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Silver & Gold prices

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I have been gone for months but now that I am back indoors since the weather is getting cold, I'm sure just like me, people especially investors have been watching silver & gold prices,I had posted about silver months ago that got a lot of hits on the post,& I hope some of you were reading & had maybe done some investing in silver,I am very pleased with the way prices are going. $100 an ounce & more is not out of the question for silver. What do ya think? Oh & by the way Happy Holidays to all.

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I suspect gold is a good investment for at least the next 18 months. But then again, I don't buy gold at all, and sure as heck don't invest in it, so don't rely on my opinions :grin: .


Silver may actually be better than gold on a percentage return basis.

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I suspect gold is a good investment for at least the next 18 months. But then again, I don't buy gold at all, and sure as heck don't invest in it, so don't rely on my opinions :grin: .


Silver may actually be better than gold on a percentage return basis.


(thumbs u


and of course if gold and silver bullion are GOOD rare coins are BETTER and pre 1835 federal coins and colonials are EVEN BETTER+


with pre 1814 federal coinage EVEN BETTER YET++



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I have been negative on silver and gold prices this year and so far, incorrect in my outlook. I still hold the same opinion because nothing has really changed.


As to whether $100/oz is in store, the answer is certainly - eventually. But eventually could be a long time.


Additionally, to those who are wishing for this, I will repeat what I stated in a prior post. I expect that most people who are wishing for runaway metal prices are in retrospect going to wish that they did not get them.


The reason for that is simple. Unless, they are one of the few who are already wealthy enough to own them in substantial quantity, the economic conditions which will accompany that outcome will STILL make them worse off than they are now or in the recent past. They will be better off than those who do not own the metals at all or in minimal amounts, but still worse off nonetheless.


And the reason for this outcome is that whatever they gain to their wealth from rising metal prices could or will be more than offset by the rising cost of living for the things that most people buy, rising unemployment, the rising cost of credit and rising taxes. Other assets such as real estate also could lose value in real terms and possibly even in nominal terms.


Most people neither did nor currently do have the financial capcity to buy them in material amounts. That's why even if they are right, they will still lose economically.

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The evidence to support this type of claim is at best circumstantial. I agree that there is some level of correlation but how much, I do not know and I doubt most others (if anyone) does either.


But in any event, I would hardly buy any coins (whether the ones you cite or any others) based upon an expectation on rising metal prices. To do so would be to use the same type of logical fallacy which conventional financial professionals use to justify buying stocks. They are required to forecast their own indicators which they PRESUME are the causal factors behind stock price movements when in this case, they are clearly not. They make the mistake of assuming that correlation (which is often weak to begin with) equates to causality.


Based upon the information available to me, the coins which have the greatest correlation to metal prices are generic US type coins such as Morgan dollars and common date gold such as Liberty $10 and $20, St Gaudens $20 and Indian Head $10. This is what I would expect because the premiums (in lower to mid MS grades at least) are the lowest which makes them most sensitive (in theory) to bullion prices. Also, these are the types of coins that "investors" tend to buy from dealers, telemarketers and brokers who peddle them because they are available in large quantities. If I were to buy any coins based upon an expectation of rising metal prices, it would be these coins.


Other coins are either subject to their own individual dynamics or flow with the general coin market which is at least partly (I would say primarily) dependent upon general prosperity. Coins are a luxury item which are not needed for any purpose and when people have greater disposable and discretionary incomes during prosperous times, they have a greater capacity and willingness to buy them.


The flow of funds into the coin market as a whole and especially to any particular segment are so pitifully small that it is technically possible for coin prices to move independently of any or all other asset classes. That's not what has happened in the past to my knowledge and I do not expect this to happen near term either, but it can which makes predicting the prices of MOST coins or series, independent of how the coin market as a whole will perform, seem to be little more than guesswork.

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I tend to agree with WC on this matter. Lets take an example:


2 different coin purchase scenarios:


First a "generic" gold 1925 St gaudens $20. It can be had on todays market in au condition for about $1500. If I buy 10 of them, my cost is $15,000 The melt on them today would be about 1200 each. The premium over melt is 300 per coin.


Second, lets take a single 1800 gold $10 in au50, around $20,000. I buy it for that, and melt is around $ 600. The premium over melt is $19,400. ( I call this the "collector premium")



Now, lets say gold does go to $ 10,000 an oz.


Now, my 10 - 1 oz coins are worth $100,000 melt.


My older, rarer $10 coin is worth $5000 melt. The premium was 19,400. Lets say that the "collector premium" doubled to 38,800.


38,800 + 5000= $43,800.





$15,000 investment = $ 100,000


$20,000 investment = $ 43,800


As you can see, not quite as good of a return as my "generic" purchase. Plus, who says the premium over melt would double on the older coin. If gold is at $10,000, times will be hard, and coin collecting will not be quite as robust as it is now.



I hope I made this clear enough to see it is not as good a purchase in my opinion to get the higher quality if you are counting on gold going way up.


Of course, the collector in me keeps saying "NO,NO,NO......





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I have never been positive or negative on Gold and Silver prices. Long ago I had started to accumulate Morgan Dollars. A few years later when Solver went to $50.00 an ounce I sold them for a good profit. I wish that I had kept them now. I didnt think Silver would go any higher and saw it as a fluke.


I started collecting Morgans again about five years ago and then I stopped about a year or nine months ago. I started again about two or three months agp. I like the coin and I also see a problem. It depends on what you think the Government will eventually do regarding the debt. I see no scenario where the dollar will get stronger because I see no scenario where there will be fiscal responsibilty in Washington etc. It all comes down to whether the movement will be slow or slower and whether the policies would be less or more drastic to try and weather the storm. Befoire this economy really went south there were indications that I posted in various places. The most significant was the fact that Bernanke had raised the discount rate about 14 consecutive times. In the History of the Fed anytime the discount was raised 6 consecutive times there has been some level of a recession 90 % of the time. There were also other indications such as Autos and Housing Starts etc and what I saw as overbuilding etc...


I anticipated it but did not make drastic enough moves. I had not looked into the real estate market because when I bought my house I had to put down 20% and my monthly debt payments including the mortgage could not be over 25% of my monthly income. I had heard information on the sub primes but had no idea that the requirements had became so low on the purchases of a home.This was an area that didnt affect me.



