RoR: Forum

Sam wrote, "IMO, if any individual hopes out "out-research" the big players in this whole mess they're in for a hard and futile struggle."

I agree. And nearly all short-term investments, IMO, runs the risk of competing with the big boys, the inside information, the full-time professionals.

In really good times where we have stability that lasts for decades, a properly diversified stock portfolio built on sound fundamentals will usually be an excellent investment. And it only takes a small portion of ones portfolio to hedge against long-term major economic risks (inflation or credit collapse). But we don't have that environment and probably won't for a long time.

When we are in an economy like today's nothing will be safe because there is too much uncertainty, volatility, widely varied understandings of what is going on by those people who are driving the ups and downs, and too much force and regulation in the mix. The best you can do, unless you have a lot more wealth than I do, is to hold gold long term, some Treasuries - until it looks like inflation is beginning to damage their resale market, and be sure you have a place to live that you don't owe money on. The goal is no longer to make money but rather to keep from losing too much.

Post 41

Thursday, August 4, 2011 - 8:20pm

John:

At the time this post of advising against investing in gold was written by Peter, I ...

I don't quite understand your post. Do I understand that Peter Schiff advised that one should avoid precious metals? What am I missing? He has been a consistent advocate of owning gold.

Sam

Post 42

Thursday, August 4, 2011 - 10:21pm

Here's my current investment strategy:

Unfortunately we live in a world where you can't really gain by investments. The best you can do is buy commodities to protect your wealth. Governments around the world are destroying their fiat currency purchasing power by inflating their money supply and handing out money to people with ridiculously low interest rates. If you can afford it, now is a good time to invest in your education and maybe go on trips to find places you might like to move to. Try to find ways to take advantage of fixed low interest rates offered by the bank and the Fed that you can pay back later with monopoly money. I think buying farm land is an awesome idea. If you don't want to do farming yourself, you can lease it out to a local farmer.

1. Buy gold/silver/commodities. Buy land, low fixed interest rate, low money down, and in an area that is expected to have the best economic future. Potential areas: Texas, Arizona, Florida, New Hampshire. Maybe Panama? Again, buying real estate is a great way to take advantage of the expected reduction in future USD purchasing power.

2. Buy index funds and low overhead mutual funds, particularly foreign countries that are already capitalist and becoming more capitalist. I think Hong Kong, China, and Singapore are good locations. Particularly mutual funds that focus on high dividends.

3. Sell bonds and dollars. Bonds currently have a fixed low interest rate, and the interest rates are expected to increase, and the more than doubling inflation of the monetary base since 2008 is going to really hurt the purchasing power of the dollar (and bonds).

4. Money market currently sucks, and its going to continue to suck until the Fed gets out loaning money... or until it at least raises its interest rate to a reasonable 10%+.

Post 43

Friday, August 5, 2011 - 7:46am

Sorry Sam I should have specified which Peter. I was referring to Peter Reidy's post #11 in this thread.

Post 44

Friday, August 5, 2011 - 8:48am

John:

Gotcha.

Sam

Friday, August 5, 2011 - 3:27pm

******************
Sorry Sam I should have specified which Peter.
******************

When you have more than one Peter, it's important to be able to distinguish between them.

Okay ... that one was bad ... that one was really, really, REALLY bad. I sure picked a terrible time to stop taking my medication.

:-)

Ed

Post 46

Friday, August 5, 2011 - 5:19pm

It's a good thing we don't have a Peter Johnson posting here.

Sam

Post 47

Monday, August 8, 2011 - 12:47am

Gold reached 1700 today.

Post 48

Monday, August 8, 2011 - 6:45am

Had you bought gold back when I wrote my earlier post and sold it today you would have made money. If you bought it then or, even more so, if you buy it today, and ride it all the way to the bottom, placing ideology over financial gain, as so many followers of Browne, Ruff, Casey and the rest of them did thirty years ago, you'll get clobbered.

Post 49

Monday, August 8, 2011 - 6:58am

"Had you bought gold back when I wrote my earlier post and sold it today you would have made money."

I know.

Post 50

Monday, August 8, 2011 - 7:21am

Peter:

Harry Browne wrote How You Can Profit From The Coming Devaluation in 1970 when the price of gold was $35. As you know it subsequently rose to $850. The "followers" of Harry Browne saw a 24 fold increase. I mortgaged my house to invest in gold at $171 in 1977 and sold at $830. Don't bad mouth Harry Browne to me!

