Gold and silver prices are down

[Varmint]

I take a long term view. I buy and wait, as you say, mostly for insurance value against a nasty economy and dropping dollar.

Today or tomorrow's sentiment are meaningless to me. I don't trade. Buy and hold.

But spot is now over $2100. And who knows what it will be next week or next month? I'm not that smart.

Nobody knows for certain either, but certain things increase the likelihood of certain things.

$2100 is viewed by lots of technical traders as the level at which gold starts it's move toward $2500 (or other similar levels). But probably need a monthly close for that chart pattern to be valid so we've got a while to wait.

If we spend a few hours up or even a day up here and go back down, it doesn't have much meaning.

What's impressive is that gold should be going down - Fed is keeping rates up, dollar is holding up, Ukraine and Gaza have quieted down, yet gold is at all time highs.

 

[richc]

Nobody knows for certain either, but certain things increase the likelihood of certain things.

$2100 is viewed by lots of technical traders as the level at which gold starts it's move toward $2500 (or other similar levels). But probably need a monthly close for that chart pattern to be valid so we've got a while to wait.

If we spend a few hours up or even a day up here and go back down, it doesn't have much meaning.

What's impressive is that gold should be going down - Fed is keeping rates up, dollar is holding up, Ukraine and Gaza have quieted down, yet gold is at all time highs.

Past success does not guarantee future performance.

 

[richc]

Nobody knows for certain either, but certain things increase the likelihood of certain things.

$2100 is viewed by lots of technical traders as the level at which gold starts it's move toward $2500 (or other similar levels). But probably need a monthly close for that chart pattern to be valid so we've got a while to wait.

If we spend a few hours up or even a day up here and go back down, it doesn't have much meaning.

What's impressive is that gold should be going down - Fed is keeping rates up, dollar is holding up, Ukraine and Gaza have quieted down, yet gold is at all time highs.

Most pros are unable to beat the S&P 500. Or even keep up with it. They have the most advanced tools available for analyzing securities, PM's, bonds and more. And they can't keep up with the S&P 500.

Some years ago I had a drink with a buddy and his Princeton college roommate and math major. The guy retired at a young age as a wealthy man. Senior guy at Goldman. Fascinating.

I asked him the secret to investing. His answer... you can't win. Buy and hold. That's how I made my money. I invested, and didn't trade. Much like John C. Bogle.

Certainly you do you. Me... worrying about day to day swings and sentiment are not relevant. Things go up. Things go down. I bought some gold at about $1100 under a decade ago. I still hold it. What has happened in between is not relevant.

 

[richc]

Gold held up very well today after a massive climb. Strong two days.

Silver also had a big day.

 

[Varmint]

Past success does not guarantee future performance.

Most pros are unable to beat the S&P 500. Or even keep up with it. They have the most advanced tools available for analyzing securities, PM's, bonds and more. And they can't keep up with the S&P 500.

You know these two statements are incompatible.

When they say pros can't beat the S&P500, they're referring to something very specific - managed mutual funds.

A managed mutual fund is usually a person or team looking around the market and picking stocks they think are undervalued, that the market isn't seeing the value. This was a very good strategy until around 2010. What changed? The Fed started ZIRP, which heavily favored tech stocks and hurt value stocks. The S&P500 is also market cap weighted, so if you put $100 into a S&P500 ETF, the money goes disproportionally to the larger cap stocks in the index. This influx of money makes those large cap (mostly tech) stocks go up, which in turn moves them further up the market cap scale. Then they get a bigger proportion of your investment the next time. It's a self-reinforcing cycle that has resulted in 7 stocks making up 40% of the index, and nearly 100% of its gains today. As more and more people were moved from managed pension and retirement plans to self managed 401ks, the move from active to passive management accelerated.

So over time retail investors noticed their S&P500 index fund was going up more than their managed mutual funds. So investors started selling their managed mutual funds, which caused forced selling in the very stocks the managers identified as the best stocks. Again it was a self reinforcing cycle that widened the gap between value and tech and managed mutual funds vs passive indexes.

So where are we today? We have a very distorted S&P500 and retail investors all in on their passive indexes, thinking they always go up. What's the problem? The problem is that all these trends that made the S&P500 go up so much, will go in reverse if we get a protracted downturn. We don't even have ZIRP anymore, but retail investors continue to merrily pump money into their passive ETFs, because they've gotten used it it always going up - not seeing the incredibly financial gymnastics the Fed has had to do to keep the bubble inflated.

If you really belief what you're saying, you shouldn't be buying gold, just buy an S&P500 index.

 

[richc]

You know these two statements are incompatible.

When they say pros can't beat the S&P500, they're referring to something very specific - managed mutual funds.

