"When" the market crashes

[My2Cents]

I'm a pretty logical person most days, and like most people who stack silver or any other PMs, I sometimes wonder if I'm really buying these at the lowest price in the forseeable future.

PMs by nature, are inflationary hedges. But according to a book I just read... "The great crash ahead" by Harry Dent, he's of the opinion that WHEN the market crashes in the next year or so, that EVERYTHING (including PMs) will correct with it... and we'll endure a long period of Deflation (not Inflation as everyone suspects).

I could go into more detail here, but the main point is that the economy has to purge itself of all the excess bad debt along with all of the 'stimulus' that was put into place, and the only way to do that is to go through the pain of what he refers to as the 'detox' of easy credit and low interest rates. All this stimulus is keeping the markets propped up on weak legs, and the crash is inevitable.

I tend to agree.

That said, and looking at the recent past... when the markets do crash, the price of gold and silver do head south with the major indexes... and I'm not taking the Dollar Index into any of this.

So while we hoard and save gold, silver, and platinum group elements under the assumption that 'the market is going to crash one day',... Wouldn't it be wise to just save your FRNs and buy PMs when you think the market finally bottoms?

[justj2k78]

How do we know when the market bottoms?

[My2Cents]

That's an interesting question, and according to one book I read a few years ago... "The anatomy of the bear - Lessons from Wall Street's four great bottoms"-- Russell Napier, he describes (and correctly btw) that the only true signal of the bottom of the market is to watch the price of copper. When that bottoms, then you'll know.

Looking at the price of copper duing our latest market crash, you can clearly see it.



Of course, you won't ever truly know if it's the bottom until we're passed the point. Hindsight is always 20/20... but I would guess that you could get pretty darn close.

[AlexTG]

I'm a pretty logical person most days, and like most people who stack silver or any other PMs, I sometimes wonder if I'm really buying these at the lowest price in the forseeable future.

PMs by nature, are inflationary hedges. But according to a book I just read... "The great crash ahead" by Harry Dent, he's of the opinion that WHEN the market crashes in the next year or so, that EVERYTHING (including PMs) will correct with it... and we'll endure a long period of Deflation (not Inflation as everyone suspects).

I could go into more detail here, but the main point is that the economy has to purge itself of all the excess bad debt along with all of the 'stimulus' that was put into place, and the only way to do that is to go through the pain of what he refers to as the 'detox' of easy credit and low interest rates. All this stimulus is keeping the markets propped up on weak legs, and the crash is inevitable.

I tend to agree.

That said, and looking at the recent past... when the markets do crash, the price of gold and silver do head south with the major indexes... and I'm not taking the Dollar Index into any of this.

So while we hoard and save gold, silver, and platinum group elements under the assumption that 'the market is going to crash one day',... Wouldn't it be wise to just save your FRNs and buy PMs when you think the market finally bottoms?

Two points I would like to make because I actually thought about this very subject recently.

1. An ounce of gold/silver today is an ounce of gold/silver tomorrow, and will be and ounce of gold/silver 100 years from now. But you own it, you hold it, and you can choose what to do with the gold/silver.

2. If you do think it's possible that the economy crashes and we go into deflation, then buy/stack copper pennies. If copper prices go down, you will always have the 1 cent face value to fall back on and you will be able to take advantage of the deflating prices like happened in the depression. On the other hand if copper goes up, the feds (arguably) will eventually let people melt down copper pennies for their content.

That being said, Ben Bernak is a "great depression scholar" and believes enough was not done to save the economy from the crash. He will print money until there is not any paper left to print on (or harddrive space to fill) just to try and avoid another depression, even if that means hyperinflation. So before we have deflation, we will have hyperinflation, unless Ben losses his spot. When he is gone, everything changes. As long as you hold your silver/gold into the hyperinflation, you will win out.

The bottom line is, stack metals now and forever more.

[beauanderos]

I wouldn't sell anything you had, hoping to buy back at "the bottom." But if you've been dollar cost averaging into silver anyway, why not halve the money you've been investing and hold it in cash until the bargains come along... if they do.

[John_doe]

I do believe that there will be a crash. It is pretty much a self fulfilling prophecy within a fiat monetary system. The dollar and markets have stabilized in the short term, but it is a band-aid fix. We all suffer when they put these "band-aids" on the markets. We see higher prices, while wages stay constant. Bernanke is ruining the thing that makes America great.


As far as buying pm's at the lowest price for the future, I would suggest doing a lot of market research and analysis.

[My2Cents]

I'll stack regardless of the price, only because I make more money than I need to survive. I was trying to figure out how to buy more PMs for my dollar. And if the presumption is that we hoard to hedge against a market crash, then it would make more sense to save for that eventual day that it does crash.

