Bubbles

The last one - the US debt bubble is the scariest of all

junk bonds - watch out

> $17,000 a month to buy a place that costs $3,700 to rent.

lmao! you sure forgot that the mortgage interest is tax deductible :-)

Have to say, i've had a blast watching home prices go down, but had been criticized as being somebody that wants society to fail... When are Americans going to get rid of the stupid Anglo obsession for property prices? Instead of making them free, they end up making themselves slaves of their houses while buried in debt.... oh silly men!

Fun to watch though... Low prices are great for the young and future generations, but deeply obsessed elderly failed to see the benefits of cheap shelter for society as they consider housing their "retirement". I'm sorry they failed to save for real, but they only have themselves to blame for it. Oh, silly old men!

Let's not stop at RE - there's a lot more must-haves that people enslave themselves to by spending money unnecessarily. The most obvious is bottled water, followed by other soft drinks, including "vitamin water."

Clearly Facebook should be compared to Boo.com and not to Google which is worth $200 billion.

Clearly gold is a bubble because it has appreciated 14pct per year since 1998. Or because it has appreciated 5.4pct per year since 1988.

Clearly Apple is a bubble because its phones dominate the market, its iPads killed the entire netbook category, it gets a cut of how much media out there?

Yes, the mortgage tax deduction!

urfna - gold has no intrinsic value, no industrial applications.

The treasury bond market is in a bubble. Return Free Risk.
Also anyone holding cash is basically in a sucker's asset. The Fed is monetizing the debt, something Bernanke swore he would not do.

Gold? Seriously? I won't say it is a bubble or isn't, but you don't get to cherry pick start dates. If you started in 1980(ish) gold would still not only unremarkable in return on a nominal basis but it has been a huge loser in real $ basis. It is a great asset to hold while in a panic but it is a poor store of value, expecially on a per/wght basis.

IOW, it is good for a trade but a poor investment, especially if you are buying it in troubled times.

Gold price is rooted in fundamentals. The cost of financing is low and as long as world government's insist on monetizing their way out of their financial troubles it will be hard to claim gold is a bubble. If anything it's the one market that is not in a bubble. Just because something goes up does not mean it's a bubble.

"Gold price is rooted in fundamentals"

How so, Mighty Economist? It's not used as a commodity.

http://www.cnbc.com/id/40088925

The "gold standard" has never worked.

well said, upper westie

how many of the obsessed gold bugs who squandered all their $$ trying to be long over the years based on:

"world government's insist on monetizing their way out of their financial troubles"

have actually participated in the recent run??

gold is an investment fashion metal--much better to hedge inflation with commodities--

and re flight to quality, in anarchy my AK47 will get me lots more food than your bars of gold

Could it be that we are in unprecedented financial times, with 0% interest rates, 2x qe2, and still 20% 'unemployment'! Flmao. This ain't your daddy's depression.

but if you came at me with your glock, to steal my food, i could throw my bars of gold at you...really hard

Glock good choice. Some a few gold coins too can't go wrong either.

At zero interest rate npv loses all meaning. irr loses all meaning. bad stuff.

malraux used to throw Kruggerands into his safety deposit box at the bank - and he wanted us all to believe that he had a real-estate empire.

LMFAO.

Gold is not a commodity - it has no industrial uses. The "demand" for it is fake; it doesn't even pay interest or dividends. It is no more inflation-proof than anything else - when there's inflation, you have to pay more gold for your carrots than you did before inflation. Ask anybody who lived in the 1800's how useful the gold standard was to their boom-and-bust cycles.

"At zero interest rate npv loses all meaning. irr loses all meaning. bad stuff."

Wrong. At 0% interest NPV is today's value, as money would not change in value over time.

