Silver & Gold prices

[World Colonial]

Lower rates are not going to solve the Option ARM problem. The reason for this is twofold:

 

First, the vast majority of borrowers selected the lowest of the three payment options they had. These options were standard amortization, interest only and NEGATIVE amortization. Most people, I believe about 75%, chose the last one probably so that they could buy as much house as they could get. When these loans reset, they will require standard amortization over the life of the loan (say 25 years) with a principal balance of at least 110% of the original loan amount. So not only will the monthly payment NOT GO DOWN, it will SOAR.

 

Second, many of these people LIED on their loan applications. So even assuming that they could make the payments based upon the new terms if they had the income they claimed, many will not be able to do so because they do not and never did have the income they said they did. Furthermore, many of these people are probably now unemployed.

 

The "ground zero" for these Option ARMS I recall are the same places which have been hit the worst: California, AZ (where I live and where homes above the lower tier remain overpriced or absurdly overpriced in my opinion) and NEV. Only FL of the worst hit states does not have a huge number of these.

 

California is by far the worst and with the combination of NEGATIVE equity and high un/under employment, you can expect a substantial increase in "strategic" defaults. This should further decrease home prices in these areas and they need it because places like California remain absurdly expensive even now.

 

Most consider falling home prices the problem. It is not. It is the solution. There is no other consumer good except for housing where people would be cheering as it rose substantially in price. It was only the recent bubble and prior to that, the government's on-going policy of CHEATING creditors for the benefit of debtors that made it appear to be a free lunch. Those days are over because the actual economic capacity to support prior and even current housing prices does not in fact exist.

 

This country needs to abandon the "American dream" of "homeownership" as formal government policy which has in actuality turned scores of millions of Americans into DEFACTO DEBT SLAVES. There are many other countries with lower homeownership rates (such as Germany) and there is nothing wrong with renting. Contrary to conventional thinking (as usual), the housing bubble was not a sign of economic prosperity but of economic poverty.

[CHABSENTIA]

I am not that familar with option arms ,however, my understanding is that it will not be as bad if it resets at the present lower rate than a much higher rate. I have only bought a home with the fixed rate.Then I had to put 20% down and my total debt payments including my mortgage could not be more than 25% of my monthly income and I believe that this should be the norm.

 

My home was paid for 6 years ago. Its value has decreased which is not a concern as I do not plan to sell or refinance etc. The decrease in value is a problem for those who plan to sell or re-finance. It is a problem for those who used the equity in their homes to finance a lifestlye that they couldnt afford with their normal pay check and which decreased in value and it is a problem with people who now want to sell their homes for wahtever reason and because they put liittle down and it declined in value now owe more then they can sell it.

 

The problem is that the home is the major or the only asset for many if not most people. If you have everything in the home and it decreases 35% in value then you have a problem. If I can afford a $125,000 home and out anf purchase a $350,000 home which I can afford and it goes down 35% then I instantly have over a 100K loss. so being able to afford can also be a problem. And this assumes a fixed mortgage. If I do the same and buy soem sort of a variable mortgage then my situation is magnified.

 

I remember when people bought homes with some sort of a variable mortgage and had a mortgage at say $1500.00 a month and Bernanke raised rates 14 consecutive times and they reset and now people had mortgages approaching 2500 .00. A thousand more a month might be a problem for people who could afford the $1500 assuming they still had their jobs.I am not sure what range you consider a "soar".,however, the option arms reset along with another decline in housing and values will be a double whammy.I understand that the new Obama program is for those that have a mortgage and lose their jobs, Is there a program for those that have a mortgage and a reset and a decline in value and still keep their jobs.? We now have "Time" magazine which has named Bernanke as "Man of the Year".

 

Then there are the people who bought several homes with no money down because of get rich seminars,I am against home ownership at anything less then what it cost me for a conventional mortgage. when I bought a home.But then there is also Credit Card Debt and not just two or three cars to a family but they have to be big SUVs etc.If you cant afford to put 20% down then you arent really committed.

 

Of course, people bought the what was the cheaper up front of the three. If somebody had to lie to get the loan then they had to know that they couldnt really afford it on their "real" income,Now unless you dont have at least 10 % to put down and an excellent credit rating thn you are out of luck. Because of only a certain availability of funds then if you only have 10% to put down and another person with a high credit rating and 12% to put down comes along then they get the loan etc.

 

So we will be hit again etc.

[World Colonial]

Let me clarify a couple of points for you.

 

When I say "soar" on the payment increase for Option ARMS, I am talking about increases of 75%, somewhat less or maybe more. How much the increase will be (NONE of these payments will go down) depends upon the mortgage terms but I do not have any insight to what they will be on a particular borrower. But increases of $1000 on a $1500 mortgage payment are not uncommon for reset based upon the anecdotal information reported publicly.

 

This may sound impossible with lower market rates but its a function of a LARGER loan balance and a SHORTER amortization period. Also, the rates will also be generally or always HIGHER because the initial mortgage payment was based on a "teaser" rate which was as low as 2%. (That's why there was negative amortization because no one can borrow at that rate even though many people were so clueless they apparently did not know this.) So though the contract rate may decrease, the rate used to calculate the payment is higher than the "teaser" rate.

 

I'm not familiar with all the government mortgage programs (I am IMPLACABLY OPPOSED to ALL of them) but to my knowledge, there is no program for anyone who does not have a job. And there should not be. The programs which exist now are absurd enough.

