Buy gold or pay off mortgage?

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  • Fri, Sep 25, 2009 - 01:44pm

    #1
    Corporal Jones

    Corporal Jones

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    Buy gold or pay off mortgage?

Hi,

I’m new to this website but the discussions have really struck a chord with me.  I thought I’d reach out for some advice.  I don’t currently have many investments as I’ve concentrated in paying my mortgage off.  Should I continue to do this or should I diversify into gold, commodities etc.

I’d be very grateful to hear peoples’ thoughts on how folk in my situation can best prepare themselves for the uncertain future that seems to be fast approaching.

Cheers.

 

  • Fri, Sep 25, 2009 - 02:29pm

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

Hi Corporal Jones,

Welcome to the site. I’ll take a stab at your question.

As nobody can know the future, probably the best approach is to diversify your assets in preparation for the various possible outcomes. If you have never bought physical gold/silver before, its probably wise to do at at least once so that you are comfortable with the process. There are also many other “peace of mind” preparations that you should familiarize yourself with. They are listed in this thread:

Consolidated List of Links to Existing Preparation Threads

Its easy to become overwhelmed with all the information, but just remember that you have time to make any changes that you deem appropriate.

Also, paying off your mortgage is an excellent idea no matter what happens or doesn’t happen.

All the best…Jeff

  • Fri, Sep 25, 2009 - 04:23pm

    #3
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

I would add that if you are of the opinion that we are in for significant price inflation in the future, and you also hold a fixed rate mortgage, that you are better off paying the minimum payment each month.  If the dollar continues to weaken, your monthly mortgage payment will decrease in real purchasing power terms as the value of the dollar declines.  Of course that line of thinking works in reverse if we experience massive deflation….which could be hedged to some degree by owning gold, which typically does well in deflation.

  • Sat, Sep 26, 2009 - 09:02am

    #4
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

And to add to crazyhorse, if inflation occurs as he states gold/silver will become more valuable.  As has been stated many times, during the Wiemar Republic episode people were buying whole apartment buildings with 1oz of gold.  Not that this will happen here but why not hedge yourself.  I honestly couldn’t imagine being without my PM’s.  Pray you never have to use them but have them on hand just in case.  You can always sell them if you need them later to pay off your mortgage.  If you never use them, your children will be a damn bit more excited to see gold come spilling out of the safe than paper money when you pass!

Welcome to the site!

  • Sat, Sep 26, 2009 - 12:31pm

    #5
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

Hey Corporal Jones!,

Welcome to the sight. IMO no portfolio should be without some position in PMs, no matter how small that position might be. JAG also makes a good point in that it would be a good idea to simply familiarize yourself with the process of buying PMs. Call some PM dealers in your area. Find out what their rates are. Find out what their personailites are like. Drive out to meet them and buy a single oz. of silver for $20 or so just to see what it feels like. 

As much as I respect the posters of this forum, (including myself) I probably wouldn’t make any big investment decisions based on their advice alone.

Just a quick comment on crazy horse’s comment:

[quote=crazyhorse]

I would add that if you are of the opinion that we are in for significant price inflation in the future, and you also hold a fixed rate mortgage, that you are better off paying the minimum payment each month.  If the dollar continues to weaken, your monthly mortgage payment will decrease in real purchasing power terms as the value of the dollar declines.  Of course that line of thinking works in reverse if we experience massive deflation….which could be hedged to some degree by owning gold, which typically does well in deflation.

[/quote]

In my opinion the deflationary scenario would be far more painful to someone in CJ’s shoes than the inflationary one were he to protract his loan payments to the maximum extent possible. I’d much rather feel foolish in an hyper inflationary environment about paying off my loan too quickly than to be weighted down and possibly ruined by crushing debt in a deflationary environment.

Also, CH’s point about mortgage payments “decreasing in real purchasing power” is true but only relevant if CJ’s income also increases in tandem with or ahead of inflation.

