Dollar Bubble Hedging

[NHsorter]

Ron Paul is in the news saying there is a dollar bubble. Stackers already know this, but when I saw the article, it did make we wonder what you guys think. What is the best way to prepare for, or the best places to store "wealth" in anticipation of a dollar crash? I get it, no one knows what a dollar crash would mean exactly. But who will come out the least damaged on the flip side? Those holding PM's? Those holding Euros? Those holding stock in certain companies?

(I put "wealth" in quotes because the word can imply an abundance of money, which is misleading in my situation. Basically all of my "wealth" was just transferred to the United States Treasury)

Not saying that I am fearing an impending currency crisis. TPTB are clearly elite can-kickers! So as plausible as it may be, I'm not holding my breath either way. And lets please try to steer clear of collapse of society on this currency crisis exercise. Of course I won't ever rule out the possibility of TSHTF, but for purposes of this thread I would like to try to stick to things other than ammo, nips, tampons and Twinkies if we can help it.

[IdahoCopper]

A jerky customer in Norway did a PPG to me, the money arrived as NOK - Norwegian Kronor. I decided to keep it and occasionally convert more USD into NOK holdings in the Paypal account.

Norway has an oil supported economy and is doing better than most countries.

[Rodebaugh]

Low fixed rate debt is by far the best "investment" during an episode of massive inflation.

Think about it. Your dollars do not go as far on consumables but your note agreement for you mortgage stays the same.
A bottle of soda goes from $1.50 to $3......while your house purchase agreement stays at $200K. (even though it now would be worth $400K)

[NHsorter]

I hear ya Doc, but I'm actually trying to get this little shack paid off. If it makes sense or not I just don't want to have a house payment any longer. Call it freedom. Call it DEflation insurance. Whatever. I'm just not ready to "Bet the house" on inflation.


Hummm.... I wonder how low of an interest rate I could get on a loan for a large chunk of land somewhere?

[Rodebaugh]

I hear ya Doc, but I'm actually trying to get this little shack paid off. If it makes sense or not I just don't want to have a house payment any longer. Call it freedom. Call it DEflation insurance. Whatever. I'm just not ready to "Bet the house" on inflation.


Hummm.... I wonder how low of an interest rate I could get on a loan for a large chunk of land somewhere?

Land rates from what I have witnessed are traditionally higher than primary dwelling notes. I know you don't want to hear it but a home equity line of credit (assuming there is equity) would be the most economical (lowest rate) option one could get.

Truth be told......House debt is excellent debt. Tax favorable and a source for equity. I am ready for the tar and feathers.

[Market Harmony]

Truth be told......House debt is excellent debt. Tax favorable and a source for equity. I am ready for the tar and feathers.

Solid advice.

As the USD bubble gets bigger... yes, bigger... it sure would be nice to acquire assets with Euro debt, and then pay it off with dollars in the future. I have been trying to figure out how to do something like this lately.

I'd like to buy an income producing asset (real estate) and have Deutsche Bank write a Euro denominated loan for it. As the dollar appreciates, the payments on the loan diminishes. It could work out so well that I could essentially get paid to have taken out the loan and get paid by the asset. The down side is that I make my purchase at a USD peak and end up breaking even.

[TXBullion]

I hear ya Doc, but I'm actually trying to get this little shack paid off. If it makes sense or not I just don't want to have a house payment any longer. Call it freedom. Call it DEflation insurance. Whatever. I'm just not ready to "Bet the house" on inflation.


Hummm.... I wonder how low of an interest rate I could get on a loan for a large chunk of land somewhere?

It looks like a double standard here. You are looking for a hedge against the dollar then you have it presented but you do not want to take it. If you believe massive inflation is aboard one of the best rates you can take. Take todays home loan at 3%. Lets say inflation runs three percent. You got a "free loan " . 4%.....

If you believe deflation is coming, then well its best to be in cash.

I don't know whats coming but historical charts would indicate that inflation occurs much more frequently than deflation.

its a two sided bet, if you can make a three or for sided bet, that is even better. Instead of wining or losing you try to structure so you win less or win more

[NHsorter]

I know house debt is good and I inderstand the logic. But it's my dwelling and I want to own it. Then it is settled no matter of inflation, deflation, stagflation, or otherwise.

I could rather easily turn my equity into cheap cheap debt, but then what do I do with the equity? Any investment with a worthwhile return has the possibility of suddenly evaporating or at least being greatly diminished. If I lose a ton of stock, that sucks. If metals prices fall off a cliff, that sucks. I could hold cash but that could be devalued. I could start a business but that could go south for various reasons.

