Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Good points, jtabeb.

If I may paraphrase, it seems to me you're reminding us that a thief (including the U.S. Federal government) has no right to your property. But if it looks like they are going to get the property anyway, despite your best efforts, it is better to destroy that property so that no has the use of it than to allow the thief to get it.

Also, you're reminding us that thieves prefer to pick on wimps than someone who will likely resist. Playing "nice" so they won't hurt you is seldom a good tactic.

[jtabeb]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

I must say that as an American, I'm quite a bit disappointed by some of the posts here.

Two points, No one is arguing that gold and silver are the biggest winners in the soverign debt crisis problem AND, will continue to be so, the only reservations come from what the government will do to "rob" precious metals holders of their well deserved gains. (Through confiscation, opressive taxiation, or making holding and transacting in gold illegal).

I remember the words of one of my IPs when I asked about making a decision and then getting monday-morning quarterbbacked, after the fact.

His response was, and I kid you not, "FUCK'EM!".

That is my EXACT response to any government action to do any of the above to my PM holdings. They want to tax me at 90%, confiscate my holdings, or make it illegal, FUCK'EM! (I would well and truly rather dump my PM's in the ocean or a sewer, or otherwise make them unavailable, rather than submit to bullshit like that.) I will buy gold and silver BECAUSE logic tells me that they will CONTINUE to be the best perfoming asset class of the next 10 years, just as they have been over the last 10 years. If the government wants to PUNISH me for using my brain and providing for my family and myself, FUCK THEM! (And some lucky treasure hunter is going to strike it rich when they find the Stanta Tabeba some day). Seriously, get a backbone people, stand-up for yourself and your rights, or get run over. The defeatism I see in some of these comments makes me NOT proud to be an American. I don't advocate for violence or civil unrest, but I sure as hell advocate for peaceful civil disobdience! Grow a pair and take a stand, or live with the consequences. You all are talking like the civil rights folks were following the letter of the law or something. I hate to point it out to you, but civil disobideince is still BREAKING THE LAW. (Because the LAW unchecked can be wrong or immorale, if we don't challange immoral laws, then they stand).

I don't mean to lecture (even though I am), but please for the sake of the country, don't surrender your quest to see justice done or give up the fight to make sure we have "liberty and justice for all" because SOMEONE ELSE says "that's not the way things work around here". My God! To think where we would be as a nation if the people of the civil rights movement, or of the women's suffrage movment, or the abolishionist movement , and every other progressive movement that effected real political change had given up so easily.

Demand Justice, and settle for nothing less.
(And buy gold and silver if you wish, BECAUSE everything you know tells you that these will be the only things left standing when everything is said and done).

IF you don't think this then DON'T buy gold and silver. But Please, let's not devolve into having a "sour grapes" argument of Aesop's Fables fame.

If you think gold and silver offer the best return with the lowest risk then Buy em. If you don't, then don't. (and if the government tries to rob you, then FUCK'EM!):mad:

Can we agree on that?


V/R

JT

[lsa420]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

www.bulliondirect.com

50% gold /50% Silver by dollar purchase amount, Physical BULLION ONLY!!! (If you have $10K then, by my book, you should be $5K gold, $5K silver).
Coins better than bars, .999% pure or better.

I've done a wee bit of business over the years and they have always been outstanding. (They will even hold it for you in their vault, and you can later choose to get physical delivery).

(Okay, Okay, maybe a lot more than a wee bit of business) ;)

I also use and recommend Bullion Direct.

[flintlock]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

We can't lump all commodities into the same category. Metals, lumber, and other things construction/growth related are one thing. Things like food and oil we need to exist are another. I agree with Raja that the issue of what the government will do about Gold in the future is a major one. I'm not as worried about what to do with the proceeds of my gold when I sell it. I don't see it being time to sell gold unless the economy is on the rebound. And if that happens, they'll be plenty to invest in.

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

On the other hand, if I recall correctly, EJ didn't think there would be hyperinflation but instead only a period of very high inflation.

