Panic on Silver or Gold in 2013? Collapse of the U.S. Dollar?

Taking bets or predictions early. Do you know or just surmise? And on what basis?

 

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IMO, the year after the current election will be one of renewed recession. So most markets will probably be down. I am certainly not a currency expert, but I would expect the dollar to be +/- 5% of where it is today, and gold & silver to be higher than now, perhaps by a lot.

Is there a prize?

 

i gave up trying to predict gold and silver moves ... i've been wrong too much!!! i am hoping some of you guys and gals are smarter than me.

 

Nothing has changed since gold hit it's highs last summer. Nothing is better. The dollar is strong right now compared to other currencies which isn't anything to celebrate. Other currencies are just that bad. The dollar isn't good.
Things have only gotten worse worldwide but people have forgotten and are complacent again. Easy to do when they're given fraudulent statistics. Just wait for the next shoe to drop.

 

Nobody knows, so everything is speculation. This nation has been saddled with an enormous economic debt that will take generations to get out of, if it ever can. I certainly don't think the dollar will collapse next year, but we may see members of the EU start to dump the euro, which could strengthen the ailing European economy. As for gold and silver, I believe that the price of both will continue to trend higher with the occasional dip such as we are experiencing now. Buy some.

 

Very good book recommendations sir! I used to assign Mr. Malkiel's book in a class I taught actually.

You are completely correct. Anyone who confidently "knows" where PM is going except for the obvious inflation adjustments is basically delusional or a salesman wanting your money. WingedLiberty is right, I don't know either, and I accept there isn't anyone really smarter than me on the subject, since its basically unknowable. Hundreds of variables account for the price every single day, most of them unknown today. A economic crisis here, debt default there, "return to normalcy", or a major new find all can turn a commodity market on its head.

Look at the history of the natural gas market the last few years to see how a ton of very educated PhD's had the economics completely right, yet the advent of fracturing utterly destroyed the foundation of their analysis. It happens every day, and those game changers cannot be seen today.

Best I believe is diversify enough to be lucky in a few investments, and have an iron stomach to buy when the news media is making you sick to your stomach to do so. That is the only success I really have had. When I bought silver the media made fun of idiots who bought PM, when I bought stocks in early 2009 I had to take tums for going against common media sentiment that the sky is falling. Diversify and be a contrarian.

Chris

 

While I think it is probably true that most people can't time the market, and that many institutional investors aren't permitted to time the market, I don't believe it is as hopeless as you suggest. So here are a few thoughts...

Benjamin Graham confessed to having a lot of interest in market timing. He suggested that the average investor can do well by adhering to the advice of "never buying stocks immediately after a significant rise, and never selling stocks immediately after a significant fall. In his book, "The Intelligent Investor," he suggests a few ways for the average investor to take advantage of market fluctuations [i.e., market timing].

Warren Buffett has freqently commented on the random walkers like Malkiel, indicating that it is enormously beneficial to value investors for people like Malkiel going around trying to convince people that there is no point in trying. His speech, "The Superinvestors of Graham-and-Doddsville" is available on the internet and is worth reading by anyone tempted to believe in random walk.

There are several enormously successful investors [e.g., Richard Dennis] who all seem to use variations on trend following in their investment processes, which is essentially a form of timing.

Jim Rogers states that he has been successful because he stays in cash until he spots something financially sound, cheap, and with a catalyst for change -- "money lying on the ground" -- and then he just picks it up. This is another form of timing.

Robert Lichello has written books on various timing systems that have worked and continue to work. I have personally used this in my own investing since the 1970s and can attest to the soundness.

So timing is more than luck. It is a combination of skill and science. EMT and MPT are a false investment religion, IMO.

...just food for thought...

 

But if one read Taleb's books one might change you mind and come to the idea that all these achievements are just luck.
If it was science than we'd had million billionaires and billion millionaires.

I have no idea where silver and gold are heading. But I have clear idea about fiat money - it goes down day after day.

Read some books about Great Depression, about how central bankers of the time tried to handle it. How they succeeded and what circumstances were. Now everything is different but bankers are trying the same way they used to do 80 years ago. So, tomorrow going to add some silver and may be gold.

 

I've read Taleb, and some of his ideas are very good. I particularly like his idea of reducing the % of equities in a portfolio and increasing the risk level of the equities held since it fits in with my own thinking. But he's playing a different game. Nothing Taleb says refutes the fact that there are many successful market timers. Buffett's article that I mentioned above is more or less a refutation of Taleb's ideas on timing.

We don't have a lot of millionaires because most people have been taught that trying is useless. So they are prisoners of what they have learned, and what they learned is wrong.

 

I don't see that. I see that we don't have more millionaires, (and we have a few million of them today in this country), because we don't have more people pursuing mathematics, hard science, etc, working hard in this country, and resisting the urge to "keep up with the Jones'" in their conspicuous consumption. Hard work, education, and a curtailed appetite for consumption still can easily lead to being a millionaire in the US. Most millionaires don't drive luxury german sports cars, have expensive hobbies, and the like. They are normal hard working people who save diligently. Btw I never said I follow all of these traits either, I drive a luxury pickup and my expensive hobby is coins.

