Wednesday, December 12, 2012

That Gold Thing

Some research guys (Steinbeis Research Center for Financial Services) went out and asked Germans some questions about gold.  The responses came back to be a bit shocking.

The average German has around 6k Euro of gold in his or her possession (roughly $8k dollars).  At least a third of this came after the recent gold spiraling upwards trend.

What's going on?  A simple explanation.

Germans hate investing in stock markets.  They don't buy stocks or mutual funds for the most part.  It's too complicated, and too risky.  Strangely enough.....for years and years....they have bought into gold.  My own speculation is that it's something that goes back over fifty and even a hundred years.  You buy a coin or a piece of gold.....you know it's value on that day.  You hide it in your house.....your basement....or your garage.

A number of Germans have this weekend occupation game.  They make five to twenty thousand Euro a year....under the table.  They don't report their secret income to the Finanzamt (the German tax folks).  So a guy has this little box in the tool room of the basement, or a 500-Euro safe that he picked up at the Hornbach store, and he puts his cash in there.

Eventually....some buddy comes around and talks up gold at the pub.  He knows this guy who has a 100k Euro in gold coins.....who would sell them at the standard gold price of the day.  The guy asks questions....calls the guy up, and some deal is made.

In the middle of darkness....this guy shows up....lays out 15k in gold coins.  You put your 15k Euro on the table, and the transaction is done.  Six months pass, and you are ready for another 15k Euro purchase.  Gold bars move in the same fashion....just with the richer crowd.

How much gold is really out there?  There's a fair estimate over this but you can't be entirely sure.

The interesting end point of this....when does gold finally a peak and retreat down in price?  Does the typical German have the ability to grasp that?  And if he fails to sell at the right point.....how big a loss is this?

The humor of this is that some guy is sitting out in a village around Wiesbaden....in his tool room at 10PM....while the wife is watching her political talk show, and he's counting his thirty gold coins...over and over.  He quietly weighs each one, and notes each one as a personalized thing.  A week will pass, and he's back in the basement....counting his thirty coins.  By June....he'll add five more coins.  Each day.....he hovers over the Bild and it's short rundown of finance updates, and there's the gold price indicator.

Yes, heavyweight investing has finally arrived in Germany....only it's gold.

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