Comment by yieldcrv
16 days ago
so basically this framework only excludes spot commodities. yeah its not common for people to be permanently bullish on commodities outside of a few niches like bitcoin and precious metals, so you don’t hear too much about that aside from those communities.
yeah that makes it easy to adhere to, while many other asset classes dont really revolve around scarcity of the asset’s existence and ownership does convey access to a productivity. I understand your criteria now.
For me I don’t have that criteria and don’t mind zero sum things. Its an entertaining and stressful player versus player match in a massive multiplayer game. Some kinds of trades I make are not zero sum, but it’s not an important distinction for me.
I do have a criteria related to human suffering: I mainly avoid exposure to some sectors like defense contracting and publicly traded prisons. Because the incentives are out of whack and dehumanize people while hoping they suffer, said in obtuse terms.
I think there is a flaw in the resource exchange logic you presented. Where you owning 1 kg of gold means the effort to extract that gold had gone to waste. In spot commodities the scarcity and continued demand at higher prices of the commodity is what justifies the further investment into extracting that commodities from harder to reach places. If a single market participant finds utility from the use of that commodity, distinct from hoarding, then acquiring access to more is beneficial. Your hoarding helped. The main difference here is that you are looking at the resource expenditure to acquire the unit you are owning, as opposed to the future utility created by the scarcity you contribute to. That’s a choice, I wonder if there is room to re-evaluate that principle, as I’m not sure we are operating on the same information.
> If a single market participant finds utility from the use of that commodity, distinct from hoarding, then acquiring access to more is beneficial. Your hoarding helped.
Talking about marginal quantity for tiny fractions of a commodity get abstract so let’s scale it up and the assign a fraction of the difference to that 1kg.
Total quantity of gold in earths crust is constant, so let’s assume what changes is the timing of when a mine gets opened. IE a bit of land is either mined in 1975 vs 2025.
Everything else being equal it’s more efficient to mine today vs 50 years ago both from an effort perspective and environmental impact. EV mining equipment for example is a lot more common today than 50 years ago, they are also a lot safer. Thus removing 1kg of gold from the market for 50 years is also a dead loss.
Correct, and that EV mining equipment was only pursued because that 1kg of gold is $100,000 now instead of $5,750 in 1975. because of that constant quantity that is now unavailable. If gold was still worth $5,750/kg, it wouldn't matter what policy changes about mining regulations were done, nobody would pursue creating the more expensive equipment and mining gold.
The conclusion in your stated logic is to actually hoard as much gold as possible so that mining in the year 2075 is even more EV+ and safer.
You’re missing two important points.
Gold mining alone has basically zero impact on Caterpillar’s R&D into EV mining equipment. The mining industry mines vastly more copper, iron, tin, etc ore and gold is at such low concentrations it’s basically indistinguishable from other types of mining until chemical separation.
If nobody was holding gold as a store of value there’d be a glut of gold for industry and ~zero gold mining the next ~hundred years. Holding gold ultimately means mining sooner not later.
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