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alstry (35.46)

Are the Gold Bugs Gold Nuts?????

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January 21, 2009 – Comments (23)

I guess this is what the Gold nuts call inflation??????

From CalculatedRisk:

The South Coast Home Furnishings Centre in Costa Mesa — conceived as a one-stop outlet for home remodelers — has lost customers, tenants and finally ended up in receivership after rents failed to cover loan payments and operating expenses.

The mall was almost 100% leased when it was sold to an investor in August 2007 for $98 million. Now almost half the tenants are gone:

The Home Furnishings Centre had 32 tenants, filling almost all of the available space, when it sold ... in August 2007. [The buyer] put $18 million down and borrowed $84 million to cover the balance of the purchase price.

As of December this year, tenants had fled, including the anchor: bankrupt Wickes Furniture. According to court records, just 18 tenants remained and 34% of the space was vacant.

The receiver just accepted a $35 million offer for the 300,000-square-foot center - a price decline of 64% in about 18 months.

Last year it took about $100 million to buy the center, this year it is only $35 million......these stories are occuring all over the nation.....CRE will only get cheaper as more and more tenants shut down and vacate.  If the premise is to buy gold as a hedge against inflation, I simply can't see any inflation for years to come.

Businesses shutting down, vacancies rising, rents falling, wages being cut or frozen, prices for assets imploding in almost all asset classes......

Alstrynomics lives in the real world and applies real world facts to extrapolate projections, the gold nuts live in the past and have not yet learned how to count money in the digital age.  Do you think the gold nuts still use scales to determine their net worths???

23 Comments – Post Your Own

#1) On January 21, 2009 at 6:25 PM, Vet67to82 (< 20) wrote:

    Your example is an example of Deflation ... and gold is also a hedge against deflation.   Have you held a 1 troy oz gold eagle?   There is a psyche difference.   It's not the same for everyone.   The weight, the sparkle and glitter ...    it sure "feels" a lot more real when I look at all the different versions of the $50 bill at the same time  ....    

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#2) On January 21, 2009 at 6:46 PM, tonylogan1 (27.94) wrote:

Gold nuts are gold nuts, but there is something to be said for maintaining a 5-10% net worth position in physical assets.

There are clearly deflationary signs, such as the one you mention, but there are also inflationary signs, like the fact the government is going to annouce stimulus big enough to buy 34,286 of these shopping centers.

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#3) On January 21, 2009 at 6:46 PM, redneckdemon (< 20) wrote:

A good try, but arguing the psychological value isn't helping the case, mate.

 Alstry, your example is indeed deflation, and I would venture that, NO, that isn't what a gold bug would call inflation either.  If I'm not mistaken, the theory is that inflation is coming soon, probably in the next couple of months.

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#4) On January 21, 2009 at 7:03 PM, stargold (< 20) wrote:

Inflation or Deflation. Gold and Silver provide an alternative, and if nothing else at least gives people the feeling they have something hedged.

Gold and Silver coins, previously the preserve of "Gold Bug" nuts is now definitely moving into more mainstream investment psychology. 

Sites such as www.bullionsupermarket.com track premiums on Gold & Silver bullion coin and bars for sale on ebay. The premiums that bullion is selling at now in secondary markets such as eBay provides an excelent barometer of just how distrustful of "financial" markets people are becoming.

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#5) On January 21, 2009 at 7:32 PM, cbwang888 (25.86) wrote:

Gold has outperformed most commodities and resources for the last 6 months, even though down.  It is also a safe haven if you are holding weakening currency.

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#6) On January 21, 2009 at 7:44 PM, abitare (38.38) wrote:

I am buying physical gold where I find it for cash at reasonable prices. I am short a gold miner stocks (paper gold), which are inflated and popular.

Gold is insurance, physical gold does not have counter party risk unlike everything else.

Gold has been money for 3000 years. There has been a recorded 3000+ currencies disappear out of circulation.

I will be a gold buyer for life. I hope it is the worst investment I make. But I pay life, health and car insurance hoping not to use them either. Unlike, AIG, BAC, MER, CFC, AHM, the dollar, I know where my gold is, what it is worth and there is no level three accounting in my fortress.

I hope you are right.

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#7) On January 21, 2009 at 8:28 PM, goldminingXpert (29.47) wrote:

"Are the Gold Bugs Gold Nuts?????"

Yes.

"Is gold ever a good investment?"

Yes.

"Is now a good time to own gold?"

