Either we will see gold at $3,000 dollars, or the Dow at 3,000, or both.
Posted on 03/22/2006 9:23:51 AM PST by stainlessbanner
I'm very bearish on the U.S. dollar and have been for years. That's why I have so many of them. This sounds like a contradiction, but let me explain. The reason I have so many dollars, even though I think they're worth less and less, is because I don't hang on to them. In my mind, cash is trash.
One of the reasons why we have this enormous gap between the world's haves and have-nots is because the have-nots value money -- they work for it, save it, cling to it, and lose it.
A friend just bought a new SUV. It's a beautiful vehicle. The problem is, the vehicle lost nearly 20% of its value the day he drove it off the lot. He's now in debt, paying off a vehicle that's dropping in value with a dollar dropping in value. He's a double loser.
Cash on the Move
Warren Buffett often says, "The best way to get rich is to not lose money." When people purchase consumer items such as a new car, use debt to finance things that shrink in value, or save U.S. dollars, they're losing money. Some people call it inflation, I call it devaluation.
Psychologically, the more Americans' cash -- and the things they buy with it -- decline in value, the more they worry about money. Many begin to work harder or, even worse, go deeper in debt purchasing more consumer items with sliding value. Unfortunately, many wind up with fewer and fewer dollars that continue to sink in value.
The reason I have more and more dollars is simply because I don't hold on to them. Instead, I do my best to keep my dollars moving into assets that are going up in value, not down.
In the late 1990s, when people were pouring money into the tech and dot-com stocks, my dollars moved into oil, gold, silver, and real estate, when prices were low. Today, because the dollar continues to drop in value, I keep moving my money into those same asset classes, although much more cautiously.
Impending Financial Disaster
The primary reason why I keep my dollars moving is because I'm bearish on the greenback. We have all heard the saying, "The U.S. dollar is backed by the full faith and confidence of the U.S. government." It is unfortunate that faith and confidence in the U.S. government is eroding. I don't believe Americans have the stomach to make the changes that are required to run a fiscally responsible government and save the dollar.
When President George W. Bush attempted to reform Social Security, that proposal was more unpopular with Americans than the Iraq war. People love their entitlements. When Bush pushed the Prescription Drug Benefit plan through, I decided the U.S. dollar is toast. To me, all hope of avoiding financial disaster was gone. The American people have voted.
My concern is that very soon, citizens of the world will tire of America's gross fiscal mismanagement and hesitate to take U.S. dollars. In order to keep the world interested in the greenback, interest rates must rise. When that happens, U.S. assets, especially paper assets such as U.S. stocks, bonds, mutual funds, and savings will drop in value. Some real estate prices will increase because replacement costs are high, but overvalued real estate will drop.
At the risk of sounding like a politician who flip-flops, there will still be paper assets and real estate that will rise in value. The secret to surviving in paper assets and real estate is to be very careful and very selective. People who diversify will lose. People who focus will win.
Americans Are Still Asleep
The secret to surviving the next few years is keeping your wealth in real money, not in the U.S. dollar. Buy things that hold their value and are exchangeable all over the world. Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else's religion, but he'll accept his gold.
One of the reasons why I'm bullish on gold and silver is because the American public is still sound asleep to this asset class. Most Americans have no idea how or where to buy physical gold and silver. The outlets that sell gold and silver I have visited are already low on inventory.
If and when the American public wakes up to the reality that their dollars are not money, but a currency, the panic and stampede will begin. Should that happen, today's prices for gold and silver will look like bargains.
Today, very few people realize that Warren Buffett reportedly holds one of the largest caches of physical silver in America. He purchased silver in the late 1990s, when it was cheap -- and while others were criticizing him for not investing in tech stocks.
The Rewards of Detachment
As I write, hundreds of millions of dollars are searching for a safe home, a shelter that will protect the dollar's value from the crash. It's unfortunate that during this period, the rich will once again become richer, and the financially naïve will again worker harder for U.S. dollars, doing their best to save as many as they can, only to wind up with fewer and fewer dollars.
So the reason I have more and more dollars is simply because I don't hang on to them. During this volatile era, it's best to keep your wealth moving up as the dollar continues to head down.
