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Put Up or Shut Up
More than any time in the last century, I feel the next 5 years will be a time to put up or shut up. If you really think gold is a bubble, go short. If you think U.S. Treasuries are a viable investment because Helicopter Ben says there is no inflation, then go ahead and risk your retirement on bonds. If you don't think there will eventually be protests and riots in the U.S., go ahead and put your head back in the sand. These are the current risks until proven otherwise. Seeing these trends is not so much a matter of intelligence- it is a matter of discernment. Without discernment, you have knowledge; with discernment, you have wisdom.
One of the things that no doubt frustrates those who wish to paint me as a permabear is how I was bullish for 95% of this monster rally in stocks. While I can't predict every twist and turn of the market, I can see the major trends. This is a dual inflation and liquidity-driven rally that is going to go on much longer than people expect. The deflationists have gone conspicuously silent as food prices globally are at record highs and gasoline prices are closing in on $4. The worst is ostensibly over, yet gold stubbornly trades at $1340 as I speak. Believe me, by the end of this crisis, you will understand that most financial professionals have no idea what they are talking about.
Stocks Overvalued?
At the present time, people generally think stocks are overvalued on a P/E basis. However, I don't like using static measures like P/Es to judge valuations. P/Es may give you a basic road-map, but there are other things to consider, such as mean-reverting profit margins and interest rates, to judge value. People in the "stocks are overvalued" camp seem to forget that the 10-year is yielding only 3.4%. Stocks can be valued richly on a historical basis because of the precipitous drop in the "risk-free" rate. Relative to bonds, one should own stocks. Generally speaking, if you buy and hold stocks in the direction of the secular trend, you are compounding your gains annually, while in bonds you are greeted by Uncle Sam every single year. Bonds need to show a very clear relative advantage over stocks in order to be invested in them.
Will Boomers Wake Up?
I have some very valid concerns about our near-term future from obvious hard trends. I truly feel sorry for Baby Boomers even though I personally don't know too many besides my parents. The Boomers I do know are scared out of their mind, and with good reason. Financial advisers who can't even beat the stock market are spewing the same old conventional wisdom that retirees should be invested in bonds. This, my friends, is financial suicide. Anyone with an operating BS filter knows that U.S. government bonds are a huge bubble looking for a pin. I highly doubt anyone but the most open-minded of Baby Boomers will go against the grain and hold more in stocks and gold than they do in bonds.
So much conventional wisdom is just plain wrong. There is this strange love affair in America with the concept of home ownership. Boomers celebrate owning their own home, which took their entire professional life to pay off. Now what? Boomers are paying onerous property taxes that are ironically bolstered by the capital appreciation they were once so happy about. The longer Boomers hold on to their homes, the greater a liability it becomes. On the revenue side, pensions, whether public or private, are going bust. Meanwhile, the economy is clearly becoming more dynamic and people need to continually evolve their skills. Working for GM for 30 years and retiring on a pension is a thing of the past. This is the kind of dislocation in the work force we saw during the Great Depression when people moved from agriculture to manufacturing. Our education system needs to change or we will fall behind, but that's another story.
This is personally an exciting time for me because I have felt like the one-eyed king in the land of the blind for a long time. People still just don't get it, and this is allowing me to quietly build a position and profit from things that "no one saw coming." The probability of bond yields spiking in the next couple of years is very high. The probability of gold spiking on civil unrest, fear, and inflation is even higher. It is truly time to put up or shut up.
Expected Returns is a blog focused on gold investing.
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+1
Can't fault the logic.
great article. buy dzz sell tbt
Interesting that no-one here seems to consider the Japanese experience, where the pundits, experts and doom-mongers have been predicting a bond collapse for over 10 years.
Seems everyone is, well, a gold-bug bond hater.
Let's see what happens, no one really knows, the baby boomers might be proved right though if 10 year yields drop to 1.5% like Japan.
Let's hope so.
Call the bluff. Ride the tide. Dive into the wave. Come out alive.
Kiss the bride. Puff the pipe.Take your bankster for a ride. Bury him six foot deep.
