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Ted Butler on the recent takedown of gold and silver

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  • Mon, Jul 05, 2010 - 06:54pm

    #31
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    Re: Ted Butler on the recent takedown of gold and silver

On an iPhone, so this will be brief: all potential investments, commodities, or assets are subject to risks of bubbles and changes in valuation. What alternative wealth preservation technique do u suggest if not PM’s? What other asset or commodity will perform better than PM’s? The problem is that there is no better option in my book. Shall we do nothing because Gold will possibly drop in value? Everything else is worse!

  • Mon, Jul 05, 2010 - 06:57pm

    #32
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    Re: Ted Butler on the recent takedown of gold and silver

[quote=JAG]

But hey, I’m not trying to convince you of anything, I was just submitting another scenario for consideration. My opinion is worth exactly what you paid for it; nothing. But my time is worth something to me so I will not bother in the future.

[/quote]

Please do not do that Jeff.  I find your contrarian perspective invaluable around here.  At least for me, what makes this site valuable is hearing different perspectives from everybody.  I usually learn a lot more from people I disagree with than those to which I agree.

Keep it up!!!

  • Mon, Jul 05, 2010 - 07:52pm

    #33
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    Re: Ted Butler on the recent takedown of gold and silver

I too appreciate the contrarian view for fear that we all end up convincing each other and developing a myopic and mutually supporting group think that PMs are the way to go.

On the other hand, given what we know about the future (the premise of the CC), I feel like it is wise to do something different with my money.  What are the options:

1.  Cash:  Great liquidity, no return, inflation, hyperinflation, bank runs, insolvent FDIC.  NO

2.  Stocks:  Really?  NO

3.  Bonds: Munis?  Ha!  T-Bills? Maybe, but inflation is still a risk and so is a cliff event that sends the economy in the tank.  NO

4.  Real Estate:  Some investment here may be in order, but its not portable, not liquid, subject to price inflation, taxed, etc.  You can’t eat it and can’t sell it to people who are broke.  Its not easily subdivided and so. . . NO.

5.  Commodities:  I’ve done that too, but they are subject to volatility in the same manner as PMs.  

My point here is that Gold/Silver has moved up the ladder as the least worse choice.  

Some advantages I see:  

1.  I can put it in my pocket and take it with me.  

2.  Really long history and track record.  You cannot ignore this.

3.  International and universally understood and valued.

4.  Not denominated in any one currency.  If Euro or Dollar collapses, Gold blows it off.

5.  Easy to sell and trade.  (Compared to many other forms of wealth.)

In short, its got all the advantages of currency with fewer risks.  The risks you have pointed out, are shared with all other asset classes.

 

  • Mon, Jul 05, 2010 - 08:14pm

    #34
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    Re: Ted Butler on the recent takedown of gold and silver

JAG,

You’re wrong with my outlook or expectations of my PM’s.  I’m not looking for profit unless you mean that it will be worth something in the future.  And that could mean, $.01 per oz.  The reason I own PM’s is as a hedge against everything else that I own not being worth a crap.  But if you’re doing things properly, you’ll have diversified to where if an investment tanks, another will pick up the slack.  But if PM’s become worth nothing, they’ll still sit in my safe (or in Perth or Switzerland or Toronto or ?) and go to my children and grandchildren when I pass.  With this, I’ll have done my due diligence and educated them on what PM’s are, and how they can/should/will be used in the future.  And again, they’ll hold onto them for their children and so on, and so forth.  I NEVER PLAN to cash mine in!  So, NO….I’m not looking for profit.  In fact, I buy the exact same amount of PM’s every month, on the same day.  I don’t ever think of the price in terms of..”should I wait a day or two to see if it comes down?” because…..I DON’T CARE!  

If you can’t get yourself to this level of thought concerning PM’s, then again, it’s not for you.  Stick with your paper investments/currencies and try to time it right.  

If you’d like to get rid of some of your PM”s, my kids would love to have it!  Again, no joke.  