For discussion. Have at it FReepers
Is gold really the way to go? Let me ask fellow Freepers this: If you had $20,000 to invest today, where would you put it?
It's at a 20+-year high. It's great if you want to sell it. Not so great if you intend to buy it.
Let me ask fellow Freepers this: If you had $20,000 to invest today, where would you put it?
Real estate in certain suburban areas of red states.
I don't disagree with the concept of holding precious metals but I do think that there needs to be some form of diversification in any portfolio.
I'll be adding precious metals to my holdings soon, although not because of this article or the weakness of the dollar.
I'll do it because it's a safe place to hold my "cash."
Does anyone know of good mutual funds that invest in foreign bonds and that are not hedged against the dollar? My problem is that most foreign bond mutual funds are hedged against changes in the dollar. Therefore, if the dollar takes a slide, you do not benefit as much.
Ah, written by the Rich Dad/Poor Dad author. Isn't he the guy who sells a board game to people for over $200, all the while convincing them that they are being taught profound economic lessons?
I agree with him. The lesson is don't waste money on that stupid game.
If you had $20,000 to invest today, where would you put it?
I'd put it into Art and Antiques.
You can make double digit or triple digit percentile increases on your money, often in a very short time. BUT you have to really know what you are doing. If you are well versed or an expert in subcategories of art or antiques, you can canstantly find items for sale that are significantly undervalued (sometimes pennies on the dollar). If you can buy and know how and where to liquidate, you can do very well.
The biggest problem is that you are usually dealing with much smaller amounts of money than you would be dealing with in big stock or real estate purchases but it does add up.
If you are looking at percentile increases per dollar of investment, a smart purchase of art or antiques is hard to beat.
Actually, if the dollar is dropping in value, he isn't a double loser. He exchanged a small amount of something that was becoming worth less, for something that he can USE (and that only "dropped" in value relative to the hated dollars anyway).
And now he is slowly paying for the item with MORE of the dollars, but each month if they are worth less and less it is costing him less to make those payments, because his payments are based on the numeric value of the dollars, not their true worthless value.
If the author can't even get this right, I don't hold out much hope for him.
Note also that Gold has done very poorly over the last 70 years, even though it has done a LITTLE better than the green bills. Thirty bills would buy gold in 1930, now it costs you 520 or so. On the other hand, if you have spent the 30 on a piece of paper, that paper would be worth HUNDREDS OF THOUSANDS now -- if that piece of paper was a stock in a company that still exists. Heck, if you had simply used the 30 bills to buy 30 dollars worth of freshly minted coins, and put those coins in a well-sealed storage device, those coins today would be worth 10 times what the gold would be worth. I bet a well-preserved $30 toy from 1930 would also be worth more than $500 today. To look at it another way. The average person would have to work a lot LONGER in 1930 to buy an ounce of gold, then they have to work TODAY to buy that same ounce of gold. In the past 5 years my house has gained more in percent value than an ounce of gold. An acre of land bought with the 30 bucks in 1930 would be worth a LOT more than an ounce of gold bought in 1930. About the only thing that has gotten to be worth "less" over the years is the dollars themselves. Which just means you shouldn't have put dollars under your bed, you should invest it in something. I suppose Gold is one option, but I would be surprised if it doubles in value again in the next 10 years. Meanwhile, my house went up more than 25% in value in the past year.
5000 in silver
5000 into real estate
10,000 in a few stocks from technical security companies I've been watching.
Robert Kiyosaki is not a man to trust for money making ideas. One of the only reasons that his books became best sellers is that he associated himself with the Amway scam leaders and his book became almost required reading among all of the Amway sheep.
Either we will see gold at $3,000 dollars, or the Dow at 3,000, or both.
be a good islamist and covet gold. dump dollars. yup that's the ticket.
I'd immediately put it into stock for my business. The profit margin on my sales exceeds any other investment.
I own one of the books this guy wrote, but only by accident. It was the biggest turd of a book that anyone has ever squeezed through a typewriter.
financial bears are so annoying. they are wrong 15 times to get credit for being right once. stopped clocks.
BAHOG
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