H-e-double hockey sticks no.

"Is there any investment that can be bought in any market conditions with blind faith regardless of price?"

Of course not--gold's no different.

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#8) On January 21, 2009 at 8:39 PM, mliu01 (< 20) wrote:

Tim geithner said that we need more and a lot more money to fix this mess.

 Thank about it. another 3 trillion dollar will be spend to stimulate.

We have good money and bad money. The bad money got destroyed. But it doesn't mean good money will become more valuable. Yea teh tulip priced crashed. But big mac did not go down with it.  Should McD have Quarter menu by now? Come on there is a deflation going on, Right?

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#9) On January 21, 2009 at 8:40 PM, mliu01 (< 20) wrote:

BTW, I believe there will be a deflation or disinflation first.

But at the end of tunnel, it will be hyper inflation. We have the writing all over the wall. People just choose to ignore it.

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#10) On January 21, 2009 at 8:41 PM, alstry (35.46) wrote:

Abitare,

I am with you.  I got a big bet with the insurance company that I am going to die.  I hope I lose every time:)

IMHO, gold is an emotional buy, if people go nuts enough, it could go to $10K an  ounce or more....at one time a tulip bulb was worth a family farm.

I am attorney, legally, gold is no longer money...maybe Obama changes that.....but I doubt it.

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#11) On January 21, 2009 at 9:04 PM, Jimmy2008 (< 20) wrote:

I am only a scientist (means not wealthy). I bought gold 2 months ago and am buying silver now. Reason? I want to sleep at night. I am afraid that the green paper could become trash overnight (maybe in a period of a year).

 

I would not held them for very long time. When I see light in the tunnel, I will sell them for fiat money.

I can not time markets. But I want to sleep well at night.

 

Make sense?

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#12) On January 21, 2009 at 9:20 PM, whereaminow (22.06) wrote:

Gold bug is a funny term.

I remember when people would toss around the term "deficit hawk" to demean anyone that raised concerns over the size of the federal deficit.

If prices are falling in so many sectors of the economy, would someone please notify the Wedding Industry. I'm trying to get married at the end of the year and they apparently have not gotten Alstry's deflation memo. Aslty, please, I'm begging you, in the name of all things holy, let the Wedding Industry know that there is an economy-wide deflation going on. They're raping me.

Could it be that it's not really deflation, but rather a liquidation of overpriced assets?

Why would deflation be concentrated only in sectors that were booming?

It appears that certain industries, particularly housing, were targeted by the Federal Reserve when they increased the amount of credit available by artificially lowering borrowing rates. Securitized debt obligations then compounded the mistake.

Since that didn't happen in every sector of the economy, like the fucking con artist ridden Wedding Industry, the resulting liqiudation of assets has not affected them. Or maybe they're just con artists.

But it's hard to argue deflation is occuring when prices aren't falling across the spectrum.

Regards,
David in Qatar

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#13) On January 21, 2009 at 9:22 PM, kayakingkarl (< 20) wrote:

There is a great double way to capitalize on Gold. That is with rare gold coins. The ones graded 70 (Perfect) by PCGS have been outperforming the market for years.

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#14) On January 21, 2009 at 9:23 PM, nuf2bdangrus (< 20) wrote:

Gold is finite.  Fiat currency is infinite.  THe governments of the world are telling you that they will monetise the liabilities of the banks.  Deflation is falling prices and a shortage of cash to cover the leveraged liabilities of the credit expansion cycle.  Cash is king in deflation, because the velocity of money slows.  But the government, again, has told you they will print ad infinitum to stimultate the velocity of money and the epansion of credit.  As debts are paid in dollars worth less, lenders will again seek a return on their capital.

 

Gold is a hedge against all of those, as it is universally recognised as money, and is scarce, unlike fiat money.  In this masrket, I remain 25% gold.  Hey, it's help up pretty well, no?

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#15) On January 21, 2009 at 9:48 PM, jszoke01 (25.28) wrote:

I'm still new to investing, so some of my theories are based on what I hear from my more favorite economists and speakers, namely Peter Schiff.  The guy has a lot of good arguments, never has bought into the same stuff as the talking heads on CNBC, so I naturally started turning toward gold (and most of everything else he focuses on) as an investment.  I'm now starting to rethink that position.  The gold one, that is.  I still think the guy is really sharp on the other foreign investments.

