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Thursday, January 20, 2011

Gold Outperformed The S&P 500, 1997-2010

I'm making this post every year. I compare gold to the S&P 500.

I only compare to the S&P 500, because it's the most widely-cited measure of the stock market. If I used the Dow or NASDAQ, the results would be similar.

Once again, Gold crushed the S&P 500 in 2010. The S&P 500 had a gain of 14.42%, including reinvested dividends. Gold gained 23.81%, for a difference of 9.38%.

Over a period of several years, gold is outperforming the S&P 500 by nearly 1% per month!

Here are my results:

YearS&P 500GoldGold/VFINXCum DifAnn Cum Diff
2011115.821388.50$11.99 9.38%9.38%
2010101.221121.50$11.08 14.00%6.77%
200980874.50$10.93 72.81%20.00%
2008127.04846.75$6.67 120.95%21.92%
2007120.54639.75$5.31 150.86%20.20%
2006104.23530.00$5.08 195.78%19.81%
200599.48444.74$4.47 209.97%17.54%
200489.84409.72$4.56 216.44%15.49%
200369.91363.38$5.20 319.36%17.27%
200289.83309.73$3.45 398.87%17.44%
2001102.12271.04$2.65 394.32%15.64%
2000112.28279.11$2.49 353.48%13.43%
199992.73290.25$3.13 320.31%11.68%
199872.1288.70$4.00 269.79%9.79%
199754.14287.05$5.30 113.42%5.18%
199644.06369.00$8.37 -2.47%-0.16%
199532.06387.00$12.07 -3.18%-0.19%

I use as my source for the price of gold. I take the value on the first trading day of January.

I use Yahoo finance as my source for the S&P 500. I use VFINX. I use the "adjusted close" column, so I'm including reinvested dividends. So, for 2011, it's the adjusted close on December 31, 2010.

"Cum diff" is the cumulative difference. "Ann cum diff" is the annualized difference. Since January 1, 2000, gold has outperformed the S&P 500 by nearly 1% per month!

You have to go all the way back to 1995, to find a time when a buy-and-hold S&P 500 investment would have outperformed a buy-and-hold gold investment.

On the Communism Channel, they ridicule gold at every opportunity. If there were a hedge fund with the same 15 year track record as gold, the fund manager would be on TV every day bragging about how super-awesome he was.

Here's the same information in chart form.

This one is in log scale. When viewing financial charts, log scale is more correct.

Pro-State trolls say "Gold has storage costs. Gold is useless. With stocks, you get a dividend." Yes, stocks do pay a dividend. The fallacy is that with a corporation, you're paying for all the waste and theft. The CEO acts like the owner, even though he isn't really the owner. Via the Principal-Agent problem, the CEO lines his pockets at the expense of shareholders.

A corporation has earnings. The cost of the waste and fraud and theft is greater than the value of the earnings.

A pro-State troll says "A clever person can outperform the S&P 500 index, by making good picks." Can you really outperform by 1% per month?

I was very disappointed, when I realized that the stock market is one big scam. It was like discovering Santa Claus doesn't exist.

It certainly is possible that the stock market will outperform gold for the next year or two. Over a period of 5+ years, I'm pretty sure gold will come out ahead.

There's a lot of State propaganda regarding gold. State comedians denigrate it at every opportunity. There are many regulations and taxes that make it difficult to own physical gold.


Anonymous said...

I was worried about inflation.

I've done some lightweight diligence and the stocks I've picked have gone up 30% overall, even including the stocks that went down. I'm not a trader or a banker and had no experience of stocks beforehand.

However the stocks I've picked are not representative of the whole index.

I skim through newspapers and my eyes pick up on useful companies.

I pick sectors that have little downside.

Mike said...

You forgot one more point, bud:
In stock market, you have to share your wins with the government parasites, but if you take a loss, it's wholly yours. With gold, you don't have to share anything with anyone. *unless you have paper gold, of course, bu then it is not gold but just another stock*.

So, you should have subtracted %15 from any year gain of S&P (once a year or even may-be average number of times people transact in any given year).

In gold, you keep all your profits and you don't finance the parasites. (no fool would claim his gold "profit" and pay %28 percent to tyrants)

FSK said...

Actually, you can take a deduction from income for losses, but only up to $3k. (I still have capital loss carryovers from my failed stock options experiment.)

Gold is much more tax-efficient than stocks, *PROVIDED* you buy and sell off-the-books. In fact, if you buy/sell gold with cash off-the-books, then it's just as "tax efficient" as an IRA!

Anonymous said...

It depends on the timeframe

FSK said...

It's invalid to compare gold to the stock market from 1933-1975. During that time, It was illegal to own gold in bullion form or non-numismatic coins in the USA and most "Western" countries.

In 1975, most of the world's gold reserves were owned by central banks. In 1980, they adopted a policy of selling gold whenever the price rose sharply. Regarding gold, market conditions have changed in the past 10-20 years.

Also, in the stock market, the "corruption factor" is increasing, making stocks less attractive.

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