15-20 year range: gold or silver?

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rayne's picture
rayne
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15-20 year range: gold or silver?

I would love to hear some opinions on this:

We are starting a college savings fund for our 2 year old and thinking about stacking some coins. We can purchase about $200 worth of bullion per month from the local coin shop. If you were in our shoes would you buy gold, or silver, or alternate between the two? I'm leaning towards silver.

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thatchmo
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stack on!

Wow, rayne.  Simple question, perplexing probabilities...Wouldn't it be something if we could feel even slightly confident in predicting where we'll be at in 16 years?  As I have zero expertise in this subject, I'll be happy to share my insights, which I'll keep short.  If silver ever gets back to its traditional ratio to gold- 7-1 (?), it will be worth a bunch.  Some folks predict gold going to stupendous levels ($10K/oz.) if it is ever used to back the dollar again.  Either way, in your time frame, I'd wager you can't go wrong.  With your $200/month allotment, it might be more fun to go with silver for monthly purchases.  You have a lucky child.  Aloha, Steve.

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Adam Taggart
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Both

I would go with both, rayne. It's easy to fall in love with the longterm outlook for silver, but the truth is no one knows for certain how the two PMs will appreciate vs each other. And if PMs ever get re-monetized, odds are substantially higher it will be to a gold standard than a silver one (as the gold standard is more familiar to our country's monetary history; and in times of crisis, you go with what you know)

I'd advise putting $200 away each month, but not necessarily purchasing the PMs immediately. $200 buys you less than 1/8th of an ounce of gold at today's spot price. And premiums/transaction costs are substantially higher when buying gold in fractions of ounces (the smaller the fraction, the higher the premium).

So you may want to save your set-aside cash for a few months & then buy as much gold as you can with it. And then save up a few months more cash & then buy silver. Yes, you're reducing your # of windows for dollar-cost averaging; but you're reducing pricey transaction costs, and you have such a long timeline that there will be enough DCA windows to matter.

And more than likely, as you mature in your career, you'll be able to increase the monthly $ amount, enabling you to make larger and more frequent purchases.

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Dogs_In_A_Pile
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I'd take the $200 and

I'd take the $200 and preiodically trade in the direction of price movement of GLD without care or bias for the direction of the move - Calls up, Puts down.  Then you don't have to worry about Dollar Cost Averaging because (assuming you are trading correctly) you are making a profit regardless of the direction of the price movement.  After accumulating cash, then buy gold a few times a year when the charts tell you it is positioned for an upward move, but more so guided by the fact that gold will never be worth zero. 

If you have a couple of ounces purchased at $1700 an ounce, but you take profits out of a Put option trade on GLD as the price drops to $1600, you have quite effectively lowered your basis.  If you buy twice as many Puts to cover your original position, you make multiples on the move and will eventually have a basis of zero.

 

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Thanks Dogs...

I only buy non-Family Gold anyways.... 

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Dogs_In_A_Pile wrote: I'd
Dogs_In_A_Pile wrote:

I'd take the $200 and preiodically trade in the direction of price movement of GLD without care or bias for the direction of the move - Calls up, Puts down.  Then you don't have to worry about Dollar Cost Averaging because (assuming you are trading correctly) you are making a profit regardless of the direction of the price movement.  After accumulating cash, then buy gold a few times a year when the charts tell you it is positioned for an upward move, but more so guided by the fact that gold will never be worth zero. 

If you have a couple of ounces purchased at $1700 an ounce, but you take profits out of a Put option trade on GLD as the price drops to $1600, you have quite effectively lowered your basis.  If you buy twice as many Puts to cover your original position, you make multiples on the move and will eventually have a basis of zero.

Dogs,  wonder what your time frame is for such trading?  Are you following hourly, daily, weekly or monthly signals?

As always, everyone needs to have a core position in gold.  Trading gold is one of the most devlishly tricky things to attempt.  Not for the weak of heart or casual types.

