Is this the time to invest in Gold / Silver / Bonds / Cash / or other

[Rx_]

What is in your Wallet? What is in your Investment? What is your idea? Choose all that apply on this poll.

All the larger countries are running the printing press at record rates. They all have fancy names and schemes. Bottom line, they inject massive amounts of digital money into the banks and financial system. In the US the Plunge Protection Team meets to prop up Wall Street. In Eruope they claim they will do "whatever it takes" to create money out of the ethernet.
More and more, there are many successful writers warning that debt is so massive, it can never be repaid. The only political tool available is to "print more money".
Meanwhile, China has been accumulating thousands of tons of gold each year (see chart). The Russia Treasury gold chart looks the same. Many Americans realize this gold is coming out of the US Treasury vault and heading East at a rate never seen in world history.
Even JP Morgan and the other too-big-to-fail banks are accumulating both physical inventory and there is strong evidence they are buying up silver mining stock on every price dip. A price dip many now understand is probably under the control of JPM themselves. Perhaps so they can shake stocks out of weaker hands. One analysist estimated JPM may have direct control of 60% of the non art / artifact silver on earth.

There are direct discussions of the China/Russia trade currency backed by precious metals and other commodities. Then there is the Bit Coin crowd. We also have the New Age of "physical currency backed or made by something real is just an ancient artifact".

The old rule: you can flirt with my wife but the religion of money gets personal. Money is a belief and is personal. So, discuss but please respect the ideas of others.

Chart: JP Morgan accumulates physical silver along with silver mining stock.

Chart:

Jim Rickards best seller: The Death of Money
http://www.physicalgoldfund.com/podcasts/ - the math predicting the failure of Bonds.

 

[The_Doc_Man]

The whole problem is that money is an artifice. It has no inherent value. Even gold has no inherent value. You can make valuable things with it (if you value jewelry) but as a lump of metal, it is merely another medium of exchange. You can't eat with it. You can't have sex with it (despite those who like to come into money). You have to reshape it if you want to wipe your arse with it. It has no inherent value any more than any other thing you dig out of the ground.

It is possible, if you look through history, to see where money can become very close to totally meaningless. For example, look at the remnants of the old Wiemar republic between the wars, where people used wheelbarrows to carry money to the store to bring home one bag of goods. Nobody robbed them because the money was worth so little as to not be worth stealing.

What really matters is what is backing up that money, and using a material object to act as backup is lunacy. The only real value is how much time you worked to make something and what that something is worth when you sell it. (Value = price/labor). No, this is not necessarily in line with economics theory, it's just my observation - and the observation of USA science fiction writer Robert A Heinlein.

Money is just a convenience to allow bartering with someone you don't know. In the earliest cultures, you bartered with your neighbor - trade some corn for some cucumbers or something like that - and you know how hard that person had worked for that bushel of corn, and that person knew how hard you had worked for that bushel of cukes. When you don't know the person, you have to rely on money as a symbol of work. Basing your economy on a backing material such as gold or silver obfuscates the fact that if you don't actually put in any work, the true value of the item has not increased.

This is also why speculative economic bubbles collapse. They represent increases in presumed value rather than in actual value. In essence, they are a form of gambling. The only reason we need commodity-futures gambling is that there are two sides to any transaction. The buyer wants to get the most (of the commodity) for the buck, but the seller wants to get the most money (for the commodity). It is when you have that balance point when both sides are grudgingly satisfied with the deal they just made that you have people who can walk away from the bargaining table without shame.

I have read an article recently about how a lot of these TV "buy gold to safeguard your investment" ads mask scam artists. (Not all... but more than you might care to think.) Often they want to sell you collectible gold coins but don't tell you that their markup is so high you can't live long enough to recoup the true value of those coins after their value inflates over time. Further, even with something like gold, if there are no buyers for it then the price goes down. Supply and demand form a vicious pair that will eat away at your profits the moment someone wants to dump their overstocked chests full of otherwise useless items, be it gold or china or scrimshaw.

In essence, futures trading only leads to the ultimate revelation - it's all one big Ponzi scheme, and the rule is that the participants at the bottom of the pyramid have to hope for a new generation of suckers... sorry, I meant "subscribers."

Doubt this viewpoint? Look at the recent REIT crash. It occurred when the people at the bottom demanded the value of their investment and the money pool wasn't there to pay them full value.

 

[Rx_]

Seriously, thanks for the response. Always enjoy another SciFi fan opinion.
LOL, can't have sex with it?
Go buy a 1/10 ounce coin or nugget. Go anywhere in the world. Offer it for sex, you don't even have to know the language.
It is common to see people confuse Money with Currency.
Currency (and the collectable scam artifacts) are different than an atom with an atomic number. Currency and collectable items require faith, trust, and other things associated with a religion. So, if it is convenience as a belief, that is fine too.
Claiming that time and labor is involved when a group with special powers can just print up more anytime, while you believe it is your duty to work for those papers with special symbols is an interesting belief, that might be associated with religious.
The clear history of all currencies is one of the elite (chosen ones) printing more and more until a Ponzi is exposed. Its just history.
The TV coins or TV poke'mon cards are all just typical advertisement.
If you ask someone to produce one ounce of the element gold, they must charge you the price of Labor / energy * Time. Unlike any currency, it can't just be created out of thin air or a few binary bits.