 

I'm not familiar with all the specifics on what it takes to qualify for a mortgage today. When I refinanced the mortgage on the house I bought with my mother earlier this year, we used one of the government programs. (She lives in it and I pay for it.) The only difference it made was that I did not have to get an appraisal and I had to pay some of the closing costs in cash. (Bank of America has the option of selling to either FNM or FRE since it is written under the government guidelines.) I'm not sure what would have happened if I had gone the conventional route. As far as I know, the house is worth more than what we owe but I did not want to bother with it. If it had appraised for less, then I would either have had come up with more cash (which I could and can do) or left it as is. From my standpoint, buying this house (though a cheap one) has been the worst use of my money ever but I did it because it is necessary.

 

Also, if the underwriting guidelines you mention are really 10% down for a private mortgage, that is just not enough, though it is "high" by recent standards. Think of it this way. Most people will incur a 6% realtor commission (it might be less but probably not) and no one can sell a home today without paying closing costs for the buyer. This adds at least 2% for the typical home. So in reality, someone who puts 10% down has AT MOST 2% equity right after they buy it.

 

Therefore, if the loan goes bad, the lender also has at most a 2% cushion in a foreclosure as protection from a subsequent decline in market value and inactuality, less because they will incur expenses to collect or foreclose. When viewed in this light, now it should finally make sense why loans traditionally required 20% down. Its only because of institutionalized inflation that the REAL risk in mortgage lending has been disguised for so long. Whether now or later, the artifificial avaialbility of credit will decrease to one extent or another which will make less credit available and at a higher cost. This in turn will reduce real estate prices because most people will only be able to pay what they can afford which will have to bear a more realistic resemblance to their actual financial capacity.

[SWNGC]

There is no reason to assume that a future reflation of the credit bubble would result in the bubble growing to a size bigger than that of 2007. In fact, the best "most stable and "energy/resource efficient"" means to deal with an extreme under or overshoot in the desired path of a "natural" system is to induce stimuli sufficient to allow subsequent additional bubbles or natural oscillations that diminish in magnitude with respect to the previous and collectively act to bring the system back to the desired path. Accordingly, one would expect any current or forthcoming reflation to be limited in scope to a path that did not overshoot the current target (does not mean "markets" can not peak/nadir higher/lower than before by a magnitude exceeding the previous one, but that it will not deviate from the desired path by an amount exceeding the previous deviation - i.e. total deviation from desired path will decrease)

 

As an individual who works to understand the mental/psychological aspects of the people/markets/gov't, it is remarkable to see that you do not appear to consider that the current market psychology/mania, etc is not also a direct result of dissiminated media/reports/legal revisions/etc and that all are greatly influenced by our gov't. To believe that the gov't "never anticipates anything correctly" could be a weak cornerstone upon which many of your additional and often otherwise well/logically construed beliefs reside and your apparant staunch contrarian position. On a side note - Ironically there exists a possible psychological motivator for this as well, as many people who hold themselves to be more educated/more intelligent/or just above the general masses, tend to highly favor the contrarian side based upon the logical justification that the other people are less intelligent and therefore cannot all be right, also often drawing internal satisfaction from the feeling of elitism/exclusivity that accompanies being "smarter"/different than the masses/groupthink. This is the demise of many an "intelligent" person, as their desire to be right and different, overpowers their desire to be nimble and focus on the real goal...$$$ Realization that "wrong or not" the masses provide such a massive energy/collective stimuli to the system that they can become a self-fulfilling inevitability, and developing a dissinterest/disconnect in whether you're right/wrong and only whether you gained from your position can make anyone much more successful. Followed by a post transaction evaluation of your move, of course...

 

To the initial point, there are many "logical" motivators for the gov't to tip their hand on possible changes to any rules that define the game in which we all play. The most important of these is to allow the time necessary for all players to revise their own playbooks/strategies to align with the possible new changes and to ensure minimal unintended shock to our economic substructures. As such, the most beneficial course of action with respect to such changes does not favor rapid action. Along these same lines, the people/consumers who also play a critical role in these systems must be "conditioned" to adhere, "buy in", to the new mantra, a process that is easier achieved when they believe that they have played a role in the changes, via public forums, local/state reps, public debate, etc - i.e. the illusion of a choice/free will. Effectively what is achieved is that the gov't and media will walk the masses through the decision making process step by step. Need recognition, identification of alternatives, evaluation of alternatives, commitment to a choice, post commitment evaluation... These are all natural phase that must be completed for psychological satisfaction.

 

These actions are planned/played out loooonnnggg before the public, or even your politicians, are even aware that they are coming, and the outcome is well defined before the first public release/discussion occurs. Thus "illusion of a choice"...

 

Today's news brings a fantastic real world opportunity to elaborate on this further... As it turns out, our incompetent gov't has failed to encrypt the video feeds from our drone aircraft and the enemy has managed to use $30 off the shelf software to "hack" them. Public result, gov't is incompetent and our drones worthless and not as high tech/threatening as before. Real result - enemy gets more "comfortable" because they perceive they have the upper hand. Fact- People are most vulnerable when they "believe" they are in a safer/more comfortable environment. Reality is that we can now conduct intelligence into who is seeking to acquire the new software, which we have most likely placed a counterintelligence bug within anyway, and ironically, intelligence gained from surveilance is often more valuable when the subject knows thay are being watched and/or then subsequently believes they are not. The reality is that we can fly drones over an area 50 times and see not change, but if we let the enemy "know" we've taken an interest in the area, they'll tip their hand by moving crucial assets/people/etc out of the area at the first opportunity and we WILL see change. Brilliant Tactic eh....

