Let me be clear- I use the term speculation in a specific way, in agreement with the generally accepted use of the term among financial professionals. So yes you can claim I've drunk the Kool Aid.
A speculative investment is one in which any gains come solely from a sales price higher than the purchase price. As mentioned earlier, this can come from either an increase in the "value" of the investment or a decrease in the value of the unit of account, such as dollars. This sort of investment relies on someone willing to pay more at some future date for the item in question than the original owner did. This future buyer is sometimes referred to as the "greater fool".
Any asset that doesn't compound or pay a coupon or dividend or provide an income stream is by this definition speculative. All commodities and collectibles fit this category.
In comparison, assets that provide an income stream, such as real estate, a bond or a dividend paying stock, have a value that can be calculated as the net present value of all future such cash flows, divided by the discount or risk-free interest rate. Assets can sometimes be found to be selling for less than this NPV, and as such can be considered undervalued. The return on this asset requires no greater fool to purchase it at some later date for a price different from that of the original investor- it is the value of the cash flows that matter. Over long periods of time these can grow well beyond the original purchase price. Judging the reliability or quantity of those cash flows is speculative in the sense that one is attempting to predict an unknowable, but it's more a form of risk assessment than speculation- it can be modeled based on a number of usually historical inputs. Judging whether or not some unknown buyer will pay more than you did for an item is purely speculative, and has a more tenuous relationship to past trends.
Any asset that doesn't compound or pay a coupon or dividend or provide an income stream is by this definition speculative. All commodities and collectibles fit this category.
I might reword that to say that any asset that doesn't have some base tangible value isn't really an asset. Therefore municipal and govt bonds of entities that are essentially insolvent are hardly investments. One could expand that to say that any bond or note based in fiat is not a true income producing asset either....just a Ponzi scheme catering to the next greater fool. Most companies or businesses these days might not be classified as "income producers" or having asset bases. Who knows what their true financial condition is when the books are so cooked these days with various interpretations and employment of FASB rules. Stocks, bonds, currencies are all fiat-based schemes as well. Companies or businesses I like with a tangible base would be miners with proven/probable reserves, food growers and producers, energy and oil producers, water/utility companies, etc.
Considering that a distorted view of money, assets, and income have been taught at our universities over the past 50 years, it's no surprise that the same view is widespread today. Easterners that came to study in the US took that same twisted logic back home with them, only to infect their own societies.
ranshdow, as I noted - I have a master's in finance and I understand this - you can play with the numbers and the definitions all you want. I draw your attention to the FASB's changes in the standards related to bank holdings of financial derivatives and the Treasury's subsequent bailout of the major banking institutions involved in the real estate market. You think there's no risk there? How many Trillions do we have yet to go before they are zeroed out, and who actually loses here? Let's talk about where the money went and where it's going to come from. How is the debt going to be restructured next time? Got any ideas? If so, let's plug that into our risk assessment model. I'd like to see some good news coming out of the financial industry for a change.
Q: Are You Printing Money? Bernanke: Not Literally
Don't get me wrong guys, I'm prepared for whatever the future brings, whether it be paradise or armageddon (I just think the outcome is most likely going to be somewhere in between)
So enjoy your weekend shopping sprees and dinners out at Ruby Tuesdays. Those days are finitely numbered for sure. If you dont believe that, then I envy you greatly as I wish I was as comfortable with my head in the sand as you seem to be.....ignorance truly is bliss!
the y2k thing didn't get me, the 9/11 thing didn't get me, none of the hurricanes or fires or floods got me, the Great Recession didn't get me, the flash crash didn't get me, the Great Freeze didn't get me, if the 2012 thing or the "collapse" or the 2024 thing don't get me, I'll try to prepare for the 2060 thing.
<< <i>Let me be clear- I use the term speculation in a specific way, in agreement with the generally accepted use of the term among financial professionals. So yes you can claim I've drunk the Kool Aid.
A speculative investment is one in which any gains come solely from a sales price higher than the purchase price. As mentioned earlier, this can come from either an increase in the "value" of the investment or a decrease in the value of the unit of account, such as dollars. This sort of investment relies on someone willing to pay more at some future date for the item in question than the original owner did. This future buyer is sometimes referred to as the "greater fool".
Any asset that doesn't compound or pay a coupon or dividend or provide an income stream is by this definition speculative. All commodities and collectibles fit this category.
In comparison, assets that provide an income stream, such as real estate, a bond or a dividend paying stock, have a value that can be calculated as the net present value of all future such cash flows, divided by the discount or risk-free interest rate. Assets can sometimes be found to be selling for less than this NPV, and as such can be considered undervalued. The return on this asset requires no greater fool to purchase it at some later date for a price different from that of the original investor- it is the value of the cash flows that matter. Over long periods of time these can grow well beyond the original purchase price. Judging the reliability or quantity of those cash flows is speculative in the sense that one is attempting to predict an unknowable, but it's more a form of risk assessment than speculation- it can be modeled based on a number of usually historical inputs. Judging whether or not some unknown buyer will pay more than you did for an item is purely speculative, and has a more tenuous relationship to past trends. >>
Your entire premise is wrong. You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow. Have you ever owned bonds that have collapsed or income property that lost $$ or dividend paying stocks in corporations that have gone belly up?
"Poets are the unacknowledged legislators of the world." PBShelley
For comparison, my IRA is much older than that, and I haven't added a dime since early 2008.
2008-2011, from high to low was a 32% drop. from low to high is 100% gain as I type. That's a 36% cumulative gain from 2008-2010. Neither portfolio was invested in commodities, the closest I got were / are a couple of oil supermajors.
So I don't know what to tell you, except that some folks who remained fully invested and committed through the recent unpleasantness are doing quite well.
( Don't ask me about coins. That's where I lose my money. ) >>
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
BTW, I dang sure ain't no pro but I'm a seasoned looser in 401K smackdowns of 2002 & 2008.
Both times my 401K was cut in half more or less. I doubt I have as much as I put in myself since 1993.
After just doing prep-round 1 with turbotax this year, I'm as protectionary and pissed as possible with the current gubbment situation as ever....especially after spending IVF money twice in 2010.
You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow.
"Speculative" and "risky" are separate concepts. Since you've called on my personal opinion here, I'd venture that all the examples you gave are "risky" to some degree or other. Whether they are "speculative" or not would have to be determined on a case-by-case basis, and centers around whether a specific assumption about the future is being made, as opposed to considering a range of possible and reasonable outcomes.
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
If you think I have only 3 yrs mkt experience, you didn't read what you quoted very carefully.
Isn't it obvious? someone with a balanced portfolio, living a life of meaningful work, with great friends and family and fun, as a citizen of a wonderful community, must be on drugs, or crazy!
