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
The entire price shift for gold has been due to increased demand for jewelry. Something about how, when a young man has a pocket full of (pick a currency) from doing an honest day's labor, and seeks to woo the affections of a young lady, he's expected to buy her shiny trinkets.
~()):~)>
plastics...
But really, there is no bad time to be rich!
Gold is amazing. The NBA banned players wearing all that bling and STILL the price goes up!
When you invest in metals, do you get the physical bullion? Or just a paper that shows you "own" some metal?
If you actually physically possess it, then what form? Bars? Coins (US or Krugerand?)??
Things I've always wondered about.
I went through an economic depression 2 years ago. My recovery was made easier by the fact that not many people around me were in the same economic duress. I started an entirely new career and it is getting better.
This guys method of financial security is faulty.
You could not be more wrong.
In fact, the person is a triple-loser. He could have used the SUV as a business expense, and taken the HUGH tax break we get from purchasing those vehicles. The tax break literally pays for the thing if you pay cash for it upfront.
As the dollar value drops, interest rates go up, making the payments on that truck just one part of the equation that results in higher payments on every aspect of the purchase. The SUV becomes more expensive to operate, leaving less available dollars for investment in income producing entities.
Ironic, since the gold bugs are usually clucking about Ponzi schemes.
LOL
"If you fail to plan, you plan to fail!"
I prefer to find it for free.
For many years I owned paper silver and just as the Y2K thing was starting, I switched to physical gold and silver, just a couple of buckets with bags of old silver coins and little plastic containers of Maple Leafs.
The buckets are a pain; they weigh about 75 pounds each and are the main reason I now prefer to hold mainly gold.
Medical companies - nursing homes, drug mfr & dev, etc.
"I'm very bearish on the U.S. dollar and have been for years. That's why I have so many of them."
- What, do you think you're cool or something?
When I invest in metals, I prefer brass-jacketed lead.
In seriousness, I bought an old scrapyard and have made a fortune selling it for pig iron to the Chinese.
They even came out and cleaned it.
I now use it for a yard for work over rigs made in China!
Check out this site..
http://www.ajpm.com/htbin/gold.cgi
1oz. coins add up quick.
Especially if the coins were gold or silver.
Numismatic value of a rare or extremely good example (uncirculated or proof) of a more common coin acts as its own hedge, yet the coin's value is also tied to its bullion content and can rise or fall on that as well.
These have the advantage of being more portable than houses as well...
"Gold is not the way to go. It is too late for that."
- Once you start hearing about it in the media, its too late, traps sprung. Now they are looking for people to sell to while the price is high.
If you want to know how to trade & invest. Talk to contrarians.
If he took a variable-rate loan on his car, he's not a loser, he's stupid. If it is a fixed-rate loan, inflation is his friend, and higher interest rates are his friend.
Heck, at some point the lender might offer to let him buy out his loan for less than the principle, just to get the money back to lend out at higher interest rates.
as for the SUV, he could have bought a Prius. I know people who kept them for 2 years and then sold them used for MORE than they paid for them (in Virginia, a Prius is a free ticket to the HOV lanes, worth THOUSANDS of dollars).
I agree with that point. Kiyosaki's point, however, was that you would be a double loser as the dollar dropped. Not true. You are always a loser in vehicle depreciation whether the dollar goes up or down. The dollar going down, however, actually reduces your loss on the vehicle.
Look at it this way. Assume you buy a car today, and the dollar drops 20% tomorrow. Therefore, the cost of the car for you tomorrow would likely be 20% more than what you paid today. So, you have 20% more equity in the vehicle due to the decrease in the dollar. Granted, you still have an economic loss, but this loss has been reduced by the falling dollar.
I agree with THAT statement. However, that's true irrespective of the value of the dollar. So I'm just pointing out that once you have BOUGHT the SUV, a falling dollar is better for you than a rising dollar, as regards the repayment of the SUV loan.
Of course, the buyer should have taken out a 2nd mortgage on his house to pay for the SUV, so he'd get a tax deduction.
You can possess it in coins, bullions and paper etc.
I just noticed the conclusion to this article:
"During this volatile era, it's best to keep your wealth moving up as the dollar continues to head down."
Yippee! Now I have the secret to wealth!
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