Sam

Post 51

Monday, August 8, 2011 - 8:03am

This reads like the testimonials faith healers get. Gold rose to $850, but then what happened? In particular, what happened to to the people who paid $850?

Post 52

Monday, August 8, 2011 - 8:25am

You can make statements like that wrt anything that fluctuates. If you have evidence that the present price of gold is a bubble, lets hear it. Just because it's historically high doesn't mean it's a top.

Sam

Post 53

Monday, August 8, 2011 - 12:28pm

Peter, to answer your question in post #51, the people that paid $850 for gold would now be holding gold worth nearly $1,700. I read Harry Browne's book and bought gold at about $42. I later sold at over $600. I bought again, many years later, at $900, and I'm not selling now... not even if it goes to $1,800. I also still hold some Treasury bonds - hedging against a severe and sudden deflation (which appears to grow less likely by the day).

I don't know why you are talking about "ideology" - the economic and political facts are pretty clear. The government inflates so the currency won't buy as much, and gold is still recognized as the primary store of value, hence it goes up as the dollar goes down. Long term why wouldn't one expect to make money, or at least preserve value, by owning gold? That isn't faith-healing or blind ideology - it is sound reason applied to solid principles.

If someone ignores those principles and that reasoning and instead fishes out the stories of someone who bought at $850 and then sold later at say $600 - thus having been mistaken on timing, or made their decision on the basis of emotions of the moment, or just didn't understand the underlying principles, or were forced by circumstances to sell... well, those stories are the ones that are antedotal floating abstractions - untethered from the reality of the trendline of gold that goes back to the thirties.

Post 54

Monday, August 8, 2011 - 1:04pm

The people who paid $850 and sold at $1700 would have doubled their money in 30 years. This is an abysmal return if you consider where stocks and real estate have gone in that time, even comparing 1980 prices to the lows that these assets will probably reach in the next few years. It's still worse if you recall that if they'd needed to cash out at almost any time in between, they would have suffered a sizable loss of principal.

Post 55

Monday, August 8, 2011 - 2:10pm

Peter, you are taking the price of gold (which is really the commodity price for a commodity primarily used as store of value relative to fiat currencies) and comparing it to the bubble price of housing. Unless you can show that gold is a bubble that comparison makes no sense. And you aren't going to be able to show gold as a bubble.

And you are comparing stocks to gold for long term value. Fine, but you would have to adjust stock prices for 30 years of inflation. Do that, if you will - take the DOW Jones index and state it in the dollars of 30 years ago to see what it would have to be just to stay even with where we were 30 years ago. Plus, there is the difference of purpose - some people try to speculate (in and out) to make money off of gold. But what I'm talking about is a long-term hedge against inflation - it is an insurance policy - not a dividend payer.

Also, take the ratio of gold to dollars at the time gold hit that high of $850 and use that to see where we should be right now - it would be a price of $2,400 per troy oz.

Post 56

Wednesday, August 10, 2011 - 7:54pm

Gold reached 1800 today.

Post 57

Wednesday, August 10, 2011 - 8:48pm

When I first heard someone, and it might have been Schiff, say that gold could easily go up to $2400 in the next few years, it was hard to believe. But that was back a couple years ago when the price was around or below $1,000. Now we are within $600 of that amount that seemed so impossible and this week it has gone up a couple hundred in just days.

There is no top for gold, because there is no limit to amount of dollars that can be created. I'm really glad someone made that little video because Schiff deserves a lot of credit for seeing things as clearly as he did and I hope all of those financial mavens that were mocking him set aside a moment or two to feel humble. They were pretty rough on him and that doesn't make them look very good.

Post 58

Saturday, August 13, 2011 - 7:36pm

It was not good to be in gold during the boom years of the 90s - just like the opposite is true now. You have to know where the trend is. Fighting it is a losing game. I have been playing in the futures market. Latest run this past crazy week first killed me (commodities) but I dumped them and got more gold - made it all back and then some. Then bought some commodities just at the bottom (oversold) and they came back. Pretty neutral now need a short pullback in gold to support levels, same with silver, before the next leg up. If the market goes up some more, will need to short it. Never fight the overall trend, that way on average you will do better.

Post 59

Monday, August 22, 2011 - 3:17pm