buying gold or silver

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  • Wed, Nov 12, 2008 - 04:38pm



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    buying gold or silver

As dollar deflates in value… is it wise to invest in gold and silver?

Which is better and what is the best way to buy?

Thank you.

I don’t have alot of cash to invest, but would like to put my money in the best/safest place.

Thank you,


  • Wed, Nov 12, 2008 - 05:34pm



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    Re: buying gold or silver

Hi Dave,

If I’ve said it once, I’ve said it a thousand times — though it usually falls on deaf ears considering most of the readers of even this site are still focused on "making money," "investing," and/or "profiting off the crash."

The only place to invest your money is in "things" — real, tangible items that have an intrinsic value to you in your life and for your life. The old economic and financial model (which isn’t that old at all) is slowly coming to an end and the faster each individual (consumer, investor) shifts to the new model, the better.

Even gold and silver, things regarded as valuable stores that obviously pre-date our current model, are essentially superfluous symbols that only might get you what you want at some point in the indeterminate future. Why? Because they rely on masses of people who all accept and agree to the functioning of a certain way of doing things. Capitalists usually take great glee in "disproving" the cliche about not being able to eat gold. However, food will never not be valuable, nor will fresh water, nor will cheap energy. Gold and silver’s value relies upon a man-made (and therefore artificial) system that must be accepted on faith to function. Early primates didn’t one day "decide" that they needed food or water to survive. That’s the difference.  

I think it’s high time that our culture shift away from being constantly sucked into the future by the illusion of future wealth and move towards immediatism. Creating the ultimate today instead of fearfully betting on tomorrow. Life’s not a game, it’s all we have.

  • Wed, Nov 12, 2008 - 05:47pm



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    Re: buying gold or silver

Again, I essentially agree with you mainecooncat.  But here’s a hypothetical scenario.  Say someone wants to buy a piece of land or a home, but can’t afford to at current prices.  Say they are saving money so that they can buy land or a house at a future date once they’ve saved enough or once prices have come down sufficiently.

That person must make a decision about what to do with the money he/she is saving along the way.  Do they store it in US dollars?  In T-bills?  In gold and silver?

The idea of preserving one’s savings to be used in some productive form at a later date is a wise practice that has always been followed by humans.  Granted, earlier on those savings may have been in the form of food or energy rather than money.  But most people are not living on farms or don’t have enough land to grow a significant amount of food.  Money is the way they store value, for better or for worse.

It’s definitely high time that our culture shifts away from the illusion of future wealth and moves towards satisfying current needs.  But that is a transition that takes time.   

Dave, to answer your question: I don’t know whether gold and silver are a good store of value during deflation. Some say yes, others say no.  I recently posted a question about this to the subscribers forum, and there’s a bit of discussion going on there.  There have been several threads in the Discussions forum on this and related topics, including how to buy gold.  Check around the site – there’s lots of great info here! 

  • Wed, Nov 12, 2008 - 06:02pm



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    Re: buying gold or silver

IMHO cash is about the best thing to own these days, at the moment it is anyway. $1000 in cash today buys you a lot more of pretty much everything than it did a few months ago.

This (perhaps) is only going to continue while this period of deflation continues, cash goes up in value because everything else is going down. So perhaps you are not wrong maincooncat, just a bit early because there is a good chance that you will be spot on in the not too distant future and cash should be spent on things you will need to get by.

meanwhile there is a good case to argue for holding some gold to preserve some of your wealth (not as an investment) should the whole sh*t house go up in flames, there are a lot of different posts on this site about buying gold. Chris has given some very good info on this

an please remember, i am certainly no expert and in these unprecedented times even the experts are making educated guesses and giving conflicting opinions, no one has a crystal ball (that works) and really knows for sure

having said that, i think we can be sure of one thing, change. And probably some shocked disbeleif as well

good luck everyone


  • Wed, Nov 12, 2008 - 06:25pm



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    Re: buying gold or silver

I was going to create a post relating to the article by Jon Nadler below, but it’s probably just as appropriate to place it here: This is from


 Not far behind oil prognosticators are doomsday scenario scriptwriters. Why, some of them have been calling for this year’s developments to have taken place in….1981. Also in 1987, 1991, 1999, 2001, and 2006. The ‘prefect storm’ was knocking on the door each and every time. Only it never rang the bell. As a result, some interesting investment results came about. Marketwatch’s Mark Hulbert fills us in on the details (and dangers) of calling the End of Days one time too often:

Sometimes you can’t win for losing. Just ask Harry Schultz. Or Howard Ruff. Or Jim Dines. All three advisers, each of whom has been editing an investment newsletter at least since the 1970s, have built their investment careers by questioning conventional wisdom’s trust in the soundness of the financial system. Not surprisingly, all three have been vociferous champions of gold and other precious metals.

You’d think that they would have cleaned up over the last year, since the disintegration of the financial system in recent months is almost exactly what they have been warning us about for decades. But you’d be wrong. Of the 181 newsletters on the Hulbert Financial Digest’s monitored list, these three advisers’ newsletters are in 173rd, 175th, and 176th places for year-to-date performances through October 31, with losses ranging from minus 64.9% to minus 70.0%. How can this be? The easy answer is that these advisers didn’t put into their model portfolios the securities that would benefit from the financial collapse that they envisioned. But that’s not a very satisfying answer. Why didn’t they construct their model portfolios around investments that would rise when the rest of the financial world was going down? The answer, as I see it, has to do with how difficult it is to forecast when a collapse will actually take place.

It’s one thing to know that the financial system is shaky, and quite another to forecast when it actually will crumble. And these advisers would have lost even more over the last several decades had they bet aggressively on a collapse every time they thought that one was imminent. In essence, these advisers came face to face with John Maynard Keynes’ famous pronouncement that "the market can remain irrational longer than you can remain solvent."

In fact, it turns out to be surprisingly tricky to construct a portfolio to profit from an anticipated collapse. You can’t just own securities that will skyrocket during such a collapse, for example, since they will lose huge amounts during the months and years you wait around for that collapse to occur. As a result, advisers who worry about a collapse sometimes end up constructing portfolios that are not all that different from those of other advisers who are more sanguine about the health of the financial system. The ironies are many.

 Researchers refer to the consequences of these dynamics as the "limits to arbitrage." One famous study conducted in the mid 1990s by Harvard economist Andrei Schleifer and University of Chicago professor Robert Vishny, for example, found that arbitrageurs more often become momentum players rather than hedgers: Rather than betting against an apparently obvious mispricing, they often will bet that a mispricing will continue and become even more extreme. That’s the theory, at least. And it only partially applies in individual cases such as the letters edited by Schultz, Dines and Ruff. But, clearly, these three advisers would have constructed far more profitable model portfolios this year if they had known that the financial collapse they have so long warned us about would happen in 2008."

One could easily add some other familiar names to the trio, but let’s not dwell on the obvious. More importantly, the lesson from the above-mentioned dynamic is that anyone telling you today that "this is the turning point" has about as much of a chance of getting it right as the three wise men in question. Just accept the market. You might miss the bottom by as much as you likely missed the top (on average, 5 to 10 percent, if you are lucky) but you won’t be blindsided by missing it altogether by stubbornly sticking to shopworn predictions.

Happy Crystal-Ball Gazing.
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