We boomers are over the zero point of the timeline in so many ways.
Boomer "Best by" date has long passed.
I have many boomer friends, most of whom "did the right thing". Few were into conspicuous consumption. Just wanted a good job, good place to live, safe neighborhood and good schools for the kids. Put most assets into the house, next into the 401(k).
Tech bubble, housing bubble, financial crisis and - bam! out of work, underwater in the house, retirement fund depleted, too old to join the Marines. Sure, we can say they got what they deserved, but did they really?
Soylent green is.. US!
It doesn't matter whether the Boomers "got what they deserved" or not. What seems to matter now is the perception that they did/do. Certainly, the Boomer generation is not surprised that there will be no SS for them; they knew this long before the present Millennial generation was born, and while the Xers were yet in diapers.
To their credit, the Boomers have not proclaimed a mass indictment against the Silents, Greatest (so called), and Lost generations that are the architects of the Great Ponzi Scheme. That they have not (as have the Xers and Millennial against the evil Boomer Americans), is probably just maturity showing, as formerly the Boomer mantra was "Don't trust anyone over thirty" - at least for certain radicals.
Millennial and Xers would do well to consider caution as they are falling for one of the oldest tricks in the book. Certainly "Divide and Conquer" is not new, but it is amazing how well it works.
Millennia and Xer: Your enemy is not the Boomer. Your enemy is the evil that wishes to enslave you, your children, your parents, your grandparents …and our nation. Sharpen your focus - realize that the enemy does not want your attention on him. Should he be successful in turning your power toward your fellow countrymen, he has won. Right now, he is doing a very good job.
If we do not stand as Americans, we are certain to fall.
Let me guess, your gig is convincing people with money to pay for your investment ideas. I've heard some lap dancers are very good at separating people from their money too:
http://www.emirates247.com/news/emirates/from-lap-dancer-to-yacht-seller...
Hey, it's a big world out there.
Stocks are not undervalued by any means. I fear corporate mean reversion and increased risk free (lol) yields are correctly identified as the big problem here. If we get a little more socialism here it may be bye bye corporate profit margins or shrinking dividend.yields. pick your poison.
Buying silver eagles as we speak...
The boomers I know haven't changed much, despite all the financial chaos of the last several years and their home values declining. They're still into conspicuous consumption at all costs.
I see a lot of their kids and grand kids running around with blackberries
And iThis and iThat...
Some thoughts:
The old adage goes:
when interest rates are low, stocks will grow. when rates are high, they will die.
I like the article also and agree with what the author says.
Equities and gold/silver and commodities will keep rising in value against Treasury bonds and the dollar as more and more people get wise to the bankers and this governments game.
I feel somewhat sorry for people that keep believing the bullshit they are hearing from Ben and their pres's, but only a bit.
It is to quite some extent due to these same peoples lazyness and just plain cussed arrogance and stupidity that they are in the mess they are in. It will get worse and then much worse til they finally wake up and do something about it.
I care nothing for the baby boomers.
The sooner they get their mush minds out of trying to plan my life as some sort of aggregate tax slave indexed by region, the better.
They did nothing but redefine everything until the land got so confused even a song with a muppet video looks tame.
So, to repeat, take a flying leap boomers, you put the fork in this shit mess made out of the great experiment. Don't let the door hit you in the fatuous ass on your way out.
The moneychangers love it when the "useless eaters" blame each other with republicans, liberals or baby boomers being the reason for what has happened. It really helps them otherwise the people would come for who is really responsible for the mess ... the money changers and their sock puppets in government. There are some baby boomers that are responsible for ignorance but for the most part it is simply the bankers and the government they own.
I agree fuck the boomers. They expect me to subsidize their.defined benefit plan and full ss benefits at 65, yet they closed the door on the defined benefit plans two years before i woyld have qualified. All of you.can go to hell. It looks like the only ones.who have.to sacrifice are those under 52.
Fcuk the boomers, and I am one, about as middle of the baby bulge as there is.