I can see both theories involving a market crash... both hyper-inflation and deflation. We've seen the inflationary aspects of all the liquidity in the markets... higher gas and commodity prices (food specifically)... although the Fed's don't include energy or food into their inflation numbers (of course not, because it would screw the numbers up).
Deflation seems logical too. After all, this last crash enabled me to buy 3 more houses at extremely discounted prices.

[silverflake]

Fellow realcenters, how short our memories are. In 2008 when our economy 'crashed', PMs nosedived even further than the broad equity markets (and a subject for another thread - we kind of had a separation of paper prices and physical...). Everybody ran to the good ol' dollar. But when everyone came to their senses, the PMs were the first asset class to start correcting and came back faster and higher than other equity markets. I say there will be a repeat.

Hold your physical, set your stops on your paper (ETFs, etc).

And keep stacking!

[beauanderos]

Fellow realcenters, how short our memories are. In 2008 when our economy 'crashed', PMs nosedived even further than the broad equity markets (and a subject for another thread - we kind of had a separation of paper prices and physical...). Everybody ran to the good ol' dollar. But when everyone came to their senses, the PMs were the first asset class to start correcting and came back faster and higher than other equity markets. I say there will be a repeat.

Hold your physical, set your stops on your paper (ETFs, etc).

And keep stacking!

So there is no guarantee that you could source cheap silver without a huge premium, if and when your bottom occurs. As well, it's impossible to predict what TPTB will do to push the price around, when or how much. The 2008 precious metals plunge was engineered, if you do enough research on the subject there is irrefutable proof that the bullion bank cartel orchestrated that "crash" as well as countless others.

[My2Cents]

Fellow realcenters, how short our memories are. In 2008 when our economy 'crashed', PMs nosedived even further than the broad equity markets (and a subject for another thread - we kind of had a separation of paper prices and physical...). Everybody ran to the good ol' dollar. But when everyone came to their senses, the PMs were the first asset class to start correcting and came back faster and higher than other equity markets. I say there will be a repeat.

Hold your physical, set your stops on your paper (ETFs, etc).

And keep stacking!

So there is no guarantee that you could source cheap silver without a huge premium, if and when your bottom occurs. As well, it's impossible to predict what TPTB will do to push the price around, when or how much. The 2008 precious metals plunge was engineered, if you do enough research on the subject there is irrefutable proof that the bullion bank cartel orchestrated that "crash" as well as countless others.

I can't say that it was engineered, but I do know that I leveraged the ProShares Ultra Short silver ETF by buying Put options when silver nailed $50 oz and rode that puppy down. Made some cash that week

[68Camaro]

To further add to points well made by Ray and others above, there is no predicting the type of market crash that will occur, how long that will take (sudden, slow motion, or some combination), or the intermediate stages of it. I believe the dollar will become worthless (is already - but is walking dead propped up by a combination of inertia and unwillingness of the masses to disbelieve TPTB), which means hyperinflation in terms of the USD. That may occur simultaneous (or not) with deflation and a depression or worse. While I understand the point made by the OP, I am personally not willing to bet the farm on paper, when physical always has retained some minimum value, and when the main plan is to stock the necessaries to get THROUGH the rough period (as best I know how) without touching the PM until the other side. PMs are wealth preservation, not investment.

[silverflake]

Amen, 68Camaro! Don't invest in PMs. Use them as your hedge, your protection, your barter tool. Definitely.

[Mossy]

Prices are going to jump all over the place for different things and over time.

As was mentioned above, PM could drop, but I'd think that if the problem stayed around for a while, the prices of PM would go a long way up. Fuel prices would probably go way up, most used cars will drop in value, and there would not be a market for new cars. People paying on their cars will abandon them, or "have an accident" that totals the car, or report the car stolen. Food will go up in price, houses probably go down in value, a plot of land that could be gardened up in value. Fancy boats will be abandoned (again), while skiffs, canoes, and kayaks go up in value.

Soooo, just exactly what can we call that mess? "Inflation", "deflation"?

[fb101]

This is an election year with a democratic president.
No crash this year.
PMs are vulnerable this year because all the news will be twisted to be positive.
We will never see a deflation because TPTB will not allow it.
We would have riots with deflation because so many believe it's up to the gov't to supply them with money.
We will inflate as far as is required to keep riots out of the streets and then some.

Next year is another story.

[68Camaro]

Mossy - A mess is right. For the important things - food, fuel, key staples, clothes, guns, bullets, cropland, seed, farm animals, important medicines - it will be a hyperinflationary time as measured in USD. Luxuries or optional goods owned on credit will be abandoned and prices of them will tumble - no surprise there, and that can't be part of any equation that values the USD.

