Do you know what the total returns are in various asset classes?
Reader Michael pinged me with an interesting chart of Gold vs. the S&P 500 vs. 30-year treasury bonds.
Let’s take a look.
Michael writes …
Hello Mish
Every once in a while I look at total returns indifferent asset classes. The chart (from Bloomberg) calculates the total returns for gold, the S&P 500, and the 30 year treasury bond since March of 2000.
I use that date because it was the peak in the stock market prior to the beginning of severe monetary measures to perpetuate a system that hasn’t worked very well. Of course monetary measures went from severe to beyond extreme as we await the next crisis for which Trump’s “cash for crumblers” infrastructure program may be needed to quell.
Michael
Time Frame
To arrive at that comparison, Michael picked the top of the stock market in 2000. The chart would look much different from the bottom in March of 2009.
Here’s a question to ponder: Are we closer to a top in equities than a bottom?
Mike “Mish” Shedlock
This is why I invest “permament portfolio” style, a la Harry Browne
In other words, PRICE MATTERS. All the “studies” about assets classes over time frames, indexing, portfolio rebalancing, yada, yada, yada… all noise and no signal. What you pay determines what you will get. Or as James Grant aptly put it, “I learned never to stand in line to buy an asset. You always want to go where nobody else is in line.”
Mish, is this gold futures (paper) or deliverable?
Neither — this assumes you bought physical gold, stored it for free in a magic vault, and somehow avoided paying any taxes on it. Its a total fantasy
I invest in lead.
Don’t worry, there’s a tax for that too
I’m a aesthete, I like my lead to look nice, so I make it wear pretty little copper jackets.
I pay $15 per year for a safe deposit box that contains my gold and personal documents. Do you really want to make an issue of storage fees?
Does anyone know anyone who has held any one of these positions, without adding to or subtracting from, throughout this time frame?
Started in 1998 and kept adding. Best theory is to buy whenever you have the funds as the insanity out there will continue to
Make it a wise investment including peak mining occurring as we speak.
Bit of a joke post amongst some better ones. Choose your timeframe and reveal nothing…..deflationary gold is not the answer but debt is the problem
Mish, does this factor in dividend reinvestment?? “Total Return” would kind of imply that, but maybe not. If not, then the S&P line is quite misleading compared to the other two investments which don’t basically pay you to hold them…
On one hand, a bottom is a reality if one assumes the here and now is close to what exists today.
On the other hand, if this is a top, which is possible if one considers excessive pressures on all measures that are graphed, the other is probable.
Personally, I would bet on gold or cash as denominated by debt represented by a vigorous market.
If anyone chooses to play my theory and aggrandize their portfolio as I see fit, then please mail me a cashiers check payable to cash and I will apply it accordingly.
So if one has perfect 20/20 hindsight and put all your money into “free” gold (no storage costs, no annual taxes… so not very realistic at all), your savings would have been destroyed:
— You would have lost money (about 2% per year) versus the cost of attending college
— You would have lost at least 6% a year versus the cost of health care, and more like 14% per year since Obamacare started robbing everyone (and that crime is on-going)
The Bernanke would be laughing his @ss off at your misfortune, as he collects six figures a year “pension” from Princeton Univ and a second 6 figures a year from the Fed — all for not fixing a damn thing!!
PS — Bernanke still not in prison!
Tell me, what is so monstrously difficult about securely storing gold? Unless you literally own a metric ton of it, it’s stupid simple and perfectly safe to store. The only real risk is owners failing to keep their traps shut about it. And frankly the whole point of owning physical is having it in you possession.
That depends on how much gold you are claiming to store. The index is completely fictitious. You could buy a few ounces of gold in the form of jewelry and store that yourself.
I guess you could buy one share of SPY in 2000 for $145 or so (and the equivalent in gold?) — but you couldn’t buy $145 worth of zero coupon 30yrs. Minimum denomination would be higher than that. The whole exercise is fiction (even ignoring the 20/20 hindsight in choosing the start date).
If you are managing a portfolio that would justify running these calculations — then you are talking a much bigger pile of gold.
You don’t have to be Buffett or Gates to be in the bigger position. If you tried to save for your retirement or for your child’s college…
I tried to answer your question, but reply went into moderation…
Happy holidays folks. More important things than blogging!
Reminds me of the story at zh of the treasure hunter who ‘forgot’ where he placed 3 tons of gold. It was known he had the gold as it was declared salvage, investors in the project have him sat in jail to help him remember.
“annual taxes”?
Where, exactly, are people charged annual taxes for holding gold? In my world, one is only taxed on the profits from sales.
Welcome to the land of the formerly free, now a socialist police state under Comrade Obama.
You owe taxes on your collectibles (like gold) when you sell, but you also owe taxes each year on bullion.
Those lazy government bureaucrats want to retire after 20yrs on full pension — that isnt free, they tax you to make it happen.
You don’t matter. Your lifestyle is irrelevant. You will serve the public servants. That is what democrats like Hilary and Obama (and all the other dark syths that work for Soros) demand.
Please provide a source. I have never heard that claim made before.
Absolute rubbish, Fred. You need a lot of help with your investing, your taxes and your money management. This probably means you are a Wall Street employee — or worse, one of their customers.
Suggest you stop blogging and read a whole lot of books.
Of course, if you skipped the Wall Street casino and focused on a job, you lost more since 2008 than you would have in the magic gold index.
Obama lies and claims to have created “up to” 15 million jobs since he signed Obamacare fraud. Free sh-t for illegal immigrants, endless taxes for citizens!
