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He omits the only valid reason any non-speculator would own gold - it holds it's value through times of political turmoil - holds it's value over millenia rathe

He omits the only valid reason any non-speculator would own gold - it holds it's value through times of political turmoil - holds it's value over millenia rather than decades or centuries. A coup d'etat may result in seizure of private companies, rendering your stock worthless, but not touching the value of gold. It would be speculating to put all your assets into gold, but a small amount is like an insurance policy. relevant: http://www.csmonitor.com/World/Americas/2011/1105/Hugo-Chavez-looks-to-take-Venezuela-s-private-Los-Roques-paradise-public http://www.csmonitor.com/World/Americas/2011/1105/Hugo-Chave... Government expropriation of private industry has been a key policy of Chávez's regime. More than 450 companies have been expropriated this year alone. ExxonMobil, which had its assets seized in 2007, is still fighting the Venezuelan government for $7 billion in compensation it believes it is owed.

mikeash 15y ago
An unstable government could just as easily seize your gold. What investor cares about millennia? Centuries is already too much, unless you're vastly more concerned about your great great great grandchildren than most people. 100 years is probably the absolute largest possible upper limit for a real investor to care about, and typically it's much less still.
- dmm 15y ago
  I think he was talking about a small amount of gold. Twenty-thousand dollars worth could fit in your hand and easily be smuggled in clothes, luggage, etc. That's pretty handy if you had the flee the country from nazis(or whatever) that have stolen all of your other assets. Admittedly that's a pretty unlikely scenario.
  - cube13 15y ago
    It's even more unlikely because you then have to find a buyer that's willing to pay market price for the gold wherever you end up at. You'll be reduced to selling it for whatever people are willing to pay.
    - dmm 15y ago
      Gold is pretty easy to sell and even if you got a terrible price for it, you are still better off than without it.
    - _delirium 15y ago
      In the past it's been mainly useful if you can flee from a region in turmoil to one with more stable conditions. For example, my grandfather fled Turkey for Greece in the late 1910s (http://en.wikipedia.org/wiki/Greek_genocide http://en.wikipedia.org/wiki/Greek_genocide), taking some gold with him that he was then able to sell in Greece, using the money to help resettle.
    - mahyarm 15y ago
      Many wealthy people in vietnam were reduced to nothing when the currency became useless. The few smart people who had gold were able to move their wealth out. The entire world is going to go to shambles at once, that is a very low probability event compared to a region. Even during WW2 there were regions that were relatively untouched by the world war.
  - arjunnarayan 15y ago
    If we've come to the point where you're fleeing the country from Nazis with only what you can carry in your hand, the only thing that's going to be sustainable is investment in _yourself_ through massive education. That way you're up and working and earning from the moment you're safely away.
    - nl 15y ago
      Since we are talking Sci-Fi scenarios... It makes a lot of sense to try and carry as much value with you as possible. Conditions during the course of your escape are likely to be difficult and the ability to pay for thing (=bribe your way out of trouble) is likely to be much more useful than knowledge of advanced mathematics or Python minutea. (Of course, the most useful way to carry value in an escape scenario is gemstones, not gold, since it is much easier to hide during transport).
      - brazzy 15y ago
        Gemstones are not a good value store at all, since there is no liquid market for them and the first-sale price is artificially inflated through marketing. Buy a diamond today and sell it tomorrow, and you'll make a loss of 30% or more.
        nl 15y ago
