Is this a bad time to buy silver?

[slimmer13]

In my opinion you have to be nuts to be invested in this over leveraged equities casino. There is very little upside and a very real risk of serious carnage.

That few thousand bucks will be nothing compaired to what you lose if you stay the course.

Really.... Think about getting out. If you need to be in get back in at the bottom. The next year or two you are picking up pennies in front of a steamroller.

One should be prepared for as many possible contingencies as possible, even the lack of a total financial collapse. If someone has assets to play the game, it's hard to say he is wrong at this point.

 

[IronMonster]

Actually no it does not because a mutual fund is not a stock and a 6% promised return is subsidized illusion based on a bankers promise. When the equity's market has lost 40% in 5 years, which I think is realistic. Do you suppose the continued existence of that financial product is likely?



I understand the need to have a retirement account and there are risks involved with everything, But in your case you need to at least understand that your promised return is promised by a Wall Street shill who can default and pay you nothing with no recourse by you possible. Read a bit about MF Global or one of several other cases of just that happening. Just because someone "promised" does not mean it's risk free.

if you trust Wall Street, the banks and the Government to do what is in your best interest I suspect someday, maybe soon, you will be very disappointed.

I'm going to post a bit I just wrote and put on Facebook yesterday rather than repeat a bunch of the same stuff here

 

[IronMonster]

One should be prepared for as many possible contingencies as possible, even the lack of a total financial collapse. If someone has assets to play the game, it's hard to say he is wrong at this point.

That's true, The market could continue up, However I think the risks far outweigh the potential benefit

 

[IronMonster]

Here is the post I made yesterday on facebook.

You know for years now I have been spouting off about the impending financial implosion. I am a student of the Austrian school of economics, A follower of Mises and Hayek which more or less means I fundamentally disagree with the theories of Keynesian economics (what has been accepted and taught for the last 70 years)

Anyone with any common sense and can rub two thinks together can see Keynesian theory is massively flawed. Its the idea that a country can borrow and spend its way to prosperity and that downturns are caused by lack of demand (which must be corrected by manipulating the currency supply)

I don't want to get off on economic theory, because honestly I know 95% simply don't care. Most folks find it boring. I really don't know why I find it fascinating but I do.

Anyway I spend a lot of time researching, reading, looking at past events and trying to extrapolate patterns. I of course tend to read economists and bloggers who share my world view (which would be considered contrarian by those mainstream)

The thing is its clear to us (Austrian thinkers) that Keynesian actions create monetary dislocations. They are responsible for exaggerated boom bust cycles and "bubbles" Monetary intervention is the direct cause of most of our income disparity and lack of real wage growth. The cycles are huge though, they take decades to reverse and the attention span of the average person is hours at best.

So. What I am trying to get too is. Everything points to us being at the end of the grand daddy of all debt cycles. The greater super cycle. The mother of all crashes. Like the possibility of system collapse like what happened in the USSR in 91.

Its not something that "might" happen. Its been happening for 16 years. We are in the eye of the storm. The only question is what the result will be. Its not that we have been "saved" its that the cycle is so big that the time for the wave to roll over is decades long. Roughly 2000-ish was the end of real growth in the US economy. Everything since then has been a distorted result of last ditch efforts to save a system that requires constant growth in a finite world.

The attempts to save us look on the surface to be successful, but they are an illusion. They were undertaken to kick the can down the road in the hopes this was a false cycle crest and we would continue on our unsustainable path. Its clear now a decade and a half in that it was a true cycle peak, that the current cycle has reached its end point.

So what does this mean? Well it means the next 20 years will be nothing like the last. That things accepted as fact will be proven wrong (like buying and holding equity investments will always work long term) Very few people understand the extreme monetary experiment we are currently living through. What is happening right now in the US is more extreme than what happened during the Great Depression. As a matter of fact it is unprecedented. We have interest rates at 600 year lows. The FED has quadrupled the money supply. The percentage of 25 to 54 year olds working today is at an all-time low. The percentage of men working today is at an all-time low. Real median household income is lower than it was in 2000 Using true inflation numbers would reveal household income to be dramatically lower than it was in 2000. It is actually lower than it was in 1971, when Nixon closed the gold window. We have a dislocated equity's market driven purely by FED policy and no relationship to market fundamentals. We have an entirely fake, supported and manipulated economy.