When I closed on my home in December of 1979 I had not received my down payment as I had sold soem property and the buyer had a note that had not matured and I would have to wait a few more weeks. I got a call from the Bank and the loan offficer told me that they could only hold the 10 3/4 rate on the mortage for a few more days. I explained the situation and he siad that he could extend a guaranty on the interest rate longer if I made a payment of 1% of the Loan. I was paying 40K for the 2000 sq foot home and putting doen 15K and borrowing 25K so the fee was 250.00. I told him that I would put the check in the mail as rates were going up. He told me that it was my decision but the Bank felt that interest rates would go no further and at the most would top out at 11%. When I finally closed about a month later the interest rate was at a little over 13% and went higher.


I lost about 12% in the Market because I did not take more drastic precautions which was well below the average. I have sense com back to even and a little better. My home went down about 20% in value but I could care less as I dont plan to sell it and it was paid for about five years ago because I made extra payments although small.


The point is that you must have the full picture and nothing much has changed . I think you are correct about the generic coins such as the Morgans participating better. The only scenario possible now is a decline in the dollar and corresponding inflation and the erosion of particular assets and trying to invest in such a way as to stay ahead of inflation. The worst scenario is one I mentioned in a earlier post with sources regarding the meeting of Saudi Arabia, China. Japan, Russia and Iran to substitute another currency or a basket of them for the dollar. When news happens that this is possible then there will be an immediate drastic drop in the dollar. Whether I am right or wrong I will have a portion of my assets in one ounce solver coins such as Morgans and Silver Eagles and modern Commemoratives with the the Commemoratives being the lesser of the three. ,At any rate, I will have them in a coin that I desire collecting in the Morgan.

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interesting note for those who still believe in the market rebound..


After the initial collapse in 1929 of the market, there was a rebound ( rarely mentioned) that saw the market regain 46% of its lost value by April of 1930..after that there was an additional 80% drop by November of 1930..


The debt is a done deal...we can never pay it off and it will be only a few years until the interest alone exceeds GDP..the Fed cannot artificially keep interest rates at 0% forever..when this house of cards collapse and hyperinflation hits the dollar will pop its bubble..


I agree with WC about 1 major point...precious metals will likely continue to soar but then things would be relative...what good is $100 an ounce silver if a can of soup costs $25?


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"what good is $100 an ounce silver if a can of soup costs $25? "


Because that 12 bux you spent on the ounce of silver today will not even buy the salt for your soup, whereas the 1 oz of silver you bought will get you 4 cans of soup.....




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A couple of corrections to your note.


I do not know where the stock market was in November of 1930, but it did not drop 80% from April 1930 to then. The total decline was 89% between September 3, 1929 and July 8, 1932. The peak was 381 and the low was 41, both in the Dow. I believe the April 1930 peak was about 279 but do not recall exactly and would have to check the price charts available to me.


I do not expect precious metals to continue to soar, at least for the near future. That is what most everyone else on this board appears to expect along with many others in the general population. To the contrary, I expect silver to collapse in price and fall below the $8.39 it hit last October since I expect a deflationary depression. I expect silver to soar after the deflation has or mostly runs its course.


To your other comment on the debt, I agree the point of no return has been reached and I agree that a default of one type or another will occur.


Where I disagree with almost everyone (including those on this forum) is what the immediate outcome will be. Most people expect high inflation or hyperinflation while I am expecting deflation.


I'm not going to go into all the details here again, having covered them in many prior posts, but there are two primary reasons for this position:


First, the US and most of the global financial system is composed mostly of credit and debt and not currency. All debt is subject to default which is deflationary and it exceeds currency and base money by a lopsided margin.


Second, the psychology of creditors, debtors, the public and even central bankers exhibits far more deflationary than inflationary characteristics at this time which is what determines what will happen. The typical person is far more worried about inflation than deflation and most people do not even believe that deflation is even possible or if it is, that it is remote. Some are more worried about deflation than others such as central banks (even though they are lying) but not many.


As for the idea that the worlds major countries and central banks will pre-emptively issue unlimited amounts of fiat currency to stop deflation in its tracks, that is an ivory tower concoction which has no precedent in the real world. Its only happened in currency based and credit poor economies and that includes Weimar Germany which is the most often cited example. It may happen later but it has not happened to date regardless of the misinformation which exists at this time. The recent "printing" from government bailouts is primarily DEBT SWAPPING in an attempt to maintain the nominal value of credit at full value. Its not working which is why the financial markets have been stressed and credit conditions have become tighter, admittedly from their ridiculous prior standards.

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I have a couple of points to make on your post.


From what I can tell, you made the correct decision to sell those Morgan Dollars almost 30 years ago and I have no idea why you regret it. Anyone who bought silver anywhere near the peak at that time and still owns it has lost a huge proportion of their original outlay. Silver remains over 60% below the peak in nominal terms and much more adjusted for purchasing power.


Your comments about the Fed are a common logical fallacy. They share the common presumption that the Fed either made a "policy mistake" and/or that they have the ability to control the economy. Neither are remotely true.


The only "policy mistake" associated with the Fed is the Federal Reserve Act of 1913 which led to its creation. Other than that, these supposedly omnipotent wizards behind the curtain have no clue what they are doing nor is there any reason whatsoever to believe that they ever have.


From a more practical standpoint, whatever "policy mistakes" that they ever made, these were NOT MADE just in the monetary policy cycle you cite but in every cycle since 1913. By the time this last bubble reached the stupendous proportions which it did with their assistance, it would not have mattered what they did or did not do.


The Fed does not control the economy or interest rates and never did. It does set its OWN interest target and bank reserve requirements but banks set their own interest rates and choose to link some of them to the Fed's target. Bank's (and the credit markets) also decide who to lend to and at what terms. Borrowers may also reduce their lending which they have recently.


What is happening now is that creditor and debtor psychology is risk averse versus the bubble peak and there is nothing the Fed can do about it other than engage in debt swapping in a hopeless attempt to keep bank balance sheets from collapsing but this in itself will not increase credit availability.


If this was not true and conventional thinking was correct, then with the Fed target effectively at ZERO, lending should be increasing or exploding. Instead, the effective interest rate for many potential borrowers is infinite because credit is not available to them at all. Many want to or are desperate to borrow but no one will lend to them (except maybe for those fools at the FHA or other government agencies).