That is what would happen without intervention. But what would actually happen is something closer to where fb101 has it. As things start to devolve the President will declare an emergency and would put controls in place that will turn this country into a dictatorship (the level of which will depend on who is in office). That is, unless there is a major shooting war that comes ashore. At some point it becomes very difficult to imagine the details as it would change moment by moment.

[68Camaro]

But we are (I think - hope) 1-3 years away from that. I hope it is longer, or never happens. I don't want to see this happen, but I have to plan for it.

[Copper Catcher]

A sidebar point on silver...from
http://esilverprices.net/world-could-wi ... e-by-2015/

The world has already witnessed a 93% drop in global inventory of Silver since the 1950 and consumptiom, investment demand continues to outpace supplies, that the world could witness silver shortage as early at 2015 or if not latest by 2020, according to FutreMoneyTrends.com.

In a video titled ‘All Hell Will Break Loose in the Physical Market If Silver Goes down: Silver Investment Update’, it is said that in 1950 there were 10 bn ounces of silver above ground available which was sufficient for 140 months of supplies but by 1970 available supplies were sufficient for only 70 months and by 1990 15 months and by 2010 11 months.

The last time above ground inventory was so low was in 1318. Consumption of silver in industry has seen a surge in recent years. In 1999 only 100 mn ounces of silver went into electronics industry while in 2011, 250 mn ounces of the metal may be consumed. In 1999, the use of silver in solar panels was so small, but in 2010 it has risen to 75 mn ounces.

It is increasingly becoming difficult to extract silver from mines- considering the cost and time involved. New mines identified in USA and Canada may take more than 10 years before a single ounce of the metal can be mined out.In Nevada, mine production has already peaked, according to FutureMoneyTrends.com. In 1997, the place produced 25 mn ounces of silver but in 2010 only 7.3 mn oz. In USA large quantities of silver go into production of American Silver Eagle coins. Of the top eight silver producing states in US, all have achieved peak production despite the newer technologies. According to US Geological Service, ore grades have collapsed 95% in the past 75 years.

Hence, considering the present gold: silver ratio, silver is an attractive investment.

“2012 is shaping up to be a very exciting year for precious metal investors, especially if we see a small pull back. As investors rush into the physical metal, we could very well see some type of Silver shortage or at the very least major delays on delivery if silver was to fall back down to the $25 mark. We are not saying that it is, but if silver was to pull back, all hell could break loose in the physical market.”

“If silver during the Euro crisis has the same initial reaction as it did in 2008, with a sharp decline, we believe that due to the nature of the crisis, 2012 being a currency crisis vs. 2008 being a liquidity crunch, the demand for physical silver would be overwhelming on a global scale. FutureMoneyTrends.com’s ultimate low for silver is $22.50, this being roughly the same percentage pull back from the 2011 high that we saw in the 2008 crash. Only this time, we believe it would be a flash crash, short lived, sending silver north of $50 in the matter of weeks. If a fiat currency crisis starts, Europe, Asia, and even Americans will start to purchase precious metals in order to protect themselves from currency devaluation.” - CommodityOnline

[theo]

Although future crashes are certainly possible, a sustained deflationary recession is not; at least not with a central bank that can print money at will. We have nearly 16 trillion in debt on which we have pay about 450 billion in interest per year. About 6 trillion in debt will roll over (or mature) in the next five years. Add to that increasing medicare and social security costs in the coming years, and you have a goverenment that WILL default if the money supply is not continually expanded. Deflation, which requires a decrease in the money supply, is out of the question.

[Copper Catcher]

Central banks' have been major buyers of gold over the past few years, especially after the U.S. dollar and euro wobbled. Here is a list of the countries with the biggest official gold reserves.

Central banks of emerging economies are key drivers of gold prices as they have been quietly accumulating significant amounts of gold, especially after the global financial crisis of 2008.

Data from the World Gold Council shows Russia increased its gold reserves from 457 tonnes at the start of 2008 to 851 tonnes by the end of 2011.

Similarly, China which had 395 tonnes of gold in reserves at the start of 2000, accumulated another 600 tonnes by 2008, and then scooped up another 400 tonnes by the end of 2011.

Meanwhile, India raised its gold reserves in one shot by purchasing the IMF's entire 200-tonne tranche in 2009, and boosted its official reserves to 557 tonnes.

Net purchases among central banks and official institutions amounted to 93 tonnes during the fourth quarter of 2011 alone, says the WGC in a report.

"This compares with a fourth quarter of 2010 which saw minor sales among central banks and official institutions, amounting to 18 tonnes. Annual purchase for 2011 as a whole stood at an impressive 400 tonnes, compared with 77 tonnes of net purchases the previous year," said the Council.

