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Ray Dalio and gold

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  • Avatar kdeva 
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    Paradigm Shifts
    https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio

    This was an interesting read, wanted to hear your thoughts.

    #233376 Reply
    Avatar G 
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    Good lord, that was a lot of rambling with no point at the end.

    I do believe gold has a place in my portfolio.

    #233377 Reply
    Liked by PhotonsRGR8
    Avatar Peds 
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    I didn’t read it, but gold does not have a place in my portfolio.

    #233392 Reply
    Lordosis Lordosis 
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    I have some american eagle gold coins given to me as a gift. About 10 K worth.  I keep it as part of my Apocalypse fund but I do not really consider it part of my investments. Maybe give them to grand kids someday if I am so blessed.  Maybe trade them for a donkey and plow if needed.

    “Never let your sense of morals prevent you from doing what is right.”

    #233412 Reply
    Vagabond MD Vagabond MD 
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    I have a long history collecting coins and stacking a little bit of precious metals. Together, they make up about 1% of my net worth, ex-house (NWEH). (There was a time when my coin collection was probably 20% of my NWEH.)

    Dalio is an interesting guy, very smart, honorable, and obviously extremely successful. His writing style is rambling and repetitive, however, and I do not care for it. I started reading his book, Principles, and enjoyed the first part, which is biographical and demonstrates how he is put his “principles” to work for himself, his family and his business. After that section, I found it dreadfully boring, the listing and explaining of the principles, ad nauseam, and I did not finish the book.

    #233427 Reply
    Hank Hank 
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    #233434 Reply
    Liked by RosieQ, Tangler, kdeva, Peds
    Avatar G 
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    Earnest refinancing bonus

    This topic gets rehashed regularly. You’re either out, in a little, or a total believer. I’ve come to realize that this is one topic that smart people can argue about, with heaps of evidence on both sides, til the sun comes up the next day.

    #233445 Reply
    CordMcNally CordMcNally 
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    If you go into the bathroom, turn out the lights, then look in the mirror, and say “Crixus” three times…he will appear. But don’t say I didn’t warn you.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    Avatar ajm184 
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    What is good investment strategy for a person does not mean it is appropriate to the unwashed masses, especially when from a famous ‘finance’ person like Ray Dalio, Jamie Dimon, and Suzie Orman, Warren Buffett, etc.  Sure, if I had an 9 or 10 figure NWEH, maybe I would consider gold, alternative investments, etc.

    Only when your financial resources, goals and risk tolerance match that of the said famous ‘finance’ person, otherwise follow their specific investment strategy at your peril.

    #233453 Reply
    The White Coat Investor The White Coat Investor 
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    Warren Buffett and gold: “You can fondle the cube, but it will not respond.”

    Click to expand…

    Good stuff there.

     

    The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century. This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while. Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.” 18 Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
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    #233454 Reply
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    Avatar Perry Ict 
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    Interesting article by Ray Dalio.  One takeaway for me on things like gold stocks is that most assets are cyclical even if they don’t seem like it, so it’s not a bad idea to diversify a little into less popular asset classes.  I’ve done so by putting a little bit of my portfolio in gold and silver miner etfs in the past couple months (So far so good on those).

    On that note, if you look back at the gold bugs index (“HUI”) since January 2000, and compare it with how the S&P 500 has done since January, 2000, HUI has actually outperformed the s&p 500, up about 300% compared to about 200% for the S&P. If I hadn’t looked, I would have guessed otherwise. Just one example of how the very recent past can distort our perception of reality.

    #233568 Reply
    Liked by PhotonsRGR8
    The White Coat Investor The White Coat Investor 
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    Interesting article by Ray Dalio.  One takeaway for me on things like gold stocks is that most assets are cyclical even if they don’t seem like it, so it’s not a bad idea to diversify a little into less popular asset classes.  I’ve done so by putting a little bit of my portfolio in gold and silver miner etfs in the past couple months (So far so good on those).

    On that note, if you look back at the gold bugs index (“HUI”) since January 2000, and compare it with how the S&P 500 has done since January, 2000, HUI has actually outperformed the s&p 500, up about 300% compared to about 200% for the S&P. If I hadn’t looked, I would have guessed otherwise. Just one example of how the very recent past can distort our perception of reality.

    Click to expand…

    Any period that begins in 2000 and includes a comparison with stocks is by definition cherry picked. Why not start in 1995, 2003, or 2009? Oh wait, I already know the answer to that.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #233579 Reply
    Avatar Perry Ict 
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    With all due respect, you missed the point (or maybe helped make the point), which is that people tend to ignore how cyclical these things are. Going back to 1999 up to the present time, that’s an entire 20+ year stretch that gold miners outperformed the stock market, and that’s even after the miners are way down from their peak in 2011 while the S&P 500 is at its all time high. I am not at all a gold bug (like I said, gold miners are only a small portion of my portfolio), but I find that fascinating when you consider how hated these stocks are by many mainstream investors. Anyway, Ray Dalio is one of the most successful investors in the world, so I would not be too dismissive of his ideas.

    #233623 Reply
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    Avatar burritos 
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    https://www.npr.org/sections/money/2009/08/hear_how_the_gold_standard_fue.html

    Interesting take on how the the gold standard was plausibly at the core of the Great Depression.

    #233667 Reply
    Avatar Tim 
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    Dalio developed Bridgewater into a powerhouse, no doubt. When I first started looking at hedge funds I noted in about 2000 he was similar to Buffet serving as a “spokesperson”. The problem is, zero of his investment techniques or philosophies could be translated into my own situation. Another hedge fund caught my attention, Duquesne Capital. https://en.wikipedia.org/wiki/Stanley_Druckenmiller

    If on wishes to emulate, I suggest Peter Lynch, Stanley Druckenmiller, Warren Buffet, even Paul Tudor Jones and of course Bogle. Dalio for the last 20 years has been on a promotional tour that seems to be about “Ray” rather than actual actionable investment approaches. Hmmm, snake oil salesman comes to mind, not worth reading. Certainly Dalio can afford it.

    #233682 Reply

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