Hyperinflation starting? What's happening in your area? Post your ground reports.

[hellolin]

Historically the stock market has done very well, I’m skeptical that it can show returns like it has in the past very long into the future. Given current economic conditions we could easily enter a depression and stocks can be depressed for decades.

Here is why, prior to 2000, if companies were unprofitable they failed. When this happened significantly in the market there was a recession where bad companies went out of business and their assets and book of business was bought by a good company. In 2000 during the dot com bust the fed swooped in lowering rates and bailed out lots of companies.

Again in 2008 the fed jumped in, pumped the maker full of cash, and propped up the market.

This resulted in a bunch of zombie companies, that did not have profits that survived on debt accumulation.

In 2020 this process accelerated and now about 1/5 publicly traded companies are zombie companies that exist because the fed is buying corporate bonds and injecting basically free (near zero interest) into the market. These companies would go bankrupt without government cash infusion. The total debt load is around $3 trillion dollars.

There is also a massive amount of leverage in the stock market, cryptos, and paper commodity markets.

With all of these factors in play, one prick could bring pain in the markets like we have never seen before. The fed has been burning up it’s available tools, so we are on a much bigger cliff than we were in 2000, and then in 2008.

On top of this we are experiencing rapid inflation, and the only way to fight inflation is dramatic increases in interest and to slow the velocity that money is turning over.

But there is the run, killing inflation will cause conditions where leveraged positions have margin calls. Zombie companies won’t be able to borrow money at near zero interest to float operations.

The fed has but 2 real options left in the next crisis, negative interest rates where you actually pay companies to borrow money, and direct stock purchases to prop up stock prices. Everything else is already deployed.

It’s impossible to predict when the pin will prick the bubble, bubbles can go on much longer than one would expect, but when it pops there is ample fuel to drive the market into a full on depression.

Right now my portfolio is heavy in land, commodities, and highly profitable, high dividend paying stocks that are super boring but have no real completion and are difficult to compete with. These companies may lose stock price value, but so long as they are able to continue returning dividends, it’s better than following a stock down hoping it will rebound as the only way to recoup some capital for reinvestment.

I also have a fair bit, maybe 30% in cash. When the markets do crash, whenever that is, I want capital to work with if rare opportunities present. Yes cash has inflation risk, but if the markets do tumble it gives me options without liquidating assets I’m a fire sale to try and but something else.

One interesting commodity play, is gold streaming and royalty companies. Read up on these to understand why they will be hugely profitable if gold sees an outsized rise in price.

Remember, wealth does not evaporate, it just shifts between different classes of assets. Money is just a medium of exchange for purchase, it has no REAL value, wealth is control of assets.

So...you mean our economy right now looks like Voldemort sucking on the unicorn blood, trying to barely stay alive, you don't say....?

 

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[Saavedra]

Not much going on here in Sweden from a peasant point of view. Same inflation as usual (2-5%?), which is already bad. Housing going up, mostly houses since people are scared of lockdowns, not much more than it already has the last 30 years.
Supermarkets are looking filled up as usual, same prices mostly.

Euro rate a bit higher than it usually is, but not in max.

 

[e_fastlane]

Historically the stock market has done very well, I’m skeptical that it can show returns like it has in the past very long into the future. Given current economic conditions we could easily enter a depression and stocks can be depressed for decades.

Here is why, prior to 2000, if companies were unprofitable they failed. When this happened significantly in the market there was a recession where bad companies went out of business and their assets and book of business was bought by a good company. In 2000 during the dot com bust the fed swooped in lowering rates and bailed out lots of companies.

Again in 2008 the fed jumped in, pumped the maker full of cash, and propped up the market.

This resulted in a bunch of zombie companies, that did not have profits that survived on debt accumulation.

In 2020 this process accelerated and now about 1/5 publicly traded companies are zombie companies that exist because the fed is buying corporate bonds and injecting basically free (near zero interest) into the market. These companies would go bankrupt without government cash infusion. The total debt load is around $3 trillion dollars.

There is also a massive amount of leverage in the stock market, cryptos, and paper commodity markets.

With all of these factors in play, one prick could bring pain in the markets like we have never seen before. The fed has been burning up it’s available tools, so we are on a much bigger cliff than we were in 2000, and then in 2008.

On top of this we are experiencing rapid inflation, and the only way to fight inflation is dramatic increases in interest and to slow the velocity that money is turning over.

But there is the run, killing inflation will cause conditions where leveraged positions have margin calls. Zombie companies won’t be able to borrow money at near zero interest to float operations.

The fed has but 2 real options left in the next crisis, negative interest rates where you actually pay companies to borrow money, and direct stock purchases to prop up stock prices. Everything else is already deployed.

It’s impossible to predict when the pin will prick the bubble, bubbles can go on much longer than one would expect, but when it pops there is ample fuel to drive the market into a full on depression.

Right now my portfolio is heavy in land, commodities, and highly profitable, high dividend paying stocks that are super boring but have no real completion and are difficult to compete with. These companies may lose stock price value, but so long as they are able to continue returning dividends, it’s better than following a stock down hoping it will rebound as the only way to recoup some capital for reinvestment.

I also have a fair bit, maybe 30% in cash. When the markets do crash, whenever that is, I want capital to work with if rare opportunities present. Yes cash has inflation risk, but if the markets do tumble it gives me options without liquidating assets I’m a fire sale to try and but something else.

