Wow. PM prices decreasing dramatically.

That is quite the assumption there. Of course tightening puts downward pressure on equities, but to state it would cause a mass exodus is at best, wild speculation considering the fact the the FED has tightened many times without causing this mass exodus you speak of. There have been times that equities have risen in a tightening environment.

 

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I am simply looking at history. 2008 was a mass exodus in progress, an electronic run on the banks, and the only reason that didn't reach fruition was solely because of QE. Take that away, and the result is obvious. Even the hint of taking it away causes markets to drop.

 

But that is sort of my point, In 2008, tightening did not cause the issues. Now to deal with the problems the FED loosened and of course that slowed it down, but let's hope so because that was the plan. But the fact remained, that folks were still exiting and the market was declining in a loosening environment.

Now just the opposite can be true, the FED can tighten and sure, this adds downward pressure. but even with the downward pressure, it may not be enough to stop the rally, just slow it down, exactly like the loosening slowed down the declines but didn't stop them.

The example of the market dropping with even a hint of stopping QE is only showing an example of the downward pressure it would exert, not a guarantee the market just keeps going down. If you are simply looking at history, then you can see my point is correct. Markets can and do advance in a tightening environment..

 

2008 was a financial institution selloff due to housing. Everything else went down, (including pm), to raise your hated cash. 2008 was a poster child for the value of cash at times. If you were unfortunate to have all of your money in pm and you needed to eat, you were hosed.

 

And it never reached fruition because of QE money being pumped into that market. Had that not occurred things would have been much worse. Nobody has to believe me about this. Hank Paulson said as much to Congress, that the DOW would drop 3000 in a day if they didn't do QE.

QE merely postponed market equilibrium, which markets are still seeking hence the continually growing QE. At some point it will either no longer be effective or will be so large that the debt burden will require a hyperinflation to sustain it. We are already beyond the highest debt/GDP ratio reached during the Great Depression.

The housing bubble was simply replaced by a currency bubble, which is not as obvious to the naked eye because all fiat currencies are debasing. There is nothing else to shift the bubble to now that it has infected currency itself. The outcome of 2008 was much different than the outcome of the currency bubble burst will be. You will need PM's in that case because they will become the price measuring stick again just as they always were.

 

I'm just glad I kept most of my money in stocks when all the Gold and Silver nazis on these boards were haranguing me and calling me a fool 18 mos ago for not putting 100% of my assetts in gold and silver.

One word: diversify.

 

We are at least double the debt/GDP ratio of the Great Depression, we are just about the same level that we were at the end of WWII. While I agree it is not pretty, you should not assume we need hyperinflation to sustain it. We did not hyperinflate after WWII so to draw a conclusion that is the only possible outcome is just not being the student of history you claim to be.

It is really hard to understand how you are so certain of the events to come when there is so much history to prove you wrong. So the question is, Are you really 100% sure everything will pan out like you say? I really hope the answer is no.

 

Again, I am simply looking at history. Debt has been growing exponentially since we went off the gold standard. When debt grows exponentially and GDP grows linearly, if at all, the only possible outcomes are either hyperinflation or default. The only way for things not to pan out as I've described would be for debt to be paid off by non-debt based money (gold and silver) or for government spending to be cut substantially.

Any of these things could happen. However, if the money printing stops then the too big to fail banks will fail (since they require debt based money injections to remain solvent), and take down the $1.7 quadrillion derivatives bubble with them. If entitlements are cut sufficiently to reverse the debt trend then half of the nation will be below the poverty line. If gold and silver are to pay off the debt then the price per oz will need to rise accordingly to cancel out the debt.

To answer your question, I am not 100% certain of the outcome. It is a matter of possibilities and probabilities, cause and effect. The available paths are clear. Any thinking person can make their own deductions as to what they think is more likely.

 

Saying debt has grown exponential since we have gotten off the gold standard is just not true.

This link has a chart that shows debt vs. GDP (the correct method to measure debt).
www.ritholtz.com/blog/2010/05/national-debt-by-president/

Now I really agree with what you say about it not being certain and it is a game of probabilities. That is exactly how I see. So IMHO it us best to "play" those odds and diversify, to cover all the bases so to say. Even if you are 80% sure of doom and gloom, doesn't make sense to at least move 20% out of PM's and buy a few of those equities? You know, just in case you are wrong, it might be nice to have some of those fiat dollars to spend YMMV

 

I didn't say national debt. I said debt, as in overall debt which includes private/student debt, corporate debt, bonds, currency creation, etc. As to whether national debt is more pertinent to GDP, I'm not certain.