Clearly, the sane and sober choice is to be living alone in a cabin full of camping food in the middle of nowhere, spending time sitting on top of a pile of gold and silver, cleaning and loading the guns and adjusting the fit of the tinfoil hat
<< <i>I just want some of what Baley is smoking... >>
Why must Baley be smoking something? Because he doesnt believe the sky is falling? Because his outlook is different from yours? >>
There are germs of truth for sure in ranshdow's and Baley's posts. FWIW, I enjoy both their POV's even if I'm often on the other side of them.
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Maybe its just me...but it seems the majority here are under the belief that the "end" is near. I guess it depends on what ones definition of "end" is. I think we can all agree things look bad, but I just dont understand why people feel that anyone who still has flat currency in a savings account, or doesnt diversify thier portfolios, is viewed as naive, or living with your head in the sand. If I invest every cent I had into cotton and soybeans, I wouldnt come on here and tell people they are living with blinders on if you dont do the same.
All good Bob! Look what the cat dragged in from the Sportscard forum.................Good to see you diversifying
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
If I invest every cent I had into cotton and soybeans, I wouldnt come on here and tell people they are living with blinders on if you dont do the same.
No, of course not, that would be silly! You would go to the cotton and soybean forums to say that
<< <i>If I invest every cent I had into cotton and soybeans, I wouldnt come on here and tell people they are living with blinders on if you dont do the same.
No, of course not, that would be silly! You would go to the cotton and soybean forums to say that >>
<< <i>RR, jmski52... and that's what makes a market.
You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow.
"Speculative" and "risky" are separate concepts. Since you've called on my personal opinion here, I'd venture that all the examples you gave are "risky" to some degree or other. Whether they are "speculative" or not would have to be determined on a case-by-case basis, and centers around whether a specific assumption about the future is being made, as opposed to considering a range of possible and reasonable outcomes.
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
If you think I have only 3 yrs mkt experience, you didn't read what you quoted very carefully. >>
You have a mistaken concept about risk. For example, risk can be thinking you should stash your cash in a CD paying say 4% when inflation is 8%. Another example might be holding and saving in US $$ when the value of dollars are collapsing.
"Poets are the unacknowledged legislators of the world." PBShelley
Assessing the risk of a bond yielding 4% in an 8% inflationary environment to be acceptable - is a mistake, not a speculation. >>
Let me tweak that. Say you buy a 10 year government bond yielding 3.75 percent when inflation is running at 6% or higher, like for instance in our current situation. Whoever is buy bonds may think they're not risking anything, but when the bond market collapses, and there are many on board that notion, then those buying that "risk free" bond haven't realized the risk they've taken. Ditto for CDs these days.
"Poets are the unacknowledged legislators of the world." PBShelley
percyb, your comments got me started up again on the issue of risk and speculation, and those should be discussed further. Risk is definable in a quantitative way. Speculation is acting upon your best guess, and that's what I do all the time. Risk doesn't equate to recklessness. Risk doesn't mean "to wager".
When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. I've simply had enough of the lies they use simply to generate commissions and fees. They are not as smart as they want you to believe.
Smartest guys in the room. Remember that? Same thing.
My contention is that joe 6 pack isn't that dumb, and that the risk managers who went to Ivy League schools to learn option pricing models and arbitrage in order to get jobs on wall street are the ones who need much more scrutiny. The truth needs to get out about who is doing what to whom, and why.
Q: Are You Printing Money? Bernanke: Not Literally
The entire Ponzi financial system has had the risk permanently distorted by manufactured low interest rates over the past 15 years. This is what those $200 TRILL in otc interest swaps owned by our top 5 banks has done....it's totally miscategorized the risks in the markets. And because of that investors have taken on risks based on purely imaginery numbers.
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
The entire Ponzi financial system has had the risk permanently distorted by manufactured low interest rates over the past 15 years. This is what those $200 TRILL in otc interest swaps owned by our top 5 banks has done....it's totally miscategorized the risks in the markets. And because of that investors have taken on risks based on purely imaginery numbers
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
So - we have uprisings all over the Middle East and the Suez Canal suddenly becomes questionable. And then just as suddenly - everything Nassim Taleb has been saying about the fragility of our financial house of cards becomes quite relevant.
Red Flags all over the place. This isn't doom & gloom, this is reality. Turn on the TV. Then turn it back off. As Baley says, there's no point in fixating on problems all day long. But keep in mind what's real and what's smoke. Smoke is what your financial broker at Merrill Lynch (wait, they aren't around anymore are they?) never mind Merrill Lynch.
Smoke is what your financial broker at Prudential, or Wells Fargo, or Citibank, or BoA is blowing up your rear when he tells you with a straight face that you should be diversified in full commission stocks, bonds, munis, and reits and in addition "have you spoken to one of our financial planners so that you don't make any mistakes with all that retirement money?" pfffft.
There may come a day for stock ownership, if they ever wring the corruption out of the exchanges and put hedge funds on an equal footing with everyone else. There may come a day for bonds, after the government and the banks decide to get honest about debt derivatives. There might be a time for income-generating real estate trusts when and if the market returns to normal, but that's a LONG way off. Munis might be a possibility if the cities refuse to overspend and hold their ground financially against government unions. Until those days arrive, don't believe for a minute that precious metals are risky assets - that's a misapplication of the concept from the very start, designed by the financial industry to keep you out of metals and in their clutches. And that's a fact.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>The entire Ponzi financial system has had the risk permanently distorted by manufactured low interest rates over the past 15 years. This is what those $200 TRILL in otc interest swaps owned by our top 5 banks has done....it's totally miscategorized the risks in the markets. And because of that investors have taken on risks based on purely imaginery numbers
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
So - we have uprisings all over the Middle East and the Suez Canal suddenly becomes questionable. And then just as suddenly - everything Nassim Taleb has been saying about the fragility of our financial house of cards becomes quite relevant.
Red Flags all over the place. This isn't doom & gloom, this is reality. Turn on the TV. Then turn it back off. As Baley says, there's no point in fixating on problems all day long. But keep in mind what's real and what's smoke. Smoke is what your financial broker at Merrill Lynch (wait, they aren't around anymore are they?) never mind Merrill Lynch.
Smoke is what your financial broker at Prudential, or Wells Fargo, or Citibank, or BoA is blowing up your rear when he tells you with a straight face that you should be diversified in full commission stocks, bonds, munis, and reits and in addition "have you spoken to one of our financial planners so that you don't make any mistakes with all that retirement money?" pfffft.
There may come a day for stock ownership, if they ever wring the corruption out of the exchanges and put hedge funds on an equal footing with everyone else. There may come a day for bonds, after the government and the banks decide to get honest about debt derivatives. There might be a time for income-generating real estate trusts when and if the market returns to normal, but that's a LONG way off. Munis might be a possibility if the cities refuse to overspend and hold their ground financially against government unions. Until those days arrive, don't believe for a minute that precious metals are risky assets - that's a misapplication of the concept from the very start, designed by the financial industry to keep you out of metals and in their clutches. And that's a fact. >>
Amen. Now how in the world can anyone dispute that. I see this thread has been totally dormant since the post above. Rational thought, how refreshing.
