 2 specific days in 1980? Nobody. Your premise of someone buying gold on those 2 days back in 1980, and who never bought gold before those 2 days, and never bought gold ever again, is a false premise because nobody actually did it. You cannot come up with a single name of anyone who did this, because nobody did.
NO!!! that does NOT!!! mean some people must have done it…no more than you can prove that EVERYONE today who currently owns stock bought all of their stock on October 23, 1929, and never bought stock before October 23, 1929, and never ever again bought another share of stock after that, in spite of the fat that 90% of all the companies traded around the world back in October 1929 are now gone and their stock is completely worthless.
Please tell me: Do you actually understand how stock markets, commodity markets, forex markets and the like produce the quotations and prices you read in the newspapers? Do you think these numbers fall from heaven, or are just made up by some guy sitting somewhere saying to himself, “Hey, XYZ Corp, which closed at $54.50 yesterday, will be $54.65 today!”, or are the result of cabbalistic experiences. No. These markets are literally that - marketplaces where buyers and sellers meet to trade in their products. When you read in the newspaper that XYZ Corp. traded at $54.50 yesterday, this means that there was actually one pair of two people - one representing a buyer, and one representing a seller - , who actualy concluded a deal transferring a number of XYZ shares from buyer to seller at a price of $54.50. Same goes for other markets, including commodity markets such as gold. So the fact that for exactly two days in 1980 (a statement which you haven’t backed up with sources yet, btw, but which I assume to be true now), gold was trading at a particular price demonstrates that there were purchases of gold performed at that price.
Your whole talk about people who bought gold “ONLY” during these days and never before or after is immaterial. Anybody who bought (or sold) gold at a given day for a given price had to pay the price (or received the price), and this is independent of prior or subsequent transactions.
By the way, you still haven’t given me all the answers I had asked for - but given that it is a recurrent theme in this thread that you refuse to address questions to which you don’t know the answer, I am afraid my curiosity will not be satisfied any time soon, and that the same goes for the plethora of other posters’ questions which still stand unanswered.
Just following up on Schnitte’s point, how do you think the value of gold is established?
It just seems so obvious to me that the value of gold is what people will buy/sell it for, so it is self-evident that if gold trades at $800 on a given day (or $350, or $1,400) then people actually bought and sold gold on that day for that price.
I found this thread in 2017 after googling ideas about to invest 1 billion dollars. I am impressed with such in-depth knowledge of economics and clarity of arguments from most of the thread’s participants.
The supreme irony of it all is that this discussion took place just a year or two before Bitcoin–an asset that some people want to be the ultimate store of value (i.e. gold) and others think is the future of currency (i.e. money)–started to take off. How different would have these answers been had this thread been started in 2017? 2018? 2019?
But I didn’t create a Straight Dope account to derail a 7-year old thread. I am actually researching what to do with a billion dollars. A lot of people here recommend getting a money manager/financial advisor. Call me stingy, but I don’t like that those guys charge a percentage of the money under their management. I am also not impressed with their ability to actually manage money, not to mention that if the person you hire happens to be Bernie Madoff, you will lose the entire billion dollars and no one will ever reimburse you.
So I’m personally leaning towards keeping $500 million in cryptocurrencies (which will undoubtedly continue to rise and make me rich); cashing out the other $500 million, paying a capital gains tax on it (if I can ever remember all the different transactions that I made over the years to prove my cost basis to the IRS), and using the remaining $350 million to:
buy an office building (skyscraper) in a decent U.S city for capital preservation and rental income: $150 million
buy a mix of index funds and bonds for passive income: $100 million
bootstrap a business in an industry that I care about, hire top talent, and attack life’s challenges: $50 million
I’d want to invest in several countries AND several asset classes. The logistics of getting all this started might be frenetic for a while; perhaps buying a small private jet might be a first step, just to speed these logistics.
But I clicked on the Zombie because misconceptions by BOTH the pro-gold and anti-gold folks are a pet peeve!
It is too bad that graphs showing SP500 or DJIA with dividends reinvested are hard to come by, but note that a SP500 div-reinvested index would also have to subtract tax on those dividends for an apples-to-apples.
But more importantly, the fact that you use a German index starting in 1988 should have been a tip-off that something was amiss! * Susannan mentioned a time scale of centuries or longer.* You’re going to answer that with three decades of performance?
Yes, you go on to mention an American index (though gold was valuable for several thousand years before the Mayan Empire let alone Columbus) but (Google Fallacy of Survival Bias) … Why didn’t you stick with Germany and see how well its stock market did during the first half of the 20th century!
In any event, whether to go 20/25/20/20/10/5 for my allocation of US stock/Foreign stock/Bond/Land/Gold/Crypto or some slightly different set of numbers would be the least of my worries! Just for starters, I’m wondering who to trust to build the vault where I’ll put my ton of gold!
Very doubtedly indeed. Oh, cryptocurrencies probably won’t crash tomorrow, but they’re going to go down eventually, and neither of us has any idea when. And the only reason the price of cryptocurrencies changes is different people making different guesses as to when that time will be.
Never make any investment where you can’t see, in real terms, where the increase in value comes from. If a potato farmer buys a piece of land, then next year he’ll still have the land, plus a bunch of potatoes: The value has increased by the value of the potatoes. If a car manufacturer buys a bunch of new robots, then next year, they’ll still have the robots, plus all of the extra cars the robots helped make. You can even apply it to intangibles: If a jeweler buys a bunch of gold, and turns it into beautiful jewelry, then next year, he’ll have all of the additional value of the beauty of his craftsmanship. But with bitcoins, where is the extra value?
With a billion dollars, you are going to want to DIVERSIFY.
If you really have a billion dollars, understand that you can pay someone to devote their entire life to managing your money. A team, even. Smart decisions are within your grasp.
You will want to have some of it in physical safes, in cash. How much makes you feel comfortable? I think $10-$50 million in cash is plenty to live on for the rest of your life, even if it does not grow by one penny. Cash in a safe. So, you have various properties spread out here and there, with millions of $$ on site, a manager paying the taxes and maintenance &etc. It is your property, you can go there and have a sandwich, play xbox, you are a billionaire after all, relax.
Do put a significant amount into US treasury bonds. $100 million? It will generate an income into an account which you can access. Be careful that all this money does not corrupt and kill you!
Spread your money out among various international bonds. EU bonds. Russian bonds. Japanese bonds. Chinese bonds. Do you get the idea? Go ahead and take the profits in various currencies, acquire international properties. You are going to be ok.
I like dividend growth investments. Might as well explore this sector.
You are mortal. Study philosophy. Plan to leave your money mostly to charity, to help the worthy of the world if nothing else. Please give at least some of your money to charity; history will remember you well this way, and not the awful sinful way you probably deserve to be remembered if you live a long time as a billionaire.
You would been 25+ tons of gold. Not a small physical package.
Storage costs on that much gold is not prohibitive but still a lot.
A billion dollars is not just wealth, it is dynastic wealth. Your great grand children will be able to live on the money without anyone between you and them ever lifting a finger to earn a buck.
The way to preserve dynastic wealth is to ladder treasuries. Rates are really low right now but over several generations it all balances out. You will get about 2.5% return on your money, no state and local tax that amounts to about $15 million/year in income.
As each step on your ladder matures, invest in more treasuries. if the US ever defaults on its debt, there will be no country in the world that will have a stable debt market. At that point bullets will be more valuable than gold.
