Where is Silver going?

Just a little side note: Germany - where's our gold?

"...So in a sense, it may be a bit of a mystery just what is in the vaults of the New York Federal Reserve, which holds a 45% chunk of Germany’s gold reserves. The Bank of England and the Bank of France hold 13% and 11% each. The Bundesbank itself holds 31% of those reserves."

 

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Well, a lot of people bought houses in the middle of the past decade who never should have, and couldn't have even qualified until about 2005. So they bought and lost the houses and are back to where they were in about 2002 - renting. Same with long time homeowners. It is easy to overstate the effect of the housing recession. From where we sit now, it's as if housing had a flat decade. This isn't fun but is hardly devistating. Markets fluctuate and people should keep that in mind.

 

It's devastating if a quarter of your net worth was WIPED OUT by circumstances completely beyond your control...

 

No it's not, what is devastating is if 90% of your net worth gets wiped out and it could have easily been controlled with proper diversification.

 

It is serious, not devastating. But as you indicate above, a lot of that 25% has already been recovered.

 

I saw an interview with a silver guy the other day and he said that long term the best amount of PM's in your portfolio is around 15%. I agree. Having a paid off house and some productive land is a good investment too. I prefer not to buy ASE's either, because there are so many cool circulated coins that can be had near their silver price. I think they will get some numismatic value after a while, and even if they don't, that's okay since silver seems to hold or go up. Silver has some volatility to it, and I think you have to live with it.

 

I don't disagree. If you go back several decades, almost every investment advisor recommended a 5% to 10% allocation to precious metals. One can forgive a "silver guy" for coming in on the high side.

 

As a responsible home owner (never missed a payment, did a 30 year fixed from the get go, not an ARM) over the last decade, my perception is that the average homeowner has been hit very hard by the housing crisis. In 2008 I knew all sorts of people who were saying their house had lost $50,000 or more in net value. At the time mine was still in great shape, but since then it has lost $100,000 in value. Thankfully that is where I got in at so I'm not hurting, but many people were enticed into home ownership by fast and loose loans from Fannie and Freddie and did not have the equity necessary to stay above water. Others were enticed by the seeming neverending rise in home prices, reminiscent of 1929 when everybody thought stocks could only go up, or 2011 when everybody thought silver was going to the moon. I was just plain lucky that circumstances lead me into home ownership the way they did, but if we all had to rely on luck to be successful not very many of us would achieve success.

 

Even a lot of homeowners who are underwater are not in bad shape as long as they can make the payments. The house payment may be as high as a rent payment on a similar property, they are getting a tax deduction, and at the end of the payments they will still own the asset free and clear. Everybody has to live someplace, so a drop in the value of a house when you go to sell it is offset by the lower price of the house you buy to replace it. The damage is frequently more psychological than real.

If a homeowner can't make the mortgage payment, they probably couldn't make the rent payment either, so they are no worse off for living in the house and still enjoy the benefits of home ownership.

 

26 MPG just announced on the new C7 corvette while delivering 450 HP. Now you can afford both
I'd go for it, if I were you........

 

Fair points Cloud and I don't disagree with you. I just think that tens of thousands of dollars in asset ownership have the potential to make a big difference. It's not so much that quality of life has diminished because they are missing that equity, but that their net worth took the hit. That money could be used to upgrade to a better house, to start up a business, all sorts of things that could lead to better situation than living paycheck to paycheck and a better overall economy. I know you've said that most of those losses have been recouped assuming the average citizen is diversified in other financial investments, but if you consider that it is with devalued dollars it's not exactly a wash. As you said, everybody needs a home, but not everybody needs to have investments. Whether they should or not is another story, I think we would both agree they should, but investing isn't necessary to put a roof over your head or food on the table, so not as many people will do it. Ultimately the net result is an extra year or 2 of labor to pay off the impact. That doesn't mean it's anybody's fault in particular, but that prospect isn't necessarily going to sit well just because day to day life appears to be the same.

