Wednesday, November 07, 2007

"No Mr. [Savings] Bond, I expect you to die!"


So about a month ago I bought some gold coins. I believed that they would appreciate, but expected it to go slowly. My thinking was (and remains) that it's silly to save dollars in the bank, when the value of the dollar is in decline. From purely a measure of spending power, the money that you put in the bank- even if it accrues interest- is less each day. If you put $1000 in an account earning 5% last year and didn't touch it, the interest you earned would not offset the decline that the $1000 has seen. That completely sucks ass. So how can you at least preserve the spending value of your savings? Well, there is the market, which is volatile as all hell, despite insane infusions of artificial cash. Then there is gold (or other precious metals, but gold is the most liquid in a financial sense).

Now, a large tip of the hat is owed to O here. He's the lesser half of Pants and doesn't blog himself. He's been a fount of wisdom in this area for me, and for the most part underscored what I was suspecting. The best thing he told me was to avoid these folks that hawk numismatic gold coins, and just deal in spot gold pricing. The short story here is that once upon a time during the depression, FDR called in all privately owned gold, and it became illegal to own gold. Really. The only exceptions that were made were done for numismatic reasons (collectable coins). Therefore, the Gold coins minted before 1933 were fair game. These are the same coins that are pushed by the likes of ITM Trading. They will say "Hey! They made owning gold unlawful once before- it could happen again" as if somehow if there is a next time the government would honor the same Pre-1933 clauses. Feh. In exchange for this so-called assurance, you'll pay 2 to 3 times spot gold pricing. Yea!

So put that nonsense aside, the core arguments in favor of gold are solid, whether it's in the form of ingots, coins, or (holy cow) bars. Ingots are available in the same weights as most gold coins, but may people don't understand or recognize them. From a liquidity point of view, they are more difficult to buy and sell, and therefore less attractive. Coins are available in a variety of sizes and from various nations, and of various purities. The Kruggerand, for example is something like 90% pure gold, but weighs more than one troy ounce, because they contain an ounce of gold, plus copper (I think that's the deal).


The gold American Eagle coin is .916 fineness (purity), and is commonly traded.


Alternatively the Canadian gold Maple Leaf is .9999 fineness gold, and is similarly available, but is of the highest available purity.


Before you go feeling like we can't even compete in the minting of gold coins, there is an American gold coin of .9999 purity and it's the gold Buffalo.


I'm sticking with this and the Maple leaves. The Austrians and Australians also make .9999 fine coins, and the Chinese have a .999 fineness coin, and maybe if I get a wild hair one day, I'll add these to the mix, but it's not my goal. My only goal is to try to preserve the VALUE of what I'm earning. Schmoopie and I talk about this in terms of cash on hand (well, you know- in the bank) versus gold, which is less liquid, but WAY more stable, and sometimes vacillate on what is the right balance for us. Here's where things get "interesting". That graph at the top, is a 30 day chart. Thirty freaking days! That's 13+% in 30 days. If you loaned money at that rate, your local I-Team Action News Consumer Advocate reporters would be banging down your door asking you to justify the unlawful usury you perform. Well perhaps not, but that's a crazy return over 30 days. And there is a corollary here too- gold tends to behave contrary to the dollar. In other words, when the dollar sinks, gold rises, and vice versa. Whoa. Somebody call in the crash cart for the dollar! Stat!

Now I'm wondering if I should continue to buy as savings allow, and while I certainly wish I had purchased more a month ago, I don't think this is the top. He's my prediction for the next 24 months: The Republicans will lose the elections- possibly on purpose. When you look at their candidates you'll see what I mean (and Scott from Oregon, I'm not trying to pick a fight, but I think Ron Paul is a bad choice too). In any event, the Dems will win big and then proceed to a.) implode due to infighting and the complete inability to organize anything, and b.) be framed economically by the Repubs so that it appears that the Dems are responsible for the unavoidable impending economic disaster. The Fed (which I have disdainfully mentioned before) will continue to lower rates and inject fiat currency into the market as necessary to forestall the upcoming "correction" until after next November. Once the election is decided, they'll stop and let the chips fall where they may, and the talking heads (including that woofer Bartiromo) will say that the market "lacks confidence" in the Dems, blah blah blah. You can imagine the script, and it's all so stupid. Fox News will feed the proles the Fact-Free-FUD that they know so well, and in four short years it'll all be business as usual, and they Dems will again be impotent and distractible.

In about 12 months the economy of this country will seriously buckle, and a lot of good folks will be hurt. A lot of rich people will still be rich, and they will not panic. Foreign investment in property will soar. Housing prices will fall. The rich will get richer. The decline of the economy will last for at least 12 months once it begins, and will not start to climb until the Repubs can take some credit for the improvement. If I'm even close to being right about this, the dollar will sink further necessarily. When that condition is true, buy gold. One ounce damn near hit $850 today. A barrel of oil broke records too. I'll be buying fewer coins (not being a rich fellow), but I'm still going to buy.

