Investing in Gold

The expression “as good as gold” suggests that gold is something of a sure thing when it comes to investments. But, while gold and other commodities remain a solid investment choice, when it comes to investing there’s no such thing as a sure thing. The trick to investing in gold is knowing the difference between gold and other asset classes; stocks, bonds, real-estate, even cold hard cash.

Putting a Value on Gold

Let’s start with its value or, as with so many things, its perceived value. Valuing gold is a tricky thing. Without earnings or cash flow (which is the most commonly used metric in valuing a company and its stock) it can be tough to identify the appropriate valuation of gold. How many dollars should an ounce of gold be worth? The spot price is simply dependent on the market forces of buyers and sellers; therefore, for the price to increase, you need more buyers than sellers. So rather than speculating, consider the following approach.

Gold as Insurance

Don’t trade gold. Moving in and out of a gold position, like many do with stocks is not a smart strategy. Gold, historically, is very volatile and has erratic movements in its spot price. Attempting to guess short-term price movements is near impossible.

The right way to view gold is as insurance. The beautiful thing about gold is that it is very tough to manipulate its price, especially over time. Stocks, bonds, and even currencies can be manipulated by political powers through monetary policy and government action. Gold will keep its value through a wide range of economic scenarios which is one reason it is so appealing during an economic downturn such as the one we are currently suffering through. As such, it can be held in order to insure against risks to your other assets. So, what are the risks?

The number one risk that you should be prepared for is the loss of purchasing power of your currency. Typically this happens whenever the government attempts to manipulate the economy in some way. The latest attempt to “fix” the struggling economy has only delayed the inevitable by increasing the national debt. The influx of cash from the economic stimulus package needs to be paid for somehow. And the usual result of this kind of spending spree is a debasement of the currency and/or inflation. When inflation occurs, your dollars are worth less. Put in layman’s terms, it is akin to attempting to dig yourself out of a hole. More debt creation will not result in getting us out of debt. So how can you protect yourself against this risk? You need insurance.

Now, just like you should not put all your eggs in one basket for a specific stock, you should not be betting the farm on an increase in the price of gold either. Liquidating all of your assets and buying gold would be a little extreme. Instead, insure your assets and your purchasing power by allocating a percentage of your assets in precious metals such as gold. Most experts recommend allocating somewhere in the range of 10%-30% of your assets. If you’re new to the gold game, start with 10%.

How to Buy and Own Gold

Ain’t nothing like the real thing baby. Part of your gold allocation should be in real, physical gold that is in your possession. You can purchase gold coins or bullion from precious metal dealers. Obviously, you will need to give good thought to where and how you will store your gold and protect it from theft or loss. Sorry, Fort Knox is not an option.

You can also consider buying ETFs that attempt to track the spot price of gold. You can purchase these ETFs (such as GLD) like any other stock through your brokerage account.

If you’re concerned that the price of gold has already risen considerably over the previous years (which it has), consider dollar cost averaging into the appropriate size position that you wish to hold. Buy a fixed number of gold coins each month or every couple months. This will help prevent buying all of your gold at one time which might be at a relatively high price.

Speculating on the price of gold can be as risky as any other form of investment. Instead, use it as a hedge against inflation and a way to gain additional diversification. But don’t take my word for it. As with any investment be sure to do your own research.

Your high IQ will kill your startup

from Cube of M

In 2004 I was in Brazil, walking down the hill in Lapa to get some lunch. I was with a friend who I had met in the hostel I was staying - his name was Ofer. We were having a discussion about intelligence, and what role it plays in success.

Then out of the side of the road stepped a man. He was holding a knife in one hand and a bottle in the other hand. He spoke to us in fast portugese, clearly asking us to hand over the things we held. I stood there, not very sure what to do. Ofer started speaking quickly to the man, telling the man not to rob us.

What you have to know about Ofer is that he had been an Israeli soldier. He hated violence of any form, but he knew how to be violent.

The man threw the bottle on the floor and it broke into pieces, he picked up the bottle and lunged at us. I ran a short distance off, and Ofer stood there and dodged the man, all the while talking to him. The man attacked several times, and each time Ofer just moved aside.

Then finally, Ofer kicked the weapons out of the guys hands, punched him, and he fell. He then told me to run, and we ran down the hill to the restaurant.

We sat there and he continued what we had spoken about. He said: That demonstrates what I mean. The man with the knife did not know how to use that knife. If he had been as trained in knife fighting as I was in hand combat, he would have been able to destroy me. But he had a tool that he felt gave him an advantage, but it's nothing compared to a person who has no tool, but has worked to develop what he has.

Intelligence is like a knife. If you are intelligent, you are at a clear advantage against people who are not intelligent. But if you are intelligent, and another person is not as intelligent, but the other person is willing to train harder than you, the other person will very quickly overtake you in ability.