Many boomers have no/little savings. They never thought about prudence, etc. Buy, buy and buy.
I think that SS and the .gov Medicas will be solved by partial default (paying less), it will not be really TERRIBLE! Just not, you know, cozy...
I do not plan to get any money from .gov. I hope to not even ever apply...
Not saving = confidence in government?
Saving = no confidence in government?
By their fruits, they may be known ;-D
<disclosure, low confidence here>
Pray tell how many of us boomers (not to mention everyone else) voted for Bennie or Greenscam? Or, how old were we in 1971 when we went finally abandoned gold? Suffice to say that congratulations on buying into the bankster's scam. Misdirect the blame while they pocket the loot.
That's about right. In 1971 I was in the Air Force in Thailand NOT bombing Cambodia, of course. Gold? Silver? All I cared about was beer and wimmin, but not necessarily in that order. The next 20 years was focused on raising 2 kids and paying the bills. I woke up in the 1990s. A bit late to "fix" anything but still ahead of the curve in acquiring some precious metals at very attractive prices. I've not looked back. That does not seem to be the case for the current crop of old folks just turning 65. Too bad. You get what you bargain for -- or not. I'm off the financial grid for sure.
I'm sorry to say that I don't think a lot of our generation has 'woke up'. I try to tell friends, family and co-workers, but while there is a lot of anxiety, they seem too paralyzed to start prepping, let alone buying any metals. As soon as the house is paid off, I'll also be off the grid...less than 2 years away.
Careful where you place blame. My guess is that no matter who the boomers voted for the bankers and their lackeys would have perpetrated the same scam on the american people. Who runs the voting machines?
It is those that fall victim to greed and the abuse of power that are bleeding this country dry. When you are born has little to do with this.
Besides, the perpetrators of fraud on their own population and violence against peoples of the world like nothing more than to turn 'we the people' against each other to deflect the righteous wrath away from themselves.
It's the divide and conquer thing.
If you think your parents are crimping your style you could move out.
I agree, the 'Boomers' knew what they wanted was a dream, work and pay a little bit maybe $100 a month into a fund and then that would magically mean hundreds of thousands in a comfy retirement at ago 60. Along with voting for assclowns who were obviously lying but promising the moon for your vote. Oh well retirees here come the pension raids and $10 Wonderbread.
I guess I'm a "tail-end-boomer" who's involuntarily paid in all these years and fully expect to realize squat out of it. I also have most of my assets in equities, a strong box full of hard assets, a nice tall safe full of things that go "pop" and so on. Having seen what happens when societies fail - for you kids out there that never learned ancient history this means Rhodesia -> Zimbabwe - I'll be happy to stand aside and see how you new masters of the real universe do. I'll bet it's much less fun than you anticipate.
How true.
Both my parents, children of great depression era farmers, rejected the farm life to succeed in the big booming world -- dad an electrical engineer and mom a highly skilled secretary. They own, as just one of their many assets -- a farm. My father always said, you never know when owning your own plot of land may be useful, if not down right valuable.
Nothing wrong with cash and some junk silver. I'll watch the Lucky Pierre high-wire act, sans net, from the cheap seats.
spot on article...as the house i grew up in came close to being paid off, the mortgage payment was 125 bucks a month. Property taxes however were 4400 a year. It was the tax that drove my mother into a shitty apartment in downtown buffalo from the suburbs of williamsville in the mid ninetys.Taxes on that house are now 7000+ a year. My parents had paid 25,000 in 1971 for the house.
KEFAYA !!!
I just looked up a house I bought for $25,000 in 1978 and compared today's value and taxes. The value has gone up 4.25x and the taxes have gone up 4.25x. So I guess the trick is to find a retirement home that one can keep from going up in value.
Ahhh the beauty of inflation
precisely. As Bernank would call it "positive inflation" ... oy
Okay, I'll try
OK let me get this straight, buy what?
I prefer silver just because it is really going to be hard to cut up that tiny little 10th ounce 'oh shit I dropped it where did it go' piece to pay for milk and bread. plus I'm too cheap to pay that much for 1 coin.