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SailAway
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Re: Trading price movement.
Dogs_In_A_Pile wrote:

I'd take the $200 and preiodically trade in the direction of price movement of GLD without care or bias for the direction of the move - Calls up, Puts down.  Then you don't have to worry about Dollar Cost Averaging because (assuming you are trading correctly) you are making a profit regardless of the direction of the price movement.  After accumulating cash, then buy gold a few times a year when the charts tell you it is positioned for an upward move, but more so guided by the fact that gold will never be worth zero. 

If you have a couple of ounces purchased at $1700 an ounce, but you take profits out of a Put option trade on GLD as the price drops to $1600, you have quite effectively lowered your basis.  If you buy twice as many Puts to cover your original position, you make multiples on the move and will eventually have a basis of zero.

 

Dogs,

It's not the first time you make it sounds like you know the general trend of the market, I'm wondering how you can possibly know this? Puts & Calls have expiration dates if I'm not mistaken so you have to be right over a short period of time, not so easy.

Thanks

 

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Dogs_In_A_Pile
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Fibonacci intervals but no solfeggios
cmartenson wrote:
Dogs_In_A_Pile wrote:

I'd take the $200 and preiodically trade in the direction of price movement of GLD without care or bias for the direction of the move - Calls up, Puts down.  Then you don't have to worry about Dollar Cost Averaging because (assuming you are trading correctly) you are making a profit regardless of the direction of the price movement.  After accumulating cash, then buy gold a few times a year when the charts tell you it is positioned for an upward move, but more so guided by the fact that gold will never be worth zero. 

If you have a couple of ounces purchased at $1700 an ounce, but you take profits out of a Put option trade on GLD as the price drops to $1600, you have quite effectively lowered your basis.  If you buy twice as many Puts to cover your original position, you make multiples on the move and will eventually have a basis of zero.

Dogs,  wonder what your time frame is for such trading?  Are you following hourly, daily, weekly or monthly signals?

As always, everyone needs to have a core position in gold.  Trading gold is one of the most devlishly tricky things to attempt.  Not for the weak of heart or casual types.

Chris -

Smallest chart I use is a 233 minute, but I NEVER enter a trade without looking at all of them...233 minute, Daily, Weekly, Monthly.  Entering a position based on the longer interval charts eliminates the day to day whipsaw you see within shorter time frames and in the vast majority of cases, when the 233 move is indicated on the D, W and M charts, you can be reasonably assured that it is going to run in that direction for some period of time.  Of course, you need to have a specific plan to follow regarding closing the position when it doesn't go the way you think it should have.  Cat and I have a very detailed rule set we follow explicitly for every trade - no exceptions.  Some rules are pure indicators and charting, some are driven by general market/event awareness, most is trading discipline.  For example, if we have an open position on a company with an earnings release date coming up we will ALWAYS close the trade several days before the earnings announcement - regardless of how much the indicators may show there is "room to run". 

Too many details to cover adequately in a single post, but needless to say, it's not a casual approach and it took years of practice to get right.  We like where we are sitting now.

Agree 100% that everyone should have a core position in gold - but from what I've read here over the past three years, I think our reasons are different from most.  We aren't counting on gold being worth "more" X years from now and looking at it in the classic Return On Investment light.

We are only counting on gold not being worth zero.....

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SailAway
SailAway wrote:
Dogs_In_A_Pile wrote:

I'd take the $200 and preiodically trade in the direction of price movement of GLD without care or bias for the direction of the move - Calls up, Puts down.  Then you don't have to worry about Dollar Cost Averaging because (assuming you are trading correctly) you are making a profit regardless of the direction of the price movement.  After accumulating cash, then buy gold a few times a year when the charts tell you it is positioned for an upward move, but more so guided by the fact that gold will never be worth zero. 

If you have a couple of ounces purchased at $1700 an ounce, but you take profits out of a Put option trade on GLD as the price drops to $1600, you have quite effectively lowered your basis.  If you buy twice as many Puts to cover your original position, you make multiples on the move and will eventually have a basis of zero.

