Friday, August 26, 2011

Selling Their Gold? The Japanese Must Be Completely Insane!

I stumbled upon this story today from Reuters about how many Japanese people are selling their gold. It seems that, at today's high prices, they want to cash in while they can.

Because of this trend, this makes Japan a net exporter of gold for six years in a row!

Why would anyone want to sell gold (real money) in exchange for worthless paper? These people selling their gold haven't a clue as to what they are doing. 

Reuters reports in "Analysis: Japanese Cash in on Gold Price Boom":

(Reuters) - For Eriko Ebina, standing outside a downtown Tokyo medical equipment store that has a side business buying gold, the recent surge in prices for the precious metal was just too tempting.

"For more than 30 years, I kept gold jewelry mother bought for me, and with media saying prices are high, I thought I would sell them now except for a few keepsakes from her," said Ebina, in her 60s.

"I earned more than I thought they were worth. I'm not interested in buying gold."

It is sellers like Ebina who will offset surging investment into gold funds in Japan, which should make the country a net exporter for the sixth year in a row.

The assets of Mitsubishi UFJ Trust and Banking Corp's physical gold exchange traded fund (ETF), Japan's first backed by metal stored in the country, have grown by a quarter since end-July to 21.8 billion yen ($284.9 million) as of August 23.

"Investors are seriously treating our gold ETF as a legitimate asset class, just like investing in equities, bonds and currencies," said Osamu Hoshi, deputy general manager at Mitsubishi UFJ Trust.

"They see a need to diversify their assets after seeing volatile moves in currencies and stocks and others," Hoshi said.
There is a serious disconnect here. Hoshi says that people need to diversify their assets, yet they sell their gold? And what do they buy? Stocks? Bonds? Paper currency?! Oh yeah, those have done especially well over these last 20 + some years.
What do they say, "A fool and his money are soon parted."

A downgrade of the U.S. sovereign debt rating amid a deteriorating outlook for the world's largest economy, as well as a spreading European debt crisis, have triggered a rush to gold that has boosted prices by 14 percent this month.
Yeah... For people like this dumb lady who sold her gold, they need to wake up and smell the coffee...She doesn't need to sell her gold, she needs to hold on to it... For those of you who don't have any gold or silver, you need to buy it.
It's the only asset that has done well over these last ten years.


Mark said...

Nice post Mike. I wrote a few posts the other day about gold on my website since I got a front row seat of the market and what was happening. The lines were amazing. People had to wait over two hours to change their gold into the worthless paper.

Now I must admit, I too sold some of my trading position on the 23rd which was the peak. Did I analyze the charts correctly? Not at all since I am not that smart. It was more of a gut feeling from my experience in buying and selling gold for my business.

The truth of the matter is, I am ready to go back and buy. I will probably average in a certain amount today and then see the impact of what Bernanke has to say today in his big speech.

Overall trend is to keep going up, so I will continue to buy.

Andy "In Japan" said...

Though I agree with the sentiments of Mike's blog, that people should own gold to protect their economic interests, I would not be so harsh on people who have been selling scrap gold and jewelry.

Perhaps they are poor or have lost their jobs and need cash to pay for current expenses. Perhaps they are retired and have had their interest rate income stream stolen by the Bank of Japan's zero interest rate policy.

We don't know their motivation, and for many in this economically stressed country, their motivation might just be good and they may not be acting stupid.

Gold isn't money, not yet anyway. Don't believe me? Take an old gold filling, a gold ring, or even a gold coin to the store and see if they will accept it as payment.

Some day gold will be currency and the paper Yen or dollars you own may not be worth much. Own gold if you can.

Anonymous said...

I'd be hard on those selling their gold, doing so is a last ditch effort, somehow I doubt most - or even all - of the People selling their gold are facing a last ditch situation. It's more likely they haven't even cancelled their cable TV service before doing so, or had a yard sale, or sold their car... and times aren't even tough yet, what then? They'll be calling themselves stupid then.

I don't believe that gold isn't money, there Are stores and vendors who accept gold as payment.

I could just as easily say, try taking a bag of Pennies to pay for a court fine or see if a store will accept it as payment.

At any rate, the video was funny and I can't stop hitting the play button.

- Clark

Anonymous said...

As I think about it, if gold isn't money, then why do central banks hold it?
Why not diamonds?

Because gold isn't widely accepted as payment does not mean it's not money. It's always been money, legal tender laws just make gold not widely accepted.

Kind of like saying, because a store Only accepts Visa and Mastercard, that means American Express isn't a form or credit.

Mises on Money:

"The function of money is to facilitate the business of the market by acting as a common medium of exchange.

...there are four kinds of money: token (base metal) coins, commodity money, credit money, and fiat money... Commodity money is what the free market has determined is the most marketable commodity, and therefore the medium of exchange...

money is not what the State says it is... Money is what the free market says it is..."

- Clark

Anonymous said...

The wife says the video was mean.

I really liked the symbolism in it.

I had a dream that Hayden Panettiere turned into a leprechaun and wanted my gold and she wouldn't even kiss me for it, all the while Captain Kirk is saying, "Kaaahhhn" as if to encourage me to give up my gold.

Then I got to go with some friends 4x4ing and shooting bazookas at trees.

Then I woke up,... and things seem strangely the same.

For instance,
The other day as we walked through the mall past the numerous gangster-wanna-be's and the hoards of cops and mall security guards clustering and massing about talking on their waki-talkis and pointing to and fro, I pointed at a Gold Into Cash store and said, "Look Honey, a leprechaun!"
She was a bit miffed because she thought I meant an actual leprechaun.
My scary unsaid thought was, things are going to get real bad and those who want the gold are going to get real serious, as in goberment/IRS/FDA/DEA/TSA we-want-to-take-what's-yours, serious,... but I digress.

Off topic, I forgot to add onto your bit about Japan TV stations wanting to be saved, I heard on the radio here in the unitedstate a commercial begging People to write their congressmen to save their local TV stations. Things are the same the world over, eh? But at the same time not.

- clark

Anonymous said...

I'm so ruined by this blog post.
Every other day I see a guy in a chicken suit standing on the side of the road waving at everyone as they drive by, trying to entice them to come into the Gold-Into-Cash store with their gold, and all I keep thinking of is the leprechaun in the video.
I do laugh though, thanks for that.

- clark

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