        In the "government collapse and you need to run from nazis" scenario, if you somehow manage to only lose 30% of your value you are doing well. I'd note that Wikipedia says: A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency funding. People and populations displaced by war or extreme upheaval have utilised this portable asset successfully.[1] [1] http://en.wikipedia.org/wiki/Diamonds_as_an_investment http://en.wikipedia.org/wiki/Diamonds_as_an_investment (yes, it says citation needed, but nevertheless it did work in WW2.)
- klochner 15y ago
  The changes that accrue over millenia all happen in some 100 year stretch. My point is that looking at the last 100 years, by definition, will overlook times of revolution and change that certainly have happened and will likely continue to happen.
- muraiki 15y ago
  The government doesn't even need to be unstable: https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102 (Granted, many people simply shipped their gold to another country, but still...)
hessenwolf 15y ago
You had better hope your gold is hidden in a safe place under these circumstances. What percentage of the current gold investors are hoarding trading-size chunks in the cellar and the woods?
DVassallo 15y ago
... unless some breakthrough in nuclear physics leads to cheap synthesis of precious metals: http://en.wikipedia.org/wiki/Synthesis_of_precious_metals http://en.wikipedia.org/wiki/Synthesis_of_precious_metals
- dmm 15y ago
  Gold would make a lovely material to construct a toilet.
Cushman 15y ago
In any serious failure of government, the value of bullets far outweighs the value of gold.
- jrockway 15y ago
  When the revolution comes, I'm going to hide somewhere and wait for everyone to run out of bullets.
  - reinhardt 15y ago
    value(canned food) > value(bullets) > value(gold)
    - bira 15y ago
      Gold is an universal store of wealth. Canned food and bullets not so much. It's a different kind of value.
      - saraid216 15y ago
        How do you define wealth?
      - reinhardt 15y ago
        Gold is a universal make-believe store of wealth: it is precious because "we" (i.e. most people) agree to consider it as precious. The fact that it's rare, cannot be manufactured and doesn't corrode over time are nice to have properties but are neither necessary nor sufficient conditions of value. The context of this subthread is SHTF situations, where all that matters is inherent value determined by the laws of nature. What good is your gold if nobody wants to take it for even a tuna sandwich or if you have a loaded gun pointed at you?
  - neutronicus 15y ago
    I'm taking an assault rifle to my hidey-hole just in case someone finds me before running out of bullets.
Czarnian 15y ago
Paranoia is not an investment strategy. There are a whole lot of things that have to go seriously wrong before we revert back to a gold-based currency. Even if we did, all the gold in the world won't help with the food shortages resulting from the collapse of companies like Monsanto. Most of the grain we use has to be chemically activated to grow. If the country falls apart to the point where those chemicals are not available, there is no amount of gold that will buy a loaf of bread.
shingen 15y ago
Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force. If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.
- gjm11 15y ago
  > stole all of America's privately held gold Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)
  - dmm 15y ago
    If someone raped you and then paid you the then-prevailing rate for a whore, does that make it not rape? What makes an exchange stealing is the involuntary aspect.
    - Steko 15y ago
      "If someone raped you ... does that make it not rape" Stunning circular logic there. "Someone" =/= "democratically elected government with clearly enumerated power". We agreed on the Constitution and it says the government can take stuff as long as it pays you. Those are rules we agreed to. If we all agreed on a Constitution that said the President could have relations with whoever he wanted and then people chose to stay in this country and then the President chose to have relations with them we might question whether that still qualifies as rape.
