1202.50

[LargoWinch]

Re: 1202.50

I honestly think today's spot price will look like a 75% off sale in a year's time.

They ran out of physical to supply the market. Time to just sit back, smoke a lucky and watch the bastard-fucks burn to death in their shorts. (Please add to your shorts, Please, won't you? Please double down again, and again and AGAIN)

The physical gold market is a powder keg resting on lake of gasoline that is sitting above an underground nuclear test site that has a 100 Megaton H-bomb with timing fuse just counting down past 30 secs on it's way to "IGNITION".

Disclaimer - My Call Sign in the Squadron is "Goldie" for a reason.

JT, kitco.com is stocked with everything PM-related. That is the first time I see this in a long time...

https://online.kitco.com/bullion/index.html


For reference, in Fall 2008, they had nothing but 400oz gold bar for sale...

I urge caution, but hope for higher PMs (I am almost 50% PMs and 50% cash).

As I said in Peak II, I prefer Crude Oil @ $74 than gold at $1,200.

[Kadriana]

Re: 1202.50

I don't get what you're saying . . . .

You are in cash, and the market has been going up, so you're afraid your missing out on potential profits?

Or you're afraid that the market is going up and now ripe for a crash? But being in cash would be good in that event, wouldn't it?

Or, that you think cash is jeopardized by one of these two alternatives, and that you think gold is safer?

In any case, I don't think anyone would not have wanted "a little more gold" given that it gone up so rapidly.

Ummm, all of the above. Main worry is probably that the value of cash will go down drastically at the POOM will happen very quickly. That the cash will be worthless.

[LargoWinch]

Re: 1202.50

Ummm, all of the above. Main worry is probably that the value of cash will go down drastically at the POOM will happen very quickly. That the cash will be worthless.

Perhaps, but with the right gold/cash ratio, your gold position will more than make up for it.

The "right ratio" of course depends as to where we are in the cycle....

[Kadriana]

Re: 1202.50

Perhaps, but with the right gold/cash ratio, your gold position will more than make up for it.

The "right ratio" of course depends as to where we are in the cycle....

I miss the days of buy and hold even though it was just an illusion and no one really made any money that way. It was a lot better than thinking the value of the dollar will drastically go down and all bills are going to go up.

[raja]

Re: 1202.50

Perhaps, but with the right gold/cash ratio, your gold position will more than make up for it.

I wonder if this is true . . . .

My fear is that gold may not even hold present purchasing power, because much of the profits earned in the mania may be gutted by tax. Something I posted in a previous thread:

(EJ has) suggested an upcoming 5-year period of inflation: 10%, 20%, 40%, 20%, 10%.
In that scenario, $100,000 cash would be worth $31,104 in real value after 5 years of such inflation.

Let's say I bought $100,000 of gold at $1000 per ounce.
If gold goes to $2500 per ounce, I will then have $250,000.
However, the profit of $150,000 will be taxed at the 28% collectibles tax, so I will have $208,000.
But the real value after the 5-year period of inflation will be $64,696.

Then, there's the risk of cashing out at the wrong time. Suppose you cash in most of your gold after a strong period of inflation, but a second, unexpected wave comes culminating in hyperinflation?

That's why I also recommend some RE, even if it looks like a bad deal now. Gold is my insurance against debasement of the dollar, but RE is my insurance against some problem with gold

[jpatter666]

Re: 1202.50

That's why I also recommend some RE, even if it looks like a bad deal now. Gold is my insurance against debasement of the dollar, but RE is my insurance against some problem with gold

That's why we decided to hold onto the house. Diversity and (some) flexibility since it's nearly paid off.

We have lots of gold, but I don't discount TPTB's ability to try and get their claws into it.

[LargoWinch]

Re: 1202.50

I wonder if this is true . . . .

My fear is that gold may not even hold present purchasing power, because much of the profits earned in the mania may be gutted by tax. Something I posted in a previous thread:

(EJ has) suggested an upcoming 5-year period of inflation: 10%, 20%, 40%, 20%, 10%.
In that scenario, $100,000 cash would be worth $31,104 in real value after 5 years of such inflation.

Let's say I bought $100,000 of gold at $1000 per ounce.
If gold goes to $2500 per ounce, I will then have $250,000.
However, the profit of $150,000 will be taxed at the 28% collectibles tax, so I will have $208,000.
But the real value after the 5-year period of inflation will be $64,696.

