So, right now my wife and I have about $6500-7000 in accumulated value Life Insurance, probably about $5000-6000 in a Thrift Savings Plan. We've got no 401Ks, no property assets (can't afford a house thanks to Uncle Sam), and really not much else. I'm thinking about sitting down and talking with her about pulling all of our money out of these other investments/safety nets and buying up a crap ton of gold and silver at least until all of this crap with the economy blows over. I mean, if everything blows over, then we can always redeem the commodities investments for cash value and reinvest the money in other areas; but, at the same time if things go downhill too much further then our current investments will be wiped out anyway, right? Is this a good idea, selling off our current assets and going to commodities I mean? Or should I give it another couple months and see what happens?
Best case scenario: The market rallies, dollar holds even over the next 5 years.
Worst? case: The bottom falls out, dollar tanks and the entire thing blows up.
In the former you have a bunch of gold you can re-sell for equal to or slightly less than you bought it for, in the latter you now are the king of the county.
You are hedging your bet against the dollar, so I would say go for it. I did a few months back with about 4k and havent regretted it.
**Note**
I'm sure you could flip those and the latter would really be the best case, but I think you know what I mean.
Andrew,
The answer to your question is, unfortuantely, to look at the world as we now live in it rather than how we Austrians wish it to be. The firm reality is that the government is going to spend trillions more of our money to make the economy look good. We all know it will be a house built on sand, but it still will be built. The world will buy our bonds to finance our 'recovery' because they are infatuated with the Obama nation. End result - over the next 4-6 years, the economy will demonstrate signs of 'recovery' until it hits another correction. The stock market will make up the 50%+ loss of 2008 and then some over this time period. Remember, the market is only a reflection of consumer and world confidence. Gold is pretty inflated right now (even though it has gone down from its highs recently) due to the economic crisis, so I feel that it is not a good investment. It was a year ago, not now. If I were you, I'd take every penny I have and put it into index funds for at least the next 4 years. If/when another bubble comes, and gold drops back below 300-400/ounce, I'd sell all the stocks and jump back onto gold for the long term.
Remember, everyone thinks the market will rebound at some point, thus it will at the first sign of improvement. Obama is going to provide that stimulus, stupid as it and the market's response to it may be.
In short, I understand your desire to buy gold, but the market is the best place to be for about 5 years until the next bubble bursts.
JParker: Andrew, The answer to your question is, unfortuantely, to look at the world as we now live in it rather than how we Austrians wish it to be. The firm reality is that the government is going to spend trillions more of our money to make the economy look good. We all know it will be a house built on sand, but it still will be built. The world will buy our bonds to finance our 'recovery' because they are infatuated with the Obama nation. End result - over the next 4-6 years, the economy will demonstrate signs of 'recovery' until it hits another correction. The stock market will make up the 50%+ loss of 2008 and then some over this time period. Remember, the market is only a reflection of consumer and world confidence. Gold is pretty inflated right now (even though it has gone down from its highs recently) due to the economic crisis, so I feel that it is not a good investment. It was a year ago, not now. If I were you, I'd take every penny I have and put it into index funds for at least the next 4 years. If/when another bubble comes, and gold drops back below 300-400/ounce, I'd sell all the stocks and jump back onto gold for the long term. Remember, everyone thinks the market will rebound at some point, thus it will at the first sign of improvement. Obama is going to provide that stimulus, stupid as it and the market's response to it may be. In short, I understand your desire to buy gold, but the market is the best place to be for about 5 years until the next bubble bursts.
Perhaps that will happen, but like you said, the stock market is really just a barometer on people's faith. If people (Americans) continue to lose faith, and increase savings rather than spend money, which we are seeing happen, then we will see an overall loss or just a hold of the current level. Foreign debt can only be extended so far, and as it is now, it seems like the foreign governments are starting to reign back their big buy's on our treasuries - seeing as that is the next likely bubble.
Remember though, gold prices are primarily dependent on comex pricing, which prices it based on supply changes and currency strength. If you look at the price as a reflection of currencies that havent devalued as much as the dollar, gold has stayed relatively even. With our increased seignorage the dollar will continue to fall and the price of gold will continue to rise. At the point in which either the dollar collapses or the govt collapses it will be both too late to buy gold as hyperinflation will make it unreasonable and the supplies will have been long gone at that point.
Gold doesnt lose its VALUE, ever. At least it hasnt in so many millenia. An Oz of gold will always be able to buy you a nice suit - so it is a hedge. So my advice right now, is always going to be put your big money in gold because if all else fails you can always sell it back for the same Value, your dollar may just be worth more or less (Unless someone finds a huge gold deposit, which is doubtful).
Even assuming 8% gains over the next 5 years, if you had 15k in the market you may make 6K, however if the market does swing upward it was likely a result of govt expenditures. Since we know we are broke it will have been made through monetary expansion, which would naturally be around the same rate. So that same Gold would have made the same amount percentage wise over the same period - in dollars simply through monetary inflation - and there is little to no risk (the opposite of the stock market).
Again, it's about value, not money on the books.
Ludwig von Mises Institute | 518 West Magnolia Avenue | Auburn, Alabama 36832-4528
Phone: 334.321.2100 · Fax: 334.321.2119
contact@Mises.org | webmaster | AOL-IM MainMises
Mises.org sitemap