How your intelligence will destroy you
People who are born intelligent start off life with everything easy for them. They don't have to work hard to get good grades, they never really have to do much to get ahead. The major challenge of early life is school - and school is designed for average people. So intelligent people just breeze through.

But there is a point where every intelligent person faces something that requires more than intelligence. It requires hard work, it requires the ability to fail, it requires being able to do tough tasks, boring tasks. For the first time in their life, in spite of their intelligence, these intelligent people are challenged, and they start failing. Like when they first attempt to create a startup.

And that's where most of them retreat. They focus on things they can't fail on, and ignore the other important things. They start to blame other things (like the school system). They procrastinate. They refuse to face new problems because they know they will not be able to handle them, and this does not fit into their worldview that they are invincible.

Let me tell another story. In 2007, I had dinner with the father of my girlfriend in Paris. He is currently a vice president at one of the top 5 consulting companies in the world. He is a jewish french immigrant from Morroco - he came in the 70s to France with no money and no connections, and he made it up to become Vice President, even though he studied to be an engineer.

I asked him: How did you do it? How did you start from being an immigrant to become executive material? He told me: I got this far because I'm intelligent. He continued: But there were many many people as intelligent as I am who graduated together with me. They are still engineers right now. The difference between me and them is that when I arrived, I knew that I did not have family here in france, I did not have connections. And I knew there were a lot of other people as intelligent as I was, and who had all these advantages. The only way to be successful then would be to gain a slight advantage over them - I had to work and train harder than they did, I had to get to know more people than they did, I had to learn more about more things that they did.

We started off equals, but at some point all the effort I put in started to pay off, and where they stopped improving themselves, I continued, and I got better and better. Where they were afraid to try new things because they would fail, I tried and I got better and knew more, till I was good enough for the job I hold now.

How this relates to you
Being intelligent is like having a knife. If you train every day in using the knife, you will be invincible. If you think that just having a knife will make you win any battle you fight, then you will fail. This believe in your own inherent ability is what will kill your startup. Success comes from the work and ability you put in becoming better than the others, and not from some brilliance you feel you may have within you.

So don't believe that the brilliance of your idea is what will make you successful. What will make you successful is when you are out there every day, doing something new, challenging yourself, trying new methods, studying new ways, having a lot of small failures, then getting better every day.

Investing, Dollar Cost Averaging and Value Averaging

“It does not matter how slowly you go …So long as you do not stop!”
Confucius (551 – 479 BC)

You start investing, and find yourself buying in at the top. Then, prices stumble and you sell …

Precisely at the bottom!

Like the pendulum that keeps on swinging back and forth, investor sentiments tend to alternate between periods of enthusiasm and despair.

Unfortunately, many investors are guided by their emotions and allow the mood of the market to dominate their investment decisions.

No one can consistently predict the tops and bottoms of the stock market.

History has proven that correctly predicting the timing and extent of stock market trends is impossible.

This is because world developments and the psychological reactions of people are completely unpredictable. It’s no surprise that a foolproof winning formula remains elusive.

One effective strategy for overcoming the emotional hazards of investing is the cost averaging approach that imposes a discipline that relieves the investor of grappling with uncertainty and volatility in the securities markets.

Cost averaging is a systematic investment plan involving buying equal amounts of an investment at set intervals — monthly, quarterly, and so on.

Cost averaging is most prevalently used by investors who don’t have lump sums to invest, but would like to accumulate an investment portfolio over time.

Strategically, cost averaging forces investors to be in the market when prices are depressed, but it also forces you to buy when prices are high.

Cost averaging does not assure a profit or protect against loss in declining markets. Because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels.

For investors with lump sums to invest, but who are afraid of entering the market prior to a correction, cost averaging will help to ease them into the market.

Value Averaging

Value averaging also capitalizes on the cost averaging systematic approach. It works in much the same way as cost averaging, but with value averaging, you decide on a target amount to invest, then adjust your monthly contributions to maintain that target.

Like cost averaging, value averaging can help lower your average cost per share. But value averaging goes one step further.

Because you end up investing more money when prices are low and fewer when prices are high, you have the opportunity to reduce your average cost per share even further.

It’s a strategy that doesn’t try to outguess the market’s fluctuation, but rather seeks to make those fluctuations work for you!

This pics sums up the sorry state that Dubai is in

This is Dubai fantasized.  Celebrities and VIPs were supposed to buy the islands representing the country of their own interests.

This is The World now, the project has ceased halfway due to the crisis as Dubai defaults on her debts.  This satellite pic sums up the pathetic state that the project is in.  Only one island is occupied whilst the rest are besieged by erosion.  Zoom out to see the rest of the islands.
 




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Is Ben Bernanke a Total Idiot?

my views? I think so cause nothing has been done yet to curb the excessive risky investment styles of the banks. No one was punished and everything will turn sour again.