Is this investment stradegy insane?

Ok, so I'll admit I don't have a life. I am an aspiring economist, and study market trends while not in school or working. Imho I feel like gold prices are going to temporarily drop within the next two years. It seems to me that gold has been marketed, and created a slight bubble above the level of hedge against inflation. The initial quantitative easing of 700 Billion last year had people running to buy gold, but the results of expected inflation were not as high as expected. With the current political environment, and pressure from other nations I do not see the Fed making another bold move anytime soon. This being said, I plan on doing a short buy on gold through an ETF or possible X2 ETF. On the other-hand I truly believe that the buzz on silver is just now beginning and with the recent drop in price, that now is the perfect time to buy. I see silver as a better long term investment, because it hasn't nearly peaked like gold has, and in the event of an economic collapse people will just not be able to afford gold. I do not have extremely deep pockets, but do plan on investing in 1k oz of physical silver. If I do a 2x ETF short on gold, it would be for a much lesser amount. Please all opinions welcome. By the way I have always done my own thing in life, and I have been burned as well as prospered because of it. In the scale of risk aversion I am "High Risk." Thank You Kindly.

~Jason

 

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My opinion is the opposite. Silver has been marketed like never before, and a lot of the claims from those marketers are pure hogwash.

 

My philosophy has always been to hold the physical precious metal not ETF or stocks.

 

I know this is a sensitive subject, and I mean no offense. I am 28 years old. My plan with gold is to save as much money as possible and invest in gold 20 years from now, when the baby boomers start to sell their gold (or lord bless em, they pass on). One way or another that gold will find its way into the market. With the massive flooding in gold and not enough buyers, it is my humble opinion that this would create a buyers market for quite some time. My generation did not grow up with any knowledge of the gold standard, and most actually perfer the look of silver over gold. Could you please explain your thinking on the silver market? I might be trying to ride too big of a bike here.

~Jason

 

Jason,

My main concern with your reading of the gold market and baby boomers is this quantity of gold, in my opinion, will have no affect on the gold market. Two reasons, one a lot of gold gets passed down to heirs. Second and more importantly gold is a world wide market and the US market is becoming less important every day. We do not have the passion and drive other cultures do to own gold, and do not really own that much gold as compared to other cultures.

Just my opinion. I understand your thoughts of wishing to be ahead of the curve, but those would be my caveats to your plan.

Chris

 

For the long-term I think metals are too risky. For any of us that have been buying coins long enough to see the rollercoaster rides they have taken and seeing the obvious top, or near top, they must be approaching now, it seems like a poor choice. You pointed out the flaws with this decision yourself with metals being market hype inflated and economic fear driven even when the economy hasn't crumbled like gold sellers claimed it would. Buying based on that should throw up more than a few red flags.
Guy

 

Ahhhh. This will clearly take years of investigating. Thank you for your opinions, I surely appreciate the life experience and indepth knowledge you all have of metals.

 

Bahhh. Still going to be torn about this for a long time. Everyone conservative seems to believe investing in stocks is the way to go. I totally disagree. Anyone who doesn't see an economic collapse coming is just not in tune with reality or done enough investigating. In 5 years time or 50 years time it is coming. 90% of Economists I know post ma understand this. How this equates to the metal market I do not know. One of the wealthiest people in America made his fortune betting against the real estate market though.

 

Stocks are the place to be in the long run. They are a hedge against inflation and make money. Many people have made more money betting bullish on real estate than Paulson did shorting it.

 

maybe, but the stock market did nothing for the past 10 years, and may do nothing for the next 10 years. i think shorting the metals is highly risky, as they can be volitile and shoot to the up or down side with little warning. If you're double short, and silver pulls one of it's 30% swings to the upside, your investment is wiped out.

In my opinion, most people that try to pick stock positions tend to be wrong more than 1/2 of the time. If you're someone that can pick right 60% of the time consistently, then you should go ahead with it because you will end up making money over the long haul.

 

Thanks. I guess shorting gold is not a good longterm strategy anyway. I'm gonna take a backseat on this one. Happy Thanksgiving.

