Exit Strategy from Gold & Silver?

[Glenn Black]

I don't understand the plan. Perhaps somebody can enlighten me.

Most at Itulip seem convinced that fiat currency is doomed, more and more each year. I agree.

Real estate had been a huge bubble for the last 80 years, and is in the process of returning to its inflation baseline, just as that 350 year study of Amsterdam real estate did. So today, real estate is a poor reservoir for wealth, and a neutral vehicle over the long term.

Commodities can be a reservoir for wealth. Coffee, tea, sugar, wheat, corn, rice, etc. are on their way to doubling in price, most likely thanks to Blythe Major and her team, and others. These commodities can be eaten, and therefore can be an essential to survival, if you can avoid contamination and infestation.

Many here at Itulip and elsewhere promote gold and silver as one of the better commodities for wealth storage and appreciation. As we know, you might be able to use it for trade, or as money, but you can't eat it directly.

If things turn really nasty, they say we should have 6 months food stored in our homes. We should be ready, willing & able to grow, hunt, or gather the majority of our food and potable water.

Silver & gold coins which are easily recognized as money, and significantly better than paper money, can be used to buy or trade for food.

Assuming we get through the worst of it, what is the exit strategy? This is where I get lost.

http://forums.silverseek.com/showthr...-Silver-Bubble
silverBubble.jpg

Here we see silver spot price superimposed on a standard bubble market price trend. Some may think we are in bubble territory for silver. I assume the same can be said for gold. Assuming we can catch the peak, do we exit silver at the top price? If so, what do we jump to when we leave silver behind?

The above red curve may be close enough to future reality to be useful for making decisions today. If true, we may be going from the frying pan into the fire. Silver & gold seem to have higher price volatility, but for what benefit?

The above link also presents Google Search Statistics comparing "silver" to "American Idol", showing no perceivable trend no bubble since 2004. In comparison of "education" and "TV", we can see a significant inverse relationship.

So... is silver and gold worth the bother? If yes, then what is the exit strategy from silver?

[pianodoctor]

Re: Exit Strategy from Gold & Silver?

I don't want to say anything specific that may be part of the info available only to "Select" (paid) members, but I think I can say a few things without stepping on proprietary info.

1. A lot of what you mention is more a part of 'gold bug' type thinking. iTulip is not a proponent of gold bug concepts. The iTulip strategy is that there are times to buy (or hold) gold, and times to sell it. There will be a time to sell it. We don't believe fiat currency is "doomed", but certainly a significant devaluation of dollars over time is likely, and gold is a hedge against that.

2. Silver is not part of iTulip strategy. Central banks don't hold silver. They hold gold. You're on your own speculating on silver.

3. The time to exit gold will be when governments take definite steps to eliminate currency risk. Where iTulipers stand on timing such things is based on E.J.s understanding of Fed policy, observation of events as they occur, and E.J.s analysis as the future unfolds.

E.J. posts certain information so any viewer can see it, but the bulk of the "meat" is for paid subscribers. There is a LOT of E.J.-written material in the achives. Some free, some requiring subscription. To best understand where E.J. is coming from, you would want to read all of it.

[Glenn Black]

Re: Exit Strategy from Gold & Silver?

I think holding gold (& silver?) and using it for survival as necessary is not "gold bug" thinking. To me, "gold bug" is to hold gold forever, till death do you part, similar to '007's Goldfinger.

I assume that EJ's purpose is not to collect wealth for the purpose of world domination, but mere protection of hard earned wealth from government's peculiar thoughts and actions. Therefore exit strategies are needed all along the way, for the government may never capitulate from their current path. If the government persist, for they can go for a longer duration than any one's individual's lifespan, an exit plan is required; sooner or later. If someone, due to misfortune or station in life, runs low on income &/or assets, and needs an exit strategy from investments to cash on hand for living expenses, then an exit strategy may be required before the government capitulates.

So on that basis, where is the logic? Where are the exit strategies all along the way?

[thriftyandboringinohio]

Re: Exit Strategy from Gold & Silver?

I hold my physical gold to protect wealth. I can't find anything else that will likely retain as much real purchasing power through the turmoil to come.
That being said, I sure would like to exit near the top on your chart, somewhere in the region between your labels of "delusion" and "denial".
If I hold all the way through to "return to the mean", I'll have achieved my primary goal of protecting wealth.

[jpetr48]

Re: Exit Strategy from Gold & Silver?

Glenn

I think in the end every person will have to decide their own exit strategy because no matter what I or anyone else says, when the volatility on these metals starts swinging in gold price $100 a day as EJ mentioned, your emotions might override what you hear. Bill Walsh, former SF 49er coach use to call the first 20-25 plays before a game because in the heat of battle it is difficult to make rationale decisions.

