We all can assume DYOD. However what do you tell the folks around you who do not read these boards and financial opinions. Is it rational to advise people that the only thing that will save their butts in the next 10 years snd more is to buy gold and silver?

Suppose, and we all have neighbours and friends. Suppose you knew they were heading for this great fall? Is it justified to forgo this usual DYOD advice and simply say buy gold ounces? I personally cannot advise for silver as the ride will be so much more volatile. But to tell my poor friend to preserve his little wealth through gold ounces? IS THIS MORALLY RIGHT? I am unable to guarantee this investment; but that never stopped any bank from selling bonds or CD's that strip wealth slowly away.

We are not investment advisors (as if that means anything in terms of honesty).

Just asking as this question is coming up in my world.

Cheers.

zooey wrote:
We all can assume DYOD. However what do you tell the folks around you who do not read these boards and financial opinions. Is it rational to advise people that the only thing that will save their butts in the next 10 years snd more is to buy gold and silver?

Suppose, and we all have neighbours and friends. Suppose you knew they were heading for this great fall? Is it justified to forgo this usual DYOD advice and simply say buy gold ounces? I personally cannot advise for silver as the ride will be so much more volatile. But to tell my poor friend to preserve his little wealth through gold ounces? IS THIS MORALLY RIGHT? I am unable to guarantee this investment; but that never stopped any bank from selling bonds or CD's that strip wealth slowly away.

We are not investment advisors (as if that means anything in terms of honesty).

Just asking as this question is coming up in my world.

Cheers.


Zooey, I have absolutely no problems with pointing ordinary people (ESPECIALLY ordinary people) toward gold and silver. All of our currencies and bonds are going to ZERO. And roughly 90% of the liquidity of ordinary people today is in cash and/or bonds.

Under these circumstances, recommending gold AND silver to these people makes me a HERO (lol!!). Remember what I've written about "volatility" again and again: IGNORE IT. There is no connection between volatility and risk. And gold and silver are the world's LOWEST RISK assets (and have been for 5,000 years).

Volatility Does Not Equal Risk

The only way that ordinary people can hurt themselves buying gold and silver is if they think they can become idiot-traders and TRADE the volatility. If they can resist the urge to commit suicide, and remain buy-and-hold, then the only possible down-side to holding bullion is confiscation.

However, since our governments can (and have) confiscated ALL TYPES of assets throughout history we could make the same warnings about cash, bonds, pensions, real estate, etc.

Zooey,

I wanted to respond to your question.

I'm born and raised in Florida. My closest friends are few and like family. My home town is home to a lot of defense contractors (NASA). Ocean front and literally islands of gated communities of wealth and golf courses. My friends are in mostly marble installation, a home they work on can take sometimes over a year to complete.
They know installation/construction is physical work and we aren't getting any younger.

I've had very "heart to heart" conversations with them. Personal, private and detailed discussions. Wealth preservation, just a little at a time. Some silver Eagles, when there's a good check ect.

I don't live in the area anymore but visit often. Their work is steady (which is testament to there quality) and they are booked for the next 18 months. "Great", I say, "stash any of your profit".

Just in this past month, one called me, to ask if now was a good time to "sell" their silver. Since I brought it up, they remember silver at $8.00 oz, this $30.00 price was killing them and what little coins they have are burning a whole in their drawers. They don't need the money, but since my message to "save" brought light on the matter. It had the opposite effect. I told them "NO", in utter disbelief.

Then another called about my opinion on Honda boat motors. He was going to buy a new one. OK, enjoy life a little, right? He's got three boats now (deep sea, ski and a flats boat). Not to mention the sail boat, which has a slip rental. The IRS just cleaned his bank account a year ago. No savings, but.... I don't know. When you work that hard you sometimes fantasize a little to much about what you'll do when your off. Of course then you don't have any money to do anything, because when not working nothings coming in.

Work is booked, the fish are biting and "Earls" talking about buying gold and silver. The economy is worse than you think or some crazy stuff like that.

In my entire life, there's never been anything good from saying "I told you so".
There's never any pleasure in those words, especially to someone you care about.

Nobody has taken any of my advice. Although they agree things are not good, it's the degree of severity and planning that (I guess), is the difference.

Just don't take it personal, as you're being a good friend and neighbor because you care about the people around you.

Take Care
Earl

Earl thanks for the anecdote - as this PERFECTLY represents the precise OPPOSITE perspective of our own resident Devil's Advocate, Seb.