Take it easy.

  • Mon, Jul 05, 2010 - 08:31pm

    #35
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    Re: Ted Butler on the recent takedown of gold and silver

[quote=JAG]

[quote=agitating prop]

One of the reasons you gave for gold prices to collapse, actually supports the counter argument– comparing gold based derivatives to mortgage based derivatives. Because there is a something like a fractional scheme going on in paper gold, the price for the real thing will be driven much higher. 

[/quote]

Kind of like how home prices exploded in 2007-2008 when the mortgage derivative market imploded? 

But hey, I’m not trying to convince you of anything, I was just submitting another scenario for consideration. My opinion is worth exactly what you paid for it; nothing. But my time is worth something to me so I will not bother in the future.

 

[/quote]

Mortages were broken up and sold, in  mortgage backed securities, but that didn’t drive the price of houses up. The price of houses went up because credit was too easy.  It’s the same thing that put upward pressure on gold bullion.   Paper gold is different…and many people who have their money in gold ETF’s, or unallocated certificates could get stung. Real estate is at least, real. Gold in derivatives can largely virtual, digital, and potentially nonexistent.  So you’re right to caution people about this form of “gold”, but wrong to conflate it with actual bullion.

  • Mon, Jul 05, 2010 - 09:25pm

    #36
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    Re: Ted Butler on the recent takedown of gold and silver

[quote=LogansRun]

 I NEVER PLAN to cash mine in!  

[/quote]

LOL, 

Yup , given this context, you are absolutely right, and I can think of no better use for PMs than the way that you described. Unfortunately, I’m not in your boat (or is it a yacht? lol). I’m going to need every penny of purchasing power to get my family through this depression.  While I admire you for saving for the future generations of your family, I’m more worried that there might not be any future generations of my family.

Take care buddy.

 

  • Mon, Jul 05, 2010 - 09:41pm

    #37
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    Re: Ted Butler on the recent takedown of gold and silver

Rector,

Obviously there is no easy answer to your inquiry. Survival depends more on one’s ability to adapt and use their brain, than it does on a financial asset. Protecting purchasing power in the markets is best achieved by what I call the Puke factor: If owning an asset makes you want to puke, then your purchasing power is most likely safe for a given period of time (see Puke: The Best Investment for more on this observation).

Nobody can prepare for all possible scenarios, but what one should aim for is to be one step ahead of the crowd. The way to do this is to observe what the crowd’s expectations are, and then turn 180 degrees and look at what the crowd is not expecting and invest accordingly. Rinse and repeat.

Best….Jeff

  • Tue, Jul 06, 2010 - 08:45am

    #38
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    Re: Ted Butler on the recent takedown of gold and silver

Yeah, I’m in a different position than most, and I thank God every day that I’m in that position.  But it could change at any time and if it does, then I’ll have my preps to fall back upon.  And my PM’s are just one “prep” of many that I’ll have that will hopefully get us through.  

But one thing I’ll say in regards to your worries of “everyone’s piling in” or “dumb money is here”……..I have many acquaintances, friends, neighbors that are worth anywhere from $5m to $1b+, and only ONE of them has bought physical PM’s.  ONE!  And guess how much he’s worth and how much he’s bought…………W/$25m……B/$100k               

THAT’S IT!

Yes, many of them could be hiding their stashes, but we’ve talked and I’ve told them that I own (only because I  keep BARELY any / less than $15k at todays value / on premises) and have educated many on the value of keeping some of their worth in PM’s.  It would amaze you if you could see their confusion when I hold a Gold Eagle up to their faces….LOL….it really is hilarious!  For me, I get that twinkle in my eye, like I want to roll around in them.  They, on the other hand, stare at it like it’s a piece of plutonium.   So NO, I don’t think any of them have gone out and bought without me knowing.  