One interesting commodity play, is gold streaming and royalty companies. Read up on these to understand why they will be hugely profitable if gold sees an outsized rise in price.

Remember, wealth does not evaporate, it just shifts between different classes of assets. Money is just a medium of exchange for purchase, it has no REAL value, wealth is control of assets.

I won't pretend to be an expert and you may be 100% right. But in my opinion, those all just sounds like commonly repeated scaremongering tropes that don't pan onto reality.

This is of course when talking about long term investing a decent amount of money. So in other words, we aren't talking about investing money we need to live on in the next few years.

Zombie companies are of no concern long term. The top 10 companies aren't zombie companies and they make up like 20% of the entire market alone. In fact, their biggest issue is they don't know where to sock away their BILLIONS in cash. Monopoly busting regulation are a big risk to them, but if they get busted up it's likely that will lead to even stronger markets (after a short bust)

Gold is a huge dud and history proves this over and over again. So are commodities. In fact they are terrible long term. The only experienced investors that are gold bugs are those that are selling something to you or have something to gain.

The term inflation risk doesn't make sense to me the way you are applying it to cash. The way I have seen Inflation Risk used is to describe the risk a low yielding investment has. The risk is asking what the chance is that it's going to gain less than inflation eats at it's value. There is not inflation risk on cash. Its basically inflation guarantee.

Cyrrent situations aren't like previous tines. People's debt numbers outside their primary residence are doing GREAT. People's mortgages are lower than ever, because of low interest rates. Alot of companies "debt" is purposeful. They recognize that money is almost free right now and sell bonds. Just take a look at Apple. They have more cash than they know to do with, but are consistently selling bonds. Just one example of how the debt trope is generally from a misunderstanding of the reality.

When choosing between market crash and inflation, the Fed seems to have chose inflation. Great way to redistribute wealth for them. But if that is true, the biggest risk is cash.

I'm not saying I'm a bull on the short/medium term stock market. I've thought it was going to crash for a few years now! I am saying that history has shown us over and over again that in the long term, betting on the USA stock market is the safest bet. No matter which metric you use (other than "feelings"), it brings you back to this reality. Which makes sense when considering our economy. If the stock market plummets and just sits at a low, you have to realize what that actually means for America period. You will be looking at a different country period. Your cash will be just as worthless. Your property prices will be much lower. Politicians are literally giving people cash right now, and we aren't even in a crash. What do you think they will be doing if we have a long and deep depression. What do you think that will do to the value of your money? What "real" value do you think your properties will have and who will be buyign them?

The point is that unless you're making a majority of your investments in a country you believe will replace us as the economic powerhouses, it seems that long term you are missing the fact that the stock market crashing and experiencing stagflation will effect every single other market. If it's not stagflation or permanent drop that you are worried about, then why worry? The only people that need worry about crashes are those that require steady employment (crashes lead to unemployment) and/or those that have not responsibly prepared to ride out a few year storm. Long term, you are betting on the same market as the market investor. Just getting worse returns on the bet.

Lastly, money is not just shuffled from class to class. Between the fed and the way modern banking works, it is literally created and destroyed all the time. You said wealth, not specifically money, but that too changes. The total pie grows larger and smaller and it isn't zero sum.

Just my uneducated take!

 

[DavidL41]

Talking about inflation... Im in Idaho, probably the gnarliest housing market in the country.

I almost bought this POS warehouse for 3M last year, owner got called feet... Sold it 1 day on market this past week for 4M... 3m was absolutely batshit

The house I bought last March for 230 I could sell tomorrow for 530.

Houses go 50-100k over asking with 10+ offers within the first week here. Im not exaggerating.

Own assets.... businesses, crypto, real estate, stocks. Cash is literally 50% more worthless than it was a year ago

There seems to be people that are buying local property that are overseas or locals buying that either are cashing in on the low mortgage rate, or are investors that desperately need to purchase a property for tax purposes.

I don't know that much about the real estate market. Is this a housing bubble situation occurring now?

 

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[GPM]

Are you guys in USA really seeing these massive product shortages? I understand Alaska, but are the lower states as well?

Here in Alberta I see insane prices everywhere, but there is full stock on nearly everything. Gas has jumped about 20%, my favorite hutterite eggs went up $1 for an 18 pack, and milk went up again since I last went to the grocery store, but full shelves for everything.

Lumber is expensive as all heck, but Lowe's and home Depot looks fully stocked. Lots of bug chemicals, furnace filters, seasonal items.... Lots of everything.

 

[Timmy C]

I am coming around on gold again.

Not the centrally controlled kind.

Even stocks I'm not keen on as centrally controlled.

My trust in government is zero.

Need physical.

Got a feeling shits going to go crazy soon.

Civil unrest is imminent.

 

[e_fastlane]

There seems to be people that are buying local property that are overseas or locals buying that either are cashing in on the low mortgage rate, or are investors that desperately need to purchase a property for tax purposes.

I don't know that much about the real estate market. Is this a housing bubble situation occurring now?

No one knows what will happen, but this is nothing like 2008. Today's mortgages are to people that are most qualified to afford them. Low interest rates mean that someone can take out more but need to pay less. Hence raising prices. People don't actually "see" the higher prices.

People with capital are just doing extremely well, and there aren't alot of high yielding safe options right now. So they are socking away money where they can.

I am coming around on gold again.

Not the centrally controlled kind.