 

Same goes for dissimination of "new" technology to enemy/rival states. As long as we "live" behind our own curve from a technology standpoint and only release/commercialize technology that is very well developed/understood, then we can control/define the path, from the very start, that the other party will follow when seeking to expand upon our "new" "secret" technology. This acts to minimize the overall threat to our system, as their outcome is known to us and not subject to the same innovative/unpredicitable outcomes that could come with the development of their own technology from scratch and along a course unfamiliar to us, while serving to "tie up" their respective class A resources. Diversion...

 

Those behind your gov't are already living in your 2030... Play the game accordingly and win.

[chinook]

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?

 

Nothing of what you wrote is true. If you are interested I will provide with facts and then of my opinion.

 

I think you need to check the charts. He is dead on about the rebound before the big drop. It went from 381 down to 198, then rebounded back to 294, before dropping to a low of 41. The only thing he got wrong was it was a couple of years after 1930 before it hit the low.

 

1920-1940 Stock Chart

 

The question I have is: Are we sitting at early 1930 right now....teetering on another big drop?

 

MM

 

 

Did I ever say there was not rebound and subsequent drop? There was no 80% drop by Nov 1930. Interest on the debt will not exceed GDP in a few years. It can be paid off. Soup will not cost $25 unless wages go to $500 per hour. At the risk of sounding extremely arrogant, you dont want to get into a discussion with me about charts.

 

The magnitude of the rebound and timing of the drop are my pet peeves. I might suggest you get this book... The Crash and its Aftermath , as you will then be able to get into Bernake's brain and the reasons for his actions.

 

The incessant bashing of the USA and the dollar is tiresome and tells me we are at the end of the dollars decline.

[chinook]

The fact that the U.S. is losing its triple A rating

 

 

How is this fact? I see it as purely speculative assumption. And a rather poor one at that.

 

 

The rest of what you write I agree with.

[SWNGC]

Spot on with respect to the payment increases for pay option arms...

Most borrowers chose the option to pay only the minimum payment which is a negative amortization payment and typically allows the borrower to reach 115% LTV based on the initial appraised value, before they must switch to fully am or interest only. These are also variable rate, with common teaser rates of about 2%, note rates of about 7%, and max rates of around 12%, on average. The "resets" for these loans do not all occur at the same time, but rather at a time, some monthly, quarterly, annually, 3yrs, after origination, so some have been and will continue to reset everyday. The average loan amount for these loans is much higher than the normal conventional loans, as it was popular in the high dollar areas you've previously notes, as well as with property speculators.

 

Accordingly and as an example, a 400k loan amortized over 30 yrs with a 2% minimum i/o payment would have been a meer $667/month... The same loan at the full rate of 12%, but still interest only, would be $4000/month, and when it reaches repayment, as little as $4114/month with a ballon at end of term and non-minimum payment, or $5520 for those ending with full 15 yr amortization. Just over 8.25 times the original minimum payment... Amazing

 

 

As for the current market, (side note to world colonial - conventional mortgages are the loans eligible for sale to fannie/freddie via du/lp automated underwriting, i.e. what you got from boa) conventional loans currently require a minimum of 5% down with private mortgage insurance (pmi) also requires for those over 80% ltv... This is reduced by 5% in MSAs deemed to be soft/declining markets thus the 90% in Chabsentia's FL... This is further reduced for multi family, condo, investment, 2nd home, non owner occupied, etc depending upon the borrowers credit score, and the max dti is also reduced in some cases. Conventional loans today still allow for property inspection waivers/value acceptance for "high" credit borrowers, typically 720+ mid fico, and in stable, well defined homogenous communities... Rates are also now highly dependent upon the combined credit score and ltv of the subject property, with the excess premium being required as compensation for the increased risk of default (ironically really "good" borrowers who pay their homes off early and/or refinance later are also viewed as and represent a risk, due to the way the MBSs are securitized and broken into various traunches(cash-flow streams) for investment)

 

The public as a whole does not fully understand the difference between loan servicing rights and who the end investor is. As an example, World Colonials and his mother's home is financed via Bank of America, but this is who retains the servicing rights (i.e. who you make the payment to) and they will generally receive/retain a 25 basis points 0.25% fee on the loan per year for this servicing. (Only when loan servicing rights are transfered, do most borrowers think their loan has been sold) In reality, the loan itself has almost certainly been securitized and sold with a few hundred million $ more of them on the secondary market, in this case almost certainly to fannie/freddie (your gov't) under the gov't mtg purchase program, and subsequently re-offered "in complicated spirit" via treasury note auctions as well as via other means.... Basically lenders today only "portfolio" (i.e. hold as their own investment) "problem" loans that they cannot otherwise currently unload on the secondary market, but will when finally given the right opportunity (i.e. they f'd up and made the loan and have to hold it or take a loss if forced - a very small % of loans)...

 

FHA, VA, USDA(rural housing) (These are what's really refered to as government financing, not FNMA, FHLMC/Freddie, which is termed conventional or "prime" loans), still allow for 97% and in some instances 100%+ financing possibilities in many areas.

 

There exist no practical options for those with no income. (i.e. non-conventional, ALT-A, subprime & private money channels that historically served these segments have fallen, failed or changed their ways) However, I believe chabsentia was referring to the current programs that allow borrowers in trouble to restructure to catch up and avoid forclosure, in which case they may have their rate modified to as low as 2% fixed, as long as their debt structure keeps them below the recommended housing and total debt ratios of around 28/38% DTI...

