Wednesday, July 27, 2011

If You Missed Silver and Gold Late Last Year, I Think You'll Get One Last Shot

Late last year and earlier this year, I moved 25% of my disposable net worth (cash) into silver and gold. Equal amounts. I thought that was a reasonable allocation at the time. I am now convinced that as things have changed- that amount is too low.

I am going to move to a 50% allocation. I think at these levels, gold and silver are over bought. But not for long.  I think there is a strong likelihood that prior to experiencing a great inflation (great for precious metals) we are going to experience an ugly deflation scenario first. If the deflation scenario strikes, and markets tank, precious metals will go down with them. You will have to be very nimble and decisive. I don't always catch market tops or bottoms. Any decline in the neighborhood of 15% for either metal will mean I am a buyer. I am not going to try and time this. I am going to start buying, incrementally, at -10% and average down. Until the downdraft ends. A 60-40 silver/gold blend. Small units in case the currency collapses. Please do not forget. All sales in excess of 600 dollars after Dec. 31 of this year...will be reported to the government. (Obamacare bill) That's why I buy the smallest unit amounts with out getting scalped by the dealer premium. Most of my silver is in 10 ounce and under sizes. Unfortunately, my gold is in one ounce sizes. Buy small.

Physical holders looking to buy significant amounts should buy metal before the new tax reporting requirements. Sellers looking to avoid taxes will be looking to sell before Jan. 1. I expect gold to act pretty weak in Dec.

Our country and it's failed leadership is something to behold. I would have never thought this was possible. Not in my life time.

I snipped this from Zero Hedge.

Morgan Stanley reported in 2009 that there’s “no historical precedent” for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation. Our total debt now exceeds GDP by roughly 400%.
Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.” On our current path, analyst Michael Murphy projects we’ll hit that figure by October.
Peter Bernholz, the leading expert on hyperinflation, states unequivocally that “hyperinflation is caused by government budget deficits.” This year’s U.S. budget deficit will end up being $1.5 trillion, an amount never before seen in history.
Since the Federal Reserve’s creation in 1913, the dollar has lost 95% of its purchasing power. Our government leaders clearly don’t know how – or don’t wish – to keep the currency strong.


Anonymous said...

"Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.”

If the debt ceiling debate ends like it loolks like it will end, look for Moody's and S&P to downgrade. Interest on long term bonds will shoot up and we could be in big trouble very quickly. But, what do I know?

Brian said...

What do you know? Apparently more than most people Jim. Dagong is going to downgrade us soon, perhaps tomorrow.