I'm not saying stocks, metals, and businesses are BAD to be invested in. But they are each their own gamble and the one thing I don't want to gamble with is my home.

[Engineer]

Truth be told......House debt is excellent debt. Tax favorable and a source for equity. I am ready for the tar and feathers.

House debt may be an excellent form of debt, but its still debt.

I'm not opposed to using leverage as a necessary tool. It should be done, however, with the understanding that risks compound as well as gains.

[TXBullion]

I know house debt is good and I inderstand the logic. But it's my dwelling and I want to own it. Then it is settled no matter of inflation, deflation, stagflation, or otherwise.

I could rather easily turn my equity into cheap cheap debt, but then what do I do with the equity? Any investment with a worthwhile return has the possibility of suddenly evaporating or at least being greatly diminished. If I lose a ton of stock, that sucks. If metals prices fall off a cliff, that sucks. I could hold cash but that could be devalued. I could start a business but that could go south for various reasons.

I'm not saying stocks, metals, and businesses are BAD to be invested in. But they are each their own gamble and the one thing I don't want to gamble with is my home.

I agree, I think its a great mind set to have your house paid for especially if you have a family. Sometimes peace of mind and intangibles have a value that exceed financial. I have also learned from people smarter than me to not use your house as a HELOC for investments . Your house is your house , then taking credit against it creates additional uncertainty and back at point A

[TXBullion]

Truth be told......House debt is excellent debt. Tax favorable and a source for equity. I am ready for the tar and feathers.

House debt may be an excellent form of debt, but its still debt.

I'm not opposed to using leverage as a necessary tool. It should be done, however, with the understanding that risks compound as well as gains.

Not necessarily , structured properly , your risk can remain a fixed position while your gain has an unlimited position.

Ex. You buy property A for 100k. You pay 20 k down, obtain non recourse debt for 80k. You default, stop paying, etc you lose the property. Your risk is always fixed at 20k (assuming you did not invest more into improvements etc). Your gains, you keep 100% of them. Goes up 50k in value, all yours, goes up 100k all yours.

You have essentially created a position where you have fixed risk ( you know your max downside ) and your gains are limitless ( so to speak)

This excludes the hypothetical event of a lawsuit but that is a product of other factors not leverage

[Engineer]

Truth be told......House debt is excellent debt. Tax favorable and a source for equity. I am ready for the tar and feathers.

House debt may be an excellent form of debt, but its still debt.

I'm not opposed to using leverage as a necessary tool. It should be done, however, with the understanding that risks compound as well as gains.

Not necessarily , structured properly , your risk can remain a fixed position while your gain has an unlimited position.

Ex. You buy property A for 100k. You pay 20 k down, obtain non recourse debt for 80k. You default, stop paying, etc you lose the property. Your risk is always fixed at 20k (assuming you did not invest more into improvements etc). Your gains, you keep 100% of them. Goes up 50k in value, all yours, goes up 100k all yours.

You have essentially created a position where you have fixed risk ( you know your max downside ) and your gains are limitless ( so to speak)

This excludes the hypothetical event of a lawsuit but that is a product of other factors not leverage

Your argument makes a point for static hedging, but risks accumulate with payment of principal, selling at a loss rather than walking away, sunk interest costs, and the possibility of a tax hit if the note is written down due to market loss. In addition to those, there's the hiccup that refis aren't nonrecourse, and the cumulative risk of your finances changing due to illness or job loss, along with adverse possession, government seizure, etc.

[TXBullion]

I was specifically referring to a specific type of investment scenario. It would most likely not be a house but something with non recourse debt OR non recourse refis as that would be more typical on commercial ( maybe not even real in residential)

I see what you are saying. I just meant you always have a fixed downside ( in theory) . Its not like when you get the leverage, you will lose more than your equity position should you walk away. You have variants such as principal pay down etc. But day 1( assuming a standard mortgage or something not weird like reverse) then that is your maximum loss into the property financially. And in my mind i was thinking more along the lines on commercial where your rents are covering your costs , paying down your principal etc.

I was just trying to make an observable point where increased debt does not necessarily mean increased risk. Arguments can be made that it does but I think its beneficial to know that it does always have to.

[Engineer]

I was specifically referring to a specific type of investment scenario. It would most likely not be a house but something with non recourse debt OR non recourse refis as that would be more typical on commercial ( maybe not even real in residential)

I see what you are saying. I just meant you always have a fixed downside ( in theory) . Its not like when you get the leverage, you will lose more than your equity position should you walk away. You have variants such as principal pay down etc. But day 1( assuming a standard mortgage or something not weird like reverse) then that is your maximum loss into the property financially. And in my mind i was thinking more along the lines on commercial where your rents are covering your costs , paying down your principal etc.