I'm with you all the way when you noted, "When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. "
"Poets are the unacknowledged legislators of the world." PBShelley
I'm with you all the way when you noted, "When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. " >>
Don't fool yourself into thinking all that money that was lost on paper derivatives went down the drain. It ended up in somebody's pocket. Why not make it your pocket next time around. Wall Street managed the risk quite well and profited heavily, while those asleep at the wheel lost fortunes. Any money lost in paper PMs will have been won by someone else. My whole point is learn to be on the winning side and you can make a bundle trading liquid PMs. The alternative is to be lazy and only stack PMs. Those of us doing both successfully are finding greater rewards with the paper. Sure it'll all come tumbling down as all derivatives eventually do. But somebody's gonna make a lot of money until then. Why not be one of them. Just don't be asleep at the wheel as were a lot of investors in 2008.
Derivatives can be risk managed and risk adjusted for optimized yield. Anyone making money with them knows that to be a fact. It just takes more work than sitting back and watching your stack grow.
Gold & Silver believers don't have to choose sides between paper and physical. They do have to realize the value, and risk, in each and manage accordingly. I'm in both markets and I can assure you that, in a potential serious drop in PM prices, the paper will turn into cash a lot quicker than the stacks will. I don't prefer paper over physical, but I do see the current money making opportunities with the right paper.
Here's a six moth chart for silver spot. Other than a slight increase in premiums, physical silver has followed this trend. Up about 175%:
Here's a six month chart for my favorite silver derivative, AGQ. Up about 292%:
Notice that AGQ movement mirrors silver spot movement, but at a higher rate (percentage point increases). If you really believe that silver will continue its climb for the long term, why aren't you holding AGQ as well as physical?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
derryb, I don't think you're delusional and I wish you all the nimbleness and luck in the world. Count me as one of the lazy ones at this juncture. You can win at paper or lose at physical, no doubt.
My concern would be the fact - that now the frauds have been exposed in spades, and why anyone would play "chicken" with their money when they already know that the deck isn't just stacked, but heavily stacked against them - that truly bewilders me.
I give a black swan event that collapses the dollar along with the world monetary system a 5% probability. I really don't think that the financial movers and shakers in the world are very competant, nor are most of the political top dogs.
I anticipate and fully expect that the nominal value of my precious metal holdings could easily be cut by half overnight. That's the mental adjustment I'm making. At the same time, I expect that the stock market will concurrently take a spill and lose as much as 75% of it's nominal value during the same occurance that trashes my metal holdings. I suspect that both phenomena will happen with maybe a 20% probability. It's all relative - I don't know anyone who will get away unscathed.
The only other possible scenario is for the stock market to increase another 50% in nominal value while the precious metals double again as retirement dollars get further wiped out. I give that a 75% chance at this point.
It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. The rules got demolished when the decision was made to give a $trillion to the bankers, and the rules got demolished when they bailed out everyone and his brother who should've been jailed instead. The rules don't apply to Tim Geithner or Chris Dodd. They don't apply to Hilary Clinton or Sandy Burger. The rules are non-existant for Alan Greenspan and Jamie Dimon and Dick Fuld. They don't apply for Rahm Immanuel or Dennis Hastert or Tom Daschel.
The rules no longer apply, especially in the markets. You just don't know it yet. Why on Earth would you still think that they do, or that you would ever see it coming?
Call me "ultra-conservative".
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>derryb, I don't think you're delusional and I wish you all the nimbleness and luck in the world. Count me as one of the lazy ones at this juncture. You can win at paper or lose at physical, no doubt.
My concern would be the fact - that now the frauds have been exposed in spades, and why anyone would play "chicken" with their money when they already know that the deck isn't just stacked, but heavily stacked against them - that truly bewilders me.
I give a black swan event that collapses the dollar along with the world monetary system a 5% probability. I really don't think that the financial movers and shakers in the world are very competant, nor are most of the political top dogs.
I anticipate and fully expect that the nominal value of my precious metal holdings could easily be cut by half overnight. That's the mental adjustment I'm making. At the same time, I expect that the stock market will concurrently take a spill and lose as much as 75% of it's nominal value during the same occurance that trashes my metal holdings. I suspect that both phenomena will happen with maybe a 20% probability. It's all relative - I don't know anyone who will get away unscathed.
The only other possible scenario is for the stock market to increase another 50% in nominal value while the precious metals double again as retirement dollars get further wiped out. I give that a 75% chance at this point.
It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. The rules got demolished when the decision was made to give a $trillion to the bankers, and the rules got demolished when they bailed out everyone and his brother who should've been jailed instead. The rules don't apply to Tim Geithner or Chris Dodd. They don't apply to Hilary Clinton or Sandy Burger. The rules are non-existant for Alan Greenspan and Jamie Dimon and Dick Fuld. They don't apply for Rahm Immanuel or Dennis Hastert or Tom Daschel.
The rules no longer apply, especially in the markets. You just don't know it yet. Why on Earth would you still think that they do, or that you would ever see it coming?
Call me "ultra-conservative". >>
Again, the point was missed - not all items traded on the stock market follow the direction of the stock market. AGQ will do what silver does, not what the DJIA does. When the DJIA crashes and sends silver up 200%, guess what.....AGQ goes UP almost 400%. For example, today the DJIA was down .72%, silver was up about 1% and AGQ was up about 1.8%.
AGQ is not a paper claim to any metal. It's a bet that silver will go up. As far as paper that is supposedly backed by metal, I could care less. I have my physical where I want it. Why not profit from paper metal as long as there are profits to be made. Kitco pool account is a prime example. Easy in, easy out, no storage and low spreads. This is the best play for the laziest of PM investors.
Here's the bottom line: The investment world is one sided and us little guys are on the wrong side. I started out believing in only physical PMs because, face it, when they have completely wiped everyone else out, my PMs will be the thing to have. The other side has been taking our money for years. Why not learn how they do it, watch their moves, ride their coat tails and make a bucket load of money AND watch your physical holdings grow.
<< <i>It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. >>
Well said and I agree, but it also concerns me that Washington may decide to put a 75% sales tax on all the metal I hope to sell one day, or worse yet, demand I turn it over to them. It's all about odds of what can happen, why not be prepared for either worse case scenario.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
When the DJIA crashes and sends silver up 200%, guess what.....AGQ goes UP almost 400%.
