The 2020 Stock Market Crash Thread

MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
why would people not buy gold at 3000 ?
 

NoMoreTO

Pelican
MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
I think the Case for Gold as a store of Value is the one that has to be made. This is a key concept in money. In 1972 Gold was $38 / oz. I am sure no one imagine the price of a fixed commodity to go up so much.

If you buy Gold now and it goes up to $3,000, part of that might be increased demand, but the other part would be store of value.

Did your Gold just go up or did the value of your dollar just go down?

I am holding off on the Gold miners but am considering buying in as I think there will be another crash and the miners will get taken down with it, but perhaps not as much. Stocks have the same effect in the inflation will buoy them, problem is sales and revenues will be on the slide.
 

godzilla

Pelican
MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
Well, first off, Central Banks are large purchasers of gold. Russia and China as of late.

Lets move on.

If people lose trust in the value of money, they will have to use their money to buy things that act as a store of value, because who the fuck is going to save in a currency that is quickly losing value.

In Argentina, their currency has gone through a few bad inflation periods. So no one in that country trusts the money. So what do they do? They buy dollars with that money. They even price Real Estate in dollars.

Its true that people if they lose trust in their currency might go buy dollars first (Please watch the dollar milkshake theory that in posted in this thread)

However, Gold is the ultimate safe haven because it has been seen as a form of money/store of value for 5000 years. Gold would only need a small demand increase to go up in value. So if people ever lost trust in dollars, they will mostly certainly buy gold (and probably bitcoin, and maybe a few alt coins)
 

Tail Gunner

Hummingbird
Gold Member
MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
You are asking who will buy gold after it doubles in value?

The answer: the same types of people who bought gold when it increased 20x from $40 to $800. The same same types of people who bought gold when it doubled in value from $100 to $200. The same same types of people who bought gold when it doubled in value from $200 to $400. The same same types of people who bought gold when it doubled in value from $400 to $800. At the time, no one had ever seen those price levels either.

The answer is . . . those who wish to preserve their wealth against inflation, stagflation, hyperinflation, currency debasement, or social upheaval.
 

godzilla

Pelican
NoMoreTO said:
MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
I think the Case for Gold as a store of Value is the one that has to be made. This is a key concept in money. In 1972 Gold was $38 / oz. I am sure no one imagine the price of a fixed commodity to go up so much.

If you buy Gold now and it goes up to $3,000, part of that might be increased demand, but the other part would be store of value.

Did your Gold just go up or did the value of your dollar just go down?

I am holding off on the Gold miners but am considering buying in as I think there will be another crash and the miners will get taken down with it, but perhaps not as much. Stocks have the same effect in the inflation will buoy them, problem is sales and revenues will be on the slide.
Gold miners will make a shit ton of money if oil stays this low and gold stays high. Just saying.
 
Another question to consider: if all these bullion dealers genuinely thought gold and silver prices were going to soar “any day now,” as they’ve been preaching for decades, why would they be selling you as much of it as you can afford? Shouldn’t they be hoarding as much as humanly possible? Or are they all just so dumb that they sell something for $1,600 that they think will be worth $3,000 any day now?
 

Tail Gunner

Hummingbird
Gold Member
MichaelWitcoff said:
Another question to consider: if all these bullion dealers genuinely thought gold and silver prices were going to soar “any day now,” as they’ve been preaching for decades, why would they be selling you as much of it as you can afford? Shouldn’t they be hoarding as much as humanly possible? Or are they all just so dumb that they sell something for $1,600 that they think will be worth $3,000 any day now?
Gold dealers make their money on the spread, just like any other market-maker. They make money regardless of price direction. That is their business model. Price is irrelevant to them -- as long as other people buy and sell. They protect themselves from wild price swings by hedging.

You could pose the same question about securities dealers. Why would a market-maker for options or equities buy the underlying options or equities, when they can make money either way by making money on the spread? Again, that is the business model for any market-maker. Price is irrelevant.

A market maker is a individual market participant or member firm of an exchange that also buys and sells securities for its own account, at prices it displays in its exchange's trading system, with the primary goal of profiting on the bid-ask spread, which is the amount by which the ask price exceeds the bid price a market asset.

How Market Makers Earn Profits

Market makers are compensated for the risk of holding assets because they may see a decline in the value of a security after it has been purchased from a seller and before it's sold to a buyer.

Consequently, market makers commonly charge the aforementioned spread on each security they cover. For example, when an investor searches for a stock using an online brokerage firm, it might observe a bid price of $100 and an ask price of $100.05. This means that the broker is purchasing the stock for $100, then selling it to prospective buyers for $100.05. Through high-volume trading, small spread adds up to large daily profits.
https://www.investopedia.com/terms/m/marketmaker.asp
 

godzilla

Pelican
Banks, dealers, etc are just middle man.

Thats why so many people love blockchain.

Look at the mortgage market.

