Borrow money to buy silver?

[mortarman]

I could potentially be leaving the army here shortly and am exploring the idea of precious metal speculation. I know there are risks, and I'll admit I don't fully understand them, but with the Fed committed to low interest rates for the time being, I doubt we'll see a repeat of Volcker era interest rates anytime soon.

Long story short, I'm considering taking out a big ol' loan, courtesy of the VA, and buying a bunch of silver. I'll sell however much is necessary to make the payments each month and hope that by the time I'm done, the metal will have appreciated enough to cover interest and leave me with a stack. This is a generic borrow-to-buy scheme, I've just never attempted it. I need some feedback, as things could get mighty interesting for me and mine here shortly. Thanks and regards.

[Engineer]

Buying on margin is dangerous, and a good way to bankrupt yourself.

Buying on margin backed by the government is even more dangerous, because many of those loans aren't dischargeable in bankruptcy.

[wagsthadog]

Hi there-

Hmm, interesting. Well, if it's any encouragement, when I took out my student loans, I took whatever my loan overpay (money they paid OVER the tuition) was and bought coins. If I sold all my coins that I bought then right now I'd have enough to cover ALL my loans...so it can be done-

If you're going to do this, I'd buy something with a low premium, probably a few 90% bags. If you might need to sell silver to pay rent, etc, you want NO bullsh#% when you go to sell, and instant liquidity, so my vote is to stay away from War Nicks, 40%, and Foreign. ASE's are probably another good choice, but I don't like premiums, I don't care how nice the coin looks.

Dont forget to buy some gold, too. If you need to sell for rent, etc, gold may be up but silver down, and vice versa.

Overall, I kinda like to play risky so I say go for it, but don't take out more than would destroy you financially if you needed to sell it all at a loss. Maybe $50K? That would buy some silver/gold...

JMO, not a financial advisor, and any actions taken are your own risk :/

wags

[Engineer]

I see two possibilities for our currency; The first is high inflation at the hands of the Fed, and it seems to be what many are expecting.

The second is something that nobody seems to be talking about...

The Fed was started with a hundred year charter in 1913, which means it will end next year unless congress renews it. There's many scenarios on how it could happen, and there's a chance that their plug could get pulled, at which time the Fed (a corporation) could go bankrupt. This seems to fit with their actions in loading up the Fed with every imaginable form of bad debt, and the Fed even buying its own debt.

What happens next is above my pay grade, but I sort of suspect that a period of severe deflation would be as likely as severe inflation.

[dannan14]

The second is something that nobody seems to be talking about...

The Fed was started with a hundred year charter in 1913, which means it will end next year unless congress renews it. There's many scenarios on how it could happen, and there's a chance that their plug could get pulled, at which time the Fed (a corporation) could go bankrupt. This seems to fit with their actions in loading up the Fed with every imaginable form of bad debt, and the Fed even buying its own debt.

What happens next is above my pay grade, but I sort of suspect that a period of severe deflation would be as likely as severe inflation.

This is very chewy. i did not know that the Fed's charter was set to expire. i wonder if the Fed is specifically buying back foreign owned debt. That would give foreign creditors a chance to convert it to something else before the bomb drops, if in fact, Congress tries to make it all just go away (the massive debt i mean). Leaving most of the rest of the world high and dry from the fallout seems to be the prudent course if Congress doesn't want WWIII declared on us hehe. i'm going to have to think about this for awhile. My paranoid/conspiracy theory part of the brain is going wild.

[beauanderos]

