Monthly Archives: August 2012

Why I Bought Gold.

1oz Gold Britannia

This is not an advertisement but a genuine attempt to pass on my own experience and to explain why I made the decision I did and when.  I am not a natural ‘gold bug’ and I’ve resisted up until this point buying gold, understanding, as everyone should, that although the global economic situation is uncertain at best, precarious at worst, it does not guarantee an increased return on an investment in physical gold, especially as I suspect that there are powerful interests with the motive and opportunity to manipulate the gold price, thus muting the clear danger signal  that a steep rise in gold would normally produce. Although, fairly recently the price of gold has been higher, it is still historically high and my investment had to be based on the presumption that this was the ‘new normal’, atleast, and until  the profound problems within the economic system could be resolved. Seeing no resolution ahead, I felt confident enough to broaden my portfolio and buy gold.

This raises another point because I would never have invested everything I had in gold alone. Looking around I found no other investment opportunity that was without similar or even greater risk. Money in the bank is being deflated, Property values could face a huge slump, Sovereign Bonds, even those from countries thought ‘safe’ are precarious, the Stockmarket appears to be a bubble inflated with QE and unconvincing political reassurances. I was looking for a place to put some money for between 6 and 8 months, under the circumstances gold looked to be a good hedge with minor downsides [accepting the ‘new normal’] yet with considerable upsides. Applying a very personal risk assessment [fairly arbitary too] that there was only a 10% chance that within 8 months the economic situation would be better [a very generous assessment in the absence of a paradigm shift in political attitudes], a 40% chance that it would get worse [extremely conservative], and a 50% chance that it would be the same [generously ignoring that “it being the same” after yet another 8 months would actually be worse], I judged a 10% chance that I would make a minor loss on the investment, a 40% that I would benefit, and a 50% chance that I would neither lose nor benefit significantly.

Why now ?

Not being a trader but instead looking for a hedged investment for 6 to 8 months I was content that although the low volume during the summer might produce volitility in the stockmarket, if the gold price was being manipulated, that same low volume would actually be easier to keep it stable and broadly with the gold price fluctuating between £1,000 and £1,050 per oz  since mid June that has been borne out. But with the return to high volume and with difficult yet unavoidable political decisions pending over the next 3 months I wanted to buy before the beginning of September. Excepting last year the 3 month period from the beginning of September since this crisis began has seen steady increases in the gold price, last year the increase started earlier and peaked mid September. With US Pesidential elections in November, Europe will be left to deal with it’s own problems alone, no incumbant would dream of risking a second term by being seen to bail out the Europeans.

In the end I bought 2012 1oz Gold Brittanias. They are legal tender in the UK with a face value of £100 and as such are not subject to Capital Gains Tax or VAT. I chose the largest 1oz Brittania because it was closest to the Gold spot price. Each coin cost £1,100.

I bought through bullionbypost.co.uk and I was happy with the service they provided.

So, now I’ve put my money where my mouth is, we’ll see over the next few months how things turn out but I’m fairly confident that I won’t lose too much on the deal and could make 10%. I’m not following the daily ups and downs as I don’t expect any big moves for a while but as gold does have a certain power over the imagination I’ll keep a broad look out for panic and bubble over the next 4 months.

Apologies for taking such a long time to return after my holiday. Once the school term starts again things should be back to normal.

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Holiday.

I just wanted to let you all know that I will be on holiday with my family over the next two weeks.

We’ll be in North Cornwall.

The Needle has had a fantastic start in it’s first 3 months with just shy of 25,000 views which is phenomenal for a new blog and I’d like to take this opportunity to thank everybody who has supported The Needle either by reading, commenting, or allowing their posts to feature.

There are several other posters who can post directly on to The Needle and so posts may be made.

Or perhaps you’d like to email me with a post you’d like to have put up ? –  gojam56@gmail.com 

You can check out some of the most popular posts in Favourites.

Or why not check out some of the excellent posts made by other posters.

