The Time Machine: What’s the best way to protect ourselves against the next market crash?
by Patricia | February 14, 2015 9:47 pm
If you had a time machine, and could go back to 2007, which stocks and other investments would you hold, buy, or sell? How about 1999, or even 1929? Do the best investments just prior to all market crashes have anything much in common?
How likely would your picks be to maintain, increase, or recover their value during and after the next crash?
Are you not worried, because you know you are invested in great companies, so can securely ride out a crash until the market resurges – which it always does? Do you see a drop like that as a good thing, because you can buy great stocks at bargain prices?
Or are you concerned enough to want to keep at least 10% of your investments in ”safe havens” – if so, what do you think the best ones are?
Do you think, like Travis does, that the next crash will be very different from the last one?
Do you think it is more likely to be caused by a cyclical panic sell-off, by bad government policies, by corrupt banking practices, by disruptions or shifts in the world monetary system, or some combination of these?
All thoughts, opinions, personal stories, and quotes from useful sources are welcome. Let’s share information, and learn from each other. Let’s figure out the best way to prepare, so we can have peace of mind and not be so fixated on financial and economic news that we don’t fully enjoy life.
Source URL: https://www.stockgumshoe.com/2015/02/microblog-the-time-machine-whats-the-best-way-to-protect-ourselves-against-the-next-market-crash/
“No stock market has out-performed the American over the long run. One estimate of long-term real stock market returns showed an average return for the US market of 4.73% per year between the 1920’s and the 1990’s.” – p. 126
“Nothing illustrates more clearly how hard human beings find it to learn from history than the repetitive history of stock market bubbles.” – p. 123
From “The Ascent of Money” by Niall Ferguson, 2008 paperback edition.
So – two days ago I pulled half my silver coins out of the storage vault and sold them to double my trading account. Before this year, that’s about the last thing I thought I’d ever do. I put in my limit orders for Tues. a.m. – feeling pretty good about my strategy – then started to feel a little uncomfortable about it. Wondered if I’m missing something, now that I’m more deeply investing in stocks. I may think I’ll be positioned to do well no matter whether the market keeps heading up for years, or crashes this month. But there are seasoned investors who visit or subscribe to Gumshoe who have been through 2008, some have been through previous crashes too. They would be bound to know a lot about wealth preservation. Even if I don’t see direct posts from any of them here, I’m going to research the archives for articles and comments by Travis that are relevant to this topic. Just phrasing the topic questions brought me more clarity on the subject, and I think just reading the questions is likely to help somebody else, somewhere, who otherwise wouldn’t have thought about this at all.
Just now becoming a new irregular, I have not read Travis’ comments concerning “…that the next crash will be very different from the last one.” Has he written how it will be different … longer, deeper, more swift … ?
Tim Wood, of cyclesman.com, would disagree with the basic statement. His research says that all have the same basic ‘DNA markers’ as a prelude to the crash.
Rick
Actually Travis used the word “crisis” not “crash”, here’s his comment which was a response to comment #10 under the the article linked below:
I think the TED Spread is perhaps an indicator of credit risk — though we now know that LIBOR was essentially a made up number manipulated by banks for many years. If you look at a longer term relationship between LIBOR and the S&P 500 it seems to me that the spread was perhaps an early indicator of the credit crisis that took down markets starting in 2008… but otherwise the two aren’t particularly connected… the last time the TED spread went over 50, in late 2011, it presaged a three year bull market without any meaningful corrections. I suspect that following the TED Spread would be a good way of looking for a future credit crisis, but I doubt that the next crisis will be caused by credit risk and counterparty risk… my guess would be that the next crisis will be very different from the last one.”
http://www.stockgumshoe.com/reviews/dailywealth-trader/dailywealth-trader-recommended-going-long-a-special-gold-fund/
Maybe Travis did use the word “crisis” but you used the word “crash” in the 4th paragraph of your article”:
“Do you think, like Travis does, that the next crash will be very different from the last one?”
That’s what rick pionkowski was quoting.
Just for the record.
Yes, sorry Rusty I was really correcting myself not you! And should have thought to say that.
I mean “correcting myself not Rick”. As an endless fountain of errors lately, I think I’ll get some sleep and come back tomorrow, I had a post on the real history of gold confiscation planned for today but it can wait a day. That’s a subject that the extremists on both sides have distorted a lot so I want to lay out what really happened with actual reliable references that anyone can check.
I’ve adjusted my strategy slightly, and am feeling very comfortable with it once again. Here it is, for anyone either interested or willing to play devil’s advocate:
1) When the markets get nervous, precious metal funds always go up until people calm down again. When markets crash, those funds (and good mining stocks) keep going up for quite a while, sometimes years. If this is news to you, look for yourself – you might start with the $SLV chart, from October 2008 to present. Even better, look at what happened to gold and silver spot prices after the Internet stock bubble burst twelve years prior.
2) 10% or more of one’s portfolio should already be in such stocks, in my unhumble opinion. That’s because there are always markets open around the world, and they can be very unstable and “shockable.” You don’t want to wake up one morning to find out that you’ve missed a good entry point because some triggering event on the other side of the world has caused a panic, even possibly an unprecedented run on gold and silver.
3) That 10% or more does not have to be just left there in the few precious metal funds you decide qualify for your list. You can keep shifting money between them, and do very well with price moves as small as 5 to 10 cents, once or twice a week. In that way you can keep growing this particular trading fund without worrying. When one goes down, great! Time to buy a lot. When another goes up, great! Time to sell that one, and buy a lot of one which is down. The most important factor is the criteria you use to decide which funds are of high enough quality to make your list. That’s a work in progress for me and I hope to keep improving upon it.
4) Anything outside of precious metals funds increases the risk. Personally I also trade in good uranium stocks, but others certainly would not agree with me about their future in a time of financial crisis.
5) I expect there are day traders using a strategy like this, it certainly seems to me like a safer way to day trade. If this continues to work out as well for me as it has, I might even end up a day trader eventually – again, something I never thought I could possibly be interested in! A relative fell flat on his face when he tried day trading. But failures don’t mean there aren’t safer, smarter ways to do it.
6) This strategy (could call it “swing trading with a golden safety net”) has nothing to do with one’s long-term value investing picks. Obviously it’s always good to be invested in large companies which have done well through good times and bad, and can be expected to in the future.
I see nothing I would disagree with. I have HL as a core holding and have done well selling covered calls against it. Also small lots of Sprott phys gold and silver funds,Sand for royalty and misc. others.
When the market crashes I think it will happen at lightening speed given how the world financial structure never sleeps. The world is operating on a vapor money supply IE the ability to tax by governments and the ability of debtors to repay based on assets and future earnings. Future earnings are ephemeral and so is the ability to collect taxes
when faith is destroyed in the soundness of money and may remain so for a long period.
Goods are called that because they are a good thing to have for survival.
One of your best assets should be friends, family and neighbors you know and trust.
I like the idea of a list of high quality gold / silver stocks to trade around. Like many others, I’m holding quite a few losers in precious metals equities, keeping them for the possible moonshot. In addition to your best assets list, Arch1, I would add a reliable rifle and ammunition.
jack I am well equipped tho I have no intent of doing a Custers last stand ,,,,,,firing off a 12 gauge shotgun at night [ala Joe Biden] does earn the notice and respect of the neighbors.
Farmers and ranchers all have guns for “predator control” and practice the three S system,,,shoot shovel and shutup,,,,,,and we all respect each other. Few coyotes and feral dogs here-abouts.
Patricia, would you care to give more details on your strategy in #3? I got into mining stocks around 2007 and am sitting on a substantial loss. I’m mostly still holding because the underlying concerns that got me into them in the first place are unchanged, but it would be nice to do something more intelligent with the funds in the meantime. Fortunately I am a bit ahead on physical gold/silver, no plan to sell those.
bezoar, I have no details to offer, it’s a work in progress, and you are better off reading everything Travis has said on mining stocks. (You can just search this site with “gold” to get some good results). I don’t plan to become an expert on mining stocks, not interested enough to spend all the time, and figure why should I when I have so much reason to trust the folks behind SGDM? And Travis’s occasional analysis of majors?
I think Rick Rule said that about 80% of the junior mining companies are junk (I think Dr. KSS mentioned once that about 85% of biotech stocks are junk), aren’t we lucky to have access to expert info on which stocks are great or promising, without having to pay big bucks for it or investing thousands of hours ourselves? Personally I’m having a great week with my strategy here without having had to spend more than an hour on it this week, guess what I actually find stocks kind of boring and would rather focus on my own chosen work, which though sporadic, really gets those creative juices flowing… got to go now (no bladder jokes please) and not checking email or this site until Saturday.