Despite a post I made yesterday discussing hyper inflation or deflation of the Dollar, I have to think that EJ is right here. No hyper stuff, just high stuff.

For hyperinflation (or hyperdeflation) one needs, in my view, a smaller isolated currency in a large sea of foreign currency. The smaller isolated currency can end up making sustained hyper-fast moves against the foreign currencies.

The Dollar is neither a small or isolated currency. It is half of the world's currencies (give or take.) It is (I suspect) written into over half of the world's contracts and long term arrangements. The Dollar has immense inertia. Imagine navigating the entire fleet of the world's oil tankers, all congregated within the Persian Gulf. Nothing happens hyper-fast ... except and unless some "out-of-band" event applies, such as a giant asteroid or a barrage of nuclear bombs on those ships, or a Bretton Woods III revalues the Dollar in terms of some new currency arrangement. All such singularities I can imagine would be essentially instantaneous.

[Mn_Mark]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Just at the time gold is soaring, the global economy will be collapsing. All commodities will be headed down because of demand destruction. What's the good of bailing out of gold at the top, only to put your winnings into a plunging asset?
....


In my opinion, this topic should be the #1 discussion on iTulip, given the 30% gold allocation that is recommended . . . .

Agreed that this is one of the most important topics.

If we devolve to hyperinflation, then everyone will be looking to put their money into real assets. Getting paid twice a day so they can rush out and buy something, anything, before the money loses its value. In that environment I can't see how commodities could be dropping in value even if there is demand destruction. In fact, if I try to picture living in such a chaotic environment, it's hard to imagine people even being much concerned with the government or tax issues - the non-compliance would be huge at that point. Lots of black market activity, perhaps a general unspoken agreement to ignore tax laws as seems to have been the case in Greece leading up to the current problems.

On the other hand, if I recall correctly, EJ didn't think there would be hyperinflation but instead only a period of very high inflation.

I guess an interesting question for those who know where to look for statistics and charts would be: how do commodity prices behave in a hyperinflationary or very high inflation environment? How did they behave in Weimar and in Zimbabwe, versus how they behaved in Argentina, for example?

John Pugsley, in his old book "The Alpha Strategy", specifically addresses this issue of how to protect your savings from inflationary collapse. He concludes that you need to do the following:

(1) Invest in knowledge and the tools of your trade first
(2) Invest the maximum possible in those goods you can buy now, store, and eventually consume (everything you use, from food to clothing to medicine, etc, that is storable)

(3) For the rest, invest in real goods you can eventually sell or exchange. These he breaks into several subcategories:

• manufactured goods, which he dismisses as poor mediums of exchange since you buy them at retail price and they become obsolete unpredictably;
• collectibles, which he dismisses as being too fickle; and
• raw commodities, which he sees as the best option.

The advantages of raw commodities:

• they are always in demand and never go out of style or become obsolete
• the markets are large so they're easy to resell
• they're used worldwide
• they carry a relatively small markup from producer to buyer

He argues that a major disadvantage of gold and silver is the government's interest in intervening/controlling/manipulating/taxing them. Another is that as the currency becomes unstable, precious metals prices fluctuate wildly, making them risky.

He advocates that precious metals be a part of your inflation-protection plans, but because of those disadvantages, they not be the major part. His main recommendation is to focus on the industrial (copper, zinc, lead, tin, nickel, aluminum) and strategic metals (mercury, platinum, palladium, chromium, cobalt, cadmium, and tungsten). He recommends diversifying among at least three and preferably six or eight of these.

[raja]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

The best idea I've come across for what to do when the government tries to take the profitability out of gold ownership is other commodities: oil, timber, steel, agricultural commodities, base metals. Like gold, they have intrinsic value. They are easy to buy and sell, unlike real estate. They hold their value in a high-inflation environment, and yet they can't really attract extraordinary, targeted government penalties like precious metals can because they need to be used by everyone and the government can't risk choking off the economy by putting special high taxes on the commodities that everything else is manufactured from.