It's true that silver was up today while the Dow was down, and that suits me fine. But remember, 2008 was not an anomaly - that wasn't the first time that silver has crashed when the stock market did. In terms of probability, I think it is more likely for silver to fall when the stock market falls on bad news because of the liquidity issue. I also still think that silver and gold will recover much faster and more completely the next time it happens.
AGQ is not a paper claim to any metal. It's a bet that silver will go up.
I understand. It's really a leveraged derivative in essence. As such, it will be more volatile in both directions. If the rest of the portfolio is boring, something like this is great, and I understand the reasoning behind it. I prefer at this time to be farther removed from the markets.
it also concerns me that Washington may decide to put a 75% sales tax on all the metal I hope to sell one day
I wouldn't put it past them. The question would be what else has happened, and what are your options?
worse yet, demand I turn it over to them. It's all about odds of what can happen, why not be prepared for either worse case scenario
Different perspective here. I'm not crazy about leaving paper trails all over the place in the event that the worst case starts heading our way. Some, sure - but not a bunch.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>It's true that silver was up today while the Dow was down, and that suits me fine. But remember, 2008 was not an anomaly - that wasn't the first time that silver has crashed when the stock market did. In terms of probability, I think it is more likely for silver to fall when the stock market falls on bad news because of the liquidity issue. I also still think that silver and gold will recover much faster and more completely the next time it happens. >>
PMs dropped in 2008 when all investors panicked and put everything into cash until they could figure out which investment direction to go. The returning rise in PMs indicated this to be one of their choices. In the next crash, with the dollar in the tank as it is, I do not anticipate many investors, even temporarily, running to the safe haven of cash. I see them immediately going to the assets that are at that moment providing the best returns.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
There are exceptions to everything, including civility.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's "uncivil" to disagree when a blatant falsehood is stated as a fact?
the remainder of your statement is probably accurate, by the way, if instead of "all" and "everything", you simply say "some" and "more"
I like the thread, sorry if my comments, before I had my coffee, seemed rude,
just had a rough week at work explaining to people who are supposed to be scientists that we must be precise and accurate in our statements of the facts
Please consider anything I post to be my opinion unless otherwise stated. I assumed that was standard operating procedure on any forum. You know what they say about opinions, everybody has one.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
just had a rough week at work explaining to people who are supposed to be scientists that we must be precise and accurate in our statements of the facts
Both you guys are good posters and I would say that Baley, while you are technically correct, that is not the point. I get good thoughts as a result of both your postings. It's funny that you mentioned your rough week at work. Not really funny, but interesting in a way.
I just had the experience of being "put in my place" by a very shall we say detailed R&D guy this week. Let me emphasize that I can make my own way in this world without this guy, but I'm not sure he could do my particular job successfully if the roles were reversed.
One thing I can say about being a scientist, for the most part you can be correct about something without being punished for it. Well, maybe not always.
Say, have you read "Atlas Shrugged"? You oughta read it, if you haven't.
I know this post is disjointed, but I can live with that. Peace, Bro's.
Q: Are You Printing Money? Bernanke: Not Literally
Sure, have read both Atlas Shrugged and The Fountainhead, both excellent and entertaining books. Also fun to read these 2+ year old opinions with the benefit of hindsight
" Am I reading the tea leaves correctly? Is the economy now collapsing and the masses aren't yet completely convinced? Hard Assets--tradable items and PMs should just keep escalating now, no? >>
"
Throw away those leaves and are you sure they were tea?
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i>Oh man. The world economy sure did collapse. The skyrocketing gold and silver prices confirm it!!! >>
Well, keep stacking them stock certificates. Pick up some Yen as well, they're on sale.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Oh man. The world economy sure did collapse. The skyrocketing gold and silver prices confirm it!!! >>
Well, keep stacking them stock certificates. Pick up some Yen as well, they're on sale. >>
Not to "rain on your parade," but I've been doing both..stocks & PM's, and they have done very well over the last 50 years. I see nothing in the future to change that. Diversify is the name of the game and leaving all your eggs in your PM basket is asking for trouble.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i>To those who understand no explanation is needed, to those who do not understand, no explanation would suffice. >>
This.
Internationalization only works if everyone involved plays by the same rules. Otherwise, one nation will capitalize on another nation's labor, taxation and regulatory weakness at the expense of its own labor force. The European Union is a good example of what happens when you share a common currency and are governed by different rules. Without a level playing field there will always be inequalities on the world economic stage and one (and often both) group of producers and/or consumers will suffer. Internationalization has been and will continue be the cause world-wide economic misery.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Internationalization has been and will continue be the cause world-wide economic misery
Have we not been doing this for hundreds of years? But even more recently, if not for "exploiting" the Chinese for their labor, there would be 1 billion people not enjoying the comforts of modern society.
Without a level playing field there will always be inequalities on the world economic stage
Are you suggesting a global system of communism? I mean communism in its purest form, not the corrupt form we are accustomed to?
Inequality promotes innovation, invention and opportunity. Where is the incentive if everyone is treated equally? One only needs to look at labor unions to prove both points.
<< <i>Internationalization has been and will continue be the cause world-wide economic misery >>
<< <i>Have we not been doing this for hundreds of years? But even more recently, if not for "exploiting" the Chinese for their labor, there would be 1 billion people not enjoying the comforts of modern society. >>
If you kept my statement in context you would have seen the "at the expense of its own labor force" part.
<< <i>Without a level playing field there will always be inequalities on the world economic stage. >>
<< <i>Are you suggesting a global system of communism? I mean communism in its purest form, not the corrupt form we are accustomed to? Inequality promotes innovation, invention and opportunity. Where is the incentive if everyone is treated equally? One only needs to look at labor unions to prove both points. >>
Inequality promotes suffering, unemployment and a need for dependence on the state. European Union is showing us that a multination set of economic rules doesn't work. Best to abandon the global production effort and just produce goods nearest their resources (material and labor) and go back to good ole' importing what can't be produced and exporting the excess of local production. That is what worked best and kept Americans employed for hundreds of years.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I don't believe our labor force has suffered. It is the most productive and educated in the world. Just because we don't make plastic toys doesn't mean we have failed.
Europe's problems are not at all due "internationalization", or economic differences but cultural difference.
<< <i>I don't believe our labor force has suffered. It is the most productive and educated in the world. Just because we don't make plastic toys doesn't mean we have failed.
Europe's problems are not at all due "internationalization", or economic differences but cultural difference. >>
The bottom half of our labor has, and is, suffering. Half the population has a IQ under 100 and most of that half use to be in the labor force and earning livable wages. At least for the 200 years that the U.S. had an agricultural and then industrial based economy.
Now we have a tech based economy, robots, mechanization, and off-sourcing of menial jobs that use to pay. The gap between the 20% in the top quintile that control 99% of the wealth the the bottom 80% grows wider each day as the rich get richer, the poor (now 40% of the county) get poorer, and the middle class gets squeezed.