Even if the Fed charter was not renewed, the liquidity injected into the system GLOBALLY would not dissipate. Silver and Gold are appreciating against their native currencies in EVERY country and will continue to do so as long as the fiat system is maintained. There are two forms of debt, what you are considering doing would be good debt, and I employ that means myself. The consistent gains in appreciation of silver and gold over the last decade have far exceeded the nominal cost of servicing the interest accrued and minimum monthly payments. At some point, with a price explosion, there comes a point where you could consider "taking some off the table" and reducing your debt load. Particularly, if your access is to a fixed loan, and your means of protecting yourself otherwise is a slow incremental process, then I would be strongly in favor of it. Say you have terms of a locked rate payable over 60 months, at 5% interest. Is there anyone here who would argue that PM's will not increase by more than five percent in the next five years?! If you do this, you might want to study a chart of seasonal strength and weakness, so that you can time your purchases to best effect. I wouldn't obtain the loan and spend the entire proceeds immediately. You might want to hold out six months of payments, either to create your own emergency fund, or to have money available for future "dips" as they occur. You might also want to land a new job when you leave the military before obligating yourself to a large lump sum of further debt. What you're really talking about is shorting the dollar and saving real money instead of fiat, which is guaranteed to become worthless... by the end of the year if you believe Lindsey Williams. Whatever you do, you have to feel comfortable, and don't do it behind your wife's back.

[Engineer]

Is there anyone here who would argue that PM's will not increase by more than five percent in the next five years?!

If we maintain the status quo, I'd expect 5%+ increases during that timeframe.

If the Fed is replaced by a new central bank with no debt, I'd expect the value of the dollar to skyrocket...which would be VERY bearish for metals.

My paranoid/conspiracy theory part of the brain is going wild.

Would it help your brain melt a little more if I told you their charter expires on 12/21/12?

[dannan14]

Is there anyone here who would argue that PM's will not increase by more than five percent in the next five years?!

If we maintain the status quo, I'd expect 5%+ increases during that timeframe.

If the Fed is replaced by a new central bank with no debt, I'd expect the value of the dollar to skyrocket...which would be VERY bearish for metals.

My paranoid/conspiracy theory part of the brain is going wild.

Would it help your brain melt a little more if I told you their charter expires on 12/21/12?

ROFLMAO! Yeah, but only the conspiracy part. That one doesn't touch the paranoid part because i've actually researched the Mayan calendar. To them, that's just the day to flip the page.

[Engineer]

ROFLMAO! Yeah, but only the conspiracy part. That one doesn't touch the paranoid part because i've actually researched the Mayan calendar. To them, that's just the day to flip the page.

You must have missed the part where I was a year off...(as foghorn leghorn would say, it's a joke son).

The Fed's charter actually expires on 12-23-1013 (the 21st is a Friday), but its a key day to watch. I honestly have no idea which way things will go with the Dollar (inflation vs deflation) when we get to that date, but its well worth watching CNBC (to do exactly the opposite of what the pundits recommend) and keeping an eye on whether the banks are holding mortgages or dumping them prior to that date.

If the big guys are loading up on physical assets in 2013, inflation would be the better bet. If they're sticking in Dollars, deflation would be the better bet.

[Lemon Thrower]

Buying on margin is dangerous, and a good way to bankrupt yourself.

Buying on margin backed by the government is even more dangerous, because many of those loans aren't dischargeable in bankruptcy.

pigs get fat, hogs get slaughtered. trees don't grow to the sky, and metals dont go up in a straight line.

[ZenOps]

My guess: They will do *both* inflation and deflation. As long as the Fed has power to create and destroy US fiat dollars at will, they can and will do both before a SHTF scenario.

The trick is: Knowing which one they will do first and when, they might even do it twice, heck - maybe even three times. Borrowing to buy metals is risky as the Fed can destroy dollars just as easily as create them.

Listen to the wisdom of the man on your nickel:

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson.

[JobIII]

Aside from the issues already raised. I'd say see what you can get and at what rate. I thought about doing this a couple of years ago. But the rate on the loan was around 8% which was way too high for my enjoyment.
Say you were able to get a huge loan and a great fixed low rate. All it would take for you to have trouble is silver to drop and not rise again.
Also who were you thinking about buying the silver from? Dealers, the public, NWT or Apmex? And would this be a lump buy or continuous smaller buys/sales?

[mortarman]

I would likely be getting 90% bags from NWT mint. Looking at 20 bags or so. Interest would likely be around 6%. Looking to form an llc iot limit my personal liability in the event of severe deflation.

[barrytrot]

I would likely be getting 90% bags from NWT mint. Looking at 20 bags or so. Interest would likely be around 6%. Looking to form an llc iot limit my personal liability in the event of severe deflation.