  - fennecfoxen 15y ago
    He paid for it at the then-prevailing rate so that you'd be stuck holding dollars, which he would then immediately depreciate through inflationary measures. Not that I'm a gold-bug, but, it was pretty rude.
  - ta12121 15y ago
ubernostrum 15y ago
The problem with gold in times of turmoil basically boils down to you saying "here's (insert weight) of gold that I'll use to pay for this", and the person you're dealing with saying "yeah, and I'm the Queen of England". Without some sort of neutral respected authority to assay and say "yup, it's gold", you just have shiny pebbles and/or dust. And when everything around you has collapsed, reliable access to a trusted assayer may not be so... reliable.
- icefox 15y ago
  It is easy for anyone to prove gold is real with an acid test. And you don't go to the grocery store with $20K of gold be it coins or chips. At most you would be carrying around gold rings which are small, something everyone has handled and knows and have a "smallish" value.
- pradocchia 15y ago
  No, gold isn't for times or turmoil, it's for when things quiet down again--seed stock for rebuilding your life once stability returns.
- InclinedPlane 15y ago
  And then the guy who stocked up on ammunition instead of gold points a gun at you and says "thanks for the gold", then leaves.
adabsurdo 15y ago
i'm having a hard time imagining a realistic scenario where political turmoil is strong enough to make all stocks worthless, yet my gold bullions at the bank are still mine. unless you think you could keep a meaningful amount at home, and then how will you protect it? if the nazis invade, if the bolsheviks take over, if society breaks down and roving bands of cannibals are out there plundering, chances are your gold is either not yours anymore, or there is no society to trade it with.
shahan 15y ago
The benefits of diversification -- higher return and lower risk -- is a better reason to invest in gold, even if it was true that gold holds its value for millenia, which probably isn't true. The article is about "why stocks beat gold and bonds" not "why you should own only stocks and never own any gold or bonds".
jonnathanson 15y ago
If this is an argument for gold, then it's important to note that most gold "owners" don't actually own gold. They own paper. Or, at best, they own shares in funds that must buy and sell their gold on fixed timetables (debatably erasing a lot of the real gains that would be made by holding actual metal). But they're pretty far removed from the physical good -- and, if the shit truly hit the fan, they'd be just as SOL as would stock-holders. Hedging against the apocalypse is a silly reason to own "gold." Hedging against market volatility is a slightly better reason. It is important that we don't conflate the two strategies, as popular perception seems to.
- klochner 15y ago
  I'm in complete agreement that holding something like GLD is only valuable as a hedge against market volatility. As for owning gold rather than "gold", I find appeal in being able to put $30k in my pocket in the event that credit cards or ATMs are temporarily out of service, which could happen well short of an "apocalypse."
- paganel 15y ago
  > Hedging against the apocalypse is a silly reason to own "gold." In the last 100 years alone there were at least 2 such "apocalyptic" events: the Russian revolution and the communists' grab of power in China. Granted, there were a couple of lucky stock-owners that didn't see their holdings going to zero (http://en.wikipedia.org/wiki/American_International_Group#History http://en.wikipedia.org/wiki/American_International_Group#Hi...), but generally speaking it would have been much better for a "White" Russian to be carrying gold or jewelry on his way to Paris in the 1920s than to carry worthless Tsarist stocks.
  - jonnathanson 15y ago
    But my point is that most people don't actually own physical gold (hence my use of the air quotes around the word).