 

Personally, I'm against the whole concept of using your primary residence as a piggy bank. This shows the danger of bad financial management and the necessity of living within your means. Quality of life based on increasing debt is a mirage.

 

Completely agree with you about the piggy bank, and people are responsible for their own decisions. But for those who bought a house and immediately lost value on it it's not necessarily irresponsible on their part or indicative that they were using it for a piggy bank. These things certainly happen, but some people could have done everything right and simply been victims of buying at the top because they had the American dream of being a homeowner.

 

"If a homeowner can't make the mortgage payment, they probably couldn't make the rent payment either..."


The mortgage payment is just one part of the total bill. Add repairs and maintenance, periodic replacement of major systems, water and trash (usually in the rent), homeowner's insurance (as opposed to tenant insurance), special assessments, and of course, depreciation and obsolescence.

That's quite a plateful. Throw in the benefits of being able to move on relatively short notice. A good many households are not able to move where the jobs are, because they can't sell their house; they're stuck.

You are in a state of denial. Homeowners all over the country have been savaged by falling home prices. The equity is lost forever. (And we're not done yet -- The President and Congress would like you to think that the worst is over, and that we're on our way back). Not so.

​

 

You could make the same mistake with precious metals. People who bought in around the high in the 80's are still feeling burned. I don't blame people too much for following the herd. I was a real estate agent in the boom times, and I could see it coming. There were NINJA loans out there (no income, no job, no assets)to be had and it seemed like it was going to be good times forever. I could tell it was coming down when I heard a lot of people saying "you can't go wrong with real estate". When I hear that about PM's I'm getting out too. I like it much better when I get the reaction where they tell me I'm crazy. Crazy as a fox.

 

Well if you want to look at the glass as half empty, but the truth is the pendulum had swung too far (as it always does) and home values were overpriced. The "profits" that homeowners experienced could not be sustained. Since you cannot simply sell your primary residence like a stock to lock in profits from an inefficient market, you really could not count the equity increase, as a true increase of wealth. The market had to correct, just has tech stocks did when the NAS was at 5000 and just as silver did a little while back when it was closing in on $50. That is just the way things work.

My price tag on my home may has went down 80 - 100 grand, but I still own one home, nothing has changed and even though I will receive less cash if I sell, the replacement residence will cost less also, so it all works out in the wash. Of course you can always find some exceptions, but in my opinion I have lost no true wealth. I still have the same amount of "STUFF"

Now certainly I feel for the folks who got caught on the wrong side of the crap storm, but these folks did not lose their houses because the price fell, the payments stayed the same, it was other factors such as loss of job, cuts in salary, etc or in some cases irresponsibility, that caused these folks to not be able to make their payments. They may have been victims of a bad economy, but the drop in real estate is not what got them.

Now I look at these lower prices as a good thing. Think of all the young folks who can now afford to buy a home where they had no chance before. These new young homeowners will now become some of the building blocks for the recovering economy. They will be purchasing furniture, appliances, home improvements etc., which will be injecting money right into the economy. The result will be what we need most, MORE JOBS

 

This. If prices hadn't fallen, none of my friends, except a choice few that got really, really good jobs would be able to afford to buy in my area right now. Instead, several own homes, and I will start looking this fall as well. I should be able to get a nice 3br, 2ba with 1500-1700 sqft for around $250-$275k. That house would have cost $350k 5 years ago.

 

While I do agree with the rest of your post that I didn't quote, the Adjustable Rate Mortgages that were proposed to a lot of unsuspecting folks did change the monthly payment when interest rates jumped up. Yes it's on them to know what they are getting into, but just pointing out the payments did adjust in some cases which played a role.

 

Yes, I agree, I did miss that point, but as you pointed out, the ARM was a choice, and a bad one at that. We all make mistakes so I am not ragging on those folks, but this is an excellent example of how much easier life can be with wise decisions.

 

I agree their timing was unfortunate, but unless they intended to live off of borrowing against the anticipated increase in the value of the house, they really aren't hurt yet except in the psychological sense. Real estate will eventually recover.