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OK, i will make it my mission to read both these books. Although i am psychologically/mentally already in that camp and well prepared. I was in grade school in November '63, and i remember it like it was yesterday. It wasn't until many years later that as an adult i was able to put all the pieces together. Fast forward to 2011, here we are in a politically driven economy.
As for ZH, and the outcome...sheesh. What can I say... i'll take it under advisement. What a world...
Being on the scene in '79, living it, and in the gold business in the early 80', i do understand PM's.
I quite agree, PM's are 'usually' not a long term investment vehicle. However, this time its about a sovereign debt crisis. We are in uncharted waters, in a raging storm, and steaming full ahead. I don't much like the looks of the captain, nor do i believe the charts he is reading are going to take us all to a safe landing. I own a lot of PM's for that reason, about 1/4 the portfolio, and about the same in cash, 50% liquid because i am prepared for the worst. If i'm wrong, GREAT! I'll know when to sell.
As for the PM bubble bursting, 2 comments: there is nothing whatsoever on the horizon that suggests PM's are going to top out. This has a very long, long way to go, just as the residential RE bottom does. Secondly, the bubble PM hasn't even started yet. Wait until the cabbie is trying to sell you some gold over at his brother-in-law's place, because its a hot deal. Then its time to sell. The only problem with that story version, it assumes things will level, and the debasement we are seeing has a happy, normalized ending. I don't think so, but i wouldn't discount your right to disagree.
So are you diversified in PM futures? If you were able to get in when Gold was $400/oz, then it makes sense, I would be VERY hesitant right now to put ANY of my wealth into PM's for the long haul. If I did it (long haul) I certainly wouldn't leverage.....a $100 drop in the price of Gold could quickly decimate one's account.
I think the risk of (long term) in PM's right now is too great, it cannot continue to climb forever. Now, scalping and swinging and such is another matter, I'd just make sure (like always) I had proper stops in place....cause when the crash happens, it's going to be fairly violent and sudden.
I point to the recent divestiture of the largest fund in the world of US treasury bonds.....a lot of people mistook that for a lack of confidence in the US Government (which it may have been....PARTLY), but it was mostly due to the increased risk/lack of return aspect....there are greener pastures arising in equities that have better risk/return ratios and that is where the money will go.
I do agree that inflation will continue to prop up PM's for awhile, but again, when the Fed ends QE2 early, and if the markets continue to at least give hope/promise, more and more you'll see investors leave the sidelines and head for equities....and when those returns are more attractive than simply squatting in the PM markets, investors will bail.
I totally agree with you on the whole outlook politically. Thankfully, the spendacrats do not have an unholy triumvirate any longer. They now have to at least answer to some counter-insanity from the retardicans and that gives the confidence in our government not going bankrupt a new glimmer of hope. I think it's still possible we could end up like Ireland and most other EU nations...but I don't think it's eminent or even VERY likely.
Gosh no, not in futures. I am in 10 oz bullion bars. As said, i only buy physical. As for silver, i'm swinging in a pool account. (awkward for sure, but i do it for fun more so).
While i do enjoy this discussion ( a lot), because it's always important to understand what others think, and also to learn from them, i think we are discussing this through the looking glass so-to-speak. You on one side of a split in the fabric, existing in the former paradigm, where investments of this sort (long term) exist in an traditional economic framework, historical rates of return analysis etc., and me on the other side, where such traditional values no longer have gravity, and where there is no longer a north because of the global currency base 'liquidation' (next level up from debasement), which, can take between 3 months and five years to play out. There are two things (at least) which could happen any minute, any second, to escalate the time frame. One is the liquidation of JP treasury debt, and the second is the 1973-75 Kissinger/OPEC treaty. Just to mention two. And, let it be known, that i am not a financial terrorist in my thinking or in my heart. I do not at all wish to see a global financial meltdown, far from it. However, that's what i see occurring. USD is sitting on a lit powder keg, the way i see it. Its simply a matter of how long the fuse is.
If by some miracle, the USD can survive what's coming, then i will stand corrected (and rejoice). In fall 2008 I dumped all my equities on the eve of destruction, and watched them plummet. It was a close call. Here we are in 2011, and ALL the little people have left the market. That's why its trading so thinly on days like today. They might come back in 5 years, but not any time soon.
BTW, this is precisely why I decided to day-trade futures, and hopefully learn how to short, the art of it. It's because, when i'm not trading, the very instant i SELL, my bank roll is back into cash, safe for the moment. Does that make sense?
Now, as far as investors bailing on Gold... i don't see that happening this year, or next. Again, its about the sovereign debt crisis, that's how i see it. Oil is going up why? Because of the revolutions and war in the ME? I say nope. Oil is increasing because USD is collapsing. The ME situation is a windfall for the oil barons.
According to your last sentence, we have a different bet on USD, i took the counter bet. I really hope your right. If you are right, i win in oil, if wrong, i win in PM and oil. Either way, its a win for me personally. In my view there will be no QE3, rather just a long QE sine wave of the fed recycling 3 trillion in debt that the fed has already created. Wash, rinse, repeat. Gold at $2,500.
Its an interesting theoretical discussion in any case, and i thank you for taking the time to thoughtfuly engage.
I am in the silver business...well...was into buying silver for my jewelry and bead biz but haven't bought any significant quantities since January of '09 when the metal was much more reasonable than it is now. I know with silver, the consumption for jewelry is not everything, with a good proportion going to industry such as photography, electronics, etc. but I can say that for me, the price has made it into a valuable albatross, i.e. wastes space in my limited display real estate as it moves at a glacial pace even at melting price but IS worth a good chunk of change (when it hits $40, I will most likely send it to a refinery).
With reference to silver, I don't see total demand going up for the physical commodity as jewelry consumption is down but perhaps solar panel and other industry use is up. IMHO, demand is in speculators using it as a hedge against fear of an economic meltdown or complete crashing of the dollar. To Donald's well thought out and tenable opinion on oil's recent meteoric rise in relation to the crashing dollar, I ain't seeing it. I mean the dollar has strengthened against the yen(for obvious reasons) but has lost a few percentage points against the CAD and AUD and a bit more to the Euro. However, commensurate to the near 20% oil has climbed in the past 6 weeks and a few more indications of potential recovery in the economy, a future with higher interest rates is looming ever closer. Higher interest rates may mean more foreign investment in the good ole US of A, and with a buying of treasuries and a strengthening of the dollar, an implosion of the commodity run up.
I heard mentioned an idea for a trade pairing SI/SLV long with an equal amount of money short GC/GLD as silver is at least being used up in industry, whereas gold is just being collected in addition to historical ratios of the 2 still favoring former equilibrium by silver going up relative to the price of gold or vice versa. Caveat on that is that silver is more volatile thus you could be shaken out of your positions in the day to day melee and really, it may be a bit overdone, at least on the short term. Check out attached weekly chart of the ratio to see what I mean, GLD has come in a great deal already.
For me, I still have some of each of the physical commodities and if playing with the stocks/futures intraday, it is still to the long side until some strong evidence of a trend reversal emerges.
Good luck to all whether buying or shorting or just leaving the metals alone. Off to get some Thai treats to eat as the Bangkok evening calls.
(speaking of Costa Rica) The Arden Sister's in today's MarketWatch on PM's. A good read. They single out inflation, but they are writing for their masters. Privately, i am sure they would talk about fears of sovereign debt default. Watch the watchers pile on buying gold and silver tomorrow.