Hi Patricia, thanks for your reply. More specifically, I wanted to stay in the precious metals space but don’t have the time or knowledge to stay on top of the mining stocks. Was curious about which precious metal funds you have been using. Your strategy makes a lot of sense and would be a good way for me to diversify out of these individual miners. If you don’t feel comfortable elaborating more on your strategy, no worries.
I agree with you completely about the majority of mining and biotech stocks being junk… I have learned this the hard way, and following Dr. KSS has certainly been an eye-opener. At the time I was following someone knowledgeable in regards to mining stocks and was doing fairly well until the bottom fell out in 2008. Hopefully it will be a while before the same happens in biotech.
Amen to that bezoar! SGDM is my favorite, I tend to favor Eric Sprott’s endeavors because he saw and sees the “financial house of cards” rottenness which hurt the world economy in 2008 and is going to hurt us further. I’ve been listening to him since about 2007. His biggest mistake was in trying to make actual predictions about where the prices of gold and silver would end up in how many years. He’s stopped trying, it’s unknowable. I can easily forgive anyone for those mistakes though because NOBODY dreamed that central banks would do the insane things they’ve now done. Everyone was assuming that interest rates would be allowed to rise as they should have. If they had, we wouldn’t have the distorted markets we now have, in fact precious metals might already have been through another bubble. Add to that the fact that the paper gold and silver funds are overleveraged, and that precious metal prices really are manipulated for various reasons, and it all makes price predictions impossible.
Sorry, I meandered. Please read Travis’s analysis of SGDM in
http://www.stockgumshoe.com/reviews/dailywealth-trader/dailywealth-trader-recommended-going-long-a-special-gold-fund/
He also has a high opinion of GDX. I also have a lot of confidence in fully allocated funds like OUNZ, PSLV, PHYS, and so on. You just want to make sure it’s not one of the mainstream “paper” funds that actually only has about 10% of the precious metal they’re selling “ownership” in. In case of a bad crisis, you might end up getting little or nothing out of your investment.
SGDM: For heavens sake….between September 2014 and now you would have lost 20+%. I thought you were trying to guard against a mere 10% loss ! Looks like youre creating your own crash.
Thanks for the recommendations. I think I will sell the individual stocks and convert to SDGM or GDX. Are you trading back and forth between mining indexes and gold backed funds for your strategy? I will have to look at some charts to figure out one of my own. I have previously owned CEF which is backed by holdings and not a “paper” fund, probably similar to the other ones you mentioned. Unfortunately tax issues can get complicated in these allocated funds, which was one advantage of miners.
Yes I fully agree with you to be cautious any time someone makes a specific prediction of what will happen, and especially when. It’s important to keep a clear head, don’t get fully invested financially or emotionally, and most importantly, DIVERSIFY.
Alan, re: SGDM: you are anti-gold, pro-cash, you’ve made that clear. So I wouldn’t expect you to think that this is an excellent buying opportunity for this fund. But you’ve also said you’re a buy-when-there’s-blood-on-the-streets guy. Mining is cyclical, and is in a bottom (unloved) right now. This sector has its own blood-on-streets phases. If it goes down more, I’ll be even happier, because it gives those of us who like precious metals as a safe haven even more opportunity before it moves back into an uptrend – which it always, always, does eventually. Read Travis’s analysis of SGDM if you like.
I couldn’t care less about the $ pricing of my PM favorites, except as lower pricing allows me to buy more. I measure my savings in # of shares I can accumulate and ignore the drunken psycho (market’s) perception of value in this sector.
I have a problem with that word DIVERSIFY. If I back all the horses in a race, will I profit or just lose more slowly? So, if Im gonna lose (which of course I would) would I be better to invest in T Bills, which return less than inflation, or stick my money in a ‘high’ (ha ha) bank deposit? In short, if all I want to do is preserve capital, wheres the least loser? Given that all the well paid bankers, hedge funds, economists, casinos, bookies etc have a hand in my wallet…..is there such a thing as a winning strategy other than DD and luck.
Absolutely Alan dividends and DRIPS in Aristocrats IMHO Best2ALL!-Benjamin
From zacks, relevant to this thread if it works:
Consequences of the Stock Market Failing
http://finance.zacks.com/consequences-stock-market-failing-5834.html
Best2ALL!-Benjamin
That seems to be pretty much the standard view based on the last half of the 20th century.That said I feel it is a little too simplistic as we are now experiencing things that have never been seen before in the history of this nation and perhaps the world. I am not prepared to go to length here but the bank bailout [crony capitalism in my view} and the subsequent actions of a greatly politicized Fed. in bringing interest to essentially zero which has forced huge amounts of money into the stock market artificially pumping it up is readily seen. Do not forget that the bond market is at least twice as big as the stock market and actions in reneging on bonds during the bailout is still not properly factored in to the price structure. If enough people become distrustful of the govt. keeping money stable great fear can set in and depress all markets for years. If money is unavailable to fund industry there can be a rapid and profound contraction that puts people out of work and makes it impossible to grow our way out of the mess that has been created.
The present unemployment figures are greatly a fiction as so many have given up on finding employment,,,,govt.programs have concealed much of this as we see no soup lines but a huge number of people are relying on public assistance. The Fed has trapped themselves into being unable to raise interest rates so things continue to snowball. At present the Euro is so sick the $ looks good in comparison,,,,that is subject to change,
All this is IMHO based on considerable research. No human can tell the future but I fear some pain is inevitable.
I think I agree with both of you: the Zacks article is a good basic description of the downward economic spiral related to market crashes – but “unprecedented” is a word we hear all the time now in regards to global gov’t debt, central bank policies, and the trillions in derivatives held by investment banks and hedge funds. One of people who tried to sound the alarm before the 2007/2008 financial crisis is Janet Tavakoli, and what I like the most about her is that she’s an expert on derivatives – one of the most complex subjects on Earth – yet she’s focused all along on the true simplicity of the problem: malfeasance. Just a basic ethics failure – she really tells it like it is. Here’s a good column she wrote last summer, “Predators Prosper, Prey Perish”:
http://www.tavakolistructuredfinance.com/2014/06/bailout-economics/
Patricia thank you for the link,,I had not previously known of Janet Tavakoli , but I tot.ally agree with her, It is painfully obvious to me that the fraudulent housing bubble and resultant failure could not have happened without venial complicity of the Govt, including both political parties. In my opinion a certain Barney Frank acted as the best Senator money can buy and his legacy is ongoing and being built upon by others. I think of the scene in DR. Frankenstein’s Monster when the peasants arm themselves with pitchforks and torches and go hunting.
Seems to me to be all a question of timing (what isnt?). I started trading straight after the 2007/8 crash and invested with Martin Weiss through something called The millionaire contrarian portfolio (spit!!). I was totally naive in those days. He advocated leveraged shorting of the $ and buying gold at $1800 per oz. As you can imagine, that hasnt worked out too well since then and it simply has to be the worst rated investment strategy on the net. But of course, had he been right, he’d have been beatified (a rare privileged for a Jewish guy 🙂 .
I have severe worries about owning precious metals. I mean, you could hardly nip down the shops with your gold bar and shave off a few grains to pay for the carrots……I specks youd be followed home and tortured to reveal where youd hidden the rest.
So how bad is this crash gonna be? I mean, the total breakdown of society and its financial system ? If so, youd do well to buy lots of guns, ammo and tinned food to last until 3/4 of the population has died of starvation, while you’re barackaded in. Also own a house near water so you can fish. No point in farming….the produce would vanish as soon as the sun goes down.
I dont think thats what you had in mind. I think your talking about investing to maintain financial stability in all weathers. Lots of choices here. Practically anything essential. But theres still a problem unless you have a surplus of money. If you invest for stability, you invest conservatively….. and that makes little profit in the mean time. So youll earn little money while youre waiting. Thats fine if you have much more than you need so you can still live comfortably without much income. But many people survive on the income from their investments and if those dont make a healthy return before the crash, they will live uncomfortably while they wait.
So, pick your ‘crash’, tell us about your present state of affluence, then we can model a solution. Till then, its an un-anwerable question.
I was hoping you’d show up here Alan, a contrarian viewpoint to keep us thinking and questioning our approach – by “our” I mean we who think PMs are a safe long-term bet. I think of them more as a savings account that can never go to zero, and as insurance against the clueless folks who always seem to end up gaining political power everywhere on this amazing, beautiful, but chaotic planet of ours. You’re right, my main question can’t be answered with any certainty – but the focus here is intended to be how to prepare for something less dire than a total collapse (there are plenty of sites for end-of-the-world mindsets). 10% or more of assets in gold or silver, that’s the bottom line.