<< <i>Europe's problems are not at all due "internationalization", or economic differences but cultural difference. >>
Europe flourished because of cultural differences prior to the Unionization of Europe.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Comments
A speculative investment is one in which any gains come solely from a sales price higher than the purchase price. As mentioned earlier, this can come from either an increase in the "value" of the investment or a decrease in the value of the unit of account, such as dollars. This sort of investment relies on someone willing to pay more at some future date for the item in question than the original owner did. This future buyer is sometimes referred to as the "greater fool".
Any asset that doesn't compound or pay a coupon or dividend or provide an income stream is by this definition speculative. All commodities and collectibles fit this category.
In comparison, assets that provide an income stream, such as real estate, a bond or a dividend paying stock, have a value that can be calculated as the net present value of all future such cash flows, divided by the discount or risk-free interest rate. Assets can sometimes be found to be selling for less than this NPV, and as such can be considered undervalued. The return on this asset requires no greater fool to purchase it at some later date for a price different from that of the original investor- it is the value of the cash flows that matter. Over long periods of time these can grow well beyond the original purchase price. Judging the reliability or quantity of those cash flows is speculative in the sense that one is attempting to predict an unknowable, but it's more a form of risk assessment than speculation- it can be modeled based on a number of usually historical inputs. Judging whether or not some unknown buyer will pay more than you did for an item is purely speculative, and has a more tenuous relationship to past trends.
I might reword that to say that any asset that doesn't have some base tangible value isn't really an asset. Therefore municipal and govt bonds of entities that are essentially insolvent are hardly investments. One could expand that to say that any bond or note based in fiat is not a true income producing asset either....just a Ponzi scheme catering to the next greater fool. Most companies or businesses these days might not be classified as "income producers" or having asset bases. Who knows what their true financial condition is when the books are so cooked these days with various interpretations and employment of FASB rules. Stocks, bonds, currencies are all fiat-based schemes as well. Companies or businesses I like with a tangible base would be miners with proven/probable reserves, food growers and producers, energy and oil producers, water/utility companies, etc.
Considering that a distorted view of money, assets, and income have been taught at our universities over the past 50 years, it's no surprise that the same view is widespread today. Easterners that came to study in the US took that same twisted logic back home with them, only to infect their own societies.
roadrunner
I knew it would happen.
(I just think the outcome is most likely going to be somewhere in between)
Liberty: Parent of Science & Industry
the y2k thing didn't get me, the 9/11 thing didn't get me, none of the hurricanes or fires or floods got me, the Great Recession didn't get me, the flash crash didn't get me, the Great Freeze didn't get me, if the 2012 thing or the "collapse" or the 2024 thing don't get me, I'll try to prepare for the 2060 thing.
Liberty: Parent of Science & Industry
<< <i>Let me be clear- I use the term speculation in a specific way, in agreement with the generally accepted use of the term among financial professionals. So yes you can claim I've drunk the Kool Aid.
A speculative investment is one in which any gains come solely from a sales price higher than the purchase price. As mentioned earlier, this can come from either an increase in the "value" of the investment or a decrease in the value of the unit of account, such as dollars. This sort of investment relies on someone willing to pay more at some future date for the item in question than the original owner did. This future buyer is sometimes referred to as the "greater fool".
Any asset that doesn't compound or pay a coupon or dividend or provide an income stream is by this definition speculative. All commodities and collectibles fit this category.
In comparison, assets that provide an income stream, such as real estate, a bond or a dividend paying stock, have a value that can be calculated as the net present value of all future such cash flows, divided by the discount or risk-free interest rate. Assets can sometimes be found to be selling for less than this NPV, and as such can be considered undervalued. The return on this asset requires no greater fool to purchase it at some later date for a price different from that of the original investor- it is the value of the cash flows that matter. Over long periods of time these can grow well beyond the original purchase price. Judging the reliability or quantity of those cash flows is speculative in the sense that one is attempting to predict an unknowable, but it's more a form of risk assessment than speculation- it can be modeled based on a number of usually historical inputs. Judging whether or not some unknown buyer will pay more than you did for an item is purely speculative, and has a more tenuous relationship to past trends. >>
Your entire premise is wrong. You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow.
Have you ever owned bonds that have collapsed or income property that lost $$ or dividend paying stocks in corporations that have gone belly up?
<< <i>My 401K just FINALLY got back to my pre 2008 crash balance. Almost 3 years in idle.
That is unfortunate, especially if you are near retirement soon.
This is TMI but my 401(k) is less than three years old, it was started in the middle of 2008.
2008 return = -25%
2009 return = >40%
2010 return = 15%
all net of contributions. I can't complain.
For comparison, my IRA is much older than that, and I haven't added a dime since early 2008.
2008-2011, from high to low was a 32% drop. from low to high is 100% gain as I type. That's a 36% cumulative gain from 2008-2010. Neither portfolio was invested in commodities, the closest I got were / are a couple of oil supermajors.
So I don't know what to tell you, except that some folks who remained fully invested and committed through the recent unpleasantness are doing quite well.
( Don't ask me about coins. That's where I lose my money.
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
BTW, I dang sure ain't no pro but I'm a seasoned looser in 401K smackdowns of 2002 & 2008.
Both times my 401K was cut in half more or less. I doubt I have as much as I put in myself since 1993.
You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow.
"Speculative" and "risky" are separate concepts. Since you've called on my personal opinion here, I'd venture that all the examples you gave are "risky" to some degree or other. Whether they are "speculative" or not would have to be determined on a case-by-case basis, and centers around whether a specific assumption about the future is being made, as opposed to considering a range of possible and reasonable outcomes.
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
If you think I have only 3 yrs mkt experience, you didn't read what you quoted very carefully.
<< <i>I just want some of what Baley is smoking...
<< <i>I just want some of what Baley is smoking...
Why must Baley be smoking something? Because he doesnt believe the sky is falling? Because his outlook is different from yours?
MY GOLD TYPE SET https://pcgs.com/setregistry/type-sets/complete-type-sets/gold-type-set-12-piece-circulation-strikes-1839-1933/publishedset/321940
Clearly, the sane and sober choice is to be living alone in a cabin full of camping food in the middle of nowhere, spending time sitting on top of a pile of gold and silver, cleaning and loading the guns and adjusting the fit of the tinfoil hat
Liberty: Parent of Science & Industry
<< <i>
<< <i>I just want some of what Baley is smoking...
Why must Baley be smoking something? Because he doesnt believe the sky is falling? Because his outlook is different from yours? >>
There are germs of truth for sure in ranshdow's and Baley's posts. FWIW, I enjoy both their POV's even if I'm often on the other side of them.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I think we can all agree things look bad, but I just dont understand why people feel that anyone who still has flat currency in a savings account, or doesnt diversify thier portfolios, is viewed as naive, or living with your head in the sand.
