Is this a bad time to buy silver?

[jbett98]

When my friend passed away in 08', his widow gave me a portion of his birthday silver.
His mother had given him an ounce of silver every birthday.
His first year, she gave him a one ounce bar, then on his second year she gave him two ounces. etc, etc.
She stopped doing that by the time he was 25 and there was around 325 ounce in his safe.
I thought that was a cool thing to do. I kinda wish she had bought gold ounces instead.

 

[The Heretic]

Education is outrageously expensive, but most people only go to college once.

I only buy a newish car about once every ten years, and most people don't need a car that costs $31K - for getting between point A and point B, a car that costs half that would be fine.

Housing is much more variable depending on what region you are in and can be much more expensive than what they quoted. I am sure those are averages. If you want to live where there are good jobs, then your housing costs will be more than they stated.

That said, the assertion that the dollar has lost a lot of value doesn't hold for many everyday things. I can live just as well, probably better, on minimum wage today, as I did on minimum wage 40 years ago - it wasn't all that good, especially since back then it was much harder to keep a job and find a new one when a factory laid everybody off, but I could live on minimum wage today. I lived on about that much (from savings) when I was laid off about 6 years ago.

I've BTDT when it comes to being poor and living on a minimal budget. The best thing I had going for me the last time around was the fact that I had no debt and some savings, but my expenses each month were about $1200, including rent, food and utilities. Today, with a mortgage, my expenses are about twice that. Fortunately, I make well above the median income.

As others have said, getting out of debt is more important than buying PMs.

 

[IronMonster]

Via CaseyResearch.com,

Gold isn't an investment. Gold is money.

In this succinct interview with Casey Research Director Brian Hunt reveals some of the biggest misconceptions about gold… and why you should own it.

Casey Research: Brian, as you recall, we probably get more questions and reader feedback on gold than on any other subject here at Casey Research… And we've noticed there are quite a few myths and misconceptions about gold out there. Can you go over some of the big ones for us?

Brian Hunt: Sure. Probably the biggest misconception investors have about gold is that it's an investment.

They'll listen to people on CNBC pick apart and analyze every $30 move in the metal, just as they would talk about a move in crude oil or stocks or bonds. They'll check the price quote every day… to see how their "investment" in gold is performing.

That just isn't a useful way to view gold.

Gold isn't an investment. A thousand shares of Coca-Cola is an investment. An income-producing rental property is an investment.

Coke is a business that stands a good chance of growing its cash flows… which will allow it to pay increasing dividends to its shareholders. Bought at the right price, a rental property will return all of your original capital in the form of rent checks… and the rest is gravy.

Gold isn't like those two examples at all. Gold is money.

Gold has been used for money for thousands of years because it's easily divisible, it's easily transportable, it has intrinsic value, it's durable, and its form is consistent around the world. And, as Doug Casey reminds us, it's a good form of money because governments can't print it up on a whim. It's the only form of money that is not someone else's liability.

Gold doesn't pay interest or a dividend. It doesn't have profit margins. Your gold holdings amount to lumps of metal held in storage.

The sooner investors realize that gold is money… and not a conventional investment, the better off they'll be. It's just a timeless form of money. That's it.

Casey Research: People can also view it as insurance, right?

Hunt: Right. Since gold is real wealth you can hold in your hand, it's also "crisis insurance"… or "wealth insurance."

Like regular insurance, you buy gold and hope you don't have to use it.

Gold is insurance against governments doing foolish things with their finances. It holds its value, while paper money does not. The value of every paper currency plummets over time. Gold doesn't.

A currency is sort of like the share price of a country. Over time, if a country produces more than it consumes, saves money, and maintains a modest amount of debt, its currency will rise.

If a country consumes more than it produces… if it spends lots of money and borrows a lot in order to do all of that spending, its currency will fall in value. While currencies fluctuate for all sorts of reasons in the short term, over the long term, countries that manage their checkbooks will enjoy strong currencies. Countries that mismanage their checkbooks see their currencies plummet.

I wish I lived in a country that produces more than it consumes… that values personal responsibility and saving money. I wish our government valued fiscal responsibility. But it doesn't.