So... What cannot continue, eventually ends. The powers that be can and have gone to extraordinary lengths to convince us they got it under control. To give the illusion of stability and growth. They can do this for some period of time but eventually every dislocated metric returns to the mean and it always overshoots to the down side when it does.

We are long overdue for this correction, The dislocation is so huge that the adjustment will be something the world has never experienced. It will result in the end of the current monetary system, the old destroyed by the attempts to stave off reality. The average person may not even know of the death of the old and the birth of the new. We will likely still spend dollars and in country only what the dollars will buy will change. On the world stage though they will see our currency reset as defaults and destruction. People here will just experience a sharp drop in quality of life over a number of years, and when change is slow most people don't even register the change. It is going to happen, it's a mathematical certainty. When a system that requires growth to function stops growing it collapses, there is nothing else it can do. We stopped growing decades ago, All the "growth" since has been manufactured by artificial manipulation of the currency supply. To wit, its not real.

For everyday people its not that big of deal. It will be a time of great change, Much of the perceived "wealth" of the people will evaporate but real wealth will not. Land, machines, skill and other tangible assets will not suddenly blink out of existence and much of the "wealth" represented by numbers in a bank computer were never real to begin with. When a wall street banker generates "wealth" nothing is created. Its arbitrary and dependent on the greater fool. Its this faux "wealth" that will be destroyed, trillions of paper dollars worth. People will feel poorer but in reality what they have will not have changed, just the numbers that represent it.

When the price of a house rises 75% in five years and then crashes 50% the value of the house has stayed constant in reality. Its intrinsic value not perceived value altered by the dislocation caused by interest rate manipulation. It was never really worth the inflated value even though when the price drops you feel less wealthy. Its utility is exactly the same if the price sticker is $100K or $400K. Its not real. People know this in their heart but when it's your $300K in perceived value you don't want to accept its as truth and you are all too happy to ride the way on the way up. Its pure asset manipulation by policy managers. The equity/bond bubble is orders of magnitude worse than the housing bubble and much of the underlying "assets" have no intrinsic value. When it pops, it will be very interesting.

So anyway. Don't listen to me. If it interests you do your own reading, come to your own conclusions. There is nothing for you to do other than make decisions about what to do with any assets you have you should take actions to protect. Even if my worst case scenario comes to pass life will go on. The sun will come up, people will still go to work, grow old have babies and die.

The world is changing though. It happens so slow not one person in a 1000 understands. We are past the end of the cycle, we are just starting down the other side. From here on out the fall will not be a straight line, just like the ride up there will be peaks and valleys, however the trend will be down for years to come. Someplace, I think soon, the dislocation caused by the monetary intervention will revert to mean. When it does it will seem like financial armageddon. It will be worse than 2008/9.

I think it we could very well see it this year or next and the reality is the longer it is till the correction the worse it will be

Anyway.... Smile The world is a wonderful place, the answer and your best hope is to simply understand it

And remember when it happens and they say "no one could have seen this coming" that lots of people did including me who is a tattoo'd nobody from small town Idaho. Why they could not see it coming is because they ascribe to a faulty model of the world called Keynesian economics. Just like the 08/09 crash lots of people saw it coming and gave warning. They were sumarly dismissed as nutjobs and when they were proven right dismissed as "lucky" Its those same people who understand that 08 was just a tremor, the crash is still coming.



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[308]

Really.... Think about getting out. If you need to be in get back in at the bottom. The next year or two you are picking up pennies in front of a steamroller.

Can I correctly assume you are saying I should cash out $500k and take a 30% tax hit plus an additional early withdrawal penalty of 10%?

Give $200k to the .gov....just like that because of innernets forum advice?

 

[IronMonster]

Nope, that is not at all what I am saying, I'm on my phone currently. When I get home I'll tell you what I would do.

 

[IronMonster]

Ok... So first off. Not only is this what I would do, Its what I did. I have a couple hundred grand that is tied up in a 401K that I am unable to reasonably convert into tangible assets (without taking the same kind of hits you are talking about)

Second of all, I am just telling you what I would do, what I think is prudent. I am a blacksmith with a interest in economics and the banking system. In no way shape or form do I claim to be an expert. I do think I am informed and understand where we are and where we are headed but I am not trying to sell you on my ideas.