Even stocks I'm not keen on as centrally controlled.

My trust in government is zero.

Need physical.

Got a feeling shits going to go crazy soon.

Civil unrest is imminent.

I dont really understand this point of view. Here's my opinion....When civil rest hits. What are you gonna do with your gold? Even if we accept without question the extreme scenario that society has devolved to us not relying on fiat currency anymore. How you gonna buy bread? You gonna pay with slivers of gold? Speaking of slivers...how much gold you stocking up on lol unless your wild wealthy, your gonna have some tiny bars that will pay for 3 things in this post apocalyptic world. You can literally only afford slivers, meanwhile others will raid Fort Knox and have thousands of square feet of blocks. The reality is that unlike the past, we are material rich as a society. The rich man is actually gonna be the one that still has the skills to use the excessively abundant environment in an effective way to survive (self defense, hunting, baking the bread to sell lol, etc)

If you believe in civil unrest you should stock up on food, water, medicine, guns, ammo and other necessities for life and protection. You should learn the survival skills earlier generations all knew but so many of us have not learned. Everything else does not apply to the modern world scenario.

 

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[GPM]

I dont really understand this point of view. Here's my opinion....When civil rest hits. What are you gonna do with your gold? Even if we accept without question the extreme scenario that society has devolved to us not relying on fiat currency anymore. How you gonna buy bread? You gonna pay with slivers of gold?

Bullion gets you started on whatever comes next. Unless you think it is going to be the wild wild west dystopian fiction like you see in the movies.

I figure it would be more like riots in the street for a few months if it comes to that. Or more like it quietly changes to something else like it has so many times in the past. If you held whatever was worthless before, you come out with nothing. If you hold land or anything physical or income producing, you stay where you were at before and just start right back where you were at, no need for a personal reset.

Do you think if things get so bad that you need to buy bread with slivers of gold that there would actually still be people in their bakeries baking bread? Hell no. Things would BE INSANE if it ever got to that point.

 

[e_fastlane]

Bullion gets you started on whatever comes next. Unless you think it is going to be the wild wild west dystopian fiction like you see in the movies.

I figure it would be more like riots in the street for a few months if it comes to that. Or more like it quietly changes to something else like it has so many times in the past. If you held whatever was worthless before, you come out with nothing. If you hold land or anything physical or income producing, you stay where you were at before and just start right back where you were at, no need for a personal reset.

Do you think if things get so bad that you need to buy bread with slivers of gold that there would actually still be people in their bakeries baking bread? Hell no. Things would BE INSANE if it ever got to that point.

Maybe im missing something, but I dont see how riots in the street lead to gold being what is valued for barter. You are giving examples of turmoil but not explaining how it is that gold becomes some magical standard or payment system.

If it gets so bad that usd is no longer effective currency and somehow gold is being used for barter, "your" land doesn't exist since there isn't an effective govt to designate it as "yours". Or they are the ones seizing it!

Maybe it's my lack of imagination, but I'm just not seeing it!

 

[Cheru Bejiga]

life is getting harder and harder on middle and low class community members due to high inflation. feeling very insecure in everything
loosing hope to live

 

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[WJK]

life is getting harder and harder on middle and low class community members due to high inflation. feeling very insecure in everything
loosing hope to live

Uh? "loosing hope to live"??? Why? Write down how you're feeling. Be specific. Get some help. When you take a close look, I bet it won't look so dire.

 

[GIlman]

It seems people have a gross misunderstanding of previous metals. The whole point of precious metals is preservation of purchasing power. Gold may rise and fall within a range but over time the relative purchasing power of gold remains relatively the same. As such you should think of Gold as money, it is not really an investment because there is no return on capital. It is the capital reserve asset itself.

As such, anyone who has previous metals could easily convert a coin into cash at the going rate and then spend that cash on what ever items they wanted. That’s of course assuming the fiat system is intact but inflation has ran rampant. If the fiat system is not intact then precious metals would be the default form of money. The only other alternative would be direct barter of goods.

To me the purpose of gold is maintaining purchasing power and an escape hatch if needed. If things ever got so bad that people were bartering in precious metals, I would want to be long gone and somewhere else. Any gold purchases are made and held in other countries, Singapore and Switzerland are two of the safest at the moment.

The purpose to me is if shit hits the fan, so long as I can get out I can find a place and rebuild - any precious metals I have are safe and waiting for me in a different country. Or if hyperinflation strikes I have some preserved purchasing power without selling other assets in a fire sale. If gold were to be crazy high and other assets crazy low, then you have the option to buy on the cheap.

But like everything, I would never be 100% in any one asset. Start a small reserve and then add a little every month, quarter, or year. It’s a good idea to diversify across a couple 3 countries too. 3 years ago I would have had stuff at the Perth mint vaults, now no way in hell.

I don’t think of gold as an investment, it’s more like an insurance policy against hyperinflation or SHTF. Many people will see gold as stupid, until the moment that they don’t, which is usually the point in time that it’s impossible or ridiculously expensive to buy.

 

[Timmy C]

It seems people have a gross misunderstanding of previous metals. The whole point of precious metals is preservation of purchasing power. Gold may rise and fall within a range but over time the relative purchasing power of gold remains relatively the same. As such you should think of Gold as money, it is not really an investment because there is no return on capital. It is the capital reserve asset itself.

