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The Apple bubble (Page 2)
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turtle777  (op)
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May 23, 2012, 11:50 PM
 
Originally Posted by Eug View Post
That's kind of a circular argument though. Gold is a precious metal because thousands of years ago people prized it because it's shiny and doesn't tarnish, and it's easy to mold into jewelry. So why is it worth so much in 2012? Because it's a precious metal?
You are completely overthinking it.

The ONLY reason gold is worth more today than in the past is that our fiat currency is worth LESS than it used to be.

The loss of purchasing power of fiat currencies is reflected in gold's increase in price.

Just look at the Gold / Oil ratio: it's pretty constant, compared to other measures (oil in fiat, gold in fiat).

http://fintrend.com/wp-content/uploa...il-vs-Gold.jpg

-t
     
Eug
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May 23, 2012, 11:56 PM
 
You're not getting my argument. My argument is that something like oil is a consumed commodity in 2012. For the most part, gold is not. It's mostly just hoarded. Governments buy it, and put it in storage.
     
Big Mac
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May 24, 2012, 03:05 AM
 
That's true, Eug. Gold has few industrial uses. Silver and the Platinum group metals are much more useful. But would you turn down a gold filled vault? No, I don't think so. You definitely have a point, though - central banks could tank the price of gold if they wanted to sell a lot of it. That's what happened in 2006, IIRC, when all the fundamentals pointed to gold going much higher but banks were dumping so it stayed cheap for a little while longer - I think it was either the 5-$600 level back then.

The other problem with el chup's argument is that when world economies are distressed, the financial markets turn not to gold or any other precious metal. PMs fall when the world economy is short circuiting, as do all the other commodities. There's one place everyone flees to - the world's reserve currency. That happens to be the $USD until the feds manage to successfully undermine that too. We have extremely high debt and no consensus among the political elites in a closely divided country about doing anything to remedy that disease, which has taken the dollar index down for years now. But the dollar is still the most trusted currency on the globe, and we also have the world's most robust financial markets. So when the global macro picture is seemingly deteriorating, people flock to the dollar and US treasuries, artificially lowering our interest rates, thereby lessening the pain of our debt service burden among other things.

With all that said, I love gold and the other precious metals., but I don't love them excessively. They are subject to market forces just like every other form of currency. They certainly store value, but if you buy in at the top of the PM market and then a big correction ensues, you may have to hold the metal for decades before you get your investment out. That's what apparently happened at the top of the gold market in the early 1980s - we still haven't passed those highs when you adjust for inflation.

Then there's another issue that was pointed out by a major investor, which I think is a very compelling argument. PMs don't grow in wealth. They only gain value at the expense of debased fiat currencies. If you take a gold bar and store it in a vault, your gold bar will do no productive work for you. It won't build you a business or pay you dividends. It will sit there, certainly being rare, desirable hard asset money, but it can't grow and multiply like an investment in a corporation can. You can't utilize the bar to make more bars as you can with other kinds of investments. If you could choose all the gold in the world or all the shares of the best companies in the world, you'd choose the shares because they're infinitely more valuable because they produce goods and services, as compared to inanimate pieces of metal, no matter how desirable those metals may be.

I hope some people benefited from my buy recommendation from this morning. I'm proud of the fact that I saw we weren't going any lower before nearly anyone else did, even when we were down $2 at the lows of the morning, at which time it could have gone even lower. AAPL looks primed to test and easily exceed $575 (our old support, now resistance level), and once that happens it's a short hop back up above $600, but that's the bullish case that assumes another bomb doesn't come from the Eurozone.
( Last edited by Big Mac; May 24, 2012 at 03:28 AM. )

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turtle777  (op)
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May 24, 2012, 08:37 AM
 
Originally Posted by Eug View Post
You're not getting my argument. My argument is that something like oil is a consumed commodity in 2012. For the most part, gold is not. It's mostly just hoarded. Governments buy it, and put it in storage.
I think you're not getting my argument.

Try storing your savings in oil

Gold is a store of value that can not be eroded away by hidden (or plain) inflation. Easy as that.

-t
     
turtle777  (op)
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May 24, 2012, 08:41 AM
 
Originally Posted by Big Mac View Post
Then there's another issue that was pointed out by a major investor, which I think is a very compelling argument. PMs don't grow in wealth. They only gain value at the expense of debased fiat currencies. If you take a gold bar and store it in a vault, your gold bar will do no productive work for you. It won't build you a business or pay you dividends. It will sit there, certainly being rare, desirable hard asset money, but it can't grow and multiply like an investment in a corporation can.
Yes, but same is true with fiat currencies.

