Dollar Dropping And No Metal Movement

Well, that's just it, Hock... we are in uncharted waters and have been since early in 2008. Today's stock market is nothing like the market of the 30-40 years before that time. There is WAY too much speculation and trading going on today for a real investor's market. Your problem, and that of many others, I suspect, is that you are trying to make sense of a non-sensible system. There are market forces at play today that we've never had before... such as 3 years of near zero percent interest rates, QE, QE2, and perhaps even QE3, a currency that is down quite a bit and looking like it will go further (maybe), massive bail outs, government grabbing control of virtually everything in sight, etc, etc, etc.

Back in the black powder era, people were advised to "keep your powder dry". Investors can take that to heart because it is just as true for them as it was for those pioneers of the past. In our case, it means:

1. be well diversified in various asset classes
2. invest 5-10% of your portfolio in PMs of the type that appeal to you
3. possess physical PMs that you control and can use for a SHTF situation
4. keep some cash available
5. own some land that can be farmed, plus the necessities for farming
6. own some good tools that don't require electricity
7. keep your friends and family close
8. invest in your own personal skills
9. have a substantial food, water, and supplies hoard
10. ignore most of the blather coming from the government

I'm sure that others can add to this list, so this is just for openers.

Confidence in the American government and economic system is at an all time low, IMHO. This is not because a lot of us are just gloom and doomers, although some folks are that. No, it is much more serious than that. Many feel that the government has been very poorly run, has caused many bad things to happen, have then lied to us to cover up their incompetence, and they continue to do so.

Examples:

They say that inflation is "not a problem", coming in at 1.5% or so. This is only true in their Alice-in-Wonderland scenario of "core" inflation. This number is not even calculated the same way that it once was back in the 1970s. If it was, then inflation would be in the area of 8-9%. Those of us who do not live in "the core" but in the real world know that food, fuel, clothing, medical care, insurance, college tuition, and a LOT of other things are up in price considerably. Perhaps we should limit our tax payments to only 1.5% more than last year because "there is only low inflation these days". Think that would work? Probably not.

They say that unemployment is at 9% but it is a fact that they stop counting the folks who have given up and are no longer even trying to find work. Their assumption is that they have found work and are thus employed! Actual numbers show that the real US unemployment rate is in the area of 18% or double what the government claims. This does not reflect the LARGE number of people who are under-employed and cannot find jobs that require their qualifications but have to settle for some less well-paid work to pay their bills.

They say that we have just come out of a bad recession but many Americans haven't come out of it yet and may not. Besides, this is not a recession but a depression. Unfortunately, no one has the "big brass ones" to actually come out and say that. But what is a depression? It is a severe recession with persistently high unemployment that drags on for years, rather than for the months of a typical recession. Is this sounding familiar to anyone else?

They say that they want a "strong" dollar, yet their actions belie that with every move they make that intentionally weakens the dollar. Yes, driving down the dollar increases US exports and reduces US imports but it also robs the buying power of anyone who has managed to save any money in spite of all these government-caused economic and financial problems.

GRRR!

Sorry for the long post on this topic. I tend to get carried away about such things at times. Perhaps this is an example of personal frustration with all of the stupid and useless things that are going on these days and how incredibly poorly done they are.

So... keep your powder dry!

It seems to me that the American economy is a bit like that of Great Britain after tyhe First World War, where their economy just stagnated until the late 1920's, while the American economy was doing better. I am not as pessemistic ar ancientcoinguy, but I do see a period of long stagnation.

If that is the case, what do you do as an investor? I believe that there will be a shift in emphasis to bond and cash deposit type of investments, and less ephasis on shares, because there will not be any spectacular growth in the size of public companies. Because real estate is so underpriced at this time, I think this type of investment will be a quiet achiever, but without spectacular results.

Ed_B is right. If you are lucky enough to have property which you can put to work and live on, you should be somewhat insulated from the present economic ructions. You just need some cash to keep your business model going.

There could be enormous problems for the World economy if the U.S. defaults on it's debt obligations. The total debt per head of population in the U.S. is a about triple that of Australia. If the U.S. can't pay her debts (mainly to China), a lack of credit in China may result. The last thing the Chinese Government needs as an unruly and warlike population as the result of unemployment.

Coinwise, British silver coins were debased to 50%. in the early 1920's.

Ed wrote:




I especially like 3, 4, 8,9 and 10. But all are acutally very important. I'd also add:

11. Have some sort of means to protect your family/belongings by investing in a gun and some ammo.

When people get desperate they do desperate things. Hopefully you'll never need it. But it'd be better to have it and not need it, than to need it and not have it.

I would pick the US dollar for that because oil and other commodities are priced in dollars on the world market.

Currencies do have an impact on the prices of all goods and services. They do because as a currency, such as the US dollar, declines in value, more dollars are needed to buy the same amounts of goods and services. For example: back in the late 1950s, a gallon of gas cost about 20 cents. That was two 90% silver dimes. Today, gas costs $3.85 or so a gallon. That is about 1.1 silver dimes. So, is gas more expensive today? Or are our paper dollars just so much cheaper?

At some point, it becomes clear that the valuation of goods and services in a currency may not be the best standard for price or value comparison. When that times arrives, something else can be chosen as "the standard", against which all other things are valued. For much of human history, these have been the monetary metals of copper, silver, and gold. It can be useful to look at various prices in terms of silver or gold to see if they are changing and about how much. This is why I used the gasoline example above.

There are a lot of things that affect the price and availability of diesel and other fuels. In the US, we now have "ultra low sulfur" diesel fuel because the new anti-pollution laws and the new diesel engines that meet those laws require it. Because of this, extra distillation steps are required to make this fuel. Extra processing always adds to the cost and reduces the amount of product available; this is no exception. Furthermore, a considerable portion of the world crude oil supply is not suitable for ULSD fuel manufacture, even with extra processing; it's just too dirty to be cleaned up that much and still make a profit. Limiting the portion of the available pool of raw material like this reduces the supply of the feedstock and raises the cost of the finished product. It can also create product shortages, particularly in some areas that are not as well served by pipelines as other areas.