So. I am making the assumption that you're invested in this fund via either a IRA or 401K. If it is a IRA the first thing I would do is set up a money market account inside the same IRA and transfer a small amount of cash to it (whatever it takes to keep it open without any fees incurred) And for the moment that's it. Since you are in a fund with a guaranteed return you are relatively safe from at least the initial stages of any down turn. The risk to your principal will come from a prolonged bear market (which we are due for in a big way) And will come from dissolution of the fund due to failing to meet return expectations.

I could not find your fund so I will use another ASF fund (SBFAX) as an example
That fund currently has $115 million in assets and a current actual return on investment for the year of -2.67% even though there is a guaranteed 7% return. On $115 million that is a $10 million dollar spread between actual return and return paid on demand (the loss is not actualized unless a person cashes out)

So here is the rub. The fund can promise to pay you 7% and as long as you don't cash out the actual performance is irrelevant because its not realized. They are betting that long term more and more people will buy into the fund, the investable assets will increase and they will over time be able to average a greater than 7% return. This is more or less the way all pensions work, and consequently why lately so many pensions have gone broke. In todays world of NIRP and so to be ZIRP the 10% forecast return most pensions count on simply are unrealistic thus in the end they end up defaulting.

Im getting off track. My point is in your case you are pretty safe now and for the first 6 months of any major downturn (unless it was really severe then it might be more like a couple months) What I would do is have the money market account established and when its clear that this is a real financial event move your money from the fund to the money market account and wait it out. When the market starts to return ( a real 10-15% rebound from the bottom) I would get back in.

The risk is that at some point that fund will dissolve and if it does you will be given actual market value for number of shares outstanding. What you were promised will have no bearing if it goes south. If the market has dropped 40-60%, (which again I know sounds ridiculous but I think is actually conservative) that fund cannot and will not continue to pay you and every other outstanding holder 6% on the $115 million in holdings its based on when in reality the mark to market value is now $40 million. They close the doors and say sorry, that's what they do when they lose, they shift the loss to the little guy. They have already got all their money out and all your fees and expenses along the way

Now is having your money trapped in a IRA money market account in some investment house safe during a currency crisis? No, but its safer than it is in a mutual fund. Attempted preservation of capital is the game and since its trapped by the IRA rules you do what you can. You have to have all this stuff set up ready to do it though because during the crisis they are not going be happy about you opening a money market account inside your IRA so you have a place to go. As long as the funds stay in the IRA you are not realizing gains or subject to taxes. The best case for them is if you are trapped in the fund with no other choice but to cash out.

I think assets outside a retirement account should be invested in tangible goods. Farm ground, commercial property, a business. These will go down in value during a crisis but they are a lot harder for the government or big bankers to make subject to a "bail in" or devaluation. You still have to have enough liquid assets to make sure taxes can get paid and to eat which is why a person would have 10-15% of their investable net worth in precious metals. In this scenario gold and silver are not an investment. They are a way to preserve buying power during a financial transition. Gold and silver are a hedge. When you buy them you are betting on either inflation or outright devaluation of the dollar. Currency crisis is not a end of the world scenario. The US has been through several currency collapses already and unless you are a student of economics you wouldn't even register them as such. People who held tangible assets (and gold and silver) were able to consolidate and even grow wealth during the transition. People with paper wealth are wiped out.

Anyway.. That's what I would do

 

[The Heretic]

In my opinion you have to be nuts to be invested in this over leveraged equities casino. There is very little upside and a very real risk of serious carnage.

That few thousand bucks will be nothing compaired to what you lose if you stay the course.

Really.... Think about getting out. If you need to be in get back in at the bottom. The next year or two you are picking up pennies in front of a steamroller.

I've been in the market, indirectly (via IRA and 401K) for almost 20 years. I went through the dot com crash and the housing bubble recession. I've been down 40%, but I did not panic like a lot of people and left the money in because if I learned one thing in Business Economics 101 in college, it is that you buy low and sell high, not the other way around.

If you stay in it over the long term, and don't panic sell when the bottom drops out, and can stand to see the value drop up to 50% on paper, and you are not in penny stocks, but rather into good value stocks in corporations that have good fundamentals, then you should be okay.