About half the U.S. is on the government dole in some form or another. More than 45 million people are on food stamps. People are being paid by the government not to work. The people employed by the government enjoy huge, outsized salaries for what they do. There are more tax recipients now than tax payers. There is no political will to rein in spending and borrowing.

This situation could easily result in a crisis. That's why I own gold… and recommend people keep at least 5% or 10% of their wealth in gold.

But here's where I differ from the average gold owner: I'd love to see gold fall down to $300 or $400 per ounce. I'd love to see the value of my crisis insurance fall, rather than skyrocket… just like I don't want my family's house to burn down… or like I don't want someone to T-bone my car in an intersection.

But when I look at the gang of clueless college professors and career politicians that occupy the White House and Congress, I'm not very optimistic.

Casey Research: We all need insurance from those people. Do you think at least large institutional investors, like mutual-fund companies, understand gold?

Hunt: Absolutely not. They are just as ignorant about gold as the average Joe on the street. They might even be worse.

From the early 1980s to 2000, nobody worried about insurance. Stocks and the economy boomed for nearly 20 years. Gold languished for a long time.

Its importance as real money – as a crisis hedge – was forgotten by most people… even by the supposedly smart folks who run big investment funds.

They learned their trade during a period of rising stock prices and falling gold prices, so they think gold is something right-wing nuts stockpile alongside canned food in a bomb shelter. It's amazing how a few decades of smooth sailing will make folks forget gold's importance as insurance against disasters.

I've heard lots of supposedly smart institutional investors pooh-pooh gold because it didn't perform well during the 1980s and 1990s. They'll post charts showing how it lagged behind stocks and real estate.

It's a silly comparison, because gold isn't an investment like stocks and real estate can be. Gold is just gold. Like I said, you own it and hope to never have to use it. You don't get it confused with a stock like Johnson & Johnson.

Casey Research: We think you've made your point. Any parting shots?

Hunt: It's tempting to make comparisons to other wild periods like the 1970s or the 1930s. But those historical comparisons aren't worth anything. And I'm going to catch hell for saying this, but they aren't worth anything because this time is different.

I know "this time is different" is a dirty phrase in the investment business – but given the global debt situation, our runaway entitlement spending, and the emergence of Asia as a large gold accumulator – this is a different gold market than any market we've ever seen.

For those reasons, I don't place any value on forecasts based on gold's past price action. I don't place any value on attempts to value gold.

I just own a lot of it. I hope I never have to use it. For me, it's that simple.

Casey Research: Thanks for your time.

 

[Doc In UPlace]

You can't eat silver. The only time that stuff is gonna be worth a hoot is after the S hits the F.
Maybe.
Unless there's a vampire apocalypse, then you are in the boolt bizness!

 

[nehalemguy]

If you are buying to have as barter bait I would recommend 90% junk silver dimes. A better thing to have than ounce rounds if you are trading.

I have never quite understood why 90% coins are desired more than silver rounds. In my view they should be equal.....a 1 oz. silver round being equal to $1.40 in junk silver.

E

 

[IronMonster]

I have never quite understood why 90% coins are desired more than silver rounds. In my view they should be equal.....a 1 oz. silver round being equal to $1.40 in junk silver.

E

Because its hard to buy stuff divided by an ounce of silver and because there is zero chance that a 90% dime is fake. People might question if your minted silver round is real, they won't question 90% dime

How you going to buy gas or bread with ounces of silver? For barter and for trade 90% coins I think make sense. If you are just stacking silver rounds and bars make sense.

 

[jbett98]

My nephew was sure that his $500.00 investment in Iraqi Dinar currency would make him a fortune some day.

 

[IronMonster]

I know a couple of brothers that each spent like ten grand buying Dinar... I didnt know it at the time, they ask me what I thought. I told them only an idiot would do that. Later found out that each of them had bought in at like $10K

 

[jbett98]

The biggest problem with the Dinar, is that after we left the country, the Iraqi government changed to a new issued Dinar and the old Dinar bills were heavily devalued and no revaluation took place.