So, if over 100+ Multi Millionaires/Billionaires aren’t buying the PM’s, then who is?  I think there’s more bluster out there than people actually buying.  I’m sure there are some small purchasers taking place quite often.  I actually think people of lesser net worth are catching on faster than people of great net worth (and I mean net worth in $ form…..not heart).  The “little man” is feeling the pressure where as the elite have no clue what’s taking place.  Very similar to the French Revolution or other revolutions in which the Ruling Class were having tea and crumpets as the peasants were breaking in their doors from starvation.  

Anyway my point is:  The MSM and bloggesphere are going nuts about PM’s.  The average american, not so much.

We’ll make it through as a community here and as things progressively get worse, it’ll be nice to come here and chat.  Take care of your family as best as you can.  And if you FEEL PM’s aren’t the way to do that, then move out of them and invest in whatever you feel will keep them safe.  It’s really that simple.  

Take care yourself! 

 

[quote=JAG]

[quote=LogansRun]

 I NEVER PLAN to cash mine in!  

[/quote]

LOL, 

Yup , given this context, you are absolutely right, and I can think of no better use for PMs than the way that you described. Unfortunately, I’m not in your boat (or is it a yacht? lol). I’m going to need every penny of purchasing power to get my family through this depression.  While I admire you for saving for the future generations of your family, I’m more worried that there might not be any future generations of my family.

Take care buddy.

 

[/quote]

  • Tue, Jul 06, 2010 - 10:58am

    #39
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    Re: Ted Butler on the recent takedown of gold and silver

[quote=LogansRun]

But one thing I’ll say in regards to your worries of “everyone’s piling in” or “dumb money is here”……..I have many acquaintances, friends, neighbors that are worth anywhere from $5m to $1b+, and only ONE of them has bought physical PM’s.  ONE!  And guess how much he’s worth and how much he’s bought…………W/$25m……B/$100k               

THAT’S IT!

[/quote]

Exactly!

I just got back from a wedding on the East Coast.  Lot of very knowledgeable professionals including tax and real estate lawyers in Manhattan, Wall Street types, economics professor, financial advisor, PhD in biochemistry, etc.  Only one had bought anything related to gold and he was into gold stocks, not bullion.  They’ve all heard about it and some of them are thinking about it but only one has pulled the trigger on it and he’s not even in physical gold.

Do I think gold and silver can drop down further this summer?  Highly probable.  Do I think it will stay down?  No. 

That being said, I also appreciate your contrarian views Jeff.  They keep me thinking.

  • Tue, Jul 06, 2010 - 12:55pm

    #40
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    Re: Ted Butler on the recent takedown of gold and silver

[quote=JAG]

Rector,

Obviously there is no easy answer to your inquiry. Survival depends more on one’s ability to adapt and use their brain, than it does on a financial asset. Protecting purchasing power in the markets is best achieved by what I call the Puke factor: If owning an asset makes you want to puke, then your purchasing power is most likely safe for a given period of time (see Puke: The Best Investment for more on this observation).

Nobody can prepare for all possible scenarios, but what one should aim for is to be one step ahead of the crowd. The way to do this is to observe what the crowd’s expectations are, and then turn 180 degrees and look at what the crowd is not expecting and invest accordingly. Rinse and repeat.

Best….Jeff

[/quote]

Hmmmm, as a contrarian your investment advice doesn’t quite work for me….for example, what makes me want to PUKE is the idea of owning any stocks with atrocious p/e ratios.  Running my handy stock screener I can come up with 347 stocks with p/e ratios over 50 (!!!).

I notice, Jeff, that you have strong emotions about gold ownership, which is fine, but I think that makes it an unsuitable asset for you to include in your portfolio.  Investments are best served cold.

For me it would be a lot easier to come up with a lengthy set of passionate reasons why people should not be investing in companies with p/e’s north of 50, heck 25 (where there are some 913 to choose from)  and why that probably represents dumb money, or why I consider 30 year bonds to be a fool’s game, but that’s just.

However, I try to approach all of this as coldly as I can because emotions and decisions, especially investment decisions, is a bad mix for me.

To each their own though.

 

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