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Going to buy gold next month, it's going to run up to $1,500. Everyone got a laugh out of that one. How would you hedge against inflation?

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  • Buying even more GOLD !
    NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
  • In addition, become a quadrillionaire!

    image
    imageQuid pro quo. Yes or no?
  • ColinCMRColinCMR Posts: 1,482 ✭✭✭
    those Zimbabwe notes are fun!
  • ksammutksammut Posts: 1,076 ✭✭✭


    << <i>Going to buy gold next month, it's going to run up to $1,500. Everyone got a laugh out of that one. How would you hedge against inflation? >>



    Let them laugh.

    Consider buying silver along with gold plus some gold and silver mining company shares.
    American Numismatic Association Governor 2023 to 2025 - My posts reflect my own thoughts and are not those of the ANA.My Numismatics with Kenny Twitter Page

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  • OnlyGoldIsMoneyOnlyGoldIsMoney Posts: 3,385 ✭✭✭✭✭


    << <i>Going to buy gold next month, it's going to run up to $1,500. Everyone got a laugh out of that one. How would you hedge against inflation? >>



    I am buying more gold and silver now. My day for laughter will come.
  • I picked up a couple cool looking silver bars yesterday at a decent price. Sorry no pics.
    NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
  • jmski52jmski52 Posts: 23,008 ✭✭✭✭✭
    it's going to run up to $1,500. Everyone got a laugh out of that one.

    Groupthink - one more reason to think for yourself. I don't allow social pressure to influence my financial thinking. That's the very last thing I want to allow.

    There are enough credible financial analysts who acknowledge that we have a debt problem in the US. Not to mention unfunded liabilities in the hundreds of trillions. Not to mention a penchant for increased govt spending. And don't forget the taxes that we were promised wouldn't happen.

    What I find revealing is that nobody from my generation (and those that followed) thinks that anything bad can happen to them, because, well - it never has.

    But when you see an obvious problem do you ignore it or prepare to deal with it? I note that prices seem to be rising right now whenever I spend money. When I travel, almost all of my costs continue to rise. It does seem as if inflation is occuring at the ground level when I pay for things.

    Your question is about how to hedge against inflation, and precious metals are a classic response to inflation expectations. In the Volker era, metals continued to increase until interest rates were bumped all the way to 22%. Then finally, inflation expectations came down, and so did the metals.

    Our current situation is different because there is no recognition by the bond markets that rates are going back up, and Bernake himself has said repeatedly that he expects rates to be low for an extended period. The main driver for low rates is so as not to kill off any budding economic recovery by raising the cost of borrowing.

    Gold will easily run to $1,500 and beyond when the gov't monetizes the debt, which they are doing now quite aggressively. A Busy Week for the Money Printing Press

    Alot of the "new money" initially got swallowed up by the banks to patch up their balance sheets, or we would have seen a price level increase before now. That wasn't really "circulating money" because it didn't get injected into the economy, but it was more just another heap of debt onto the debt burden (which does have long term consequences, even though it doesn't cause an immediate increase in price levels).

    So, if you're buying gold with expectations of seeing $1,500 per ounce, that's probably not a stretch even in the near term. Question is, what then? I think that we're into another world already, where gold will be the ultimate savings vehicle and store of value, at a minimum.

    If you think that you can come out ahead by investing in gold and selling it at $1,500 for a quick profit, I do think that you could very likely be kicking yourself for taking that quick $500/oz. profit ($250/oz. after tax) in paper profits. I think that the dollar will continue to dissolve, and that those $250/oz. in profits will look insignificant as prices keep going up for the forseeable future.

    My theory is that gold is here to stay as a savings and asset protection vehicle, and that the other alternatives all suck really bad. JMHO.image
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • MoneyLAMoneyLA Posts: 1,825
    This is just something to discuss, and not my opinion or financial advice:

    If you really think that inflation is going to soar, do you want to buy gold or do you want to buy the things you will need in the future?

    For example (and these are "loose" examples), if inflation soars would you want to buy a new car today instead of buying a new car a year from now at the inflated prices?