As such, anyone who has previous metals could easily convert a coin into cash at the going rate and then spend that cash on what ever items they wanted. That’s of course assuming the fiat system is intact but inflation has ran rampant. If the fiat system is not intact then precious metals would be the default form of money. The only other alternative would be direct barter of goods.

To me the purpose of gold is maintaining purchasing power and an escape hatch if needed. If things ever got so bad that people were bartering in precious metals, I would want to be long gone and somewhere else. Any gold purchases are made and held in other countries, Singapore and Switzerland are two of the safest at the moment.

The purpose to me is if shit hits the fan, so long as I can get out I can find a place and rebuild - any precious metals I have are safe and waiting for me in a different country. Or if hyperinflation strikes I have some preserved purchasing power without selling other assets in a fire sale. If gold were to be crazy high and other assets crazy low, then you have the option to buy on the cheap.

But like everything, I would never be 100% in any one asset. Start a small reserve and then add a little every month, quarter, or year. It’s a good idea to diversify across a couple 3 countries too. 3 years ago I would have had stuff at the Perth mint vaults, now no way in hell.

I don’t think of gold as an investment, it’s more like an insurance policy against hyperinflation or SHTF. Many people will see gold as stupid, until the moment that they don’t, which is usually the point in time that it’s impossible or ridiculously expensive to buy.

Yeh, well im all in on the insurance policy items now.

Crypto and gold.

Don't trust anything controlled by these psychopaths.

 

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[Matt33]

Yeh, well im all in on the insurance policy items now.

Crypto and gold.

Don't trust anything controlled by these psychopaths.

The question is..


Where do you store your gold as a high net worth individual? There's lots of places you can store it in Switzerland. Credit Suisse, private vaults. And plenty of other "safe Haven" countries. It's nice to go by the mantra if you don't hold it you don't own it but holding it yourself has its own risks and may not be the move, especially considering that the government has confiscated gold before and we're now in some pretty serious uncharted territory.

I don't think it's a great idea to hold much on your own property, if we're talking a 7-figure net worth individual. Especially if you consider your own safety. An AR-15 doesn't make you invincible.

But then again, are these safe haven countries and even domestic vaulting companies safe at all? It seems that all it could take is some political turmoil and you could get screwed anyway.

It seems that the best solution is heavy diversification among vaulting companies and jurisdictions. I opt for this for myself over holding it on my own personal property. And I sleep better at night for it.

 

[Matt33]

It seems people have a gross misunderstanding of previous metals. The whole point of precious metals is preservation of purchasing power. Gold may rise and fall within a range but over time the relative purchasing power of gold remains relatively the same. As such you should think of Gold as money, it is not really an investment because there is no return on capital. It is the capital reserve asset itself.

As such, anyone who has previous metals could easily convert a coin into cash at the going rate and then spend that cash on what ever items they wanted. That’s of course assuming the fiat system is intact but inflation has ran rampant. If the fiat system is not intact then precious metals would be the default form of money. The only other alternative would be direct barter of goods.

To me the purpose of gold is maintaining purchasing power and an escape hatch if needed. If things ever got so bad that people were bartering in precious metals, I would want to be long gone and somewhere else. Any gold purchases are made and held in other countries, Singapore and Switzerland are two of the safest at the moment.

The purpose to me is if shit hits the fan, so long as I can get out I can find a place and rebuild - any precious metals I have are safe and waiting for me in a different country. Or if hyperinflation strikes I have some preserved purchasing power without selling other assets in a fire sale. If gold were to be crazy high and other assets crazy low, then you have the option to buy on the cheap.

But like everything, I would never be 100% in any one asset. Start a small reserve and then add a little every month, quarter, or year. It’s a good idea to diversify across a couple 3 countries too. 3 years ago I would have had stuff at the Perth mint vaults, now no way in hell.

I don’t think of gold as an investment, it’s more like an insurance policy against hyperinflation or SHTF. Many people will see gold as stupid, until the moment that they don’t, which is usually the point in time that it’s impossible or ridiculously expensive to buy.

No way in hell would I keep anything at the Perth mint vault

 

[socaldude]

life is getting harder and harder on middle and low class community members due to high inflation. feeling very insecure in everything
loosing hope to live

While it’s true that a lot of this is unfair. It’s not a sufficient excuse to live in despondency and despair or to get discouraged. The resources will always be there waiting for someone to better allocate their efficiency. There is still plenty of opportunity.

Constantly being in an off-kilter emotional state will hold you back and will put you at a disadvantage.

 

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[Deleted70138]

life is getting harder and harder on middle and low class community members due to high inflation. feeling very insecure in everything
loosing hope to live

Today watched a zebra crossing river full of crocodiles. Got at the end with it's intestines hanging and died after couple of seconds. Guess that zebra could not care less about inflation.

Funny to see envious people complaining about lack of luxury.

 

[Timmy C]

life is getting harder and harder on middle and low class community members due to high inflation. feeling very insecure in everything
loosing hope to live

Hey it's not that bad.
I mean, even if your on a bad income just jump in a share house with a bunch of people.

Not ideal for sure.

But you'll survive. Many have it a lot worse.

 

[e_fastlane]

It seems people have a gross misunderstanding of previous metals. The whole point of precious metals is preservation of purchasing power. Gold may rise and fall within a range but over time the relative purchasing power of gold remains relatively the same. As such you should think of Gold as money, it is not really an investment because there is no return on capital. It is the capital reserve asset itself.