Ah! Then the answer is simple. 2008, Have enough cash to last you 2 yrs ….forget whatever stock you own….drink G&T’s, and youll be back into a hazy profit by 2010. You see, if you have more than enough cash in the bank, neither fear nor greed is a problem.
I guess you trust cash and banks more than I do Alan! I’m a bit of a history buff. Governments have always ended up spending so much on wars, poorly designed social programs, and corrupt siphoning of public money, that the currencies they issue end up failing. The world doesn’t end each time it happens, but there sure is a lot of pain until the defaults play out.
And the US gov confiscated all the gold less than 100yrs ago. It had no legal cash value…..while cash (however depreciated) bought carrots. Now we get back to investing in essentials. Thats NEVER been illegal. In any event, I thought we’d agreed a 10% crash….not a total breakdown of the whole social/banking system.
Interesting Market Watch article-
UPDATE: Why the U.S. stock market is one of the most dangerous in the world
By Brett Arends, MarketWatch
Some global markets are cheap by historic standards, but not here
Which are the most dangerous markets to investors around the world?
Which countries’ stock markets are most likely to blow up your retirement plan, your kids’ college funds, or your hopes of saving up enough to buy that yacht?
If you think it’s markets such as Russia or Greece, or even China, you may want to think again. According to some fascinating research produced by Wellershoff & Partners, an investment firm in Zurich, Switzerland, the real dangers are in very different places.
Based on data comparing the current valuations of each stock market to its historic averages, Wellershoff comes up with a list of five markets most at risk of producing miserable returns over the next five years — and fourth on that list is the stock market of the United States.
Ireland ranks at the bottom, according to Wellershoff’s calculations. Over the next five years the Irish market is most likely actually to lose investors about 16% of their money, after accounting for inflation. Other markets offering the lowest returns include South Africa, plus the very minor emerging markets of the Philippines and Thailand.
Wellershoff’s estimate for the U.S. is for a total stockholder return between now and 2020, measured in constant dollars, of just 8%. Not 8% a year — 8% overall. The historic average would be a gain of about a third, in constant dollars, over five years.
Before going any further, I need to point out that the future includes so much that’s random that all forecasts need to be taken with pinches of salt. “Never make predictions, especially about the future,” as Casey Stengel, legendary manager of the New York Yankees, once said, and he had a point.
Yet there is a broad gray area between thinking we can predict the future with a lot of accuracy and thinking we are living in a world of total chaos and we can’t predict anything at all. Over the next five years, I’m going to wager that the Februarys will be colder on average than Julys, the sun will rise in the east, and Kim Kardashian won’t be elected Pope. Call me a nut if you will.
Wellershoff’s analysis is not based on sticking a wet finger in the air. Instead it’s based on comparing share prices with average per-share earnings over the course of an extended economic cycle. That’s the methodology for “cyclically-adjusted price-to-earnings” ratios made famous in the U.S. by Yale University Professor and Nobel laureate Robert Shiller. The rationale for this model is to smooth out booms and busts and look at the underlying earnings power of the stocks. Wellershoff then compared today’s cyclical PE for each market with the average cyclical PE.
So, for example, since 1979 Australia’s average cyclical PE is about 18, according to Wellershoff. Today it’s 15. So although the future involves a lot of guesswork, it is reasonable to say that the Australian stock market appears to be cheaper than its average levels over the past 35 years. That may not sound like much, but it’s actually a huge statement.
There is an enormous body of research arguing that a key driver of financial returns — and probably the key driver — is the valuation of a stock or a market when you buy it. Buy cheap, sell dear.
And one of the key factors in the Wellershoff analysis is that it is based on currently observable facts, not on what somebody says Vladimir Putin or Angela Merkel is going to do next month.
Right now, Wellershoff says, the U.S. stock market sells for about 24 times its cyclically-adjusted per-share earnings, compared to an historic average of about 16 times. That is very expensive by historic standards. Shiller himself says the market sells for more than 27 times cyclical PE.
No, this doesn’t mean we should all rush to sell all our U.S. stock funds today and hide under the bed. But there are real, meaningful conclusions that every ordinary investor should draw.
The U.S. market is risky. Investing all or most of your risk capital in U.S. stocks alone, for example through a Standard & Poor’s 500 (SPX) stock market index fund, is foolish. Those who recommend it are actually recommending that you gamble. Maybe it will work out, maybe it won’t. Damagingly, they are not selling this gamble as a gamble, but as a “safe” and lower-risk strategy.
Financial intermediaries who are recommending this are doing so, in part, because the practice is so widespread that you won’t be able to sue them if it goes wrong.
Most ordinary people want to improve their chances of earning a good return while minimizing their risks of getting hosed.
Wellershoff finds that many or even most overseas markets are either reasonable or a good value by historic standards. Apparent bargains can be found across a broad mix of developed and developing countries, and across multiple continents, from Mexico to France, and from Poland to Hong Kong.
You can include those in your portfolio by investing in “international” (i.e. developed) and “emerging markets” funds alongside your U.S. small-cap and large-cap funds.
Or you can just gamble on one market that looks really expensive, and hope for the best.
-Brett Arends; 415-439-6400; Best2ALL-Benjamin
Thanks Benjamin – I’d read that MarketWatch article yesterday but your post puts it into much better perspective. The “historic standards” you refer to are exactly what a euphoric market tends to ignore, as I understand it.
The best article by Travis that relates to this thread (that I’ve found so far anyway) is:
http://www.stockgumshoe.com/reviews/disruptors-dominators/finishing-up-the-annual-review-plus-the-greatest-gold-opportunity-in-the-last-decade/
Here are a couple of sections:
“I still think it’s important to have a small allocation to gold and silver as part of a long-term savings plan to protect against currency depreciation (all modern currencies depreciate, they lose value over time… though not always against each other), and I like to speculate on the occasional gold-related or mining equity, but it’s probably important, every time you look at a mining stock, to remind yourself about just how lousy a business mining is…”
“The idea that buying during washout periods of selling and malaise in the commodities space will work out well is a popular one — there were fortunes made by folks like Eric Sprott and Rick Rule because they bought mining stocks during times of maximum pessimism and held on for the next bull market…”
Anyone interested in our discussion here should read EVERY WORD of Travis’s above article. The “adjustment in my strategy” I’d mentioned that allowed me to finally rest easy about my next trades was simple: no individual junior mining stocks are allowed on my “safe list.” Majors with great financials are OK, and an ETF like SGDM is fine, but no matter how tempting it is to take advantage of price swings in the juniors, that’s not smart for a small investor. I think of this trading fund as savings I am growing (regardless of how it’s currently being priced in fiat currency) – so the intent is to keep most of it in fully allocated precious metals funds like PHYS and OUNZ, and trade on those drops/jumps in price along with what are determined to be superior mining companies who are managing to stay in decent financial shape during these tough times for their sector.
Stocks lost 60% in 2008…and have now recovered 200%……gold (from $1900) has lost 40% and keeps falling. Cash has lost 0% relative to gold and stox. Only inflation hurts cash and everything liquid suffers from that. Gold , apart from teeth (ugly) paperweights (a brick does as good), only has one use and thats for wedding rings, which, unless youre the poorer partner or a divorce lawyer, are the worst investment on this planet. Invest in essentials: a roof with some land and a lake (or sea), loads of cash and some ammo as an insurance policy….. And sod the kids inheritance.
But Alan, you are pricing everything in U.S. $, over a term of about 8 years… if you think benevolent geniuses are running our government and the Fed, and any day now will start instituting sane policies so that the structural economic changes we need have a chance to come about – then I can understand your long-term faith in the dollar. You get the last word if you want it because now I’m late, got to go!
Its not the $, its the fiat system. We simply cannot go back to swapping beans for carrots. Never mind…if you gotta go, you gotta go. Far be it from me to delay a lady with a full bladder.
Alan, I wasn’t trying to ditch our debate, before your comment I’d already posted that I had a busy week and would be back Saturday. Anyway, I agree with you on two counts: gold is a terrible investment (I don’t consider it an investment, I consider it a safe form of savings or insurance in case of financial crisis and especially a currency crisis). And we are in a fiat system, and have to operate within it, and may very well never return to any form of currency backed by tangibles of any kind. But until, if ever, world leaders get their fiscal act together, gold and silver are a historically proven good hedge against temporary bad times. In the U.S. we have legislative protection against confiscation, and I hope enough members of Congress would back up the public on that if ever it came down to the wire. I plan to post more on the actual history of precious metals confiscation on Saturday. Thanks again for your arguments, I like debate, and sometimes it helps us see where we’re wrong or have missed something. The folks who already agree with us don’t help us in that way.
