Keeping your net worth positive as the dollar devalues

smallchange

I just finished reading the thread about shorting and hedging. To be sure your net worth is undamaged as the dollar continues to fall in value how much silver and or gold should one keep. Is there a ratio of paper assets to hard assets or do people just try to accumulate as much as possible. In other words if you had a net worth of 500,00.00 how much gold and silver would you want to feel like you are hedged against a falling dollar. Thanks,

Jim

derryb

Any dollar not invested in something to protect it's value is a dollar that will lose value. Each person has to determine "how much" and "what else" based on their circumstances. One rule of thumb I personally like to follow is "don't put all your egss in one basket." I have only enough in dollars to cover expenses that have to be paid in dollars. My savings is 100% in physical silver and gold, my retirement accounts are 100% in Asian equities, currencies, PMs and PM miners. I am long what I think will do well while the dollar declines and I am short on things that I do not believe will do well. The real question is "how many of my dollars to I want to save from the fate of a falling dollar?"

Note that this is my opinion.

RedTiger

There is no "one size fits all" as far as percentages. That's one reason I never try to argue that another person's percentage is wrong. Age, income, family situation, lifestyle, personality all tend to be unique factors. Finding a healthy and realistic balance is far more important than squeezing the last few percentage points of investment performance. At the extreme, the fabled Scrooge had a big pile of gold, but had lost so much in his pursuit of money. Again, the concept is balance.

For the average person, seeking an age and income appropiate asset allocation is what I would suggest. Again, the other unique factors will skew the percentages different ways.

One idea made popular over 20 years ago by Harry Browne is called the "permanent portfolio." Do a search to read more about the long term track record. The basic basics are 25% each in precious metals, money markets, long term bonds, and stocks. Rebalance one a year or so. The concept was developed before foreign investments became popular, so a person might modify it, to incorporate some foreign stocks, bonds and even money markets if so desired. Again, I'm not going to argue for or against the concept or the percentages, as each person's situation is unique. There is a lot of information on the concept for those that want to research it.

One aside, I've recently been reading some of the Vanguard boards. They call themselves "Bogle-heads," after Jack Bogle, Vanguard's founder. It is a different planet from this forum, with a different language. They openly make jokes about folks that invest in precious metals. I can't argue with success as most of the regulars there have significant net worth. Those that stick with the program are almost certain to do well, better than most, unless one of the big four apocalyptic events occurs (U. S. loses a major war, major famine, major plague, revolution). For the Bogleheads, the key concepts are living below one's means, very high savings rate, steady investing in low cost funds, and age appropiate asset allocation. I'm sure a person would get a very different answer on that planet vs. this forum.

smallchange

Derryb and RedTiger, thanks for your thoughtful answers. They were both very helpful.

jmski52

And they were both right!

John Bogle's contribution was in the realm of index fund investing at the lowest cost possible and long term horizon investing. I wonder how many "Bogleheads" lost traction during the 2008 stock market meltdown?

To Everything (Turn, Turn, Turn)
There is a season (Turn, Turn, Turn)

In my opinion, John Bogle's assumptions for growth in US and even possibly world stock markets must be challenged in light of the debt issue.

And a time to every purpose, under Heaven

MoneyCollector

This is a different answer but also something to think about. I have a large "operating" budget in my life and I feel the need to have a decent amount of liquidity so I hold more cash (or near-cash) than I should. I have a lot of PM and the usual equities and a lot of investment real estate (with leverage) and still have a mortgage. Having liquidity lets me sleep at night. But I also know that as the value of the dollar falls it is being offset by the leverage. If I woke up tomorrow and my dollars were worth nothing, I would use them to pay off my creditors - so in my mind (I may be wrong) it seems like a bit of a hedge to me. I could try to maximize everything but this is the balance that makes me happy.

ranshdow

If I woke up tomorrow and my dollars were worth nothing, I would use them to pay off my creditors

So in a way, dollar-denominated debt is a hedge against dollar depreciation. Of course. I'd never thought of it that way.

I too keep a fair amount of cash on hand because my liabilities are denominated in dollars, and I don't want the price risk or transaction risk of holding them as anything else. I didn't think to separate them into those that could appreciate in cost (food, fuel) and those that wouldn't (debt).

watercrest

Spreading your "net worth" into multiple asset classes are the way to go.

DoubleEagle59

If I lived in the US, quite frankly, I wouldn't even keep $1 in 'cash'.

Every available dollar would be invested in Gold and Silver.