 

Yes your gov't is footing a portion of the bill to supplement their housing, however it does also substantially benefit the lender/investor/structured debt market, neighbor/community, housing market, and the remaining general public as a highly "interested" party... These programs are serving as a damper and are as good as it will get for these "people in need" and will be revoked when the housing market can sustain the remaining undampened impact.

 

On a side note - It is my belief that the 6% realtor hit will drop considerably in the coming years, due to market based factors, as well as increased reliance upon technology and overall pressure on the industry... Your homes' primary purpose should always be a functional one, with the secondary objective to be related to investment potential.

 

 

 

 

 

[World Colonial]

You have a lot in your post but let me try to address a couple of items.

 

You are of course entitled to your opinion, but there is no evidence whatsoever to believe that the government can make things happen the way you state them. You have not provided them and no one else can either because there are no "potent directors" who are in control the way you seem to imply. What you have provided are generalized statements like most people do. Like most others, you use a term ("government") and then appear to conclude that it has a common motivation when in actuality, this impersonal entity is not a real person at all. It is a group of people, some of which share common motivations in part but with sufficient differences to create the complete screw-ups we see over and over again. The government is significantly divided in actuality and not united.

 

In posts included on other threads and in one in this thread, I specifically acknowledged that it is possible that "the system" may be maintained without collapse (whether from much higher inflation or as I believe, deflation) but only TEMPORARILY.

 

If you do not agree with me, then you can explain why Bernanke or others like him both have the motivation and the capacity to create the outcome you claim. Of course the "government" would like to create "modest" inflation to keep this ponzi scheme going, but what actual evidence is there that they can actually do it indefintely? You cannot do so just as I and others who share a bearish opinion cannot state what exactly would cause the financial system to collapse or an economic depression to occur. If it happens it happens and if it does not, then it does not regardless of the supposed "reason".

 

(In my other posts in this thread, I was refuting or attempting to refute what I consider to be common logical fallacies, in this instance for the inflationary position. Arguing against a postion is the easy thing to do. But no one can affirmatively state an outcome in advance no matter how logical it may appear to be on paper. That is why I cannot state with certainty the conditions that guarantee deflation even though I believe it is far more plausible than the inflaitonary outcome. )

 

As for the media influence, the media is also influenced by the mania psychology but they do not create it. It is a feedback loop of cause and effect. People in the media are human being like the rest of us and are as susceptible to manias and panics as the rest of us. (And for that matter, so are bureaucrats in the government.)

 

If the government has anticipated anything correctly, they certainly have not prevented anything. It is an assumption that they have done so. Did they prevent the Great Depression? Or the banking failures of the early 1990's? Did they prevent the housing bubble? No, they actively participated in the actions that were later blamed as the cause and made it worse. Have they or are they going to "save" the economy or the financial system from this recent fiasco? I do not believe so but apparently you do. One of us is going to be correct and one is not.

 

The reason the "equilibrium" you imply is not going to happen is because of both psychology and moral hazard. What you state in theory makes sense but no system exists or will ever exist where the motivation for people to act in the supposed "common good" will occur in actuality. Who is to say what the common good is? Personally, I do not give a rat's what most people consider to be the "optimal" outcome because for the last century, that has involved stealing from many of those who create or accumulate wealth to give it to those who do not. Everyone has their opinion of that and even with those who have more influence, the end result (when anything even happens) is a compromise which is far from "ideal" because only each individual knows what is in THEIR interest.

 

Some other people believe that major events and outcomes are planned in advance and then these "potent directors" make them happen as they wish or at least generally as they do. It is the "conspiracy" argument. Whether that is what you are saying or not, I do not know. But in any event, there is no way to prove that one way or the other.

[SWNGC]

 

So you do not refute that there is in fact no legitimate reason that mandates that a subsequently occuring bubble or reflation would necessarily exceed the size of any previous one or that the corresponding deflation would necessarily occur in an "implosion" as you've stated, but could very easily, in fact, occur in the very same fashion as the many bubbles that you've previously cited have, with the world as we know it going on, the dollar remaining the dominant and strong currency over the long term and the US economy and lifestyle being the one most coveted by every other country in the world. (Fact - We, as a nation, will fight to retain our power by any means necessary if forced to do so and are phenominally well positioned to be successful in any such endeavor... You don't like our game, we'll show you the way out - The world's overpopulated anyway:)... Bad news for us, worse news for the rest of the world)

 

The evidence that the "government" can, does, and has acted to control the world in which we live is all around you. Accordingly, actions by any entity of power always work to serve at least one purpose. The power behind the entity, in the case of the US gov't, like anywhere else, is Derived from multiple sources. In our case major contributors are our people, technology, infrastructure, natural and unnatural resources, military and psychologically based confidence from both within and outside our borders. The result is not at all a fair for all, equal, one, but instead one that is highly favored by and to an extent controlled/manipulated by the parts of the whole on a "value weighted" basis, whereby the elite individual entities, organizations and people who in part comprise the whole have considerably more influence in the whole, whether the influence serve to benefit them at the expense of a foreign or domestic entity, it will always be weighted to serve the elite few and there will always be a disadvantaged majority. (surely you do not dispute that there is an elite class of people and that they posess more wealth, power, influence, control, etc than the typical person, or that they will act in their own collective best interest) It would be foolish to believe that the world as we know it and as it exists around us was not designed and built to serve this purpose or to assume that those positioned to benefit the most from it first will not fight a threat to their system, and two, want you to know who they are, as people act out towards those who take advantage of them... (Fact - Those in power will move to influence the world around them to increase their own position especially when the reasonable threat to the stability of that system is not jeopardized.... Those out of power will act to destabilize the system that they do not control in hopes of replacing it with one they can - this is life)

