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PalmGuyWC

Is Gold the answer?

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PalmGuyWC

I will admit I'm a very unsophiscated investor. I thought I was so damn smart before the dot com bust. Most of my IRA was invested in tech stocks and I felt rich. Hell, I was, but then the bust came and I felt pretty stupid. Then the real estate bust came and the present situation and I'm feeling stupid again. I felt so inept, I hired a "financial advisor." He's done a fair job, sold a lot of stock, has me in a nice cash situation with a balance in equities, and I can't complain about that, but his stock picks haven't been to wise.

I got a letter from my financial advisor today with the same platitudes about the current situation, etc, the same stuff I see on the financial channels on TV. I'm very worried about the direction our country is headed, massive debt and more to come. The goverment is printing money as fast as the presses will run, and continues to run up debt. I can only see massive inflation ahead, and when it will come no one knows, but it's coming, but the dollar is declining rapidly. Something you don't hear much about, but the dollar could collapse over night. It has happened to other currencys, and it could happen to the dollar.

I'm thinking of moving some of my assets into gold or silver. I know my financial advisor will be against it, because it's "dead" money as far as he's concerned. I know he will explain all the reasons I shouldn't do it. I once held on to some gold for almost 15 years and it didn't do doodley. As soon as I sold, the price of gold started to climb. Some say gold will be $3000 or even $6000 an oz in a few years. What do you think?

Dick

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JakeK

Dick, I'm not going to give you advice on whether or not you buy into gold, but here is some food for thought.

The market value of gold is inextricably tied to the value of the U.S. dollar as long as the U.S. dollar remains the reserve currency. As the Dollar continues to depreciate the market value of gold will rise. At some point the Fed will have to raise interest rates to stop the devaluation. At that time gold will fall in price as the Dollar rises in value. The question is when will the Fed raise interest rates? China and England are already divesting out of the U.S. Dollar and into gold which only drives the value of the Dollar down even further.

As a part of your portfolio, gold should be used to help hedge your cash reserves in times when the Dollar is depreciating. If the Dollar were to collapse, gold is a liquidable asset as well, so you would still have some solvency.

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Alicehunter2000

I opened a TD Ameritrade account shortly after the October 2008 Stock Market crash. Since then I have had an approx. 60% return on my money trading in and out of various stocks. I purchased $5000 in silver eagles at the height of last years run up in silver, so I have only broke even on that investment. Bought an ounce and a half of gold eagles at the same time and am currently up around 20% on those.

My TD Ameritrade stock trades have by far outdone my gold and silver coins during the same period. I have made the largest gains with commodities such as copper mining companies (TCK). and recently Chinese agricultural companies. So you can say that I have also bet against the dollar but have done so through the commodity companies rather than holding the actual metal. Much more liquid. I agree with you that the dollar is crap, but other worldwide currencies are not much better. Hard commodities are the best bet IMO against this devaluation. Gold, Silver, Platinum, Palladium, Copper, Steel, Iron, Rare Earth Minerals, Grains, Soybeans, Corn, Beef, Hogs, chicken etc. etc. These things have real value.

I have recently started playing the infastructure companies as most gov. spending is scheduled to start in 2010 before mid-term elections :hmm: Now why would they do that? :hmm:

My advice would be to wait for a day when the dollar shows some strength and buy your coins or bullion on a pullback. I wouldn't put everything in Gold and Silver but enough so that you will have some hedge against inflation or the anxiety associated with crippling deflation (depression) and high unemployment. Either way it is nice to have some coins. Good luck.......we are all going to need it in the coming year.

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Kathryn

Gold is part of the answer for my diversified portfolio. The price is high now, so purchasing on pullbacks as mentioned above would be best. I bought some more gold recently but I think I got on that train a bit late. It might go to $2,000, but I seriously doubt it will get anywhere near $6,000. I expect it might be something I keep for a while - it's kind of nice to hold some bullion in my hand.

I have a good percentage of my savings in cash right now - more than I would like, but I don't like where I think the market is headed. I have been purchasing some stocks that have done very well this year, but I am focusing on ones that I think are good in the long run even if the market tanks in the short term.

I had a financial advisor years ago, but didn't like his advise about stocks, bonds and mutual funds. If I listened to him, I would not have had as much money to loose in the recent downturn. :) Also, he really pushed some insurance products that I completely disagree with as an investment.

I’m looking to diversify even more. Anyone got 40 to 60 acres of farmland they want to get rid of?

