Gold, zero, and stimulus.

[pokerjoe]

As the resident MW psycho-pseudo-econ dude, I feel compelled:

The Fed, fearing a stock market drop, takes 3/4 of a point off its funds rate last week, and the market does seem buoyed. Great. And our beloved leaders also promise us a stimulus package, in which most of us will get a bit of a paycheck, probably in the late spring, certainly before election day. Also, great.

Do they, and we, not know that ZERO is coming? We can't drop rates below zero. Yet, we're headed that way. To zero. And then what? Then we have no ammunition left, with monsters still coming. It's like we're a drug addict, trying to kick, but as soon as things get tough, we (Wall Street, really) start begging for just one more dose, please, just, get me through this tough stretch and then I'll quit, I will, I promise.

I won't even delve into the immorality of a government that cares about Wall Street returns, or feeds into a culture of gamblers who feel entitled to collect when they win but get bailed out when they lose (as with the various foreclosure solutions being talked of). Markets are supposed to go up and down. They're supposed to. Up and down. Up and down. And if they don't, they don't work. But, let's let that go.

My point is that ZERO IS COMING. And that will break us. We can't just keep lowering the fed rate. We can't. It just isn't possible because ZERO IS COMING. Yet we keep driving toward that cliff, pretending it isn't coming. Lowering the fed rate is keeping our economy alive; zero is coming. Hmmm.

In the meantime, gold looks better than ever, doesn't it? Everytime the Fed drops the rate, the dollar devalues, and because gold trades on a world market, it's price in dollars rises. But what's more, as the dollar devalues, the idea of keeping funds out of currency altogether gains momentum. And also, if the biggest knock on gold is that it doesn't collect interest, how much of a knock is that if nothing collects much interest? The rise of the dollar as the world's default reserve currency broke gold. The collapse of the dollar as the world's default reserve will resurrect it. (btw, this wisdom enters my head only after selling 20 ounces when gold crossed $750, and seeing it hit $915 today).

But there is a greater economic stupidity than dropping the Fed rate: the stimulus package. And I'll let all defenders of the action figure this out: why give us all $600, or $800, or whatever it'll end up being? Why not give us $60,000 each? Why not $6 million each? Why not? Really, take the time and articulate to yourselve why $6 million each would be ridiculous, and then you'll understand why $600 is ridiculous, only on a lesser scale, because the difference only is a matter of scale.

The US got into this mess by spending money we don't have (budget deficit, trade deficit), and by discouraging savings (taxing income much more than spending, and dropping the Fed rate so that savers earn less and borrowers pay less). So our solutions, so far, consist of again dropping the Fed rate (to further punish savers and save borrowers), and of worsening the budget deficit by dishing out more money we don't have, via the stimulus package.

Brilliant.

The only good news is that the rest of the world will suffer right along with us because, in their greed to sell us shit we don't need for money we don't have, they took their profits in devaluating dollars and collapsing mortage-based securities. Lucky them.

[KoolPappyPD]

PokerJoe,

Being a "psycho-pseudo-econ dude", I wish you would go to this link and read:

A Talk by G. Edward Griffin
Author of The Creature from Jekyll Island

The Creature from Jekyll Island, The Federal Reserve, talk by Edward Griffin

It's rather long, but very interesting. I would really like to hear your thoughts?

[drunkguy]

In the meantime, gold looks better than ever, doesn't it? Everytime the Fed drops the rate, the dollar devalues, and because gold trades on a world market, it's price in dollars rises.

no shit


but with gold at an all-time high you kinda missed the boat a little on that

the point is not to recap the past but to predict the future

if you are plowing your money into gold you are making a big mistake I think. That is fear talking. If you want to make money you need to go against the grain and taking a defensive posture in gold is definitely not a contrarian mindset

[KoolPappyPD]

Originally Posted by drunkguy

no shit

but with gold at an all-time high you kinda missed the boat a little on that

if you are plowing your money into gold you are making a big mistake I think.

As long as this country has the Federal Reserve, Gold will cotinue to gain value to the Dollar...

read the link I posted, It's fascinating...

[robin]

the stimulus package is nothing more than welfare to add to our nations welfare state.

disgusting.the only way to save the countries economic well being is to quit warmongering / nation building and to cut spending drastically.


make poor people actually live like they are poor.

[stevo]

Thats why I've been collecting interest on my cash for awhile now. I missed out on the top of this market but dont care. Would rather sleep well at night

[grapefruit]

You guys are all smart guys, and PokerJoe is right on the money here

Drunkguy, normally I would agree with you that you should avoiding getting in when something is at an all-time high, but in this case I disagree

Stagflation and economic collapse is imminent, that is beyond doubt to everyone, it's just a matter of who's in denial OR who is unable to put 2 + 2 together... currency will continue to decline in value until long after the collapse, and most likely will never return in its current form - i.e. cash, stocks, bonds


Aaron Russo and the 3rd part of Zeitgeist go into this in more depth


"The only good news is that the rest of the world will suffer right along with us ".... That doesn't make be fell any better BTW

[neilm]

If you had the ability to travel forward in time and opted to take the plunge...say dialing up 2058 (fifty years from now) as your first stop on this fantastic voyage....and you could cash in all your chips today before the fifty year zap....how would you elect to take them?

a) $ US?
b) Euros?
c) Yuans?
d) Some other paper currency of your choosing?
e) Oz of Au?
f) Barrels of Oil?

