THE LONG DRY SPELL - GENERATIONAL PERSPECTIVE

[DTEJD1997]

Hey all:

I think it all boils down to this...

The government has written a lot of checks it can't cash. Social Security, Education, Defense, Pensions, Medicaid, Medicare, on and on...The government is spending far more than it is taking in. Even if tax rates were to up substantially, we still could not pay for everything. There would be an open rebellion if tax rates go too high too quick. I grew up in the 70's. I remember my father rarely eating breakfast with the family. He was gone for lunch. He was frequently gone for dinner. He would work Saturday mornings, sometimes the afternoons too. He EASILY worked 65 hour weeks. The tax rate on his earnings was high.

I won't do the same thing. If tax rates go above 40%, I'll just scale back on my work & earnings. I am sure I am not the only one who won't put up with it.

So that leaves the government with TWO choices:

A). The HARD WAY. Get spending down to responsible levels. Cut some programs, raise interest rates, pay off the debt. Kind of like what Paul Volker did back in the day. That requires a LOT of fortitude and will result in a lot of pay.

B). THE EASY WAY. Just print your way out.

Now which is it going to be?

Plan accordingly.

[Country]

Six months have now transpired since I wrote this thread. I am believing that a generational wait is possible before PM resurgence. Now, many would relish the opportunity for decades to increase their stash, but others will either keep it for their future generations or just liquidate because they can't wait that long. I really don't see why the manipulation couldn't continue a lot longer than most of us expect. I'm not relishing another long wait like 1981-2001. I think I need some visible hope, but can't see it right now. This bear market in PMs looks very depressing and could have lasting effects on the belief that PMs are a viable way to store wealth.

[68Camaro]

Country - it might happen that way, but I think we are at a significantly different period in the economy and politics of the country and world than we were 30+ years ago. I don't give it more than 7 more years tops, and I'm tending to think we can't get past 2016 or 2017 without one of our competitors making a move - presuming the USD doesn't collapse on it's own before then. And that's presuming the futures market doesn't collapse first. No, today's world is radically different than 1980. That's why I'm in PMs hard now, but I only had a token amount then as a curiosity.

[Rastatodd]

Keep posting Realcent members. I'm fascinated by peoples take on this matter. I was just wondering with what seems along time with pm going sideways if not down whether I have bet on the wrong horse. I came along this tread and am invigorate in the possibility of what and when not if's.

[IdahoCopper]

I look to Japan and its multi-decade stagnation. Since Jan 95 interest rates have been less than 1%, for nearly a generation.

Since the manipulation regulators have recently given their blessings to the banksters, I think the USA jugglers can keep all the balls in the air for pretty much as long as they want.

Country's viewpoint has some real validity.

[68Camaro]

Hmmm. OK, it's one thing to say you believe that. It's another to describe how. Do you believe the rest of the world - which doesn't depend on Japan but does depend on the US - is going to sit by and let the US continue to print money and put THEIR investments at risk, without repercussions? How many trillions can the US print before that can't be sustained? I sense the Saudis are pulling away, and as soon as they get an insurance bomb from Pakistan to assure (in their minds) their security from Iran and security independence from the US they'll be all over the Chinese, and the Chinese can.then make their move to replace the USD. But that's just an opinion.

[IdahoCopper]

Spin, Twerk, Dance. Politicians, Media, and Banksters are all on the same payroll. They can play their games until the Morons wake up and stop re-electing the same old Idiots. Like that will ever happen, lol!

[silverflake]

I look at it this way, a generation from now, 2 generations, what would I rather be holding? I say PM's vs. FRNs. But keep in mind too that the high we reached on silver this time around 2010 was much lower than in jan 1980 when you adjust for inflation. Silver (and gold) just feels better in my hand than paper dollars. Maybe it goes down, I don't know. We have to stop measuring PMs in terms of dollars and start measuring dollars in terms of PMs.

Keep stacking anyway.

[Recyclersteve]

Remember the famous quote from famed economist John Maynard Keynes which says: "Markets can remain irrational longer than you can remain solvent." Keeping this in mind, I try and stay prepared for virtually everything I can think of. If silver explodes in the next 6 months to a year, I feel that I should do quite well. If it goes sideways for another 20 years, I feel that I (and my offspring) should do quite well. Being patient and having to explain to others why I continue to hold when prices aren't acting well is, admittedly, frustrating at times. But I think about those who own NO SILVER whatsoever, except perhaps for a small amount of jewelry or something quite trivial. I can just envision some of these people saying in the future "Silver just went to $50 real fast. I'm not gonna buy now. I remember what happened a few years ago." And then silver blows past $50 real quickly to $100 or more. And then they come back again and say "What would you do now?" Now if I didn't have any silver I would feel nervous about taking my initial position at $100 an ounce. Fortunately I could say that it really wouldn't matter all that much to me. As long as my health holds out and I can still work to bring home some bacon, I feel blessed. Happy Thanksgiving to all. There is much to be thankful for- you just have to do some soul searching at times to come up with a decent list of those wonderful things. As the Dos Equis guy would say "Stay thirsty, my friend!"