The only completely sure way to not lose is to have nothing to lose. The problem with cash is that it can totally lose its value. Iraq ,Zimbabwe, Brazil.Chile,Argentina. Germany as some examples in just the last 100 years. Wealth preservation is usually best in having what people need and what people want. Often the want is more profitable than the need for the reason that your goods may be ” morally” stolen from you for the justification/ excuse that the need must be met. It is entirely possible to have a market crash and still have a good economy where wealth is retained,,,,weeds out the weak,inefficient etc. and while it is a crisis for anyone in the stock market bond holders do well,,,,tho not necessarily so.
That is why thinking ability is of more value than money,,,,you can’t have it taken from you and thus can be used to get you your needs. Money is only a convenience so you do not have to trade 6 apples for a cabbage,,both of which soon rot. Gold and silver have been used because people like shiny things that don’t rust or rot.
Exactly Frank! I think of gold and silver as compact commodities. If there were some form of pork bellies that never spoiled, and could be magically miniaturized so they didn’t take up much room until needed, that would be just as good for me as a store of value. (Though I don’t suppose miniature pork bellies would make very attractive jewelry, so I guess PMs have an advantage there.)
I wonder if I’m the only one in my neighborhood who is happy whenever I see my primary stock watch list completely in the red. I sure doubt it. What a great week to buy the ones on my short list.
I have to get back to work, very busy this week. I’m so pleased with the posts from others that turned up here, from several of my favorite (and smartest) subscribers: thank you! You guys are serious investors, I’m small-time and a rookie, so your comments are super helpful. I’ll check back in Saturday.
Made the mistake of checking my email before Saturday and seeing Alan’s last post so here I am for a couple of minutes.. I also wanted to clarify something in post in #10: I meant “several of my favorite (and smartest) GUMSHOE subscribers.” I certainly don’t consider posters here my “subscribers”, in fact didn’t expect this discussion to last all that long, but I’ve already gotten plenty out of it so would fade away happy even if it never got another response.
Patricia this sure seems to be an attempt of the use of reverse psychology as I understand it [;-]-) Shalom, Benjamin
Ha – I can see how you’d think so Ben, but I meant it. I’ve now read your post #10 three times along with two of Frank’s. I assure you you’ve helped me immensely (as well as some lurkers probably). I’ve been fed, I’m not like the plant in “Little Shop of Horrors”, so won’t be expecting or demanding attention! From you and Frank I’ve gotten reassurance and additional perspective/info on this approach: from Alan I’ve gotten challenges, and both have been very useful. If any of you post here in the future it should be only because you feel like it! **Shalom**
I truly appreciate your jena se qua Patricia. One of the avenues I walk is utilizing the TVIX as insurance at ALL times. Best2ALL!-Benjamin
Correction Ben: I’ve read your post #7 several times (not #10). Really excellent.
Sogiam: Now this is where Im a dim newbie. WTF is TVIX all about. I read yahoo profile and still didnt understand it. Thanks in advance for your explanation.
Additional VIX video: https://www.youtube.com/watch?v=oETupU86PDY
Credit Suisse AG (TVIX) Stock Chart Technical Analysis for 02-06-15
https://www.youtube.com/watch?v=kjvyYE5klbQ
Daily 2X VIX ST ETN Velocityshares (TVIX) Stock Chart Technical Analysis for 02-18-15
https://www.youtube.com/watch?v=BjJxi98PIgU Best-Benjamin
Alan: A video on the VIX follows: https://www.youtube.com/watch?v=uTpdGyn7xm0
BTW I wasnt having a pop at you at all, I was just trying (and failing) to be amusing with the play on your words….’Ive got to go’….full bladder.
Actually, I totally applaud what you are doing. I just wish I had a sufficient surplus dosh to be able to park some assets on the other side of the ‘need for income’ street. I’m sure that, one way or other, you will have the last laugh.
Mwah!
Alan – Ok – always hard to be sure online. Looks like you’re right by the way about keeping a lot of cash as a safe haven – I’m finding that people like Jim Rickards and Rick Rule actually have recommend that (both think that some major financial collapse and restructuring is coming within a few years). Plus you called me on how bad a crash are we talking about. I’d said something less dire than a total collapse, but then I contradicted myself by going into dire or long-term “what-ifs”. You got me on that one. Even “The Death of Money” guy Rickards wrote a column recently entitled “The Dollar Will Die with a Whimper, Not a Bang.” He expects the next financial crisis to be so extreme and widespread that the IMF will have to step in and provide the needed liquidity (with SDRs – Special Drawing Rights – a kind of global currency the IMF can create that’s been used in past crises) – he says the IMF is the only entity now with a strong enough balance sheet to come to the rescue, all governments/central banks are stretched to their limit. In that scenario, local currencies continue to exist, but are all pegged to the SDR. He’s never said that the dollar would evaporate – just cease to be the world’s reserve currency.
One thing that’s been mentioned though is that it’s a good idea to keep a good amount of cash at home securely, like in a floor safe only you know about, in case of an attack on the power grid or an EMP event. Access to the banking system could be shut down for a couple of weeks or more in widespread areas, and the aftermath would be pretty tough too. I’m not being an alarmist, just realistic, since evidence of planned and thwarted attacks on power grids (both physical and cyber) has turned up here and there. Not just Jihadist terrorists, but hostile states like Iran and Russia, seem to be actively interested in that sort of warfare, and it would be fairly simple for hostile states to pull those off while making it appear that small terrorists groups were the perpetrators.
Which by the way reminds me, that’s one more reason I’m so enthusiastic about Elon Musk’s companies right now. His latest talk about Tesla batteries to power SolarCity homes – wow. Right now the emphasis is on an efficient battery to store excess power from solar panels, which currently is being sold back to power companies. His batteries are going to allow the homeowners to store and use that energy themselves. Though I haven’t seen it mentioned in any of the articles on this subject, it occurred to me yesterday: a battery like that would be useful in ANY home. I think of all the blackouts I’ve been through in my life – one in the past couple of years lasted 12 hours. What if we’d had a battery like that which, kept charged through a basic electrical outlet, was ready to kick in at any time and power the house from three days to a week? No messy gas generators needed. There’s also the fact that the batteries could be powered by existing geothermal systems, or small wind turbines in windy areas. I think we’re looking at the inevitable future here, from what I’ve read there are major energy utilities who see that market disruption coming and are trying to either slow it or get ahead of it.
I know Elon Musk may not be the one who ends up with the best battery and biggest market share, but based on his history I’d be as likely to bet against him as against Apple.
Thankfully this discussion isnt on the main bio thread or Id be boring the many. Im not trying to be horrid, but its terribly important in developing any workable strategy, that you know precisely what goal your aiming at. I dont yet know what goal that is.
Heres one: I want to preserve the stability of my present of my wealth against a 10% crash. Thats simple; invest a balancing amount in a leveraged $ decline etf (ie short the $) or, (if you believe in it) buy a leveraged gold/silver etf. That will give you a standstill. But tying up capital in the etf will cost you meanwhile….so the ‘insurance’ will mean youre immediately worth less whether the crash happens or not. The problem with physical assets is that you always run the risk of having them stolen in the meanwhile…..thats a whole different type of 10% loss. In any event, as I said, you cant take a physical bar of gold, or even a silver coin, to the shops during a recession, without risk.
Then theres another scenario. I want to PROFIT from a 10% crash. Simple, 60% short the $ as insurance and/or hold cash (perhaps in the bank to avoid the risk of robbery) so that you can buy AAPL (or whatever) at $50…..then wait for the recovery.
Then theres: The sky is falling scenario. Theres a total breakdown of law, order and the world fiat system. Cash will be valueless (see the german mark post 1945). A hoard of physical gold will get you and your family tortured till you reveal where the (perhaps non existent) rest is hiding. In any event, who is to say that the new currency will have a cash value relative to gold etc ? Gold could be outlawed.
A better investment for this scenario would be lots of tinned food, weapons, and ammo plus a fishing rod and lake till 75% of humanity dies of starvation.
Pick your scenario. But theres still the chance youll pick the wrong one.
Looking back over ALL past crashes, the losers were those that owed money coz the assets they were secured against were un saleable so the debt increased till everything had been repossessed. Those who were cash positive fared very nicely. So avoid ALL forms of debt and hold a cash balance in a sound bank account or perahaps better, T Bills.