As such, anyone who has previous metals could easily convert a coin into cash at the going rate and then spend that cash on what ever items they wanted. That’s of course assuming the fiat system is intact but inflation has ran rampant. If the fiat system is not intact then precious metals would be the default form of money. The only other alternative would be direct barter of goods.

To me the purpose of gold is maintaining purchasing power and an escape hatch if needed. If things ever got so bad that people were bartering in precious metals, I would want to be long gone and somewhere else. Any gold purchases are made and held in other countries, Singapore and Switzerland are two of the safest at the moment.

The purpose to me is if shit hits the fan, so long as I can get out I can find a place and rebuild - any precious metals I have are safe and waiting for me in a different country. Or if hyperinflation strikes I have some preserved purchasing power without selling other assets in a fire sale. If gold were to be crazy high and other assets crazy low, then you have the option to buy on the cheap.

But like everything, I would never be 100% in any one asset. Start a small reserve and then add a little every month, quarter, or year. It’s a good idea to diversify across a couple 3 countries too. 3 years ago I would have had stuff at the Perth mint vaults, now no way in hell.

I don’t think of gold as an investment, it’s more like an insurance policy against hyperinflation or SHTF. Many people will see gold as stupid, until the moment that they don’t, which is usually the point in time that it’s impossible or ridiculously expensive to buy.

Here is my disagreement with what you said. Here is the graph of the price of gold in REAL (inflation adjusted) terms: HERE

In my opinion, it doesn't really line up with the spirit of what you are saying. Yes, it is true that when inflation spikes, precious metals generally go the other way. But this is the academic view. Looking at retrospective analysis like this isn't applicable to real life. Let me explain. In the classroom, you imagine yourself putting your money at the exact right time and taking it out at the exact right time. But then you are just playing market timing. If you have a crystal ball, you don't need gold! That's the fallacy most people make when investing. Thinking they can time the market. So for the people without a crystal ball, the best analysis relies on assuming what happens when I invest at the best/worst/middle times? How long does it take me to recover? How long does it take for me to start making some serious money on it even if I mistime things? Is it still worth it? etc..

Imagine putting your money into gold near the peak in the start of the 80s. Your money halved within a year. Then it literally lost 80%+ of its value. It took 30 years just for you to finally be even. I don't know what reality something that goes down 80% in value and takes 30 years to recover is a good "capital reserve asset". That is INSANE volatility. Even if you were consistently putting your funds all throughout the 70s and alot of your funds grew year after year. You would still end up in a shit situation very quickly. Which leads me to my first point: Gold in no way, shape, or form does a good job of shielding you from currency volatility. No one should accept 80% downside from something that is supposed to shield you from volatility.

I know. I know. Just like most people, the fastlane investor may think "Nah, im not a dumbass, smart people know when inflation is about to start and when it's time to take out of gold because the economy is doing great". Unfortunately statistics don't bear that out. All you have to do is read through all the investing threads going back a few years on this forum to see embarrassingly wrong predictions from everyone.

Most reasonable people think inflation is happening right now and is going to even increase in the coming years. Right now is the time to buy then! It has been for a little bit, hasn't it? Well why don't you take a look at the graph I linked. We are about record highs for gold (inflation adjusted). Here's the problem. I can weave a great story for why tomorrow the economy defies experts expectations. Inflation drops because of X or Y and the economy goes a direction. Then some newly minted experts come out and write articles about why it was so obvious this would happen and it was because of X and Y. Then gold plummets to it's previous lows and all the smart gold bugs are 80% down in their "capital reserve asset", while billy down the street who invested in Apple 10x'd his investment.

Of course the opposite can happen and Gold was the good buy. Which only proves my next point. It's a risky asset based on market forces. Once you accept that, a smart investor compares it to other risky markets based on history. It seems like a terrible bet. (Gold VS Stock). Its literally got more volatility and smaller upside than the plain old boring total stock market. Lose/Lose. The only "win" is if you can surgically time the gold markets and put in and take out at very good times. If you can do that though, you don't need any of us mortals advice!

Lastly, I just wanted to repeat what I said before....Maybe I'm not reading the room right. This perspective assumes you are talking about long term holding and investment. If you are just saying: "Hey, I hold 2 months worth of living expenses in Gold so that if SHTF I don't have to take out of my other heavily depreciated assets for a few months". That sounds perfectly reasonable!

 

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[GIlman]

Here is my disagreement with what you said. Here is the graph of the price of gold in REAL (inflation adjusted) terms: HERE

In my opinion, it doesn't really line up with the spirit of what you are saying. Yes, it is true that when inflation spikes, precious metals generally go the other way. But this is the academic view. Looking at retrospective analysis like this isn't applicable to real life. Let me explain. In the classroom, you imagine yourself putting your money at the exact right time and taking it out at the exact right time. But then you are just playing market timing. If you have a crystal ball, you don't need gold! That's the fallacy most people make when investing. Thinking they can time the market. So for the people without a crystal ball, the best analysis relies on assuming what happens when I invest at the best/worst/middle times? How long does it take me to recover? How long does it take for me to start making some serious money on it even if I mistime things? Is it still worth it? etc..