Why is that so bad?

commodity
3. economics an exchangeable unit of economic wealth, esp a primary product or raw material
http://dictionary.reference.com/browse/commodity?&qsrc=

the demand for it is as an alternative currency at a time when faith in fiat currency is declining..a time where central banks are scrambling to debase their currency and print their way out of deflation. a time when fiscal policies are irresponsible. its a trade, like anything else. If demand was fake, it would never have lasted this long, like the fake demand for oil in mid 2008 when it surged from 80 to 145 in 4-5 months time, only to crash to the 30s within 6 months later.

OK all you frightened Bubblers, so where are you investing your money today? Money market accounts?

I agree with Urban. Gold is in a long term secular bull market. And unlike the u.s. dollar the supply of gold is relatively fixed.

RS: "esp a primary product or raw material"

Precisely my point, RS: gold is NOT a primary product OR a raw material. It has very few industrial uses that can't be met by cheaper alternatives, such as copper; gold's weakness is precisely its strength: it is very difficult to impossible to combine it with anything else. It is inert.

RS - if central banks released their stored supplies of gold, they'd be giving it away in the streets. It's hardly got a "relatively fixed" supply.

And if it did, as Roubini rightly states, it would exacerbate economic cycles just like it did in the 19th century. Check your history books.

UD, the entire "fiat currency" thing is a red herring: gold is just as much a "fiat currency" as anything else, and a very bad one at that. I don't see, RS, where UD says that gold "is in a long-term secular bull market," but if it were you'd better watch out, because that would mean that stocks would crash.

The whole gold thing is fake, lads, just like housing and tulips were. How many of the people currently buying gold are using it for anything? Virtually none. Therefore, there is no real "demand" for it - it's a psychological and/or ideological fetish. It may go up and up and up and up in price like red tulips once did, and it will wind up in exactly the same spot.

guess time will tell. the moment volcker shows up in some policy actions, Im fully out of gold. Although I did sell out half my position at 1300 or so a few months ago..

No one needs gold. If I were Riversider & actually believed all the gobbledygook about fiat currencies and the gold standard and the impending crisis, then I'd be hoarding crickets instead of gold. At least you can eat crickets.

All this Bernanke printed money is like dry timber waiting for a match. And if they want to sop it up, the only tool the gov't will have is to tax the hell out of us, or raise interest rates.

thats just silly. our arguments over gold go back years steve. Who cares anyway though. I bought gold in the 600s for a specific reason for a specific trade. Now its at 1400. I didnt think the world was ending, with guns and bread and whiskey being the only things needed to live. Maybe Roubini thought that, but not me. We had a huge credit crisis, confidence crisis, and destruction of trillions of wealth in shadow banking system. Now the feds and other CBs around the world need to engage in policy actions to stem deflationary forces. Simple. Done. THAT is fake to me. This rally in junk bonds, search for yield, etc., is engineered. SO WHAT. Its all fake isnt it? But you invest and you buy things for fundamental reasons and hopefully you can see the trade through. Sometimes you cant. Sometimes the markets can stay irrational way longer than the smartest guys can stay solvent - think all those short RMBS/CMBS in 2004 and 2005..and were forced out with losses. I needed gold because given the times we were in and the policy actions taken to counteract the problems, I felt golds market value would rise - and yes that value is somewhat psychological. But isnt everything?

the fed can also sell assets to primary dealers through POMO to drain excess reserves

Urban , selling assets means issuing treasuries, and that would require raising interest rates.
If we're talking about non-treasury assets, it's all toxic garbage(maiden lane 1,2,3,4,5,6,7) then there is no buyer, I don't believe the Fed would ever sell, and if they did want to do something, the best they could do is a reverse repo, whereby the tax-payer retains the credit risk.

right, but at some point it has to happen in some form. but that is likely years away.

no difference between issuing treasuries or selling treasuries on the Fed's books. if they want to take dollars the implied rates would need to rise(substantially).

Trading gold is fine, UD, as long as you know the risk. My beef with gold is you can eat beef, but not gold. Don't take it personally....

No, the value of everything is not psychological - at least not for long periods of time.