What planodoctor said is true. Yet the line of demarcation or exit will be less clear as your graph is. Personally, I will start drawing up an exit strategy once I start seeing the "yellow of their eyes." I will be triangulating my decision based on 1) sound macro fundamentals and counsel from EJ and trusted others 2) technical analysis including sentiment - see sentimenttrader.com 3) valuation in other foreign currencies such as swiss franc as the dollar will be trash. I am no Bill Walsh but I will work my plan and adjust accordingly

[Adeptus]

Re: Exit Strategy from Gold & Silver?

I'll worry about my exit strategy the second Bernanke announces he will execute his (and a private jet to Venezuela is not what I'm talking about).

Disclaimer: I have zero background in economics. Everything I know was learned from the interwebs in the past couple of years. That said, I’d love some feedback on my thoughts below. Actually, it’d be wonderful to see EJ and his team address your very question.

What are the Fed's options? Well, the Fed only seems to know how to print money, so aside from option 1, the others only require the same action, although outcomes may vary.


1) THE VOLCKER EXIT: Raise interest rates 10-20%+ to curb the inflationary spiral.

My guess as to probability of occurrence: 10-15%
(I don’t put 0%, because it’s been used before!)

My exit strategy: Watch the interest rate vs inflation velocity. So long as real inflation remains above the speed at which the Fed could raise interest rates, it will continue to be extremely bullish for PMs (i.e. China right now - Chinese acquisition in PMs in 2011 so far is 5 fold of the rate of accumulation in 2010). After interest rates finally manage to put commodity prices on a lowering trend line, then exit to USD cash and hold for the rest of the trend. By the time it's over, real estate will be 50%+ off from even today's prices!

2) PRINT UNTIL SDRs ARRIVE: Keep printing & POMO’ing, and causing massive inflation & wars abroad to buy more time and to give the IMF more ammo to get the G20 to sign off on SDRs becoming the official world reserve currency.

My guess as to probability of occurrence: 30%
(I only don’t assign a higher score, because I’m not entirely convinced some black swan even won’t occur first)

My exit strategy: Hold PMs until I understand exactly their definition of what an SDR will be (which basket of currencies/commodities?), then listen to experts like EJ and others as to what will make sense to invest in next.

3) PRINT UNTIL CHINA FREE FLOATS THE YUAN: Purpose, to ‘fix’ US trade imbalances, breathe new life into the US export sector to increase GDP and pay back the debts

My guess as to probability of occurrence: 15% (in 2 years) 25% (in 4 years).

My exit strategy: Assuming this occurs as an event, rather than what appears to be happening now (Yuan being appreciated in very small steps), then all commodities and imports made in China will quickly skyrocket in price as Chinese slave-labour would get exponentially more expensive overnight due to Yuan rise vs USD. I’d make sure that I have all the cheap Chinese crap I needed before such an event happens (shouldn’t cost much anyway :P). I think PMs could greatly devalue in US dollar terms if this happens. The US dollar would devalue vs Yuan as would all other major currencies. I’m not really sure to what degree I would sell my PMs, as I’m not sure how quickly the trade imbalances would balance out or to what degree this could fix the global economy or what new problems this may actually create (i.e. dramatically higher chinese wages would eventually result in them exporting inflation into north America). In theory if this really happens, hopefully I can trade my devaluing Canadian dollars for rising Yuan (right now, there’s like a $2,000 limit or something to that effect).

I put the likelihood of this occurring as an ‘event’ rather than a process at 20%. So 80% chance the Yuan will sloooooowly depeg over time – it’s much safer for everyone, assuming Bernanke doesn’t overdo the POMO.

Would love to hear other’s insights on this. China will hold onto that peg for as long as they possibly can though. Also note that my layman’s understanding of an SDR is that all components within it must float freely. Therefore option 2 above is actually only possible to include the Yuan AFTER China floats it freely. Based on the last G20 meeting, it sure as heck sounded like China had no such intentions. Heck, they can barely agree on a new set of global market indicators to measure things equally.

4) PRINT OUR WAY OUT OF DEBT: History tells us that this has a 0% chance of being successful, but that doesn’t mean that the Fed won’t keep doing it. This does not appear to be working so far. The free money appears to be escaping USA, even with POMO as the “new tool” of QE2, the result can be seen on CNN for the past month – 3^rd world countries revolting due to excessive food/commodity inflation. Eventually this would spread to poor Western countries, and eventually to US, UK, etc as well, and everybody would be on government food stamps. Before then though, I would expect the US dollar from being refused by the rest of the world as acceptable payment method for trade. i.e. reserve currency status = game over. I’m guessing this would happen around QE4 or QE5 at the latest.