    Would you want to buy a house today, instead of buying it a year from now at the inflated prices?

    If gold will only keep pace with inflation, when you sell the gold you will merely be buying more expensive things with the proceeds of the gold sale. So wouldn't it be wiser to buy those things now?

    I am interested in your comments. thanks.
  • jmski52jmski52 Posts: 23,008 ✭✭✭✭✭
    if inflation soars would you want to buy a new car today instead of buying a new car a year from now at the inflated prices?

    That's always going to depend on how badly you need a new car (or even a used one). We have a couple of '97 cars and an '03 - all of which are well-maintained. There's no point in buying a car unless you have run out of viable transportation.

    Would you want to buy a house today, instead of buying it a year from now at the inflated prices?

    Same basic answer as for the car question, except that more really depends on your financial prospects and the credit markets than on housing price trends. If you are renting, the buy vs. rent equation comes into play as a matter of personal economics. If you are buying housing real estate as a speculation, then you have to balance the current borrowing rates vs. the expected rate of inflation, and whether you are doing the financing vs. bank financing. And of course, most decisions of this sort are ultimately tax-driven. I prefer a simpler life, with fewer risk variables.

    If gold will only keep pace with inflation, when you sell the gold you will merely be buying more expensive things with the proceeds of the gold sale. So wouldn't it be wiser to buy those things now?

    Your questions seem to be of a mindset that asks, "what is the best speculation to make money?"

    If gold is a store of value (which I believe that it is), then it is not really a vehicle for speculation, unless you leverage it. And that's not investing, that's speculation. The OP's question didn't specify whether he was interested in a quick profit turnaround or in a store of value for savings.

    The point of gold investing, I believe is to keep your purchasing power intact in an ultra-conservative sort of way - and to worry about making a good return when you have confidence in a specific investment. I think that confidence in the financial system is eroding, mainly as a consequence of watching what is going on in our federal system of government.

    I also think that anything less than PMs in this environment is at risk for market manipulation, whipsawing, and degradation of capital. In this environment, I think that the risks in PMs are mainly to the upside vs. the dollar (in which I think that the risks are almost totally to the downside). I think that paper assets, including the dollar, stocks, and bonds are extremely vulnerable now. I think this is much less problematic in physical gold, silver and/or platinum and/or palladium. JMHO.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • DoubleEagle59DoubleEagle59 Posts: 8,347 ✭✭✭✭✭


    << <i>Going to buy gold next month, it's going to run up to $1,500. Everyone got a laugh out of that one. How would you hedge against inflation? >>



    To hedge or protect oneself from the (I believe inevitable) large scale inflation buying precious metals, especially gold (or silver) is the best idea.

    I'm not interested in picking 'bottoms' to save a few bucks per ounce because when the price of gold takes off, you won't be concerned at what price you paid for it.
    "Gold is money, and nothing else" (JP Morgan, 1912)

    "“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)

    "I only golf on days that end in 'Y'" (DE59)
  • Heres my reply to your question as whether to buy cars, homes now before inflation. Here's my take and strategy. Buy what ever you can or want now, as long as you pay cash. Do not increase debt exposure, no credit purchases!!!! There really hasn't been any significant improvement with bank solvency, (lets see who closes their door next), no significant loans are being given to business. Medicare is bust, FDIC is bust, We're in debt to the tune of Trillions. Government will raise taxes on January 1, 2011 (Bush tax cuts expire Dec. 31, 2010). No improvement in unemployement (unless it's a government job).

    2010 will be similar to 2009, some small gains, slight corrects, but over all flat or small increase in assets.

    2011 is where I'm totally in the negative column concerning the economy. Here's where things could get really ugly. It's hard to believe we could go into hyperinflation, but it's happened to other countries. Look at Europe's economy, cause that's what our current government wants.

    Solution: Buy PM's, the real thing. Buy real assets, things people will want to barter with. What ... the barter system, it's possible. (Think what a bottle of vodka might be worth or that 6 pack of beer.)



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