The declining dollar and our alternatives (1 Viewer)

[geauxboy]

After seeing the inevitable with Iran dropping the dollar and the talk that it would seriously wound the dollar, I began to weigh my options. I don't know enough about finances or investing so I have many questions about our options.

I know that I am way behind on making the adjustment but that's mainly due to not having anything to adjust.

I would like to ask about and focus just on foreign monies and precious metals / gems for the moment. When we get past these, then y'all can confuse the snot out of me with blue chips and funds and all sorts of other highly manipulated investment options.

First and foremost, dealing with just monies, how does this work? To give a general scenario, what could the average person do if they had $10,000 USD in the bank? Would the interest alone be enough to keep that $10,000 worth $10,000 in say 10 years? I guess that would be a no in the first place due what that money would actually be worth in 10 years. It may only get you $8,000 of worth by that time, right?

Secondly, if I did deal in monies, how exactly does that work? BTW, I don't wanna deal with the market in a way. I just want to have the money IN MY HANDS (in the bank). Can I, or should I, deposit foreign monies in my account and would it be honored under that monies ebb and flow (value)? I would have to believe that the interest rate is still the same ol rate, but the monies themselves would still increase in buying power (of course that all depends on if it goes up or down). You can sell off declining money and replace it with rising money. Is this right or am I WAY off?

Would it be better to just collect foreign monies and put them in a safe deposit box or my matress and use it when/if the dollar crumbles to nothing? Same thing goes with gems and metals. If I understand correctly, both of these are still tied to the dollar and it rises and falls constantly.

Now, about metals and gems. Bclemms said that they too can rise and fall sharply in such short time. Ok, I see that already, but in the long run, don't they all go up? If you wait out that drop, it could easily go back to where it was when you first bought it. Of course the obvious thing to do is to buy it low so the upside is practically assured.

Ultimately, where I am really going with this is how should I be positioned if/when the dollar puts us in a massive recession. What should we do to keep oursleves somewhat unharmed from a recession? If I have about $100,000 EU over $100,000 USD (excluding the actual difference in worth), wouldn't I be in a better position?

Also, as far as recessions go, would that put precious metals and gems on someone else's "dollar" because our dollar ain't worth squat?

That's enough for now. I have MANY more questions, but I'll keep it at this for now.

Confuse away

 

[xaeniac]

My question is if you do invest in gold where can you sell it to get the value that the market is selling for. You have to have a willing person to sell to besides the pawn shop, so where is this place?

 

[SaintJ]

My question is if you do invest in gold where can you sell it to get the value that the market is selling for. You have to have a willing person to sell to besides the pawn shop, so where is this place?

People usually buy stock in (gold) mining companies, you can also buy currency, or certificates backed by bullion.

If we're at a point where none of those are honored, your best investments will be in gasoline, proper vehicles, automatic weaponry, some C4, cases of bonded liquor and a sharp bayonet.

 

[bclemms]

My question is if you do invest in gold where can you sell it to get the value that the market is selling for. You have to have a willing person to sell to besides the pawn shop, so where is this place?

I had someone PM me a couple weeks ago with nearly this exact question. Here was my reply.

There are a bunch of different ways to invest in gold. You can buy the gold and physically hold it. This is usually done by those that are wanting to hold gold for a long period to hedge inflation or in case of economic collapse. If you want to go this route there are plenty of places to buy from. The most popular is www.kitco.com but you can find it cheaper if you search around. You can even buy it by the gram or ounce on ebay.

If you are wanting to buy physical gold but do not want to actually hold it and want to have the ability to sell in an instant then there are gold holding companies online. You can buy x amount of gold for y dollars. They hold the gold but you can sell anytime you like for market value. There is a small fee involved for this. I am not sure the best company but you can do some research in the two links at the bottom of the message.

The most popular way people buy "gold" is with stocks. In this case you would not actually be buying gold, instead would be buying stock to companies that follow gold like mining companies. You can buy single stocks or you can buy mutual funds. The fund I was most invested in until recently is USAGX which is managed by USAA. Many of the mining companies are foreign owned and operated so buying them would just depend on the brokerage service you use. I use USAA and can buy just about any stock that is traded but many swear by scottrade or others like it. The mining companies make money by selling the gold that they pull out of the ground (obviously). If a company pulls out 100oz of gold a week and sell it for $800 per ounce then they are making $80,000 per week. If the price of gold jumps to $1000oz then their profit jumps to $100,000 per week and the stock goes up. The mining stocks don't follow gold perfectly but it is pretty darn close. When the price of gold goes up the mining stocks follow 99% of the time.

You can also lease or rent gold but I am not the person to talk to about that.