I do have some cash on hand so I can take advantage of a 'cash is king' scenario which would be temporary IMO, and also my share of equities only because I'm not ready to retire, but I don't personally feel good about that. High frequency trading is also growing exponentially and currently accounts for over 90% of all market volume. It's not a real market. Yes there is money to be made, but as we have seen by the flash crash in 2010, and firms like Knight Capital or MF Global, paper contracts are ultimately only worth the paper they are printed on. It's foolish to argue against diversification, but it is also foolish to put your wealth into a ponzi scheme to achieve that end.

 

What does high frequency trading have to do with long term investing? How does the fact 90% of all trades are just trying to skim a penny here and there affect those who wish to buy and hold equity positions in firms we believe will do well long term?

I am just wondering what the heck you mean that just because 90+% of trades are short term trades, its not a "real market". To me this is the same argument of short term investing using technical analysis versus value investing long term. Technical analysis cannot stop stocks from rising or falling long term, they can only be used very short term.

 

Overall debt in not increasing exponentially either. In fact personal debt is actaully coming down. It peaked at 12 Trillion in 2008 and is now around 10 Trillion. As far as corpoarte debt goes, US corporatation are now flush with record amounts of cash on the ledger, so this is not a problem either


Now for the Ponzi scheme thing

Here is the definition of Ponzi scheme

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.[SUP][1][/SUP]


I was not sure if you were refering to fiat currency or the equities market as a Ponzi scheme, but neither comes close to meeting the definition. Many people including a lot of bloggers seem to tag things they don't like as a Ponzi schemes, but just saying it does not make it so.

As far as bankrupt companies like MF Global, that point is simply not germaine to the situation. Some companies go out of buisness, always have, it does not reflect an overall unheathy market. No one ever suggested you put all your money into one company.

As far as the high frequency trading, I think Chris covered that.

 

You ever think maybe there should just be a permanent thread in the bullion investing section labeled, "the unending argument"? Seems its the same arguments over and over just rehashed from thread to thread.

I am not saying this to say anything negatively about the situation. I think honest disagreements, provided they are civil, are very valuable both for the participants as well as the readers. I just find it funny how one a month or so we find another thread to "latch onto".

 

No Chris, the fight must go on, don't bail on me now. There are only a few stackers left and once we convert the last one-- All the SILVER will be OURS!!! :yes:

 

This is wrong. There seems to be more and more people interested in PMs than ever before. Just because a few of you feel the need to educate people to your way of thinking doesn't make this true at all. Just because you see those ideas as extreme doesn't make them wrong. From most of what I've read from a few of you, you see the validity in those ideas, you just don't want them to come true.

In fact, many of you that rail against these exact ideas also have a stack of PMs. I'm sure you can defend your purchases as a collector or just liking them, but it's a stack whether you believe it or not. I'll also add that it seems that some of you want to profit from them as well.

 

(Wow, I read mikem2000 as ironic and not scheme-y.)
Also, what are these "exact ideas" anyway?
Can someone please ennumerate (poll?) these specific ideas that the rulling clique endorses?
Bullet points, thanks.

Signed,
An Outsider

 

Actually, he thinks he's being cute with his good friend medoraman. The truth is he posts like a know it all and piling on is a bully tactic...just saying...

 

Good friend? I have never met the man.

I thought everyone here, while posting their opinion, is a knowitall. Who else knows their OPINION better than themselves?

Who the heck is piling on to whom? My post was a good natured post, not directed at anyone, (or anyone's thoughts). Mike was simply having fun with a good natured post. You are the one who COMPLETELY misread everything, got your panties in a bunch over a joke, and now are still hostile even though YOU misread the entire exchange.

Dang, even posts where I disagree with nobody people try to jump down your throat here. Good gosh.

 

+1 ha ha!

 

It doesn't happen often, but I think it's hilarious when someone accuses me of jawbonin' down the price of Silver or Gold.

"I CONTROL THE PRICE OF GOLD, bwahahahaha!"

By my relentless propagandizing, I did manage to get an old-timer coin dealer interested in Rhodium today. (Disclaimer to any paranoid accusatory mods: I don't SELL any PM products, period!) Doubt it'll move the Johnson-Matthey quote though. Harrumph! And I KNOW those people.

o.k. so I'll bite... what are you gonna DO with all our Silver, King Midas? (I know that was the Gold guy; who's the Silver fiend I forgot)