The downside is the fluctuations in price, and the fact that if the economy is entering a very sharp downturn, the reduction in demand for commodities could significantly affect their value. On the other hand, as the economy recovers, there will be a voracious appetite for raw materials.

Your case for commodities is good . . . except the downside of price drops, which you mention.
And, it's a huge downside . . . .

Just at the time gold is soaring, the global economy will be collapsing. All commodities will be headed down because of demand destruction. What's the good of bailing out of gold at the top, only to put your winnings into a plunging asset?

Perhaps it would work if one sold gold, held onto the cash for awhile, and then bought commodities when they are at their nadir. But one of the main reasons gold would be rising is that inflation is also rising, and the value of the dollar is dropping. So the dollars you are holding after selling gold may lose value at the same rate as the commodities you want to buy.

Unfortunately, I don't have a solution.
I guess bailing out of gold in time is the important thing . . . and then decide what to do with the falling dollars at that point.

It would be nice to hear from EJ on this.
His post painted a rosy picture of spectacular profits resulting from following the iTulip path . . . but neglected to discuss the downsides and what might be done to avoid them . . . .
As I said in my previous post, the iTulip strategy could result in significant losses if the government interferes . . . something that I consider quite likely.

In my opinion, this topic should be the #1 discussion on iTulip, given the 30% gold allocation that is recommended . . . .

[medved]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

My question then is, how would they know your cost basis? There is no place that i can find where your tax basis is kept, except in your head..... If the govt feels the need to tax gold 90% (outright robbing you) and gold is at 2K or 5K or whatever, then my best guess was that i bought at 4500 or so..... Whats to stop that?

The "best guess" approach will go away in a while. Remember, when dealing with IRS the burden of proof is always on you, and presumption of innocence does not apply. So, if you don't have a cost basis record, they will assume your cost basis to be zero (gift, lucky find or worse yet, illegal untaxed transaction).

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

google dillon gage. they had a walk-in retail desk a couple of years ago. decent inventory, good pricing, big operation.

I just spoke with Dillon Gage on the phone for the first time now. Dillon Gage has a minimum order size of $3000, and they quoted $22 for one ounce American Silver EAGLE coins.

On their website just now, APMEX single one ounce American Silver EAGLE coin price is $21.92, or $21.12 for quantities of 100 or more. It looks like I'll be sticking with APMEX -- better meets my needs (a cheapskate small fry ;)).

Hmm.... Bullion Direct looks to be $21.19 for a single one ounce American Silver EAGLE coin. That's a good price too.

[Mn_Mark]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Good points. Your comments would lead one to think that "they" won't tax gold based on one's profit (sell price minus cost basis), for lack of a well documented cost basis.

Therefore, sooner or later, they will find other ways to make one eventually wish that one had not remained invested in gold. ....

I detoured from the topic of gold to inflation because I suspect that when the matter of failing confidence in numerous national currencies, including the Dollar, is resolved by this major reset, then will be the time to move out of gold ... plus or minus a few days. That minus could hurt; the time to move may come the day before we know when or where to move. For now we have to take that risk, being prepared to lose some wealth in the crossover but still doing the best we can until then.

In short, what's sometimes called "inflation", meaning in this case a loss of confidence in the legal tender of the land, is what's driving gold at present. At some point, that confidence will bottom out, likely I suspect in the days before a major reset. That will be the time to move, if only one can anticipate it and if only one can figure out where to move to, without excessive loss of wealth in the transition.

The best idea I've come across for what to do when the government tries to take the profitability out of gold ownership is other commodities: oil, timber, steel, agricultural commodities, base metals. Like gold, they have intrinsic value. They are easy to buy and sell, unlike real estate. They hold their value in a high-inflation environment, and yet they can't really attract extraordinary, targeted government penalties like precious metals can because they need to be used by everyone and the government can't risk choking off the economy by putting special high taxes on the commodities that everything else is manufactured from.