If I invest every cent I had into cotton and soybeans, I wouldnt come on here and tell people they are living with blinders on if you dont do the same.
Just venting.
Hi Mark! how are ya?
MY GOLD TYPE SET https://pcgs.com/setregistry/type-sets/complete-type-sets/gold-type-set-12-piece-circulation-strikes-1839-1933/publishedset/321940
<< <i>Hi Mark! how are ya? >>
All good Bob! Look what the cat dragged in from the Sportscard forum.................Good to see you diversifying
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
No, of course not, that would be silly! You would go to the cotton and soybean forums to say that
Liberty: Parent of Science & Industry
<< <i>If I invest every cent I had into cotton and soybeans, I wouldnt come on here and tell people they are living with blinders on if you dont do the same.
No, of course not, that would be silly! You would go to the cotton and soybean forums to say that
Well played sir....well played.
MY GOLD TYPE SET https://pcgs.com/setregistry/type-sets/complete-type-sets/gold-type-set-12-piece-circulation-strikes-1839-1933/publishedset/321940
<< <i>RR, jmski52... and that's what makes a market.
You think bonds and dividend paying stocks or rental properties aren't speculative just because the generate income? Wow.
"Speculative" and "risky" are separate concepts. Since you've called on my personal opinion here, I'd venture that all the examples you gave are "risky" to some degree or other. Whether they are "speculative" or not would have to be determined on a case-by-case basis, and centers around whether a specific assumption about the future is being made, as opposed to considering a range of possible and reasonable outcomes.
No body with 3 years experience in stock market should even be commenting with the seasoned pros here
If you think I have only 3 yrs mkt experience, you didn't read what you quoted very carefully. >>
You have a mistaken concept about risk. For example, risk can be thinking you should stash your cash in a CD paying say 4% when inflation is 8%. Another example might be holding and saving in US $$ when the value of dollars are collapsing.
Speculation is based on your own risk assessment.
Assessing the risk of a bond yielding 4% in an 8% inflationary environment to be acceptable - is a mistake, not a speculation.
I knew it would happen.
<< <i>Risk can be measured.
Speculation is based on your own risk assessment.
Assessing the risk of a bond yielding 4% in an 8% inflationary environment to be acceptable - is a mistake, not a speculation. >>
Let me tweak that. Say you buy a 10 year government bond yielding 3.75 percent when inflation is running at 6% or higher, like for instance in our current situation.
Whoever is buy bonds may think they're not risking anything, but when the bond market collapses, and there are many on board that notion, then those buying that "risk free" bond haven't realized the risk they've taken. Ditto for CDs these days.
When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. I've simply had enough of the lies they use simply to generate commissions and fees. They are not as smart as they want you to believe.
Smartest guys in the room. Remember that? Same thing.
My contention is that joe 6 pack isn't that dumb, and that the risk managers who went to Ivy League schools to learn option pricing models and arbitrage in order to get jobs on wall street are the ones who need much more scrutiny. The truth needs to get out about who is doing what to whom, and why.
I knew it would happen.
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
roadrunner
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
So - we have uprisings all over the Middle East and the Suez Canal suddenly becomes questionable. And then just as suddenly - everything Nassim Taleb has been saying about the fragility of our financial house of cards becomes quite relevant.
Red Flags all over the place. This isn't doom & gloom, this is reality. Turn on the TV. Then turn it back off. As Baley says, there's no point in fixating on problems all day long. But keep in mind what's real and what's smoke. Smoke is what your financial broker at Merrill Lynch (wait, they aren't around anymore are they?) never mind Merrill Lynch.
Smoke is what your financial broker at Prudential, or Wells Fargo, or Citibank, or BoA is blowing up your rear when he tells you with a straight face that you should be diversified in full commission stocks, bonds, munis, and reits and in addition "have you spoken to one of our financial planners so that you don't make any mistakes with all that retirement money?" pfffft.
There may come a day for stock ownership, if they ever wring the corruption out of the exchanges and put hedge funds on an equal footing with everyone else. There may come a day for bonds, after the government and the banks decide to get honest about debt derivatives. There might be a time for income-generating real estate trusts when and if the market returns to normal, but that's a LONG way off. Munis might be a possibility if the cities refuse to overspend and hold their ground financially against government unions. Until those days arrive, don't believe for a minute that precious metals are risky assets - that's a misapplication of the concept from the very start, designed by the financial industry to keep you out of metals and in their clutches. And that's a fact.
I knew it would happen.
<< <i>The entire Ponzi financial system has had the risk permanently distorted by manufactured low interest rates over the past 15 years. This is what those $200 TRILL in otc interest swaps owned by our top 5 banks has done....it's totally miscategorized the risks in the markets. And because of that investors have taken on risks based on purely imaginery numbers
Until the US bank's $200 TRILL in IR Swaps gets negated, as well as what's owned by the rest of the world's banks and funds (potentially another $700 TRILL), then any determination of risk is quite meaningless. Risk cannot adequately be defined today when so many entities are not coming clean with what they hold. And in that environment it's no wonder that PM's and commodities have moved towards the top of the investment chain displacing questionable paper in the process.
So - we have uprisings all over the Middle East and the Suez Canal suddenly becomes questionable. And then just as suddenly - everything Nassim Taleb has been saying about the fragility of our financial house of cards becomes quite relevant.
Red Flags all over the place. This isn't doom & gloom, this is reality. Turn on the TV. Then turn it back off. As Baley says, there's no point in fixating on problems all day long. But keep in mind what's real and what's smoke. Smoke is what your financial broker at Merrill Lynch (wait, they aren't around anymore are they?) never mind Merrill Lynch.
Smoke is what your financial broker at Prudential, or Wells Fargo, or Citibank, or BoA is blowing up your rear when he tells you with a straight face that you should be diversified in full commission stocks, bonds, munis, and reits and in addition "have you spoken to one of our financial planners so that you don't make any mistakes with all that retirement money?" pfffft.
There may come a day for stock ownership, if they ever wring the corruption out of the exchanges and put hedge funds on an equal footing with everyone else. There may come a day for bonds, after the government and the banks decide to get honest about debt derivatives. There might be a time for income-generating real estate trusts when and if the market returns to normal, but that's a LONG way off. Munis might be a possibility if the cities refuse to overspend and hold their ground financially against government unions. Until those days arrive, don't believe for a minute that precious metals are risky assets - that's a misapplication of the concept from the very start, designed by the financial industry to keep you out of metals and in their clutches. And that's a fact. >>
Amen. Now how in the world can anyone dispute that. I see this thread has been totally dormant since the post above. Rational thought, how refreshing.
bumanchu
I'm with you all the way when you noted, "When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. "
nor as good as we may hope for.
There will always be appropriates excuses why charts do not
perform as they indicate they should in the future.