Buying and selling gold is considered very risky. Gold is near an all time high right now and if the bottom fell out you would lose money and lose it fast. It also moves quite a bit on a daily/weekly timeframe. So remember the risk is there and even if you diversify in the gold market it is still risky. In my opinion (which is mine, don't do anything because of what I say) gold is not that risky right now. The reason I don't think gold is that risky is because it tracks the dollar. The dollar has been on a steady decline for several years now but as long as the fed has to continue to cut rates to keep the stock market from tanking the dollar will continue to weaken. As long as we are in Iraq spending Trillions the government will continue to print money and hurting the dollar in the process. Until something drastic happens gold is a pretty safe bet not to lose your ***, which is not typical for gold historically. I'm not saying you can't lose money because you can, just the risk is less than normal.

Something to remember when buying and selling gold stocks. Gold is traded almost all day, year round on the global market. The price of gold could bottom out while you are sleeping and before you could sell the mining stocks would hit the floor so be careful, particularly over long weekends where gold might be traded for three days between the time you can place trades. Also remember that Fed rate cuts make the price of gold swing pretty dramatically. In late October to early November gold moved up $150/oz in just a couple weeks

Again, IMO, gold has a huge upside. If the market crashes and foreign countries do start selling the dollar in huge quantities gold will skyrocket overnight. The same thing if OPEC eventually decided to move away from the dollar. Those may not be likely to happen but if either or both did gold would truly be worth thousands of dollars an ounce. What is likely is that the dollar continues to slide against other currencies and inflation continues to grow. This will cause gold to go up. Again, these are just my thoughts. Do your own research if when you get ready to buy.

The best places to learn about different ways to buy and sell gold is a couple of forums. Keep in mind that a lot of these gold guys are extremely bullish and always optimistic so don't value opinions until you know whose opinion it is.



https://www.kitcomm.com/
http://goldismoney.info/forums/

Here is a live chart to track the price of gold.
http://www.kitco.com/charts/livegold.html

Here is a live chart to track the dollar (java, takes a minute to load):
http://www.fxstreet.com/rates-charts/currency-rates/

 

[geauxboy]

SaintJ, point well taken.

bclemms, thanks for the info. You really made it easy to understand.

I must admit, part of my reasoning for this thread is for if/when it hits the fan. I'm already so ill prepared that it wouldn't take me long to go down in flames. I would like to avoid said flames.

My idea behind actually holding gold is, if that's all that's traded for good and services and bribes, I wanna have some. I know, my mind is wandering, but people ain't hording weapons fer nothin.

I have read about gold/silver/platinum certificates that you mentioned and I very much like the idea. If it hits the fans, are those certificates worth more than tp?

xaeniac brought up another question I have. Where do you sell gold beside a pawn shop and the Diamond District ?

 

[JimEverett]

tomorrow same as today

invest in U.S. equities. Most of the world is continuing to do so, and many of them are a lot smarter than you/me.

 

[SWJJ]

obligatory vote for ron paul post.

 

[Mr. Sparkle]

http://finance.yahoo.com/q/bc?s=FCX&t=2y&l=on&z=m&q=l&c=



52 week range: 48.85 -> 120.20

 

[SWJJ]

obligatory vote for ron paul post.

quoted for being a good idea to save the economy.

 

[philipkw]

Bclemms is a fount of knowledge about this stuff. He’s provided some good info for those interested in gold investment. I’ve been toying with the idea as a short term gamble to see if I could capitalize on the dollar gloom. Still haven’t pulled the trigger because I haven’t reached the comfort level knowledge-wise.

Anyhoo, for a long term investment scheme I still think being balanced and staying pat in the face of perceived upheaval is the right way to go. So far it’s worked pretty well for me. The balance of my economic/investment knowledge would fit in a thimble but I trust my broker and he hasn’t let me down. I spoke with him yesterday and did a gloom dump. He sent me some info regarding 2008 forecasting from one their firm’s economists. It’s not good, but it’s certainly no where near catastrophic either. He did mention moving a small percentage of my portfolio into commodities and some foreign investments.

I’ve actually seen some info out there that suggests we might soon have a dollar rally. One of the bullet points in <a href=http://www.wachovia.com/ws/econ/view/0,,3992,00.ppt#580,20,Slide 20>this briefing from Wachovia</a> states that “the probability of a dollar meltdown is rather small”.

Who knows?

 

[JimEverett]

I’ve actually seen some info out there that suggests we might soon have a dollar rally. One of the bullet points in <a href=http://www.wachovia.com/ws/econ/view/0,,3992,00.ppt#580,20,Slide 20>this briefing from Wachovia</a> states that “the probability of a dollar meltdown is rather small”.

Who knows?

I know just barely enough to be stupid about this stuff, but it seems to me that the dollar decline has actually been a good thing. There was a clear imbalance, and we have seen a rather progressive decline of the dollar as opposed to a sharp and quick fall. I mean if you take the dollar relative to the Euro, the decline started, I guess, sometime in 2002. A 5year+ orderly decline beats a 3 month panic anytime. And the quick sell-off was always the real fear - not the natural clearing out of the imbalances.
Furthermore, its been clear for some time now that Europe is hurting because of their strengthened currency.They are quickly losing export markets. Let people conservatively store value in the Euro, its no skin off our back. Our equity markets are still king of the world - and if you want to make money that is where you invest.