[68Camaro]

The direction and intentions of the Chinese are clear. They haven't tried to hide it. Their statements are public record. And their actions speak even louder than their words. In addition to being the largest mining source of gold in the world - and retaining 100% of that for themselves - they are the largest importer in the world, and accelerating. They are quickly buying all the western gold, preparing for the fall of the USD, regardless of whether they actually instigate that fall or not. The documented imports through Hong Kong alone (not their only supply chain) are below. If they aren't already the largest holder of gold in the world they will be soon.

At some point it won't matter what US government, politicians, banksters, or media say or do - spin, twerp, or dance. The Chinese will be in control. Prepare for that.

So the question is not, are you smarter than a 5th grader? The question is, are you as smart as the Chinese? Do what they are doing.

china.jpg (40.85 KiB) Viewed 865 times

[inflationhawk]

Unless we get a hard crash tough love Fed policy like in the early 80s, I don't see us set up for another 20+ year bull run. The policy we are on now is a slow death policy that only keeps our head above water so long. If done perfectly, it's possible we have 10+ years of consumers slowly deleveraging and banks recapitalizing to the point they are willing to lend more freely, but it's doubtful and there's likely going to be a policy misstep or misread at some point. Additionally, we have an aging population and the demographic will be quite different than the last boom.

Eventually, inflation will come. The type of inflation that just can't be manipulated away by changing the measuring stick. I suspect gold and silver will have its resurgence when inflation becomes more pronounced. When gold boomed in 1979-80 the stock market was also moving up strongly.

Also, I believe its more the extended period of low/zero interest rates that is causing the boom in the stock market now. The result of QE is the massive reserve balances being held by banks at the Federal Reserve. I don't believe that QE money is directly making its way into the market. Those reserve balances are making a 0.25% return. The fed has discussed taking that rate to 0, whereby you can then expect banks to start adding more fees to their depositary customers to make up for the loss. Eventually, and who knows when, banks will become recapitalized enough and view the market as stable enough to start using these excess reserves and making loans....watch out when this happens! To me the key to inflation starting is what happens to the excess reserves banks are holding at the Fed. This will be what brings the next bull market in gold/silver.

[inflationhawk]

The skeptic in me wonders if there is a wink wink nod nod going on between big banks and the fed whereby QE money is being slowly and steadily released to banks to help them recapitalize and then when interest rates start to go up, the banks take those excess reserves and buy treasuries with them to help stabilize the treasury market and keep the sellers at bay and under control to prevent a massive exodus and uncontrolled rise in rates. That seems a risky game.

[InfleXion]

The amount of financial leverage out there is at unprecedented levels, both nominally and as a function of growth. We are sitting on the precipice of another 2008, Y2K, 1980, 1928, whatever you want to liken it to. As you mentioned Country, the way they ended the bull run in 1980 was to hike interest rates to 20%. Today we not only have essentially 0% interest rates, but with the addition of QE we are going negative, because when you can't lower interest rates any longer you have to monetize the debt to get the same effect. So they would have to stop all QE to get back to zero, let alone on the positive side. All this they have done so the economy can simply tread water, the bare minimum to keep the train on the tracks. There is no way this bull market is over unless they can find a way to raise rates again which would cause the 440+ TRILLION in infinitely hypothecated (re-loaning the same asset over and over to balloon balance sheets with no additional underlying value) interest rate swap derivatives to implode the TBTF banks (thus necessitating even more QE than before to stem the tide), but as long as they can perpetuate the status quo with money printing to control markets and perceptions it will be an arduous journey to fruition. At some point the money junkie will OD, but since it is a race to the bottom that we are now losing to China we could be looking at a few more years of bizarro world. However, based on the law of exponents I would be shocked to see that last anywhere near a generation. If the bull market was over then sure, but the fundamentals today are stronger than they've ever been. As numbers approach infinity it doesn't become noticeable until the 11th hour when things really start to gain steam.

[inflationhawk]

Not so sure that fundamentals today are stronger than they've ever been! Unemployment is still historically above the norm at the nominal rate and when considering the level of underemployment or labor force participation its historically pretty bad. GDP is limping along and while approaching the long term mean is not what I'd call strong. The zero interest rate policy is only helping us to lightly tread water and also is helping big business. The larger cities and local economies tied to shale oil/gas are doing quite well, but middle america is not faring as well. I agree for the most part that this is a bizarro world though and we are at unprecedented levels of leverage.

[reddirtcoins]

The thought of waiting out another 23 years to see a new bull in PMs is depressing

Not for our kids. What a great time to teach our children the value of wealth. I for one will help my kids create a great stack.