On the average, I have made about 8% per year. Not this year - so far anyway. I am down about 2%, or at best, barely breaking even, compared to what I had coming into the year. But it will come back, it has in the past, and on the average it does in the future.

If you look at the charts of where the markets are over the long term and ignore the day to day fluctuations, or the month to month, and look at it over at least 5 years, the trend is upwards overall. But you have to be able, both financially and psychologically, to take the downs with the ups.

THis year, when the market was down, I put 85+% of my paycheck into my 401K for about 3 months. When it came back to about where it was last year, then I dropped back to 15% of my paycheck and I will let that ride the rest of the year unless the market drops severely again.

I am not worried about those investments. I don't really need them to retire on. I have other investments, such as real estate which is, so far, on paper at least, doing better than 10% per year. We'll see what it is like when I am ready to sell it when I retire in about 5 years, but at the very least I am pretty sure I will get out what I put into it (including interest payments), and the monthly payments are about what I paid for rent in town (considering I live on 20 forested acres with a house and shop, where I live is much better than the property I leased in the city).

So, in a few years, I plan to slowly (about 2% per year) shift my investments out of the market and into safer funds. But those investments are mostly for my daughter who can't invest for herself. I plan to live on my real estate investments and SSI. I am retiring in about 5 years, so there should still be SSI for me, probably not for my daughter.

 

[The Heretic]

I have enough cash in my checking account to live on for 2 to 3 years at my current rate of expenses (not including spending money on things I don't absolutely need). Then I have enough for another year in a Roth IRA. Then I have a much larger amount in a regular IRA, which is well in the black compared to what I put into it when I rolled a 401K over into the IRA. Then I have a 401K that I max out every year, including catchup funds.

Then, assuming I work to retirement age - another 4 years - I get enough from SSI to live on even with my current mortgage.

If I sold my property today at what Zillow says it is worth, I could buy 10 acres out on this side of the coast range somewhere, put up a simple house and shop, and still have cash left over.

The plan is to leave my IRAs and 401K alone until I am 71, then only pull out the minimum amount each year, and reinvest that into safer funds (e.g., guaranteed return bonds, etc.) - leaving almost all of it for my daughter when she retires, or I kick the bucket, whichever comes first. When I die, she gets all of my estate. She can then either keep or sell the property, and she would have enough to retire on, depending on when I die. My life expectancy, given my family history, is about another her 15 to 20 years.

Not everybody can do this - but at this point, it seems to be working out for me.

 

[The Heretic]

At the very least, even if my IRA/401K doesn't increase in value over what I put into it, as long as it stays in the black, when the money is pulled out, I will have saved about 10 to 15% in taxes, because when I pull that money out, I will have an annual income that is much lower than what I have now.

 

[The Heretic]

The "impending financial implosion" is why I got into prepping in the first place - 40 years ago.

That promised "implosion" hasn't happened in those 4 decades since, although every year a doomsayer says it is "impending".

It is kind of like those "prophets" who keep saying the rapture/tribulation/second coming/etc., is going to happen in 6 months, and we should all sell everything, put on sack cloth and go stand on a hill waiting for it to happen. They have been doing that for a couple of millennia.

You know what did happen?

I got older - 40 years older. I prepped for a couple of decades as if something was going to happen tomorrow. I ran up the credit card bills until I was using on CC to pay the other. I had more CC debt than I had annual income. Then I got laid off.

I came close to bankruptcy. My financial implosion had come about

I wised up. I paid off my debt (it took about ten years because I got laid off several more times - once for two years during the dot com crash - but I paid it off). Then I started saving money for retirement, because there was one thing that was much more likely to happen to me than a global economic collapse; retirement.

I was lucky during the housing bubble; I was just about to buy a house when I got laid off. I had some savings and no debt, so I weathered the recession fairly well.

I am doing okay now too. Even if the market flattens out and stops growing over time, I will be okay. So don't worry about me.

 

[The Heretic]

Other have said it, but I will say it again; there are a couple of investments that are better than any others and that I will never regret:

1) Pay off all debt as fast as possible. The person who only has a $10 bill and no debt, or at least has a a net worth on the plus side, is far ahead of 90% of the people in the USA who have more debt than they have assets.