The downside is the fluctuations in price, and the fact that if the economy is entering a very sharp downturn, the reduction in demand for commodities could significantly affect their value. On the other hand, as the economy recovers, there will be a voracious appetite for raw materials.

So diversifying among oil and the other commodities is much like the suggestions some people make for stocking up on ammo or food or the other necessities of life, except you're stocking up on the broader, economy-wide, society-wide necessities. It's a lot easier to do that than try to convert all your savings into tins of food and crates of ammo - and then try to sell them later when the crisis passes. Obviously you need an adequate supply of those personal necessities and of all of the things you consume. But for those of us who have savings beyond what can be completely converted into those personal necessities, commodities provide an alternative on a large enough scale to be useful.

The trick is knowing what commodities to get into and when to get out of gold. Gold's rise over the past decade has been spectacular but gradual enough that it hasn't attracted any particular government looter (to use Ayn Rand's term) attention yet. But if we get a big multi-thousand dollar price increase, I would think that somewhere in the midst of that would be the time to not worry about wringing every last drop of profit out of it and to sell a lot of gold and get into a basket of oil and the other commodities (and perhaps stock indexes, if the gold/Dow ratio is down around 1 or 2). I expect that those days of multi-hundred dollar gains in gold is going to attract the attention of the poor saps who always get in at the end of the bubble, as well as the government leeches looking for a way to "spread the wealth around" for the "common good", and that will be the time to take profits and get the hell out of the gold arena while the gettin's good.

I think one could be in very nice shape if, after the smoke clears from a serious economic collapse, you're sitting there with a fat portfolio of oil, steel, timber, copper, and so on. Sort of like Scarlett O'Hara prospering with her second husband's timber business as the South began to rebuild

[Bruno T]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

High Commissioner..

Funny.. please quote me correctly. I said 'may'. And the show isnt over yet...$USD is knocking on the door of a new powerful trend...

You may die today. Or you may not. You may win the lottery today. Or you may not. I can flip a coin and it may land heads. Or it may land tails.

"May" is a great word when you make your living making "predictions", isn't it?

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

My question then is, how would they know your cost basis? There is no place that i can find where your tax basis is kept, except in your head..... If the govt feels the need to tax gold 90% (outright robbing you) and gold is at 2K or 5K or whatever, then my best guess was that i bought at 4500 or so..... Whats to stop that?

Good points. Your comments would lead one to think that "they" won't tax gold based on one's profit (sell price minus cost basis), for lack of a well documented cost basis.

Therefore, sooner or later, they will find other ways to make one eventually wish that one had not remained invested in gold. In the 1930's, FDR confiscated it, then devalued the Dollar against his newly expanded hoard of gold. In the 1980's, Volcker turned the corner on Dollar inflation fears, cramming down the price of Treasuries (jacking up their interest rates) hard enough to put a floor under Treasuries and begin a 30 bull market in them. Gold backed off from its peaks when this was done and was a poor investment for the next 20 years.

Perhaps this time around we'll see much of the gold held by private Chinese interests end up helping fund a greater Chinese holding of SDR's. Or perhaps we'll see the beginnings of a multi-decade bull market in SDR's (though not a market that us peons get to play in directly), which would correspond to another bear market in gold.

The inflation vs deflation argument has become a hot potato, as do seemingly all important topics. iTulip does a good job of not getting caught up in much of the agit prop, but perhaps not so (in my view) on the inflation vs deflation topic.

My (non-iTulip compliant) view is that tracking debt creation is more useful than tracking retail prices of some basket of goods. The massive "money printing" by the Fed is being "sterilized" rather affectively, meaning that they are monetizing the debt of favored insiders, while depriving debt to others. Giant holes are being blown in the balance sheets of less favored corporations, banks, governments (federal, state and local), pension funds, and individuals, as the value of their assets and their cash flows both collapse, while their debts (secured by those assets and cash flows) become increasingly onerous. The collapse of retail sales volumes is a more important driver of retail pricing than any abundance of cheap and easy money. For us peons, there is no such abundance. Any company with a non-trivial amount of debt or another wise high fixed cost structure has to squeeze suppliers, customers and employees to survive.