My guess as to probability of occurrence: 90% with success rate of <5% or 0%.

My exit strategy: At the rate we’re going, it should be less than 5 years before I’m a paper multi-millionaire. At some point I’d start buying real estate, as even in Canada, I expect it to start declining any month now for other reasons. That said, Canada wouldn’t be my first choice. I’d probably start by buying real estate in my country of origin in Europe, since it’s already quite depressed and cheap over there and only will continue to be so with prolonged austerity + commodity inflation. Probably I’d wait until the Euro collapses another 20-30% vs CAD. In 2 or 3 years max I figure. So the PM exit would be a slow one, as I don’t see how they can lose value long term in this scenario.

5) PRINT OUR WAY TO WW3: This should crash the stock market. Quite frankly I’m too young and too ignorant of world war history to know what to do here. I’d certainly keep my European passport up to date and make decision as to whether its safest in Canada or to immigrate back to Europe. If I stay, first thing I’d do is buy 1 yrs supply of food from Costco, trade my bars of PMs for PM based coins and use my money to flee to some remote part of Canada, should my city be in any thread.
That’s enough for now. I’ll leave it for others to propose other exit strategies I haven’t thought of.

The main problem I see is that there's too many different negative consequences to endless printing, and we have to deal with which ones may end up afflicting us, and our individual exit strategies will vary depending on which country we live in, when the impact of printing starts having a serious affect on our life style, how many PMs you have, your situation in life (married?kids?own a house?multi-citizenships?,etc).

Adeptus

[doom&gloom]

Re: Exit Strategy from Gold & Silver?

Well Glenn, i'll say one thing about gold and silver -- in todays's sell-off (first real one of it's kind in a while), gold and silver barely budged. Oil was also up, but everything else was pretty much off. What I infer from that is the "gold trade" is still on whether it is "risk on" or "risk off" time, and that plenty out there still see the world as many of us do.

I personally think the time to unload will be when either the dollar has "stabilized" at some new low level (I would venture in the 50's to 60's on the dollar index), the OPEC countries (especially the Saudis) or the IMF find a new world currency, and everyone RUNS to these metals. Like everything else, when there are no more buyers, the peak will have arrived, and it will be time to move into real estate or something else.

Right now I am still seeking good farmland in uruguay as a hedge on the dollar and commodity prices going forward, but I continue to add to metals at times and have not entertained any ideas of selling them.

[globaleconomicollaps]

Re: Exit Strategy from Gold & Silver?

[FONT=Verdana]

5) PRINT OUR WAY TO WW3: This should crash the stock market. Quite frankly I’m too young and too ignorant of world war history to know what to do here. I’d certainly keep my European passport up to date and make decision as to whether its safest in Canada or to immigrate back to Europe. If I stay, first thing I’d do is buy 1 yrs supply of food from Costco, trade my bars of PMs for PM based coins and use my money to flee to some remote part of Canada, should my city be in any thread.
That’s enough for now. I’ll leave it for others to propose other exit strategies I haven’t thought of.





Adeptus

Did you see this?

http://www.zerohedge.com/article/doe...icult-mean-war

With the recent surge in geopolitical volatility (which nobody could have foreseen of course), it is easy to forget that the US economy is still deep in the abyss of a transfer process that sees trillions in capital needed to be funded by the government and plug holes in the private sector. This is not news and anyone who has followed Richard Koo over the past two years is fully aware of this: all of this is fully recreated in his latest presentation reproduced below. What is interesting is the addition of exhibit 23, which notes something very important: namely reality. Koo observes, very keenly, that "sustaining fiscal stimulus in democracy during peacetime is difficult" (of course, in authoritarian regimes nobody cares about stimulus until inflation surges to the point where the bulk of the population, which knows it has no other recourse, sees no other option than to revolt). Which leads to the question: so what? If fiscal stimulus is difficult (and virtually impossible after trillions have already been spent with little/no effect) in peacetime, does this mean that democracies are forced to turn to war as the only possible recourse (it worked with the Great Depression)? Or, alternatively, continue relying on the Fed for monetary stimulus, which however as we have all too vividly seen, is the bluntest instrument available, and tends to lead to the very same regime destabilizing revolutions that one may say are pursued by the abovementioned "democracies." The natural outcome is that instead of building up resentment against the political system, the population personifies the chairman of the Federal Reserve with the Devil, thereby deflecting anger from an impotent cadre of politicos. Yet regardless of the nuances, the bottom line is that without continued trillions of debt-funded injections in some form, the economy stagnates, and becomes another Japan case study.