As for the type of timing you are talking about Cloud, I agree and its what I was referring to when I said have an iron stomach and invest even when everyone says the sky is falling. Its hard on the stomach to see a stock decline 50%, have news media show bad news after bad news articles, yet still part with your hard earned money. I never said that part is easy, but its effectively the timing you are mentioning. That is the hard part for me, willing to use your head and not follow the pack. It is hard, but generally leads to better returns.

 

Right, but one of the main ideas of Taleb is that successful market timing might be just luck. And he shows this with example if you remember (take 1000000 investors, after year 1 there is 50/50(let's say) chance they beat the market or lose, so year 2 starts with 500000, and ends with 250K, year 3 .... etc). And we come to the place where Buffets and others seat.

So you are talking about science and skill. Let's take a look at all the hoard for example who graduated from the same schools (science) and went through the same training(skills) - are they all millionaires/billionaires?! My answer is NO. Because there is no science of investment. There is a skill of picking stock though, but lots of people possess the skill, but they are not worth millions. Why?! the same old LUCK

 

The really hard part is to actually determine if someone is simply lucky or skilled. It takes at least 7 years of data to make a statistically meaningful statement about a fund managers skill. The bad news is most fund managers only manage a fund for about 3 years on average.

I agree with both of you really. I say skill in knowing how to not follow packs, analyze economic and industry data and come up with the right conclusion, etc. However, even if you get all of that right, there are unknown information today that will dramatically affect future outcomes. That is where the luck is involved.

This is why I usually prefer value stocks. I like to buy stocks that not much is expected of them, then if the luck happens to be good they go up, if the luck is bad well it was pretty much priced into the stock to begin with.

 

I don't have a bunch of theorists' names to throw around, but I can tell you in my own equity investment, using dollar-cost-averaging and index funds over the years has made me pretty content. No muss, no fuss, no-brainer. Can the same approach be applied to precious metals? I would think so, but I'm not completely sure.

 

Of course it can sir. I think your approach is very practical.

The hard part of DCA into PM would be discipline. I like DCA since it tries to enforce discipline, and works well when automated, (money scheduled to come out of your account each month for example). However, if a person has to go to a store and buy the PM I would be worried about their emotions getting involved. I would worry that when its going up they would get excited and want to buy more, but when it is down they don't want to think about it and don't want to buy. This is exactly the opposite of what they should do, of course, but its human nature to feel that way. That to me is the greatest advantage of DCA. If somehow someone could automate the procedure to DCA into PM I would feel better about it personally.

Btw, yes we disagree on DCA Cloud.

 

I have no social commentary to make regarding the value of hard work and education vs. lifestyle [the old grasshopper vs, ant story]. I'm only commenting on success in the stock market [and perhaps other markets]. I agree that it is emotionally difficult to buy when things look bad but assets are cheap [value investing], and almost equally difficult to buy after a stock has been rising for awhile [trend following]. My personal solution has been to gravitate toward mechanical trading systems to eliminate the emotion as long as you are using a method that you believe is fundamentally sound.

 

Read Buffett's article "The Superinvestors of Graham-and-Doddsville." It answers your concerns and proves Taleb wrong. Of course, anyone is free to believe what they want. If someone believes it is impossible to beat the market, then they will probably never be able to do it. It is more difficult to unlearn the things you were taught that are wrong than to learn new things that are correct. Also, I don't think that making millions is the benchmark for success. Return on capital should be the benchmark. Someone starting with $10,000 with little to add may be extremely successful at investing and never make millions. Someone else might start with $1M and end up with more money but a lower rate of return, and not be successful by that measure. So success is relative to the starting point.

 

The thing I don't like about dollar cost averaging is that it works in only one special case -- where the ending market price is significantly higher than the low price over the entire holding period. You can prove this to yourself using Excel and sample numbers. Now, it probably can be said that the probability of this happening is high, but the risk of hitting one of the exceptions is too high for my taste. I've recounted elsewhere the details, so I won't get into it again.

 

And just so other who don't know the story has the cliff notes version of it, my side would be:

1. Most people don't have a huge lump sum to invest, so investing some over time in an orderly manner is better than someone saving up and trying to time a market they don't really know.

2. Cloud's assertion that DCA is flawed mathematically completely depends on what you infer as your cost of money. This is a debatable point, (which he and I have debated ).

Not trying to start the argument again Cloud, just giving Cliff notes version of our previous discussions for those who may have missed them.

 

Y'all know a lot more about the theory than I and I readily admit that. I'm just saying I am living proof that dollar-cost-averaging and a non-managed approach to equity investing can work very well. I believe we often make things more difficult than is necessary. I'm a firm supporter of K. I. S. S. (I don't mean the silly make-up band either.)