Then, there's the risk of cashing out at the wrong time. Suppose you cash in most of your gold after a strong period of inflation, but a second, unexpected wave comes culminating in hyperinflation?

That's why I also recommend some RE, even if it looks like a bad deal now. Gold is my insurance against debasement of the dollar, but RE is my insurance against some problem with gold

raja, why would gold go up to "only" $2,500 / oz in your scenario of inflation (10%, 20%, 40%, 20%, 10%)?

What if gold ends up a $5,000 /oz? what about $10,000 /oz? (which I think is certainly possible under a 100%/5-year inflation scenario).

[globaleconomicollaps]

Re: 1202.50

raja, why would gold go up to "only" $2,500 / oz in your scenario of inflation (10%, 20%, 40%, 20%, 10%)?

What if gold ends up a $5,000 /oz? what about $10,000 /oz? (which I think is certainly possible under a 100%/5-year inflation scenario).

If you remember the premise of the article, it went roughly like this: If the effective cost of a house is doubled in a five year period, the sub-prime borrowers will be off the hook, and the country will be out of the woods. The article was written some years ago and it might not apply anymore. The point was to make a hypothetical calculation about how government might respond to the housing bubble. it was not intended to be a prediction ( I think).

Moreover EJ wrote a long article about how inflation can be "walled off" in certain areas of the economy. It is not a light switch that makes everything more expensive. It looks to me like there is a bi-partisan consensus to isolate inflation in the health care field for the next cycle. If you want to gamble on inflation, I would buy the most revolting HMO or drug company you can find.

One more thing:
To paraphrase EJ gold is insurance, why spend all your money on insurance?

P.S.
Oil hit 70 today...I use a lot of oil.

[flintlock]

Re: 1202.50

Moreover EJ wrote a long article about how inflation can be "walled off" in certain areas of the economy. It is not a light switch that makes everything more expensive. It looks to me like there is a bi-partisan consensus to isolate inflation in the health care field for the next cycle. If you want to gamble on inflation, I would buy the most revolting HMO or drug company you can find.

I find this interesting. Why Health care?

[LargoWinch]

Re: 1202.50

If you remember the premise of the article, it went roughly like this: If the effective cost of a house is doubled in a five year period, the sub-prime borrowers will be off the hook, and the country will be out of the woods. The article was written some years ago and it might not apply anymore. The point was to make a hypothetical calculation about how government might respond to the housing bubble. it was not intended to be a prediction ( I think).

Moreover EJ wrote a long article about how inflation can be "walled off" in certain areas of the economy. It is not a light switch that makes everything more expensive. It looks to me like there is a bi-partisan consensus to isolate inflation in the health care field for the next cycle. If you want to gamble on inflation, I would buy the most revolting HMO or drug company you can find.

One more thing:
To paraphrase EJ gold is insurance, why spend all your money on insurance?

P.S.
Oil hit 70 today...I use a lot of oil.

I am with you on Oil.

Over the past month or so, I have argued that Oil is a better by than gold.

Again, my point to raja (and to you) however is that in the event of 100% inflation in 5 years there is no way in my book that gold will go up only 2.5x times.

Lastly, regarding HMO or drug Co., why do you think they would be a good investment in a high inflation environment?

[raja]

Re: 1202.50

raja, why would gold go up to "only" $2,500 / oz in your scenario of inflation (10%, 20%, 40%, 20%, 10%)?

What if gold ends up a $5,000 /oz? what about $10,000 /oz? (which I think is certainly possible under a 100%/5-year inflation scenario).

I try to be conservative when I calculate potential profits, but I may have been too conservative in this instance.
You are certainly right . . . gold could very well go higher than $2500/oz. As a gold owner, I hope so. But how much higher?

If we take an example in which gold rises in step with inflation, let's see what would happen under the 5-year inflation scenario proposed by EJ of 10%, 20%, 40%, 20%, 10%.

In that inflation scenario, the dollar would drop in value from $1 to $0.31 :eek:

$1 of gold purchased at $1000/oz would go up to $2.44 ($2440/oz). But after taking away the 28% "collectibles" tax on $1.44 profit, it would be worth $2.04.
However, that $2.04 value is nominal. After 5 years of inflation at the rates mentioned above, the $1 of gold would be worth $0.63 in real terms :eek:

Of course, there are a lot of assumptions in this thought experiment.
One is that there won't be hyperinflation.
Another is that the government won't raise the gold-profit tax rate.
A third is that gold's price will rise in step with inflation, but in reality there will probably be a mania multiplier.

