Financial Meltdown!

Im sure you guys have all heard by now that the US was downgraded from AAA to AA+ and caused the markets to plummet.

I remember coming on NewWinnipeg suggesting that people buy Gold when it was around $900 -$1000 and everyone was saying its too high and that I was crazy.

:ewwTROLL:

Well now its @ $1770 and not slowing down.



If you held on to TSX stocks from 2006 for the past 5 years right through 2008 and until now, your down 2% while gold is up 200%!



TSX in 2006 was 12000 and today its back to 11600



While Gold in 2006 was $600 and now its almost $1800!









Now please tell me im crazy again....

oh, and the Dow futures are down 250 right now, so expect another mudslide tomorrow!

https://www.youtube.com/watch?v=3CquMO3vJvo

Are you suggesting that people dump their stocks at a loss and buy gold at it's highest price?

Zwicky! Welcome back!



Also the downgrading did not trigger a market sell off. People panicking or more aptly pretending to panic for political reasons caused this. Som stock were up 35+%. Yesterday

This is a tricky financial situation. It is concerning as hell but my portfolio is not following the market. I still don't much like what's happening.

How come we NEVER see days where the market increases 3-4 points for a few days in a row?

Zwicky-Zwacky wrote:I remember coming on NewWinnipeg suggesting that people buy Gold when it was around $900 -$1000 and everyone was saying its too high and that I was crazy.

when you were buying gold at $1000/oz I was buying stocks with the TSX under 8000 points.

Over the past couple of years my portfolio has jumped over 120% and many stocks have also been paying out healthy dividend yields. In the same time yours has gone up around 80% and pays out no dividends.

I have been taking profit for the last 3-4 months and have a healthy cash position to start buying in the next week or so.

Gold is not your be all and end all. Sure it is a great hedge against inflation, but it does nothing for investors.

Another story. My mom invests in high yielding stocks and she lives of the dividends. The value of the share is generally irrelevant because she has no intention of selling off any units while the market is down. Using gold as an investment vehicle would mean that she would have to sell physical units gold just to buy inflated dollars only to weaken her portfolio.

Using gold as an investment vehicle would mean that she would have to sell physical units gold just to buy inflated dollars only to weaken her portfolio.

Is their an echo in here?

grumpy old man wrote:This is a tricky financial situation. It is concerning as hell but my portfolio is not following the market. I still don't much like what's happening.

How come we NEVER see days where the market increases 3-4 points for a few days in a row?

Because every Joe Sandboxer is using the TSX and the NYSE as their personal Las Vegas. They read ill informed news from a variety of media outlets, blogs and websites and immediately try to take hold of their futures and start massive selloffs using their online brokerage accounts.

In reality it is a dumb move. The fear based selloffs trigger more and the markets slide more dramatically than they should.

If people actually stopped and thought about their logic behind selling they wouldn't.

Is the US being AA+ (instead of AAA) going to result in Coca-Cola selling less soft drinks or Pfizer selling less Viagra? Hell no.

As in all things, moderation is key. Don't put all your eggs in one basket... etc.

BTW, Welcome back, Zwicky!

Zwicky-Zwacky wrote:If you held on to TSX stocks from 2006 for the past 5 years right through 2008 and until now, your down 2% while gold is up 200%!

Meh. You can do this with anything given you choose the right timeframe.

If you held $10,000 in gold from 1980 to 2007 you would have been holding a commodity with zero gains and would have lost money as the dollar inflated over the 27 years. You would have basically turned $10,000 of 1980 money into $10,000 of 2007 money. Not a smart move.

Gold was temporarily popular when oil crashed and interest rates were through the roof in the late 70s and early 80s. However for decades following gold lost nearly half its value and stayed stagnant while waiting for the next economic instability.

Going back to 1980... if you invested the money into stocks in 1980 you would have doubled your money a few times over. You would have turned $10,000 into nearly $200,000.

Check this chart comparing gold to a good Canadian equities fund.

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?compareBench=3145&FromMonth=1&FromYear=1980&ToMonth=12&ToYear=2007&id=18151&symbol=PHN130&style=na_eq&profile_type=ROB

grumpy old man wrote:How come we NEVER see days where the market increases 3-4 points for a few days in a row?

It's also the twisted percentage math, where losses are reported relative to the higher value, and gains relative to the lower value. This means, that if you have a 50% loss where half of the value is gone, you need a 100% gain which means a doubling of value to be back to where you started.

one thing to note though.....

INVESTING in gold aint gonna help you much in the event of a complete meltdown because you dont actually possess the gold, and purchasing the gold you are charged stupid GST and other such fees. So there is still the inherent faith that the system will continue to operate and that you wont be screwed over.

HELL... actually possessing the gold wont do you much good either because its teh people who have the firearms, the food, the water, the alcohol and the tobacco that will be the really well off, and its unlikely that they will trade any of that scarce commodity for a few shiny pebbles.


invest in guns, lots of guns and go after the people who have the gold.

sputnik wrote:I have been taking profit for the last 3-4 months and have a healthy cash position to start buying in the next week or so.