Sure, you can loan them out for interest, but so can you with gold (if you are stupid enough).

-t
     
Eug
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May 24, 2012, 10:13 AM
 
Originally Posted by turtle777 View Post
I think you're not getting my argument.

Try storing your savings in oil

Gold is a store of value that can not be eroded away by hidden (or plain) inflation. Easy as that.
Yes, but my point is that the reason it is valuable is the same reason diamonds are valuable, because companies/government/etc. limit its availability.

From an industrial usage standpoint, there is absolutely no reason for it be priced anywhere near where it's priced. This is quite different for platinum, which is a much rarer commodity, and which has more use in industry. And yes, you could simply buy platinum and store it in your bunker if you wanted.

     
Big Mac
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May 24, 2012, 10:22 AM
 
You could do that with Platinum, hoarding it. Wouldn't be a bad idea as long as you're bullish on industry, and autos primarily. The problem is, in the 2008 financial crisis gold held most of its value, but Platinum cratered hard especially when it looked like autos were falling off a cliff. Of course, it recovered quickly too (would have been an excellent buy right after we stabilized), but if we face economic meltdown I'd prefer gold to any other PM. When PMs are bullish, gold leads the way, and when PMs are retreating gold lags the retreat.

I like platinum too, but I think your sentiment is a bit too bearish on gold.

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Eug
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May 24, 2012, 10:33 AM
 
Originally Posted by Big Mac View Post
You could do that with Platinum, hoarding it. Wouldn't be a bad idea as long as you're bullish on industry, and autos primarily. The problem is, in the 2008 financial crisis gold held most of its value, but Platinum cratered hard especially when it looked like autos were falling off a cliff. Of course, it recovered quickly too (would have been an excellent buy right after we stabilized), but if we face economic meltdown I'd prefer much prefer gold to any other PM. When PMs are bullish, gold leads the way, and when PMs are retreating gold lags the retreat.

I like platinum too, but I think your sentiment is a bit too bearish on gold.
I'm not being bearish on gold in relation to platinum. I think it will retain its value better than platinum in a downturn, since industrial usage of platinum decreases in an economic downturn. Since people don't care about gold's industrial usage anyway, that isn't an issue with gold in a downturn.

IOW, my statement here is that the world has arbitrarily chosen gold, mainly for historical reasons. The only real pro argument for gold IMO is that it's common enough that everyone can have some, so it's better suited for currency-related stuff, but otherwise there isn't any real logical reason to choose gold over platinum IMO.

To put it another way... people eat horse meat in France, but not in Kentucky. Why? Just because that's the way it is. That's not going to change any time soon. Even though the potential for growth of horse meat consumption is much higher in Kentucky (because nobody eats it there), that doesn't mean I'd invest in a horse meat restaurant in Kentucky. That'd be an excellent way to lose money. The reasons here are not logical. The reasons are historical and cultural, nothing more.
     
turtle777  (op)
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May 24, 2012, 10:49 AM
 
Originally Posted by Eug View Post
Yes, but my point is that the reason it is valuable is the same reason diamonds are valuable, because companies/government/etc. limit its availability.
But again, not to sound like a broken record, the *same* is true for fiat currencies.

The difference is, Governments / Central Banks can print more fiat, whereas Gold supply is very limited.

Maybe you misunderstand my intention about Gold: Gold is NOT an investment, Gold is merely *true* money to preserve my purchasing power and wealth.

Originally Posted by Eug View Post
From an industrial usage standpoint, there is absolutely no reason for it be priced anywhere near where it's priced.
I'm not sure why industrial demand should be the be-all / end-all of attributing value / price to things.

From an industrial usage standpoint, a lot of things are overpriced (e.g. residential real estate, FaceBook etc...)

-t
     
Eug
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May 24, 2012, 11:01 AM
 
Originally Posted by turtle777 View Post
The difference is, Governments / Central Banks can print more fiat, whereas Gold supply is very limited.
Gold supply is artificially limited. There is actually quite a bit of gold around. It's just that it's hoarded.

Maybe you misunderstand my intention about Gold: Gold is NOT an investment, Gold is merely *true* money to preserve my purchasing power and wealth.
"True" money? What does that mean? Would you prefer a box of diamonds or a box of gold?

I'm not sure why industrial demand should be the be-all / end-all of attributing value / price to things.

From an industrial usage standpoint, a lot of things are overpriced (e.g. residential real estate, FaceBook etc...)
Indeed. Residential real estate dropped 50% in parts of the US. Facebook dropped 20% in the first few days of trading.

