Reporters Convert Toxic Assets Into Gold

Those crazy NPR Planet Money kids took the money they had left over from their failed toxic asset investment – affectionately known as “Toxie” – and put it all into the next big bubble: gold! For $419 they got one shiny gold coin. In 6 months they’ll sell it, regardless of prices, and in the meantime, report on what happens to it.

We Bought Gold! [Planet Money]

NPR’s Pet Toxic Asset, “Toxie,” Dies
Reporters Buy Up Toxic Assets

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  1. FatLynn says:

    ARGH…this gold bubble cause all of my jewelry to re-appraise much higher than a decade ago, so I have to pay more for insurance.

    Please, people, it’s a bubble! When will we learn???

    • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

      I propose the creation of a learning bubble. ;)

    • TuxthePenguin says:

      I’ve been in a real good debate with a friend of mine (financial analyst) over the “gold bubble”. Neither of us are sure its entirely a bubble, but we’re also sure that its not entirely real either.

      Assets, in theory will only change in price due to two factors – rarity and changes in the fiat currency. (Yes, its not always true, but there’s arbitrage which brings it back to what it should be). If we find more gold, value of existing gold decreases. If we take tons upon tons and shoot it into the sun, the value of current gold goes up (change in rarity).

      Right now we have a government spending money like no tomorrow (2.8 trillion projected deficit this year, IIRC). That means there is an increase in the money supply and assets must appreciate to hold their value (I’ll come back to this). IE, if your one unit of gold was worth $1 and there was $100 in total currency, if the government printed another $100, your unit of gold would be worth $2 because of this inflation.

      Now we haven’t seen much in the way of inflation. But part of this gold bubble is saying that “Its coming!” and they’ve already hedging against that.

      Now, where we think its a bubble is that gold has no real value. It cannot be used in necessary production – plows made of gold aren’t gonna work very well. You can’t eat it. It is a medium of exchange. (This is where I laugh at people who said gold has never been worth 0. Yes it has. And it would again if society collapsed. You wouldn’t trade your food and starve for a shiny rock…). So while a unit of food would appreciate in value necessarily, gold might not. Maybe only by 50% instead of 100%.

      Anyway… long way of saying that this isn’t entirely a bubble.

      • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

        Gold has more uses than just trade. It has great properties for EM shielding, electrical conductivity, corrosion resistance, and nuclear uses. Arguably, if society collapses the need for those useful properties are almost none, but to rebuild a society…

        • Loias supports harsher punishments against corporations says:

          Still, their value is inflated because of our desire for shiny things. The same holds true for diamonds. They are useful in the world of science and production, but really serve no purpose for individual use other than vanity and status.

          If humans weren’t so vain these items would be practically worthless. But just practically.

        • DeepHurting says:

          Gold is indeed useful for other things that trade, but there are other materials that are much more common that can perform the same functions. Gold is expensive due to perceived rarity and societal attitudes.

          Personally, I prefer the look of sterling silver or tungsten over gold. I’m sure if there was some run on tungsten, it would go up in value and be perceived as more rare than it is, although I’m not saying that gold ISN’T rare.

          Anyways, I’m rambling. All I’m attempting to say is that gold is expensive because people think gold is expensive.

          • MauriceCallidice says:

            The connectors on the RAM in my computer are not gold-plated because of “perceived rarity and societal attitudes”.

            • AnthonyC says:

              Very true, but the price is still higher than it would be if people didn’t use lots of gold for jewelry as well. Probably.

              Gold isn’t that much rarer than other metals used in technology and chemistry- tellurium, indium, etc., it is more abundanet than palladium, and we know a *lot* more about how to mine it effectively, yet it is several times more expensive than these.

      • Powerlurker says:

        Assets can also change value because of a change in demand. If people all of a sudden decide that they want gold twice as much, the price should theoretically double.

      • Culture says:

        Funny that demand does not affect price. You would think this would be the single largest factor in price.

        • TuxthePenguin says:

          Demand would be the “external” influence on price, not an natural influence. Demand is what causes bubbles…

    • Loias supports harsher punishments against corporations says:

      When will YOU learn that gold is always will be at an inflated value.

      If you wish to keep and insure a product whose sellable value is greater than its actually use value, go right ahead. But don’t complain : – )

      • FatLynn says:

        Well, seeing that it is all inherited jewelry kept for sentimental value, I did not purchase any of it nor do I intend to sell it.

        (I suppose, by my own logic, I shouldn’t bother insuring an irreplaceable item, though?)

        • wrjohnston91283 says:

          You should still insure it if it has a high value – getting $5K for grandma’s necklace is better than nothing.

      • bwcbwc says:

        You do realize that gold actually has a pretty high use value in electronics and other industries for its corrosion-free properties. Not that anyone can afford to use it in kilogram lots, but it actually has a pretty high use value.

    • The cake is a lie! says:

      If you have enough money tied up in your gold jewelry that you feel the need to insure it, then presumably you have the resources to afford whatever those insurance premiums cost. If you don’t have the money to insure it, then lock it in a vault and don’t risk losing it. But don’t complain about it. It is like listening to people complain about the cost of gas when they are fueling their hundred thousand dollar cars.

    • PBallRaven says:

      No, as gold is still well under historic values, accounting for inflation.

