Need opinion from the experts here...

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MrEnergyCzar's picture
MrEnergyCzar
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Posts: 54
Need opinion from the experts here...

I'm posing this question to you guys because you are the most intelligent group I've come across regarding Peak Oil, investing and the economy.  My close friend has been preparing for peak oil with the standard preps, is debt free, lives below his means etc...  However, he doesn't believe that being and staying diversifed, regardless of what you "think" will happen, is the safer way to go.  He wants to be mostly cash (age 37) rather than have and maintain an even percentage of cash, bonds, tips, gold, silver, stocks, reits (doesn't own any shelter).  He has no long term plan but feels cash will be king if we stay in a deflation spiral for an extended period.  My thought is what if 20 other things happen that you didn't predict, like hyper inflation, gold soars, the dollar crashes or whatever.  Any thoughts appreciated.

Thanks,

MrEnergyCzar

ao's picture
ao
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the coming collapse of gold
MrEnergyCzar wrote:

I'm posing this question to you guys because you are the most intelligent group I've come across regarding Peak Oil, investing and the economy.  My close friend has been preparing for peak oil with the standard preps, is debt free, lives below his means etc...  However, he doesn't believe that being and staying diversifed, regardless of what you "think" will happen, is the safer way to go.  He wants to be mostly cash (age 37) rather than have and maintain an even percentage of cash, bonds, tips, gold, silver, stocks, reits (doesn't own any shelter).  He has no long term plan but feels cash will be king if we stay in a deflation spiral for an extended period.  My thought is what if 20 other things happen that you didn't predict, like hyper inflation, gold soars, the dollar crashes or whatever.  Any thoughts appreciated.

Thanks,

MrEnergyCzar

He's making a decent bet in my opinion ... for the time being, at least.  But his actions would depend, to some extent, on his net worth, especially his liquid net worth.  Low LNW, I'd be heavily into cash.  High LNW, I'd still hold a lot of cash (mostly USD) but I'd have more diversification including business ownership, income producing property, and productive land.  But I wouldn't hold any bonds, TIPs, REITs, or stocks at the present time.  Also, I don't see any threat of hyperinflation in the short term.  I would have reduced my PM holdings by now.  Check out the article on the RCW website on "The Coming Collapse of Gold: for one perspective why.

 www.RCWfinancial.net/collapse

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MrEnergyCzar
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Posts: 54
response

Thanks for the response.  Any others want to weigh in?  As far as his Net worth, not much.  He's got a year or two of living expenses saved but lives dirt cheap so that's relevent to know.  Net worth is probably just below what a 37 year old has on average, mainly because he's debt free.  He's able to sock a lot of money each month for many years.  Seems risky to have all eggs in one basket.  

 

MrEnergyCzar 

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FAlley
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Posts: 90
Opposite bet

I have made the exact opposite bet, placing my all of my (minimal) savings into silver when it was under $30 an ounce (which after almost exactly a year's time, it has returned to). I have a very low-frequency, long-term investing perspective (put my money into it and don't think about it again), and certainly if I'd sold at $50 I could've made a 60% profit (didn't).

Diversification is always safer, and I'm of the mind there is never a perfect position. We can only ever make our own, individual choices and continue to watch the world and adjust accordingly.

My other bet; Guns 'n' ammo won't be going outta style. Not the greatest appreciating asset, but (especially if had at a good haggle price) certainly will be worth its long-term value.

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tictac1
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Posts: 175
The author claims that gold

The author claims that gold prices are currently artificially inflated.  All evidence points to exactly the opposite, that gold prices are being actively suppressed.  Consider that most central banks are buying.  They are in a unique position to know which direction things are being manipulated.

Doug's picture
Doug
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Posts: 3124
Consider that most central banks are buying

Most recent news is that CBs are selling PMs to raise cash liquidity.  And that may be what isdriving prices down short term.

http://harveyorgan.blogspot.com/

Quote:

With cheap gold and silver (also negative lease rate) the bankers raided gold and silver. Most financial commentaries believe this action was to make the world seem to be in better shape if gold/silver was down as Europe is in a mess. I do not believe that this was the reason for today's raid. The real reason was the fact that Europe again after just two weeks of huge dollar swaps, have run out of dollars again. Collateral at the European banks are few and it seems the only "good" asset that they have is the gold that they have not already leased out. All other European gold that have been leased out has not been returned and thus remains as a short to the banks. The subsequent sale of the leased gold/silver raises the needed USA dollars.

Doug

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Poet
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Posts: 1891
Why Sell Precious Metals When You Can MAKE Liquidity?

I'm not sure I get it. Why would central banks sell precious metals to raise liquidity... when they can MAKE liquidity (print money)? I thought the consensus was banks and hedge funds selling gold to raise liquidity?