But at least you can live in a house. You can't live in gold... unless you build your house out of it.
     
turtle777  (op)
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May 24, 2012, 01:04 PM
 
Originally Posted by Eug View Post
"True" money? What does that mean? Would you prefer a box of diamonds or a box of gold?
No, diamonds are bad for the purpose of money, because it doesn't have some of the key attributes of money:

-divisible
-homogeneous
-identifiable

-t
     
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May 24, 2012, 01:39 PM
 
Diamonds make better tools, whereas gold is useful for powered rail.
     
Big Mac
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May 24, 2012, 01:40 PM
 
Powered rail? Didn't know that. Thanks for the info andi!
Originally Posted by turtle777 View Post
No, diamonds are bad for the purpose of money, because it doesn't have some of the key attributes of money:

-divisible
-homogeneous
-identifiable

-t
Excellent point. Some companies have been advertising investment grade diamonds as the new, cheaper alternative to gold, but you're right, it's not money. Near money, pretty damn good and I'd love a handful, but not money.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
olePigeon
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May 24, 2012, 03:58 PM
 
It's also easier to get conflict-free precious metals than diamonds, if you care about such things. Also, a diamond's worth is purely subject to the person examining it. No one cares about defects in gold, you just melt it down and purify it. If you have 1 large piece of gold and cut 1/10 off of it, the larger piece is still worth 9/10 and the smaller piece is worth 1/10. If you have a large diamond and you cut it, the intrinsic value is greatly diminished. It's worth a lot more as a larger diamond than several smaller diamonds because it's a lot more difficult to find a larger diamond without defects.

So I agree that diamonds, while valuable, are a poor substitute for precious metals in terms of currency.
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May 24, 2012, 04:05 PM
 
Apart from that, real diamonds are no longer reliably distinguishable from industrial diamonds.
     
olePigeon
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May 24, 2012, 04:07 PM
 
I thought I'd also point out what the near future holds for gold and many other precious metals. At this very moment there is a company that's going to be mining near earth asteroids for precious metals, gas, and water.

To give you perspective, one certain type of asteroid has more gold than all the gold mined in the history of our planet. Another type of asteroid has more gas than all the gas used to fuel every single space launch in the history of our planet.

So the price of gold, silver, nickel, etc. is going to plummet in the next 20 years. It also means cheaper and better electronics.

Monster cables will still be overpriced no matter what.
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Big Mac
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May 24, 2012, 04:12 PM
 
Do you think they'll be successful in that endeavor? Is it going to be cost effective to mine the asteroids and bring back the payloads?

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May 24, 2012, 04:48 PM
 
More gas than used in every space launch ever? Last I looked most rockets burned liquid Oxygen, where did an Asteroid pick up Oxygen?

Asteroids are also good for things like Iridium.
I have plenty of more important things to do, if only I could bring myself to do them....
     
olePigeon
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May 24, 2012, 04:57 PM
 
Originally Posted by Big Mac View Post
Do you think they'll be successful in that endeavor? Is it going to be cost effective to mine the asteroids and bring back the payloads?
I sure hope they're successful. If they didn't think it was cost effective, they wouldn't be investing over a billion dollars of their own money into the company. I'd like to buy some shares in it. It's a lot cheaper to get stuff down to earth than off it.

Originally Posted by Waragainstsleep View Post
More gas than used in every space launch ever? Last I looked most rockets burned liquid Oxygen, where did an Asteroid pick up Oxygen?
They extract oxygen and hydrogen from the water-ice on (or composed of) an asteroid.

Originally Posted by Waragainstsleep View Post
Asteroids are also good for things like Iridium.
Yep, as well as iron and tons of other useful materials.
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olePigeon
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May 24, 2012, 05:03 PM
 
Name of the company is Planetary Resources, Inc., by the way.
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Eug
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May 24, 2012, 05:41 PM
 
Originally Posted by olePigeon View Post
Yep, as well as iron and tons of other useful materials.
     
turtle777  (op)
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May 24, 2012, 06:23 PM
 
Originally Posted by olePigeon View Post
If they didn't think it was cost effective, they wouldn't be investing over a billion dollars of their own money into the company.
*snicker*

Pouring billions into a company, despite being totally cost uneffective ?
That would never happen.

Uhm, oh, wait, FB anyone ?

FWIW, I think all of those "space mining" ideas are a pipe dream until we discover a complete new cheap energy resource other than fossil fuels. There is no way in heck all this space mining would ever pay off when powering our rockets with fossil fuels.

And yes, I'm the first to admit that a complete paradigm shift in cheap energy would cause gold (and many other things) significantly decrease in price, let alone because energy is a major cost in mining today.

I'm not worried though, because I'm know the Gold bull market will end sooner or later. I will sell when everyone else buys. That's going to happen sometime in the next 10-15 years. We won't see an energy revolution that soon.

