Investments 2018

[MarkB_MI]

So, how did the stock market do this past year versus the popular "guns and gold" investment strategy?

Not a great year for the stock market. The S&P 500 closed December 29, 2017 at 2674. Yesterday it closed at 2507, down six percent for the year. Add in the two percent dividend paid by the S&P 500 and the net loss is roughly four percent.

For my gun price index, I've been using the sale price of a Bushmaster "Patrolman's Carbine" from the regional Dunham's sporting goods store. Unfortunately, Dunham's doesn't put that gun on sale as often as they used to, so the last time it was listed on their sale flyer was in November. A year ago it sold for $800; in November it was $750, a six percent drop.

As for gold, the London fix for December 28, 2017 was $1291. December 28, 2018 it was $1279, a one percent drop.

So, if you had your money split between guns and gold, you would have beat the stock market last year by about half a percent. That's the first time since I started running these numbers several years ago that guns 'n' gold came out ahead. Of course, last year was the worst year for stocks since the recession.

 

[Gambles]

"last year was the worst year for stocks since the recession."

Only if you buy a stock and just sit on it....without ever doing anything with it.
I've got a brother-in-law who made a fantastic amount of money last year in the stock market (and just about every year) because he just doesn't buy stock and forget about it. You can't invest in the stock market and expect to make any amount of money if you just do nothing with it.
Now that game is not for me.

 

[Mike(NEOhio)]

Whenever the market takes a hard dive many think it's the end of the world. But it has always come back stronger. If your money is in a 401k. IRA or you're reinvesting dividends and capital gains you've still probably still made money along the way. And when the stock prices are lower your reinvestment buys more shares for when it come back.

 

[Geo-TH,In]

MarkB_MI
There is still money to be made in the market.

I'm invested in annuities with a guaranteed rate of returns.
Once I annuitize the annuity, it's locked in at a fixed rate of return regardless what the market does.

Rates of returns range from 5, 6, 7 %. That's better than 0.25% in a savings account.

I had set aside come cash to build a pole barn. Once I decided I didn't want to pay as much for taxes on a pole barn as I pay for my house, I invested that money in a Jackson Life guaranteed annuity. The annuity guarantees a 6% annual rate of return even if the market losses money. If the market does better that 6% I win too. When I decide to annuitize, start drawing income, I'm guaranteed 5% or better even if we go through another 2008 dip.

Do the math, if you have a 5.75% annual return in 12 years your money will double.

If we go through another great depression, you will need a lot of ammo. People will do whatever it takes feed their kids. You can't eat gold or lead.

Everyone needs a good financial advisor that will find you what you want and a good CPA to keep the IRS happy.

 

[whereswaldo]

Me either. Over 50 years ago, the Company I worked for was bought out by a larger Company that made railroad cars. Nothing to do with my employer; railroad cars were making them so much money they had to invest or pay taxes on earnings. When the oil embargo came, suddenly there was no need for more rolling stock and we all found in the time clock slot an offer to BUY a Flatcar and LEASE it back to them. Cost? $75,000.00 At the time I was earning right at $6.00 an hour and it was seasonal work; a good year would be 10 thousand. We all laughed at that because they would use the cars they owned outright first. Didn't realize at the time it had similarities to Ernie Ford's "16 Tons'.

 

[JF in MI]

I find that guns aren't much different from stocks when viewed as an investment. You buy some that look like they'll appreciate and they turn out to be dogs. Most gun dealers will tell you that when there's a Dem in the White House gun sales are crazy. With a Rep in there sales tend to go flat. I remember when you almost couldn't give away one of those AK-47 semis but when they looked to be banned in California the prices sky rocketed.

 

[D beatty]

If you get the right investor you would have made money. In 08 when everything took a dump I lost good some of money but 3 months after everything leveled out again my investor had made up everything that was lost + plus a nice profit. It's all in finding a good investor. If everything would go belly up you guns and gold are not going to do you much good.