Once again RS shows that he has NO CLUE how finance and money and banking work. Taxing will NOT "sop it up," you fool, and the Fed doesn't control long-term interest rates directly. UD is correct - the way the Fed reduces the money supply is either to sell assets, or, more likely, to let their swaps mature and not renew them.

Taxes are fiscal policy; the Fed is monetary policy. The Fed creates money by increasing bank reserves by buying treasuries, MBS's, and other assets, thus converting them into cash that banks can lend. The purchases are done through swaps, which mature. In the case of MBS's, they are paid off and prepaid. It is very simple for the Fed to "sop it up," as you call it, and it does not affect taxes.

I now know why RS & LICC support the economic policies they do - they have no clue how the real world works. The Fed does not directly control interest rates. The Fed increases bank reserves, "creating money," which banks then lend out, which is multiplied through the multiplier effect. The whole problem with the gold standard, as Roubini rightly points out, is that it does not allow for this flexibility, which tends means that monetary policy will tend to enforce business cycles rather than counteract them, which in turn leads to periods of great inflation and deflation, regardless of the fixed nature of the money supply - in fact, its fixed nature under the gold standard is precisely what exacerbates the cycles: too many people chasing too few goods leads to inflation, regardless of what the currency is.

You really, really need to head back to Bronx Community College, RS, to learn yourself a thing or two about money and banking.

"no difference between issuing treasuries or selling treasuries on the Fed's books."

OMG OMG OMG.

The Fed does not "Issue" treasuries, you fool. The Treasury issues treasuries - that's why they're called "treasuries," believe it or not.

The Fed is not buying the treasuries from the Treasury - primary dealers buy treasuries from the Treasury through the Fed's auctions. The Fed then swaps those treasuries for cash, in the form of excess reserves. The more reserves that banks have, the more that they can lend, meaning the greater the money supply will be.

The Fed buying treasuries from the Treasury would be like you paying yourself money to mow your own lawn: there is no real transaction there. Primary dealers have an obligation to buy treasuries, to make a market in them. A bank could, then, swap an MBS for treasuries with a primary dealer, and then swap those treasuries with the Fed for cash. The treasuries that the Fed has swapped for, because they are held by the Fed, constitute excess reserves. The more money that banks have with the Fed, the more they can lend out. The Fed keeps renewing these swaps or lets them mature - depending on that, the bank will continue to swap the MBS for the treasury....

I think this is all too complex for RS - let's get back to stone tables, chisels, and gold: they're much more understandable....

Taxes are most certainly a monetary tool or can be used as such. I understand this is not widely understood. The gov't can spend money without borrowing it first or collecting it via taxes. It simply credits and debits accounts. When we are taxed all that occurs is that numbers are removed from our bank statements and funds are removed from circulation.

when the gov't "borrows" and "taxes" it propogates the myth that this these two actions are directly related to its spending, when in reality the gov't could spend without taxing or borrowing and simply print money, otherwise known as monetizing the debt. Taxing citizens or selling Treasuries accomplishes much the same goal(they both remove money from circulation).

"I understand this is not widely understood."

Yeah - except you, the other 4.9 billion people in the world just don't get it.

"The gov't can spend money without borrowing it first or collecting it via taxes. It simply credits and debits accounts."

Yes it can. That is what "printing money" is, and it's vastly different from what is currently being done. It ALWAYS leads to hyperinflation.

But that is not "monetizing the debt." The Fed can do what it does regardless of whether fiscal policy is in balance or not - the government still borrows money.

"Taxing citizens" and "selling treasuries" do NOT accomplish the same goal. Taxation leads to spending by the government, or transfer payments. Selling treasuries is just like any corporation selling a bond or other obligation - the money is no longer in circulation UNLESS it is put into circulation by a) spending, or b) transfer payments.

Just time to fess up that you have not a clue about what you're talking about.

NOT A CLUE.

”Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” Warren Buffett.

my second pasty this month, but a brief one, and apolitical

digs--yes gold has been a good trade, but to call it a good long-term investment and inflation hedge is wrong--it simply hasnt been if one doesnt cherry-pick troughs and peaks--and the gold obsessed have been ruined generally throughout the last 50 years--including during times of awful uncertainty and inflation

agree re junks and other spread product, where value often (like now) gets dragged along irrationally in sympathy with treasuries--yield hunger will prove to be dangerous

rs--it's about econ 101--M U L T I P L I E R effect

Great quote by WB, WB! My sentiments entirely - adjusted for inflation, gold is still down from its peak the day after holding it in any quantity was legalized. (About 35 years ago, WB, not 50: it was 1974.)

Fundamental principle of value investing: there is NO absolute hedge against inflation, or deflation. There are only good investments, and bad.

Like trades - good ones, and bad ones.

Gold is worthless in and of itself. No one needs it, it has no industrial use except in minute quantities as a conductor. The gold standard not only did nothing to prevent inflation and deflation in the 1800's, it had to be abandoned many times to combat the very problem it is commonly thought to solve. It was suspended again during the Depression, because it prevented the government from increasing the money supply.

The more RS posts these Ayn Rand rants, the more ignorant he proves himself to be of economics, finance, and banking.

If someone gave me gold I'd just spit at that person and throw it back. Clearly gold is worthless.

If someone gave me gold I'd sell it right away. And if somebody gave me an Edsel, I'd probably do the same.

Anyone in the market for an Edsel? (The car, not the person because it would be illegal to sell a person or a corpse)

"digs--yes gold has been a good trade, but to call it a good long-term investment and inflation hedge is wrong--it simply hasnt been if one doesnt cherry-pick troughs and peaks--and the gold obsessed have been ruined generally throughout the last 50 years--including during times of awful uncertainty and inflation"

Gold has been a store of value for over 5000 years. When America is long gone and the dollar is a relic, gold will still be traded and used as money. wbottom you seem to be constantly wrong. I wish i could take the opposite side of all your trades.

"When America is long gone and the dollar is a relic, gold will still be traded and used as money."

Who uses gold as money today? No one, so your prediction is already wrong.

"Gold has been a store of value for over 5000 years"

Yup. And people used to sacrifice animals to the gods 5,000 years ago, too: that doesn't mean it's right.

Gold is not money any more than conch shells are, and they were used for money, too. Trinkets.

"Gold is not money any more than conch shells are, and they were used for money, too. Trinkets." Gold is not money.... stevejhx actually said this. Enough said.

Can we now compare gold and tulips, that seems to be where the conversation is leading us.

Julialg -- Thanks for adding to the dialogue by simply quoting the prior post and saying "stevejhx actually said this. Enough said." Really helpful and keen analysis.

I'm not weak, I tell myself
I stay because I'm strong
The truth is, I'm not man enough
To stop her from doing me wrong

She's acting single
I'm drinking doubles
I hide my pain
I drown my troubles

My heart is breaking
Like the tiny bubbles
She's acting single
I'm drinking doubles

She's acting single
I'm drinking doubles
I hide my pain
I drown my troubles

After all this one thing is certain: steve didn't make any money trading gold.

He also called a triple top of SPX at 1110.

manhattan island was bought from native americans in a transaction involving beads, another conch-shell-like store of wealth---unfortunately beads fell out of vogue as a store of wealth--cant buy no apartment with no beads

gold, a soft, malleable, usually yellow metal is very much in vogue these days--for any number of reasons as expressed by those who hoard it..it goes in and out of vogue for any number of similarly diverse reasons

julia i know that glenn has got you all super-excited, including about gold, but be careful about casting your financial lot with him on this--he's a bit in bed with some real scum in the metals business--see Goldline--as much as i love you j, pls dont give them your money, regardless of glenn's encouragement and his excitng way with you

why consider something a store of value that has no on it's quantity? QE2 brings that home. Weinmar Germany brings that home. Hopefully Bernanke gets the message.

why consider something a store of value that has no LIMIT on it's quantity? QE2 brings that home. Weinmar Germany brings that home. Hopefully Bernanke gets the message.