Poet

Doug wrote:

Most recent news is that CBs are selling PMs to raise cash liquidity.  And that may be what isdriving prices down short term.

http://harveyorgan.blogspot.com/

Quote:

With cheap gold and silver (also negative lease rate) the bankers raided gold and silver. Most financial commentaries believe this action was to make the world seem to be in better shape if gold/silver was down as Europe is in a mess. I do not believe that this was the reason for today's raid. The real reason was the fact that Europe again after just two weeks of huge dollar swaps, have run out of dollars again. Collateral at the European banks are few and it seems the only "good" asset that they have is the gold that they have not already leased out. All other European gold that have been leased out has not been returned and thus remains as a short to the banks. The subsequent sale of the leased gold/silver raises the needed USA dollars.

Doug

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Doug
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my guess
Poet wrote:

I'm not sure I get it. Why would central banks sell precious metals to raise liquidity... when they can MAKE liquidity (print money)? I thought the consensus was banks and hedge funds selling gold to raise liquidity?

Poet

Doug wrote:

Most recent news is that CBs are selling PMs to raise cash liquidity.  And that may be what isdriving prices down short term.

http://harveyorgan.blogspot.com/

Quote:

With cheap gold and silver (also negative lease rate) the bankers raided gold and silver. Most financial commentaries believe this action was to make the world seem to be in better shape if gold/silver was down as Europe is in a mess. I do not believe that this was the reason for today's raid. The real reason was the fact that Europe again after just two weeks of huge dollar swaps, have run out of dollars again. Collateral at the European banks are few and it seems the only "good" asset that they have is the gold that they have not already leased out. All other European gold that have been leased out has not been returned and thus remains as a short to the banks. The subsequent sale of the leased gold/silver raises the needed USA dollars.

Doug

My guess is that only the ECB can print, member nations' banks can't.

Doug

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ao
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Posts: 2220
FAlley
FAlley wrote:

Diversification is always safer, and I'm of the mind there is never a perfect position. We can only ever make our own, individual choices and continue to watch the world and adjust accordingly.

Diversification ISN'T always safer.  That's just what we've been told and most people believe. 

ao's picture
ao
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Posts: 2220
tictac1 wrote: The author
tictac1 wrote:

The author claims that gold prices are currently artificially inflated.  All evidence points to exactly the opposite, that gold prices are being actively suppressed.  Consider that most central banks are buying.  They are in a unique position to know which direction things are being manipulated.

Do you mean like the last time they were actively selling?;-)

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dmger14
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Posts: 83
I think it's very telling

I think it's very telling that central banks have been purchasing large amounts of gold in the last year or two.  I also can understand why banks with no printing authority would sell PMs if they absolutely have to.  It is clear to me that PMs will be much higher in the future. The question is when and how much farther (if any) they will fall in the meantime.  I feel much better knowing I have accumulated a significant amount of PMs already.  For me, there is a lot of value in my piece of mind knowing I have some protection if inflation gets out of hand, rather than risking that protection if prices skyrocketed from here.  Also, who is to say that, even if banks are selling PMs because they have to, that central banks aren't right there ready to buy and keep the price from falling much (i.e. we may be at or very close to a bottom simply because investors would quickly step in and buy at this level)?  Fear is also a reason to buy PMs, and there is plenty of that in a deflationary environment.

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Poet
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Posts: 1891
Thanks, Doug

Thanks, Doug. I totally forgot about the member nations' banks. I was only thinking Fed, ECB, and BoJ.

Poet

Doug wrote:
Poet wrote:

I'm not sure I get it. Why would central banks sell precious metals to raise liquidity... when they can MAKE liquidity (print money)? I thought the consensus was banks and hedge funds selling gold to raise liquidity?

Poet

Doug wrote:

Most recent news is that CBs are selling PMs to raise cash liquidity.  And that may be what isdriving prices down short term.

http://harveyorgan.blogspot.com/

Quote:

With cheap gold and silver (also negative lease rate) the bankers raided gold and silver. Most financial commentaries believe this action was to make the world seem to be in better shape if gold/silver was down as Europe is in a mess. I do not believe that this was the reason for today's raid. The real reason was the fact that Europe again after just two weeks of huge dollar swaps, have run out of dollars again. Collateral at the European banks are few and it seems the only "good" asset that they have is the gold that they have not already leased out. All other European gold that have been leased out has not been returned and thus remains as a short to the banks. The subsequent sale of the leased gold/silver raises the needed USA dollars.

Doug

My guess is that only the ECB can print, member nations' banks can't.

Doug

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Doug
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Posts: 3124
Poet

Here's another wrinkle I wasn't aware of:

http://harveyorgan.blogspot.com/

Quote:

Europe because of its structure cannot print to infinity as Germany stands against it.

Thus by 2009-2010, the banking problem morphed into a sovereign European problem as the economy slowed down over there and tax revenues fell off a cliff. Their debt problem now became more pronounced as sovereign interest rates rose because of perceived risk of not repaying that debt.
 
The rest of Organ's post has a good discussion of European debt, who owes and who is owed, what the chances are of massive printing vs. doing nothing and what the consequences may be.
 
Doug

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