Conventional thinkers term this "pushing on a string" but what they do not admit is that the psychology which creates this condition is what also makes the Fed's illusionary powers what they appear to be. Today, both the Fed and most (possibly all) major central banks are "pushing on a string" which is why they have resorted to "quantitative easing". It has not worked in Japan for the last 20 years and it will not work anywhere else either.


Your comments on the USD are also typical and I believe incorrect. The "fundamentals" you cite do not drive FX rates because if they did, then the Yen should be the weakest major currency. Instead it has rallied significantly against every currency except for the CHF (up but a lot less) since the Japanese government began its futile efforts to revive the Land of the Sinking Sun in the early 1990's


As for that supposed meeting, that is irrelevant rumor. I already addressed that in a prior post. Even accepting these claims at face value for which there is no basis whatsoever, the source you cited claimed that this change would not happen until toward the end of the next decade. That would have no impact on FX rates today.



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When it comes to precious metals, the only thing I’m certain of is that I have no idea where prices will go :acclaim: . I thought gold topped out on multiple occasions over the past couple of years. Today prices appear to be falling and I don’t know why.

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From a grossly simplistic viewpoint, all markets will run in cycles, and will take breaks, or periods of retracement, following atypical or strong movements in either direction for many fundamentally based market related reasons. The underlying catalyst(s) that drive each such movement are sometimes complex, sometimes numerous, and sometimes as simple as it gets. In our current situation, the vast majority of the recent rise in commodity prices can be directly related to a weakening in the dollar. With that in mind, we must recognize that the powers that be have taken action to control the rate at which the dollar was allowed to devalue, until recently, when they appear to have allowed it considerably more latitude for movement. I find it no coincidence that this was allowed to happen and has thus far corresponded perfectly with the peak holiday shopping season in the US. To that point, the result of the weakened dollar worked to benefit the American manufacturer/producer with respect to their foreign competitors during the time that americans were/are spending a considerable portion of their "excess" income on holiday related items. While it is true that this action stands to work in reverse for our products in foreign markets, they are not experiencing a period of disproportionate spending to the extent that we are, which results in a net comparable benefit to our businesses and economy. Following with the cycle statement above and in line with the fact that cycles for currency/commodity pricing require significant time to transpire under most any circumstances, it is likely time that the time has come for a substantial swing in the opposite direction.


With that said, it is important to note that there still exists a significant potential opportunity/risk with market based investment vehicles, etfs, etc that derive pricing from physical commodities such as gold/silver in naked or partially naked positions where physical inventory is not on hand to back the fund. Should a run on physical inventory result from a collapse or psychological development related to the stability of such vehicles, a significant price variance could occur.


Additionally, while silver is currently lagging gold with respect to historic ratios, considerably less silver has been required for photography related purposes since the early 80s, and has skewed the demand for the metal downward with respect to production levels and while other industrial purposes have picked up some of the slack (electronics), it must be considered that while it is a benefit that silver has more industrial, real world, uses than gold, these same pros can work against you when innovation/legislation/politics intervene in existing processes. A wonderful example of this can be seen by examing Rhodium, it's role in catalytic converters and as a catalyst in general within industrial processes as well as the geo-political conditions in south africa that when combined took it from $200 to $10,000 in around fifteen years.


While on the subject of investments, it is important to also note that the "ideal" base wafer substrate for semiconductors is a perfect diamond, due to it's insulating properties, and unique ability to withstand heat and electromagnetic interference (think space based/military) that would otherwise render conventional semiconductors inoperable due to a break down of the depletion zones within the chip. These are already being used in sensitive applications an have been for many years. Keep in mind that these must be produced in crystaline form with "absolute perfect" atomic alignment and that the technology exists and is in use to create these ingots. For comparison, similar silicon crystals can be as much as two feet across, many feet long and p.e.r.f.e.c.t. in structure. Result, diamonds will be a very very bad investment in the coming decades...


I'm sticking with in the essentials/consumables (the items that walmart/walgreens/etc sold when you were a kid and that they still sell today), basic medical needs suppliers, transportation that gets the junk to market, communication that facilitates the sale, goldman sachs, and Agriculture - The main advantage that the US has over every other nation is the ability to produce way more food than we could ever need, and which is more and more critical everyday to the rest of the ever expanding world.


& yes coins are an investment of sorts, and whether for investment, as a dealer, or as a pure hobby, you will learn invaluable lessons regarding the history of your country and a fantastic ability to readily recognize details and subtleties in many other aspects of your life that others tend to overlook. As it turns out, the secret to being lucky and successful is to be observant....





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"what good is $100 an ounce silver if a can of soup costs $25? "


Because that 12 bux you spent on the ounce of silver today will not even buy the salt for your soup, whereas the 1 oz of silver you bought will get you 4 cans of soup.....





Its obvious that in an inflationary environment, that silver will maintain its purchasing power better than any fiat currency, but I was trying to make a different point.


Under most circumstances in an inflationary environment, I expect silver and gold to improve its terms of trade versus most items. We cannot know this with certainty but they have since 2001 and did so in the 1970's.


But even if they do, it still will not be enough for most people because of what I said, the average person does not have the financial capacity to buy enough metals to offset what it will cost them to live which means that their standard of living will still fall. or more likely, they will not buy the metals at advantageous prices. Let's use a hypothetical example with $100 silver.


The median household today has an approximate net worth of somewhere between $80,000 and $90,000. It might even be less now but I believe it was $88,000 according to the 2004 FRB Survey of Consumer Finances.


I do not recall the composition of this net worth but I do know that most of it is (or was) home equity and personal items such as automobiles and household effects (furniture). The latter I believe are almost certainly overstated in value on the survey but that is irrelevant for this example.


So let's say that the balance is $20,000 in financial (or other) assets which is available to buy silver (its almost certainly less) and that our prospective silver owner was able to buy 2,000 ounces at $10. So now they have $200,000.


First, to actually spend this money or any part of it, they would have to sell it and at current rates, would probably have to pay between 20% and 35% in combined federal and state income taxes though this might be lowered somewhat by extending the sales period over many years. I expect taxes to be higher in the future but we do not know what they will be.


A second factor would be whether our prospective silver owner's wage compensation will increase or, whether they will be employed at all. The norm in above average inflationary environments to my knowledge is higher unemployment and if so, obviously they will be worse off. But even if they are employed, I would expect that on average, that their real wages will decline.


