How much bullion is "enough"?
gecko109
Posts: 8,231 ✭
I constantly feel like I dont have enough bullion....but I cant quite define the term "enough" in relation to the topic. I realize that each individual, or family varies greatly as far as circumstances, but there has got to be some type of general guidline that fits each individual.
As an example, lets use John Doe as a hypothetical 25 yr old who earns $40,000 a year in a decent, stable job that he started 3 years ago. John owns his own home, with a note of maybe $1200 and has no other real debt. No kids, single, likes bullion. Approx how much (dollar amount) physical bullion should John have stockpiled as of now, and what type of yearly chunk should he be converting into metals yearly?
I have seen it written...and heard it said....that 5-10% of one's portfolio should be in metal. That just feels WAY too low to me! Anyone else feel the same? What do you feel is a sufficient amount of metal for the above example?
As an interesting.....but possibly useless statistic.....I have come up with a calculation based on income over a specific time period. The formula works like this: Count the number of years you have been stacking bullion in earnest. Now estimate your average yearly gross income for that span of time. Multiply the number of years by your estimated avg annual gross income to arrive at your total gross income during that time span. Now take the value of your total stack and divide by your total gross income to arrive at a % amount. Without getting into nominal dollar values, my % works out to just under 7%. I'd be interested to see others here do the same calculation in order to see if I have been too aggressive, or not aggressive enough in relation to my fellow metalbugs.
As an example, lets use John Doe as a hypothetical 25 yr old who earns $40,000 a year in a decent, stable job that he started 3 years ago. John owns his own home, with a note of maybe $1200 and has no other real debt. No kids, single, likes bullion. Approx how much (dollar amount) physical bullion should John have stockpiled as of now, and what type of yearly chunk should he be converting into metals yearly?
I have seen it written...and heard it said....that 5-10% of one's portfolio should be in metal. That just feels WAY too low to me! Anyone else feel the same? What do you feel is a sufficient amount of metal for the above example?
As an interesting.....but possibly useless statistic.....I have come up with a calculation based on income over a specific time period. The formula works like this: Count the number of years you have been stacking bullion in earnest. Now estimate your average yearly gross income for that span of time. Multiply the number of years by your estimated avg annual gross income to arrive at your total gross income during that time span. Now take the value of your total stack and divide by your total gross income to arrive at a % amount. Without getting into nominal dollar values, my % works out to just under 7%. I'd be interested to see others here do the same calculation in order to see if I have been too aggressive, or not aggressive enough in relation to my fellow metalbugs.
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<< <i>
I have seen it written...and heard it said....that 5-10% of one's portfolio should be in metal. That just feels WAY too low to me! Anyone else feel the same? What do you feel is a sufficient amount of metal for the above example? >>
Approx 55-60% of my portfolio is PM if I don't consider my wife's cash and houses. In that case it will be a way lower.
Though, I am not a stacker, I like PMs and I buy them for enjoyment and in place of a savings account.
<< <i>
As an interesting.....but possibly useless statistic.....I have come up with a calculation based on income over a specific time period. The formula works like this: Count the number of years you have been stacking bullion in earnest. Now estimate your average yearly gross income for that span of time. Multiply the number of years by your estimated avg annual gross income to arrive at your total gross income during that time span. Now take the value of your total stack and divide by your total gross income to arrive at a % amount. Without getting into nominal dollar values, my % works out to just under 7%. I'd be interested to see others here do the same calculation in order to see if I have been too aggressive, or not aggressive enough in relation to my fellow metalbugs. >>
I just started 2 years ago. If my math is correct, I am a little over 9%.
In your example, unless John D. is totally committed to regular stacking, life will get in the way at some point and redirect the allocation of the stacking funds to some extent. To kinda give you an answer to your question, John would only have about $3-5k per year to allocate towards the stack after all other (normal) expenses were paid (i.e. house, car, insurance, utilities, food, strip clubs, etc.). If he's been committed to this thing, he should have somewhere between $9-$15 worth in today's metal environment, maybe even more I would think due to the recent run up in metals this year.