mikeash 15y ago

An unstable government could just as easily seize your gold. What investor cares about millennia? Centuries is already too much, unless you're vastly more concerned about your great great great grandchildren than most people. 100 years is probably the absolute largest possible upper limit for a real investor to care about, and typically it's much less still.

dmm 15y ago
I think he was talking about a small amount of gold. Twenty-thousand dollars worth could fit in your hand and easily be smuggled in clothes, luggage, etc. That's pretty handy if you had the flee the country from nazis(or whatever) that have stolen all of your other assets. Admittedly that's a pretty unlikely scenario.
- cube13 15y ago
  It's even more unlikely because you then have to find a buyer that's willing to pay market price for the gold wherever you end up at. You'll be reduced to selling it for whatever people are willing to pay.
  - dmm 15y ago
    Gold is pretty easy to sell and even if you got a terrible price for it, you are still better off than without it.
  - _delirium 15y ago
    In the past it's been mainly useful if you can flee from a region in turmoil to one with more stable conditions. For example, my grandfather fled Turkey for Greece in the late 1910s (http://en.wikipedia.org/wiki/Greek_genocide http://en.wikipedia.org/wiki/Greek_genocide), taking some gold with him that he was then able to sell in Greece, using the money to help resettle.
  - mahyarm 15y ago
    Many wealthy people in vietnam were reduced to nothing when the currency became useless. The few smart people who had gold were able to move their wealth out. The entire world is going to go to shambles at once, that is a very low probability event compared to a region. Even during WW2 there were regions that were relatively untouched by the world war.
- arjunnarayan 15y ago
  If we've come to the point where you're fleeing the country from Nazis with only what you can carry in your hand, the only thing that's going to be sustainable is investment in _yourself_ through massive education. That way you're up and working and earning from the moment you're safely away.
  - nl 15y ago
    Since we are talking Sci-Fi scenarios... It makes a lot of sense to try and carry as much value with you as possible. Conditions during the course of your escape are likely to be difficult and the ability to pay for thing (=bribe your way out of trouble) is likely to be much more useful than knowledge of advanced mathematics or Python minutea. (Of course, the most useful way to carry value in an escape scenario is gemstones, not gold, since it is much easier to hide during transport).
    - brazzy 15y ago
      Gemstones are not a good value store at all, since there is no liquid market for them and the first-sale price is artificially inflated through marketing. Buy a diamond today and sell it tomorrow, and you'll make a loss of 30% or more.
      - nl 15y ago
        In the "government collapse and you need to run from nazis" scenario, if you somehow manage to only lose 30% of your value you are doing well. I'd note that Wikipedia says: A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency funding. People and populations displaced by war or extreme upheaval have utilised this portable asset successfully.[1] [1] http://en.wikipedia.org/wiki/Diamonds_as_an_investment http://en.wikipedia.org/wiki/Diamonds_as_an_investment (yes, it says citation needed, but nevertheless it did work in WW2.)
klochner 15y ago
The changes that accrue over millenia all happen in some 100 year stretch. My point is that looking at the last 100 years, by definition, will overlook times of revolution and change that certainly have happened and will likely continue to happen.
muraiki 15y ago
The government doesn't even need to be unstable: https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102 (Granted, many people simply shipped their gold to another country, but still...)

hessenwolf 15y ago

You had better hope your gold is hidden in a safe place under these circumstances. What percentage of the current gold investors are hoarding trading-size chunks in the cellar and the woods?

DVassallo 15y ago

... unless some breakthrough in nuclear physics leads to cheap synthesis of precious metals: http://en.wikipedia.org/wiki/Synthesis_of_precious_metals http://en.wikipedia.org/wiki/Synthesis_of_precious_metals

dmm 15y ago
Gold would make a lovely material to construct a toilet.

Cushman 15y ago

In any serious failure of government, the value of bullets far outweighs the value of gold.

jrockway 15y ago
When the revolution comes, I'm going to hide somewhere and wait for everyone to run out of bullets.
- reinhardt 15y ago
  value(canned food) > value(bullets) > value(gold)
  - bira 15y ago
    Gold is an universal store of wealth. Canned food and bullets not so much. It's a different kind of value.
    - saraid216 15y ago
      How do you define wealth?
    - reinhardt 15y ago
      Gold is a universal make-believe store of wealth: it is precious because "we" (i.e. most people) agree to consider it as precious. The fact that it's rare, cannot be manufactured and doesn't corrode over time are nice to have properties but are neither necessary nor sufficient conditions of value. The context of this subthread is SHTF situations, where all that matters is inherent value determined by the laws of nature. What good is your gold if nobody wants to take it for even a tuna sandwich or if you have a loaded gun pointed at you?
- neutronicus 15y ago
  I'm taking an assault rifle to my hidey-hole just in case someone finds me before running out of bullets.