Expect the unexpected, to derail, deter, reverse or otherwise savage
what may seem a prudent, modest and indeed appropriate economic plan.
Mass emotionalism, panic, fear, margin calls, limited reserves and boundless
enthusiasm are all the spices in the Devils pepper pot. Some win big, many lose
big and what remains is a mass of confused, disheartened , angry and distrustful
masses of people who thought that they were seasoned investors like the big boys
who are plugged in as tight as an infant to a nipple.
Camelot
<< <i>jmski,
I'm with you all the way when you noted, "When people talk about risk management and act as if ownership of paper assets can be risk-adjusted and optimized for yield, they are selling the same crap that got us all into this hot water in the first place. First-order derivatives become 2nd-order derivatives and then they become snake oil. " >>
Don't fool yourself into thinking all that money that was lost on paper derivatives went down the drain. It ended up in somebody's pocket. Why not make it your pocket next time around. Wall Street managed the risk quite well and profited heavily, while those asleep at the wheel lost fortunes. Any money lost in paper PMs will have been won by someone else. My whole point is learn to be on the winning side and you can make a bundle trading liquid PMs. The alternative is to be lazy and only stack PMs. Those of us doing both successfully are finding greater rewards with the paper. Sure it'll all come tumbling down as all derivatives eventually do. But somebody's gonna make a lot of money until then. Why not be one of them. Just don't be asleep at the wheel as were a lot of investors in 2008.
Derivatives can be risk managed and risk adjusted for optimized yield. Anyone making money with them knows that to be a fact. It just takes more work than sitting back and watching your stack grow.
Gold & Silver believers don't have to choose sides between paper and physical. They do have to realize the value, and risk, in each and manage accordingly. I'm in both markets and I can assure you that, in a potential serious drop in PM prices, the paper will turn into cash a lot quicker than the stacks will. I don't prefer paper over physical, but I do see the current money making opportunities with the right paper.
Here's a six moth chart for silver spot. Other than a slight increase in premiums, physical silver has followed this trend. Up about 175%:
Here's a six month chart for my favorite silver derivative, AGQ. Up about 292%:
Notice that AGQ movement mirrors silver spot movement, but at a higher rate (percentage point increases). If you really believe that silver will continue its climb for the long term, why aren't you holding AGQ as well as physical?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My concern would be the fact - that now the frauds have been exposed in spades, and why anyone would play "chicken" with their money when they already know that the deck isn't just stacked, but heavily stacked against them - that truly bewilders me.
I give a black swan event that collapses the dollar along with the world monetary system a 5% probability. I really don't think that the financial movers and shakers in the world are very competant, nor are most of the political top dogs.
I anticipate and fully expect that the nominal value of my precious metal holdings could easily be cut by half overnight. That's the mental adjustment I'm making. At the same time, I expect that the stock market will concurrently take a spill and lose as much as 75% of it's nominal value during the same occurance that trashes my metal holdings. I suspect that both phenomena will happen with maybe a 20% probability. It's all relative - I don't know anyone who will get away unscathed.
The only other possible scenario is for the stock market to increase another 50% in nominal value while the precious metals double again as retirement dollars get further wiped out. I give that a 75% chance at this point.
It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. The rules got demolished when the decision was made to give a $trillion to the bankers, and the rules got demolished when they bailed out everyone and his brother who should've been jailed instead. The rules don't apply to Tim Geithner or Chris Dodd. They don't apply to Hilary Clinton or Sandy Burger. The rules are non-existant for Alan Greenspan and Jamie Dimon and Dick Fuld. They don't apply for Rahm Immanuel or Dennis Hastert or Tom Daschel.
The rules no longer apply, especially in the markets. You just don't know it yet. Why on Earth would you still think that they do, or that you would ever see it coming?
Call me "ultra-conservative".
I knew it would happen.
<< <i>derryb, I don't think you're delusional and I wish you all the nimbleness and luck in the world. Count me as one of the lazy ones at this juncture. You can win at paper or lose at physical, no doubt.
My concern would be the fact - that now the frauds have been exposed in spades, and why anyone would play "chicken" with their money when they already know that the deck isn't just stacked, but heavily stacked against them - that truly bewilders me.
I give a black swan event that collapses the dollar along with the world monetary system a 5% probability. I really don't think that the financial movers and shakers in the world are very competant, nor are most of the political top dogs.
I anticipate and fully expect that the nominal value of my precious metal holdings could easily be cut by half overnight. That's the mental adjustment I'm making. At the same time, I expect that the stock market will concurrently take a spill and lose as much as 75% of it's nominal value during the same occurance that trashes my metal holdings. I suspect that both phenomena will happen with maybe a 20% probability. It's all relative - I don't know anyone who will get away unscathed.
The only other possible scenario is for the stock market to increase another 50% in nominal value while the precious metals double again as retirement dollars get further wiped out. I give that a 75% chance at this point.
It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. The rules got demolished when the decision was made to give a $trillion to the bankers, and the rules got demolished when they bailed out everyone and his brother who should've been jailed instead. The rules don't apply to Tim Geithner or Chris Dodd. They don't apply to Hilary Clinton or Sandy Burger. The rules are non-existant for Alan Greenspan and Jamie Dimon and Dick Fuld. They don't apply for Rahm Immanuel or Dennis Hastert or Tom Daschel.
The rules no longer apply, especially in the markets. You just don't know it yet. Why on Earth would you still think that they do, or that you would ever see it coming?
Call me "ultra-conservative". >>
Again, the point was missed - not all items traded on the stock market follow the direction of the stock market. AGQ will do what silver does, not what the DJIA does. When the DJIA crashes and sends silver up 200%, guess what.....AGQ goes UP almost 400%. For example, today the DJIA was down .72%, silver was up about 1% and AGQ was up about 1.8%.
AGQ is not a paper claim to any metal. It's a bet that silver will go up. As far as paper that is supposedly backed by metal, I could care less. I have my physical where I want it. Why not profit from paper metal as long as there are profits to be made. Kitco pool account is a prime example. Easy in, easy out, no storage and low spreads. This is the best play for the laziest of PM investors.
Here's the bottom line: The investment world is one sided and us little guys are on the wrong side. I started out believing in only physical PMs because, face it, when they have completely wiped everyone else out, my PMs will be the thing to have. The other side has been taking our money for years. Why not learn how they do it, watch their moves, ride their coat tails and make a bucket load of money AND watch your physical holdings grow.
<< <i>It concerns me that any paper claims on a pool of precious metals or rights to those precious metals can be defaulted on. >>
Well said and I agree, but it also concerns me that Washington may decide to put a 75% sales tax on all the metal I hope to sell one day, or worse yet, demand I turn it over to them. It's all about odds of what can happen, why not be prepared for either worse case scenario.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's true that silver was up today while the Dow was down, and that suits me fine. But remember, 2008 was not an anomaly - that wasn't the first time that silver has crashed when the stock market did. In terms of probability, I think it is more likely for silver to fall when the stock market falls on bad news because of the liquidity issue. I also still think that silver and gold will recover much faster and more completely the next time it happens.