As far as how much is enough, I don't think one could ever get enough. If you could afford it and continue to afford it, why would you want to stop stacking? Unless you just simply don't have room for it, that would be my only cause to stop buying.
Too many positive BST transactions with too many members to list.
John Doe's $40K job is not secure; tho, he thinks/believes it is.
The ONLY hope he likely has to save his house is to rapidly throw
cash at gold, AND hope against hope that he can accumulate
enough profits to pay off his mortgage with cheaper dollars before
his employment is pau.
It may already be too late for John, but he should proceed as tho
he still has a chance to survive the coming troubles.
>
Successful transactions on the BST boards with rtimmer, coincoins, gerard, tincup, tjm965, MMR, mission16, dirtygoldman, AUandAG, deadmunny, thedutymon, leadoff4, Kid4HOF03, BRI2327, colebear, mcholke, rpcolettrane, rockdjrw, publius, quik, kalinefan, Allen, JackWESQ, CON40, Griffeyfan2430, blue227, Tiggs2012, ndleo, CDsNuts, ve3rules, doh, MurphDawg, tennessebanker, and gene1978.
<< <i>As an example, lets use John Doe as a hypothetical 25 yr old who earns $40,000 a year in a decent, stable job that he started 3 years ago. John owns his own home, with a note of maybe $1200 and has no other real debt. >>
What kind of home does JD own? If JD only has worked for three years and currently earns $40k it likely means that he has averaged perhaps $38k per year income and he must take home $22k or so each year or thereabouts. Unless JD comes from a wealthy family or has some relatives willing to give him cash outright for a home it would seem like he couldn't possibly have worked long enough to save for a down payment, purchase a home and stack bullion.
In honor of the memory of Cpl. Michael E. Thompson
By the way, I am assuming you mean the $1200 note is the monthly payment, not the actual note balance.
<< <i>What is the term of John's Mortgage? 15 yr, 30 year, fixed rate or variable rate? Personally, if he has a 30 yr (even a 15 yr) mortgage or a variable rate (15 or 30 yr mortgage), I would use the excess $$ to reduce the term of the mortgage. This is a known reduction of your biggest liability and will provide future funds to play with PM’s when it is paid off. But, dumping the excess $$ into PM is an unknown. Interest rates could start going up, PM could crash or be illegal to own, etc – way to many variables. Paying off the mortgage ASAP would be the wise thing to do.
By the way, I am assuming you mean the $1200 note is the monthly payment, not the actual note balance. >>
I could not disagree more with your recomendation. In the current times of ultra low interest, long term loans, why would anyone put any extra cash towards those loans with dollars today that will NEVER have more value than they do right now?
For instance, lets say John is 3 years into a 30 year fixed rate @ 4.25%. Do you really believe that inflation.....true inflation.....will remain under 4.25% per year for the next 20 years? If John has $400/month remaining each month after all expenses, he would be far greater off in buying gold or silver than in adding payments towards his mortgage.
I began buying metals in earnest about 5 years ago, almost the exact same time that I closed on my home, and 30 yr mortgage. Care to run the numbers both ways? Lets call it an even $500/month in gold for the past 60 months vs adding an extra $500/month towards my mortgage. Which one was the smart play?
Gold is going into its 12th straight up year. Today isn't a ground floor opportunity for precious metals. It is similar to buying stocks after 12 straight up years, it may keep going up, but it may not. The fundamentals for any asset class always look great after that kind of run. Even though I still think gold is going much higher ($3000 has been and remains a long term target), I don't see any need to bet everything on one asset class. Investors get it wrong all the time, and getting out can be tricky. They won't ring a bell when the party is over, and a good many all-or-nothing types will lose huge percentages when markets reverse. In a bubble top, herds of investors will buy heavily near the very top and lose their shirts. It happens in all markets. It will likely happen to gold.