I was just trying to make an observable point where increased debt does not necessarily mean increased risk. Arguments can be made that it does but I think its beneficial to know that it does always have to.

No problem, Jack.

You were thinking more along the lines of business investment while I was thinking of the limitations of a typical homeowner.

[TXBullion]

Agreed , I should have put that as a disclaimer

The other great hedge can be copper pennies. In an inflationary environment, they have a high likelihood of going with the tide. Deflations is where its interesting is that its always worth a penny! You have limited downside and unlimited upside

What the others are suggesting with theoretical alternative denominated currencies may they may also be onto something but I'm not too familiar with currency swaps/investing. I know it would be a challenge to get the loans denominated in those products but maybe there are some creative products out there to make that possible.

I think ray always suggest it also, i myself am a fan of the strategy, pre buying/paying items you will end up using anyways . Like batteries, razors, toilet paper ( if you think the price will be higher in the coming years instead of now

[Engineer]

I think ray always suggest it also, i myself am a fan of the strategy, pre buying/paying items you will end up using anyways . Like batteries, razors, toilet paper ( if you think the price will be higher in the coming years instead of now

+1.7

My wife rolled her eyes when I ordered ten pairs of my favorite sneakers...until they discontinued the type she liked. I still have 4 years worth at $40/pr while she's buying the new and improved version at $60.

[TXBullion]

I think ray always suggest it also, i myself am a fan of the strategy, pre buying/paying items you will end up using anyways . Like batteries, razors, toilet paper ( if you think the price will be higher in the coming years instead of now

+1.7

My wife rolled her eyes when I ordered ten pairs of my favorite sneakers...until they discontinued the type she liked. I still have 4 years worth at $40/pr while she's buying the new and improved version at $60.

Ha!!! thats too funny. Just am finishing up shoe pair number 4 or 5 from a buy several years ago I someone how seem to destroy shoes

[fansubs_ca]

I think ray always suggest it also, i myself am a fan of the strategy, pre buying/paying items you will end up using anyways . Like batteries, razors, toilet paper ( if you think the price will be higher in the coming years instead of now

Batteries...if only they had a longer shelf life...generally don't want to buy more than
a year to year and a half of "likely usage" or there will be serious waste
.
Razors...I'll be really old before I need more, nice that they take up so little room and
one usually lasts me 1-3 months.

Toilet Paper...have room for about 6 months worth, that's usually what I try to build
it up to by the time we get snow. (I try to reduce winter shopping, especially for bulky
stuff because winter makes everything more difficult than it needs to be.) Since it's
spring now I have to restock.

My wife rolled her eyes when I ordered ten pairs of my favorite sneakers...until they discontinued the type she liked. I still have 4 years worth at $40/pr while she's buying the new and improved version at $60.

Back in 2008 I made a 12 pair purchase from Payless...though I had to buy a gift card,
use it to make the order online for in store pick up which I picked up about a month
after getting the gift card on my next trip to the U.S. (The Canadian division doesn't
do that, they either have them or they don't, no ability to special order, the best they
can do is look up what other locations have on hand and send you running all over town
for them.) I even got lucky and got BOGO when I did the order (didn't actually plan
that) so I got more shoes for my money than originally planned.

Though more than price there was a bit of a concern at the time about things
that may disrupt international trade, I am unfortunately a size 14W which is not
particularily common, and have a preference for velcro. (Not only saves time
but holds more solidly than laces.)

All said between BOGO, the U.S. price being lower than the Canadian price to
begin with and price increases on the particular style over the ensuing years
I ended up paying about half what I would have to buy them here.

I had 12 pairs on hand before that (when you are my size you generally buy them
when you see them) and that brought me up to 24, I'm back down to about 12
pairs on hand now so somewhere this year or next I really should do a restock of
the new style. (Picked up a pair of the new style this year, it's currently in "test"
and seems to hold up just as well as the old ones.)

Ha!!! thats too funny. Just am finishing up shoe pair number 4 or 5 from a buy several years ago I someone how seem to destroy shoes

Could it be your line of work? When I worked for a fast food restraunt doing
cleaning the grease/water/cleaning chemicals on the floor caused the bottom
of the shoes to wear through in about 3 months. After changing to annother
job I found I was getting at least 6 months out of a pair.