My personal favourites are Jayadee’s  Looking at the ‘Great Black Cloud of Uncertainty’ , sdharbinger’s The Sociopathic Financial System., and Moraymint’s The European Tinder Box. but those are just three, there are some really good posts by others.

I hope you all enjoy your Summer holidays and I look forward to posting again when I get back.

Kind Regards,

gojam

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Mario Draghi in Vertigo.

Vertigo voted best film ever.

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The Big Screen Reality.

by Moraymint

What is the big screen reality ? It is the economic/energy equation.

“Economist and resource analyst Jeff Rubin is certain that the world’s governments are getting it wrong.  Instead of moving us toward economic recovery, measures being taken around the globe right now are digging us into a deeper hole.

Both politicians and economists are missing the fact that the real engine of economic growth has always been cheap, abundant fuel and resources.

But that era is over.  The end of cheap oil, Rubin argues, signals the end of growth – and the end of easy answers to renewing prosperity …”

http://tinyurl.com/d993x5a

I’m pretty clear in my own mind having researched this matter exhaustively now for the past 7 years (as a physicist and businessman, as it happens).  Unless and until our politico-economic Establishment adjusts its paradigm, ie adjusts its view of how the world works within a revised economics framework, then we’re going to see more and more articles like this one making futile screams for a return to industrial age rates of economic growth (whilst debating relatively trivial economics indicators that miss the fundamental point).

It ain’t gonna happen, guys, it just ain’t gonna happen: in my book the laws of physics trump an obselete economics paradigm any day (a paradigm largely developed within mankind’s industrial, ie fossil fuel era).  Recognising that you have a problem is half the battle in solving it.  If we think that the developed world’s debt problem and the interminable recession/depression that appears to be going with it is killing us today, just wait and see how things look tomorrow when we haven’t re-established that ‘urgently needed growth’.

“If growth in world oil supply is constrained and may possibly begin to fall in total in not too many years, this adds to the downward pressure on world GDP growth for all of the areas of the world.  Thus, re-examination of GDP growth assumptions seems to be in order.  Perhaps slow recent growth is not an aberration – perhaps future real GDP growth will be even lower …”

http://tinyurl.com/ct2mqk2

Perhaps indeed.  Are our politicians and economists preparing our complex societies for a lower energy future, I wonder, and the economic contraction that goes with it, or are we sleepwalking in to something pretty disastrous here?

How long before European electorates wake up to the massive destruction their politicians have inflicted on them?

Let me tell you something; for as long as the developed world’s politicians fail to grasp the economy as an energy equation, “massive destruction” will be an understatement for what happens over the next decade or so.

But even now, concepts like ‘the economy as an energy equation’ or, dare I say, ‘the end of growth’ are treated by the economics Establishment as the rantings of raving lunatics.  So, an urgent return to economic growth it shall be then; or else.

PS Anybody noticed a slight problem with energy in India recently?  Do you think the situation there (and elsewhere around a world desperate to re-establish rampant economic growth … they need/want 6% pa in India apparently) will get (a) better, or (b) worse over the coming years?

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Wiggins: Well Beyond the Fringe !

Link to the original ‘Beyond the Fringe’ sketch – http://www.youtube.com/watch?v=Y5YW4qKOAVM

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Hu Flung Match ?

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Football Teams Like Tulips ?

On the day questions are asked over Manchester United’s ‘overextended’ IPO valuation and the recent bankruptcy of some of Britain’s big clubs, it’s worth asking if the mania for buying football clubs resembles the 17th century Tulip Bubble [graph above]. But it’s not just UK clubs which are facing problems. Some of Europe’s biggest clubs are mortgaged to the hilt and are owned, in all but name, by Spanish and Italian banks. Ironically, these clubs are worth more on the balance books of the banks [which include the nominal value of overpriced players] than they could ever realise as assets and so the farce must continue for now or those banks would be further weakened.

Glasgow Rangers will not be alone, the peak of the ‘Football Bubble’ has already been reached and some very big European football clubs are bound to follow them into bankruptcy.

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