Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

[jtabeb]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Well, maybe their "suicide" will present a chance for all of us to move on. (Darwinian selection at it's finest.)

[Pascal]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

I think one reason that China is encouraging its citizens to buy gold is because at some point the government may want or need it, and they will order the citizens to turn it in as their patriotic duty. Free gold for government.

I don't believe the U.S. government will do door-to-door confiscation of gold. It would be political suicide, and wouldn't be cost-effective because so few Americans own gold, and what they do own isn't enough to significantly plug the holes in the deficit. The big wealth to be plundered is in IRA's and 401K's.

What government WILL do is impose a large, say 90%, "luxury" tax on gold transactions. This will be politically palatable amongst the voting majority, the "have nots". When that happens, gold owners will choose to sit on their gold for a few generations, as they did when Roosevelt "confiscated" gold. Gold transactions will take place "underground".

Just my $0.02.

China has enough US currency reserves on hand to buy up about half the world's existing gold if it could do so at today's prices. Not sure it needs to back-door it through its citizens.

You could be right about a punitive tax. It seems like they should have better targets though (thank you Goldman, et al).

Rather than confiscation I think the bigger issue will be choosing a sell point based on fundamentals. The key to those fundamentals will be, I think, the ones EJ has outlined with a possible modification for a new currency regime at least partly linked to gold.

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

google dillon gage. they had a walk-in retail desk a couple of years ago. decent inventory, good pricing, big operation.

Thanks. I take it that they are engaged in a wider array of investments than just precious metals, and that they do not have a retail gold business over the web - right?

[thriftyandboringinohio]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

China has enough US currency reserves on hand to buy up about half the world's existing gold if it could do so at today's prices. ...

I doubt they would get that much at any current price. Price elasticity of supply would kick in.

...I think the bigger issue will be choosing a sell point based on fundamentals. The key to those fundamentals will be, I think, the ones EJ has outlined...

That's my current interest, so I find this commentary by EJ fascinating. I began accumulating physical gold and avoiding dangerous assets 8 years ago, thanks largely to iTulip. And it's proven to be a fabulous strategy. If the sell point for our physical is less than 8 years away (EJ targets 2013) I'm ready to start thinking about exactly how and when. Advanced planning sure helped when I was getting into this excellent position. I'm ready to start planning and positioning to execute the exit strategy and stick the landing.

In the Boy Scouts they taught me to "be prepared". If the exit is only 36 or 48 months away, I have some work to do!

[Pascal]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Same here Thrifty.

I've always found the selling decisions to be a lot tougher than the what and when to buy decisions. Likely to be especially true for this particular investment.

[pococansado]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Thanks. I take it that they are engaged in a wider array of investments than just precious metals, and that they do not have a retail gold business over the web - right?

don't know PC. i never had any interest in their other businesses, or in buying gold over the web. for the thirty years i lived in dallas, DG was just the place to go with cash in your pocket, place your order, inspect your purchase, and walk out. on one occasion they didn't have the qty on hand and shipped it. i didn't like that, but it turned out ok. should have called ahead.

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

don't know PC. i never had any interest in their other businesses, or in buying gold over the web. for the thirty years i lived in dallas, DG was just the place to go with cash in your pocket, place your order, inspect your purchase, and walk out. on one occasion they didn't have the qty on hand and shipped it. i didn't like that, but it turned out ok. should have called ahead.

Thanks - those details help. Sounds quite interesting.

[Chris Coles]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

I doubt they would get that much at any current price. Price elasticity of supply would kick in.



That's my current interest, so I find this commentary by EJ fascinating. I began accumulating physical gold and avoiding dangerous assets 8 years ago, thanks largely to iTulip. And it's proven to be a fabulous strategy. If the sell point for our physical is less than 8 years away (EJ targets 2013) I'm ready to start thinking about exactly how and when. Advanced planning sure helped when I was getting into this excellent position. I'm ready to start planning and positioning to execute the exit strategy and stick the landing.