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Kathryn
I once held on to some gold for almost 15 years and it didn't do doodley. As soon as I sold, the price of gold started to climb. Some say gold will be $3000 or even $6000 an oz in a few years. What do you think?

Dick - You sound similar to a guy I worked with years ago. Everytime he bought a stock, the price dropped. Everytime he sold, it went up. So everyone just did the opposite of what he did. Let me know if you buy some gold soon so I can sell mine. :)

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John Case

Gold is sexy, but here are the downsides:

1) Security. Where will you keep it? A safe in the house? A safe deposit box at the bank? Worry, worry. This is a cost.

2) Gold collects no interest. It is a medium of exchange and has no other value. You may exchange your dollars for gold and gold for dollars, but can you buy a loaf of bread? Scrape something off that Krugerrand, brother.

3) Gold goes up as long as there is someone who wants to buy it. Once everyone has some gold, that will be the end of the upswing. Right now there is an upswing....but for how long? At $1,150/ounce I don't want it, at $3000/ounce I'll want it less.

On the upside:

1) It is pretty. Go into the Museum of American History (I think) at the Smithsonian and enter the gold room......you will understand the gold bug. While you're there, check out the Hope Diamond.

2) It does move with the strength of the dollar.

3) There is always someone who will buy it, however, you'll pay a fairly steep commission (on both sides,..look at the buy/sell prices)

4) It probably should be part of you overall portfolio of assets.

There is so much hype in the media today about gold but think of this......if gold is going up, why do these guys want to sell? If I held gold right now, I 'd be more interested in holding it, than buying more.

I am suspicious by nature and tend to invest contrarily.......at this point I am not interested in gold as either a buy or sell,...howver, if it moves quickly to $2,000, I'll be shorter than a Manx's tail in it.

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epicure3

None of this is better than my matress.

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Palmə häl′ik

ROTH IRA for us 'YoungBucks'

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redant

There are some good etf's to play gold and silver, GLD for gold SLV for silver GDX for gold miners. Also a good Blackrock fund that invests in commodity producing companies BCF (which also pays a nice 8%+ div.) The etf's and close end funds are nice as there is daily liquidity and the div from Blackrock is nice. I'd mix it up a bit, don't put all the eggs in one basket. Of course if you really want to go broke fast you could open a futures trading account and trade the futures on gold, very low cost method and directly correlated to the price of the underlying contract.

Edited by redant

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MattyB

Gold has never been worth zero $. So, I'm waiting for that to happen next.

I don't trust investing. I'm perfectly happy living with a moderate paycheck cashed, stored in a coffee can, and no bank account. My wife don't fly with that so I just give her my paycheck. She can do with it as she pleases and I'll ask her how much money I can spend that weekend. It's usually $5, so BS Man has to pay for my burrito.

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Walter John
Gold has never been worth zero $. So, I'm waiting for that to happen next.

I don't trust investing. I'm perfectly happy living with a moderate paycheck cashed, stored in a coffee can, and no bank account. My wife don't fly with that so I just give her my paycheck. She can do with it as she pleases and I'll ask her how much money I can spend that weekend. It's usually $5, so BS Man has to pay for my burrito.

:floor:

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Dypsisdean

When you start hearing about an investment idea from the shoeshine kid or on a palm forum, that's usually closer to a top than a bottom.

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Dypsisdean

If you bought an once of gold in 1988 for $500 US, it would be worth today's price of approx $1100 US.

If you put that same $500 into an account earning 10% compounded monthly it would be worth approx $4000 today.

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Mark_NoVA

I like the old boring advice. Be diversified, be patient. Don't watch the blowhards on financial TV, don't pay attention to extreme claims on either right or left, don't try to time the market, don't try to quickly make back everything you lost. Just put a little bit into gold as part of the diversified package, forget about it, and think about palms instead!

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redant
When you start hearing about an investment idea from the shoeshine kid or on a palm forum, that's usually closer to a top than a bottom.

No truer words have ever been spoken.

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Kim
If you put that same $500 into an account earning 10% compounded monthly it would be worth approx $4000 today.

Where do I sign up?

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bubba

The question regarding Gold depends on what you believe the future portends. Between 1978 and 1980, the price of Gold flutuated between $185 an ounce and $850 an ounce.

Rephrased, what do you or more importantly what does the World consider the dollar to be worth? If you believe the in the sancity and stability of the US economy, Gold is a silly,stupid place to be. If you have concerns about the direction of the US economy based upon historically high deficits and political uncertainties, the dollar has the capability of becoming worth the value of it's paper. Correspondingly, Gold is a more than a solid investment.