-t
     
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May 24, 2012, 06:44 PM
 
Originally Posted by olePigeon View Post
They extract oxygen and hydrogen from the water-ice on (or composed of) an asteroid.
I can't see that flying into space and Oxygen from ice and then flying it back again is more economical than extracting it from seawater.

Originally Posted by olePigeon View Post
Yep, as well as iron and tons of other useful materials.
Are we that short of iron? I know there is a constraint on the supply of rare earth metals and that China owns most of the supply.
I have plenty of more important things to do, if only I could bring myself to do them....
     
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May 24, 2012, 07:04 PM
 
Originally Posted by Waragainstsleep View Post
I can't see that flying into space and Oxygen from ice and then flying it back again is more economical than extracting it from seawater.
The water isn't used on Earth, it's used to fuel ships after they get into space. It uses a lot fuel and costs a lot of money to get into orbit. The amount of fuel you need in a rocket is compounded by the amount of fuel you have to take with you just so you can use it after you get into space. It's a fraction of the cost to simply fill up after you get into orbit, not to mention the additional several tons of cargo you get to carry because you're not taking all that fuel with you.

Originally Posted by Waragainstsleep View Post
Are we that short of iron? I know there is a constraint on the supply of rare earth metals and that China owns most of the supply.
You're thinking backwards. Most of the stuff they're mining isn't coming back to Earth, with the exception of rare earth minerals. Stuff like water and iron would be processed in space so we don't have to spend resources to get it up there in the first place.

The company is building refineries and refill depots in orbit. That way NASA (or anyone, for that matter) can make a rocket with just enough fuel to get into orbit, then they can fill up at a depot and finish doing whatever it is they need to do.
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May 24, 2012, 07:16 PM
 
Originally Posted by turtle777 View Post
Uhm, oh, wait, FB anyone ?
FB owners are billionaires. The people who got in pre-IPO are all billionaires and millionaires. Worked out great for them. Also, that analogy doesn't work. Facebook doesn't manufacture anything, they just mine personal data and sell it to advertisers.

Originally Posted by turtle777 View Post
FWIW, I think all of those "space mining" ideas are a pipe dream until we discover a complete new cheap energy resource other than fossil fuels. There is no way in heck all this space mining would ever pay off when powering our rockets with fossil fuels.
Heavy lift rockets aren't powered by fossil fuels, they use a solid propellent mostly composed of aluminum, ammonium perchlorate, and iron oxide. The main engines use a combination of liquid oxygen and liquid hydrogen. Also, the orbital refilling depots make it much more economical because you don't have to take any fuel with you to get where you're going after you get into orbit.

Originally Posted by turtle777 View Post
I'm not worried though, because I'm know the Gold bull market will end sooner or later. I will sell when everyone else buys. That's going to happen sometime in the next 10-15 years. We won't see an energy revolution that soon.
I think you've come to the right conclusion, but for the wrong reasons. We don't need an energy revolution, but I also don't expect the process to really turn out until 20 years from now.
"…I contend that we are both atheists. I just believe in one fewer god than
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May 24, 2012, 07:31 PM
 
Originally Posted by olePigeon View Post
You're thinking backwards.
Actually I was assuming investors would be thinking backwards. I had no idea they were planning something this sensible, given there is no market for iron in space yet.
I have plenty of more important things to do, if only I could bring myself to do them....
     
olePigeon
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May 24, 2012, 09:20 PM
 
Originally Posted by Waragainstsleep View Post
Actually I was assuming investors would be thinking backwards. I had no idea they were planning something this sensible, given there is no market for iron in space yet.
Sure there is. It's the key component in steel and important for solid fuel propellents. A lot of the ISS is made from expensive, lightweight materials because it was the most cost effective way to get it into space. Now you can build structures out of relatively low cost steel because weight is no longer an issue.

This is all about saving money. It's not that the resources themselves are always going to be valuable, but being the only company that can build stuff or provide fuels for a fraction of the cost? That's some serious money to be made. How many governments are going to jump on board to save billions of dollars in costs associated in simply getting supplies into orbit? That translates to potentially billions of dollars for Planetary Resources.
"…I contend that we are both atheists. I just believe in one fewer god than
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May 30, 2012, 01:59 PM
 
To get us back on topic (after a fascinating diversion), AAPL is touching daily highs of $577 on a day when nearly everything else is selling off hard. Reverse head and shoulders technical pattern is coupled with overblown June quarter fears, one of the most important iPhone revisions ever, huge iPad sales and yet more strong indications that full Apple TVs are for real. Just FYI

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
 
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