[Engineer]

I think ray always suggest it also, i myself am a fan of the strategy, pre buying/paying items you will end up using anyways . Like batteries, razors, toilet paper ( if you think the price will be higher in the coming years instead of now

+1.7

My wife rolled her eyes when I ordered ten pairs of my favorite sneakers...until they discontinued the type she liked. I still have 4 years worth at $40/pr while she's buying the new and improved version at $60.

Ha!!! thats too funny. Just am finishing up shoe pair number 4 or 5 from a buy several years ago I someone how seem to destroy shoes

Shoes are cheap compared to joint replacements. Pushing them, I could go through 2 pair a year, but through spending an extra $40/yr, I can keep my knees aligned and not hurting for a third of my walking life. If that small investment postpones a $40k knee replacement for even a year, it's an insurance policy that costs .001 of capital invested.

Add in the comfort factor with dollar hedging, and it's a no-brainer to buy a closet full of shoes.

[TXBullion]

I never looked at it that way. And i would guess thats my time frame on shoes as well. This is really genius here....

[TXBullion]

Forgot, FOREVER stamps!!!!!

Great inflation hedge.

You can also further enhance the benefit by buying at a discount

http://www.ebay.com/itm/Forever-Stamps- ... 25a2ca4d02

look hard enough, you can find in quantity at 5-15% off.

You do have counterpart risk here though. If USPS decides to switch their system, goes bust etc. poof.....

[neilgin1]

Ron Paul is in the news saying there is a dollar bubble. Stackers already know this, but when I saw the article, it did make we wonder what you guys think. What is the best way to prepare for, or the best places to store "wealth" in anticipation of a dollar crash? I get it, no one knows what a dollar crash would mean exactly. But who will come out the least damaged on the flip side? Those holding PM's? Those holding Euros? Those holding stock in certain companies?

(I put "wealth" in quotes because the word can imply an abundance of money, which is misleading in my situation. Basically all of my "wealth" was just transferred to the United States Treasury)

Not saying that I am fearing an impending currency crisis. TPTB are clearly elite can-kickers! So as plausible as it may be, I'm not holding my breath either way. And lets please try to steer clear of collapse of society on this currency crisis exercise. Of course I won't ever rule out the possibility of TSHTF, but for purposes of this thread I would like to try to stick to things other than ammo, nips, tampons and Twinkies if we can help it.

i'll try and stay off the SHTF stuff.......I agree with the posters that say own the home outright. Must have a base dwelling.

the word "hedge" doesn't imply investment, right. You're trying to lock in VALUE, right. break it down to what we need to LIVE everyday.

Water, Food, Heat.

let me go in another direction. I don't trust paper or digital money or investment vehicles....I DID at one time, I thought the BEST way to park money was the triple A rated muni bond, it seems like yesterday they paid out tax free.....4-5%, but now?.....do any of you guys REALLY trust paper of digital vehicles to HOLD VALUE? I have NO TRUST in ANY banking or trading institution. I cant help it.

I like what Tex wrote, "copper", therefore in my world, I love the $100 Face Value brick of nickels, think of each roll as a metal $2 bill....75% copper, 25% nickel...its true we went from 5.2 cents a coin to last I looked 3.9 a coin, so in theory that's a 25% "loss", but its a simple hedge...and yes, each brick does weigh a bit, but a 100 bricks ($10,000)...wouldn't that be of some comfort?....stashed in the basement. A whole LOT of metal $2 bills, wrapped, and inside a sturdy cardboard box?....and if you have a good relationship with the folks at your CREDIT UNION, which you should, you pay face, no more. That's real savings, imho.

Lets go back to water, food and heat. land acquisition. I don't where you, my brothers live, but where I do is the OPEC of clean drinking water, plenty of land, for sale, that has natural springs....VALUE....plenty of land (no houses) that is heavily forested...value.....my theory is , the old school investments that do NOT attract a lot of interest NOW, those are the places to park dollars.....I just saw a quote of 474 in Netflix stock, and i'm decidedly middle class and HAPPY for what I have, but boy, when I saw that 474?...if I was high net individual with the capacity to short 10,000 shares?...or 100,000?....my only fear would be when the hammer comes down, they'll just suspend trading...or some mysterious cyber FUBAR happens and I get jammed.

my hedge against the dollar bubble is metals, in coin form, wood and water.

and about the SHTF?....its already hit. i'm going to pin up a 1:30 of something I HAVE NEVER seen on the suburban streets of America in my 50 plus years of life, and ya'll tell me if this is "normal":

[johnbrickner]

Interesting. Ontario is were you fly into when you don't want to use LAX or John Wayne airport in the OC. Basically LA's back yard. I used to live about 20 or 30 miles from. Thanks for keeping us aware, Neil.