How High Would You Go?

Interesting question. I read one time that in Weimar Germany, stocks and real estate lost a tremendous amount of value - on the order of 80% of purchasing power - while PMs held their value. In the case of real estate, this was attributed to the fact that real estate is normally purchased at least in part with borrowed money. In a hyperinflationary economy, nobody will lend so the real value of property drops to the point where people can buy for all cash. However, this came from a single source and I've never been able to verify it.

 

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I would wager that cropland that produces exportable crops would not have suffered the same fate Cloud. Most real estate is tied to the local economy, but not cropland, it is tied to international markets. I know my land has more than doubled in 3 years, while my house has declined.

Edit: The point of my question is to see if people here really are interested in dollar diversification or simply making reasons to support their idea of buying PM's. There are many paths to dollar diversification, but lots of reasons people will make up to support their made up mind of having to own PM's.

 

Good question, but no way to get a statistically valid answer. I have concerns about the USD, but as I have said before, I do not believe it is going to be replaced by PM, the mark of the beast, or any other "money". The Feds do have the power to drive the dollar anyway they wish. I can not see them allowing the power of "money" to change from what it is, so I grab those Fed res.notes anytime I can. If I am getting them cheaper, I am betting they will get better. Why? because when we use the words weak/strong, we are referring to the dollar compared to other currencies, and if you research those, the only ones with a positive future are the very small European counties such as Switzer, Finland, Netherlands, etc. If you think that Germany, GB, etc. are that much different than the US, then you differ from me. And that is fine as the market is made by differing thoughts and reactions ( That is why I like Candlestick charts for commodities ). If you bring up China, good luck, as I think there is tremendous deception in any reports from their central bank ( IMO).

Jim

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And take a good look at corn, futures in corn are getting ready to go through the roof. With corn working as a food and a fuel, the future for corn is bright. JMHO

 

I am trying to learn more about the dollar and PMs. I find it very confusing and unstable at best. My reasons to collect PMs is to have a viable precious resoure that is readily available to me if the time comes when I need to use it. I try to use good judjment and find the best deals I can but in the end its a quess at best. Hopefully I will never need to use it and will simply hand it down to my children. But nobody can predict the future so what you buy it for and can get for it tommorow is a mute point. The only true value it has is what its worth on the day you need it !!

 

I recommend PMs because that is the area I know the most about. I don't like international stocks because this is a global crisis and every major economy in the world is heavily tied to the United States. I don't like any fiat currencies (including the Yuan) because once the dollar goes bust people are going to be extremely skeptical of any fiat. It's all about confidence when it comes to money and once people see the US Dollar go from being the "gold standard" of paper to worthless, they are going to be skeptical that it could happen to any currency. F*CK BONDS! I don't care who issues them, no bonds are paying high enough interest rates to compensate for inflation and default risks.

Real estate is an interesting option. Farm land is a good idea if you are going to be a farmer and I think that will be a fine way to make a living moving forward. However, I don't like the idea of buying property now with the sole intention of selling it for a profit in the future. It's very illiquid and I still think prices have a ways to fall. Rising interest rates and the death of long term mortgage loans spells doom for real estate. What would the median home price be if there were no mortgages? If every buyer had to bring 100% cash to the table?

The best investment anyone could make moving forward is physical oil. Unfortunately, it doesn't last that long and it's not easy to store. After that, give me PMs all day long as the best store of wealth available today.

 

The most simple way to think of it is this:

US Dollars = Money
Gold/Silver = Money

Both are purchased by speculators as investments, but both are truly nothing more than currencies used to store value or buy things. US Dollars are being printed by the billion and given away to social welfare programs, thus diluting the dollars that you worked for and earned. Gold/Silver prices are being suppressed by the futures market so that central banks (governments) and other major banks can buy physical metal cheaper.

I don't say this to justify any decisions I've made. I say this because it's true.

 

And on that day of need, it's value could swing greatly from transaction to transaction. One person will say they will accept it, but then I doubt if he will make change. The second person will say; If I can't eat it, I don't want it. No change due in that senario either.

 

I don't make "End of the World" type predictions. There was a time... not long ago, that people could make change with silver coins. There will be a transition period away from the dollar and it will be difficult. If you are starving and can't get food, then obviously you won't sell your last potato for any amount of silver.

But once we get back to some degree of normalcy, farmers will take PMs for their food. Prices will settle down and will probably be more consistent than they are today.

 

My hard earned Rule #1 - Be reasonable.

I was taught to not base your plans on "last potato" or FEMA Camps or 10k gold. Start balanced, be balanced and end balanced. Dumbest things I have ever done were driven by fear or greed.

Having said that, this $40+ silver is freaking me out! Can feel the greed monster pushing me to sell.

Fortunately, I have a note on my stack that says "Only to trade for House!" Wife laughed when I wrote it but over the past 5 years it is looking more and more like a possibility.

 

There are reasonable houses in my area selling for $25K. Nothing special, but they are places you could live for the rest of your life. I think the day will come when 500 ounces buys a very decent piece of property.

 

My current holdings, as of 4/3/2011:

ROTH IRA, Fed Govt TSP, & 401(k): 34%
Metals: 15%
Cash: 5%
Coin Collection: 42%
Stocks in Taxable accounts: 1%

I crunch the numbers once a month. I look at the stocks in my ROTH IRA almost daily. I hold mREITs, Canadian mining Jr's, T Bills, and Canadian oil.

My investing mantra: Boring is beautiful.