Related to real wages would be the cost of living. This varies for each household of course but even if we limit this analysis to one commodity - oil - we can see that a substantial portion of any gains could or would be consumed by the increase in the cost of living. If oil goes to $350/barrell and gas to $10/gallon which is entirely probable with $100 silver, this would be a four fold increase from today's prices which would probably cost the typical household multiple thousands of dollars per year extra every year for the rest of their life while the silver price increase would be a one time event. And this is just one expense.


An argument could be made that the silver could be sold and the proceeds invested to offset the increased cost of living and that's true. But this is in turn dependent upon the investment acumen of the individual and as far as I am concerned, the typical investor is completely clueless. I equally doubt that most would invest these proceeds wisely just as I doubt that most have the foresight to buy the metals at a good price to begin with. In the case of the metal enthusiast, many or most would probably fail to sell them at close to the peak price, just as they did in 1980.


Ultimately, its impossible to know what would actually happen because there are too many variables. But I believe that this scenario I outlined makes it clear that a booming metals market may hardly be the economic windfall that many gold and silver enthusiasts believe it to be. Since 2001 it has been but the outcome they see is not consistent with indefinite moderate price increases in the cost of living.

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Let me clear up a few things because apparently I did not convey it correctly. I regret selling my Morgans at the higher price mostly for an aesthetic reason because they were cheaper and of much better quality then the ones I have collected today. Certainly more plaesing to look at. When I sold a waterfront lot in 1979 to get the down payment for my house I tripled the money on my initial purchase price. If I had held the property instead until now then I would have quadrupled it from that price. I had no choice at the time because in that time period one had to put 20% down and their monthly debt payments including their mortgage payment couldnt be anymore than 25% of their monthly income in order to get a conventional fixed mortage and I had not accumulated anyhting at the time.I also did not have to pay an extra fee because my equity was below a certain point. I figure it was a "wash" outside of the recent decline because my home quadrupled in value, I would have paid higher property taxes on the waterfront lot as the value increased and after the down payment my mortage payments were less than what I could rent a 2000 sq ft home.


I do not watch the Fed for detailed policy decisions. My biggest point was that in the history since its establishment anytime they raised the Federal Funds or Discount rate 6 consectutive times then there has been some level of recession 90% of the time. Didnt mean that it wasnt the 10% . Bernanke raised it about 14 times. That and other indicators suggested a great possibilty.


Nobody could make decisions based on those policies whether or not you thoufht the Fed was incompetent ot not, Lets look at 1999. Phil Gramm and the passed the repeal of Glass Steagall.Clinton did not veto it. Now for a few other facts. At the time Citibank which is now Citgroup wanted to merge with Travelers. Glass Steagall made it impossible to do because of restricitions that only permitted Banks to do plain old vanilla banking and not expand into other areas and expand across State lines. The repeal of Glass Steagall made the merger possible.Two weeks after Clinton signed it into Law, Robert Rubin who was his Treasury Secretary resigned to become Chairman of Citibank. Quite a coincidence!That and the Community Reinvestment act revival also contributed.This was the tipping point for this catastrophe today and not the Spending Policies that many want to credit it for today. Then there is the policies of Greenspan and his extreme lowering of the rates which made the environment for borrowing money easier which was combined with the repeal of Glass Steagall and the C.R.A which made the environment even more easier. Yet Greenspan was idolized so much that even after he resigned the Stock Market moved on his comments etc.


Why would I be worried about the actions of the Fed and Incompetent politicians such as the actions mentioned above.All you can do is be awrare of them and their indicators and act to try and protect yourself.



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The point I was trying to make about the Fed is that you are correct about the correlation but not about the causality. And the same is true of the repeal of Glass Steagall and the CRA. Those were not the causes of the bubble implosion either. They were the RESULT of the mania and bubble psychology which made people confident enough at the peak to make those changes.


Glass Steagall was passed in (I believe) 1933 to "prevent" the depression that had already bottomed. It did not prevent anything then and while repealing it made it easier for the bubble to get bigger, we cannot know what would have happened it it had not been repealed. Possibly or probably, the outcome would have been similar because much of what we see now has little to do with this anyway. Derivatives have nothing to do with that and neither do the ridiculous lending standards. Banks could have just as easily made the same crappy loans they did and the investment banks could have securtitized them.


As for the CRA which I utterly hate, that is simply another manifestation of the free lunch mentality. In the upcoming depression, I doubt it will be repealed but I still expect credit to these deadbeats to essentially disappear and it already has except for the absurd lending by government agencies such as the FHA.


The fact of the matter, and history proves it, is that regulators have never really prevented anything. Glass Steagall, the SEC, the FDIC and other nonsense was passed in 1933 and 1934 to prevent the depression that had already bottomed.


People believe that the FDIC is a great success but in actuality, it has contributed mightily to reckless and unsound bankiing practices. Today, the typical bank customer could not care less what their bank does with their money. They have no clue until there is a crisis like last year. No financial system can indefinitely survive that complacency and apathy.


The SEC sanctioned (that is, created) the existing credit rating system in 1974 and we can now see what a marvelous success that has been.


The FDIC improvement Act of 1991 was passed after the S&L fiasco was over and it has not prevented the current banking problems either. To the contrary, even as that regulation was passed, regulators were sanctioning bogus accounting presented in regulatory reports by granting "Certificates of net Worth" which was PHANTOM CAPITAL.


Sarbanes-Oxley was only passed recently but it will not prevent anything either. The main reason for this is that its based upon the bogus premise that stock prices are driven by earnings and more importantly, that objective accounting standards are possible when they are not. Even now, banks are lying about their capital with regulator approval.

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First of all, you would have to assume that the average person is smart enough to know these things. This is not the case because many if most people think that this situation was caused by more Government spending in relation to Income which caused a Deficit which eventually results in Inflation, loss of purchasing power ,decline of the dollar and an erosion in certain assets etc.


They dont know the difference between the above and the fact that people making 30K a year couldnt afford to purchase a home for 300K and certainly didnt understand the difference between a variable and fixed rate mortgage as well as people who used the equity in their homes to have a lifestlye they couldnt afford with their regular income and who managed to accumulate an average credit card debt of 11K nad what this will now mean in an economy which is 70% driven by consumers and what the absence of this spending will mean etc.I have seen interviews with suh people who moaned that the Lenders did not tell them that thy couldnt afford a 300K or 400K home etc on 30K a year.