Regular readers know that Seb was not one of the FIRST to get into precious metals (although he's still WELL AHEAD of the sheep - lol). His concern has been that he's not "making profits" on his gold and silver (so far) and thus he is "too late" to the party.

My quip in return has been "would you ever spend day after day checking out your FIRE INSURANCE policy to see if you had made 'a profit' on it?"

The intention has not been to mock Seb personally, but to point out that once we RECALL our basic premise (that gold and silver are our monetary "insurance") that it is silly - in general terms - to be obsessing about short term profits.



Now we see the exact OPPOSITE attitude on display: people who DID buy early - but who are now ALSO obsessing about profits (this time TAKING PROFITS).

Note that despite the OPPOSITE circumstances between these individuals and Seb that I can use EXACTLY the same reply: would these people EVER muse about SELLING their fire insurance - simply so that they could make a PROFIT ???

The moment we identify our gold and silver as INSURANCE (which precisely describes the function which it fulfills today), note how EASY it becomes to choose an optimal strategy: buy and hold.

Hi all.....just an avid amatuer here still attempting to make sense of the dynamics of PM and the market....

My question is: 'what happens if the Fed decides NOT to quantitatively ease?'

The debt in this country, as i understand it, is probably non-payable. It would be not credible to believe that legislators could work together to lower the debt - and even assuming that incredible happening - its probably too late. We can't tax or create growth fast enough to recover. That is my understanding.

I look at the markets each day - and for the past week i keep thinking that the Fed will make some sort of statement. I recall Greenspan once jumping in to save the markets. The past week looks decidedly bad.

The Fed, apparently, via twists and repurchases, has been involved in QE. But what happens if they allow interest rates to stay low and not CONSPICUOUSLY save the dollar by QE'g? I believe that is the presupposition of Jim Sinclair? That the Fed is forced to protect the economy by QE - else - we have outright 1929 depression? I think i have his logic correct. And it makes sense.

But what happens if the Fed sits on their hands and does a twist here and there but no conspicuous QE? Interest rates will rise and that will surely be an even bigger negative for the metals won't it?

If interest rates DO rise precipitously (which seems inevitable) then, as in Volcker 1980's - we have an economy that becomes deleveraged slowly and painfully BUT.....that would be bad for metals wouldn't it? Just asking here.

I am a believer that the Fed can only keep increasing QE which will lead to inflation which leads to higher metal prices. But does anyone think there is a chance they might not do this? Thanks....

arihalli wrote:
Hi all.....just an avid amatuer here still attempting to make sense of the dynamics of PM and the market....

My question is: 'what happens if the Fed decides NOT to quantitatively ease?'

The debt in this country, as i understand it, is probably non-payable. It would be not credible to believe that legislators could work together to lower the debt - and even assuming that incredible happening - its probably too late. We can't tax or create growth fast enough to recover. That is my understanding.

I look at the markets each day - and for the past week i keep thinking that the Fed will make some sort of statement. I recall Greenspan once jumping in to save the markets. The past week looks decidedly bad.

The Fed, apparently, via twists and repurchases, has been involved in QE. But what happens if they allow interest rates to stay low and not CONSPICUOUSLY save the dollar by QE'g? I believe that is the presupposition of Jim Sinclair? That the Fed is forced to protect the economy by QE - else - we have outright 1929 depression? I think i have his logic correct. And it makes sense.

But what happens if the Fed sits on their hands and does a twist here and there but no conspicuous QE? Interest rates will rise and that will surely be an even bigger negative for the metals won't it?

If interest rates DO rise precipitously (which seems inevitable) then, as in Volcker 1980's - we have an economy that becomes deleveraged slowly and painfully BUT.....that would be bad for metals wouldn't it? Just asking here.

I am a believer that the Fed can only keep increasing QE which will lead to inflation which leads to higher metal prices. But does anyone think there is a chance they might not do this? Thanks....


Arihalli, understanding this issue requires two things:

1) Performing simple arithmetic
2) Ignoring EVERYTHING the propaganda machine says about the fraudulent U.S. bond market, and the even more fraudulent Fed.

Now let's review the facts:

a) There are NO BUYERS for U.S. Treasuries.
b) The Fed CLAIMS that "buyers" are paying the HIGHEST prices in history, at a time of MAXIMUM supply, when U.S. Treasuries have never been more WORTHLESS.