 

Evidence is provided in the fact that the various gov't agencies have all made the current economic "crisis" their top priority and have repeatedly and publicly taken action via dissemination of information, policy revision or introduction, and direct investment to "combat" the current situation. By definition, combat is to employ necessary means to defeat an enemy, i.e. bring them under your control. So they have blatantly said their actions are directed at controlling the situation and they have continued to do this. Direct ownership in formerly publicly owned companies is the greatest and most notable evidence that the system is not allowed to naturally run its course, but is instead manipulated as necessary. It is no coincidence that the swiss have recently agreed to pay half a billion dollars in retribution for dealing with Iran and it is no coincidence that Dubai was recently forced to kneel before its neighbor to receive emergency backing in retribution for their role in aiding Iran's trade, just as it is no coincidence that the Saudi gov't acted to invest in failing US companies at the gov't request in partial repayment of the fact that they are not now a province of Iraq. The very reason that the "curb" policy exists for the stock exchanges is to control undesirable drastic moves in this system... Controls and curbs are all around you in many forms and serving many functions all geared to achieve relative respective system stability, Not "equilibrium"

 

As for the past "crisis" you have cited, It is my understanding that the great depression was a wake up call to the many affluent and powerful families of the time that if they failed to act together for the common good of their elite group that they would be subject to the very real risk that their actions or failure to act could result in substantial unintended damages to the world in which they dominated and thus precipitated the world we now know. Banking crisis will exist as long as there is wealth to redistribute, plain and simple... When necessary, the power within the financial arena will be reined in and brought under control of the elite, at the expense of the dreamers... and unintended fallout from such actions will be constrained/mitigated if necessary (See Executive order 12631, as an interesting example, Established the entity deemed the "Plunge Protection Team"). The world operates within natural laws and constraints that can be manipulated, an event which will occur when the result is a net benefit to the manipulator. Conspiracy Theory, NO, it's life, people live because they are allowed to do so by those who possess more power than them simply because they are a critical part within a system that is designed to further benefit those in power and as long as they do not present a meaningful threat to the system or those in power. People are employed by companies for the very same reason, and treated as friends for the very same reasons, it's our society and it works... Instead of asking if the gov't could have stopped the bubbles, etc, ask yourself this question, did we as a society and or those at the top of say "big business" benefit from as an end result of these events, especially in relative terms to other possible outcomes which you could have conceived as alternative choices...

 

Yes they take wealth from those who have, keep a little, and "give" it to those who do not (I too despise these worthless, dependant bastards, but it is what it is). The reality is that this serves to inhibit complacency in the "haves". Because these people tend to be the more intelligent, more ambitious members among the population. The action serves to motivate them to be more productive, innovative, etc, by which our society is advanced and by which they regain the wealth previously taken from them and redistributed so the process can begin anew... Actually beats the hell out of the top minds "retiring early", as this is more of a waste than the worthless lazy sap who never would have accounted for anything anyway never being pulled from the nipple.... If only they could be sterilized and/or stripped of their rights to vote as a condition of receiving funds to fight the dilution of the quality population.... If only...

 

I recall the words of an influential individual with whom I was having dinner over a decade ago in response to my question as to why in the world they "wasted" so much good money on a particular program designed to assist wayward youths and young families, where he explained that the "small" "investment" served to remove a particular young population from the streets and/or jails at a crucial crossover point and to redirect them and their young families to be loyal and responsbile members of the community and that as a result, the entire community benefited tremendously and quantifiable in the form of a better public image, leading to a higher quality of life, more tourist dollars, and a greater appeal to other large businesses... In the end, a huge ROI.... It's Always about business and serving the objectives of the few, it always will be, accept it and work with it as opposed to against it...

 

Whether you believe markets/currencies/individual stocks/etc are too big to control or not, it is difficult to dispute that people and entities desire to predict and control them and will therefore attempt to control them. As a result of this and other occurances, it is fact that routine swings in markets, prices, etc happen all day everyday and always have an underlying cause. Regularly compounded success in this everyday market, far surpasses anything you could ever hope to gain by waiting for any explosions/implosions that "could" occur if everything went wrong and there truly was nobody left/willing to intervene... "Come out of the bunker, make some money and live a little"

 

The general US population should consider themselve fortunate to be a part of and a luxury to benefit so tremendously from a system that they will never begin to fully understand. They truly find themselves in better company than they should be...

[World Colonial]

I am not endlessly debating this with you because it is pointless.

 

I agree with much of what you say but what I totally reject is that the government or anyone else has the power to make the things happen as you say. If you want to believe it, then go right ahead because I am not going to talk you out of it and it would be a waste of my time to try to do so.

 

To your point on whether a larger bubble is "mandated". no of course it is not. Its my opinion that this is what is required to keep this ponzi scheme going just as you apparently believe that the government has the ability to keep this ponzi scheme going indefinitely essentially as it had been before late 2007. I reject your position because I consider it either the equivalent or a modified version of the free lunch theory.

 

I have never claimed that the USD was about to lose its reserve status. Near term, I am expecting it to soar and have said so many times.