A managed mutual fund is usually a person or team looking around the market and picking stocks they think are undervalued, that the market isn't seeing the value. This was a very good strategy until around 2010. What changed? The Fed started ZIRP, which heavily favored tech stocks and hurt value stocks. The S&P500 is also market cap weighted, so if you put $100 into a S&P500 ETF, the money goes disproportionally to the larger cap stocks in the index. This influx of money makes those large cap (mostly tech) stocks go up, which in turn moves them further up the market cap scale. Then they get a bigger proportion of your investment the next time. It's a self-reinforcing cycle that has resulted in 7 stocks making up 40% of the index, and nearly 100% of its gains today. As more and more people were moved from managed pension and retirement plans to self managed 401ks, the move from active to passive management accelerated.

So over time retail investors noticed their S&P500 index fund was going up more than their managed mutual funds. So investors started selling their managed mutual funds, which caused forced selling in the very stocks the managers identified as the best stocks. Again it was a self reinforcing cycle that widened the gap between value and tech and managed mutual funds vs passive indexes.

So where are we today? We have a very distorted S&P500 and retail investors all in on their passive indexes, thinking they always go up. What's the problem? The problem is that all these trends that made the S&P500 go up so much, will go in reverse if we get a protracted downturn. We don't even have ZIRP anymore, but retail investors continue to merrily pump money into their passive ETFs, because they've gotten used it it always going up - not seeing the incredibly financial gymnastics the Fed has had to do to keep the bubble inflated.

If you really belief what you're saying, you shouldn't be buying gold, just buy an S&P500 index.

A portfolio should have some diversity and exposure to PM’s. I think even the most conservative of money managers believe this.

I think there are a lot of really smart folks in this group. You do you.

But I also know some very smart folks that lost fortunes. One MD Buddy lost about $7 million during the dot com bust. Lost his wife and house too.

Oh and he lost his company’s retirement fund by self investing. And was required to sell his house to reimburse employees for the losses.

Know your limits

 

[Varmint]

A portfolio should have some diversity and exposure to PM’s. I think even the most conservative of money managers believe this.

I think there are a lot of really smart folks in this group. You do you.

But I also know some very smart folks that lost fortunes. One MD Buddy lost about $7 million during the dot com bust. Lost his wife and house too.

Oh and he lost his company’s retirement fund by self investing. And was required to sell his house to reimburse employees for the losses.

Know your limits

Rick Rule is always pointing out that money managers are not in gold, with only 0.5% exposure to gold today (traditionally it was more like 2-3%, so if that comes back, 4-6x the institutional money will go into gold).

I'm of the opinion that self investing is safer than just throwing your money into passive ETFs. I remember back in 2008, we owned managed mutual funds and index funds. The passive index funds got destroyed in 2008-2009, they went down way more than the managed funds, because there was no one at the wheel to respond to the rapidly changing market.

Know the limits of passive investing in index funds.

 

[richc]

Rick Rule is always pointing out that money managers are not in gold, with only 0.5% exposure to gold today (traditionally it was more like 2-3%, so if that comes back, 4-6x the institutional money will go into gold).

I'm of the opinion that self investing is safer than just throwing your money into passive ETFs. I remember back in 2008, we owned managed mutual funds and index funds. The passive index funds got destroyed in 2008-2009, they went down way more than the managed funds, because there was no one at the wheel to respond to the rapidly changing market.

Know the limits of passive investing in index funds.

https://www.cnbc.com/2022/03/27/new-report-finds-almost-80percent-of-active-fund-managers-are-falling-behind.html

 

[DJBrad]

https://www.cnbc.com/2022/03/27/new-report-finds-almost-80percent-of-active-fund-managers-are-falling-behind.html

Hopefully they don’t start falling down (Michael Douglas style)

 

[Varmint]

https://www.cnbc.com/2022/03/27/new-report-finds-almost-80percent-of-active-fund-managers-are-falling-behind.html

For only the last 12 years. See your comment about past performance.

Also keep in mind if your managed fund is benchmarked to the S&p500 it means you’re limited in what you can buy. You cannot heavily overweight the energy sector or tech sector even if you think it will outperform. These managers are playing with one hand tied behind their back.

You can easily find managed funds or ETFs who beat the S&P500. Any tech focused fund is probably beating the S&P500. Even Cathy Wood’s ARKK is beating the S&P since inception, and she’s a clown.

 

[Varmint]

Hopefully they don’t start falling down (Michael Douglas style)

All they had to do was buy the Big 7 and they’ve been destroying the S&p500, but any manager who did that is not benchmarked to the S&p500 and won’t be counted in these statistics.

 

[Reptile]

This is interesting:

S&P 500 Companies by Weight

 

[Varmint]

This is interesting:

S&P 500 Companies by Weight

I think last year NVDA was # 5, now #3.

Top 25 Stocks in the S&P 500 By Index Weight for January 2025

The top 25 stocks in the S&P 500 by weight represent the largest, most influential companies in the index.

www.investopedia.com

 

[DJBrad]

Finally we had a 4am spike in gold

 

[DJBrad]

From John Rubino on reasons why gold is seeing inflows and more upside.