At the end of the day, whether it ends up being deflation or inflation, debt still is and always has been a claim on future earnings.

  • Sat, Sep 26, 2009 - 02:14pm

    #6
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

I too am a new to the site…I/we own small apartment communities and we have recently decided the stock market isn’t for us and we’ve paid off two small apartments with a nice increase in income…some friends have said they thought it wasn’t a smart thing to do as stocks will go up…for us, however, it feels right and our apartments are mostly student occupied and in great locations…at some future date we plan to sell them little by little holding the notes with a 30 to 40% down…we will be the bank and it appears the only people who got money were the banks…again it just feels right although very conservative.

  • Sun, Sep 27, 2009 - 10:03am

    #7
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

Welcome!

Great investment IMO.  We have many rental properties and anything that’s bringing in cash flow is a good thing.  Next you may want to look at properties with a little land.  Not talking acres but something with a yard at least.  Diversification in property ownership is as important as diversification in any other investment.

Also, I appreciate your attitude toward the market.  Many people on this site are investors in Wall Street but myself, I couldn’t stomach it any longer.  And as you stated “it feels right”, I agree!  Just like playing on the playground with a bully…You know it’s not right to continue to play with him but you still do it…..not right.  I can’t morally invest in a system that has those people involved no matter how much money I may lose.  

Cheers!

 

[quote=rdkeene]

I too am a new to the site…I/we own small apartment communities and we have recently decided the stock market isn’t for us and we’ve paid off two small apartments with a nice increase in income…some friends have said they thought it wasn’t a smart thing to do as stocks will go up…for us, however, it feels right and our apartments are mostly student occupied and in great locations…at some future date we plan to sell them little by little holding the notes with a 30 to 40% down…we will be the bank and it appears the only people who got money were the banks…again it just feels right although very conservative.

[/quote]

  • Sun, Sep 27, 2009 - 09:47pm

    #8
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

LogansRun wrote:

As has been stated many times, during the Wiemar Republic episode people were buying whole apartment buildings with 1oz of gold.

Is that really true?   I can understand how 1 oz of gold could pay off an apartment buildings debt that was incurred before the hyperinflation but it makes no sense to me for that to be the case in general.  Why would someone sell an apartment building (clearly has utility value) under any circumstances for only one once of gold?  Gold can not provide shelter from the elements and is not necessary for life.

The only way I could imagine this happening is if the market for gold was like the market for tulips in Holland during tulip mania.

  • Mon, Sep 28, 2009 - 01:48am

    #9
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

Gold may not provide shelter from the elements or be necessary for life but it is liquid and easily transportable (unlike the apartment buildings). A family that might still have outstanding debt tied up in the apartment building, see the deterioration in the economic and political situation in Germany, and decide to cut their losses and leave the country at that time, might sell the building for that price needing the gold to buy transportation out of the country … or they may just have needed the gold to buy food to survive.  

  • Mon, Sep 28, 2009 - 02:57am

    #10
    Peak Prosperity Admin

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    Re: Buy gold or pay off mortgage?

AO wrote:

Gold may not provide shelter from the elements or be necessary for life but it is liquid and easily transportable (unlike the apartment buildings).  A family that might still have outstanding debt tied up in the apartment building, see the deterioration in the economic and political situation in Germany, and decide to cut their losses and leave the country at that time, might sell the building for that price needing the gold to buy transportation out of the country … or they may just have needed the gold to buy food to survive.

But the situation you describe is not buying an apartment building for 1oz of gold.  If you have already have a fixed debt, you may be able to pay it off in the future with 1oz of gold in hyper inflated dollars, but that is not the same as buying an apartment building for 1oz of gold.  Nor is an example of a jewish family that sells their assets for below market value because they fear for their life and property.

Does anyone here really think that in America’s future they will be able to BUY a home (not payoff an already incurred debt) with a few ounces of gold?  I don’t see how that is ever going to happen.

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