I'd planned on adding to my stack a week ago but didn't pull the trigger (just my luck). My entire net worth is mostly made up of precious metals and cash. I recently learned that annual M3 money supply growth in New Zealand is currently over 6%. The best rate you can earn in an on-call savings account here is 4.5% before tax, so clearly a negative real rate of return. Despite already being PM-heavy, I've come to the realisation I still have too much fiat sitting in banks. As far as the short-term outlook for precious metals is concerned, I think people fall into one of two camps: those who think Greece will default and those who think it won't be allowed to (officially) default. Based on the evidence presented, I agree with Jim Sinclair that Greece won't be allowed to (officially) default and we'll see "QE to infinity." Sinclair says the credit default swaps cannot be triggered or else five of the biggest US banks will collapse. Funnily enough, the International Swaps and Derivative Association credit event committee (the official body that decides what constitutes a default) is made up of people from these same banks. Therefore it seems quite logical to assume there won't be a default (they'll just call it something else). Turd Ferguson (tfmetalsreport.com) says we should expect a "battle royale" around gold at $1,800 and silver at $36. In other words, a lot of volatility. My conclusion is that now is a good time to continue stacking, but if you're a trader you might want to wait for the next pullback.
I'm still confused about what a default (if that happens) would mean :/ Would pm prices really go up? Didn't they go down in the last GFC? We have lots of $$$ to spend on PM's and I'm waiting for a dip. I was hoping to see one this week.
Possibly. The problem is you also need a stack of cash for use in emergencies; ie: either bullion or stock price drop. As Rick Rule says, if you are out on the african plains, and all of a sudden, a whole herd of game animals come out, its useless to you if you have no bullets. Don't be one of those guys who repeats the mistake made by many in 2008, when the price of gold dropped precipitously to bargain basement prices. If you were someone who wasn't already sitting on a pile of fiat for use in an emergency like that, then you were flat outta luck.
You are 100% right Black_Sun. The paper we have to spend is only for our super fund. We have a private stash of silver but still plenty of paper to get us by.
My understanding is that if Greece officially declared a default, then precious metals, the Euro and I guess stocks would collapse in price. It would have a contagion effect because attention would then turn to the rest of the PIIGS and eventually the US economy, which if it wasn't for the fact they have the reserve currency, would be in a worse position than Greece. I don't believe they'll allow that to happen, otherwise the entire system collapses. Instead they'll print, print, print, and precious metals will continue their ascent. The monetary system will collapse eventually, but the powers that be will delay the day of reckoning as long as possible. Edit: PIIGS, not PIGGS.
I agree with you and that's why I still have quite a lot of fiat earning me negative real interest rates. I guess what I'm not sure of, is just how much powder do I need to keep dry? I don't want to divulge too much of my personal financial information, but hey, we're all friends here I'm currently 65% PMs and 35% cash. The cash portion is a few tens of thousands of dollars. The other thing to keep in mind is that what gold and silver do in US dollars doesn't necessarily impact us in Australia and New Zealand. Looking at a five year chart, gold started 2008 at NZD $1,110 and ended at NZD $1,526. In 2009 there was a big spike and pullback in the first quarter and it ended the year at NZD $1,509, which is a tiny loss. Looking at a ten year chart, the gold bull market in New Zealand dollars didn't start until the middle of 2005 and with the exception of the wild first quarter of 2009, it's steadily trended up. Granted, no one has a crystal ball, but I think we're far more likely to see continued money printing and eventual hyperinflation than we are to see a near-term collapse. Something else to consider is that the next global financial crisis is likely to be one that the banking system can't recover from, in which case you might be kissing your paper assets goodbye.
That being said about cash, there is one other thing which a "John Christian" said on one of his Youtube "Stella Concepts" videos. This was that one day, a moment may well come (can't remember if he was talking about gold re-monetization or something re. the ongoing silver fraud) where you would wake up in the morning, and some big announcement would be made - world-wide, and you were either IN (the metal) or OUT (of the metals). There would be no time (its too late) to ring your bullion dealer; you were either IN or OUT at that exact moment in time. I agree. Probably in connection with gold re-monetization, although as one of my recent Ted Butler posts showed, Ted made nearly the exact same point in regard to government admittance of the silver market manipulation. So if you are sitting on massive wads of cash when that moment comes, too bad. When John joined the ABX, he took nearly everything down from YouTube. Its too bad for those guys who didn't get to see his stuff, because he made a great contribution.
I keep hearing lots of people talk about 'cash' what about the scenario of using the off-set account from an investment property. So in total we are in debt, but have access to cash. I have still been using the "have quite a few ten thousands in 'cash'" logic via that offset account, because it is a basic transaction account. Does this count?
Jim Sinclair recently published the following timeline for what he expects to pan out: Something big happening in March 2012 (obviously related to Greece), which will kick off the next wave up in the price of gold[/*] World focus turning towards the US dollar as the currency of deep concern round June 2012[/*] Major changes to the international monetary system around June 2015[/*] John Christian's YouTube videos are still available, he just moved them to his other channel: http://www.youtube.com/user/ozstellaconcepts
heike I consider the cash off setting our home loan cash that I have access to as it's still our money to spend on whatever we want. Having said that we did in fact spend heaps of that money we had sitting in that account... On silver!