 

There isn't anything wrong with putting a small percentage of your investments into metals. But, unlike most stock options, I'd plan on turning them sooner rather than later. My problem with commodities based on fear and speculation is you never know when the peaks and the valleys will appear so it's nothing more than a guessing game. If you can afford to gamble a lot of money on a guess then by all means go for it. If you prefer strategy based investing based on long-standing and proven methods, then stay with stocks. It's all personal preference. There just seem to be a lot of people who think they're going to get rich with metals. If this were the case we'd have seen it during the 70's and 80's, yet we never did.
Guy

 

What gold the Babyboomers own is so insignificant, that it's not going to make any difference at all. They grew up during the golden age of the post WWII American economy and had no reason not to believe in the system of banksters, central banking and wall street. Demography they are in debt, statistically will have to work 2 years beyond their death to earn enough to retire, and are selling their assets now to get by. This isn't something you need to worry much about.

(they also spoilt their kids)

 

Your plan of saving paper money now and buying gold in 20 years doesn't sound like a good plan to me.
First of all, your assuming your paper money will still be around in 20 years, still have value and precious metals will be cheap.
Just take a look at what's going on in the financial markets and the debt problems that exhist, both in North America and in Europe and it does't look good for any paper currency. The corruption of Wall Street and the big banks is slowly being exposed as you can see from the protests at all major cities. This banking system and the Federal Reserve, in my opinion, won't be operating as they use to. They are trying desperately to insert one of their own into the next election, a man who took advantage of the taxpayers during the last economic crash by giving advice but I doubt he stands a chance. What happens when the game is over is anyones guess but I assume a lot of people and countries will be looking to exchange their fiat paper dollars for something with intrinsic value. I am betting that people will be looking back in 20 years and talking about how cheap silver was in 2011.

 

Well, nothing in life is ever absolutely good or bad. Short positions can be a useful tool. I've thought about entering a smaller long term short position in the metals to help offset the larger physical position that I do have.This way, if the price of metals get slammed, at least the value of the short increases, and acts as a cushion against the loss in value of the metals. Of course, this will also reduce the unrealized gain when metals increase.

the strategy could go something like: as the price of silver increases by 10%, increase the short position by X amount, repeat every increase. Then when the price of silver plummets by 10%, decrease the short position by X amount, and repeat every decrease. As you're liquidating the short position when the price of the metals fall, you could use that money to increase physical holdings.

 

I appreciate the insight. You all are clearly more experience in the metals market than I am. I can only assume that most of you have above average IQ, but the average investor does not. This is what worries me. Just look at some of the morons that are current presidential nominees. I am not sure what will happen in the next 30 years, but most likely I will be investing in Silver, Cotton, Wheat, and ammo.

 

The problem with the current presidential nominees is that they are in a predicament due to the last Republican president who wrecked his party through power lust. Ron Paul is good, without him there is a question whether we would have gold and silver eagles started in 1986 through his work and others.

The Chinese central banks are buying gold, the Indians are buying, every serious large investor is buying precious metals. The risks are not great if you are not in a hurry to get out.

 

I see Ron Paul speak, and then I see people like Rick Perry and Michelle Bachman try to counter, and I want to throw up in my mouth. I am glad that you guys actually offer some insight on top of your knee-jerk reactions. On yahoo answers I usually just get a typical leftist response.

 

If you can go as long as you want to, the risk with PM is almost nonexistent. When the spot price goes down some of my coworkers ask me how much I lost. My always say nothing, I haven't sold any. Then they see me buying more and scratch their head, my source for PM also works there.

 

I have a few thoughts about your posts.

- If you want to understand economics, stop reading internet articles and study Keynes, followed by the classical economists. This is important because it is the basis of most current economic thinking, and you will discover that what is practiced today as Keynesian economics was never proposed by Keynes.

- If you are virtually certain that the economy will collapse, you should short whatever asset class your fellow experts think will go down the most. You said you are High Risk.

- Successful investing isn't a contest where results improve with IQ. To invest successfully, you need to (1) know how to value a security, and (2) know the right way to think about market fluctuations. It's more a matter of mental dicipline and knowledge than IQ. Read The Intelligent Investor by Benjamin Graham.