 

[teflon6string]

In a scenario where dollars no longer have any value, I'm thinking that silver and gold still might. And if it comes to bartering with someone for a few gallons of siphoned petrol, I'd rather pay them with 1-ounce silver rounds than pretty much any common denomination of gold.

Of course, lead will work too.

 

[The Heretic]

One gallon of gas ==

 

[nehalemguy]

Because its hard to buy stuff divided by an ounce of silver and because there is zero chance that a 90% dime is fake. People might question if your minted silver round is real, they won't question 90% dime

How you going to buy gas or bread with ounces of silver? For barter and for trade 90% coins I think make sense. If you are just stacking silver rounds and bars make sense.

I understand the value of having fractional coins on hand, I'm just saying that if I barter/purchase an item that costs .80 cents of silver dimes and then slide a 1 oz silver eagle across the counter, I would expect .60 cents back in change.

I know that counterfeits are a possibility, but I think them to be a rare occurance. Plus, the risk and repercussions of getting caught passing counterfeit coins in a SHTF scenario probably far outweigh the reward IMO.

E

 

[IronMonster]

I understand the value of having fractional coins on hand, I'm just saying that if I barter/purchase an item that costs .80 cents of silver dimes and then slide a 1 oz silver eagle across the counter, I would expect .60 cents back in change.

I know that counterfeits are a possibility, but I think them to be a rare occurance. Plus, the risk and repercussions of getting caught passing counterfeit coins in a SHTF scenario probably far outweigh the reward IMO.

E

Ok... But if everyone just has ounce rounds of silver, How are you going to get your change back in silver? That is my point, That is why having some 90% coins is preferable

 

[nehalemguy]

Ok... But if everyone just has ounce rounds of silver, How are you going to get your change back in silver? That is my point, That is why having some 90% coins is preferable

I'm not advocating having only 1 oz. rounds. Personally I keep both bullion and 90% coins on hand. I'm simply saying that 1 oz., or larger, should have their place as a medium of exchange.

E

 

[IronMonster]

I don't think anyone who knows anything about silver would balk at taking ounce or larger well marked rounds or bars, but a lot of people who don't know anything about silver will understand old US coins that have silver content.

 

[The Heretic]

The change I would return:

 

[IronMonster]

Id probably take that. I also think if you are serious about barter you need to understand that not everyone will want the same thing or understand everything you have to offer. There will be folks who will put a much higher value on .22 LR than on Silver, and folks who would not be interested in .22 for any trade. And folks who only could be enticed by food. Folks that will only deal in gold and silver. If you really think there is a chance that we will be in a barter economy and you want to be the guy cutting a fat hog because you were prepared the only thing to do is cover all the bases well.

 

[The Heretic]

If I had silver or gold (it wouldn't be because I stocked up on it), I would prefer to get ammo as change.

I would think that in a SHTF situation, that rimfire ammo would be good barter, and a decent denomination to provide change in - it would probably be worth somewhere between 10 and 20 cents. Right now, you can't touch most RF ammo for less than 6 cents per round, with some of it going for 10 cents or more.

But if they don't want RF ammo, I could give them a drink of well water or a chocolate truffle.

 

[IronMonster]

But it's all relative, I would take .22 as change, but I sure would not take it at a premium. I have probably 60,000 rds of .22 but only a very limited supply of trading silver. I would want the .22 for next to nothing if I had to take it where I would be willing to take the silver or gold at a premium.

 

[The Heretic]

Conversely, I would take ammo at a premium and would be reluctant to accept gold or silver as I would have no immediate use for it and to me it is as much fiat money as paper money is.

I realize that there are industrial and medical uses for some PMs, but that is mostly only true if you have a "civilization" that has some kind of industrial base - if that is present, then you will probably have paper currency.

YMMV, but I tend to prefer barter items that I could use immediately and in day to day operations.

Of course, if you have a surplus of something, it's value to you in accepting more of it in barter lessens. You can't eat ammo any more than you can eat gold or silver, but you can often use ammo to get more food, and IMO ammo may be in more demand in a SHTF situation than precious metals. It is a consumable after all.