As far as I'm concerned, the US dollar is still on its path of decline.

Whether or not other world currencies will follow, is the question.

Here in Canada, our country is considered a 'natural resource' region and our Canadian dollar has often been referred to a 'Petro Dollar'.

In the last 11 years it has gained huge ground on the US dollar.

In the year 2000, one US dollar could be exchanged for $1.60 Canadian dollars.

Since then, the Canadian dollar has strengthened (or US dollar has weakened) and presently, one US dollar when exchanged will only get you about $0.97 Canadian dollars.

storm888

<< <i>If I woke up tomorrow and my dollars were worth nothing, I would use them to pay off my creditors >>



///////////////////////////


Sadly, that would not work.

Your accounts payable to national creditors would be "redenominated"
in NEW dollars.

Mortgages, credit-card balances, ALL secured and unsecured debt
would become payable in NEW dollars.

In order to maximize the "cheap dollar scheme," ALL debts need to
be paid BEFORE the OLD dollars are "worth nothing."

The ONLY way to "get a free house" is to pay it off BEFORE the NEW
dollars are introduced. Ideally, that payoff should be done immediately
before the reset; trying to time it too close will leave many PM-bugs
out in the cold.

The "Mortgage Protection and Equalization Act" would close the "free
house" window.

The banksters and THEIR govt would NOT allow the peasants to pay
past debts with failed money.

The time to bail out of the OLD dollars is while your creditors are still
accepting those dollars.

derryb

<< <i>So in a way, dollar-denominated debt is a hedge against dollar depreciation. Of course. I'd never thought of it that way. >>


Inflation is another factor to consider. As the dollar devalues and inflation increases you get hit with a double whammy - more dollars for a loaf of bread because a dollar that is worth less due to devaluation and more dollars for the loaf of bread because inflation has driven up it's price. Buying something now and paying for it later could be a good thing, if you can afford the debt. Of course, this is exactly what the Fed wants, more credit (debt). Look for them to do what they can to stimulate borrowing. Debt is the new slavery.

jmski52

So in a way, dollar-denominated debt is a hedge against dollar depreciation. Of course. I'd never thought of it that way.

That has always been true.


Spreading your "net worth" into multiple asset classes are the way to go.

Only if you are totally unsure of what is going on with finance in general.


<< If I woke up tomorrow and my dollars were worth nothing, I would use them to pay off my creditors >>

///////////////////////////

Sadly, that would not work.

Your accounts payable to national creditors would be "redenominated"
in NEW dollars.

Mortgages, credit-card balances, ALL secured and unsecured debt
would become payable in NEW dollars.

Glad to see you back, Storm. What do you suppose will be the tipping point when this might occur? The goal is to liquidate the debt just prior to "the change" - so what do you figure will be the telltale signs of the dollar default prior to its happening? Another "Saturday Night Massacre" with no warning? Surely we will have some serious rumbling just prior?

Do you think they could make it retroactive? If they re-price every single mortgage in new dollars in order to bail out the mortgage lenders, how many home owners will refuse to pay? It seems there would be a real "breech of contract" issue in the event of such an occurance. Of course, it wouldn't be the first time in this administration involving breech of contract or breech of trust either.

I'm almost afraid to pay of the rest of the mortgage for fear that they wouldn't be able to track where my deed ownership actually resides. I'm almost content to sit on the remaining payments "as is". Surely, mortgages are selling and exchanging ownership somewhere without a problem.

storm888

What do you suppose will be the tipping point when this might occur? The goal is to liquidate the debt just prior to "the change" - so what do you figure will be the telltale signs of the dollar default prior to its happening? Another "Saturday Night Massacre" with no warning? Surely we will have some serious rumbling just prior?

Do you think they could make it retroactive? If they re-price every single mortgage in new dollars in order to bail out the mortgage lenders, how many home owners will refuse to pay? It seems there would be a real "breech of contract" issue in the event of such an occurance. Of course, it wouldn't be the first time in this administration involving breech of contract or breech of trust either.

I'm almost afraid to pay of the rest of the mortgage for fear that they wouldn't be able to track where my deed ownership actually resides. I'm almost content to sit on the remaining payments "as is". Surely, mortgages are selling and exchanging ownership somewhere without a problem.

////////////////////////////////


I dunno when the "tipping point" might come.

I do know that waiting too long to employ the OLD dollars
derived from PM profits could render those profits useless,
IF the banks force their govt to intervene.