What I like about having some gold is that when silver starts being used, rather than hoarded, it's velocity will make price dive. Gold, not so much..
I disagree. Silver is finite just like gold (and unlike paper). Granted gold is needed for large items..but everyday items it might be difficult to divide that puppy up. But hey I could be wrong.
I like both. Platinum as well. But the BULK of what I hold is gold. Wealth (vs. speculation).
You aren't wrong. Me likey silver very much too, and have a good amount of it in various forms. Mine isn't an argument against silver, but an argument for some gold too..
Great avatar, btw.
People make this mistake all the time, they assume that something being horded means it is more expensive however this is not always the case. Easiest example is dollars, the value of the dollar is based on what you can get with it, not intrinsic value. Take away it's legal tender status and it becomes worthless. Silver or gold on the other hand become more valuable once they are monetized because demand increases. So velocity increases but also demand does as well. Its really the difference between less than 1% of the population in possession and greater than 50% of the population using it in some transitional state (exchanging hands). If money velocity could be infinite you would be correct, but it would be impossible to achieve infinite velocity.
+1 Thank you for the explanation, makes sense.
the part of the onerous property taxes and holding on to our homes that have now become a LIABILITY is 100% spot on.....here in NJ , we already know what the rest of the country is soon to find out about property taxes.....you NEVER really own your home (and now even less so, with the broken chains of titles and assigments)
+gold!
Interesting insights but let's be realistic in that no one knows the outcome of this mess...do we have some more inflation before another deflationary setback...all you can do is take the necessary precautions and react accordingly...everyone was in love with the Bernanke Put in 2008 until they weren't.
1) Peak oil is here.
2) The current fiat system can not survive zero and quite likely negative growth.
3) Gold
I am sure of this to the same confidence level that a meteor won't crash through my roof right now and kill me.
The only things I can see that can stop gold are a miracle energy source find, or a road warrior level collapse. The energy source would have to defy everything we know about physics right now, so it is highly unlikely. R&D will be in permanent decline now that peak oil is here. The roadwarrior situation is slightly more likely but only at a distance in the future. I'm working on grid free living personally.
EdIt:
I know no one ever responds to my peak oil comments. It's like there hasn't been a myriad of thing written on it:
The Limits of Growth, The Long Emergency, Why Your World is about to get a Whole Lot Smaller, The Ecotechnic Future, The Collapse Gap, The Power of Community: How Cuba Survived Peak Oil, The Collapse of Complex Societies.
You don't even have to know basic science to observe that living standards have increased exactly at the rate of energy usage. The entirety of the industrial system's technology is excellent at maximizing the rate of usage of energy, but atrocious at using it efficiently. Our society is less efficient than it was 500 years ago.
I will do you the honor of responding to your commentary on oil. There are more people on this planet than ever which will require more sources of energy. Admittedly I am not an expert on energy but the problem I have with the Peak Oil theory is that is has been around for decades. Yes there are less friendly and easily accessible places to drill but there are still a lot of untapped places that have promise. Seemingly every time we hear about how we will never be able to acquire oil a new technology makes the acquisition possible at reasonable cost. The logic while not completely transferable reminds me of car manufacturers who tell us a CAFE rating is not achievable then years later they meet the objective and more. Assuming oil is not renewable (some people have claimed that is possible despite the idea sounding a bit odd) then in theory we will reach peak oil at some point. Is this the time we hit that limit or a few decades down the road is anyone's guess.
I agree that there is no way to clearly see the way forward because there are so many variables.....including leadership pulling rabbits out of hats.
But it does seem as if the inflationary fuse has been lit.
Agreed...on the plus side I am of the mindset precious metals will do well regardless of deflation or inflation in the long-run until we see some fundamental change from the current chaos.
CD, January silver sales (6,422,000) would confirm your fuse has been lit view is shared by many.
http://www.usmint.gov/mint_programs/american_eagles/index.cfm?action=sales&year=2011#SilverTotals
Simply astounding.