The pity of all this is a net worth of approximately 88K. My home alone is worth at least twice that and I have Coins and Stock worth about the same as that 88K and I dont consider this a big figure. When I purchased my home in 1979 because I got married I then saved 10% of my wages and then paid for my necesssities. If afterward there was no money left then there was no entertainment etc and no non essentials.When I first started out at this time I couldnt afford to buy a home because of the restrictions and had to sell other property to make the necessary down payment and be below the debt payment restrictions to qualify and this was my only debt because I had been taught by my parents ton pay cash or you couldnt afford it.


So you are correct when you state that "people do not have the money to purchase gold and silver etc to take advantage of protecting themselves from infaltiona and an erosion of assets. My Son-law came to me about 15 months ago oand then only because my daughter kept bugging him. He had 100K in a 401K because he had left a job that had been purchased by another comapny and he quit because he didnt like the new situation,He wanted to cash in the 100K and buy and fix up homes on the advice of friends. I told him that first of all he would pay a 10% penalty and would then have to pay the tax on the added income which meant that depending on his income level that he sould pay penalties of 25% to 30% more etc. One friend was recommending annuities and he showed me the info on that. I told him to stay away from it and he didnt listen. I dont know how much they lost as they wont talk about it. He valued the friends advice more.


I told my son about five years ago to not spend too money on a wedding and to use it on a down payment for a Home. They didnt listen. I then told him to stay in an apartment until they could save the money, They didnt listen. I told him not to purchase a variable mortage. They didnt listen. I told him not to use the equity in their home to borrow money, They didnt listen.


If you have family members who wont listen at every step of the process and is knowlegeable enough to lead them and they dont listen then how can you expect people who dont have the advantage of it or the ability to pay for the advice and then not be sure if it is good advice to have anything?


So talking about buying Silver and Gold much less understanding why you should purchase it is impossible for many. I have no desire to buy the bullion except for the silver eagles and I now purchase the Morgans because I like them and then it is only if the purchase price is below retail.


Where are these people going to get 20K for 100 ounces of silver even if they do realize that it will probably enable them to be able to maintain the same standard of living down the line?This is correct.




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I agree with your post. You will get no disagreemnt from me.


But I wrote it because I believe that at least some or many "gold bugs" or metal enthusiasts think they are going to get rich or become better off if metals soar when in actuality, they will be worse off. Its based upon the logical fallacy that metal prices will soar and nothing else will change much. It is irrational and ridiculous.

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If the Mint should decide to do a 180 with respect to SAE's, we might expect another rise in the price of silver bullion, but if it should hit $25/oz. the Feds will probably find some reserves somewhere in order to flood the market and drive the price down. If not, I wouldn't be surprised to learn that the Mint would be charging $60-75 for silver proof sets or discontinue them altogether when they start losing customers.


About 4 years ago, I bought 100 rolls of circulated quarters at 2x face. I needed the money, so I sold them about 2 months ago at 10x face. I would have liked to hang onto them longer, but I can still live with earning a 400% profit.



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Your post is also anecdotal confirmation of what I have written here.


Listening to those who are rooting for higher metal prices, one might think that these prices will rise in a vaccum when they will not. Soaring metal prices will amost certainly be associated with many economic problems. And because most people have a limited capacity to deal with them, they will be forced by adverse circumstances to sell them "prematurely" and this even assumes that they have the capacity to time their purchases and sales reasonably well in order to make any real money when in fact, there is absolutely no evidence of this.


But of course, since I am not looking for inflation or soaring metal prices in the near future, I do not anticipate this as a likely problem. To the contrary, I expect the opposite.


Most people are going to be wrong like they usually are. And in this context, I expect


To have silver prices fall substantially in a deflationary depression

Coincident with rising unemployment

Followed by and conicident with forced selling for all kinds of assets, including silver


If this is a reasonable reflection of the future, then many people who own the metals now will not own them later when prices are higher because they will no longer own them. But even if my outlook turns out to be completely wrong, the typical buyer of precious metals is unlikely to be better off.


It is isn't going to happen, but the best economic outcome for most everyone is economic stability. The economic stability between 2003 and 2007 was bogus and was unsuatainable with indefinitely rising metal prices. That of the 1990's was somewhat better but did not involve rising metal prices at all.

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I cannot agree with you on this. People fail to realize that price deflation/inflation as measured by the CPI or other common indicators are not the same as monetary deflation/inflation. Monetary deflation/inflation of a fiat currency can occur in either a price deflationary or price inflationary environment.


Right now, prices are falling due to numerous and varied reasons, and at the same time our Federal Reserve is increasing money supply at an unprecedented rate. Our currency value is falling because, other currencies being equal, they are inflating the supply of money relative to prices. What I do not understand is how our currency has managed to fair so well, so far. If you follow the Fed's repo offerings, agreements to take some supply out of the system, they are trying to reduce the appearance of increased money supply but it is my opinion that eventually they will fail. At some point, somebody needs to mop up excess money supply that is being created today. When this happens, if the economy is not growing gangbusters, then the currency value falls, prices may or may be going up, but the value of alternate currencies i.e. gold and silver, will rise relative to the value of the fiat currency.


While I over simplified a number of concepts above, the bottom line is that so long as money supply continues to increase relative to aggregate price levels, physical stores of value i.e. gold, silver, and land, will rise.


I do not see any steps the government is taking right now that would indicate our currency is going to be saved. I see monetary inflation coupled with a low price levels for some time, therefore I see higher gold, higher silver, and land prices that will eventually rise.


For the record, I am in the gold $5,000 and silver $200 camp.


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What you are saying, I am already aware of. I've already addressed this topic many times in prior posts and cannot repeat everything here.


Whether there is either monetary inflation, price inflation or both is a matter of PSYCHOLOGY and not any mechanical relationships as conventional theory believes. And right now, psychology is more deflationary than inflationary on both frionts unless you are a believer than this rebound is going to reflate the credit bubble. I do not, but even if I did, the bubble led to asset price inflation and not that of goods and services except marginally.