Conclusion: the Fed, the U.S. government, and the media are lying their faces off.

Obviously the ONLY thing stopping the U.S. bond market from ALREADY imploding is the fact that the Fed is (secretly) COUNTERFEITING U.S. dollars - and using that bogus/illegal currency to buy-up all the OTHER worthless paper.

Understand that at this point the U.S. cannot afford to pay the INTEREST on its massive debts. So it MUST (fraudulently) keep interest rates at zero in order not to be IMMEDIATELY bankrupted.

Put another way, if U.S. interest rates had been pushed up to the SAME level as Greek interest rates (at their worst) the U.S. would have had to QUADRUPLE its tax revenues just to pay the INTEREST on its debt (while shutting down all the rest of the government).

Thus as a matter of arithmetic your question has a very simple answer: IF the Fed ever turned off its printing press the U.S. economy would IMPLODE faster than you could say "deadbeat".

arihalli wrote:
My question is: 'what happens if the Fed decides NOT to quantitatively ease?'

Same here, avid amateur. Found this interview with David Stockton from a link on Max's site:

www.testosteronepit.com/home/2012/5/9/th...d-david-stockman.htm

Recall from csper’s videos, our debt based system (pyramid) is the bond market:
www.csper.org/renaissance-20.html
I do get a chuckle when reading David’s rants. Not so much from happiness but how he totally rips the Fed, politicos and Wall Street:

The Gold Report: David, you have talked and written about the effect of government-funded, debt-fueled spending on the stock market. What will be the real impact of quantitative easing?
David Stockman: We are in the last innings of a very bad ball game. We are coping with the crash of a 30-year–long debt super-cycle and the aftermath of an unsustainable bubble.
Quantitative easing is making it worse by facilitating more public-sector borrowing and preventing debt liquidation in the private sector—both erroneous steps in my view. The federal government is not getting its financial house in order. We are on the edge of a crisis in the bond markets. It has already happened in Europe and will be coming to our neighborhood soon.
TGR: What should the role of the Federal Reserve be?
DS: To get out of the way and not act like it is the central monetary planner of a $15 trillion economy. It cannot and should not be done.
The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. The yield curve signals nothing anymore because it is totally manipulated by the Fed. The very idea of "Operation Twist" is an abomination.
Capital markets are at the heart of capitalism and they are not working. Savers are being crushed when we desperately need savings. The federal government is borrowing when it is broke. Wall Street is arbitraging the Fed's monetary policy by borrowing overnight money at 10 basis points and investing it in 10-year treasuries at a yield of 200 basis points, capturing the profit and laughing all the way to the bank. The Fed has become a captive of the traders and robots on Wall Street.

The Fed, apparently, via twists and repurchases, has been involved in QE. But what happens if they allow interest rates to stay low and not CONSPICUOUSLY save the dollar by QE'g? I believe that is the presupposition of Jim Sinclair? That the Fed is forced to protect the economy by QE - else - we have outright 1929 depression? I think i have his logic correct. And it makes sense.

David doesn’t believe 1929, 2008 or 2012 have anything in common, and notes that Bernanke is full of it.

TGR: Does this unwinding of the Fed and the bond markets put the banking system back in peril, like in 2008?
DS: Not necessarily. That is one of the great myths that I address in my book. The banking system, especially the mainstream banking system, was not in peril at all. The toxic securitized mortgage assets were not in the Main Street banks and savings and loans; these institutions owned mostly prime quality whole loans and could have bled down the modest bad debt they did have over time from enhanced loan loss reserves. So the run on money was not at the retail teller window; it was in the canyons of Wall Street. The run was on wholesale money—that is, on repo and on unsecured commercial paper that had been issued in the hundreds of billions by financial institutions loaded down with securitized toxic garbage, including a lot of in-process inventory, on the asset side of their balance sheets.
The run was on investment banks that were really hedge funds in financial drag. The Goldmans and Morgan Stanleys did not really need trillion-dollar balance sheets to do mergers and acquisitions. Mergers and acquisitions do not require capital; they require a good Rolodex. They also did not need all that capital for the other part of investment banking—the underwriting business. Regulated stocks and bonds get underwritten through rigged cartels—they almost never under-price and really don't need much capital. Their trillion dollar balance sheets, therefore, were just massive trading operations—whether they called it customer accommodation or proprietary is a distinction without a difference—which were funded on 30 to 1 leverage. Much of the debt was unstable hot money from the wholesale and repo market and that was the rub—the source of the panic.
Bernanke thought this was a retail run à la the 1930s. It was not; it was a wholesale money run in the canyons of Wall Street and it should have been allowed to burn out.