Imagine putting your money into gold near the peak in the start of the 80s. Your money halved within a year. Then it literally lost 80%+ of its value. It took 30 years just for you to finally be even. I don't know what reality something that goes down 80% in value and takes 30 years to recover is a good "capital reserve asset". That is INSANE volatility. Even if you were consistently putting your funds all throughout the 70s and alot of your funds grew year after year. You would still end up in a shit situation very quickly. Which leads me to my first point: Gold in no way, shape, or form does a good job of shielding you from currency volatility. No one should accept 80% downside from something that is supposed to shield you from volatility.

I know. I know. Just like most people, the fastlane investor may think "Nah, im not a dumbass, smart people know when inflation is about to start and when it's time to take out of gold because the economy is doing great". Unfortunately statistics don't bear that out. All you have to do is read through all the investing threads going back a few years on this forum to see embarrassingly wrong predictions from everyone.

Most reasonable people think inflation is happening right now and is going to even increase in the coming years. Right now is the time to buy then! It has been for a little bit, hasn't it? Well why don't you take a look at the graph I linked. We are about record highs for gold (inflation adjusted). Here's the problem. I can weave a great story for why tomorrow the economy defies experts expectations. Inflation drops because of X or Y and the economy goes a direction. Then some newly minted experts come out and write articles about why it was so obvious this would happen and it was because of X and Y. Then gold plummets to it's previous lows and all the smart gold bugs are 80% down in their "capital reserve asset", while billy down the street who invested in Apple 10x'd his investment.

Of course the opposite can happen and Gold was the good buy. Which only proves my next point. It's a risky asset based on market forces. Once you accept that, a smart investor compares it to other risky markets based on history. It seems like a terrible bet. (Gold VS Stock). Its literally got more volatility and smaller upside than the plain old boring total stock market. Lose/Lose. The only "win" is if you can surgically time the gold markets and put in and take out at very good times. If you can do that though, you don't need any of us mortals advice!

Lastly, I just wanted to repeat what I said before....Maybe I'm not reading the room right. This perspective assumes you are talking about long term holding and investment. If you are just saying: "Hey, I hold 2 months worth of living expenses in Gold so that if SHTF I don't have to take out of my other heavily depreciated assets for a few months". That sounds perfectly reasonable!

If you look at gold from an “investment” instead of an “insurance” perspective, then yes typical investments did better over the periods that you mentioned. The stock market in a healthy functioning economy will do better because they generate revenue and return on capital - gold has no revenue.

But there are periods of time where markets cease to be healthy and functional and so this doesn’t hold up. What is “normal” is not predictable. Look at what is going on Australia today, 5 years ago would anyone have predicted they would be descending into an authoritarian fascist state - I’m betting not. It is in these very times and markets that secured gold serves its purpose.

Gold as insurance as I previously described, one acts very differently. When first taking a position, start with some lump sum. Then add slowly to the position as I described, every month, quarter, year, etc. As I said before it is prudent to diversify accords countries, and there may be times you need to change countries because of geopolitical shifts.

The plan is not to sell ever, unless there was some market that gold was so high against other assets that it made sense to give up some security of the insurance policy to buy another asset in that moment. Just like insurance, it is not free to do this. There are vaulting costs of anywhere from 0.2-0.3% typically a year.

See that’s the difference, your looking at gold from the perspective of “how do I make money”. I’m looking at gold from the perspective of “how do I make sure to escape financial disaster”, how do I protect myself. I’m not looking to get rich from gold, I live a comfortable life now. I’m looking to protect myself from catastrophe, in situations when the bulk of people will crash and burn.

As such one has to decide how much insurance they want. To me 5%-10% of net worth seems like a reasonable position. When prices are relatively high add at a slower rate, when relatively low add at a higher rate. But…It’s enough to start over if one ever needs to.

The other thing I look at is who buys bullion. Not the lay public in general. Big banks, governments, hedge funds, and royal families typically. To me that indicates something. Organizations and people with large generational wealth do it for a reason, because when financial catastrophe eventually hits any economy, gold is there hedge to keep their financial position. No one can predict this, it may happen in my lifetime, maybe not.

Say the US does NOT suffer a massive financial catastrophe, great, then my investments in businesses, stocks, real estate, etc will pay off handsomely. I’ll just keep trickling in a small portion over the years into my gold position. After all it’s a reserve asset to me that is kept in reserve not meant to be traded or spent but a backup position.

Then some may say, well why gold and not real estate or some other asset. Well, first it should be gold and other assets. They are not mutually exclusive.

The reason for gold as a pillar of investing though is liquidity. Fiat currency is the most liquid asset, so long as it is accepted as the fiat currency. Next to fiat currency, gold is a close second. You can take gold anywhere in the world and exchange it or trade it for whatever fiat currency at a known exchange rate in minutes. Gold in a vault, you can sell it for a predictable “spot” price right from the vault.

So I guess the short and sweet answer is, don’t hold gold to get rich, hold gold to stay rich.

 

[e_fastlane]

If you look at gold from an “investment” instead of an “insurance” perspective, then yes typical investments did better over the periods that you mentioned. The stock market in a healthy functioning economy will do better because they generate revenue and return on capital.

Gold as insurance as I previously described, I act very differently. When first taking a position, start with some lump sum. Then add slowly to the position as I described, every month, quarter, year, etc.

The plan is not to sell it ever, unless there was some market that gold was so high against other assets that it made sense to give up some security of the insurance policy to buy another asset in that moment. Just like insurance, it is not free to do this. There are vaulting costs of anywhere from 0.2-0.3% typically a year.

See that’s the difference, your looking at gold from the perspective of “how do I make money”. I’m looking at gold from the perspective of “how do I make sure to escape financial disaster”.