 

Dogs,

It's not the first time you make it sounds like you know the general trend of the market, I'm wondering how you can possibly know this? Puts & Calls have expiration dates if I'm not mistaken so you have to be right over a short period of time, not so easy.

Thanks

 

SA -

If you look at a Monthly, Weekly, Daily and 233 minute chart of the DJIA, NAS, S&P, etc.,  you can always see what the general trend of the market is.  You have to have event awareness of things that may move the market in the short run and trade accordingly - i.e., bad idea to get into a trade in front of a scheduled FOMC meeting/announcement or a company's earnings release date.

Also, if you study the general market year over year, you will see a very strong correlation to the overall direction the market moves over the course of a year.  I expect the market to get choppy and volatile in the summer because the big money is out of the market on vacation at the Hamptons and it is subject to swings on lower volume trading.  I expect a fade in the fall into the end of October.  I expect that if there wasn't a major correction or meltdown in Sep/October that November is going to be generally an "up" month.

And when the current market indicators match the expectation for that time frame you can be assured of profitable trading opportunities.  Key to all of this is a market neutral approach.  Up or down, I don't care, as long as the price of the stock or index is moving.

Regarding options, yes, Puts and Calls have expiration dates, but if you buy time you mitigate the loss of Time Value.  In other words, I am purchasing March 2013 Puts/Calls right now.  I will lose very little time value in the option position as the trade starts/continues to move.

And it's a minor point, but I approach every trade with the mind set of being right, right now.  If it doesn't start going in the direction I expected it to, I'm not going to stick around and hope it comes back.  I am going to close the position (subject to our trading rule set), thereby minimizing the loss, figuring out if I did the trade incorrectly or if something else drove the reversal and move on.  In the long run, you don't accumulate wealth in the market by maximizing your profitable trades, you do so by minimizing trades that aren't profitable.

But like I mentioned in my response to Chris, it took years of practice trading and tip toeing in to get to a point where we are comfortable with what we are doing.

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It helps if ...

You don't have to be a rocket scientist to use Dogs' method.  But it helps if you can operate a nuclear reactor.  cool

Travlin 

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Doubting Thomas

Dogs,

How does one reproducibly know, in advance, what the "general trend" in the market is going to be?

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Dogs_In_A_Pile
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Doubt is healthy....
robbie wrote:

Dogs,

How does one reproducibly know, in advance, what the "general trend" in the market is going to be?

By studying what the trend has been year over year going back for as far as you have data.  Then bounce that up against what the charts show you - in this case, the DJI is up against a pretty hard potential resistance level.  The Bollinger bands have pinched in over the past few weeks (yesterday's pop notwithstanding).  We are headed into a weekend, a lot of things can happen over the weekend, but absent an earth shattering event somewhere, I would expect a pull back on Monday.  If I were to get into a position this afternoon, it would likely be a Put option, but I haven't looked at the charts for a specific stock or index so there may not be a trade entry.

Remember, it's an "expectation" of the direction of the movement coupled with matching indicators that give you the potential trade.  Expected future moves based on historical moves are only a part of the approach.  I must have indicators that are confirming the expectation. 

If I saw the OEX topped above 80 on StochRSI (like it currently is), with MACD turned down and opening on a 233 minute chart (like it currently is), I would expect to see this set or setting up on the D and W charts, possibly up to the M.  With yesterday's pop, the 233 shows a big white candle for yesterday and a flying flag pattern set up (so far) for today.  A flying flag candlestick pattern typically indicates an upcoming downward move.  If that were to fade a bit this afternoon and look like it were to close with a tweezer or hanging man pattern I would have indicators on the 233 that confirm the expected downward movement direction.  The Daily chart shows the price candle outside the top Bollinger Band - candles need oxygen to burn and there is oxygen inside the Bollinger Band.  Given where the other indicators are, I expect the price to move down in the next day or so.  The Weekly is up against the top Bollinger Band, but still inside and up against pretty substantial potential resistance - again, an indicator that the next direction is to the downside.  Pretty much the same thing on the Monthly chart.

