Monday, February 15, 2010

All that glitters...


The starting point is key to making money on an investment, a truism which is highlighted in an article about gold in today's FT. If you had bought gold in 2001 at its low of $255 per ounce, you could have made a huge profit selling it in December 2009 at its high of $1214. However, Dylan Grice of Societe Generale claims that if you had put all your wealth into gold in the fifteenth century, bequeathed it to your children and required them to do the same down the generations, you "would be more than a little miffed when gazing down from your celestial place of rest to see the real wealth of your lineage decline by nearly 90% over the next 500 years." In real terms, today's gold price is similar to the prevailing price in 1265. (And let's not bring Gordon Brown into this discussion.)

5 Comments:

Blogger kinglear said...

The missing element of course is what The Sage refers to as the eight wonder of the world- compound interest.
I seem to remember if you had invested 1p when Christ was born at 5% compound, you would now own everything in the whole world.
I also remember the tale of the man who said he would take from a king just 1 grain of rice on the first square of the chess board, 2 on the second, 4 on the third, 8 on the fourth, 16 on the fifth and so on, and when the king had his people start to do it, around square 30 out of 64 they ran out of rice....
I supose its why investment gurus say you need both Timing and Time.

11:45 am  
Blogger kinglear said...

.. and ps, if you had bought at the peak in the early 80s you would be feeeling sick as a parrot.

11:45 am  
Blogger Angus said...

This comment has been removed by the author.

3:42 pm  
Blogger Angus said...

And what would Mr Grices favoured investment theme have been in 1265?
The Black Death, intermitent wars, occasional revolutions, fire earthquake etc etc all make land ,property etc rather problematic.

3:45 pm  
Blogger Winchester whisperer said...

You're right, KL - gold has no yield so no interest.

True, Angus - one's land could be confiscated. I suppose foundries could have been good investments with so many weapons needed? A switch into corn would have been good, tulips for a short hop, selling quickly, US railways, again making a timely exit, telecoms, internet...the list is long and imagine how wealthy we'd be if we'd timed all those trends perfectly!

8:30 am  

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