 

I'm not sure whether the US lifestyle will or will not remain the most coveted or not. I absolutely believe that the standard of living of the typical American is going to decline and that there is absolutely nothing that the US government can do to prevent that. When and who, I do not know but it undeniably has for many people in the current economy and since I do not believe that credit will return as before, this I do not see as a short term situation for many.

 

And no, I never did say that the world was going to end if there was a depression. But I also do not believe that the government has the capacity to prevent one or that the aftermath would maintain the status quo or possibly anything like it. We cannot know that in advance.

 

I am also familiar with the "megapolitical" or "geoplitical" considerations you state, I just happen to have a different opinion from you regarding the power of the US government.

 

You will get no dispute from me that the US is likely to remain the dominant power in the world for the foreseeable future. But that has nothing to do with whether there will economic depression or prosperity. Sure the government has been engaged in "combat" to maintain the economic status quo, but if they were as powerful as you seem to believe, then why did this happen to begin with?

 

To the answer of whether there is an economic elite, of course there is one. And yes, I believe it is to some extent organized within and across national boundaries. But this elite is not monolithic either. The priviledge and financial interests you speak of are not the same for all of them.

 

The other thing I would add is that even if this elite is as powerful as you apparently believe them to be, they do not operate in a closed system. Aside from divisions within the US elite and between the US and other elites elsewhere such as the remainder of the "Western Alliance", there are parts over which this elite has little to no control. For the moment and the foreseeable future, they are able to use force to "win" but ultimately in some instances, I expect an effective loss though it gives me no pleasure to express this opinion. An example of this is with Al Queda and the Taliban. Sure we have (for the moment) defeated this militarily insignificant enemy but at a stupendous cost. And we will only continue to "win" as long as we maintain the will to use the resources to do so. But unfortunately, I consider this temporary.

 

In terms of investment strategy, I am not waiting for a market crash to make a "killing" and my opinion has nothing to with that. That makes about as much sense as those who think they are going to get rich by silver going to $100, $200 or whatever number you want to pick.

 

As for your last comment, sure I think the US is a better place to live than anywhere else for the common man. But that does not mean I plan to stick around indefinitely to get plundered if I do not have too. And I will provide the same advise to everyone that I have provided before. You have to accumulate it first, but to those who have wealth, it is rational to leave the country, take your money with you and get a new passport.

 

 

[SWNGC]

While I agree that the market is a ponzi scheme/confidence game (they all essentially are), I do not believe it necessary to continue it as it was pre 2007, but instead to continue it along a steady path towards it's next embodiment, the new redefined ponzi of tomorrow.

 

It is also true that quality of life for some individuals or segments of individuals may temporarily decline somewhat, but for the majority the impact will be minor and temporary, as advances in science/technology/medicine, etc will continue its upward movement for the forseeable future - People always suffer, and for some, life sucks, parents have to give "tough love" to their children on occasion to teach a bigger lesson, and your recent bubbles, etc are in part, just that. The events that have transpired have gained the world's focus and have resulted in real, long term improvements in the beliefs, convictions, and resulting actions of the general populus and are not necessarily bad.

 

Sure there are individuals, groups, countries, etc within the elite that are displeased with the "way things are", but most are forced or historically been forced to comply with the others or face a very difficult road ahead. These people realize that their time has come and many have accepted that the best they can hope for is to hold off the inevitable through the time of their death and then allow the vultures to rip apart what they have and have built. It's nature...

 

Wars are about power, economics, influence and control and can easily be ended when prudent to do so. There are many other not so obvious reasons that we may wish to maintain a military force in these areas and/or disrupt their status quo to serve other agendas... Make no mistake these events have considerably stronger roots in China, India and in part, Russia, than al-queda or the taliban...

 

Obviously you share a strongly contrasting view of the United States, the opportunity that you have been provided within, and the infinite value of being able to partake in the fantastic opportunity that it presents and foolishly believe that the grass is greener on the other side and that your accumulated wealth will somehow be safer in a less evolved and/or regulated foreign environment. NEWSFLASH! Everyone, Worldwide will TAKE your money if given the opportunity to do it, whether by tax, policy, theft, deceit, or force. With great luck you live to try again and build on your mistakes...

 

To this point, and as you are so confident that your "wealth" will be better served/preserved once taken to another country, then why not just surrender your passport now, denounce citizenship, and go make your "fortune" and live your life in whatever "fantastic" land you believe to be so great. We Americans Will Not Shed A Tear.

 

 

[CHABSENTIA]

I am not saying that the rates you refer to are impossible. I am saying that initially the increase is not going to be as bad at the present rates as they will be in the future. I referred to this in a E mail where I had read an article where the author beleived that interest rates would go up at the next FOMC meeting because the U.S. Treasury had covered for treasurty bonds etc by converting to them form Agency Bonds and that the price will have to go down meaning the interest rates on bonds will have to go up and the Fed will have to follow accordingly. If interest rates do go up and they eventually will it does not imply that it was only because of this etc. The only conecern is that when they go up and these arms reset then it will be at a much higher cost then the present.

 

People invest differently. Some might buy stocks according to PE na d what they think of as growth stocks etc and some might buy because Cramer on CNBC tells them to buy a certain stock etc.Gold is a different animal. There is no need to buy if we are ina deflationary economy and you think that deflation will be here for at least 18 moths to two years which I think is the minimum. There is no guaranty that there will be a ratio of gold to silver of 60 to one or 20 to one. etc. There is no guaranty that enough people might seek gold in a flight from the dollar to make any difference. There is laos the fact that at $11000.00 there is less chance of an increase unless you buy 100 ounces or put out 1110,000 and then there is the chance it could sink back to a low of $850 and you could lose over 25K so you could probably say that being a "gold bug" is more Pschylogical then buying into the market.