Right now, most of the actions of the government have not increased the money supply as much as people believe and to the extent that it has, most of that "printing' is sitting on deposit with the Federal Reserve with ZERO velocity and no matter what anyone thinks, that is not inflationary until it is lent out. The rest of the "printing" is not printing at all, it is DEBT SWAPPING through the alphabet soup of term lending facilities.


The strategy that the US is following now is essentially the same as Japan has followed for the last two decades. There are some minor differences such as savings rates but far more similarities. And just as Japan's "efforts" have not created price inflation there, the Fed's are unlikely to do so here.


The monetary aggregates LOOK like they are increasing substantially but as long as lending does not increase, the deflationary pressures will persist on both credit and prices. Marked to Marked, credit and asset values are down substantially and in a credit based economy, that is far more important than measures of base money.


I expect prices to increase for metals eventually though I have no opinion on when that will be at the current time. First, I expect them to fall and for silver at least, substantially. I expect silver to fall below the $8.39 it hit last October long before it hits $200.


As for land, I see essentially a zero chance that it will increase at all in the near future. Land and real estate are predominatly financed with credit and even if price inflation increased substantially, I do not believe that land would increase much if at all generally. Real estate is still absurdly overpriced and unaffordable to the typical American, except with the ridiculously low lending standards which cannot be maintained.


As for your supposed mystery on the USD, you need to consider that many other countries are in even WORSE shape than the US.

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I dont think that you can put any one cause on the catastrope although some played a more important part then others. I mentioned that Greenspan had lowered rates so low that it was a more easier to get people to borrow money because of the low rates. Remember when Greenspan was recently called in front of Congress for his alledged part and Greenspan said? " I was naive but i believed that Wall Street would be repsonsible enough to police itself in the environment of the easy credit"What I said was that the repeal of Glass Steagall and the revival of the CRA was a tipping point.I also mentioned that people who had made bad decisions and bought homes that they couldn't afford were blaming the lenders for not telling them that they couldnt afford the home. I remember the seminars on T.V. about buying homes with no money down etc. I remember the mailings on getting credit cards and it being so easy. I know of at least one wealthy person who bought a home that they could afford and actually told me regarding the papers that a buyer has to sign at closing that "nobody reads all that stuff".So we are talking about the lack of personal responsibilty on both ends of the financial spectrum.


One point is unavoidable and that is the one that if a person bought a home and that they could afford it whether on the basis of one wage earner or both spouses and they use a variable rate mortgage because it is cheaper up front and the underlying rates are raised 14 consecutive times and that $1500.00 a month mortgage then becomes $2300 or more when it resets then it was a problem even if both spouses managed to kep their jobs. The selling that ensued when prices were driven down by foreclosures and people walking away from their homes then affected the next leg of home buyers. These are the people that used the equity in their homes to live a lifestyle they couldnt afford on their normal wages. A person has a 200K home and takes out 50% equity and the home goes down by 30% to a value of $140K and they now have a home valued at $140K and they owe 100K on it. You certainly cant sell a home that you can now only get 100K for but has loans out where you owe 130K unless you do a short sale in another instance.Then there were the rating agencies that now admit that they couldnt understand many of the forms of exotic financings so they gave high ratings based on the reputation of the lending institutions.


I also don't see deriavaties and the other forms of exotic financings as being a major cause but ones that aggravated the situation. I unserstand that many of the people who then resold these loans did them under a type of self insurance and avoided regular Insurance companies to avoid the more stricter regulations.


This situation is more the result of a Housing bubble that was brought about by the excesses mentioned above and more, The system collapsed under them. it is true that many of these excesses came about by sme degree of Psychological reasons if you want to use the term to describe emotions of greed,wanting to live a lifestyle beyond you means,an attitude that you could do it because Home values would continue to increase, and even naiviete etc. I remember a survey conducted by the U.S.Post office some years back during the rise of Publishers clearing house where they sent out mailings that people had won etc etc. Something like 70% of the people responded . The U.S.Post office then sent out mailings telling the ones that responded that is was a scam and gave points to look for. They waited a few months and sent out similar mailings again to the ones that responded and 50% of them again responded even after the warniings. I attribute another name to these people.


The credit part comes about because this Economy is 70% driven by consumers. Credit card debt for the average person was 11K a year ago. The choking off of credit at keast started when Bernanke raised the rates 14 consecutive times. When the situation started to become evident and the Central Banks of other countries made huge moves to try and avert it our Fed did nothing. They said it wasnt a problem and that it could wait until the Fed had their next open market meeting which was about 3 weeks later. The only rate they changed was the one which Banks use when they loan money to each other. Many confused this with the Federal Funds rate which is determined at the monthly open market meetings and affects "all" interest rates.When you now have a large amount of people that cant contribute to the economy because they are paying down debt or dont have a job then it is going to suffer. If businesses cut back on inventoreis because there is no demand and even businesses that have the demand cant got credit then you have a credit problem. Some businesses are doing relatively well because you have increased production from less people probably because they dont want to be on the next chopping block or unemploymeny line so some aspects of the Stock Market are doing well.


If you count the people who are unemployed and are no longer looking for a job and the people who lost full time work and had to accept part time then the 10.2% average is actually 17,5% unemployed. The Government and some others calls this the " underemployed" and doesnt include them. This is pathetic. If you are unemployed then you are unemployed period. I suppose this could be Psychological if you think it is not so bad. Looks better if you decrease 10.2% by .2% then decrease 17.5% by a tenth or so. Also looks good if you don;t mention that 17.5% is an average and it is more than 20% in some States.


My original point was that if you ask the person on the street what causes the problem you will get an answer that it was the excessive spending by the previous administration.This is nonsense. My House is paid for and I have no debts. The excess spending has not affected my lifestyle one bit, There are even more opportunities. It could affect me down the line with Inflation and a loss of purchasing power and an erosion of certain assets. Since I am retired and on a fixed income there is no way that I can increase my income by increasing taxes or printing more money etc. I could win the Lottery or inherit it but there is non guaranty here. I cant do anything about the Politics such as the reason for the repeal of Glass Steagall or the actions of the Fed etc. The only thing that I can do is to keep informed of the actions and the odds of the results and change my assets to anticipate them etc.