1. The Shanghai gold exchange has a premium trade creating arbitrage where western gold is being sold.
2. Central banks are still buying 1k tons of gold a year.
3. Super core services inflation is running at 8% higher so inflation could be good for gold.
4. ⁠US gov debt is rising $1 trillion every 100 days.
5. ⁠$10 trillion of new treasury paper is being issued.
6. ⁠US is now looking to spend confiscated Russian assets.
7. ⁠Foreign nations seeing this have now began to be concerned that it may happen to them too.

 

[Varmint]

From John Rubino on reasons why gold is seeing inflows and more upside.



1. The Shanghai gold exchange has a premium trade creating arbitrage where western gold is being sold.
2. Central banks are still buying 1k tons of gold a year.
3. Super core services inflation is running at 8% higher so inflation could be good for gold.
4. ⁠US gov debt is rising $1 trillion every 100 days.
5. ⁠$10 trillion of new treasury paper is being issued.
6. ⁠US is now looking to spend confiscated Russian assets.
7. ⁠Foreign nations seeing this have now began to be concerned that it may happen to them too.

I think he meant why prices are going up cause ETF inflows are probably still negative.

Global, not just US, gold ETFs saw the 8th month in a row of outflows in January 2024. It could be that reversed in February, but not sure why it would since outflows have continued as the price went up.

Some analyst (Joe Mazumdar?) said that some investors are exiting GLD to buy physical gold. Dunno if that’s true, I think gold just doesn’t interest investors compared to NVDA.

 

[Varmint]

Gold just touched $2150, pulled back to $2142.

Could be the breakout we’ve been waiting many years for!

I mean the breakout point was $2100, but we’re so used to gold rallies magically fizzling out . . .

 

[richc]

For only the last 12 years. See your comment about past performance.

Also keep in mind if your managed fund is benchmarked to the S&p500 it means you’re limited in what you can buy. You cannot heavily overweight the energy sector or tech sector even if you think it will outperform. These managers are playing with one hand tied behind their back.

You can easily find managed funds or ETFs who beat the S&P500. Any tech focused fund is probably beating the S&P500. Even Cathy Wood’s ARKK is beating the S&P since inception, and she’s a clown.

A lot of folks were overweight the NASDAQ back in 2000 when it dropped 80%...

point... counterpoint...

 

[Win]

A few daily closes above $2100 will likely get some peoples' attention

 

[DJBrad]

A lot of folks were overweight the NASDAQ back in 2000 when it dropped 80%...

point... counterpoint...

I’m invested in NES.com

 

[Varmint]

A lot of folks were overweight the NASDAQ back in 2000 when it dropped 80%...

point... counterpoint...

Nearly all of the recent gains in the S&p500 are from just the top 7 stocks, the bottom 493 are in the red. So you can easily beat the S&P500 by buying those 7 stocks. But you’re basically buying all tech.

So that’s the thing, people think when they buy the S&P500 index they’re buying the overall stock market, but they’re really buying 7 tech stocks who are highly correlated. It’s like owning Cisco and JDS Uniphase back in 2008. Everyone thought Cisco was going to go to the moon, just like NVDA. A tech crash would wreck the S&P500.

In fact in 2024 it’s really just one stock carrying the S&P500. How crazy is that?

 

[richc]

Nearly all of the recent gains in the S&p500 are from just the top 7 stocks, the bottom 493 are in the red. So you can easily beat the S&P500 by buying those 7 stocks. But you’re basically buying all tech.

So that’s the thing, people think when they buy the S&P500 index they’re buying the overall stock market, but they’re really buying 7 tech stocks who are highly correlated. It’s like owning Cisco and JDS Uniphase back in 2008. Everyone thought Cisco was going to go to the moon, just like NVDA. A tech crash would wreck the S&P500.

In fact in 2024 it’s really just one stock carrying the S&P500. How crazy is that?

The Magnificent 7 are akin to the Nifty 50 of decades ago. Buy them and you can't lose. Until you do lose...

 

[richc]

OK... a thought experiment for the group.

I'm talking spot price here. None of that voodoo futures $hit...

Which comes first. A spot close below $2100 or a spot close above $2150?

Are you feeling lucky, punk???

 

[Varmint]

OK... a thought experiment for the group.

I'm talking spot price here. None of that voodoo futures $hit...

Which comes first. A spot close below $2100 or a spot close above $2150?

Are you feeling lucky, punk???

I think we close above $2250 this month.

 

[DJBrad]

OK... a thought experiment for the group.

I'm talking spot price here. None of that voodoo futures $hit...

Which comes first. A spot close below $2100 or a spot close above $2150?

Are you feeling lucky, punk???

$2222

 

[Win]

$2250.01

 

[richc]

Damn, gold is only up $15 or so today. Before you know it gold will be back below $2000...

 

[chris_1001]

I’m invested in NES.com

Did you buy the silver NES coins from @GaryO?

Need gold ones next.

 

[DJBrad]

Did you buy the silver NES coins from @GaryO?

Need gold ones next.

Was there such a thing?

 

[Varmint]

$2250.01