 

[bclemms]

Bclemms is a fount of knowledge about this stuff. He’s provided some good info for those interested in gold investment. I’ve been toying with the idea as a short term gamble to see if I could capitalize on the dollar gloom. Still haven’t pulled the trigger because I haven’t reached the comfort level knowledge-wise.

Anyhoo, for a long term investment scheme I still think being balanced and staying pat in the face of perceived upheaval is the right way to go. So far it’s worked pretty well for me. The balance of my economic/investment knowledge would fit in a thimble but I trust my broker and he hasn’t let me down. I spoke with him yesterday and did a gloom dump. He sent me some info regarding 2008 forecasting from one their firm’s economists. It’s not good, but it’s certainly no where near catastrophic either. He did mention moving a small percentage of my portfolio into commodities and some foreign investments.

I’ve actually seen some info out there that suggests we might soon have a dollar rally. One of the bullet points in <a href=http://www.wachovia.com/ws/econ/view/0,,3992,00.ppt#580,20,Slide 20>this briefing from Wachovia</a> states that “the probability of a dollar meltdown is rather small”.

Who knows?

I am big on gold but I am even bigger on being diversed. I also agree that a full dollar meltdown is small, at least in the very near future, but even if the chances are small it would hurt a lot less to have a 20-30% lose some money in PM's versus losing everything if the dollar does tank.

The dollar could very well rally but I just don't see it happening before the end of the 1st quarter. I expect a .25 drop in the discount rate today which will allow the dollar to slip down even farther and more than likely a couple more rate cuts before things calm down. The simple fundamentals of the dollar just aren't there for a rally in the near future.

Take these forecasts with a grain of salt because no investment firm is going to spell doom and gloom because it would simply shoot themselves in the foot. The same goes with the fed. Each time Bernake speaks he spills a little more bad news. I'm pretty sure the Fed has known all along just how bad the credit crunch was going to be but spilling all the beans at once would have caused a stampede in the wrong direction. I'm not saying that the entire US economy is going to collapse tomorrow but I still think it will be worse than expected.

Jim, you are correct about the dollar. You are also correct about the Euro. I don't see the dollar sliding too much against the Euro over the next few months because Europe is also dropping rates to try and weaken the Euro for the reasons you mentioned. At first glance this will make the dollar appear stronger than it actually is. We are getting to the point that all fiat currency will be getting weaker. The best thing to judge the dollar against will be the Brittish Pound since it is tied to silver.

The dollar being sold off quickly is absolutely the biggest worry. This is still very possible. Too many things could cause this and if it does happen nothing is in place to stop the fall. War with Iran, Opec switching currencies, Asia or middle east dumping dollars for other currencies, a huge drop in the stock market,etc. The dollar is vulnerable and if a large sell off occurs the Fed can't increase rates at the last minute to try and slow it down unless they pushed rates so high it would cause a stock market crash. Like I said, it is unlikely to happen but far from impossible so everyone should have at least a small portion invested in PM's.

 

[JimEverett]

Another point too - I know that probably 5-6 years ago I saw it written in several publications that foreign trade didn;t amount to 20% of the US GDP. I cannot imagine it is 25% today. That is a significant amount, but it is small when compared to many other countries.
For instance:
UK- over 50%
Germany - roughly 75%
France - almost 50%
Japan - almost 30%


So any impact from a declining currency will be felt less here than most other places. And, to take it a step further, the negative impact would probably only affect roughly 15% of the GDP (the amount of imports) and positively affect the 7-8% or so of GDP based on exports.

 

[geauxboy]

It's amazing that the Euro is about to undergo a planned fall just because it is worth too much. I can understand that their exports are hurting because of that, but it's amazing how they can purposely tank the value. If you are "in" with this crowd, then you would know before common folk would know. That's virtually insider trading. Am I not correct? Don't tell me that those that know before hand don't take advantage of it.

I'm glad the fiat issue came up. That's kinda where I was going with this whole thing. If/when fiat money isn't worth squat, what do you do? If you actually have gold in your possession, you're as good as gold, literally.

What if you went to a jeweler and had them melt down your gold into 5 gram coins? That way, no matter where you are in the world, those coins (once verified as real) can be used for goods and services.

That brings me back to gold/silver certificates. If I understand correctly, if the mine goes under, then those certificates are worthless or atleast worth much less? If that's the case, I'd rather have gold on hand than on paper. No matter what, that gold will still be worth gold. I understand that they could make silver worth more and make gold worthless if they really wanted, but if it's gone that far, then you better be cocked and loaded.

 

[MattyV]

If all you want to do is protect the value of your $10,000 and ride out a recession, look for low-risk, inflation-proof investments. You can put it in low-yield bonds, cds or a money market account. I've got a tax-exempt money market account that pays 3 percent, enough to protect against inflation and liquid enough to write checks from or make an online investment if I spot something good.

I use: www.vanguard.com.