Sounds like you were doing your homework. Please feel free to share some buying tips when you go on your shopping spree.

I really have no tips per se. I generally stick with blue chip stocks and mutual funds along with sound simple logic when making decisions.

I am not one to day trade penny stocks.

Generally I sell portions of my holding when I have made decent money on it after a minimum of 6 months.

I don't actually own gold. I own shares in companies that mine gold (and silver and a couple other precious metals).

As for people winning and losing in lock-step with the TSX, I say that is mostly those that own mutual funds. I remember a few years ago when all I had were mutual funds I use to track them against the TSX. They rose and fell exactly as the TSX did.

eViL tRoLl wrote:

grumpy old man wrote:How come we NEVER see days where the market increases 3-4 points for a few days in a row?

It's also the twisted percentage math, where losses are reported relative to the higher value, and gains relative to the lower value. This means, that if you have a 50% loss where half of the value is gone, you need a 100% gain which means a doubling of value to be back to where you started.

I understand that. Yet we still rarely see a 3% or 4% increase. We NEVER see that kind of increase on several consecutive days (at least as far as I can recall).

grumpy old man wrote:I don't actually own gold. I own shares in companies that mine gold (and silver and a couple other precious metals).

Me too. I prefer investing in gold where it produces a regular stream of income instead of investing in physical gold that just sits in a vault being shiny.

grumpy old man wrote:As for people winning and losing in lock-step with the TSX, I say that is mostly those that own mutual funds. I remember a few years ago when all I had were mutual funds I use to track them against the TSX. They rose and fell exactly as the TSX did.

I don't think there is anything necessarily wrong with this. On the long term a fund that closely tracks the TSX, DOW or S&P is probably a good thing and will net somewhere between 9-12% annually. What I usually do is use globefund.com to compare the Canadian equity funds against the fund index and look for funds that have performed better than the index (average of other Canadian equity funds) and not worry too much about a few basis points on an MER.

RBCAM and PH&N funds are some that I consider very well managed with reasonable MERs.

sputnik wrote:

Zwicky-Zwacky wrote:If you held on to TSX stocks from 2006 for the past 5 years right through 2008 and until now, your down 2% while gold is up 200%!

Meh. You can do this with anything given you choose the right timeframe.

yes true, but your the one who is saying they were buying stocks at the absolute low in 2008. In the past 10 years Gold has outperformed EVERY asset class. Yet its not reported in the media so much because NO FINANCIAL ADVISER WILL GET THEIR COMMISSION IF YOU BUY GOLD. Dont forget to add that into your profits and also the Capital Gains Tax.

sputnik wrote:
If you held $10,000 in gold from 1980 to 2007 you would have been holding a commodity with zero gains and would have lost money as the dollar inflated over the 27 years. You would have basically turned $10,000 of 1980 money into $10,000 of 2007 money. Not a smart move.


Going back to 1980... if you invested the money into stocks in 1980 you would have doubled your money a few times over. You would have turned $10,000 into nearly $200,000.

Check this chart comparing gold to a good Canadian equities fund.

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?compareBench=3145&FromMonth=1&FromYear=1980&ToMonth=12&ToYear=2007&id=18151&symbol=PHN130&style=na_eq&profile_type=ROB

Ah yes, the typical cherry picked graph from the TOP of the previous gold bull market in the 80s to 2007.
Why not go even further back in the beginning of that run in 1970 when it went from
$35 to $850 for a legendary 2500% rise for the decade? Even to $500 it was a 1700% gain.
http://static.safehaven.co​m/authors/contrary/16976_b​.jpg


There are times that Stocks are in Bull markets and there are times when commodities and Gold are in Bull markets. The key is to know when to be in each. Over the past 10 years it has been GOLD. You need to look at the Gold to Dow (or TSX) ratio.

In 2001 the DOW was around 10,000 and today its fighting 11,000. Thats 10% over 10 years or 1% a year. Meanwhile Gold went from $250 to $1650 = 650%. 2001 it took 40 oz of Gold to buy the DOW and now only 6.3. As it gets lower its more attractive to sell gold for stocks....maybe in a few years.

http://www.marketoracle.co.uk/Article9046.html

[quote="sputnik"]

grumpy old man wrote:As for people winning and losing in lock-step with the TSX, I say that is mostly those that own mutual funds. I remember a few years ago when all I had were mutual funds I use to track them against the TSX. They rose and fell exactly as the TSX did.

sputnik wrote:


I don't think there is anything necessarily wrong with this. On the long term a fund that closely tracks the TSX, DOW or S&P is probably a good thing and will net somewhere between 9-12% annually.

