RAMSEY: Tonight's "Myth vs. Truth," Myth, gold is a good investment.
Truth, gold has a poor track record. That's being real nice. Gold sucks. I don't care how many ads you see on TV or listen to on talk radio, do not buy gold as an investment. Listen, you're playing the commodities market, come on. Seriously, this is the most volatile market on the planet. Well, gold is what everybody goes to if the world comes to an end. A failed economy does not return to the gold standard. Show me one since the Roman Empire that did. It never has.
We used the gold standard at different times. But gold has no more intrinsic value than paper does. It's just because somebody is willing to exchange it.
Let me tell you what happens in a failed economy. Look at Katrina hitting New Orleans. There is a temporarily failed the economy, a micro collapse. What happens? Gas becomes very valuable. A bottle of water becomes valuable. clean blue jeans or shoes are a big deal. Those are the kinds of commodities you want in a failed economy.
Y2K people did not pile gold into their garage. Well, some of them did. But they got water and electricity and they got canned food and they prepared that way for something that didn't happen. That is how some people prepare. They would not go out and trade gold bars if things happened bad at Y2K.
This survivalist crap does not work with gold deal. And gold has a 70-year track record of 4.3 percent average annual return. That is horrible. It does even keep up with inflation.
I've got to tell you, I am really sick of these commercials. They're everywhere. They're so cheesy to start with. But here's the deal, -- it is a crummy investment with a crummy track record. I do not own any gold, except some cool cufflinks and one watch. Other than that, that's it. I do not have a little bit over here just in case. I don't play with it. It is a precious metal investment. Silver is the same thing. Art is the same thing as a collectible. It is ridiculous. You'd be better off to invest in guns then gold, because of these they have a utilitarian value should something happen. Seriously. Gold? Come on. But people bite on this stuff, because they have this illusion. All the conspiracy theorist guys get into it.
It seems Dave Ramsey only thinks of Gold in terms of as an investment and he also seems to not be aware that in Zimbabwe they are bartering with Gold for food.
So I wrote Dave Ramsey the following letter:
I have heard good things about you and your advice. I know a few couples who you've helped. I heard you didn't recommend gold and that you've stated that gold is never used for bartering.
In case you're not aware - right now in Zimbabwe the people no longer use currency because the market sellers only want gold and hyperinflation has destroyed their currency! They work all day panning for gold to buy bread. Here is an amazing video report talking about it.
There are various reasons to buy gold and silver. One is for investment purposes - but there is another reason - for insurance purposes against various scenarios as a way to barter and a way to preserve wealth. For example: Hyper-Inflation or the collapse of a currency.
Best of luck,
Within an hour I received the following reply from his customer service representative:
This information provided below is from the Dave’s Radio Show:
A listener says a lot of people are asking about gold investments. Is this a good idea?
On-air call from The Dave Ramsey Show -
2) Read what Dave says:
It’s a bad idea to invest in gold. Everyone’s talking about it right now because gold is really high.
In the book, Stocks for the Long Run, Jeremy Segall has a graph that shows what would have happened to a single dollar invested in gold, bonds and stocks since 1801.
One dollar invested in bonds in 1801 would yield $13,975 today.
One dollar invested in stocks in 1801 would be worth $8.8 million today.
One dollar invested in gold in 1801 would be worth $14 today.
Via: The Dave Ramsey Show –
Question: Amanda's dad is reading a book and is convinced that the stock market is about to crash and wants to pull all his money out and buy gold overseas. She doesn't know enough to talk some sense into him. What can Dave say?
Dave Ramsey's advice: I'll be as nice as I can ... I think it's absolutely ludicrous! I have seen books like this come out every year since I could read. I've heard the end of the world predicted every year. Could the stock market crash? Yes, but there is no indication that he should say this. I CAN'T BELIEVE THIS! This author is a nut burger. The end of the world is not coming.
In order for the stock market to crash, companies like Microsoft, Ford, GM, Home Depot, GE, Whirlpool and all those other big companies have to close. Not decrease in business, but CLOSE! Can you honestly imagine all of those companies closing? Our stock market operates differently now than in 1929; there are many more safeguards now. Less than two months after 9/11, the market was back up to the level it was on September 10. The people who make these predictions are doomsayers.
I don't own any gold or silver, nor am I buying precious metals as investments. The returns are horrible and the volatility is all over the place. The stock market looks like a cake walk next to gold. I own mutual funds and paid for real estate, and I'm not moving a dime on the advice of this author.
Investing In Silver
QUESTION: Mark asks about silver as an investment, since he was talked into it. It’s worth $7,900 and he doesn’t know if he should keep it. He makes $50,000 a year. Dave tells him why playing with silver is like playing blackjack ... not good.
When you play precious metals, you are gambling with about the same odds as playing a blackjack hand. You are not investing … you are speculating. This thing can go south on you in a hurry. This is gambling, and I would get out of it.
The response didn't really reply to my email. I haven't heard anything further.
Incidentally - the exchange above with Amanda took place in January 23, 2008. The book her dad was reading is called Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books) (You can read my review Here. Oh, and by the way, Peter Schiff was largely right when he wrote that book.).
You can hear a recording of the exchange with Amanda in this YouTube video: (If you're getting this post in email form you may have to visit mountainsteps.blogspot.com to see the YouTube view)
By the way - as I explored Dave Ramsey's website I found out that he doesn't seem to understand what inflation is:
From Dave's Website: http://www.daveramsey.com/etc/askdave/index.cfm?event=dspAskDave&intContentItemId=10639
Explanation Of Inflation
Janine has a pretty basic question ... how does inflation work, and how can we stop it?
QUESTION: Janine wants to know what causes inflation, and how can it be stopped. Dave tells her what goes into it.
ANSWER: Inflation is the increase of the cost of something. If the inflation rate of gasoline is 10%, that means the cost of gasoline went up 10%. What causes things to go up in price are a lot of variables. One thing that can make it happen is supply and demand. If there are 100 people wanting 10 things, there will be a bidding war that will drive the price up. Conversely, if there are 10 people wanting 100 things, the demand is not as great and the price goes down.
Some other items in our economy have more complicated things to do with it. For example, if you buy food from outside the country, that country’s economy affects average inflation in this economy. If you’re buying a house and the shingles on the roof are more expensive because of oil in the shingles, then oil caused housing prices to go up. It gets very complicated and interconnected at that point. Basically, inflation is just the increase of prices.
Dave Ramsey is wrong - what he is describing is not the inflation that the caller was calling about. What Dave Ramsey is describing is price fluctuations due to supply and demand - not inflation caused by the devaluing of a currencies worth because of the amount of money in circulation. What is happening in Zimbabwe is not simply "just the increase of prices".
My conclusion here is that Dave Ramsey is brilliant at helping people get out of debt - he's designed a program that seems to have amazing results. And if you need to get out of debt you might want to consider his advice. But for investments (he seems to prefer rental property and growth mutual funds) he doesn't seem to have an accurate understanding of the larger picture and you may want to see what he says and balance it with other peoples advice (or just trust your gut instinct and do what you think is right.) He also seems a bit too quick to discount people by calling them "nutburger's".
I wish Dave the best of luck, but wish he was aware of what is happening in Zimbabwe and could understand Gold and Silver isn't just for investments. He is in a position to encourage people to prepare, but he seems to prefer to call people getting prepared "nutburger's" instead.
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