A note from Safety Sam: If you decide to buy gold coins, be advised that the coin dealers only accept cash, and that in this post-PATRIOT ACT era, safety deposit boxes may now be examined by the authorities. You'll want to find some other place to keep your gold.

Also, if anyone has any experience in establishing bank accounts overseas, and in foreign currencies, I'm all ears.

Links:

Kitco.com - Live spot gold prices
USAGold.com - Images and descriptions of gold coins.

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10 Comments:

Blogger That Guy said...

gold coins or foreign money. its a better bet. I personally have about $300 cash in Canadian somewhere in the house. it was entirely accidental that I had it and its from my traveling days. Not that it makes me rich but I feel better :P and today its worth about $330 US.

12:28 PM  
Anonymous Anonymous said...

Please be aware that gold had a similar chart leading up to May of 2006. It dropped from over $700 to less than $600 in a matter of weeks.
Look at the historic gold charts on the right side of www.kitco.com near the bottom. It shows the one yera chart, but has links to others.
Gold is _very_ volatile, silver moreso. Long term is good, short term we are nearing historic resistance. Maybe it'll go through, maybe it'll consolidate.
Foreign currency investing can be handled through Everbank (looked into it, but I do not have an account cos cash flow has sucked for a while).
Ron Paul is the best choice out there, but is unelectable.

4:31 PM  
Blogger Hammer said...

I put all my money in cocaine and hookers..the rest I just wasted...

6:33 PM  
Blogger Scott from Oregon said...

No worries about the fight. I must say, though, that your forecasts suggests a willingness on your part to bend over and take it up the ass.

I see in Ron Paul a not very charismatic advocate of some very necessary ideas.

It is the idea I am supporting, here, which, to me, seems better than squealing.

The unelectability issue is not a unique one. I'm banking on the woodworks being filled with people who are sick of all Washington has become. And coming out of these wordworks to cast a vote.

I invite you to tell me your prejudices and opinions on this. I'd love to hear them.

6:55 PM  
Blogger My Reflecting Pool said...

Its funny, if you watch certain news channels, they already are blaming the Dems for upcoming events yet to take place. Buy gold, it maybe the only thing of value soon enough, I mean, implosion is going to happen right?

BTW, you are my Caption winner, come collect your prize!

7:32 PM  
Blogger Scott from Oregon said...

You might enjoy this short clip, which, as you know, will lead you down all sorts of avenues...

7:43 PM  
Blogger Scott from Oregon said...

oops!

http://www.youtube.com/watch?v=9UuivYdiS5w

7:44 PM  
Blogger Stucco said...

TG- That's not EXACTLY what I meant, but I'm glad that worked out for you :)

Anon- Yeah, it dropped, but the 5 year graph show an almost uninterrupted uphill. So long as the future remains unknown, it's a best guess method. I think that the seemingly deliberate devaluation of the dollar is enough of a guarantee of gold growth. Your mileage may vary.

Hammer- that's awesome! You're my new advisor!

Scott- It's been said before that I'm living a lie, but I like to think I'm a pragmatist. I'm all in favor of trying to change the world for the better, but it's like pushing a rope when no one pays any attention to things. Oh, and it was Anon that said Ron Paul is unelectable. I think he's electable, but he's not getting my vote. I was hoping for the woodwork contingency in '04 and they were no shows.

MRP- Gold is globally desirable, but if things go badly enough it won't matter much. After all, you can neither eat or drink it. Well, maybe drink it- what was that Goldschlager crap anyway?

P.S. Scott- I think it's very in vogue to dump on the dollar in discussion, but it'd be helpful to know the best ways to actually act on that council. As for the Ron Paul matter, I think that there is a correlation between developed nations standards of living and the degree to which they have socialistic domestic policies. This country was never greater than after the New Deal, and was starting from the Depression too. This is an oversimplification of course, and there are other significant factors involved (namely the matter of public education and mass media ownership), but I suspect that's for a different post.

8:55 PM  
Blogger Scott from Oregon said...

Socialism on a scale as large as ours has too many downsides. Bring social values back to the state and you have the means in which to play out all of your socialistic fantasies.

The European nations who function well in this regard are mostly Scandinavian in nature. All of which rely on the US army outreach program to keep them safe.

What you have, in effect, are small nations with high-production citizens all maintained with a false national security expenditure, thanks to us.

You have countries the size of states, in effect. Apples and oranges.

If you want to beleive that Washington knows more about West coast environmental concerns, economic and water and land use issues... etc... ad throw up already... I'll let you think that.

No matter how cool Kucinich is, he's still clueless, and he's still in Washington.

10:42 PM  
Blogger Région Frontière said...

Scary stuff.

I tried to open a bank account in London but you need to prove you live there. I wonder if i could use my friend's address....

Although putting USD in a UK bank would be painful (the pound hit $2.10 yesterday, with no end in sight), the interest i'd be earning in a UK bank would eventually overtake the initial loss.

At this point i feel like taking all my money out of the bank and putting it under the mattress. My mom assures me if anything happens it's covered under the FDIC, but where is the money going to come from if the economy collapses? The gov't certainly doesn't have any money. I don't see how we can survive another great depression.

8:14 AM  

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