Czarnian 15y ago

Paranoia is not an investment strategy. There are a whole lot of things that have to go seriously wrong before we revert back to a gold-based currency. Even if we did, all the gold in the world won't help with the food shortages resulting from the collapse of companies like Monsanto. Most of the grain we use has to be chemically activated to grow. If the country falls apart to the point where those chemicals are not available, there is no amount of gold that will buy a loaf of bread.

shingen 15y ago

Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force. If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.

gjm11 15y ago
> stole all of America's privately held gold Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)
- dmm 15y ago
  If someone raped you and then paid you the then-prevailing rate for a whore, does that make it not rape? What makes an exchange stealing is the involuntary aspect.
  - Steko 15y ago
    "If someone raped you ... does that make it not rape" Stunning circular logic there. "Someone" =/= "democratically elected government with clearly enumerated power". We agreed on the Constitution and it says the government can take stuff as long as it pays you. Those are rules we agreed to. If we all agreed on a Constitution that said the President could have relations with whoever he wanted and then people chose to stay in this country and then the President chose to have relations with them we might question whether that still qualifies as rape.
- fennecfoxen 15y ago
  He paid for it at the then-prevailing rate so that you'd be stuck holding dollars, which he would then immediately depreciate through inflationary measures. Not that I'm a gold-bug, but, it was pretty rude.
- ta12121 15y ago

ubernostrum 15y ago

The problem with gold in times of turmoil basically boils down to you saying "here's (insert weight) of gold that I'll use to pay for this", and the person you're dealing with saying "yeah, and I'm the Queen of England". Without some sort of neutral respected authority to assay and say "yup, it's gold", you just have shiny pebbles and/or dust. And when everything around you has collapsed, reliable access to a trusted assayer may not be so... reliable.

icefox 15y ago
It is easy for anyone to prove gold is real with an acid test. And you don't go to the grocery store with $20K of gold be it coins or chips. At most you would be carrying around gold rings which are small, something everyone has handled and knows and have a "smallish" value.
pradocchia 15y ago
No, gold isn't for times or turmoil, it's for when things quiet down again--seed stock for rebuilding your life once stability returns.
InclinedPlane 15y ago
And then the guy who stocked up on ammunition instead of gold points a gun at you and says "thanks for the gold", then leaves.

adabsurdo 15y ago

i'm having a hard time imagining a realistic scenario where political turmoil is strong enough to make all stocks worthless, yet my gold bullions at the bank are still mine. unless you think you could keep a meaningful amount at home, and then how will you protect it? if the nazis invade, if the bolsheviks take over, if society breaks down and roving bands of cannibals are out there plundering, chances are your gold is either not yours anymore, or there is no society to trade it with.

shahan 15y ago

The benefits of diversification -- higher return and lower risk -- is a better reason to invest in gold, even if it was true that gold holds its value for millenia, which probably isn't true. The article is about "why stocks beat gold and bonds" not "why you should own only stocks and never own any gold or bonds".

jonnathanson 15y ago

If this is an argument for gold, then it's important to note that most gold "owners" don't actually own gold. They own paper. Or, at best, they own shares in funds that must buy and sell their gold on fixed timetables (debatably erasing a lot of the real gains that would be made by holding actual metal). But they're pretty far removed from the physical good -- and, if the shit truly hit the fan, they'd be just as SOL as would stock-holders. Hedging against the apocalypse is a silly reason to own "gold." Hedging against market volatility is a slightly better reason. It is important that we don't conflate the two strategies, as popular perception seems to.

klochner 15y ago
I'm in complete agreement that holding something like GLD is only valuable as a hedge against market volatility. As for owning gold rather than "gold", I find appeal in being able to put $30k in my pocket in the event that credit cards or ATMs are temporarily out of service, which could happen well short of an "apocalypse."
paganel 15y ago
> Hedging against the apocalypse is a silly reason to own "gold." In the last 100 years alone there were at least 2 such "apocalyptic" events: the Russian revolution and the communists' grab of power in China. Granted, there were a couple of lucky stock-owners that didn't see their holdings going to zero (http://en.wikipedia.org/wiki/American_International_Group#History http://en.wikipedia.org/wiki/American_International_Group#Hi...), but generally speaking it would have been much better for a "White" Russian to be carrying gold or jewelry on his way to Paris in the 1920s than to carry worthless Tsarist stocks.
- jonnathanson 15y ago
  But my point is that most people don't actually own physical gold (hence my use of the air quotes around the word).