Taking a stab at accounting for the mania factor, let's say gold goes from $1000/oz to $5000/oz.
Taking away the 28% tax, we come away with $3880.
After 5 years inflation, the original $1000 in gold would be worth $1207 in real value . . . a profit of 21%. Not bad when all cash holders are taking a 69% haircut.
On the other hand, if gold only goes up to $4000/oz, an ounce purchased for $1000 would be worth $982, a loss of 1.8%

The take away conclusion for me is that gold would need to go above $4000/oz to break even.

Caveat: It's late in the evening, and I had a long day on the farm, so my math might be off, or my conceptualization of how all this should be calculated may be faulty . . . but I went over it a few times and it appeared correct.

[Dr.No]

Re: 1202.50

That is all.

I can't be that precise...my target was a somewhat wide range of 1200 +/- about two percent.

[globaleconomicollaps]

Re: 1202.50

I am with you on Oil.

Over the past month or so, I have argued that Oil is a better buy than gold.

Gold demand is created by central banks. If the central banks decide that the barbarous relic is "too barbarous" than you may find yourself holding 400oz of shiny lead. EJ has made the case that this in fact happened to silver. It went from being a monetary metal to being a minor component of jewelry. He seemed to be equivocating about that last time I mentioned it though. Oil on the other hand is a necessary ingredient to our way of life. No oil means no food.

I recently read an article about money in prisons where smoking was banned. Prisoner have taken to trading canned fish:
http://online.wsj.com/article/SB122290720439096481.html
cigs of course go bad in the pack eventually if you don't smoke them, and prisoners like to smoke them, so the amount of cigs in circulation in prison would naturally go down over time.

Cigarettes == Oil
canned fish == Gold

Again, my point to raja (and to you) however is that in the event of 100% inflation in 5 years there is no way in my book that gold will go up only 2.5x times.

Not to troll here or anything , but from 1981-2000 Gold actually went down while the price of housing at least doubled and in my area went up about 4 times. You might be right, but have same humility. Nobody has a crystal ball. We are all here to get a sense of the wind before we throw the dice.

Lastly, regarding HMO or drug Co., why do you think they would be a good investment in a high inflation environment?

I'm not opposed to universal health care, far from it, but Obama-care is designed to give doctors, hospital administrators and HMO executives the moon. There is lip service to cost control, but it is a thinly disguised hand out to business. It is the leitmotif of the fascist administration.

High inflation means people have less money to spend on discretionary items. What do people think is a non-discretionary item?
Rent? Food? heat and light? What about health?
As for me, if I was unemployed and looking at a doubling of my food bill I would toss over my medial insurance unless it was illegal to do so! This is the crux of the Obama-care plan. The millions of uninsured where putting a small, but none-zero downward pressure on health care bills. With everybody required to carry health insurance the sky is the limit for medical bills.

Let's look at the history of inflation for health care compared to some other things:

this is from
http://www.itulip.com/forums/showthr...ghlight=health
it doesn't show my case to clearly, but you can see that health care is going up faster than most other things and has been on a tear for decades.

check this article:
http://www.financialsense.com/Market...2008/0109.html
America is getting older and sicker in a hurry. America needs to "hide" trillions of dollars worth of debt deflation from it's creditors. What better way than to blame rising health costs.

[unlucky]

Re: 1202.50

$1 of gold purchased at $1000/oz would go up to $2.44 ($2440/oz). But after taking away the 28% "collectibles" tax on $1.44 profit, it would be worth $2.04.
However, that $2.04 value is nominal. After 5 years of inflation at the rates mentioned above, the $1 of gold would be worth $0.63 in real terms :eek:

Your math looks correct to me. I'm guessing the same argument applies to any other asset subject to tax on the nominal price increase. In an inflation scenario, the tax hit ends up being pretty painful.

I believe some jurisdictions allow inflation to be taken into account when calculating capital gains tax, so in theory this would remove the painful hit. However in practice the "inflation rate" used to make the calculation is set by the tax authority...