But what happens if the Fed sits on their hands and does a twist here and there but no conspicuous QE? Interest rates will rise and that will surely be an even bigger negative for the metals won't it?

David believes all assets are overvalued and one day there will be large sucking sound of assets being revalued:

TGR: Does every sector collapse?
DS: If the bond market goes into a dislocation, it will spread like a contagion to all of the other asset markets. There will be a massive selloff.
I think everything in the world is overvalued—stocks, bonds, commodities, currencies. Too much money printing and debt expansion drove the prices of all asset classes to artificial, non-economic levels. The danger to the world is not classic inflation or deflation of goods and services; it's a drastic downward re-pricing of inflated financial assets.

I am a believer that the Fed can only keep increasing QE which will lead to inflation which leads to higher metal prices. But does anyone think there is a chance they might not do this? Thanks....

TGR: But if the government keeps printing money, cash will not be worth as much, either, right?
DS: No, I do not think we will have hyperinflation. I think the financial system will break down before it can even get started. Then the economy will go into paralysis until we find the courage, focus and resolution to do something about it. Instead of hyperinflation or deflation there will be a major financial dislocation, which means painful re-pricing of financial assets.

How painful will the re-pricing be? I think the public already knows that it will be really terrible. A poll I saw the other day indicated that 25% of people on the verge of retirement think they are in such bad financial shape that they will have to work until age 80. Now, the average life expectancy is 78. People's financial circumstances are so bad that they think they will be working two years after they are dead!

I agree with David that all asset classes could be devalued. It’s a good article, I probably just wasted time trying to snip and past. And in conclusion his investment model

TGR: Finally, what is your investment model?
DS: My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains.

Samak, thanks for adding the post and comments. It reminded me that I had neglected to address an important point from Arihalli's multi-part question:

"...will we have another 1929 Depression?"

This is arguably THE most important point for people to understand: a Depression "like the 1930's" is 100% impossible.

In the 1930's our governments had TINY debts, and thus were capable of ABSORBING large amounts of new BORROWING to help ease the economy through that crisis.

Today, our governments have "maxed-out their credit cards" already. NO ONE will lend them any more money. So what happens IF (when) their crippled economies collapse into a bigger-and-badder 21st century Depression?

There are ONLY two possibilities:

1) Default. Most/all of these worthless Western bonds go to ZERO.
2) "QE to infinity" (as Sinclair likes to say) and ALL the paper goes to zero.

That's it! There are no other mathematical possibilities for our governments (unless they were to adopt all of my OWN economic policies immediately).

Are $10's of TRILLIONS in bonds going to ZERO somehow "bearish" either for bullion or the miners? Obviously NOT. Where are the Bond Refugees going to flee to?

On the other hand if ALL the paper goes to zero (i.e. hyperinflation) then that is THE most-bullish scenario for the PM sector.

So there are only TWO possibilities for the precious metals sector going forward: a VERY bullish scenario and an ULTRA bullish scenario.

As Samak pointed out 2012 has absolutely ZERO parallels with 1929 (except for the desperation/evil of the respective banksters involved - lol).

Thanks all for the feedback. I am left where I began but with insight.

Lead a horse to water. they will normally drink if thirsty. My neighbours unfortunately are looking for easy answers that do not challenge the norm.

I am through talking. About 15 years ago I gave some offhand advice to a guy to buy gold. He looks at me as though it is partially my fault that his money is gone now and gold is 4 times what is was then.

Zooey,


"I am through talking. About 15 years ago I gave some offhand advice to a guy to buy gold. He looks at me as though it is partially my fault that his money is gone now and gold is 4 times what is was then."

People, often don't look in the mirror, when things go wrong personally or financially.

We have a choice to get mad, be happy, to eat, to drink and the choice to make decisions. We may not always like our choices. But so few realize they "have a choice".

Be accountable to the one in the mirror, accept the imperfections and realize you have a choice.

From were I am, you should be very proud. To be so humble and so caring. This world needs more people like you.

Thank You, for such sincere, heartfelt honesty.

Take Care
Earl