 

Real Estate is different. Jus tbecause I can buy a home for $6500.00 in Detroit which might seem cheap does not make it a good investment. I can purchae a nice three bedroom home near me that is about 10 years old for 100K. Couldnt purchase the same equivalent home in San Jose California for 100K.If I paid 100K for a home in say 1979 I would have to put 20K down and my total debt payments for debt couldnt be more than 25% of my income. I had this situation when I purchased my home for 40K in Dec 1979 and I had an interest rate of 10 3/4 % on a conventional fixed mortage that was at 13% by the time I closed Some intereat rates eventually went to 18%. Going back to the 20% and 255 would be a good deal. If you arent committed enough to save the money for a down payment and to stay i n certain debt ranges then you dont deserve a home which will affexct others as it has done with this mess.

 

If Inflation goes to 18% again only those that have the cash that they can invest at say 15% to keep reasonably ahead of the curve will be able to survive a little while the others hav ehtoers eroded etc.

[World Colonial]

Since I am going on vacation for three weeks after today, this is the last post on this topic for which I intend to reply to you. If there is anything else that you want to ask or have me comment on, that is fine but I am not commenting further on subjects like the one in your recent posts which have nothing to do with what I was originally talking about.

 

Apparently, you take offense on my comments about taking the entirely rational position of someone acting in their best interests in the way I describe. That is completely irrational.

 

You yourself have stated an opinion with which I agree regarding the elites and the corrollary to this opinion is that the supposed "national" interest is in actuality the ELITE INTEREST. Why anyone would want to fall on their provebial sword to support that is beyond me but if you want to do so, I wish you luck.

 

The idea that United States is the only country with a satisfactory rule of law is patently absurd. There are plenty of other law abiding countries where the rule of law and private property rights are afforded equal protection and based upon your prior comments, you should know it.

 

I am not an America "hater'. I simply do not believe in the nationalist claptrap (whether American or otherwise) which you apparenlty accept.

 

In terms of why I have not left, that is a red herring argument and my business; not yours. You know nothing about me or my motivations and have no reason whatsoever to make these personal comments.

[gbsten]

With all due respect to all parties this thread has become some kind of economic treatise. I hope that some time it will go back to discussing silver and gold prices.

[SWNGC]

Back on topic and Pure opinion... With Dec options now expired, I believe there is downward room to around 1070/80 (weak/easy money still there to shake out) with a reversion to near contract mean of around 1130/40 by month/2009 end... Money play looks to be moving back to oil now however... Major need to reassess at 2010 start, should be fairly uneventful until then...

[gbsten]

Two questions:

 

1) Will gold dip below $1100 in next 30 days?

 

2) Will silver hit $20 in next 90 days?

 

 

 

IMO...yes/yes. Expect quick recovery for gold as dollar weakens even more in '10.

[SWNGC]

yes & maybe from current perspective, doubt 21 though... I really think we'll see a bit more strengthening of the dollar and it will take a bit longer than expected before weakening. Probably not enough to get silver over 20 within the next quarter... IMHO

[CHABSENTIA]

I have given specific examples of Gold and Silver including the historical ration between the two which doesnt necessarily mean that it will be followed. I have given reasons why I would invest in pre-modern silver coins as opposed to either Gold, Gold Bullion or Silver Bullion and that there is less of a chance relatively speaking of Gold over silver because of both Political and other reasons.

 

We are in a deflationary mode which s characterized by Over Capacity. low demand and low unemployment. I think this will ast for at least another 18 -24 months give or take a few months at the very least.If you are looking for a large rise in Gold before this then you might have a long wait unless there is some really bad news on the econmic front befire then although there could be some movement because of irrational Psyhcological behavior. I know if nobody who can predict this things in advance.The only option then is ot be relatively assured that Inflation is down the line and then try to predict whether it is modest, 18% as during the Carter administration or hyper inflation.

 

 

.

[Grayrider16-migration]

I am looking for Gold $950-$1000 and Silver $15-$15.50 as key support levels worth a trade.

[CHABSENTIA]

I guess it depends on your time frame. Wouldnt it be nice if somebody could predict the range and the top and bottoms of a certain stock. As long asw we remain in a deflationary cycle then you are probably close. The minute that there are inflationary forces then the game is off. The there is the sum total of Psychological forces which nobody can predict.

[SWNGC]

Back on topic and Pure opinion... With Dec options now expired, I believe there is downward room to around 1070/80 (weak/easy money still there to shake out) with a reversion to near contract mean of around 1130/40 by month/2009 end... Money play looks to be moving back to oil now however... Major need to reassess at 2010 start, should be fairly uneventful until then...

 

Today and tomorrow look to be prime opportunities for the trend to temporarily reverse through end of month and play nicely into the current market setup... FYI, current price drops in gold are attributable approx 3 to 1 to speculative selling vs fluctuation due to currency change. Major gold ETFs have been big, big buyers (tens of tons) over the last two days and do not plan to take a loss. Still expect reversion to near contract mean of about 1135 by end of month.... You never know, it just might be time for some bs "report" of how influx/supply of scrap gold pre holiday (those seeking holiday cash) served to offset what would have been higher gold prices, etc, etc... and/or a new 2010 gold "outlook". IMHO price will rebound slightly in coming days.... Currency is ripe to give a little to the cause as well... Time will tell...

[SWNGC]

Back on topic and Pure opinion... With Dec options now expired, I believe there is downward room to around 1070/80 (weak/easy money still there to shake out) with a reversion to near contract mean of around 1130/40 by month/2009 end... Money play looks to be moving back to oil now however... Major need to reassess at 2010 start, should be fairly uneventful until then...

 

Today and tomorrow look to be prime opportunities for the trend to temporarily reverse through end of month and play nicely into the current market setup... FYI, current price drops in gold are attributable approx 3 to 1 to speculative selling vs fluctuation due to currency change. Major gold ETFs have been big, big buyers (tens of tons) over the last two days and do not plan to take a loss. Still expect reversion to near contract mean of about 1135 by end of month.... You never know, it just might be time for some bs "report" of how influx/supply of scrap gold pre holiday (those seeking holiday cash) served to offset what would have been higher gold prices, etc, etc... and/or a new 2010 gold "outlook". IMHO price will rebound slightly in coming days.... Currency is ripe to give a little to the cause as well... Time will tell...

 

Ok, So it took 4 trading days into 2010 to get there, but I'm now back out (for a nice 5.1% gain in about 2 weeks) and will wait for another easy opportunity to re-enter. Speculative buying was almost all of the last $25 run-up in gold and right around $1135/1140 offers some nice resistance right now (unless currency rates push us further, this should be a good temporary "upper range")... Gut says bounce around 1120 to 1140 in the next week or so (larger downside than upside risk at current price), and money says "use me elsewhere until better opportunity exist with this commodity"

 

Cheers

[SWNGC]

To recap,

 

On Saturday 12/19, with gold at 1112/oz and "rebounding", I posted that we would first dip to 1070/1080... by 12/22 just before noon, we hit 1074 and quickly rebounded. After seeing that my order's had filled (I was a buyer on any $2 rebound following a dip below 1080), I posted on 12/22 (just after noon) that we would reverse trend and should see my upper range of about 1130/1140. On 1/6, we briefly hit 1140 and then retreated. I like to let my winners run, and therefore did not exit until this morning 1/7/10...

 

Sweet aye....

 

See charts from kitco below

 

A single 5.1% score like this every 2 months translates to a 35% annualized return.... My policy is don't get greedy and wait for the "right" opportunity in the "right" investment.

 

Good luck to all...

 

Still a non-believer World-Colonial?

[Nick Jr.]

I'm very patient silver is going back up on 1/08/10 $18.00 + if it does not go down like it did & just keeps going up that is not good it has to let off steam & go down & then go up. But at one point here it will hit its stride & take off. Just watch, because @ one point it was a cheap buy in & still is relativly speaking.

[just-john]

GOLD / up 50% in 2009 Now copper was up 100% during the same time in 2009

Silver get you a 62x mult at $18 o'z vs gold @ $1.117.00 o/z

or 90% silver coins $1000.00 bag seem to be the was to go worst case you end up with $1000.00 in dimes from your 14 grand can't recall change

 

 

[SWNGC]

Back in... Gold 1060, Silver 15.38 - Looking to make some "coin":)

 

 

[RareSov]

Good luck, don't think you'll need long to be thinking about cashing out

[SWNGC]

Back in... Gold 1060, Silver 15.38 - Looking to make some "coin":)

 

 

Sold out of Position

 

Gold 1094.20

Silver 15.63...

[SWNGC]

Back in... Gold 1060, Silver 15.38 - Looking to make some "coin":)

 

 

Sold out of Position

 

Gold 1094.20

Silver 15.63...

 

That's One Calendar Week (5 Trading Days)

3.22% return on gold, 1.63% on Silver, 2.86% weighted overall (Silver trade was a smaller portion - usually don't even do silver at all)...

 

Compounded with previous trade from prior posts (Exit 1/7/10), = 8.722% return from both trades together in under 2 months (That translates to a 65.16% annualized return and my position/cash was only active and exposed to risk for 22 calendar days during the two month period thus far)....

 

Gold/Silver may go higher, but bigger downside here than upside, IMO, as 1100 may offer resistance, currency issues still exist, fed uncertainty, opex next week, and I'm content to take my gain and wait for a better set-up to either re-enter long or go short... Ready to take the weekend off, regroup, reassess and keep vision clear..

 

Cheers to all!!!

 

 

[SWNGC]

The P&F charts, and the 3 year weekly show gold and silver entering a prolonged downphase.

 

Check my NGC blog from a few days back:

 

http://coins.www.collectors-society.com/JournalDetail.aspx?JournalEntryID=6837

 

Check my NGC blog re: metals correction from a few weeks back:

 

http://coins.www.collectors-society.com/JournalDetail.aspx?JournalEntryID=6724

 

 

With respect to the Quote taken From your link Below...

 

A plateau for the stock market late this Spring may drive metal prices down.

 

It looks as though the technicals are lining up for another short term correction in the stock market late this Spring. It may come in the form of interest rate hikes by the Federal Reserve / Bank of Canada, failure of certain manufacturers to repay their TARP loans, or perhaps even another banking meltdown. This may allow money to flow back into the USD and out of metals in the short term, since the two are inversely proportional. There seems to be a lot of support in gold at $1000 USD,

 

No offense, but where are you that it is Late Spring and what "manufacturers" are you refering too???