 

[Geo-TH,In]

d beatty,
Friend with horses has a collection of guns he claims are worth over $10,000 each. He could use the money to rebuild his 1914 barn. He has two problems. One he loves his guns too much and two where will he find anyone with that much money to sell his guns too in a down economy?

So if the market goes to hello in a handbasket, who will you sell your guns to?

Guns are like YT tractors. They have a peak value before the market goes south.

I like investing in things with a proven return.

I've been a landlord for 50 years. I make money regardless what the market does. People need a place to live. Yes there are tenants from Hello. You need to learn how to screen tenants. The nicer your places are, the more you can charge and avoid bad tenants.

 

[JOCCO]

I will add that I do believe in some diversification. As in do not put everything in guns,stocks or apartment building.

 

[john in la]

My 401k may be down for this year but I still have more money in it than I put in over the years.
So I figure I am still playing with the houses money.

 

[JD Seller]

That is kind of funny in that I had to meet my tax guy a few weeks ago because of the profit my stocks earned. Had to switch some expenses around to keep from getting hammered with taxes.

The indexes are not the best indicator on how stock are doing. One sector can be getting hammered while another is doing well. My shares in companies that make things needed every day usually about always makes a return. Nothing flashy but a return.

The market has been pretty good for several years. It is due for a correction on a lot of "tech" stocks. I think stocks like Google and Twitter will get hammered in the future. They really do not have any thing of tangible value backing them. It is all smoke and electronic mirrors.

 

[The Famous Grouse]

The whole "guns and gold" investment "strategy" (if you can call it that) has more holes in it than a rusty bucket.

The main problem is that you, as an individual, cannot liquidate guns easily, quickly, or without cost that erodes your value.

Let's say you had 10 of Brand X gun that you wanted to liquidate and take your profits. First, you'd have to find buyers and that would be a slow process and for 10 units, would probably take months. Also, buyers are very hesitant to pay "rack rate" for guns bought from private individuals, so buyers will almost never buy NIB guns for the same as what they can buy them for from a reputable retailer.

Secondly, the cost of sale (gun site listing fees, etc), packing, shipping, etc all erode your profit. You also would have to store and if you're smart, insure all those "investment" guns, all of which has a cost.

Then there is the opportunity cost. What OTHER investment could you have made with the money you had tied up in guns. Had you bought guns 5 years ago anticipating another "Sandy Hook" panic, you'd still be waiting, but had you invested that money in an S&P fund even counting this "down" 2018 year, you'd still be way, way, way ahead.

Also, guys who claim to be fans of this strategy almost never seem to sell. They're always looking to time the market and sell at some future mega peak time that they claim they will see coming and sell at the top of the top. Hmmm. If stock investors can never seem to do this, how come we believe gun investers could?

(quoted from post at 12:43:47 01/01/19)
The market has been pretty good for several years. It is due for a correction on a lot of "tech" stocks. I think stocks like Google and Twitter will get hammered in the future. They really do not have any thing of tangible value backing them. It is all smoke and electronic mirrors.

Stock prices are all the same--they are based on speculation of future falue. Every one of them. Doesn't matter if they produce steel, oil, or nothing you can see of feel. Value moves up or down based on precieved FUTURE worth.

Facebook, Twitter, and Google have high values because they sell advertising and user data. Those products are very popular right now and it's unlikely this will end anytime soon.

Warren Buffet always looks at the "moat" that surrounds a stock. How much market share would say, Coca-Cola have to lose before it made even a dent in thier profits? A lot. What is the likely hood of a competitor being able to capture that much market from Coke even over say a decade? Next to none.

Apply that to Google. How likely is it that a competitor would emerge that will take away even 10% of Google's daily user base away? There is next to zero chance of this happening.

It's not about the value of what a company owns or produces, stock prices reflect the market's speculation of future performance and value.

Grouse

 

[davpal]

What people do is buy a gun at Dunhams for $800 dollars and sell it a year later to a friend for $400 dollars because they're broke and need the money. Most people aren't gun "collectors". They're impulse buyers or hoarders that purchase things they don't need and realize later they couldn't afford it to begin with. A serious investor probably doesn't have guns in his portfolio.