As such one has to decide how much insurance they want. To me 5%-10% of net worth seems like a reasonable position. It’s enough to start over if one ever needs to.

The other thing I look at is who buys bullion. Not the lay public in general. Big banks, governments, and royal families typically. To me that indicates something. Organizations and people with large generational wealth do it for a reason, because when financial catastrophe eventually hits any economy, gold is there hedge to keep their financial position. No one can predict this, it may happen in my lifetime, maybe not.

Say the US does NOT suffer a massive financial catastrophe, great, then my investments in businesses, stocks, real estate, etc will pay off handsomely. I’ll just keep trickling in a small portion over the years into my gold position. After all it’s a reserve asset to me that is kept in reserve not meant to be traded or spent but a backup position.

Then some may say, well why gold and not real estate or some other asset. The reason is liquidity. Fiat currency is the most liquid asset, so long as it is accepted as the fiat currency. Next to fiat currency, gold is a close second. You can take gold anywhere in the world and exchange it or trade it for whatever fiat currency at a known exchange rate in minutes.

I understand your perspective, I am just having a tough time understanding how something that may lose greater than 80% of it's value can be good insurance. Insurance means you are paying a 3rd party to amortize the risk of something between a large pool of people. Outside of a small fee they are charging for providing this service, you are breaking even. This means that the insurance all but GUARANTEES to make you whole if the risk happens at any time. If you were using an insurance company that at any time would give you 80% less when the risk happens, most people would rightfully say that is ridiculous to use. At that point you would be much better off using the market or some other safe vehicle to 'self insure'. Otherwise you need insurance for your insurance basically going out of business!

There are other vehicles of insurance that are basically guaranteed outside of some kind of cataclysmic event that would devastate the united states govt as we know it (for example I-bonds right?). Imagine what world you are talking about if these instruments are worthless just because they are not something that you are holding in your hand. Then imagine what it is you think your gold will do? Also, how big a chance do you think this extreme outcome will come to pass? Then compare that to the opportunity cost of that money (5-10% a year).

I think this may get to the point the fastest....What crises are you insuring against where gold will be your go to. Can you give a historic (last 100 years) example? If not, can you give a slightly more detailed example of what you imagine happening?

 

[AceVentures]

Current state of affairs in Canada - Reporting August 11th 2021. I think the Canadian Government has found a way to save their dying economy.

 

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[GIlman]

I understand your perspective, I am just having a tough time understanding how something that may lose greater than 80% of it's value can be good insurance. Insurance means you are paying a 3rd party to amortize the risk of something between a large pool of people. Outside of a small fee they are charging for providing this service, you are breaking even. This means that the insurance all but GUARANTEES to make you whole if the risk happens at any time. If you were using an insurance company that at any time would give you 80% less when the risk happens, most people would rightfully say that is ridiculous to use. At that point you would be much better off using the market or some other safe vehicle to 'self insure'. Otherwise you need insurance for your insurance basically going out of business!

There are other vehicles of insurance that are basically guaranteed outside of some kind of cataclysmic event that would devastate the united states govt as we know it (for example I-bonds right?). Imagine what world you are talking about if these instruments are worthless just because they are not something that you are holding in your hand. Then imagine what it is you think your gold will do? Also, how big a chance do you think this extreme outcome will come to pass? Then compare that to the opportunity cost of that money (5-10% a year).

I think this may get to the point the fastest....What crises are you insuring against where gold will be your go to. Can you give a historic (last 100 years) example? If not, can you give a slightly more detailed example of what you imagine happening?

The history of the stock market is not as reliable as you paint it out to be. There was a crash in the late 1920’s-early 30’s of 90%.



Then from about 1962 to around 1982 it was basically flat.

All markets can see massive speculation for periods of time that result in massive corrections. Both gold and the stock market have had big peaks, sizable crashes, and some long periods of stagnation. Actually any market you look at can have this pattern.

What crisis am I insuring against? Well, I have studied many different countries over the years and what has happened in those countries. In general, when governments create massive social programs and recklessly blow out spending, all that they cannot fund, they turn to their central bank and ramp up the money printing. The effects are commonly catastrophic to the currency and can absolutely implode the economy.

On top of that, I perceive the US monetary system is in a particularly precarious position because we are currently the reserve currency of the world. However that appears to be slipping away as some countries are moving away from the USD. Because of our reserve currency status there is a ton of exported USD, that if it appears the US is at risk of losing the reserve status may come back and result in hyperinflation.

It has happened repeatedly through out history, that a dominant currency loses its position and it wreaks massive havoc on the currency value and economy of that country.

The other thing, is that our rate of debt accumulation and spending is exponentially increasing. Remember I’m 2008 when they did TARP, I remember all the political heartburn over 800 Billion to do that. In 2020-21 we are on pace to do closer to 10 trillion. And that’s the history of money printing. When you print money to get out of one financial disaster, when the next one happens you have to do exponentially more Money printing than the time before. Also, each time we have a crisis, our response makes the system even more fragile and prone to disaster.

So in a nut shell what am I insuring against, a de facto default of the US monetary system. Hopefully that doesn’t happen, but the cards are stacked in such a way that there is a significant risk of that from where I sit.

But it’s not as if I have my head in the sand, and am just squirling nuts away. I’m still investing in real estate, select stocks, building up my businesses, and expanding into new ventures. I have no intention of standing still, but I also have an escape plan with offshore resources should the high risk situation I perceive materialize into an existential monetary crisis.