Dont be too spooked. Investment feeds on greed and fear and the journalists feed on both.’ This stock will rocket 500%….subscribe for $100 and Ill tell you its name’…..or…….’the sky is falling. Subscribe for $100 and Ill tell you how to protect yourself and profit.’ following all the wars and crashes, my parents had a golden rule…….If you cant afford to by it cash….you cant afford it.
“Stay out of debt” is a great fundamental Alan, your parents taught you well as did mine. Maybe the first rule for investors in uncertain times should be to invest with cash only: don’t even have a margin account. Come on – borrowing money to buy stocks at market highs is what devastated so many after the 1929 crash, yet that mistake keeps being repeated. It’s just gambling fever, fine for the rich to play but don’t bet the farm (which some folks literally did).
In 2008/2009 I noticed in my own neighborhood that a terrific Chinese restaurant with a lot of start-up debt quickly went under. A really lousy one with no debt survived – it had been there a long time, and is still there today. No debt + super-friendly service are the only reasons, because the food is truly horrible (and I’m not particular: I consider Panda Express “good” Chinese food – I’m no gourmet.)
Bad debt was the fundamental cause of the so called Great Recession, but on too many fronts bad debt has been compounded not remedied – not nearly enough deleveraging has occurred (or allowed by the Fed to occur) to give us anything close to a healthy economic recovery.
Before investing in TVIX you should know what Contango is and how it can work against you in any ETF but nearly always in leveraged ones like this meaning long term you lose.
Danger danger Will Robinson…….. frank
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Ben There is more money made using dire warnings to sell news letters,,,How does that line go ” Financial wizards have predicted 39 out of the last 9 crashes” ? That said I really think we are in new territory and a major change is soon to occur.Chinese proverb “Great risk equals great opportunity”.,,,all depends on who has the last chair when the music stops.
In 2008 I bot TTM for $2 in a few months sold for $6 intending to buy at next good entry point,,,it is now $50 and I am still waiting. Bot C at $1 sold at $3…..Bot ECTE at $27 when it was headed for the moon continued up and I held, then it dropped. Still have a token lot as reminder,,,now $2.89 but promising,,,and promising.and promising etc etc.
I have always believed it is not how or why you fall but how you land and recover that makes the difference. frank
https://www.youtube.com/watch?v=9-cPWheNyaA
Love that movie, love this clip! So maybe keeping 10% in the best safe havens is like having LaBoeuf (a great sharpshooter) on that hill to back you up when things go to hell.
https://www.youtube.com/watch?v=OcykofWTCgY
https://www.youtube.com/watch?v=tRwYQgk05DY
Frank: You gotta get rid of that cartoon image and replace it with Yoda. Some people are old at 20….. Others, like you, just keep getting wiser. You’re a v valuable asset on GS.
I once had an idea for a series of short 1 minute filler films to be called Age of wisdom or Last Rights, where an elderly person was asked to sum it all up in one paragraph. If I ever get this off the ground, you will be the first person I call.
Alan You flatter me,,,,Here Is a quip by Walt Kelly who published Pogo cartoon; Do not take life too seriously,,,,it is in no way permanent… frank
I just returned from dinner with my yungin’ @ the NWLAWVH. Five or more of my bud’s have began another life after life after life . https://www.youtube.com/watch?v=6tveUnZe7WA Shalom-Benjamin
“Taps” performed in Arlington National Cemetery (summer and winter)
https://www.youtube.com/watch?v=Bfe4TxvUOiw
Also from Walt Kelly, a most remarkable cartoonist: “We have met the enemy, and it is us”.
Ben, are you recommending this newsletter, or just mentioning it because it’s related to this thread? I’m always interested in people who can read the signs and see trouble coming in specific sectors… vs. the ones who only claim that they did or can. I couldn’t find member reviews of Lombardi but haven’t had much luck with any of the few newsletter searches I’ve done on Gumshoe. The alphabetical list doesn’t seem to function for me.
As it related to this article Patty. I posted the current smallcapnetwork.com new article article after this but it is stuck in moderation, alas. The third video relates to the buffet provided by our chef on the biotech platters and life by one of the greatest artist of all times imho. Shalom-Benjamin
Ok. Thanks for music vids, I like your taste, and here’s my favorite of all time – a live lived in reverse, and a beautiful song:
https://www.youtube.com/watch?v=Rk_sAHh9s08
Sleepy and signing off for today, “goodnight Ben”.
Excellence at best. Shalom and godspeed my friend 😉 >>>—–> Ben——–>
A Meltup is Underway, to Heck With the Valuations
February 20, 2015 1:49pm PST
Dear SmallCap Network Members,
Welcome to the weekend, friends and fellow traders. And, congratulations to anyone who got in – and stayed in – long positions for the past several days. The NASDAQ just logged its eighth straight daily gain. Crazy. Honestly though, it’s a little too much unquestioned bullishness for my comfort.
We’ll handicap the broad market’s near-term odds in a moment. The first thing we want to do today is answer a reader’s question regarding yesterday’s newsletter. Odds are good several of you were probably wondering the same thing. Our reader asked:
I read your newsletter each day. Love it. Today you brought up something I have often had questions about breadth of market; If there is a share of stock sold for each one bought, and also one bought for each one sold, then how can there be more buyers than sellers? Seems to me that there would always be a balance. There must be simple answer for this.
Thanks for the question.
You are right – for every single share of stock that’s sold, there’s obviously a buyer at that same price. So, how can the market’s breadth indicate more sellers than buyers? The answer is, the Arms Index (and most breadth and depth tools for that matter) looks at the number of stocks that are below their previous day’s close, and compares that to the number of stocks that are above their previous day’s close. If more of the – say the New York Stock Exchange’s listed equities – are trading down for the day (compared to yesterday’s closing prices) than the number of NYSE stocks that are up for that day (also compared to their prior day’s closing prices), then the breadth is considered bearish.
Ditto for the depth, or volume. Bearish depth is determined by the number of shares that have traded hands during any given session for each stock that’s in the red for that day compared to the previous day’s close. Conversely, bullish depth is measured by the total amount of volume for stocks that are up compared to the previous day’s close.
So to answer your question, though a lot of people use terms like “more buyers than sellers” and “more sellers than buyers”, it’s not an accurate assessment – it’s just an easy and quick way of saying “all the willing buyers and willing sellers could only come to an agreed-upon price at levels lower (or higher) than the prior day’s prices, and they did so in greater (or lesser) numbers “… which is a bit of a mouthful.
Thanks again for the question. It brings up another point worth making here…
While we’re fans of breadth and depth tools, they’re not necessarily the only way to take the market’s temperature, so to speak.
I scour all the financial news sites every day, and I came across this commentary yesterday explaining how fewer and fewer stocks were contributing to the NASDAQ’s new highs. In other words, though the market has been broadly rewarding, it’s been tougher and tougher to match or beat the market’s performance by picking individual stocks. Or, said another way, an increasingly smaller handful of tickers are being called on to do more and more work to push the overall market upward here. This is another way of saying something I’ve said for a while now…. this rally lacks the participation it needs to remain in motion for the long haul. The author of the “Fewer Stocks Contributing To Nasdaq Highs” even goes on to explain what alarming statistical outcome we usually see in this situation.
And then a thought occurred to me…. two thoughts, actually. The first one was, how sweet would it be to be able to own some of the few stocks that are leading the market higher at this time? The second thought was a realization that somebody has been holding a great number of market-leading stocks of late, and therefore has been able to meet and even exceed the market’s recent bullish performance.
Yep, I’m talking about the Elite Opportunity service, which has seen the bulk of its open long-term trades just soar in recent days. JetBlue (JBLU) is up nearly 20% since January 9th. WhiteWave Foods (WWAV) is up 15% in just the past six trading days. Ford Motor (F) has gained 11% this month so far. Ubiquiti Networks (UBNT) has advanced more than 19% since February 5th, and looks like it’s still picking up steam. OmniCell (OMCL) has advanced 10% month-to-date. TripAdvisor (TRIP) is up 30% in the past six trading days. There are more I could talk about, but you get the idea – the EO team finds the market’s best (and occasionally rare) movers, and turns them into real money for subscribers.
You know what though? I’m not even going to suggest you become a member of the Elite Opportunity club just yet. My advice is, put ’em to the test. By that I just mean I think you should first sign up for the EO’s free stock-picking alert service. You won’t get as many stock picks or the complete commentary full Elite Opportunity members get, but you’ll get a pretty good sample of the kinds of ideas John Monroe and his team are finding every day.