Koo's prophetic exhibit:

[ATTACH]3782[/ATTACH]


Latest always informative Richard Koo presentation:
[ATTACH]3783[/ATTACH]

[flintlock]

Re: Exit Strategy from Gold & Silver?

Regardless of the exit strategy, I think the time to implement it is still years away.

WWIII is looking more likely to me. Or at least a more violent period.

[c1ue]

Re: Exit Strategy from Gold & Silver?

The problem with being an ant, is if 100 grasshoppers invade your home and steal your stash.

Looking around you, do you think there are more or less than 100 grasshoppers to your personal antdom? How about grasshoppers in your own family? friends?

[vinoveri]

Re: Exit Strategy from Gold & Silver?

The problem with being an ant, is if 100 grasshoppers invade your home and steal your stash.

Looking around you, do you think there are more or less than 100 grasshoppers to your personal antdom? How about grasshoppers in your own family? friends?

So perhaps one should be an ant, but walk, talk, and smell like a grasshopper, however difficult this may be.

[jpetr48]

Re: Exit Strategy from Gold & Silver?

Exactly as I said don't fire until you see the yellow of their eyes. People like EJ Finster Jordan Roy Byrnes Bob Hoye who look back to the early 1900s and look at the history of gold and silver get my attention. Perhaps another 4-6 years before we begin to think seriously about exiting. It's all going to come down to emotion vs a sound understanding of the principles governing gold and silver ownership and a good plan.

[charliebrown]

Re: Exit Strategy from Gold & Silver?

Just like the wall street financial planners say, I would have a diversified portfolio.
But ... I would have no were near the recommended traditional cash/stock/bond portfolio that is suggested.
I took a quiz on vanguard said I was conservative and 40, and I think they want me 70/30 stocks and bonds.

I have taken EJ's advice and have blended that with the permanent portfolio model.
So I have buckets of cash and short US$ bonds, foreign cash and short bonds, blue chip stocks some US other foreign, silver, and gold.
In roughly 45, 20, 10, 5 and 20 percentagages.
My stock holdings are only blue chip low P/E, solid dividend, low volatility, no banks or finance companies. (I just don't trust financial balance sheet hanky panky)

Now stocks are expensive, given a shiller PE of 24, and div yield of 1.6% Therefore I have been moving money from the stock bucket to the USD short term treas bucket. I don't really like holding 45% cash, but it is there to buy assets
if we have another deflation wave.

E.J. has mentioned and I believe it to be in the free section that he envisioned a dow/gold ratio of 1. That would be an interesting time to move some gold to stocks.

I also look at the
u.s. debt/gdp number
trade imbalance
US debt held by foreigners .
10yr treas rate vs. producer price index.

As long as all of these numbers are deteriorating, I don't lose much sleep over holding my gold.
Now if stocks were to crater, S&P sub 1000 again, some of my gold might make its way into stocks.

Silver I don't know about, I have had a great ride, buying a large block at 16.00 I have stopped buying,
and if it goes much higher, I might trade it for gold. I suppose if silver were remonitorized, it would
go to the historic ratio of roughly 20 oz silver / 1 oz gold. So if it hits $70 and gold is still at $1400,
I will do a major pare back of the position.

There is also a correlation between gold and crude. I would love to store unleaded gasoline in a big tank somewhere, but that is not feasible. Oil futures have decay, and oil stocks may run into oil prices not keeping up with extraction costs. I assume gold will generally track oil. I can store a good deal of wealth in a small amount of gold.

Hope this rambling helps.
CB

[dcarrigg]

Re: Exit Strategy from Gold & Silver?

Exactly as I said don't fire until you see the yellow of their eyes. People like EJ Finster Jordan Roy Byrnes Bob Hoye who look back to the early 1900s and look at the history of gold and silver get my attention. Perhaps another 4-6 years before we begin to think seriously about exiting. It's all going to come down to emotion vs a sound understanding of the principles governing gold and silver ownership and a good plan.

Unless...

[jpetr48]

Re: Exit Strategy from Gold & Silver?

My black swan bet is on a geopolitical events like another war -Israel against the rest of the middle east with Russia joining in with Iran. It's getting interesting. Here is a blog from Joel Rosenberg who is spelling out the events followed by some interesting quotes. The basic message these quotes reveal is the end times drawing near.

http://flashtrafficblog.wordpress.com/


Iran
" Iranian President Mahmoud Ahmadinejad is telling the people of Iran that the Twelfth Imam is managing the the revolution now underway in Egypt and in various parts of the Islamic world, and that “the final move has begun”
Israel

Israel Rabbis
"We cannot know. But it’s probable that any unrest that God creates shows that the Messiah is coming, and that we must begin to prepare for it and become stronger.”