Speculative bubbles since Law (France) Economics are very commonly created when paper money is created and directed to specific commodities. In the US, the loans favor Housing, Stock Market, and Bonds.
Typically, paper money printing bubbles directly lead to war and abuse of citizens rights. To promote the sacred printing of currency, laws must ban any citizens activity that doesn't support the sacred beliefs that the currency is not the only way to trade.
Currency wars create strife between countries.
Gold is simply a currency with no central bank. It is an asset with no counterparty.
At this point, the Federal Reserve is caught in a Bear Trap. If they raise rates, the barrels full of bonds worldwide will be dumped as you describe. So for now, they must accelerate the printing rate to keep the Ponzi going.
Over half of the world's population citizens think gold has value. During Brexit, those who bought gold before the Brexit and the currency adjustment maintained Value.
The Wiemar and recently the 70% of bonds worldwide paying negative interest, that money is not put to work and in addition it has lost value. Even worse, there is no mathematical way those bonds can be paid back at today's value.
The State of Texas state employee retirement program put 10% away in gold. From the looks of it, they are the only State Retirement Program that is solvent.
I am also a big Robert A Heinlein fan. I think The Moon Is A Harsh Mistress may be worth a review. Worthless Bonds and Currency couldn't buy air.

 

[The_Doc_Man]

Go buy a 1/10 ounce coin or nugget. Go anywhere in the world. Offer it for sex, you don't even have to know the language.

First, you are having sex FOR it, not WITH it. That is just another case of barter with someone you don't know.

Second, my comment about "can't have sex with it" comes from dog-think, where the viewpoint is "if I can't eat it, have sex with it, play with it (think chew-toy), then p|ss on it."

As to "produce one ounce of gold" - that doesn't matter. It is what happens next that makes a difference. When you PAY for that ounce of gold, what do you pay with? More gold? Paper money? The labor to produce the gold determined the asking price, but in terms of yet another medium of exchange - because the seller doesn't know how hard you had to work to earn that money.

Over half of the world's population citizens think gold has value.

Yes, and 100% of the world's population of flies eat sh|t - but that doesn't mean I have to join them for dinner.

An interesting side note is that money doesn't even have to be printed as often with the advent of credit cards. I had this discussion with a friend some time ago. When you get into formal economic models, there is a "Money in Circulation" value that is part of the theory - but it has to be augmented by the "Equivalent Money Floated via Credit Card" - where no paper changed hands (other than the paper credit receipt) but it is like "Virtual" cash. The paper money never got printed but the banks honor it anyway - and so do vendors. Like virtual memory, credit-card debt exists somewhere, no matter how unreal it seems.

 

[Rx_]

Details, details.... LOL Or I could say With IT - I have sex? Without it, I don't.
Virtual money falls into the category of a Note. A Note is a promise to pay actual money at some point in the future.
In the case of the Federal Reserve Notes ( a private bank incorporated in Delaware), until 1964 the printed contract was "on demand". So, you and I are so old, we use to be able to take the Federal Reserve Note into a bank and receive actual US money on demand.
Just in the last few years, the artificial credit creation of the central banks was a staggering $13 Trillion US (A Trillion in the US is 1,000,000,000 in case the UK has a different meaning). Will this uncontrolled expansion result in a "currency debasement"? This creation concept isn't modern or new.
Back in the 1960's the exchange rate for one ounce of gold to a dollar of Federal Reserve Notes was $35.
“Paper money eventually returns to its intrinsic value – zero.” (Voltaire, 1694-1778) Each paper currency is just some new age religion. As one Fiat currency fails, another pop's up to take its place. People Forget.
The poor don't hold most of the gold. Right now, it is the Central Banks that are accumulating the most. What do they know that the poor don't know?

 

[pbaldy]

(A Trillion in the US is 1,000,000,000 in case the UK has a different meaning).

Unless I'm hallucinating, that's a billion. A trillion would be 1,000,000,000,000. I'll take the gold though.

 

[Steve R.]

I have never been a fan of investing in precious metals, such as gold. As an alternative to an investment in precious metals, invest in energy stocks that pay a dividend.

The energy sector is currently in the toilet. For now it may not be a good time to invest if you are a conservative investor. For those who can accept the risk, this could be a great time to buy energy stocks. Buying stock in refining companies can be a good hedge. Lower oil prices tend to mean greater profits for the refiners.

In terms of "bonds or other", to me, they are a ticking time-bomb. Don't invest. If interest rates are allowed to return to real rates as set by the market, the value of paper paying interest (bonds, treasuries) will plummet. Those holding bonds and treasuries will be badly hurt.

Now that I have raised the interest rate concern. The stock market today is "high" because people have virtually nowhere else to invest their money. Bank accounts, bonds, and treasuries pay virtually no interest. In some cases the interest rate is even below the inflation rate!!!! That should never happen if we had a function free-market system.

As a final comment. I don't believe in a gold standard. But there is an obvious problem with the monetary system when the value of precious metals inflates in terms of paper dollars. Theoretically, the price of assets (gold/silver) should essentially remain constant (as a gross generalization. A lot of factors go into pricing assets, which I will leave out). The answer, I believe, is much more than simple inflation. I have not yet reached a conclusion concerning this, other than to acknowledge that there is something wrong.