 

[John T]

I think anyone who invests ONLY in Gold n Guns or Pure Stocks or Pure Bonds or Pure Cash is "purely financially speaking" unwise. I say DIVERSIFY, sure some Guns n Gold is good along with some Stocks n some Bonds n some Cash n some Precious Metals etc etc. Guns n Golds is fine by me and anyone's free choice so even if that's ALL they invest in who are we to say otherwise ?????????

Hey I've made good money in precious metals and love Golds n Guns same as anyone but I just like to have a diversified portfolio and NOT put all my eggs in only one basket .

So to those who love Gold n Guns more power to them. In some years it may do good in others not so good BUT I RESPECT THEIR CHOICE regardless if they do better or worse then me in certain years WHO ARE ANY OF US TO JUDGE OR BE TRUSTED TO GIVE INVESTMENT ADVICE LOL

Gold n Guns is fine by me but best wishes to those who don't think the same

John T

 

[dr sportster]

What davpal said " a serious investor doesn't have guns in his portfolio". You just do this for your own interest.

 

[John T]

Indeed my guns are safely stored (NOT in my investment portfolio although some precious metals are indeed) and FWIW increased significantly in value since purchased yayyyyyyyyyyyyyyyy

Will I see you in Florida again this year???

John T

 

[MarkB_MI]

> What people do is buy a gun at Dunhams for $800 dollars and sell it a year later to a friend for $400 dollars because they're broke and need the money. Most people aren't gun "collectors". They're impulse buyers or hoarders that purchase things they don't need and realize later they couldn't afford it to begin with. A serious investor probably doesn't have guns in his portfolio.

Well, yes. I didn't mean to imply that one can actually make money buying guns at retail prices and later reselling them.

When I started doing this several years ago, my intention was to poke holes in the theory that guns and gold are somehow safer investments than the volatile stock market. The problem I had is that, unlike stocks and precious metals, there are no reliable indices that indicate general movement in firearms prices. So I chose the single gun type that is as close to a commodity as anything: the AR-style rifle. And I picked a particular model whose price was published every week in the Dunham's flyer. Over the past couple of years, Dunham's hasn't put the Patrolman's Carbine on sale as often as before, so I may have to pick something else.

 

[MarkB_MI]

> The main problem is that you, as an individual, cannot liquidate guns easily, quickly, or without cost that erodes your value...Then there is the opportunity cost.

Correct. Guns are collectibles, and if you are going to collect, you should do so because you get enjoyment from the things you collect, not with the intention of making money. Which brings up another point: Capital gains on collectibles are taxed at a higher rate than other long-term investments. (And I know everyone here is scrupulous about paying taxes on gun sales.)

> Also, guys who claim to be fans of this strategy almost never seem to sell. They're always looking to time the market and sell at some future mega peak time that they claim they will see coming and sell at the top of the top. Hmmm. If stock investors can never seem to do this, how come we believe gun investers could?

There is an interesting phenomenon called "<a href="https://en.wikipedia.org/wiki/Endowment_effect">endowment effect</a>", and it covers pretty much anything a person can own, from personal property like guns and cars to real estate to more abstract property like stocks. Once a person acquires an item, they are reluctant to sell it, even if they can make a profit doing so.

 

[MarkB_MI]

> I'm invested in annuities with a guaranteed rate of returns.
Once I annuitize the annuity, it's locked in at a fixed rate of return regardless what the market does.

George, if annuities work for you, fine. But they're not my cup of tea. Yes, by buying an annuity you transfer your risk to the seller of the annuity. But they're charging you a hefty fee to take on that risk. I prefer to have a well-diversified portfolio and accept the risk myself.

 

[dhermesc]

Agreed. If you buy guns and keep them in a portfolio you have screwed up. You buy guns and keep them on hand.

 

[dr sportster]

John , I will always stop by at Florida Flywheelers and say hello !