Past 10 years the TSX has gained 50% for 5% a year. Not too bad, but not too great. After selling, your taxes and fees will eat up your profits...and lets not mention inflation. Im sure prices of items are 50% more expensive now then they were 10 years ago.
http://www.google.ca/finance?q=TSE:OSPTX

The Dow isnt so lucky and it only up 4% in TEN years.
http://www.google.ca/finance?q=INDEXDJX:.DJI

meanwhile, Gold went from $250 to $1750 for a very nice 700% gain!

Expect more -
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/Gold%20Debt%20Ceiling%20.jpg

grumpy old man wrote:I don't actually own gold. I own shares in companies that mine gold (and silver and a couple other precious metals).

sputnik wrote:
Me too. I prefer investing in gold where it produces a regular stream of income instead of investing in physical gold that just sits in a vault being shiny.

Yes, seems like a good idea, but Bullion has outperformed many of the Miners. You can get lucky and buy some small junior miners who get a discovery and get bought out by a large cap miner, but its hard to pick them.

Right now the Miners are getting slaughtered, but Gold is holding its own.

I think the miners will bring massive gains like they did in the 80. They are extremely undervalued, but there are faults too.

basket of mid-large Miners
http://www.google.ca/finance?q=NYSE%3AGDX

basket of juniors Miners
http://www.google.ca/finance?q=gdxj

Same with the HUI Gold Bugs Index. Its under performed Gold

Zwicky-Zwacky wrote:
There are times that Stocks are in Bull markets and there are times when commodities and Gold are in Bull markets. The key is to know when to be in each. Over the past 10 years it has been GOLD. You need to look at the Gold to Dow (or TSX) ratio.

Again. That 10 year comparison is just another cherry-picked range. The past 10 years is a small length of time when you start to look at long term (30-40 year) portfolios. Not to mention that a TON of profits could have been taken off the equities market in the interim by a reasonable amount of active trading.

So based on your own personal financial analysis, when is the best time to sell your gold and buy equities?

Zwicky-Zwacky wrote:
yes true, but your the one who is saying they were buying stocks at the absolute low in 2008. In the past 10 years Gold has outperformed EVERY asset class. Yet its not reported in the media so much because NO FINANCIAL ADVISER WILL GET THEIR COMMISSION IF YOU BUY GOLD. Dont forget to add that into your profits and also the Capital Gains Tax.

A discount brokerage definitely collects a commission when you buy a gold ETF.

The manager of the ETF still collects a percentage based MER fee. They are smaller, but there is really nothing to manage when you are an ETF tracking a gold spot price. A monkey could do that work. Makes me wonder what the MER for a gold ETF covers anyways.

If you buy physical gold you are paying your commissions in advance with the price of gold at the vendor. No one sells gold at spot price. It is always spot+commission.

Gold is not a commodity free of commissions.

Gold is also not free of capital gains taxes either.

http://www.financialpost.com/forget+rules+during+gold+rush/3418499/story.html

sputnik wrote:
So based on your own personal financial analysis, when is the best time to sell your gold and buy equities?

In the next few years when the Gold to TSX ratio is near 1:1. Meaning that 1 ounce of Gold will buy whole whole TSX. Right now its about 7.5, but it has been declining since 2001 where it was in the 30-40 range.

chart with the different "waves"
http://www.sunshineprofits.com/files/images/research/20081126/6_dow_gold_ratio.png

http://greenbackd.files.wordpress.com/2009/11/dow-gold-ratio-1900-to-2009.png

just google "Gold to Dow ratio". There are tons of charts. Not so many with the TSX, but the theory is the same.

Whats even MORE INTERSTING is if you price the average house sale price in terms of ounces of gold. EVERYONE and their dog will tell you how Real Estate has made them rich and what a good investment it has been. Well, the house prices have actually been going down when you measure them in ounces of gold.

http://steadfastfinances.com/blog/wp-content/uploads/2011/03/Chart-of-the-Day-Real-Estate-Median-Single-Family-Homes-Priced-in-Gold-or-Home-Price-to-Gold-Ratio.gif

http://s3.amazonaws.com/files.posterous.com/gregor/DNJ1by6J6cRSt4DCO5CrjS9P45vq2zvf96pRC4eX3XaBrlDdRLwVuPUtBjnm/House_Prices_in_Gold_1968-_via.png?AWSAccessKeyId=AKIAJFZAE65UYRT34AOQ&Expires=1312924439&Signature=3FBkz%2BCfWY7ROYYtj%2BpOl%2FnocJE%3D

ZOMG!!
if you would have invested in Gold at 3PM EST today you would have lost money by 4PM!!!

Deank wrote:ZOMG!!
if you would have invested in Gold at 3PM EST today you would have lost money by 4PM!!!

Better sell your gold for cash then you can buy shoes. (Ever see that Cash$Gold commercial with the women talking about buying shoes with their C4G money, lol)
pretty funny since your selling an appreciating asset (gold) for a depreciating one (shoes)

hehe.. yup.

The we just had a bunch of old jewellery laying around.. WHO KNEW IT WAS WORTH SOMETHING!!!

LOL funny to the max!