I have a mortgage so I have debt, but my net worth is double what I owe on my mortgage, my mortgage is my only debt and it is backed by the property I live on, which is costing me a little more than renting (including interest and taxes) and it is appreciating.

Most people in the USA have a lot more debt than they should have - they should only owe on a mortgage, not on a new car, a new TV, a new phone, etc.

2) Invest in improving yourself. Especially with regards to your career - or lack thereof. I am a senior software engineer - self taught. I make a six figure income. I am less than five years away from retirement. I spend at least an hour every workday improving my skills in software engineering - outside of my job duties.

If you have no debt, and you are doing well in your profession, and you can easily fund your retirement, and you have enough savings to last a year or two if you lose your job, then maybe you would be okay to invest in PMs.

 

[kilimanjaro]

I can buy an ounce of silver in coin or bullion for $20. I cannot buy real estate or stocks for $20, in any form or amount that is going to give me the security that ounce of silver will get me when the time comes.

A well-rounded investment portfolio is going to include a good mix of equities, precious metals, and realty.

 

[The Heretic]

I would rather have an acre of land I can grow fruit and veggies on than an ounce of silver to buy that fruit or veggies.

A person's situation may not allow that, but for many, real estate is better than PMs.

 

[JSchuster]

I am not nearly as well studied on many of the topics discussed in this thread, but I will 100% agree on a couple of points in this thread based on my limited experience and education:
- Rarely is there a true complete collapse. Weathering a short-medium term (in the scope of our lives) collapse or return to "third-world" status is a far more realistic economic preparation goal.
- Minimizing debt is the truth. I largely avoided debt (except for a couple of stints of poor judgement that I recovered from) and have a significant amount of economic freedom because of it. My only rotating balance of debt is my home, which is tangible property with utility (even a quarter+ acre in Beaverton) and potential to appreciate.
- During economic downturn the powers will inevitably salvage banking as much as possible. It is their modern creedo. Short of a total collapse, the value of our currency may be questionable but our debts will largely remain intact.
- Diversification of investments (in all manner of living, really) is paramount.
- Buy low, sell high (applied to all manner of living and the financial market) is also paramount. I was freshly out of college and had very little disposable income during the recession of 2008. I researched and invested everything I could in select investments. At the age of 23 I bet everything I possibly could and I won every single bet. I paid the downpayment on my home with the winnings. If I failed I would've suffered a couple thousand dollars loss-- in the scope of things and my otherwise thrifty and debt free life this would've been easily survived.
- Liquidity should be balanced with investments. This is actually far more complicated than that statement, but liquid cash should be balanced (not in equal proportions) to investments and hedges. Sometimes cash IS king.
- PM as currency is temporary at best. Fiat currency is widespread and I believe adoption of an independent or another fiat value is likey to take place after a collapse.
- Skills and knowledge are invaluable. The ability to help build homes, cultivate crops, fix machines, etc. will have significant value in a collapse.
- Negotiation and social skills are also invaluable. I work in a field where tactful confrontation, tactful negotiation, and peaceful resolution are something I practice regularly. For a post-collapse transaction these things will be useful. To survive a true SHTF scenario these will be necessary. I am also convinced that your social circles will be critical in a likely (in SHTF) return to tribal social rules. Being part of a group of loyal, like minded people with diverse skills is ideal. This reeks of hippie commune mentality, but it's the truth. Running your tribe becomes like running a small society, and everybody has a part.

That was way longer than anticipated, and a bit off the topic of the OP. But that's my mentality. I look forward to the constructive feedback on things I may have overlooked.

 

[The Heretic]

Short of a total collapse, the value of our currency may be questionable but our debts will largely remain intact.

I have a hard time imagining a scenario where my debt (mortgage) would retain the same "value", but currency wouldn't. I.E., if I owe $200K on my real estate, and I have $100K in USD, then while that $100K might not buy a used car in an inflationary scenario, it will still pay down my mortgage by $100K.

I have a contract with the mortgage lender - I owe them a set amount at a set interest rate. As I understand contract law, the lender cannot change the amount I owe or the interest rate, no matter what the real value of a US Dollar currently is.