[Country]

It's now been over a year since I posted this thread. There seems to be many getting out of PMs, sellers abound on RealCent. Where are we now? Is there now a fear that the bull run in PMs is over?

[John Reich]

The fundamental reasons for owning pm's haven't changed: an insurance policy against the economic shenanigans of the Powers That Be. Use the magic of dollar cost averaging to lower your cost per ounce. I had a good friend who owned a couple hundred ounces of silver he was into for a nickel an ounce! Like any other investment, don't buy with money you'll need in the next couple years. You don't cash in an insurance policy as soon as it builds a little cash value!! It was hard to keep the faith in pm's in the "dark ages" from 1981 to 2003, but those of us who did have been well rewarded!

[68Camaro]

Inflexion and John Reich have it right. Stop worrying about prices of PMs measured in fiat currency being propped up in desperation by endless money printing. Just be sure you have your other preps well under control - if you've done that well, buy PMs while the sale remains!

[cooyon]

Inflexion and John Reich have it right. Stop worrying about prices of PMs measured in fiat currency being propped up in desperation by endless money printing. Just be sure you have your other preps well under control - if you've done that well, buy PMs while the sale remains!

+1
Insurance against the puppet masters.

Measure your PM stacks in ounces / fractional ounces...I also keep track of my 35%, 40%, 80%, and 90% by $ FV to calculate FV x multiples...a sign of being anal retentive, I guess.

[Sheikh_yer_Bu'Tay]

It's now been over a year since I posted this thread. There seems to be many getting out of PMs, sellers abound on RealCent. Where are we now? Is there now a fear that the bull run in PMs is over?

Nah, all I have to do is read about Asian nations buying all the gold and silver they can get their hands on. Read about all the nations trying to dump the dollar (FRN) from Iran to China to Russia for an International Basket of Currencies. Read about what Western countries do to anyone who actually puts a plan in place for a gold standard (Libya & the Golden Dinar); or anyone who wants to dump the Petro Dollar (Iraq & Oil for Euros instead of Petro Dollars) and I am very happy in PM's.

One day the bubble is going to pop. On that day it will be too late to get back into PM's.

China was a large exporter of Gold until they decided the International Basket of Currencies should include the Yuan. Now they are the world's largest importer of gold. China is holding way too much FRN to allow the bubble burst anytime too soon, but it's coming.

The way US government liabilities work (IMHO) ~ inflation is a very good thing, so long as it happens slowly. It's their only hope for weaseling out of the outrageous $$$ commitments they have made to virtually everyone on the planet.

Some LCS are still holding silver they bought in the $40's. It's sitting in their vaults until they can get their money back. I will wait with them. I don't think that wait (bubble burst) will be more than five years - ten years at the most.

[Country]

It's now been two years since I've posted this thread. I would say we are now getting into the major capitulation phase of the downturn presently. Capitulation causes severe downturns in price; the fundamentals will be ignored. IMHO, a significant amount of patience is going to be required to ride this bear phase in PMs. Time will be a problem for those who patiently wait who are older, especially if this plays out like in 1980-2001. Diversification of assets will be necessary while we all wait.

[68Camaro]

Good points.

One difference between now and 1980... I don't really think the global economy can stand another 15+ years of record money printing. I can't conceive of it; but maybe I'm missing something. Regardless, I can't see putting my faith in a paper system backed by nothing, when the government officials authorizing the printing are making up their rules to suit their needs as they go along, laws and constitution be damned. So hard investments and debt reduction are my recommendation.

[beauanderos]

Good points. Hard investments and debt reduction are my recommendation.

If you think about it... there truly is no realistic alternative. But just try telling that to anyone (or... don't)

[neilgin1]

It's now been two years since I've posted this thread. I would say we are now getting into the major capitulation phase of the downturn presently. Capitulation causes severe downturns in price; the fundamentals will be ignored. IMHO, a significant amount of patience is going to be required to ride this bear phase in PMs. Time will be a problem for those who patiently wait who are older, especially if this plays out like in 1980-2001. Diversification of assets will be necessary while we all wait.

and it's a good thread....I thought 2012 would be the implosion, then time FLEW. Indeed, every aspect of life in these States United, has been getting more dysfunctional, confusion reigns, anger boils beneath the surface of national life, it seems the whole globe is on fire, its July 2015, and soon the fall of the year will be upon us, a time of year, when the cold of winter comes, that equities (and other paper markets) sell off....who knows?...the Signs abound...but I keep seeing "2018" and/or "2022" in my mind, and I don't know why.

[theo]

Good points. Hard investments and debt reduction are my recommendation.

If you think about it... there truly is no realistic alternative. But just try telling that to anyone (or... don't)

Unfortunately, I was telling people that when silver was in the 30s and 40s. . . These days I I just talk about silver as a good contrarian play.