In the Boy Scouts they taught me to "be prepared". If the exit is only 36 or 48 months away, I have some work to do!

Surely the problem is: that with any other something of value, you might be correct to step out at the upside, but the question to ask in this case must be; what do you get in return when you sell Gold?

[ThePythonicCow]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

what do you get in return when you sell Gold?

Well, first of all, you make sure you have zero debt and own your home, car and a good supply of the tools and dry goods of use to you over the next few years. Be sure you have some way to eat and drink "off the grid" (I have bags of rice and beans, a good Berkey water filter, a lake within walking distance, some liquid propane tanks, a propane fired outdoor gas grill and a pressure cooker.) Reduce cash flow needs to a modest fraction of reliable income.

Then I suspect, if you have money left over, you invest in farmland, mines, and other such basic commodities. I'll probably resume investing in gold mining stocks, as this has been an area where I've long played with good success overall, but that's not an easy area for most investors. There may be a period between when I sell my gold and silver, and when I choose to get back into gold mining stocks, during which I'll as nervous as a cat on a hot tin roof.

[unlucky]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

What if things don't calm down?

Well right now I'm heading towards 50% without doing anything :eek:

[raja]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

EJ's article did not discuss the possible government-originated risk of gold ownership, which would seem important when considering when to sell gold.

When raja would like to sell his gold:

1) Before the government decides that gold owners would be a politically safe, readily accessible source of funds to help feed it's ongoing Ponzi scheme, and decides to tax gold profits at 90% or thereabouts. Couldn't happen? Remember the 90%+ income tax brackets.

Say you bought gold for $270 in 2001, and sold at $5000 . . . well, you'd clear $472 after a 90% gold profit tax. Whoopee, you've doubled your money over 15 years! Of course, over that time period inflation may have reduced that $472 to $100 in real terms, so you'd have only lost about half your original investment. :eek:
But wait, it gets better. If the government does impose a big tax on gold profits, expect the gold price to plummet. What's the point of owning something when most of the profit is taxed away? So maybe gold drops back down to . . . $1232, or lower by the time you sell.

2) Before the government decides to institute a new currency and doesn't want any competition for this new fiat money, so it decides to ban personal gold ownership, similar to Franklin's gold grab during the Great Depression. You turn in your gold for the old dollar, which is then devalued 90% by the creation of the New Dollar. (This scenario suggested by vinoveri in a previous post).

Good luck timing these . . . .

From Denninger yesterday:

We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse. Cash is perfectly fine but make damn sure it's really cash and not some exotic "cash equivalent" that can get gated. This means, unfortunately, money market funds are no longer safe with recent changes to SEC regulations. If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)

[raja]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

hey jtabeb - are you also familiar with Antal Fekete?

Here's an interesting short read:

http://www.professorfekete.com/artic...tionPaper1.pdf

Thanks for posting this . . . .
It's good when both sides are presented . . . .

Here are some excerpts:

it is possible to have a shortage of money simultaneously with the overworking of the printing presses. Hyperinflation is not the same as the ultimate inflation of the money supply. It is the ultimate depreciation of the currency unit.

People postone buying indefinitely because they expect prices to fall further. This is hyperdeflation. It manifests itself in the ever rising value of the currency unit. It is important to remark that it can happen while some prices are still rising. Other than gold, food and energy are two important exceptions. People have to eat, and they want to keep themselves warm and mobile, no matter what. Paradoxically, this may reinforce deflation. Because of rising food and energy prices people will have that much less to spend on other goods, accelerating price declines in other sectors. This defeats the arguments of Turk and others who try to refute the case for deflation by pointing to high or rising cost of food and energy.

I am not trying to adjudicate between the two schools of thought, one asserting that hyperinflation and the other asserting that hyperdeflation of the dollar is inevitable and imminent. I am merely trying to point out certain facts about deflation that most people areunaware of, or tend to ignore.