This is how it flows

You --> Mortgage Broker --> --> Government (sometimes) --> Bank --> Mutual Fund --> You

The largest holding of the largest bond fund, are mortgages (Federal National Mortgage Association 3%). Held by millions of Americans in 401ks. https://finance.yahoo.com/quote/BND/holdings?p=BND.

You basically pay take out a mortgage at 4.5% and end up earning the same interest on that mortgage at 3%.
 

Foolsgo1d

Peacock
MichaelWitcoff said:
The question nobody’s answering: who’s going to buy gold for $3,000 an ounce, or silver for $100? The price doesn’t matter if nobody will pay it, and the dealers who sold gold for $1,500 an ounce aren’t dumb enough to buy it back for 3k.
Perhaps the same people who bought overpriced stocks and lost a lot of their fortune and never learn? Plenty more suckers in the manipulated market.
 

SlickyBoy

Ostrich
Tail Gunner said:
MichaelWitcoff said:
Another question to consider: if all these bullion dealers genuinely thought gold and silver prices were going to soar “any day now,” as they’ve been preaching for decades, why would they be selling you as much of it as you can afford? Shouldn’t they be hoarding as much as humanly possible? Or are they all just so dumb that they sell something for $1,600 that they think will be worth $3,000 any day now?
Gold dealers make their money on the spread, just like any other market-maker. They make money regardless of price direction. That is their business model. Price is irrelevant to them -- as long as other people buy and sell. They protect themselves from wild price swings by hedging.
I think, maybe, he is thinking of the hype preached by so many gold bug vendors who talk about the coming Armageddon saying the dollar is going to fail, and therefore everyone must own gold. Yet they all willingly accept cash in exchange for gold.

Buying in and out of precious metals for a gain is one thing, but holding onto them for dear life as if one day we'll all be buying bread with Krugerrands is foolhardy.
 

Tail Gunner

Hummingbird
Gold Member
SlickyBoy said:
Tail Gunner said:
MichaelWitcoff said:
Another question to consider: if all these bullion dealers genuinely thought gold and silver prices were going to soar “any day now,” as they’ve been preaching for decades, why would they be selling you as much of it as you can afford? Shouldn’t they be hoarding as much as humanly possible? Or are they all just so dumb that they sell something for $1,600 that they think will be worth $3,000 any day now?
Gold dealers make their money on the spread, just like any other market-maker. They make money regardless of price direction. That is their business model. Price is irrelevant to them -- as long as other people buy and sell. They protect themselves from wild price swings by hedging.
I think, maybe, he is thinking of the hype preached by so many gold bug vendors who talk about the coming Armageddon saying the dollar is going to fail, and therefore everyone must own gold. Yet they all willingly accept cash in exchange for gold.

Buying in and out of precious metals for a gain is one thing, but holding onto them for dear life as if one day we'll all be buying bread with Krugerrands is foolhardy.
I disagree. The whole purpose of owning 5%-10% of your wealth in gold is as insurance against the vagaries of the financial system. Just as you buy insurance against all sorts of possible but unlikely events, you buy gold as insurance against the worst that life can dish out.

Your image of buying bread with Krugerrands is a laughable fantasy. You buy a Krugerrand today for $1,700 to sell it later for $3,000 or $5,000 or $10,000 -- or perhaps trade it for an entirely different currency. Then you buy your bread -- or your new house -- with the increase in cash that the sale of your gold provided to you. I think that this is rather obvious.
 
Yes, gold is insurance. No, price doesn't matter. Remember, it was 1000 at one time too, now it's almost 2000. It will go higher, and that will, at least in short term spurts, also support the increasing demand.

I think gold is misunderstood (I am not, and have never been a goldbug) because its window to shine is so small. Some people can't believe that we are approaching that window, so you get more skeptics even when clearly more people desire gold. Warren Buffett was born at the right time, in the right country. And putting aside all of his success, he has never been particularly honest about his treatment or analysis of gold (by the way, he bought and sold silver for a profit once). That is odd, but just shows that the recent history of the US has been remarkable. That window is closing, and another is opening, slowly but surely.
 

Tail Gunner

Hummingbird
Gold Member
Blade Runner said:
Yes, gold is insurance. No, price doesn't matter. Remember, it was 1000 at one time too, now it's almost 2000. It will go higher, and that will, at least in short term spurts, also support the increasing demand.

I think gold is misunderstood (I am not, and have never been a goldbug) because its window to shine is so small. Some people can't believe that we are approaching that window, so you get more skeptics even when clearly more people desire gold. Warren Buffett was born at the right time, in the right country. And putting aside all of his success, he has never been particularly honest about his treatment or analysis of gold (by the way, he bought and sold silver for a profit once). That is odd, but just shows that the recent history of the US has been remarkable. That window is closing, and another is opening, slowly but surely.
Just as people always misquote the Bible when they say that "money is the root of all evil," when the Bible actually says that "the love of money is the root of all evil," Warren Buffet misquoted Keynes when he called gold a "Barbarous relic."