But, but, but, but, but .... I use every day the only tiny piece of gold I have - the filling in one of my teeth. It's very useful. Chomp, chomp, chomp......

Wedding rings are often gold. See what happens if you suggest stainless steel.

columbiacounty Ignored comment. Unhide

Ok Riversider,
what is blurglarking?
Most of the usernames I can figure out but this?

YOu can figure out the user names but you can't figure out that I know Riversider as well as I know columbiacounty as well as I know you?

My wife's wedding ring was made from straw.

I forced her to spin it into gold.

(by the way, do you like the ones where I reference w67thstreet's nudity around children or w67thstreet's wife being touched by thousands? I thought those are some of the best, probably tied only with w67thstreet taking a dump and w67thstreet having stds).

You should not force your wife to do anything.

WBottom - "digs--yes gold has been a good trade, but to call it a good long-term investment and inflation hedge is wrong"

TOTALLY AGREE! I never called it an inflation hedge. Actually, Im on the other side of this argument and publicly stated this on UD long ago. In 2008, I was of the belief that inflation will fall, dollar may strengthen (with debt deflation/swell), and that gold will STILL rise. That those buying gold on an INFLATION HEDGE, will own it for the wrong reason yet reap the rewards.

http://www.urbandigs.com/2009/02/how_in_is_gold_huh.html

"For the next few years while global fiat currencies are systematically debased, via central bank printing to counteract local slowdowns, the future whiplash-inflation trade (maybe 2012-2013) will be slowly building as the Kondratieff Winter plays out. It seems logical that the gold trade is a multi-year trade; if it doesn't get parabolic too early."

"NOAH - comment - Sun Feb 22nd, 2009 04:21 PM

Anon - I would go as far as to say it this way. The gold rise is NOT a US dollar hedge here. Gold is finite, and paper is unlimited. In a world of printing presses, they cant print more gold. When I argued for the rise of gold a year ago, the main reason was not a fear of dollar collapse. What will the US dollar collapse relative to? Plus, do we see wage inflation going rampant in the near future? I see reverse for a while ahead, yet gold will rise. Something else is at play here. Can gold rise at the same time your dollars gain purchasing power? Yes. "

"Weinmar Germany brings that home."

Riversider, Riversider, Riversider: despite that it has been shown that you have absolutely no idea what you're talking about:

1) MBS Hedges - HAHAHAHA!
2) No Multiplier Effect - HAHAHAHA!
3) Taxation is a Monetary Policy - HAHAHAHA!
4) Money is Made in Exploding Stars - HAHAHAHA!
5) The Fed Issues Treasuries - HAHAHAHA!
6) The Fed Buys Treasuries from the Treasury - HAHAHAHA!
7) There Is No Difference Between Book-Entry Creation of Money & Monetization - HAHAHAHA!
8) Regular People Can't Buy Treasuries

and so on and so forth, you still insist on droning on about your stupid economic theories.

The Weimar Republic engaged in book-entry inflation - that is, the government merely printed banknotes to repay its war reparations. It wasn't until that policy was stopped and the money supply was controlled through monetization of assets that the hyperinflation stopped.

And economics was a new science 100 years ago. We've learned much since then. Weimar was an early lesson, as was the Great Depression. (As is the Great Recession.) You really, really, really need to get back to the Bronx Community College and take a course in money and banking before posting one more thing.

UD - I'm disappointed with you: "Gold is finite, and paper is unlimited." That's like saying, "Land is limited in Manhattan, that's why it's so expensive here."

It's untrue. The problem with gold is precisely that its supply can't be controlled, so economic cycles can't be managed. That's why the gold standard necessarily leads to periods of great inflation followed by periods of great deflation, and why it has to be abandoned, and/or recalibrated, over time, as economic conditions change. It's just NOT money - if it were, you would be quoting dollars as a function of gold, and not the other way around.