Couple all of that with the expectation (based on market history) that the market generally drifts down in September/October and you have indicators matching expectations and a potential OEX Put option trade entry position later this afternoon.

Like I said before, it's less knowing in advance what something "is" going to be and more of looking to see if current indicators confirm expectations.  That and the process I just typed up in this post took me and Cat almost 5 years to get right....

One of the most helpful books we have on our shelf is Ned Davis' "Markets In Motion" 

http://www.amazon.com/Markets-Motion-Ned-Davis/dp/0471732818#_

As a teaser, it's amazing what you see if you lay all of the charts for years ending in 1, 2, 3, etc., down on top of each other........

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a different approach

I'd take a different approach.  I'd take the $200 monthly and invest in myself to increase my income to more readily be able to pay for my child's college tuition.  My first year of working full time, I made 13K.  I plowed 3K of that back into books and courses to become better at what I did.  I made similar percentage investments the following years.  Income steadily increased and more than outpaced what I "invested" in myself.  And I would invest in my children the same way.  I'd buy them books.  Not electronic things with EMR that affects their brains and bodies, electronically lit screens that adversely affect their eyes and thinking processes, digital information that can disappear in the flash of an EMP or solar storm, etc. but rather real books that they can touch, feel, smell, underline or highlight in, writes notes in, bring to bed with them, have read to them, etc.  And I'd strictly limit TV, movies, electronic game time, etc.  When you invest in educating and relating to your children, you greatly increase the likelihood that they will win scholarship money that will probably be far more than what you can accumulate at your present rate.  Teach your children to learn how to learn and to learn how to think.  It will pay huge dividends.  As an aside, your use of the phrase "stacking" suggests that you may have already been molded into a mindset which could be detrimental to the flexibility of your thinking and your subsequent ultimate returns.  Stacking is what kids do with building blocks.  Think in other terms when considering wealth assets and how they are managed most favorably.

This is coming from someone who invested heavily in gold and silver when it was hated, saved enough to pay to put both children through top universities, and yet didn't have to use much of that money for college because of the scholarships they obtained and the jobs they worked. 

    

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Thanks!

Thanks Adam, I appreciate the advice!

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Thanks Dad.

Oh online forums! I forget how I loathe you so!

ao,

You seem to have made quite a few assumptions about me. Lesson learned on the "stacking some coins" phrase. I thought that is what people called it when collecting physical bullion. I am new to investing in precious metals and thought 'when in Rome....'

I may be able to pay for my son's tuition without dipping into savings but I cannot predict the future and I would rather be prudent. See, in MY situation (as a gen-Xer) I had to go deep into student loan debt in order to invest in myself. I would rather my son not have to go through the same.

To each his own.

Oh, and I read to my son. I am a wonderful mother thank you very much.

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Get some of both...

Adam's idea is worth considering.  It's nice (some would say a must; I'd agree) to have physical, but in case that presents any challenges for you, maybe you should consider GoldMoney.com.  Maybe put $100 in there each month towards gold, then buy a couple/few rounds of physical silver.  I don't think there are any minimums on the account.  Adam or Chris, any opinions on that idea?  Good luck Rayne...

ao's picture
ao
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transposition of intention
rayne wrote:

ao, You seem to have made quite a few assumptions about me.

I may be able to pay for my son's tuition without dipping into savings but I cannot predict the future and I would rather be prudent. See, in MY situation (as a gen-Xer) I had to go deep into student loan debt in order to invest in myself. I would rather my son not have to go through the same. To each his own. Oh, and I read to my son. I am a wonderful mother thank you very much.

rayne,

You seem to have made an assumption about me making assumptions.  Information was simply offered ... nothing more and nothing less.  Your last statement seems to imply that I implied that you weren't a wonderful parent.  No statement of that kind was made by me nor was it implied but your statement, by its very nature, is revealing.