Recently, Gold has surpassed what was previously believed to be a huge psychological barrier of $1000 dollars an ounce. Today,Thanksgiving, it closed at just under $1200 dollars an ounce. Certain parties, not highly enamored with current US monetary policy, have predicted an ounce of Gold to be valued at $5000 dollars an ounce before the end of 2010. Remember that you read this on a Palm Talk Board.

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DoomsDave

Send me to hedge fund managers' school, instead.

OOOH YEAH!

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bubba

Gold hits record today in dollars at $1218.00 per ounce!

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rozpalm

Bubba, how much of the decline in the dollar do you think is related to the dollar funded carry trade? I have heard there is close to 1/2trillion dollar carry trades since January. I ask because what does not make sense is that the treasury recently sold a tranche of bonds with a near zero percent yield. One would believe that if the decline in the dollar was related to a loss in confidence in US policy and monetary policy, then any debt issued in dollars would be sold at a discount to take into account further possible dollar depreciation. Clearly, there is a big disconnect between the decline in the dollar and the yield on the latest round of T-bills. To me that points to a possible big pop in the dollar sometime in the future as the dollar shorters get squeezed out. Whether the squeeze leads to a reversal will be the big question to be answered. I hold some gold in my portfolio as a hedge, but I have to admit its awfully tempting to dump at least half at this price level.

My view is that the Fed is encouraging the dollar carry trade in an effort to keep the dollar weak and thus help out US and Chinese (rmb is tied to a dollar dominated basket) businesses by making their goods cheaper and pricing out the competition. Its also good for the bottom line (ie exchange profits) of multinationals with a large amount of their sales outside the US. At some point the EU (the worlds largest group of exporting nations 3x China) is going to cry foul and demand the Fed raise rates to reverse the decline.

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JakeK
At some point the EU (the worlds largest group of exporting nations 3x China) is going to cry foul and demand the Fed raise rates to reverse the decline.

Right now the Fed Fund Rate is .25% and many financial institutions are borrowing insane amounts of money and investing it overseas in high yield bonds generating passive income. When the Fed Fund Rate goes up there's the high likelihood that it will exceed many of the high yield bond rates investment banks are currently invested in, and the interest they will owe will be greater than the yield they are earning overseas. I worked for a bank that got caught in that game a few years ago and had to write off $500MM in loan interest losses in one quarter. They had to write additional losses in subsequent quarters, but that was the largest interest loan loss. Regular investors can earn passive income using this same method but with state municipal bond funds.

To get back on topic a bit, it's my opinion that gold really has no value to a long-term investor due to the nature of commodities unless you believe in the doomsday theories, but can be a great way to generate income in the present by selling if you happened to have bought in low.

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rozpalm
At some point the EU (the worlds largest group of exporting nations 3x China) is going to cry foul and demand the Fed raise rates to reverse the decline.

Right now the Fed Fund Rate is .25% and many financial institutions are borrowing insane amounts of money and investing it overseas in high yield bonds generating passive income. When the Fed Fund Rate goes up there's the high likelihood that it will exceed many of the high yield bond rates investment banks are currently invested in, and the interest they will owe will be greater than the yield they are earning overseas. I worked for a bank that got caught in that game a few years ago and had to write off $500MM in loan interest losses in one quarter. They had to write additional losses in subsequent quarters, but that was the largest interest loan loss. Regular investors can earn passive income using this same method but with state municipal bond funds.

To get back on topic a bit, it's my opinion that gold really has no value to a long-term investor due to the nature of commodities unless you believe in the doomsday theories, but can be a great way to generate income in the present by selling if you happened to have bought in low.

Jake, any investor can participate in the dollar carry trade by opening up a Forex account and playing the Euro/Dollar pair. The scary part about the carry trade is that it involves insane amounts of leverage and if the bottom falls out (short squeeze) as you described, we could possibly have another banking crisis. Why the heck does the Fed encourage this kind of behavior? Telling the investment community that rates will remain low for the foreseeable future, is akin to sending a signal that the dollar funded carry trade is safe (risk-less money). Insane.

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www.dadluvsu.com

:interesting:

And today fundamentals mean nothing and bread and circus is the way... 

This past month announcements that Banco de Mexico, Sunshine and Perth mints are having trouble keeping up with retail demand.

Hourglass still has more sand than imaginable.  Rome didn’t fall in a day either, but our moral decline seems technologically faster than I’ve ever seen exemplified in history books.

 

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