Obama’s own Council of Economic Advisor director Alan Krueger published a report this month showing that 94% of those jobs (assuming they are real?) were what the good professor likes to label “alternative positions” (better known as temp work, no benefits).
http://dataspace.princeton.edu/jspui/bitstream/88435/dsp01zs25xb933/3/603.pdf
94% of “new” jobs since Obamacare are temp jobs!!!
Krueger himself said he was surprised by the results — he didn’t realize so many of the jobs allegedly created were temp jobs. (being an academic, Krueger doesn’t really have much real world experience).
So as bad as returns were in the financial markets, it was even worse in the job markets.
Rather odd question without designating the period. If in Sept ’87, you said top, you would have taken your victory lap afterwards, but look kinda foolish today.
I do appreciate you pointing out the cherry picking of the starting point, it infuriates me and immediately makes a person untrustworthy when they so that crap. Better than picking ’09 though, that would have been really uncool.
Now, I do remember thinking in ’12 that this was going to go to 2,400, but I really don’t specifically remember my reasoning. So, I’m going to stick to the 2,400 number, but after that… when I look at it, I see 1,600 written all over this thing. Break a 12-13 year double top and never re-test it.. that’s rare. Very rare. That would suck.
Then again, I have no record as a technical analyst. I think overall I am kinda decent at it, but I have no way to be certain. Therefore my opinions worth sh*t.
A better question to ponder is was this very limited view of different markets even worth posting? Not being the sharpest tool in the toolbox, I haven’t yet figured out how this chart gives us insight into whether we are closer to a top or bottom in equities…
You would have to look at that chart and say that the S&P is the LEAST likely to be in a bubble, but that is the opposite of what is opined here.
Either that or the US economy is trashed. Gold is not something to look for returns on, though nothing to stop that, over the long it is a fair store of tradeable wealth relative to all else. If you look on it otherwise then you are likely to get confused somehow. Not to forget the volume of the markets that make stocks much more pertinent in gains or losses, especially considering how they are tied into the economy, finance as a whole.
Either way, the charts are past, and the only real question with gold is if you want to set some wealth aside relatively safely, being prepared to make a loss if not a gain (as in all investment but with parameters set in somewhat different fashion ) doing so. There are plenty of other hard assets to invest in which may be worthwhile or useful, gold is easily traded and so liquid of itself , deserves its place accordingly.
on the other hand, colleagues send me spx vs PM from that march 2009 bottom in spx. Everything depends on where you sit.
the question is what happens next. Another quest is just how much risk is in being in stock or bond markets as nobody seems to care about portfolio risk anymore.
Wow, this is some serious misinformation. Beginning at an arbitrary date that forms the bottom in gold and the top in stocks is completely misleading. Why not start in 1929? Or in 1932? Then at least you have a longer period of data.
Concerning the current situation:
* The dollar will go up, as the dollar is the best place to be for the rest of the world.
* As a result commodities will go down, likewise with gold and silver. Gold will go below $ 1000, see M.A.’s analysis.
* Capital flows from the rest of the world will flow to the dollar, which means the U.S. stock market will go up.
* Interest rates will go up, which means that bond funds are the worst place to be. The end of the cycle in lower and lower rates is here.
It is not all that difficult. Just follow the capital flows.
I think mutual fund “families” have this locked down. They have so many funds that somewhere they have several that always have performed “better” and the fund families can always tout that.
Martin Armstrong’s analysis? Really?
Here are a few of his other “analyses” from the past several years:
In 2009: “Gold Headed To $5,000 And Beyond!”
In 2012 “Armstrong is still looking for gold to explode to the upside into 2015 due to the Sovereign Debt Crisis”
In 2013 he predicted the DOW would double by 2015 (then at 14k)
In 2014 he stated that $100+ crude oil was “here to stay”
Etc.
Please replace that awful photo of yourself making a forced smile with a photo of yourself with a serious mien.
Otherwise you’ll be dismissed as another fake joker, Mish.
If gold ever skyrockets, the system will be collapsing. Then food will be more important than gold. Gold is a psychological investment to make you feel safe about your portfolio. In reality it is just another investment seeking profit.
I see precious metals as a currency with which to barter. for things I need.
Not many people have been in circumstances where they might appreciate holding gold, so not to expect any understanding. It doesn’t just ‘melt like snow in your hands’ as cash does, either, and it does not depend on authority/credibility of issuer.
Complete nonsense. The widespread ignorance and myopia relating to Gold is remarkable.
If one had exchanged Bolivars for gold in Venezuela in 2014-15, one would currently have roughly 50% greater wealth than having kept the currency. Since 2011, the number is 64%.
That is just one of many real-world examples of how gold can be a crucial insurance policy against Government profligacy and the resulting degradation of fiat currencies.
Furthermore, there will be more than enough time for holders of Au to convert it to other things of value before anything like Mad Max appears.
Charts exclude S&P divvies and bond coupons hence a false presentation. Not reflective of a true total return comparison. I like gold but analysis should be correct.
The definition of relativity is based solidly on the relationships or values determined by the laws of nature. Often we find the qualities of relativity extend to other parts of our lives and the universe as well such as the markets and economics. We are occasionally forced to ask what is the real value of stocks or anything for that matter.
It is impossible to deny the unrestrained growth of intangible assets over the last few decades. The article below warns of how a failure of faith in these intangible “promises” could cause wealth to suddenly shift into tangible goods seeking a safe haven causing inflation to soar.
http://brucewilds.blogspot.com/2016/12/economic-relativity-in-relationship-to.html