All the signs around us point to deflation. The money supply is being pumped up on an unprecedented scale, but all it does is pushing on a string. You cannot make a case, as Turk is trying to do, out of the fact that the price of crude oildoubled as compared to its recent low. Another fact, more startling, is that the price of crude oil has declined 45 percent as compared to its all-time high. We must see the general decline in world prices, even though in some cases they may be disguised as a loss of pricing power of the producers. True, list prices have not declined, but nobody trades them. They are for window-dressing only.

But why is it that the inordinate money creation by the Fed is having no lasting effect on prices? It is because the Fed can create all the money it wants, but it cannot command it to flow uphill. The new money flows downhill where the fun is: to the bond market. Bond speculators are having a field day. Their bets are on the house: if they lose, the losses will be picked up by the public purse. But why does the Fed under-write the losses of the bond speculators? What we see is a gigantic Ponzi scheme. The Treasury issues the bonds by the trillions, and promises huge risk-free profits to the bond speculators in order to induce them to buy.

But why is it that the inordinate money creation by the Fed is having no lasting effect on prices? It is because the Fed can create all the money it wants, but it cannot command it to flow uphill. The new money flows downhill where the fun is: to the bond market. Bond speculators are having a field day. Their bets are on the house: if they lose, the losses will be picked up by the public purse. But why does the Fed under-write the losses of the bond speculators? What we see is a gigantic Ponzi scheme. The Treasury issues the bonds by the trillions, and promises huge risk-free profits to the bond speculators in order to induce them to buy.

[karim0028]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

EJ's article did not discuss the possible government-originated risk of gold ownership, which would seem important when considering when to sell gold.

When raja would like to sell his gold:

1) Before the government decides that gold owners would be a politically safe, readily accessible source of funds to help feed it's ongoing Ponzi scheme, and decides to tax gold profits at 90% or thereabouts. Couldn't happen? Remember the 90%+ income tax brackets.

Say you bought gold for $270 in 2001, and sold at $5000 . . . well, you'd clear $472 after a 90% gold profit tax. Whoopee, you've doubled your money over 15 years! Of course, over that time period inflation may have reduced that $472 to $100 in real terms, so you'd have only lost about half your original investment. :eek:
But wait, it gets better. If the government does impose a big tax on gold profits, expect the gold price to plummet. What's the point of owning something when most of the profit is taxed away? So maybe gold drops back down to . . . $1232, or lower by the time you sell.

2) Before the government decides to institute a new currency and doesn't want any competition for this new fiat money, so it decides to ban personal gold ownership, similar to Franklin's gold grab during the Great Depression. You turn in your gold for the old dollar, which is then devalued 90% by the creation of the New Dollar. (This scenario suggested by vinoveri in a previous post).

Good luck timing these . . . .

From Denninger yesterday:

We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse. Cash is perfectly fine but make damn sure it's really cash and not some exotic "cash equivalent" that can get gated. This means, unfortunately, money market funds are no longer safe with recent changes to SEC regulations. If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)

My question then is, how would they know your cost basis? There is no place that i can find where your tax basis is kept, except in your head..... If the govt feels the need to tax gold 90% (outright robbing you) and gold is at 2K or 5K or whatever, then my best guess was that i bought at 4500 or so..... Whats to stop that?

[pescamaaan]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

i buy from apmex.com - they have detailed records of everyone's cost basis, no? same goes for bullionvault, bulliondirect, etc etc etc...(though admittedly they did not ask for a SSN when purchasing)

i guess if you buy in cash from a local dealer you're all set?

[Chris Coles]

Re: Before the FIRE Gold Update: Is $1,237 the new $720? - Eric Janszen

Wriggly, (and the others). Simply, the point I was trying to make was, in effect, is it not possible to jump, classically, out of the frying pan and into the fire? That there must be circumstances where you are always better off not selling but staying put; waiting out the transition between the collapse of the FIRE economy and whatever follows? That it might be better to wait for longer than EJ is postulating? That what you buy with your Gold may be, in all circumstances, not such a good deal as staying put? That once in Gold, stay in Gold.