It’s real easy to do, too. Just go here to register, or cut and paste this link: https://www.smallcapnetwork.com/pages/SCNEOL/v1/. No credit card is needed All they need is a way of delivering you their recommendations. I think you’ll be glad you did.
OK, let’s take a look at the market after today’s nutty session.
Whatever
You know, you can only play the “Greece debt debacle is resolved” card so many times before it loses its effectiveness. Actually, let me rephrase that. You should only be able to play the “Greece debt debacle is resolved” card so many times before it loses its effectiveness. For some reason though, each time that pendulum swung in an encouraging direction over the past week and a half, stocks rallied on the news. Problem is, stocks never actually pulled back when hope was taken off the table. But, whatever.
I’m going to guess some of you saw the commentary at FactSet today pointing out how the S&P 500’s forward-looking P/E of 17.1 was the highest forward-looking P/E we’ve seen since 2004. That’s not 2007…but 2004, and it was on the way down then.
It should be bearish, or at least concerning. Yet [and yes, you’re hearing this from a guy who’s been screaming “overvalued” for weeks now], at this point if the mob is collectively willing to ignore the glaring reality and instead focus on news that, frankly, doesn’t really matter much, then you can’t stand in their way. Sometimes you just have to let the stampede run its course.
That’s my long way of saying I’m actually a bull in the very short term. I still stand by my recent calls for a significant pullback in the foreseeable future though, not just based on the market’s crazy valuation, but also on the utterly low TRIN reading we talked about on Thursday.
In that light, I can’t stress enough how my bullishness is a short-term call. I’ve got some reasons for my thinking though.
You guys (and ladies) know we always keep an eye on the VIX, but back on February 11th we added the put/call ratio to our repertoire. Take a look at an updated version of that chart below. The VIX is trending lower. So is the CBOE put/call ratio. Both have room to keep sliding lower before hitting major floors though, which in turn means – theoretically anyway – the market has room to keep rising.
Don’t get me wrong – I hate it. The market doesn’t deserve to go higher. Looking at things in an unbiased way though, sentiment hasn’t gotten dangerously complacent yet.
Yeah, Friday was an options-expiration day. I didn’t see any unusual impact on the put/call reading or the VIX because of that expiration though. All I saw was a continuation of their current trends.
As for where this leg of the rally might finally hit a wall, a look at the weekly chart probably sheds a little better light on the current situation.
My guess is, the S&P 500 is aiming for the upper edge of a long-term resistance line that’s been acting as a guidepost since 2013. It’s currently at 2140, where the upper Bollinger band will soon be.
At that price, the trailing P/E for the S&P 500 will be 18.9, and a forward-looking P/E of 18.0. Honestly, both figures are just stupid. The projected P/E of 15.6 for 2016 isn’t really any better. If the masses don’t care though, there’s nothing you or I could say to prevent them from doing what they seem to be ready, willing and able to do. I still foresee it all ending with something of a painful sucker-punch, however, as the volume behind each subsequent gain continues to get weaker and weaker. In the meantime though, the bulls seem to have the momentum. Go figure.
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This doesn’t necessarily mean stocks have to continue moving in a straight line all the way there to 2140. I suspect even the most bullish of the bulls have to agree this current surge is due for a little profit taking. The litmus test will be how and where the recovery effort starts once the market is given a real test.
In any case, there’s no need to dwell on it over the weekend. We’ll resume our ongoing analysis again on Monday.
Have a great weekend,
SmallCap Network
http://www.smallcapnetwork.com
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Hi pocket I do not understand why you are sad that I share absolutely free information which provides timely, relevant and actionable news and links to current markets. Alan I am not pumping any of the after mentioned equities or services in anyway, shape or fashion. I have received no remuneration from any parties alluded therein. Best2ALL!-Benjamin
I don’t get it either, maybe she’ll explain? I have no problem with sharing newsletter info relevant to a thread. I was already planning to do that myself, I have only one subscription other than Gumshoe but a summary of this week’s issue is worth sharing, I’ll get around to it within a few days.
Sogiam, my frowny faces were due partly to how you presented the above information, and partly because a large chunk of it was totally useless. Do you really want me to know how to unsubscribe you from your email? 🙂
I appreciate your many contributions to SGS. However, when passing along information from documents you cannot link to, instead of cutting and pasting the complete article, as you did, it would be good if:
1. You would give us your interpretation of the information in a synopsis form –best, but at least
2. Use some good judgment about what in the article is important, and cut and paste only the important parts of the article.
I doubt that anybody benefited from anything after “Disclaiamer: The SmallCap Network Newsletter is an electronic publication ….. up to “The information found in this Newsletter is protected ….. ,” and up to “………. All Rights Reserved. Contact Us : Privacy Policy : Safe Unsubscribe Safe Unsubscribe”.
That part of your post was about 1/3 of a very long post!
“Judgment” is an attribute that should be fostered and used. If it makes you feel better, I have to admit that mine needs a lot of fostering and should be used more often. Such as recently when I . . . . . . . . 🙂
Well said
In case of natural disaster everyone should have a minimum of three days/72 hours of food water and shelter per person for realistically that is how long before emergency help can be marshaled and reach you. The electrical grid is overburdened and aging with next to nothing being done to improve despite the $billions being poured into “green energy” and can rather easily be brought down by a single solar flare as happened in Canada a few years ago
. California is seriously proposing using the Teslas Prius’ and Leafs battery storage being hooked up to the grid at all times they are not being driven and indeed that has some logic,,,,at least until the auto owners see how that would degrade their battery life. All batteries are energy wasters,,,at best you may recover 80% of the power put into them and that does not allow for losses in the feed lines or the charger.Tesla
is apparently planning on using LI ion batteries built jointly with panasonic . A123
company that failed used NiMH batteries but had major manufacturing and reliability problems in the spotwelding of leads to the cases. Most auto batteries are lead/sulfuric acid and have good storage and reliability characteristics but have the weight problem.
The forever battery using sodium hydroxide solution and iron has good longevity but are expensive for the amount of power that can be stored. We really do not have a good way of storing electricity in quantity. Probably the best solution would be for every city/town
that has a usage of 200MW or more to set up modular nuclear plants such as those designed at Oregon State University that do not require the huge amount of cooling water as existing nukes and can be instantly shut down without meltdown. As each is a 200 MW module you just add more modules as needed for more demand. If you think about it all usable power on this planet originated by nuclear fusion or fission,,,solar from the sun is stored in hydrocarbons and used as oil coal NG, wood biomass etc but was born in fusion. Wind arises from solar heating causing temperature differences and the earths rotation. Geothermal is using earths interior heat which is still existent through fission going on in the radioactive mix with the iron core.
If your area and housing would allow it an old usable camp trailer parked near is a great survivor pod if you keep it stocked with food water and blankets sealed in vermin proof containers.Generally they use LPG for heat and cooking and a storage battery for lights. In your house you can drain a lot of potable water from your water heater and if you are serious about water storage you might have a stripped non functioning but non leaking old heater plumbed into the piping in the garage for more storage plus it harvests ambient heat before the water gets to your working water heater, saving heating costs. frank
Thanks for the (long) pump Sogiam.
Frank this is a terrific post. I was a Red Cross Disaster volunteer in the past, did a lot of their training, so kind of thought I had a complete handle on disaster prep. But you’ve mentioned a couple of things here I’d never heard or thought of.
Also appreciate your comments about the origins of all energy…. geothermal is my personal favorite as a clean energy source – it has so much potential (especially enhanced geothermal because it could be done nearly anywhere) that I’ve come to the conclusion it’s being deliberately suppressed by “them powers what be.” Geological displacement which causes quakes has been an argument used against it – but guess what – coal mining, extracting gas and oil, and even hydropower (dam building) all cause geological displacement which can and have caused small earthquakes. Somehow geothermal gets attacked more for that problem.
So here we are all standing on a limitless source of heat and energy, which could be making most homes, business properties, and communities energy independent. But for the most part we don’t tap into it. Meanwhile polluting fossil fuels are being (quite expensively) extracted, transported to refineries, and transported again to points everywhere. Go figure.
Iceland is using geo thermal heat in many ways successfully and is an often cited example, What you dont see coming is what is the killer,,,,often GT is very corrosive,,,salty,,,water and steam,,,even in wells where the water is injected. Often the rock strata does not lend itself to water infiltration or the composition does not transmit/conduct heat well,,,,contains things like arsenic or other heavy metals that poison organisms that ingest or contact the waste water. Many other unsolved problems….not necessary to charge conspiracy when stupidity (or ignorance) is adequate explanation. Most practical use of GT is at shallow depths using a heat pump to heat or cool your residence due to constancy of temp of soil thru the seasons. Maximum insulation is probably the best cost/benefit you can do.
I have total confidence that Earth’s engineers and scientists can solve the problems you cite. But where’s the incentive – where’s the funding. There’s very little. Those whose wealth is largely centered on existing fossil fuels deposits and infrastructure, and who also control most of the R&D (and PR) in the energy field are bound to be unenthusiastic, to say the least. Call it a conspiracy, or call it a shared mindset – the results are the same.
For example, one wouldn’t invent the perfect photovoltaic system, then burst into a bar full of oil riggers to announce it and expect any applause. Even if everyone there knew you and believed you. Never mind the benefits to mankind at large – naturally, their immediate concern is their own livelihoods. That typical human response to progress doesn’t make them evil, but it sure slows that progress, it always has.
I have more confidence in nuclear energy as a clean alternative over the next few decades, but expect that geothermal will eventually come into its own. Nations which have no fossil fuel resources of their own, and want or need to become energy independent, may end up forcing that progress.
I was just pointing out thermal is not a great investment now or indeed likely to be in near future,,,,,,I feel nukes are the safest and cleanest energy source to pursue at present but the existing plants are using 60 yr. old technology and pose a risk til upgraded. I think Chernobyl was a worst case possibility and the surrounding area has already returned to a wildlife paradise as the former farms revert to wetlands/swamps. Modern technology is far far more safe and will become increasingly so. Thorium reactors would do away with most objections but they are still maybe 20 years away from large scale success,,,as they have been for the last 50 years. Another survival tip,,,Always carry a sturdy pair of shoes in your vehicle when traveling in case your machine fails and you must seek help.Most womens dress shoes and many mens would fall apart in a mile or two of walking on a hot freeway,,,,,water is also a good idea and some mylar thermal blankets. If you are in western US. Summer heat and no water can kill quickly ,,perhaps not as soon as winter snows.
Lets see – I agree, I agree, and, you’re right.. plus more great survival tips. You’ve left me speechless, a true miracle Frank. Cheers!
“….not necessary to charge conspiracy when stupidity (or ignorance) is adequate explanation.” I’m including that statement in my portfolio of wise sayings. Thanks, Frank.
Totally blown away of all the great Biotech companies based in Cambridge, Massachusetts. I knew there was a lot but never paid attention that all of these were based their. It is by far the all-star city of Biotech.If you want to be successful just go to Cambridge it seems.This maybe a useful site with all the companies based in Cambridge with websites.Anything that comes out of Cambridge we probably need to pay attention.
http://www.cambridgema.gov/~/media/Files/CDD/EconDev/EntreprenaursTechCos/ed_company_list_201406.ashx
Cheers,Glenn
Alan, guarding against a 10% market drop came from you not me. The only 10% I’ve talked about is that much of any portfolio being in safe havens. The main discussion here was supposed to be what are the best safe havens, and the safest long-term value holdings. A 10% market drop to me is just a correction, not a true crash. I don’t need you to respond, I’m just trying to make that clear to anyone who might read this thread now or in the future.
Im getting totally confused. I haven’t suggested any crash %; Ive just asked ‘What sort of crash are YOU trying to prepare for…..10% or the complete breakdown of society and the whole financial system?’. You seemed to be asking for our opinion in the preamble….. I was just trying to provide a specific answer. But I cant do that till I know which question to answer. Your heading is ‘What’s the best way to protect ourselves against the next market crash’. Well that’s a bit like saying ‘How do I prepare for running a race?’ Well, it all depends on whether is the 100yrd dash or a marathon. I saw Travis’ comment elsewhere ie ‘the next crash will be very different from the last one’. In a sense this answers your question: you cant prepare for the unknowable.
BUT ! It now seems that you are trying to justify/convince yourself that youve got the correct solution already ie to stuff 10% of your assets in precious metals because historically they have done well when the markets crash (and vis versa). Ive read many similar ‘the sky is falling’ goldbug articles on SG since joining. Personally, I think this is wrong headed, as Ive said at boring length. Investing in essentials like Johnson and Johnson, and taking the dividend, seems a better idea. But it depends whether the next crash is caused by someone being poisoned by baby powder…I dunno!! But if PM’s is your chosen solution, you certainly dont need anyone else’s absolution…..Go4it. Youve answered your own question.
Travis apparently would disagree with you – he owns some as a hedge and explains why. I’m not trying to convince myself – the world’s history of repeated market crashes and currency failures is what convinces anyone who cares to read up on it. Forget the gloomy-doomy gold bug sky-is-falling sites. I know they can be nuts. Just read a good book on the world’s financial history and get back to me then – or not.
You choose cash as your hedge (and tangibles other than PMs) – fine, I’ve already acknowledged that can be a good choice. Not sure why you’re compelled to trash a different choice. Maybe they all have some merit: did you ever consider that possibility.
I thought you were asking for opinion, not pumping gold. Glad to have helped.
Alan I trust Travis’s judgment on precious metals far, far more than yours. I agree with him on a small allocation being a good idea. Sorry you see that as radical and seem to have no interest in his reasons or mine. Now maybe we should stop stalking each other, especially since I know I’d never get a gold ring in the end, just a paper one.
Oh the old kissing the bosses bum and appealing to the crowd for support, routine. In future, if you want Travis’ advice, ask Travis directly. Dont waste others’ time with a fake discussion. Unsubscribed.
Surprised to learn here that Travis is my “boss.”
If true I want a raise.
bezoar, if you make those changes you mentioned, I hope you do it on the basis of great analysis like Travis’s, not my recommendations! I’m a rookie and a never-to-be guru on these stocks and funds. CEF is one I plan to add, highly recommended by some folks I listen to, but I’m sure you have your own reasons to think well of it. I was hoping to end up with a few people like you here who want to watch the sector and post helpful info where you find it. Kind of like a few of the folks on the biotech threads who are not medical or investing professionals, but add a lot to the discussion just by keeping an eye out for relevant info. Even if there were only 2 or 3 people like-minded people doing that here occasionally, we’d each get the benefit of having spent 2 or 3 times as much time on research as we have. Because we’re not trying to pitch anything, it’s honest information, which is what drew me to Gumshoe in the first place.
I was planning on making those changes anyways at some point… as I mentioned it’s just too difficult to keep on top of the individual miners. As an analogy, if we didn’t have KSS for guidance I would be in IBB (biotech index ETF). Also, as I mentioned, I am intrigued by your shifting funds strategy.
I’m by no means an expert in all this, and am not so much a “sky is falling” type but firmly believe that we are set up for crisis of some sort. The unanswered questions are when (months? years? decades?), and also to what degree. I personally feel that the survivalist scenario is extremely unlikely. There are a whole range of possibilities in between. In any event, there will be money made and money lost in a very short period of time. Hopefully by having done some homework I will be able to react quickly and stay on the favorable part of the curve.
Our goals seem similar. I, some of my relatives, and the small biz I was working for in 2008 were all very hard hit by that financial crisis and “recession”. Probably some folks on Gumshoe, well-heeled investors, experienced it personally just as a market crash. That’s all it should have been – market corrections. But because of the rotten financials and policies underlying it, widespread economic damage was done and it left me really angry (in a quiet, steely-eyed, determined kind of way). I listened more afterward to the friend who’d tried to warn me (she came through it all with no problem). I read some books she recommended and found more on my own, and have a decent library now on economics and financial history. (Paul Krugman is no part of it. An idiot with a Nobel prize in economics.)
My own guess is that we’re in for something several times as bad as 2008/9 within the next few years – but if it involves sovereign bond defaults and resultant currency failures it could be even worse. Precious metals have historically protected people in such extreme events. First they plunge due to margin calls – because margin clerks, not the investor, decide and take what’s still valuable to satisfy the calls. Then they shoot up in the aftermath – to a bubble usually – that’s the time to sell and buy land and other assets at rock bottom prices. That’s what the rich have done in times of crisis. The more people who know this and protect themselves the better. Of course, for a lesser crisis cash achieves the same thing.
A short timeline of the U.S. gov’t confiscation of precious metals during the Great Depression, up until private ownership rights were restored:
2/18/1933 – A “run on gold” heats up after the press announces that a Secretary of the Treasury candidate declines Roosevelt’s job offer because Roosevelt would not assure him he planned to maintain the gold standard. “Frightened Americans joined agitated foreigners in seeking saftey by moving their capital abroad or into gold. A renewed run on the U.S. gold stock resulted in $160 million leaving for foreign climes in Feb 1933 and another $160 million in the first four days of March that led up to Roosevelt’s inauguration. The mounting panic included withdrawals of gold coin from the commercial banks, with over $80 million going out in the last ten days of Feb and over $200 million during the first four days of March.” “Over ten thousand banks disappeared from the scene in 1933….” (1)
4/5/1933 – Using a WWI statute “Trading With the Enemy Act” which was still in effect, President Franklin Roosevelt signed Executive Order 6102 which criminalized the possession of gold coins, bullion, and certificates (individuals were still allowed to own up to $100 worth – anything in excess was punishable with up to ten years in prison, $10,000 in fines, or both. Some other exemptions for certain trades, and collectible coins.) (2)
6/30/1934 – Roosevelt issues an executive order fixing the price at $35.00/ounce (up from the $20.67 price that had been set in the Gold Standard Act of 1900).
8/9/1934 – President Roosevelt issues Executive Order 6814, confiscation of silver, similar to the earlier order regarding gold.
12/1971 – A years-long “run” by other nations on America’s gold stocks (redemption of Federal Reserve Notes for gold @ $35.00/ounce) resulted in President Nixon convening an emergency meeting of the ten major trading nations… but all their ensuing efforts at adjusting international currencies failed, and by November 1973 “the USA had also abandoned trying to hold on to a fixed price for gold even in its official dealings with other central banks.” (3)
Well, I’m getting tired so I’ll cut this short. Under President Ford’s administration, our right to privately own gold was restored. During the same time period Congress passed legislation restricting the President’s power to confiscate gold unless there is a wartime emergency. As I was looking for those references though I found this, and I think it shows us that the gov’t can pretty much do whatever they want (and aren’t we always in “wartime” in some way?) so we’d better just focus on electing good people:
http://www.law.cornell.edu/uscode/text/12/95a
Timeline references:
(1) The Power of Gold: The History of an Obsession, Peter L. Bernstein, John Wiley & Sons, Inc., 2012, pp 319-320
(2) http://en.wikipedia.org/wiki/Executive_Order_6102#mediaviewer/File:Executive_Order_6102.jpg (an image of the executive order)
(3) The History of Money, Glyn Davies, University of Wales Press, 2002, pp 523-524
Once again you are on point,,,several years ago there was a CIA synopsis circulating,,,roughly titled,,, the advantages of eternal war…….Thus the war on drugs, war on poverty etc etc ad infinitum frank
Many years ago Congress sloughed off their responsibility to protect and defend the constitution and thus are now powerless in stopping the patently unconstitutional acts of several of the last presidents including the present POTUS. IMHO The Supremes are a bunch of gutless weasels. again IMHO The American electorate love the Koolaid again IMHO Sorry for the rant (not really) frank
Above all else be sincere in your statements,,,even if you have to lie…Old Sasquatch saying
Please note all forgoing statements are from an inhabitant of the home range of the Sasquatch and other undesirable outcasts. frankly speaking
Rants, I’ve learned, can be ok, especially yours. We the electorate get the government we collectively deserve – voters too often either elect the wrong people or stay apathetic and ignorant enough to allow them to get elected.
The point of a post on gold confiscation was that we live in a very different world now than when it happened during the Great Depression, and we’ve been off the gold standard for a very long time now. Roosevelt is often painted a villain by gold bugs because of it, but look at what was happening when he took office – gold WAS money, and people were panicked and pulling gold out of banks, hoarding it, and moving it out of the country. That was contracting the money supply even further.
The 1933 Banking Act, included a federal system of bank deposit insurance, and put an end to the bank run panics which had happened repeatedly in America’s history – was a very stabilizing piece of legislation which has helped out economy ever since. Roosevelt at least signed the bill. I think he made a lot of mistakes which may have prolonged the depression, but mistakes can be learned from. If things got really bad in this country, the gov’t can always invoke emergency powers and take whatever they want to. But I don’t expect the gold standard to be reinstated in the U.S., ever, unless it’s forced by “the people”, which seems highly unlikely unless we ever experience a truly global fiat currency crash which inspires “the people” to insist on some sort of sort of built-in restraint on money supply (including “credit money” – fractional banking will never go away).
Well put — gold was confiscated and re-priced because we were on a gold standard and there wasn’t any other way to create the increase in money supply/inflation that Roosevelt needed… now, the Fed and the government can do (and have done in the last decade) far more aggressive things, it’s hard to see what the point of confiscating gold would be these days unless we really enter a dark age and the government is confiscating all assets to build a Maginot line between us and Canada (for example). And if we do go back to a real gold standard, which I think is nearly impossible, those who hold exclusively gold now as a bulwark against all possible ills will probably be really unhappy — because it seems likely that gold pricing would be under much more direct government control and manipulation.
Travis Truth and I feel accurate assessment. frank
Thanks for your input here Travis. Re: some gold/silver holdings as long-term savings protection, it gives me even more peace of mind. Looking beyond just the U.S. though, I think new gold standards are unlikely but still possible, because attitudes towards precious metals are very different among the populations of other heavyweight member of the G-20 than they are here. At the same time that China, Russia and other members are massively increasing their gold reserves, they are also trying to increase their influence in the IMF – so that well may change the balance of what backs SDRs in the future, especially if the next crash is due to a currency crisis not just a financial one. Since throughout written history gold/silver have always been the world’s fallback “currencies” (always accepted in black markets), new standards based on them could happen just out of default after a bad crash, because temporarily it may be all people will trust in those areas of the planet with the highest populations.
So you point out an essential consideration: PM owners should be careful what they wish for. Perhaps we’re better off hoping gold and silver are always just treated as commodities, which on average and over time retain their value compared to other tangibles like food, shelter, and oil. But any return to their direct use as money means the gov’t takes control – I’m sure owners would be compensated if there were any future confiscation, but we’d be paid with vastly devalued currency. There’s also Jim Rickard’s notion that a 90% “windfall tax” could be imposed instead.
So stay diversified and be ready for anything seems to be the consensus. I agree with Lulu on another thread, about the importance of owning land. Also with bezoar’s statement above on Feb 22: “In any event, there will be money made and money lost in a very short period of time. Hopefully by having done some homework I will be able to react quickly and stay on the favorable part of the curve.”
I’m winding up this thread now, it has served its purpose, helped me sort out my own approach to crash prep and maybe helped somebody else out there too. I got more response than expected, including some very anti-gold remarks by Alan which we who favor PMs have to consider, because he described how he got burned by investing too heavily in PMs at the wrong time (with Martin Weiss). Too bad we ended up sniping at each other a little here and elsewhere without really listening to each other, but we’re both kind of ornery, plus I think he ended up annoyed with my pessimistic economic views. Since we’re both still ornery, and I’m still largely pessimistic, we’ll stay away from each others posts (at least that’s my plan.)
So, if there are a few others who want to start up another thread with a more narrow focus, on precious metals and mining, maybe that will happen. If only to pull together Travis’s past comments on the subject onto one thread for the benefit of new readers interested in mining stocks, then keep it updated. If no one else does it I may later on, time allowing.
As You close my favorite miner is Hecla $HL . They manage to profit even in this down market and when demand recovers should again reach historic highs IMHO.
If you would like music while you contemplate here is something a little different.
https://www.youtube.com/watch?v=toXNVbvFXyk&list=RD3ahoqR6OGdM&index=4
frank
Thanks Frank, $HL is one of SGDM’s holdings, I just checked and saw there was actually a great swing trade opportunity with $HL between last Wednesday and Friday which I missed while sitting things out with PMs last week – obviously I need to expand my short list! Very helpful, thanks. See you around, maybe this weekend.
arch1, frank….that was so enjoyable….ive been listening for hours now….thank you for sharing.
Just a quick note for anyone planning on accumulating physical gold or silver. A great alternative or supplement is bullionvault.com. I feel it is the next best option to holding physical gold without worrying about storage, plus it is highly liquid. You hold ownership of bullion with choice of several international vaults, and have the choice of buying/selling in USD, Euros, or Pound Sterling. The fees are quite reasonable. Have had an account with them over the past 8 years.
Final note: anyone curious re: Travis’s percentage of PM holdings, he mentions that in his latest article (in the section on Sandstorm Gold) – “… I give this one a lot of leeway as an equity exposure to precious metals (balanced by holding some physical gold and silver as well, all as a hedge against currency depreciation over time, though total exposure to gold and silver for me is only about 5% of my portfolio and savings).”
http://www.stockgumshoe.com/reviews/high-yield-energy-report/the-play-that-will-beat-buffett-plus-some-updates/