That's why for average folks automatic rebalancing is a good way to go. It forces a person to buy assets when they are cheaper, when they are on sale. Most folks don't have a good nose for timing. I sure don't. I'd guess about 80% tend to buy near the top, sell near the bottom. It is human nature and how all markets work, and will never change. The magical Lake Wobegone where everyone is above average doesn't exist in any market. Yes, a person with an exceptional nose for the markets will do well with all-or-nothing plunging like some on this forum favor. However, those big winners tend to be exceptional people, way above average. Those exceptional folks will do well no matter what course they chart, and don't need to ask for advice.
/edit to add: as far as dollar amounts, I advocate a healthy balanced approach to life. Make conscious decisions on where to spend money. A high savings rate is good, but a penny-pinching miser is a kill-joy and can become another Ebenezer Scrooge if he isn't careful. Have some fun, but temper it, and keep saving. A high savings rate, living below one's means, will tend to mean more in the long run, than where the money is invested. Yes, there are a few exceptional stories about investment home runs, but I tend to look at average experiences, not the exceptional winners. The big winners don't need help.
Since we're working with hindsight, how about "running the numbers" for 1979-1984? How about 1989-2004?
"Never" is a very very long time. Look at how strong the Yen is getting!
Liberty: Parent of Science & Industry
My target is a very modest 3 hours of pre-tax dollars/week of my hourly rate toward physical, 3-5 hours toward cash reserve. Sometimes more/less either way, but I'd like to keep that average. Once the last car note is paid (5k to go) that will bump up, or I'll start playing stocks again, haven't decided.
You are now saying he has a fixed rate. Let say he has a variable rate, that 4.25% could be 12 to 14% before it is paid off. In addition, there is talk on the Hill about doing away or limiting the Mortgage deduction. He can live in his house. But if rate go up, he may be forced onto the streets because he can't make his payments. He can only sit on his PM's and only hope that have gained value and hopefully he can sell.
By the way, gold and silver HAS NOT kept up with inflation. Remember, silver s/b $175+ an ounce adjusted for inflation with gold being around $4k+ an ounce. Do you truly believe PM's will keep up in a high inflationary period? They haven't in the passed. Tax free Muni Bonds were paying 14 to 18% in the 70's. What were PM's doing?
will not have the funds to cover all of the promised money on savings.
A sever drop of the market to 6000 will crush pension funds and 40lKs
and the Government pension insurance plan will not have the money
to cover. So let us sum up:
1. declining number of workers and a declining number of jobs
2. Pensions will be in doubt, if they can continue at their stated
payout rates.
3.The stock market which has been rigged to be inflated, will drop to its
true low level of true value.
4. Federal revenue will decrease, from its already inadequate level.
5. Bonds will drop in real value as interests rates go up.
6. The price of basic commodities, items that people need to live, will
increase, even i n an atmosphere of lack of money.
7. Greenbacks will accelerate the decline in purchasing power.
8. PM seem the only bet left, and heaven alone knows where they will be
headed.
9. The second dip will happen and will be admitted as being the second
Great Depression.
10. Home values, after a slight stabilization ,will continue their price declines.
11. The unemployed ranks will be swelled by many hundreds of thousands of
newly unemployed State, Municipal and Federal workers.
12. There will be civil disturbances in our major cities as the safety net is shredded
if not eliminated.
13. The political Parties will continue their Kabukki Dance.
14. We will survive as a people and as a Nation , but it will not be pleasant., We are looking
at a period measured in decades and the standard of living will plummet.
The solution:
1. Election of hard nosed realists that will consider Nation First and Party second.
2. All of the deferred hard decisions will finally have to be made.
3. There will be a coming together of the majority of citizens for mutual survival.
4. Lobbyists must be expunged from the political stage.
5. All Federal elections will be financed by the Government and capped as to total
cost. Political adds will be limited in number and provided free of charge by the networks.
It is an outrage the to run for President, both Parties combined must spend 2-3 billion dollars.