Sure, gold makes a lot of sense in an age where you can't use anything but the barter system.  It's common enough, but also rare enough, that it can be traded.  You can't make it in a basement, so there's no worry about your neighbor artifically making his own to reduce the value of yours.  But I have a problem thinking that something that you can't eat, drive, burn, or whatever else has an intrinsic value (other than it's shininess).  Why not Palladium, or tutonium, or phlybiddium, instead of gold?

I'm starting to rethink my position becuase I think it may be better to invest in a different, better, foreign currency.  In this age, you can do that.  You couldn't in the 70's or 80's, or for that matter, any other time from when the greeks ruled to the present.  I think it may be better to actually hold a strong currency from a stable country, as with that, you could really buy as many of the dollars or yen or yaun as you wanted, making it in effect much more stable than gold ever could be.

Am I wrong here?  Please tell me why gold is better than a strong currency?  The stuff just seems so old fashioned.

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#16) On January 21, 2009 at 10:05 PM, Jimmy2008 (< 20) wrote:

jszoke01,

I'm starting to rethink my position becuase I think it may be better to invest in a different, better, foreign currency. 

I like your idea. What would it be? yen? Swiss Franc? Yuan?

Thanks!

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#17) On January 21, 2009 at 10:16 PM, jszoke01 (25.28) wrote:

Right now I'm thinking the Aussie Dollar.  I'm by no means a currency expert, but it seems like their fiscal policy is MUCH stronger than ours. 

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#18) On January 21, 2009 at 10:50 PM, XMFSinchiruna (27.48) wrote:

abitare

Abit... this, my friend, is my first recommendation for statement of the year:

Gold is insurance, physical gold does not have counter party risk unlike everything else.

That says it all.

Great post... and great posts all!!

nuf2bdangrus

No sooner do I scroll down further, than I encounter my second:

Gold is finite.  Fiat currency is infinite.  THe governments of the world are telling you that they will monetise the liabilities of the banks.  Deflation is falling prices and a shortage of cash to cover the leveraged liabilities of the credit expansion cycle.  Cash is king in deflation, because the velocity of money slows.  But the government, again, has told you they will print ad infinitum to stimultate the velocity of money and the epansion of credit.  As debts are paid in dollars worth less, lenders will again seek a return on their capital.

Gold is a hedge against all of those, as it is universally recognised as money, and is scarce, unlike fiat money.  In this market, I remain 25% gold.  Hey, it's help up pretty well, no?

Bravo! Bravo!!

I would only add, that no matter which of the scenarios Fools may alternately foresee, that we all wish for the best possible outcome for all of our fellow Fools... and that peace and human kindness prevail.

In the meantime, let's keep watching these markets for clues.

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#19) On January 21, 2009 at 11:19 PM, XMFSinchiruna (27.48) wrote:

jszoke01

Australia that just sent en envoy to speak with BHP Billiton about possibly avoiding an announced mine closure. Sounds to me as though they might themselves be a touch nervous. The extent of the Australian economy's reliance upon material extraction has rendered the near-term collapse near catastrophic for the Australian economy, IMO.

The numbers revealing the rate of economic contraction that's coming out of Shadowstats right now are staggering. 11 percent decline in industrial production, and I believe 17% YOY 4th quarter contraction within the retail sector. Recent layoff announcements would seem to support this. In a normal environment, such a decline would continue to comprise a deflationary event, but the response to the crisis will undoubtably, unavoidably, cause an inflationary consequence sooner rather than later.

There is no safer spot that gold right now, IMO, and perhaps no upside potential so great as silver. :)

Just one man's opinion. Fool on!

 

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#20) On January 21, 2009 at 11:32 PM, Jimmy2008 (< 20) wrote:

I have bought some gold before. I am buying silver bars now. I could not find a good currency. I leant that even Switzerland prints money. Is it true?

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#21) On January 22, 2009 at 9:22 AM, XMFSinchiruna (27.48) wrote:

Jimmy2008

Yup... unfortunately we live in a fiat world.

Keep buying. :)

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#22) On January 22, 2009 at 9:34 AM, oversea (< 20) wrote:

Jimmy 2008,

no Switzerland isn't printing money, but they try to keep the Swiss Franc low, because there is some speculation going on on it.

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#23) On January 26, 2009 at 5:09 PM, cbwang888 (25.86) wrote:

I'm with abitare. Even with deflationary scenario, which will last for at least one year, gold can still glitter. Now more signs showing money is flowing out of T-bonds/notes. When there is no government that you can trust, gold is golden.

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