Keynes never said that gold was a barbarous relic. Keynes wrote that "the gold standard is already a barbarous relic." The gold standard might be a barbarous relic in the eyes of many, but gold will always act as insurance. Why else are the major central banks all buying record amounts of gold?

BTW: I am in no way a gold bug. I simply recognize the value of gold as a form of insurance in a very unstable world. I just recognize reality.
 
I understand the theory of holding metals as insurance against a currency collapse, and have a little bit of my own for that scenario. Mike Maloney, who I don't particularly trust but who has a great series called Hidden Secrets Of Money, thinks that at some point you'll be able to trade silver for a house. Whether he's right, and if so how much silver that would take for a decent house, is up for debate. It is objectively true that all fiat currencies in history have eventually hit their intrinsic worth of 0. The question is what will replace the USD when that happens (when, not if). Crypto seems the most likely thing the elite are setting the stage for, and I'm not convinced that Bitcoin itself wasn't an oligarch test-run. Work the bugs out now so when they roll out the real thing they'll have a good idea of the risks and weak spots. Either way, in my opinion, metals should make up a relatively small percentage of your portfolio. Buying lots of gold or silver, with no stocks or real estate for example, is probably not a winning play. I think Modern Portfolio Theory is mostly ridiculous, but it does make sense to hold at least a few different asset classes that are as non-correlated as possible (and then switch it up when that ceases to be the case).
 

Tail Gunner

Hummingbird
Gold Member
SamuelBRoberts said:
kurtybro said:
How much silver, for how much house?
Yeah I don't quite understand this either.
You can buy a house with silver right now, if you've got enough of it.
It is very simple. Say you bought $20,000 worth of silver when it sold for $10 per ounce. If silver eventually rises to $100 per ounce, your silver is now worth $200,000. You now convert your silver into currency and buy a house (or you buy the house from a gold/silver bug willing to accept your silver in exchange for his house, because he expects the price of silver to continue to increase). If you had instead kept $20,000 in your bank account (instead of buying silver), then you could not afford to buy a house -- because your $20,000 in currency is still worth $20,000. He is simply talking about the multiplier effect of the value of hard assets during periods of inflation, stagflation, or hyperinflation.

BTW: You can do the same thing with gold, copper, or anything else that dramatically increases during periods of inflation or stagflation.
 

The Wire

Kingfisher
Gold Member
MichaelWitcoff said:
I understand the theory of holding metals as insurance against a currency collapse, and have a little bit of my own for that scenario. Mike Maloney, who I don't particularly trust but who has a great series called Hidden Secrets Of Money, thinks that at some point you'll be able to trade silver for a house. Whether he's right, and if so how much silver that would take for a decent house, is up for debate.
Well a decade ago he said by 2015 at the latest you could buy a medium size house with 500 ounces of silver....or even 'trade' for it which is even more ridiculous of a statement.

Is it possible that in your lifetime your local fiat will become so devalued that owning precious metals will serve as an insurance allowing you to exchange in a different currency to survive and even prosper some? Absolutely. Thats the insurance aspect of owning it. But I would ignore idea that we are going to be purchasing windfall items directly with these items.

One thing to always keep in mind is how the world is always changing which means general financial rules could breakdown which means whatever you own may not be as safe as you think. U.S. government has already stolen gold off it's citizens and gotten away with it. In the future governments could make various assets difficult to own or transfer, for reasons of taxes, hyperinflation, or asset confiscation by authorities. The direction of things is socialism and depending on your time horizon things could get ugly in the future. I don't believe for a second if things collapse enough that someone with 50 ounces of gold is just going to be able to start buying major things like real estate and profiting like a bandit on a winning lotto ticket. There are too many regulatory forces that could screw with that.
 

SlickyBoy

Ostrich
Tail Gunner said:
Your image of buying bread with Krugerrands is a laughable fantasy. You buy a Krugerrand today for $1,700 to sell it later for $3,000 or $5,000 or $10,000 -- or perhaps trade it for an entirely different currency. Then you buy your bread -- or your new house -- with the increase in cash that the sale of your gold provided to you. I think that this is rather obvious.
I think we understand the same thing; I am not denying the use of gold the way you suggest.

My "image" referenced above wasn't mine. Perhaps it may be a fading memory to some, but it comes from a slew of very real scare monger blogs and advocates around 2008 who swore up and down that once the dollar crashes we would be relying on gold as the only source of value. Those people would have laughed in your face about selling a Krugerrand to get more of what they recommended getting rid of - dollars.

Daily Reckoning and much of what Agora publishes were high on the list of gold bug scandal sheets back then.

The dollar may indeed crash from hyperinflation, but no, one should not expect to conducting barter with Krugerrands or any other form of gold for a variety of reasons.

BTW, we are past 115% debt to GDP now, according to the debt clock. Even that may be an under-estimation.
 
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