That kind of money will never come from 10 - 20 dollar contributions of the average person. It
will come from the rich and the powerful who will expect and receive fair compensation for their
contributions. Let us say 10 billion dollars in benefits for every 1 million in contributions. 10,000/1
PAYOFF. NOT TOO SHABBY.
6. Tax structure will strip out all exemptions and the rate lowered. Everyone will pay taxes.
The Corporations, the rich, the middle class and the poor. This means no deductions for home interest,
exemptions for childen, charitable contributions, medical expenses ect, ect.
7. Corporate profits will be taxed at a higher rate if kept off shore and over seas then if kept on the US
mainland.
8. Financial institutions where financial chicanery has taken place, will have heavy prison sentences imposed
on those officials found guilty by a jury of their peers.
9. People leaving Government, shall not find employment with any employer doing business with the Government on a
state or Federal lever for a period of 10 years. Violations will have prison sentences imposes.
10. Excessive salaries and bonuses will have claw back provisions imposed.
11. Glass Steagle will be reinstated in its entirety.
12. Members of Congress shall be covered by the same medical plans as the general public
13. Congressional pension plans will be scaled back to more closely relate to plans enjoyed
by the general public.
14. Filibuster in the Senate will be limited to 30 days, then the issue will be subject to an up or down vote.
15. Members of Congress shall be subject to all of the laws that the general citizen population is subject to.
16.There shall be a maximum limit of 20 years for total service in the congress that includes service in both
the Congress and the Senate. The maximum age to serve in the Congress shall be 80 years of age. It shall
be instant retirement upon reaching such stated age.
17. All appointments by the President, to be subject only to simple up or down votes by Congress after the appropriate
committee has researched and evaluated the candidate.
18. The President shall be allowed a line item veto.
19. Every home should have a reasonable arsenal of revolvers or automatics, as well as a long gun, shotgun or Uzi.
If this sounds like a wartime, militant rule, it in fact is. It will take a period of such strict and severs
changes to right the economic boat and change the public attitude towards entitlements. In fact, life
will become rather brutal , severe and harsh.Remember, these thoughts are coming from someone
who has always thought of himself as a political Liberal but a financial conservative and realist. We must
restore the integrity of society even if it is to be by harsh methods.
Camelot
good post Mr. Bear.
Too many positive BST transactions with too many members to list.
I remember telling my brother-in-law one day, after selling some gold and he said, "I should be keeping it" that I had a stock pile of lead. He say, "Lead? What good is it?"
I say, "With lead, I can take your gold!"
Can I add a few?
Repeal the 17th ammendmend and give the election of Senators back to the State Legislatures. This would transfer power away from the feds and back to the states, as orginally intended. Unfunded federal mandates magically go away.
Limit all federal publically elected officials to 2 terms of any office. True statesmen could spend 4 years in the house and 12 in the senate. That's enough. The House would then again belong to the people.
Balanced budget ammendment (controversial, but many states have demonstrated that this can work)
Federal definition of healthcare. Is it a right or not? If it is, by definition, the entire healthcare industry must be nationalized. If not, let market forces prevail without political meddling.
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That is the part of the future that Americans are simply not grasping;
even the sophisticated folks don't get it.
It is fashionable for metal-buyers to operate on the theory that paper
money is "no good." In theory - prolly in fact - that is true.
BUT, we are headed into a period where the money will be recognized
as "pretty worthless," AND most folks STILL will not be able to put their
hands on ANY of that "worthless money." All at a time when supplies
of the things they need are LOW and prices are HIGH.
THAT is why debt will kill MANY of those who thought they were safely
in metals. They will have no/little income, BUT their mortgage payment
will still be due.
Notwithstanding ANY actual/perceived/historical advantage of retaining
cheap mortgages, the correct way to leverage metals profits is to use
them to ELIMINATE ALL residential mortgage debt. (Some commercial
mortgages may be a little safer, but they too can become unserviceable
when cash is ultra-scarce.)