I am not concerned about the Monetary policy etc per se because there are many other considerations just like there were many other considerations of the resulting Housing and Credit bubbles. I was born and raised in California. My Great Grandfather and Great Gradmother were fom Italy. My Grandmother had a brother who personally knew Gianninni who fonded the Bank of America and had an opportunity to work for him when he founded his first bank and refused. I can remember when the Bank of America was not allowed to expand outside California. If it had been confined to California then any bad loans it made would have been confined to California etc. If it had not been allowed to make these type of Loans then it would have also been more confined.If in addition people would not have been allowed to purchase a home or homes for no money down or could only have a certain percentage of debt as I did when I had to put down 20% and could not have more than 25% of my income including my mortgage be attributed to debt then it would also be more confined. This is why the repeal of Glass Steagall and the revival of the CRA was a tipping point.



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That is correct and goes to the Pyschology mentioned in both of our previous posts or numerous other reasons. My wife and I knew this couple whon have since moved to Atlanta Ga and he had a successful Plumbing business. The husmand was always asking me for advice. They got involved in one of these pyramid scams. Something to do with skin cream or something. They both came over one night and were pushing this Amway. I told them that what I knew of it did not interest me. They kept bugging me about it and finally asked us to coem to their home where they had some representive with a movie etc. After the Movie I commented that the people in the movie were Doctors and Athletes etc who not only had the contacts but somehting to fall back on in case of failure etc. I then asked to see their pricing catalogue and was told that only members were privy to it and if I paid the fee that I could see it. I told them what I thought of that and was shown "the book". I pointed out that my wife only liked certain brand names in some cases because the generic brands were inferior and that many of these products could be purchased cheaper with store sales etc. Their excuse to this is that I would have to change my buying habits to take advantage of it etc. He kept up avoiding and trying to rationalize and I then told him that many State Attorney Generals had sued them because they misrepresented the amount of money that the people on various levels could earn etc. The guy then excused himself and left. The Husband never did come to our home again and the wife always had some excuse for him . I saw her later at a birthday party for our grandchildren because she is the Godmother for them. I asked her how the Amway business was coming and she told me they were no longer associated with it and dropped the subject.


You are correct about the gold bug schemes etc which relates to our previous posts. When I started collecting Morgans there was no Internet or Ebay. The only real home computer was one made by a Canadian company by the name of Commodore. You really ahd quality dealers and quality merchandise. There was very little of the junk etc that is sold today and is the reason I regret selling my previous Morgans.So I collect them because I like the issue and any jump in prices of silver is a bonus.


Peole are going to be drawn in by all sorts of schemes as mentioned earlier whether it is gold bugs or silver bugs or Amway etc or buying homes for no money down and turning huge profits and think they are going to get rich. When they or it fails then it is never because they were ignorant or mis-informed etc.And if they ask you then they dont want advice for the most part but agreement. My Father passed away three years ago but my Mother still lives in South Texas. You go about thirty feet in their back yard and there is a seven foot sea wall which is in front of the Gulf of Mexico. You can look across the water and see South Padre island or drive to it in fifteen minutes by car. When it was starting to grow a friend of my fathers asked about building a minature golf course on it and my father gave him the reasons that it would not be a good idea at the time. He went ahead anyway and built it and it failed and he lost a great deal of money. My father told me that he didnt really care. He just wanted approval and I never forgot it like many other lessons in life/

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In this post, I am going to attempt to summarize in distinct clear statements what I have stated in this thread and others. I hope that this will make what I am trying to explain clearer and if anyone disagrees with me, that is fine because the opinion that most others hold is held by 95% to 99% of the population and market participants. I am not interested in agreeing with them most of the time.


ALL prices are relative and psychologically determined. There is no formula or rule that applies to any of them, either to the relative or absolute price level. The "explanations" that are used are usually RATIONALIZATIONS to retroactively account for what has happened and have limited to zero predictively ability.


No mania, such as the NASDAQ and real estate bubble, is caused by any specific factor other than psychology. Now I will agree that the extent and the duration are limited by the economic "fundamentals" in the sense that the gap between perception and reality cannot last forever, but this relates more to timing.


I see little evidence of actual printing which is the primary reason why most people see an impending inflationary problem. The vast majority of the supposed "money supply" is DEBT which is also subject to default. This is true for all of it except for base money, currency and bank reserves.


Monetary and price inflation are psychological events as well and not mechanical outcomes. That's why conventional thinking is so consistently wrong.


To the extent that inflation can be created intentionally (Japan has failed to do so for 20 years), there is little evidence that those who are in a position to make it happen have any incentive to do it. People like Bernanke and Geithner cannot do so unilaterally and there is no evidence whatsoever of the US government taking pre-emptive action of that type in the past. Government is ALWAYS behind the curve.


There is more evidence today of deflationary stress than inflationary stress in the economy and here are a few examples:


The bond market is certainly not worried about inflation because if it was, interest rates would not be so low.


Private credit, at least in the United States, is CONTRACTING. That certainly is not consistent with inflation.


Metal prices are increasing but so are all other asset prices at this time, except for the USD To me, this is more of a symptom of the partial reflating of the credit bubble, the same as 2004-2007, than impending inflation. Most of the inflation since 1981 has been with asset prices and not those for goods. What's happening now is no different than recent history.


There is vast excess capacity everywhere, both in labor and production. This is not consistent with inflation either.


Crashing real estate prices are defintely not a sign of impending inflation and neither is the glut of housing inventory, commercial real estate and pending foreclosures.


I agree that the potential for commodity shortages exists. I do not see this as a significant risk to price inflation generally but do agree that, to the extent that price inflation is a problem in the near future, that it will occur here and potentilaly have a significant impact on many many people.


So how does this all relate to silver (and gold) prices? It does not just as the arguements that silver bulls have been using for almost 30 years do not either. I too expect silver prices to rise significantly but only LATER after they decline significantly based upon the situation I see today.


Of course, its possible that silver could rise despite deflation but history does not support that. It could spike somewhat higher first before declining and I acknowledgte that possibility. Despite my near term bearishness, I have said many times that everyone should own some of the metals, as much as they can reasonably afford to keep. Just do not expect to get rich off of it.

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The same thing would have happened to the Dow Jones Industrials last year if they had not taken GM, Bank of Amer and others out of the Dow. The Dow Jones average does not mean much really because when they don't like the average they just change it's makeup!

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Here's the kind of innovation that if scaled could have a significant impact on silver prices and/or the gold/silver ratio... If it goes mainstream and is mass produced, minute amounts, of silver are required millions of times over to potential "power cars?", other devices...