 

[Bigguns50]

But it’s not as if I have my head in the sand, and am just squirling nuts away. I’m still investing in real estate, select stocks, building up my businesses, and expanding into new ventures.

I'm doing the exact same thing. I'm not as educated as you in the monetary policies of other countries. I see things from a different point of view but our actions are the same. Thank you for the information.

 

[GIlman]

I'm doing the exact same thing. I'm not as educated as you in the monetary policies of other countries. I see things from a different point of view but our actions are the same. Thank you for the information.

If your interested, Ray Dalio has written several books about economics cycles. He is the founder of one of the largest of not the largest hedge funds in the world, and he basically made his money over the years by studying history and economic cycles, then positioning himself based on history and current similarities to the past.

You can read his latest book for free on his website which is all about the changing of world order. This book is EXTREMELY insightful, and highly recommended if you want to know history and where the US is sitting right now.

Principles by Ray Dalio

Principles: Life & Work by Ray Dalio now available in hardcover and as an audiobook. Learn more at principles.com

www.principles.com

His other book is excellent but more dense and much slower reading. It is called “Principles for Navigating Big Debt Crises.”

Big Debt Crises: Ray Dalio: 9780578565651: Amazon.com: Books

 

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[Bigguns50]

If your interested, Ray Dalio has written several books about economics cycles. He is the founder of one of the largest of not the largest hedge funds in the world, and he basically made his money over the years by studying history and economic cycles, then positioning himself based on history and current similarities to the past.

You can read his latest book for free on his website which is all about the changing of world order. This book is EXTREMELY insightful, and highly recommended if you want to know history and where the US is sitting right now.

Principles by Ray Dalio

Principles: Life & Work by Ray Dalio now available in hardcover and as an audiobook. Learn more at principles.com

www.principles.com

His other book is excellent but more dense and much slower reading. It is called “Principles for Navigating Big Debt Crises.”

Big Debt Crises: Ray Dalio: 9780578565651: Amazon.com: Books

Thanks for this! Yes, I will read it. It fits with my longer term planning. I know of him but never read any if his works.

 

[Guest-5ty5s4]

Some of y’all may be familiar with my patented fishing product.
Currently this is a very small startup in the works for me, but I have a thread on INSIDERS for it.

Basically, I have to get manufacturing done overseas because everyone in the states wants to charge more than what it will retail for.

But I just talked to my supplier and he wants to raise his price on me by 21%.

This is a factory in China. He said it is due to a rise in material cost...

 

[WJK]

If your interested, Ray Dalio has written several books about economics cycles. He is the founder of one of the largest of not the largest hedge funds in the world, and he basically made his money over the years by studying history and economic cycles, then positioning himself based on history and current similarities to the past.

You can read his latest book for free on his website which is all about the changing of world order. This book is EXTREMELY insightful, and highly recommended if you want to know history and where the US is sitting right now.

Principles by Ray Dalio

Principles: Life & Work by Ray Dalio now available in hardcover and as an audiobook. Learn more at principles.com

www.principles.com

His other book is excellent but more dense and much slower reading. It is called “Principles for Navigating Big Debt Crises.”

Big Debt Crises: Ray Dalio: 9780578565651: Amazon.com: Books

I follow the domestic real estate cycles. Most follow the general economic cycles, but not always. They are a piece in the bigger puzzle.

 

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[WJK]

Are you guys in USA really seeing these massive product shortages? I understand Alaska, but are the lower states as well?

Here in Alberta I see insane prices everywhere, but there is full stock on nearly everything. Gas has jumped about 20%, my favorite hutterite eggs went up $1 for an 18 pack, and milk went up again since I last went to the grocery store, but full shelves for everything.

Lumber is expensive as all heck, but Lowe's and home Depot looks fully stocked. Lots of bug chemicals, furnace filters, seasonal items.... Lots of everything.

I've heard from several people who have traveled through Canada recently. Canada has stock piles of lumber and saw logs. They saw miles and miles of yards with stored wood products ready for export. The lumber shortage is a national political decision sparked by the pandemic and resulting disruption in the trucking industry. And that's only one example.

Our clam processing plant up the road has been down for the last 2 seasons. And the fish processing plants are either down or running at a fraction of their normal production.

Our normal building season has been totally disrupted by the lack of lumber and supplies. We must harvest beetle kill trees to supply our saw mills so we can have lumber to do our building this summer. It's a slow sog for my husband. Usually I buy semi truck loads of saw logs each spring. This year, our source is cutting his logs on his saw mill rather than selling them to us. He's making big bucks. We have a lot of beetle kill standing dead trees in our area. The beetles kill the older mature black spruce trees. The bottoms of the tress are good saw logs an the tops are good firewood for this coming winter. But, it sure has slowed down our projects.

 

[Lyinx]

Things are going to get much worse in the states soon (IMO)

we have a harness shop, we manufacture a lot of goods in the states, but import stainless steel hardware from overseas (strap goods get made in the states, metal gets imported)

Tiawan: hardware supplier: shutdown again due to recent covid outbreak, unknown when they will open up
China: will supply hardware, but prices are going up 25% or more

Shipping: freight container costs have shot up through the roof, if they can even get them, so even if they make the product, it needs to sit on the docks and wait a few days/weeks till they get a spot