Life goes on in times of scarce and high-priced food. Life without shelter
is a tough nut to crack; when you see a price you like, throw some of
those metal profits at F&C ownership of that shelter. If none of the bad
things we contemplate actually happen, your life WILL be changed once
you have NO shelter payment. If the bad things come, you will have shelter
AND you will have a MUCH better chance to do the gathering of the other
stuff you need to buy with whatever scarce "worthless money" you are
able to acquire.
<< <i>How much bullion is "enough"? >>
minimum 80% of your savings. You should only have enough cash in accounts to cover 2 months' needs. All other cash should be in physical PMs. Preserve your wealth with PMs, it is the best game in town and where the smart money parks itself.
"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
bend over, take in the a$$, and commit to gold, period.
World Collection
British Collection
German States Collection
In my view that is not enough and I am working on upping the percentage.
https://www.pcgs.com/setregistry/gold/liberty-head-2-1-gold-major-sets/liberty-head-2-1-gold-basic-set-circulation-strikes-1840-1907-cac/alltimeset/268163
things we contemplate actually happen, your life WILL be changed once
you have NO shelter payment."
Again, this is a very circumstantial statement. For those whose mortgage payments represent 25 or 30% of their gross income, I might agree with you. But for those of us who have mortgage payments that represent about 10% of our gross income, then you are wrong. I currently have a mortgage payment of around $1,600. If that bill was eliminated tomorrow, the quality of my life changes very little......since it represents such a small % of our income. Therefore I feel no urgency to dump "good" dollars into it today rather then simply pay with "bad" dollars tomorrow.
You wouldnt use pre 1965 silver coins AT FACE VALUE to pay off a mortgage early.....so why would you use the stronger dollar of today to do the same?
<< <i>" If none of the bad
things we contemplate actually happen, your life WILL be changed once
you have NO shelter payment."
Again, this is a very circumstantial statement. For those whose mortgage payments represent 25 or 30% of their gross income, I might agree with you. But for those of us who have mortgage payments that represent about 10% of our gross income, then you are wrong. I currently have a mortgage payment of around $1,600. If that bill was eliminated tomorrow, the quality of my life changes very little......since it represents such a small % of our income. Therefore I feel no urgency to dump "good" dollars into it today rather then simply pay with "bad" dollars tomorrow.
You wouldnt use pre 1965 silver coins AT FACE VALUE to pay off a mortgage early.....so why would you use the stronger dollar of today to do the same? >>
Funny, your little "hypothetical" has John Doe making a mortgage payment of 36% of his GROSS income. Besides, you don't know what is going to happen to the dollar in the future anymore than you can tell what is going to happen to PM's. You can guess but that is all.
Now, using your real life example of $1,600 "represents such a small % of our income" is a game changer and only cause confusion with your "hypothetical" scenario above. Is your current income fixed and irrevocable, meaning you are 100% certain it will never change for the worse? You can't include you PM stack as future income because you don't know if the value will be there or not.
I have struck a balance where I will be debt free soon while still being able to stack due to my income. But, I make a heck of alot more than John Doe.
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......
That means we face or are already in a double dip and it is not an Ice Cream Sunday, headed
for the second great depression. Shadow Statistics show us getting verrryyyyy close right now.
Gold and silver may not be the ideal investment, but with interest rates so low and the stock
market so tenuous ,bank stability questionable, bonds over priced ect, ect, what else is left ,as a safe haven?
Might look at the dogs of the DOW. AT&T stock paying 6%, J&J, Coke, Pfizer ect, ect. How ever, who knows what is
really going on within those companies.
Camelot
<< <i>
<< <i>How much bullion is "enough"? >>
minimum 80% of your savings. You should only have enough cash in accounts to cover 2 months' needs. All other cash should be in physical PMs. Preserve your wealth with PMs, it is the best game in town and where the smart money parks itself. --Thursday August 04, 2011 12:34 PM >>
oooof!
Liberty: Parent of Science & Industry