nicejim

It's now September 2010...

And this is still the August thread ;-)

It's always good to have your assumptions and opinions challenged. This video may shake up some of the silver investors here and make you rethink your approaches.

From:

I've only got one Zimbabwe note but since it's over 2 years past its "on or before" date it's probably quite valuable now.

There are quite a few of them on here as well.

I must have missed that. Can you provide a quote?

'The latest figures from the Bank of England revealed that net lending – which strips out redemptions and repayments – dropped to just £86 million in July, a steep fall from June’s £518 million.'

 

86 million sounds like a very small amount of lending. How many homes would that buy, a few hundred?

This is net lending so doesn't translate directly into house purchases. It does seem pretty small though.

With the apple tree part I am fine - in fact, long term, I would value an apple tree much higher than for instance a fancy (petrol) car. In the coming oil crises, the apple tree will still feed me.

 

With labour it is different, especially as a state employee. While the job might be safe, the real level of income is not. Given the state of finances of most western states, how can we be sure that state employees won't earn 30%-50% less in real terms within the next 10 years? If so, don't you think economic affairs would be such that gold could go up 3 to 5 times in real terms during this time?

 

I think so.

In your first example you compared gold holdings relative to a person's total income until retirement, which implied that holding less than enough gold to cover 25 years of zero income would be considered insufficient. I would expect some loss of income and have no problem with comparing gold holdings to 30% of income for 10 years if that is the value at risk.

The value of the house in the example was fairly small compared to the lifetime income. So, I am not sure why you are picking on the house. Eroded income is a bigger risk IMHO.

Perhaps because I agree with the idea of insuring future income (though not necessarily against 100% loss) but not of insuring the house, it appears that I'm picking on the smaller issue.

When the crisis was beginning someone said to me "I don't get all this - if you've got an apple tree it still produces apples, right..?" So, the closer something is to an apple tree, the less you need to insure it against financial collapse; the closer something is to a bond, the more you need to insure it. Unlike bonds, labour will never go to zero. You don't need to calculate the tree's value as a Collateralised Apple Obligation and buy insurance for that amount.

http://www.telegraph.co.uk/finance/persona...ps-by-36pc.html

Physical gold bar demand climbed 29pc to 96.3 tonnes (2nd quarter)

Especially if held without debt.... and the monetary value of assets are not a prime concern.

 

If on the other hand one was either in mortgaged property or completely liquid, then the percentage of your liquid worth in gold should ideally be greater imo.

Debt confuses the issue because you can have 1oz of gold and it be worth 500% of net liquid assets. To determine a suitable holding you need to consider the change in asset values relative to the debt and the likelihood of income from the assets being sufficient to service the debt. It may be safer to repay the debt rather than buy gold. Fortunately I'm not in a position to have to think about this :-)

Back over the £800 Toz mark again today...

...and £12 for silver. But if you'd tried to buy any silver in the last few weeks you'd barely have noticed the dip!

"100% of WHAT?"

Of the value at risk. The house will retain most if not all of its value (as a house, not necessarily as a means of barter for other goods or services) even though the price may fall. Someone with a £2m farm will not be having nightmares if they own less than £200k of gold! Among one's non-liquid assets the value at risk may be very small.

It obviously all depends on your personal financial situation and how much savings/assets you have.

 

Say, you are a 40-year old state employee on 50K/year and you have been there long enough to get a 50% final salary pension. Assume 80 years life span. Since all payments are inflation-adjusted, we don't discount them and we assume a retirement age of 65. The future lifetime income is 25x50K + 15x25K = 1.625M. Say you own a house outright, 250K. Say you have another pension fund of 50K, and your truly free assets (your "savings") are 100K (which is nice given you own the house outright and you have a safe job). Total assets: 2.025M. Now you put 10% (10K) of your liquid assets in gold, the rest in cash, and you think you are diversified.

 

OK, let's see. You have 10K/2.025M = 0.494% in gold, most of the rest in a bond (80.247%), a little in the house (12.346%), and 4.444% in cash.

 

0.494% (i.e. next to nothing) in gold, and the rest in investments (bond, house, stocks, cash!!) that will most likely suck big time.

 

You are NOT exactly well diversified in that case.

<snip>

I'm not sure what your reason for holding gold is in this example but it looks like you intend to protect the value of your entire life and future in the event that all pension obligations are defaulted upon, you can no longer earn an income and you have to abandon your home, all during an even in which gold's purchasing power rose tenfold from today's level (so that 10% of assets in gold is enough to restore all wealth).

Personally, I'm prepared to run the risk of those not happening together and of my labour and home retaining some value. The house is owned outright so is worth a house before and after the event and does not need to be insured by gold. It may be hard for a while to earn an income but having £100k of purchasing power should be enough considering everyone will be in the same boat and happiness is often relative.

Cost of insurance for house, savings and income: £10k.

It's likely you'll be able to get income from investments after "the event" so I'll conservatively assume 5% returns. The £25k annual pension would require £500k of capital post-event.

Cost of insuring £25k annual pension: £50k

Cost of insuring £50k pension pot: £5k

So £65k should cover it. I'd move the £50k pension into GoldMoney or buy gold stocks with it, and keep a few dozen sovereigns nearby, with the actual number depending on my age as this determines whether I'm able to access the pension money. The rest would be used as insurance against "the event" not happening! Given that there is about 1oz of gold per human, the idea that it would take more than £65k (81.25oz today) to restore a middle class existence after a major collapse seems absurd.

Yep, that sound about right. You want to give cricket a go though. The tests are better than the one day circus... or even worse 20/20. It's great.... five days of gentlemanly leisure....where more often than not no-one wins.

 

A bit like the medieval contests before the French started taking thngs so seriously.