(Think a gold/silver "pair-trade" if not concerned with inadequate physical supply behind market based instruments). As noted before, investing in gold/silver/etc to combat currency fluctuations is ineffective compared with other more direct hedge mechanisms. Also always good to remember that from a production standpoint, gold/silver/copper/platinums and many other metals are often produced from the same ores (not always cost effective individually, but as a byproduct, the others are considered a free bonus), and when the demand/price point for one drives increases in production, there will tend to be an increase in supply/potential surplus of the others (purely from a production standpoint and devoid of demand changes within these respective markets) and downward pricing pressure may exist for the others... i.e. a divergence from traditional ratios and an opportunity to capitalize in a manner highly independent from traditional and potentially unpredictable currency risk... In such circumstances, a defined term pair trade can readily create a known max loss, identifiable upside potential, and mitigate risk associated with a potential meltdown due to physical supply, as such developments require substantial time to develop, would likely occur in both metals in the pair, and would not be as likely to occur at a time when big institutional traders had other opportunities to make an easier dollar...


Food for thought...





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Talking about gold as an investment and then as a hedge to hyperinflation is not comparing apples to apples in my opinion.


There was even an article on Bloomberg last night talking about checking account interest in the last 20 years has beat out gold as for investing.


That is true, BUT if in 2010 you are holding 20,000 from a checking investment you started in 1990, and lets say only 16,000 from the same dollar amount gold investment in 1990 and hyperinflation takes hold, I assure you unless you are quick and smart enough to get out fast, that 16,000 pile of gold will buy you more than that 20,000 cash will when it is over! (Ok, 16,000 worth of gold is not a pile, maybe a "lump") (shrug)


It is all a matter of WHEN you look at valuations of gold vs the dollar.


You have to decide what purpose you are using the gold for, investment, or safety net.



By the way, I tend to agree with WC that it will be a while before inflation takes hold, but it is coming...


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Morgan Man,


My point was that Gold, like everything else with limited and/or varied supply and demand and market based pricing pressures will experience periods of over and under valuation and that if your investment objectives are to capitalize on these fluctuations then there exist strategies that will allow you to structure your investment to optimize the potential rewards while mitigating additional inherent risk that may otherwise be associated with the base underlying asset. In the example given, my intention was designed as a follow-up of sorts with my previous post involving the similarities and differences in investing in gold and silver and the potential for one or the other to on occasion act independently or disproportionately with respect to the other. As an example of how one may capitalize on such an occurance, I offered the pair-trade scenario. In such a scenario, if for example, you believed that silver would outperform gold over a given period, then you would take a long position in silver and simultaneously counter with a comparably valued short position in gold. In doing this, you achieve a gain if silver outperforms gold, regardless of whether the actual price of gold or silver increases or decreases. The benefit this achieves is that it takes the price fluctuation due to currency valuation out of the picture (mitigates this risk). Additional advantages can be derived from the time horizon chosen for the investment, as a max loss/gain can be computed, as well as the potential for an individual to "leg into" the investment. A scenario where one or the other half of the investment is entered into a different times and/or accumulated in multiple moves to achieve a completed position - This is often popular for people who have already established one position and typically are already ahead, and wish to "lock in" a portion of the gain without liquidating the position. Similar strategy can be employed upon exit of the position, especially when the investment vehicle chosen contains an expiration and/or element of premium decay over time as expiration approaches...


To that point, my statement was that direct investments in gold/silver are INEFFECTIVE (perhaps inefficient would have been a better word) as currency when compared to other strategies (not the best tool in the box), hence the discussion of an option that may be utilized to effectively neutralize the impact of currency valuation on your investment and allow you to be more refined, and on target with your dollar...


As for investment comparisons over non-objective time horizons, you can generally look at almost any investment over a selectively chosen previous time horizon and illustrate the great gain or loss that could have occurred. Correspondingly, you can almost always take the two over a second selectively chosen period and illustrate the exact opposite. (The key is to understand these cycles, the underlying dynamics and flow of money and capitalize) Rhodium as mentioned before, is also a good example here, as it went from 200 to 10k and then in late 2008 from 10k to around 1k in only a few months.... Great in the first example, horrible in the 2nd....


Also - World Colonial...


You are correct that the insufficiently_thoughtful_persons at the FHA, are still operating under mandate to dish out high ltv junk loans to people who often have no business owning a home, all in the name of stimulating the economy... What most people don't know is that the USDA has a rural home program that still lends to 106% ltv outside of major cities and is doing the same thing... The little known secret is that many fairly recent changes involving home appraisals and valuation were in fact designed to drive more high quality loans to FHA to help shore up a mess that would have otherwise already collapsed or required significant additional gov't inflows of capital. In theory, the idea was sold as a means to ensure that lenders did not influence the valuation and required that all loans sold to fannie and freddie use appraisals ordered by independent third party organizations. In practice, all it does is add 2 weeks plus and $100 to $200 more to the borrowers costs. As a work around, lenders can still use their "own" appraiser, who they can hold accountable for a delivery schedule, when packaging loans via FHA... Due to pricing structure (add ons) for FHA mortgage insurance, this is not fiscally practical for loans over 80% ltv, but under 80% it's a no brainer... As a result, while FHA historically only received the BS 95%+ LTV, extremely risky loans, they now have a huge influx of under 80% ltv high quality borrowers, thus raising the total portfolio quality considerably and continueing to allow them to sell MBSs and other structured debt instruments at significantly higher premiums than would otherwise be possible, despite the high percentage of poor quality loans that are hidden in the mess. The thought process behind this appears to be that even if a significant portion of these borrowers fall behind, many will receive their 8k gift from the gov't next year, catch up on payments, and then we can blame it all on the ecomony and declare that defaults have improved and we have recovered... Ha....


To that end, we must also be aware that while the market has been conditioned to keep an eye on foreclosure filings, the reality is that, thanks to gov't incentives to stall f/c and/or for banks to faux work with distraught borrowers, it is often taking a year, two years, and perhaps even more for these properties to make it through the courts, into the banks REO depts, and back on the market, as a result, we have not begun to see the real impact of the housing "crisis" on market prices, as the backlog of investor owned properties is tremendous... I suppose they believe it can be held off until the economy has improved and/or policies to create artificial demand can be employed...

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