  2. The cake is a lie! says:

    The value of the coin they bought could have been inflated because of the rarity of the coin itself. For example, a Quarter is not made up of $.25 worth of material and it only worth face value because that is what they stamped on it. However, a rare gold coin from a limited run with historical significance could be worth much more than the face value or even the weight. So buying a coin may not be the best test unless they plan on just valuing it by weight and not by significance.

  3. MustWarnOthers says:

    They should have bought a Glenn Beck sponsored collectible coins in my opinion.

    Those coins come with more inherent integrity.

  4. obits3 says:

    Look! Toxie is evolving into… Golden Toxie!

  5. Dover says:

    I love how they call it “left over”. I think “not lost” might be a more appropriate term.

  6. thewriteguy says:

    The American economy has been running on fumes since 1980 — leapfrogging from one boom to the next. The best one was the Internet dotcom era that ran from the mid-90s up to 2000, since that actually benefited most people (and the world).

    Now after the housing crash and the failure of the Iraq war to create a post-war economic boom, Americans are desperately looking for the next bubble to leech off of for the next several years. We were hoping it would be green, sustaining energy tech, but that requires too much work and education, so it’s either gold speculating — or exploiting the youth generation by roping them into inflated-interest college loans.

    • obits3 says:

      How about exploiting the youth generation by roping them into inflated-interest college loans that are backed by gold derivatives?

      • failurate says:

        It is not just the young folk. There was a whole MBA boom amongst older folk too. Yay! Everyone gets an MBA!

  7. dolemite says:

    I’ve yet to understand gold as an investment. Mainly because when you attempt to sell it, you get a value that is MUCH lower than the market value.

    • cleek says:

      “Mainly because when you attempt to sell it, you get a value that is MUCH lower than the market value. “

      the trick is to find a buyer who doesn’t know that’s how the market works. or, hope the value of your gold has increased enough to make up the buyer’s discount.

    • Culture says:

      Obviously you are not familiar with gold holding exchange traded funds (ETF) such as GLD.

    • TuxthePenguin says:

      If you’re buying gold or assets physically, yes, disposing of it is much tougher. But when people say “I’m investing in gold” they aren’t really buying a physical bar, they’re buying into a fund… yeah, you read that right.

      See the problem?

    • omg says:

      Depends on how/where you sell it. If you go to a dealer, sure there’s a markup which can be substantial. (I’m guessing they bought a $5 gold coin, which should not cost close to $400 – a $10 gold coin would certainly cost more than the amount they paid,)

      People can readily buy gold and silver coins on eBay at prices very close to bullion value; indeed, it is a great place to sell these coins for (net of auction and PayPal fees) prices approaching market value.

      While the dealer might have steered them to a ‘numismatic’ gold coin (one with collector value greater than its bullion value), if this is what they bought, they made an uninformed or misinformed purchase. A rising bullion market is not a good time to buy numismatic gold and a lot of people get burned by the hype.

      BTW, the thickness of a $5 gold coin is 1.19 mm, which is mighty thin.

  8. dush says:

    These planet money people are horrible at investing.
    They keep buying things at the wrong time.
    They should have bought “toxie” five years ago and sold it two years ago.
    Then bought gold two years ago and sold it now.
    They’d be gagillionaires!

    • MMD says:

      I hope you’re joking…the whole point of these exercises is to illustrate how these markets are functioning *now*.

  9. Scurvythepirate says:

    I’m gonna go back to investing in Beanie Babies.

    • Tim in Wyoming says:

      and fully articulated action figures… left in their boxes.

      • mianne prays her parents outlive the TSA says:

        Don’t forget baseball cards from somewhere around 1989! I’ll make a bloody fortune!

    • MustWarnOthers says:

      Ever since the Beanie Baby market got saturated, It’s been buyers heaven.

      I’ve been holding mock trading days with my other, more significant stuffed animals and I’ve been coming out ahead on most days.

      I’ll probably leverage all of this soft, plastic-pellet stuffed wealth in an effort to gain control of a larger portion of real estate in my bedroom.

  10. Rocket80 says:

    The value of gold is unchanging – it is only changing in relation to it’s USD equivalent, and that’s only going up because the USD is tanking. Gold is a hedge, not an investment. If gold is going ‘up’ that means your dollars are decreasing, and vice versa. So as long as you have both, you are protected. And as long as our federal reserve continues to print new money, which they are doing at record rates, and increase the overall money supply, gold will be worth relatively more USD’s, just like every commodity.

  11. Gizmosmonster says:

    A few years ago, my husband’s Jewish grandmother gave me some lovely family jewelry. I was incredibly honored, and told her I would keep them and make sure they were passed down in the family.

    She shook her head and smiled, then told me what family jewelry was for. “You can always bribe the border guards with gold,” she told me. “Over the last 100 years, carefully hidden family jewelry got us out of Russia, the Ukraine, Romania.

    It allowed us to bring the family Torah out of hiding under a barn in Russia in the thirties, and bring it to this country. Yes, it is beautiful to wear, but never get too sentimental about it.” Our people have had to flee from places we considered home again and again. Jewelry is better than cash, it can be hidden, sewn into clothing, it survives governments the way paper money never can.”

    • ARP says:

      Don’t forget to carry a decoy bag of jew gold.

      /southpark reference

      My grandmother in law once sewed $10,000 into a coat for relative to bring back to Poland during the communist regime.

  12. INsano says:

    Bet this article got a ton of hits from BOA/Chase/AIG IP addresses just for it’s headline…