How does an LLC limit your liability in the case of a deflation?

[camtender]

I would likely be getting 90% bags from NWT mint. Looking at 20 bags or so. Interest would likely be around 6%. Looking to form an llc iot limit my personal liability in the event of severe deflation.

How does an LLC limit your liability in the case of a deflation?

If you leveraged-up under a properly structured LLC on the bet of inflation, but the market went against you, there is implied personal asset protection - as LLC statutes vary by state.

[barrytrot]

I would likely be getting 90% bags from NWT mint. Looking at 20 bags or so. Interest would likely be around 6%. Looking to form an llc iot limit my personal liability in the event of severe deflation.

How does an LLC limit your liability in the case of a deflation?

If you leveraged-up under a properly structured LLC on the bet of inflation, but the market went against you, there is implied personal asset protection - as LLC statutes vary by state.

I see so you are planning to use the LLC to avoid paying your debts. Evil move.

And it likely will not work as well as you think. But even if it does evil has its own price.

[Mossy]

Are you sure the VA will loan to an LLC? I do not have knowledge, but it sounds doubtful.

[camtender]

I see so you are planning to use the LLC to avoid paying your debts. Evil move.

And it likely will not work as well as you think. But even if it does evil has its own price.

It nice to see people on here that have the ability to see peoples' intent (some kind of super hero alter ego?), not to mention accounting/legal expertise to boot.

In addition, your question on how an LLC could protect in the event of deflation was answered, but to spin away from your embarrassment, I suspect using some kind of defensive mechanism.

Sounds like Psychological Protection, as Dr. Freud would say........

In a general sense, psychological projection can mean that people assume that other people share their thoughts or beliefs, good or bad. For example, someone who likes dogs might assume that all people like dogs, or an unfaithful spouse might conclude that everyone is unfaithful, since this would reflect his or her own experiences. As a defense mechanism, this allows people to feel more comfortable about themselves because they think they see traits in common with others.

[barrytrot]

I definitely don't assume my beliefs are shared. I only assume they are correct.

And I will keep assuming as such until proven that my beliefs are incorrect.

Certainly the belief that a "word is your bond" is not going to be proven wrong, EVER.

If your purpose was not to avoid debt then what was it? I am happy to issue a public apology if I maligned you inappropriately.

But if you were trying to avoid debt then I state again: Evil.

[Lemon Thrower]

the one and only time i ordered from NWT Mint i spoke to their presiddent - Ross somebody - who assured me they had my bag of 90% in stock. Somehow they still took 6 months to ship it to me. try repaying a loan by selling silver you haven't received yet.

[mortarman]

Barrytrot makes a valid point. No apology is necessary. And he's absolutely right that the idea was motivated by the thought of sheltering my family if we lost our shirt.

To his credit, it's making me think about the moral obligations that are incurred when borrowing money. It's an idea that I failed to consider. Thanks for keeping me on the straight and narrow, I honestly mean that. I guess the thought of me being a civilian again just makes me panic a bit.

The patriot express loan (http://www.sba.gov/content/express-programs) is available to businesses. If not an llc, then what is a good option? Sole proprietorship? Incorporation? I'm new as a spring chicken to all this and appreciate any guidance y'all have to offer.

[Hades12]

The SBA requires business plans and most of the loans are just gurantees to the bank that you get the loan from. Have a feeling they will not approve of your plan.

[Mossy]

the one and only time i ordered from NWT Mint i spoke to their presiddent - Ross somebody - who assured me they had my bag of 90% in stock. Somehow they still took 6 months to ship it to me. try repaying a loan by selling silver you haven't received yet.

Oh, I had "real good luck" with them, then. It only took a couple of months for them to send me the Krug's I ordered, and that they kept saying were "in stock". Seems they also claimed they only made a mail run across the border into the US once a week, and somehow could not resched around holidays.

Noooo, I don't think I'll be back with that outfit.

[Mossy]

The SBA requires business plans and most of the loans are just gurantees to the bank that you get the loan from. Have a feeling they will not approve of your plan.

Well, he originally wrote "VA" (who I did not know made loans).

[mortarman]

The VA doesn't make loans. I misspoke.