Only five days? Wasn't there once a game between South Africa and England which was designed to be played until everyone was out? IIRC it lasted 9 days and had to be called off early because the England team's boat was due to leave. They called it a draw.

Goldmoney? I do.

Very interesting research from Hinde Capital here.

http://tinyurl.com/22roz7m

Primarily concerning silver (bullish) and suppression. Also, exchange traded commodities are cheap relative to other industrial commodities, EM reserve growth bullish for EM stockmarkets (supported by possible silver rise). They've got some interesting ratios I've not seen before.

Think about your own worldview to decide if it is free of supernatural or mystical deities, forces, and entities. If you decide that you fit the description above, then you are, by definition, a bright!

Unfortunately it's not always that easy. A supernatural Magnetar has recently been discovered ;-)

http://www.bbc.co.uk/news/science-environment-11011118

I agree with this but the problem is; the purchasing power of an ounce of gold fluctuates - say within a month, it may purchase 5 percent more or less than the nominal dollar price of an item. Within this short time frame, a loaf of bread or gallon of fuel will be the same or possibly a bit higher priced in dollars - so some get locked into thinking the Sun orbits the Earth! IMO, only when prices are rising visibly, monthly, will people (some) begin to use an ounce of gold as the reference point.

I agree with that. When people thought the Sun etc went round the Earth it made calculations of the position of the planets very complex; rethinking the proposition allowed the sums to be simplified. In economics human behaviour and biases determine reality and we should consider reality to be whatever makes the calculations most simple. So, in pre-hyperinflation Germany the shops priced goods in Marks and the Sterling price fluctuated. But there came a point at which it was easier to price goods in Sterling and list the exchange rate by the till. Neither was wrong at the time it was done but it shows we should be prepared to adjust our perceptions...just not yet.

half crowns in good nick, better than your average pre 47 scrap

They don't look so good to me. These do though, and they're advertised as "high grade". Went for less than 5% above spot.

http://cgi.ebay.co.uk/ws/eBayISAPI.dll?Vie...em=160469397538

What am I missing? 501g pre-1947 = 8.05toz ASW = £95.52 @ £11.86/toz.

2 bidders went over £100 and it's currently going for £122.20!

http://cgi.ebay.co.uk/Pre-1947-Silver-Coin...RL#ht_500wt_949

Check these babies out.

£78 looks like a bargain for that. For anyone who missed that auction, the London Coin Company has a set

http://cgi.ebay.co.uk/1977-ROYAL-MINT-SILV...2#ht_4380wt_934

They obviously don't compete on price!

I've got more than 10% below spot including delivery within the last few months (for pre-47 British coins) but the last few days it seems everything is going for above spot (even excluding postage) and there's not as much on offer as there used to be. They mentioned on FSN that the premium for silver coins has been rising. Has anyone else noticed this?

As an example, check out this feedback page.

http://feedback.ebay.co.uk/ws/eBayISAPI.dl...eedbackAsSeller

6 times since May they sold £5 face value of "mostly better than scrap" with £3 postage and they usually had each coin in a plastic envelope. On 20th June, with silver at about £12.96 (going by charts at Bullionvault) someone paid £102.87 for delivery of about £114.30 of silver (I'm allowing for a little wear on the coins). Their current auction stands at £105 for about £102.30 of silver (and no plastic envelopes this time!)

http://cgi.ebay.co.uk/pre-1947-silver-coin...British_RL#shId

Financial Times Says European Banks Lent Their Customer's Gold to the BIS

Dear world,

TAKE F%&*ING DELIVERY !!!1!!1!!!!

Yours sincerely etc

I don't think that Bonner has revoked his "trade of the decade" yet.

That was last decade. This decade's trade is sell Treasuries, buy Japanese stocks.

So what’s next? What’s the trade of the coming decade? Well, your editor has decided not to double-down on the identical trade. Gold will remain in our core holdings, but not in our Trade of the Decade for the next 10 years. Why? Because we think the US economy is going the way of Japan.

http://dailyreckoning.com/our-new-trade-of-the-decade/

We sold...because of the potential changes to CGT & to bank gains...

If it weren't for the tax system you'd not have sold. So buy.

...Isn't that more or less the £2000 a week asylum seeker story?

 

I had conversations about that with my team this week. None of my team earn over £25,000. Seeing someone getting paid £2000 a week housing benefit means it is more difficult to motivate them to work for that amount per month (before tax)....

Pretty much

http://www.dailymail.co.uk/news/article-12...l#ixzz0tSiiV4k9

The £2,000 per week is paid directly to Mr Nur and his family, who then pay their landlord. Property sources say the house was being advertised locally at a cost of £1,050 per week.

 

The house is owned by Brophy Group Business Ltd, a British Virgin Islands company whose registered address is a post office box in Liechtenstein.

Yes, it's not much of a motivator.

Where can I find last months gold thread?

Thanks.

There's a link on page 1

http://www.greenenergyinvestors.com/index....0&start=360

Sadly for us Brits over the next few years nominal wages will stay flat whilst inflation ticks away at 5%+ year after year.

This is why the government's "triple guarantee" to pensioners makes no sense. They benefited from the credit boom but are not being made to pay for it, in terms of state pension allowance at least. Compounding works here too, so after 3 years of flat wages and 5% inflation the pension will have risen 15.8% in nominal terms. Workers, who will have had a 14.3% pay cut in real terms, will have to pay higher taxes to fund this.

An unintended consequence of Americans' improved health care is that the premiums on 1/10oz coins will rise. Isn't it weird how things work out!

http://www.numismaster.com/ta/numis/Articl...ArticleId=11843

Your use of the word adhominem to attack me rather than my argument is just an ad hominem by you.

+1