For now, all national fiat money is increasingly suspect, racing to the bottom while gold shines. At some point, in perhaps a year or two, "they" will crank up the volume on the economic stress machine all the way to "11" on the dial, and come riding to the rescue with a major reset of the international monetary system. That will usher in a "new era" with a new world-wide reserve currency (based out of BIS/IMF/G20) supported by a world-wide regulatory, economic and taxation structure "just affecting the rich bad banks and spendthrift nations" for now, though imposing "well deserved" austerity on the citizens of one or two dozen bankrupt nations.

I detoured from the topic of gold to inflation because I suspect that when the matter of failing confidence in numerous national currencies, including the Dollar, is resolved by this major reset, then will be the time to move out of gold ... plus or minus a few days. That minus could hurt; the time to move may come the day before we know when or where to move. For now we have to take that risk, being prepared to lose some wealth in the crossover but still doing the best we can until then.

In short, what's sometimes called "inflation", meaning in this case a loss of confidence in the legal tender of the land, is what's driving gold at present. At some point, that confidence will bottom out, likely I suspect in the days before a major reset. That will be the time to move, if only one can anticipate it and if only one can figure out where to move to, without excessive loss of wealth in the transition.

[Chris Coles]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Wriggly, (and the others). Simply, the point I was trying to make was, in effect, is it not possible to jump, classically, out of the frying pan and into the fire? That there must be circumstances where you are always better off not selling but staying put; waiting out the transition between the collapse of the FIRE economy and whatever follows? That it might be better to wait for longer than EJ is postulating? That what you buy with your Gold may be, in all circumstances, not such a good deal as staying put? That once in Gold, stay in Gold.

[pescamaaan]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

i buy from apmex.com - they have detailed records of everyone's cost basis, no? same goes for bullionvault, bulliondirect, etc etc etc...(though admittedly they did not ask for a SSN when purchasing)

i guess if you buy in cash from a local dealer you're all set?

[karim0028]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

EJ's article did not discuss the possible government-originated risk of gold ownership, which would seem important when considering when to sell gold.

When raja would like to sell his gold:

1) Before the government decides that gold owners would be a politically safe, readily accessible source of funds to help feed it's ongoing Ponzi scheme, and decides to tax gold profits at 90% or thereabouts. Couldn't happen? Remember the 90%+ income tax brackets.

Say you bought gold for $270 in 2001, and sold at $5000 . . . well, you'd clear $472 after a 90% gold profit tax. Whoopee, you've doubled your money over 15 years! Of course, over that time period inflation may have reduced that $472 to $100 in real terms, so you'd have only lost about half your original investment. :eek:
But wait, it gets better. If the government does impose a big tax on gold profits, expect the gold price to plummet. What's the point of owning something when most of the profit is taxed away? So maybe gold drops back down to . . . $1232, or lower by the time you sell.

2) Before the government decides to institute a new currency and doesn't want any competition for this new fiat money, so it decides to ban personal gold ownership, similar to Franklin's gold grab during the Great Depression. You turn in your gold for the old dollar, which is then devalued 90% by the creation of the New Dollar. (This scenario suggested by vinoveri in a previous post).

Good luck timing these . . . .

From Denninger yesterday:

We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse. Cash is perfectly fine but make damn sure it's really cash and not some exotic "cash equivalent" that can get gated. This means, unfortunately, money market funds are no longer safe with recent changes to SEC regulations. If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)

My question then is, how would they know your cost basis? There is no place that i can find where your tax basis is kept, except in your head..... If the govt feels the need to tax gold 90% (outright robbing you) and gold is at 2K or 5K or whatever, then my best guess was that i bought at 4500 or so..... Whats to stop that?