Sorry you had to go into debt to invest in yourself.  If your son works hard, he shouldn't have to do that.  I earned scholarship money plus worked 24 hours/week carrying a minimum of 18 credits per semester and graduated with no debt and some money in the bank.  It can be done if the determination and will is there. 

Or talk to Erik T. and find out how your son can get a free education.  MIT, Hillsdale College, and others have an abundance of free college courses on line.  If your son is raised to be a self starter, he can educate himself, use the money allocated for college to start a business, and be way ahead of the curve.

P.S. The Dad comment was unnecessary for someone just offering advice.     

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jdye51
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I feel for young parents in

 I feel for young parents in this time of great change in the world. It takes courage and optimism to bring a child to a planet undergoing enormous climate changes affecting all aspects of human life. I wonder what the world will look like in 20 years - will there even be a college to send a child to? Will we be living in a post-industrial society where practical skills are more valued than book knowledge? What will be the food/water situation in this country? What sort of infrastructure will be left? If Chris and others are correct, we could be living in a much different world by then. How does one plan for the future in light of that? 

I suspect gold and silver are good investments Rayne, no matter what your child will be facing, whether as a means of education or survival. But what about your immediate preps? Have you done all you can to prepare for your family's resilience now? If not, you might consider using some of the $200/month for that and the rest for PMs. It all depends on how far along you are in your preparations and the discretionary funds available. If you feel secure in that, then you can use that extra money as part of your long-term plan for your child's future needs - whatever they turn out to be. The thing is to remain alert to the changes and flexible in your response to them. That you are a member of this site means you are already ahead of so many other parents who have no idea what is going on. There are so many uncertainties before us, remember that we can only do so much to anticipate them. Who you are as a parent, the love you give to your child, and the life skills you pass on are your best legacy. My heart goes out to and your family as we all face a troubling future together.

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website

Rayne, do you know about www.thesurvivalmom.com website? I bought her book and recommend it.

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Good point about investing in self

Both ao & jdye51 have given very good inputs. The conventional advice about saving for college needs to be scrutinized very carefully. Mish Shedlock has started refering to the education bubble and he is right. People pay too much to learn too little. The current education model will have to change drastically to be of any use in the future. It is better to use the money to keep teaching yourself/your child new skills that can be bartered. I did all of my formal education in India. From playschool to undergrad degree, my total tuition spend was about 48000 rs (less than $1000.). But my parents always spent a lot of money on books. The love of reading, learning and researching on my own that I developed was the best gift my parents gave me. It cultivated the quality of self-reliance. While I was in the corporate world, I was very comfortable switching to any new area of work (including very technical software and civil engineering projects). Now, though my focus is building primary skills around farming/permaculture/water harvesting, whenever I find time (and right people to learn from) to learn any practical skill, I do it. Recently, I handled the full plumbing work for a friend. It worked really well. What it means is that I don't have to earn money to pay a plumber. If I run out of money, I can always barter my skill and find somebody to reciprocate. The more practical skills we develop, the more resilient we become. In one of William Engdahl's book, I came across a very inspiring phrase "Formerly the rural Cuban had squatted so contentedly on his square land which produced about everything he wanted, that.a German peddler coined the immortal phrase: The "damned wantlessness" of the Cuban countryman.". If the money you save can be used to create that kind of self-reliance for yourself/your kid, you would have set your child for success in the coming new world.

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redfir223
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Skills

Rayne,

A little off your original question, but Narmada made a good point. I didn't go to college, I learned a trade, carpentry. I can build things people need. I have woked for people who literally could not install a toilet paper holder. I am not suggesting that your child doesn't need a college education, but resilliency in anyones life might include both. People on this site are very smart and only want to help you. Thanks for the question.

redfir

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