- Liquidity should be balanced with investments. This is actually far more complicated than that statement, but liquid cash should be balanced (not in equal proportions) to investments and hedges. Sometimes cash IS king.

Agreed. I always carry some decent amount of cash on me - from a few hundred to a few thousand in my money belt. I have enough cash in my bank account to pay my current expenses for 2 to 3 years. I have enough in my retirement accounts to theoretically retire tomorrow at my current level of expenses and I could cash it out without penalty (but pay taxes on it) within a week or two.

The one thing that would take months to cash out would be my real estate, but I live here, and it is about the same as rent, so I consider that a necessary risk.

 

[JSchuster]

I have a hard time imagining a scenario where my debt (mortgage) would retain the same "value", but currency wouldn't. I.E., if I owe $200K on my real estate, and I have $100K in USD, then while that $100K might not buy a used car in an inflationary scenario, it will still pay down my mortgage by $100K.

I have a contract with the mortgage lender - I owe them a set amount at a set interest rate. As I understand contract law, the lender cannot change the amount I owe or the interest rate, no matter what the real value of a US Dollar currently is.

Agreed, perhaps I wasn't entirely clear- Your balance will remain the same. The point is that you WILL retain a balance. Debts are unlikely to be forgotten or amnestied. So don't bank on the bank forgetting/disappearing. Somebody will come looking for the cash, worthless or not.

 

[The Heretic]

And I have the cash to pay the mortgage payments, possibly even pay them off. I could quit work tomorrow and retire if my only concern was my current living expenses.

That isn't my only concern; my primary concern is providing funds for my daughter when she retires (or has to retire due to health). My other concern is that I know from experience, that as I get older, my healthcare expenses will increase. Also, my plan is to sell my current property, buy land further out and build on it, hopefully soon after having no mortgage at all.

My point was that if something happened tomorrow, my mortgage won't increase even if the dollar becomes worthless. The mortgage contract says I owe X number of 2012 dollars, and will no matter what happens to the value of the USD. Since this is my only debt, and I currently have enough funds to cover it for the rest of my life, I am not concerned too much about paying it.

That said, stuff happens - but for 40+ years someone has been saying that the global economy was going to crash "real soon", that X, Y and Z would happen and that we should all invest in guns/ammo, gold and MREs. Most of the people saying this are either selling their books, have read those books, or are selling guns/ammo, gold or MREs.

The global economy hasn't crashed.

What HAS happened was I got 40 years older, I still have guns/ammo and food/etc., I still have Mel Tappan's original edition of "Survival Guns" and Mel Tappan is dead, never having seen the predicted collapse. I will probably die too without seeing the predicted collapse.

What I am seeing is climate change, drought in much of the PNW, wells on the west coast going dry, fishing seasons being closed because the rivers are too low and/or too hot to support taking of the fish in sustainable manner, fish and aquatic mammals dying because they eat the plastic we through into the oceans, elk with hoof rot possibly due to the pesticides we spray on the forests, and so on.

Then there is the human population growth.



I assert that this is the bigger picture than just a simple economic collapse. That there is very little being done to prevent a global collapse due to all of these factors (and more). That in the coming decades, there will be a point where there is not enough arable land, not enough water, not enough food from the oceans, not enough energy, to support the human population. we are more or less at that point, but we are not at the point where more people are dying than are added to the population - the momentum is still upwards. At some point there will be a collapse and millions more (possibly hundreds of millions more) people die than are added to the population.

This isn't theory - it is called carrying capacity, and we have seen it in animal populations ever since we were smart enough to observe it (i.e., for millennia). We've seen it in human populations too (consider the Mayans) - just not globally.

This is what I prep for and precious metals won't help. Arable land that has decent rainfall, that is further away from population centers, that I owe no money on, that I have prepared for growing food, will help. At some point in the coming decades, food, water and shelter will be the "precious metals". If a person already has that, has guns/ammo/food setback, has no debt, has retirement funds adequate for their retirement, then maybe they could invest in PMs or other speculative investments.

 

[jbett98]

Gold just jumped $68.00 today because the Brexit votes in favor of leaving the EU.

 

[The Heretic]

Then now more than ever is NOT the time to buy.

Buy low, sell high.

DOn't be a panic buyer