Central banks of Russia (33 tonnes) and South Korea (15 tonnes) were some of the biggest buyers last year, along with Thailand, Bolivia, Venezuela, Kazakhstan and Tajikstan.

Central banks, which have been predominantly net purchasers of gold since Q2 2009, increased their activity even more during 2011. The WGC says that central bank net-buying reached a record with much of the purchases taking place during Q3 and Q4.

Emerging markets have been especially spooked by the volatility in the American dollar and with the euro and the British pound victims of their own internal economic turmoil, gold has emerged as a stable store of value.

Most analysts expect the trend to continue, especially as central banks of developed economies - the very banks that are buying the yellow metal - will continue to keep a loose monetary policy.

"[Ben] Bernanke and the Fed aren't the only central bankers in the fiscal and monetary bullring," says Frank Holmes, CEO of U.S. Global Investors. "Brazil has cut its benchmark interest rate a few times and China lowered its reserve rate for banks in December. According to ISI Group, 78 "easing moves" have been announced around the world in just the past five months as countries look to stimulate economic activity."

Adrian Ash from Bullionvault says global central banks are on a buying spree since the Fed cut interest rates by 25 basis points in 2007. Central bankers' shift to buying gold was a significant sea change for the yellow metal.

Not all central banks are net buyers, especially in the Western world. Spain, for example has offload nearly a 100 tonnes since 2007, and the European Central Bank nearly offloaded 147 tonnes of the yellow metal during the same period.

CHINA LEADING THE WAY

While OECD economies sell their gold holdings, emerging markets led by China are on an accumulation spree.

China, which is the biggest foreign buyer of U.S. bonds, has been looking to diversify its foreign-exchange holdings.

"The total volume of China's Treasury holdings appears to be showing the first year-on-year declines in 10 years while gold reserves continue to increase by about 30% a year," says a Goldcore report.

More importantly, creditor nation central banks gold holdings remain very small when compared to western debtor nation gold holdings which are generally well over 50%.

World Gold Council data shows that China's official gold reserves at 1,054 tonnes, remain very small when compared to those of the U.S. 8,133 tonnes and indebted European nations - such as Italy with 2,452 tonnes.

"China's growing gold reserves are miniscule when compared with China's massive foreign exchange reserves of over $3.1 trillion. The People's Bank of China is almost certainly continuing to quietly accumulate gold bullion reserves. Common sense alone strongly suggests that they are," says Goldcore.

"As was the case previously, the Chinese government will not announce their gold bullion purchases to the market in order to ensure they accumulate their gold reserves at more competitive prices. They also do not wish to create instability or falls in or runs on the dollar and or euro - thereby devaluing their sizeable reserves."

http://www.zawya.com/story/ZAWYA2012031 ... _holdings/

[tractorman]

I don't know ANYTHING about the silver market. I'm just a collector of silver, and no I don't mean the numismatic stuff. Mom was the manager of the local convenience store and when she heard on the news about the Hunt brother's boom, she would kinda keep an eye out for silver coins. I'm not saying she searched all the coins, but she would notice Bens and 64 Kens when someone paid for gas or cigarettes with them (she didn't know about 40% halves ... DOH!). She always brought them home to me and it caught my fancy so I have sporadically bought silver some over the years. If only I'd KNOWN.

I realize this is a little off topic, but I looked back over the years I (mostly) missed out on ... over 25 years I've seen bottoms of $3, $9, and most recently $27. Now, like I said ... I know absolutely NOTHING about predicting with charts, but ... the next number in that progression is 81. I think I'll just feed the hobby as I can ... under the dollar cost averaging theory, if it must be viewed as an investment.

[My2Cents]

But we are (I think - hope) 1-3 years away from that. I hope it is longer, or never happens. I don't want to see this happen, but I have to plan for it.

I think you're right in the ballfield of it happening.

[My2Cents]

Although future crashes are certainly possible, a sustained deflationary recession is not; at least not with a central bank that can print money at will. We have nearly 16 trillion in debt on which we have pay about 450 billion in interest per year. About 6 trillion in debt will roll over (or mature) in the next five years. Add to that increasing medicare and social security costs in the coming years, and you have a goverenment that WILL default if the money supply is not continually expanded. Deflation, which requires a decrease in the money supply, is out of the question.

Agreed. The biggest question is how long the 'sustained' deflation will persist. If it's like the last crash, it'll be over within a few months... at least for PMs.

[Mossy]

68, I could do without agreeing.

If you take a look at what happened in NYC with price controls, well, it's not a good thing, and not really enforcable, either.