................

In 2009, Forbes painted a dream "example" scenario for mortgagors:

A 30% devaluation of the currency would raise asset values by about
43%. (PMs included.)

A $200K house with a $230K mortgage would become...

A $286K house with a $230K mortgage.

Forbes pronounced the "example" as win/win; good for consumers,
good for banksters.

The banksters would STRONGLY disagree. Their goal is to get nearly
ALL of the fixed assets - real property - on their side of the ledger
BEFORE ANY official devaluation. The banks would be wiped out, if
the mortgage balances were not "adjusted;" UNLESS they had A LOT
more REO on the books than they currently have.

While some tiny countries - Latvia - legislated against some banks modifying
mortgages post-devaluation, larger countries like Brazil took the opposite
position and largely protected the mortgagee class.

American legislation would, at the banksters' insistence, follow the "protect
the mortgagee" models.

And, REMEMBER: We now expect something MUCH harsher than a 30%
devaluation. America's govt will NEVER slay the banksters that control it.

...............

Is the "Mortgage Protection and Equalization Act" unconstitutional?

In an academic sense, of course it is.

The banks will simply tell THEIR courts that "hybrid/de facto" force majeure
and vis major elements are in play and the courts will have no choice
but to cave.

.....................................

The best clue about the "tipping point" is prolly when we see foreclosure
rates soaring from present levels; 2012/2014, maybe; maybe sooner.

The day and the hour knoweth no man, and many could easily guess
wrong. BUT, if a "Mortgage Protection and Equalization Act" is a likely
outcome, it is foolish to wait until "the last minute" to turn $6-$15 silver
and $400 gold into PAID FOR real property.

That message will become clear, the first month you don't have to make
mortgage payments.


.....................

New mortgages are trading just fine. The paperwork is in order. FNM
and FRE are running a totally different op than they did before the
"trouble." The new op has the taxpayers on the hook for $TRILLIONS,
but the kite is flying high.

The old paper is more toxic and convoluted than ever. Anything recorded
by MERS is suspect, but satisfying your personal mortgages should not be
impacted by the suspected defects. Just get the Title AND the ORIGINAL
NOTE back; and, use a lawyer to shepherd the recording of the satisfaction.
(Many such Notes are now "lost," but your lawyer and the mortgagee can
easily get a judge to sign-off on the docs if necessary.)


........

Kip

I want to do a reverse mortgage on my property, take the cash and buy PMs. I am single and no family to fight over home...Am I making a mistake in this thinking???thoughts please!!
Regards
Kip

derryb

<< <i>I want to do a reverse mortgage on my property, take the cash and buy PMs. I am single and no family to fight over home...Am I making a mistake in this thinking???thoughts please!!
Regards
Kip >>


Borrowing money to invest has gotten most people into trouble. Why not just convert your savings to PMs? If you have no savings, start there, then covert it to PMs.

storm888

<< <i>I want to do a reverse mortgage on my property, take the cash and buy PMs. I am single and no family to fight over home...Am I making a mistake in this thinking???thoughts please!!
Regards
Kip >>



/////////////////////////////

I like the RM concept, but you gotta do you homework b4
you jump in. TONS of pro/con info on the internet.

RM's have HIGH upfront costs; they cost more to close than
a conventional mortgage or a simple "line of credit."

When I looked into getting an RM, I could not find one that
did not require "mortgage insurance." I also could not find
one that would accept my "self insurance" scheme for all
hazards. Those costs can be substantial and reduce the value
of the RM.

You also need to be aware that most/many RMs require
you to be PRESENT in the property for the duration. If you
are in the hospital/rehab too long, you can get a "call" on
some RMs. Same result if you "travel" too much.

If you are planning to be "Medicaid Eligible," check with the
govt to see what kind of roadblock the assets acquired with
RM funds would/might create.

ALL THINGS considered, a conventional "line of credit" may be
a better option for folks just wanting to speculate on PMs with
the loan proceeds. Tho, those require that regular payments
be made on the balance owed.

If you guess right on the direction of PMs, you will win. If you
guess wrong, you will lose. Not complicated. LOTS of gamblers
win/lose. Good Luck!

Baley

If you guess right on the direction of PMs, you will win. If you
guess wrong, you will lose. Not complicated. LOTS of gamblers
win/lose. Good Luck!

Thanks! Starting to need it!

cohodk

I want to do a reverse mortgage on my property, take the cash and buy PMs.

This was probably a sign the top was near.