AGQ is not a paper claim to any metal. It's a bet that silver will go up.
I understand. It's really a leveraged derivative in essence. As such, it will be more volatile in both directions. If the rest of the portfolio is boring, something like this is great, and I understand the reasoning behind it. I prefer at this time to be farther removed from the markets.
it also concerns me that Washington may decide to put a 75% sales tax on all the metal I hope to sell one day
I wouldn't put it past them. The question would be what else has happened, and what are your options?
worse yet, demand I turn it over to them. It's all about odds of what can happen, why not be prepared for either worse case scenario
Different perspective here. I'm not crazy about leaving paper trails all over the place in the event that the worst case starts heading our way. Some, sure - but not a bunch.
I knew it would happen.
<< <i>It's true that silver was up today while the Dow was down, and that suits me fine. But remember, 2008 was not an anomaly - that wasn't the first time that silver has crashed when the stock market did. In terms of probability, I think it is more likely for silver to fall when the stock market falls on bad news because of the liquidity issue. I also still think that silver and gold will recover much faster and more completely the next time it happens. >>
PMs dropped in 2008 when all investors panicked and put everything into cash until they could figure out which investment direction to go. The returning rise in PMs indicated this to be one of their choices. In the next crash, with the dollar in the tank as it is, I do not anticipate many investors, even temporarily, running to the safe haven of cash. I see them immediately going to the assets that are at that moment providing the best returns.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
May I kindly and ever so gently suggest that this assertion may be just a tiny little bit of an exaggeration?
Liberty: Parent of Science & Industry
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
the remainder of your statement is probably accurate, by the way, if instead of "all" and "everything", you simply say "some" and "more"
I like the thread, sorry if my comments, before I had my coffee, seemed rude,
just had a rough week at work explaining to people who are supposed to be scientists that we must be precise and accurate in our statements of the facts
Liberty: Parent of Science & Industry
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Both you guys are good posters and I would say that Baley, while you are technically correct, that is not the point. I get good thoughts as a result of both your postings. It's funny that you mentioned your rough week at work. Not really funny, but interesting in a way.
I just had the experience of being "put in my place" by a very shall we say detailed R&D guy this week. Let me emphasize that I can make my own way in this world without this guy, but I'm not sure he could do my particular job successfully if the roles were reversed.
One thing I can say about being a scientist, for the most part you can be correct about something without being punished for it. Well, maybe not always.
Say, have you read "Atlas Shrugged"? You oughta read it, if you haven't.
I know this post is disjointed, but I can live with that. Peace, Bro's.
I knew it would happen.
Liberty: Parent of Science & Industry
<< <i> Friday February 18, 2011 3:00 PM
" Am I reading the tea leaves correctly? Is the economy now collapsing and the masses aren't yet completely convinced? Hard Assets--tradable items and PMs should just keep escalating now, no? >>
"
Throw away those leaves and are you sure they were tea?
Interests:
Pre-Jump Grade Project
Toned Commemoratives
<< <i>Oh man. The world economy sure did collapse. The skyrocketing gold and silver prices confirm it!!! >>
Well, keep stacking them stock certificates. Pick up some Yen as well, they're on sale.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>Oh man. The world economy sure did collapse. The skyrocketing gold and silver prices confirm it!!! >>
Well, keep stacking them stock certificates. Pick up some Yen as well, they're on sale. >>
Not to "rain on your parade," but I've been doing both..stocks & PM's, and they have done very well over the last 50 years. I see nothing in the future to change that. Diversify is the name of the game and leaving all your eggs in your PM basket is asking for trouble.
<< <i>To those who understand no explanation is needed, to those who do not
understand, no explanation would suffice. >>
This.
Internationalization only works if everyone involved plays by the same rules. Otherwise, one nation will capitalize on another nation's labor, taxation and regulatory weakness at the expense of its own labor force. The European Union is a good example of what happens when you share a common currency and are governed by different rules. Without a level playing field there will always be inequalities on the world economic stage and one (and often both) group of producers and/or consumers will suffer. Internationalization has been and will continue be the cause world-wide economic misery.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Have we not been doing this for hundreds of years? But even more recently, if not for "exploiting" the Chinese for their labor, there would be 1 billion people not enjoying the comforts of modern society.
Without a level playing field there will always be inequalities on the world economic stage
Are you suggesting a global system of communism? I mean communism in its purest form, not the corrupt form we are accustomed to?
Inequality promotes innovation, invention and opportunity. Where is the incentive if everyone is treated equally? One only needs to look at labor unions to prove both points.
Knowledge is the enemy of fear
<< <i>Internationalization has been and will continue be the cause world-wide economic misery >>
<< <i>Have we not been doing this for hundreds of years? But even more recently, if not for "exploiting" the Chinese for their labor, there would be 1 billion people not enjoying the comforts of modern society. >>
If you kept my statement in context you would have seen the "at the expense of its own labor force" part.
<< <i>Without a level playing field there will always be inequalities on the world economic stage. >>
<< <i>Are you suggesting a global system of communism? I mean communism in its purest form, not the corrupt form we are accustomed to? Inequality promotes innovation, invention and opportunity. Where is the incentive if everyone is treated equally? One only needs to look at labor unions to prove both points. >>
Inequality promotes suffering, unemployment and a need for dependence on the state. European Union is showing us that a multination set of economic rules doesn't work. Best to abandon the global production effort and just produce goods nearest their resources (material and labor) and go back to good ole' importing what can't be produced and exporting the excess of local production. That is what worked best and kept Americans employed for hundreds of years.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Europe's problems are not at all due "internationalization", or economic differences but cultural difference.
Knowledge is the enemy of fear
<< <i>I don't believe our labor force has suffered. It is the most productive and educated in the world. Just because we don't make plastic toys doesn't mean we have failed.
Europe's problems are not at all due "internationalization", or economic differences but cultural difference. >>
The bottom half of our labor has, and is, suffering. Half the population has a IQ under 100 and most of that half use to be in the labor force and earning livable wages. At least for the 200 years that the U.S. had an agricultural and then industrial based economy.
Now we have a tech based economy, robots, mechanization, and off-sourcing of menial jobs that use to pay. The gap between the 20% in the top quintile that control 99% of the wealth the the bottom 80% grows wider each day as the rich get richer, the poor (now 40% of the county) get poorer, and the middle class gets squeezed.
<< <i>Europe's problems are not at all due "internationalization", or economic differences but cultural difference. >>
Europe flourished because of cultural differences prior to the Unionization of Europe.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey