A Safeguard Against Inflation and Deflation
- Cash would be good in a deflation.
- Cash would be bad in an inflation.
What stores value equally well in any environment?
Real estate – meh, not so much. I’m thinking (once again) – gold.
Of course, in a deflation cost per ounce goes down, however theoretically (and practically?) that ounce of gold can buy you the same amount of “widgets”, because “widgets” now cost less as well.
I’ll try to buy some gold from Questrade tomorrow.
Update: I changed the subject of the post, accidentally put in “Depression” instead of “Deflation” 🙂 oops, Freudian slip.
And I decided to put off buying of the physical gold until $850 is tested.
The situation is more complicated and the worse then inflation, the modern situation is stagflation.
I think, it must be real, natural gold and silver but no stupid paper warrants.
Paper warrants are covering nothing in case of real turmoil and real economic calamity.
What’s cash???
Who needs the dead cash?
If you have ‘some’ cash, the cash have to work for you.
I think, the key is dynamic asset allocation: long-term(70-80%) plus short-term smart speculating.
R,
I have physical gold and silver, and want to add some more.
Paper gold and silver are convenient for trading, but as you’ve seen, I prefer miners. So I’m trying to make that cash work for me 🙂
Where did you get the Metastock clones? Which ones specifically are you using?
Kat,
Gold taken at $35oz in 1935 at a compounded rate of 3.84% [compounded inflation rate from 1935-2007] would give you a price of $547oz
At the current price of $860, you are overpaying.
Gold a few years ago at $250oz was hated. As always sentiment and cycles fluctuate. I actually remember sitting at the dinner table discussing investing in gold at about $700oz in 1979, for much the same reasons.
Buy it [any asset] when everyone hates it.
jog on
duc
Duc,
I decided to wait and see if it dips lower (i think it may).
The gold I have now was bought in $680’s.
“Buy it [any asset] when everyone hates it.”
That would make real estate a good investment now? 🙂
I’m not thinking decades ahead, by the way, just for the intermediate turmoil. Don’t you feel that there’s some change coming? Maybe it’s normal to think so when something dramatic is happening, but this feels to me like a real crisis that can lead to some lasting changes.
Kat,
With regards to R/E actually yes…as long as it is purchased at a bargain, which means that it may need to be hated a bit more yet.
Real estate compounded returns run at circa 4.5% which takes into account the long-term compounded inflation rate.
R/E is additionally easily leveraged [under normal circumstances]
As to change….”plus ca change, plus c’est la meme chose”
jog on
duc
Phantasmix, I mean if you worry seriously about the modern crash, you have to buy physical silver, gold, platinum, oil and uranium 🙂
I told you about Metaqoutes, not MetaStock.
Metaquotes’ software product is MetaTrader, the final version is 4.
Hundreds of forex brokers around the world offering MetaTrader as their trading platform with
a lot of financial instruments, like cdfs, futures, futures on indexes, etc.
MetaTrader have a dozen of tech indicators, nice UI and his own program language.
You can build more indicators and your own trading systems.
On of the clones, you can get from here: http://www.alpari-idc.com/mt4setup.exe
Install it, open a demo through placing some abrakadabra into the pop-up form and go ahead 🙂
Under the “Symbols” topic, you can find more instruments.
For each instrument you can open and design different chart window with such periods of time as 1min(intraday) tol 1month candles, for example.
Duc,
Absolutely, I agree with that. However, would you say that when the Communist regime came to power in the Eastern Europe things remained what they were?
I’m not at all saying that USA will convert to Communism (LOL), just saying I’m sensing that some material changes to the political structures and economies may happen, both in the USA and the world.
R.,
see my reply above for an intro to this topic 🙂
I’m not sure about a crash. Crashes themselves don’t scare me, permanent changes do. As you very well know, when there’s a regime or other change, wealth is usually taken away or destroyed.
(Thanks for the software link. I’m testing out different ones now.)
Some of my letters and words are disappearing from the view 🙂
R.,
I see everything just fine. My blog isn’t on good terms with Firefox and possibly other browsers. Works okay on IE and its clones.
BTW, did you check up Google’s Chrome?
Yes, I posted about it on the blog the day it came out. (Their terms of service were just outrageous, though they later made a correction).
I still prefer my Avant browser 🙂
Kat,
With regards to Eastern Europe, absolutely things from an investment perspective stayed the same.
Inflation/Deflation, booms/busts are natural phenomena of financial markets and human nature. Call it capitalism/communism, the end results and intervening fluctuations have not yet invalidated speculation nor investment principals.
jog on
duc
Duc,
I’d be very interested to hear more about this (how is this possible?): “things from an investment perspective stayed the same.”
I’ll competely understand if you don’t want to discuss this further; present is so much more interesting than the past 🙂
Kat,
You only have a certain number of investment classes, cash, commodities, real estate, real assets or common stocks [manufacturing plant for example] Bonds [debt]
Do you think in a communist regime, that these somehow change or go away?
The ease of trading, or transparency may well be difficult or opaque, but they are all still present, correct and accounted for.
Black markets flourished during Soviet times in all their satellite states
jog on
duc
Duc,
I disagree. Black markets existed, but mainly for things like imported jeans and tape recorders. And currencies, yes.
There was a bit of an uproar (among bloggers, anyway) when shorting stocks was banned recently, but imagine if you were also prohibited from holding other currencies. And if you were found to trade currency you would most likely be jailed for 2-5 years.
Most people had nothing to do with any type of investing/trading of commodities, stocks or even real estate (not much anyway) for fear of going to prison for speculation. There were no stocks to be had, black market or not. Real estate speculation existed but it mainly had to do with marriage scams 🙂
So you have a lot fewer people participating in the market that is missing a lot of the basic investment classes, which I think changes the nature of dealings a lot.
Kat,
You seem to have interpreted “Black market” as purely an illegal market. While in some cases that is true, a wider definition includes non-transparent markets.
Workers in various industries were issued coupons that could be exchanged for ownership shares in said industries. These were eminently “tradeable” and were actively traded. So much so that foreign investors purchased huge tranches, thus effectively taking large equity positions.
Thus even within communist economies trading continues unabated. Certainly political positions are highly advantageous to facilitating any trading opportunities, but as we already know, that is no different in a “capitalist” economy.
There are many more examples across all asset classes.
jog on
duc