Yes, wedding rings are made of gold. About half gold, to be sure. It's a great metal because it's shiny, doesn't rust, and you don't have to polish it. That's about it.

Gold is not an inflation hedge
It is a currency hedge. But it's important to keep in mind that when a currency depreciates the cost of imported goods priced and global commodities can rise. As a result of QE and the upcoming QE2 the amount of dollars has gone up and is expected to go up sharply. Simple supply and demand tells us that if the quanity of dollars goes up perhaps doubles and triples then those dollars are worth less. Bernanke stood up in Congress and said he would not monetize the debt. We clearly see that he's lied. Commodities are at a two year high and Gold is the obvious store of value.

so land in manhattan is cheaper than in wisconsin, maine, PA, florida, etc. then?

Land in Manhattan is not fungible with land in Florida

"Julialg -- Thanks for adding to the dialogue by simply quoting the prior post and saying "stevejhx actually said this. Enough said." Really helpful and keen analysis."......midtowner... Some comments (like stevejhx above) are so mind numbing that you just have to repeat it and marvel in it's stupidity.

"so land in manhattan is cheaper than in wisconsin, maine, PA, florida, etc. then?"

Some land in Manhattan is cheaper than some land in Wisconsin, Maine, PA, Florida, etc., yes. It's not because it's an island, however. Staten is also an island, as is Long, as is Catalina, as is Capri: what determines the value of the land in these places is very complex, but overall, as land is used for a purpose, its value will depend on what purpose it is put to.

"Gold is not an inflation hedge. It is a currency hedge."

HAHAHAHAHA! That is one of the most bass-ackwards things you have ever said. Gold serves no such purpose, because you can't spend it.

Exactly how would this work, Oh Brilliant Riversider?

The price of gold on 01/02/74 was $116.50 per ounce.
The price of gold was on 1/03/84 $383.00.
The price of gold was on 1/04/94 $394.10.
The price of gold on 1/05/04 was $420.60

http://www.usagold.com/reference/prices/history.html

$116.50 in 1974 dollars was worth $245.89 in 1984.
$383.00 in 1984 dollars was worth $546.30 in 1994.
$546.30 in 1994 dollars was worth $693.05 in 2004.

http://www.westegg.com/inflation/

So exactly how did gold act as a "currency hedge" during this period? In 2004 the price of gold was $420.60; however, to keep up with inflation from 30 years prior, it would have had to be worth at least $693.05. So, if you had put all your money in gold in 1974, not spent a dime of it, then converted it all back 30 years later, you would be in the red by about 40% when adjusted for inflation: (693-421)/693 = 39%.

So - how does it help?

And: if land in Manhattan "is not fungible with land in Florida," as you claim, then how can you likewise claim that high tax rates in Manhattan will drive jobs to Florida? Where would those jobs be placed if not on land in Florida?

Therefore, it must be "fungible," as you (improperly using the term) call it.

"and marvel in it's stupidity."

You mean "and marvel in its stupidity"?

"HAHAHAHAHA! That is one of the most bass-ackwards things you have ever said. Gold serves no such purpose, because you can't spend it." Think about it before you write something. You buy a little gold trinket, say 1 ounce in 2002 for $300. You sell it in 2010 for $1400 and you go buy an economics tutor.

Of course one can spend gold! It's been done for thousands of years.

"say 1 ounce in 2002 for $300. You sell it in 2010 for $1400 and you go buy an economics tutor."

That's what they were saying about condominiums in Florida about 10 years ago.

"It's been done for thousands of years."

Okay. Instead of buying a gold ETF, take delivery on some gold, walk into LICC's Duane Reade in Long Island City, and ask how much gold you'd have to pay to buy a box of Ginkgo Biloba to help your mind power, come back to me with the answer.

its funny how gold brings out such emotions. why is that?

Gold ETF's are not the same as gold. Many do not not permit delivery option and many gain their exposure via derivatives which assume counter-party risk. And that's a very good question Noah, I can't for the life of me understand why people take such an emotional stance toward the yellow commodity.

There's nothing emotional about it - it simply isn't what RS touts, and there are no data anywhere to support his "theories": there was vast inflation in the 1800's under the gold standard, and vast deflation, too. The gold standard has had to be abandoned many times when inflation or deflation needed to be countered, due to the business-cycle swings using the gold standard.

And again, RS proves that he knows nothing: "Many do not not permit delivery option."

No ETF allows for delivery of the underlying asset, whether it be stocks or gold or commodities. You don't own the asset - you own an index (which you have previously denied you could own).

And again: "many gain their exposure via derivatives which assume counter-party risk."

There IS NO COUNTERPARTY RISK in publicly traded derivatives: the risk is assumed by the clearinghouse.

Riversider, I've demoted you from fool to dope.

Steve your desperate bid to find someone who is more foolish than you is getting extreme.

goldbuggery has for decades been an obsession for many--and, for the most part it has, for them, resulted in....well...buggery

recent trading profits for many, attendant hyping by the media, brokers, etc; have transformed it from a wacko obsession to a prudent investment product

hell, the s & p has nearly doubled since the front contract touched the deadly 666 level a lousy year and a half ago

i think im going to stick with warren on this one

http://www.cnbc.com/id/40107439

I've been saying what Warren says since much before I even knew that he said it: gold has no utility, except as my back bottom left molar.

"Gold is not money any more than conch shells are,' Great deduction stevejhx. I will trade you conch shells for gold. Stick to trying to 'fundamentally transform' America into a socialist state..

Money was invented by rich people. Of course Steve might ask why rich people would invent money since they were already rich? The answer was that they held Gold and didn't want to give it up, So they told the rest of the folk "Take my money it's as good as gold"

"Money was invented by rich people"

OMG. Riversider has gone from dope to desperate.

It's just faux pyrite.

I'm not a finance person, but seems to me gold is in a bubble. If you agree:
When do you think it'll burst?
What will cause it to burst?
What'll be the aftermath of the burst?

Gold will bloom, not burst. After all, gold is the same as tulips.

Gold is certainly due for a pull back, but then back to secular bull market.

Tulips has not traditionally served as a store of value. It's supply is not relatively fixed. The asset is perishable. In virtually every way it is not like Gold. The comparison's awful.

What would cause gold to bust?

5000 years from now, America will be another Babylon, the dollar will be a relic,the global warming theory will be ridiculed and progressivism will be a strange curiosity, but gold will still be a store of value.

"but gold will still be a store of value"

Hasn't worked so well in the past....

RS: If you take out a loan in gold, how do you pay interest on it since its supply is fixed? Economics then becomes a zero-sum game: the net result of all transactions is always zero, and the economy, rather than expanding, stays the same.

But since that can't happen, inflation ensues despite the gold standard.

If wood teeth were good enough for George Washington, they're good enough for me.

" If you take out a loan in gold, how do you pay interest on it since its supply is fixed? Economics then becomes a zero-sum game: the net result of all transactions is always zero, and the economy, rather than expanding, stays the same."

If you borrow 2 ounces of gold , for example, you pay back 2.25 ounces of gold. Simple

The reason the progressives hate gold is because they can't run deficits. Gold takes away their power and control. They despise gold as a currency. Ask any lib what they think of gold.

steve thinks that income paid to you in 2011 is reportable on your 2010 income.

steve thinks that mutual funds are derivatives.

steve thinks that mutual fund bond managers cannot target a duration for their portfolios.

And steve thinks that he understands money and finance and others do not. (LOL!!)

Julialg,
I don't necessarily disagree, but, I think gold is in a bubble. It feels bubbly, like all the people who bought RE during that bubble. Guess I'm contrarian.

dwell, I agree, we are in a bubble, but it probably has a long way to go.. Adjusted for inflation it is still way below 1980's price of 850. The government is on a destructive debt path and the dollar and country is in real trouble. Gold will go much higher then you can imagine over the next 7 years.

"you pay back 2.25 ounces of gold"

And from whom do you get those extra .25 ounces of gold?

Dear, dear, dear LICC: spouting off again, this despite the fact he has seen - because I've posted - the links to the IRS regarding the taxation of dividends and bonuses declared: in the year they are declared, not the year they are paid.

Read the definition of "Derivative" again: http://www.riskglossary.com/link/derivative_instrument.htm

Mutual funds, bond funds, and ETF's are not cash instruments; their values are derived from other assets.

Never said that bond fund managers "cannot" target a duration; nor did I ever say that the mechanics of managing a bond fund were different from the mechanics of bond trading. You are the author of that gem.

Thus - LICC thinks that he understands money and finance and others do not. This is what led him down that wayward path many years ago when he decided to move to Long Island City, whence he can stare at the beautiful skyline of the place where he really wants to be: Manhattan.

HAHAHAHA!

If you take out a loan in gold, how do you pay interest on it since its supply is fixed? Economics then becomes a zero-sum game: the net result of all transactions is always zero, and the economy, rather than expanding, stays the same."

Well, unlike borrowing cash, you wouldn't need an inflation premium.

stevwjhx... Please get a grip. You earn the extra .25 ounce of gold by working. You've heard of that ancient concept. Working for money instead of the government giving yon stuff with borrowed money, haven't you?

"You earn the extra .25 ounce of gold by working"

You've created value, indeed, by working - but there is nowhere to get that extra .25 ounces of gold except by taking it from someone else, since the supply is fixed. If you take it from someone else, you don't create anything: it's a zero-sum game.

You will note that the Bible prohibits interest on loans; Muslim countries do today, as well, and Catholic countries did until the Reformation. It leads to stagnation.

And RS is self-contradictory again: a few days ago he was complaining (incorrectly) that IRR and discounting break down when interest rates are zero. Now he claims that, with gold, interest is not needed because "you wouldn't need an inflation premium."

Well, interest is not an "inflation premium," which is why you were wrong before, and are wrong again. Interest is the time-value of money: how much you would otherwise earn on the money if invested elsewhere. Of course with the gold standard you cannot "otherwise earn money," because the amount of money is forever fixed, so any money you earn must be taken from the pocket of someone else.

The entire concept is a house of cards that has never worked from Biblical times, when gold (and conch shells and beads and trinkets) were the coin of the realm. Gold has not protected against inflation, and it has not "hedged" currencies, since all currencies have a relationship to all other currencies, and gold is quoted as a function of those currencies.

It just makes no sense, does not work, never has and never will. Glen Beck has done more for the price of gold than even Moses could.

Why does anyone take steve the clown seriously??

In steve's world of lunacy, income paid to you in 2011 gets reported on your 2010 income tax return, because it was "declared." - IDIOTIC.

In steve's world of the ridiculous, mutual funds are derivatives even though they are investment companies that issue securities and that own other assets, therefore deriving a net asset value from their holdings, because they are "not cash instruments." - IDIOTIC.

In steve's world if the unintelligent, the strategies used in managing a portfolio of bonds are not different whatsoever from the technique used to trade a singe particular bond. - IDIOTIC.

steve has been exposed as someone who does not have sufficient intelligent understanding about that of which he speaks. Fact.

Why does anyone take steve the clown seriously??

In steve's world of lunacy, income paid to you in 2011 gets reported on your 2010 income tax return, because it was "declared." - IDIOTIC.

In steve's world of the ridiculous, mutual funds are derivatives even though they are investment companies that issue securities and that own other assets, therefore deriving a net asset value from their holdings, because they are "not cash instruments." - IDIOTIC.

In steve's world if the unintelligent, the strategies used in managing a portfolio of bonds are not different whatsoever from the technique used to trade a singe particular bond. - IDIOTIC.

steve has been exposed as someone who does not have sufficient intelligent understanding about that of which he speaks. Fact.