I have an economics degree and only e and f appeal to me....

What would you choose?

And btw, if we are fortunate enough we all will have the ability to travel into the future...albeit not 50 years a shot but rather at the rate of one day at a time that we've grown accostomed to....if you, like me, would rather have e or f in fifty years time...why do most investors have portfolios loaded with a,b,c, and little cat d today?

[grapefruit]

I would take (e) because Oil might be a lot more abundant than is acknowledged right now, with the new GIANT discoveries in Alaska being downplayed and also new technology may even replace the need for oil

However, new technologies WILL definitely recquire large amounts of Gold, which is much rarer and will have far more uses...

One thing to remember with gold though, is that if you do not actually have physical access to it, investments in derivatives and exchanges are dangerous, I forget why but I remember when I was looking into buying gold and there were a lot of warnings about any method of investing other than holding it yourself somewhere secure

[SwampHog]

Great question, I wouldn't go oil just in case green gets momentum. Actually, I wouldn't go any natural resouce just in case science figures out how to replicate any molecule, rendering them all worthless.

So yea, I think an interest in human endeavors is the way to go, whether currencies or shares of Microsoft, best as you can spread it around. If I were truly limited to one investment, I think I'd try to back end into one of the time-honored vices, prostitution or gambling, maybe even Real Estate on the Strip, but every decision here is fraught with danger.

[niltes]

one thing IS guaranteed by the strong cut in interest rates by the fed.
the dollar IS not being supported at all by this country. what this means,
barring a global worldwide calamity which sends everyone scurrying to buy us dollars because of its inferred political safety, is that the us dollar must go down. simple as that. how much, who knows, but it must go down.
my major investments at the present time are in the japanese yen and gold.
i do not see that changing for awhile. other attractive options are:

resource (oil + metals) mutual funds from politically safe countries.
canada and australia come first to mind as their economies are influenced more by this than most other nations. one can make money either by their
currencies going up or by the resources appreciating (hopefully both).
one only loses if both the us dollar gets stronger AND the price of metals/oil
goes down.

any currency but the us dollar, although i would prefer economically and politically sound countries. you can probably even find funds that give you a
weighted average of ALL the other currencies.

realize that if one invests in gold or a foreign currency, one must make more
than the standard US interest rate just to break even compared to that investment option. with buying gold direct one has transaction or even storage costs to work into the equation too. this is why my preferred investment is the currency trusts trading on the NYSE (FXY for the yen).
in addition to having liquid markets, one also has the ability to sell future options against one's position thus turning one's investment into an income generating machine assuming that the underlying currency is not weak.
in the yen's case it is quite easy to earn 15-20% annualized returns with little risk investing in the yen as long as there is a some or even more appreciation in the japanese currency. hope this help.

[stevo]

I just heard that 2 mil homes were forclosed on last year. Is that a mistake???

What the hell were these people doing

Fortunate I bought my homes 13 years ago and got good deals. Both could be paid off right now.

[degenerategambler]

stevo, 60 minutes had a very good expose on the sub prime mess on last night. 2 mill + and climbing everyday. If you can find the 60 minutes piece its worth watching.

[degenerategambler]

Originally Posted by drunkguy

no shit


but with gold at an all-time high you kinda missed the boat a little on that

the point is not to recap the past but to predict the future

if you are plowing your money into gold you are making a big mistake I think. That is fear talking. If you want to make money you need to go against the grain and taking a defensive posture in gold is definitely not a contrarian mindset

The avg. person is still fully invested in stocks. No one has a defensive position in gold today. The government is building a few more printing presses to give away free money, can't see gold going anywhere but up. We may see a pull back or short term correction but I would be willing to bet 18 mos from now gold is significantly higher than it is today. The fact that the average person knows nothing about gold or has no holdings is extemely bullish. Its still a contrarian investment today imo.

[GoodKarmaGuy]

Drunkguy,

I believe the high for gold, inflation adjusted is about $2,100

[JohnGalt]

Fading all of you "the sky is falling" people and putting most of my liquid assets into the stock market this week, mutual funds primarily, spread out over several different types.

[niltes]

amen

[degenerategambler]

good luck with that John. Care to post specifically what you put your cash in and at what price?

[buddyboy]

yada yadi...

boys I havn't bought shit this year... getting ready to pull the trigger on some RAI buying it over the next 3 months 63 all the way up to 68.

fyi all my buys are long term... RAI pays 5.34% dividend

I'll take out my original money as soon as I can and let the rest ride.

gold, oil, copper, coal, corn... it don't matter it's like talking about a game played 3 weeks ago... think about the game coming up not the one that is over.