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K202

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  • Dividend Investors' Guide 2014 Review - Household Products Industry [View article]
    Robert - Actually, I believe that Venezuela's devaluation may be only the first of many in the coming years. That means that, depending upon how much appreciation occurs in the the US$, volume growth will be offset somewhat until we reach equilibrium in currencies again.

    That said, the US$ may not be out of the woods yet, in terms of value. If the FED doesn't handle its balance sheet unwinding with near perfection there could be significant inflation in the U.S. which could hinder the US$ value against some other currencies. One might wonder if we could continue to export our inflation and inflict it all on emerging markets, but that does not work in all economic environments. We will most likely take them with us but have to endure higher inflation than some. Thus, the US$ could easily fall against currencies with more buoyant economies. It is a matter of degree. Those central banks that are hoarding gold may be able to support their economies better, and, by extension, their respective currencies.

    Globalization has created a complex web of inter-dependencies the likes of which have never been seen. So anyone who says they know with certainty how things are going to turn out just doesn't know what they don't know.

    We can only make educated guesses in this environment because there are no historical precedents. I know that isn't a straight answer, but at least it's honest!
    Apr 1 10:26 AM | Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Carlos - All true. But i didn't say anything about prices going that low and staying there. It would be temporary. How long? I don't know. It is also my worst case scenario, not my expectation.

    Marginal mines with higher costs would be closed but there are still mines producing both gold and silver below those prices. There were mines open and producing PMs profitably when silver was $7 and gold was $400. So, the average all in costs are not the all in costs for each mine. Supply would be reduced until in balance with demand. In a deflationary environment PMs don't do well as there is no longer a need to hedge against inflation. Lower prices would just remove all speculative buyers from the market creating temporary excess supply causing downward pressure until long-term value investors would step in to buy. You'd be surprised at how many weak hands are out there when prices drop below an investor's original entry price. Without speculators market demand is much lower than today.

    But again, whatever happens will be temporary and the uptrend will come again when inflation returns. And I believe that the odds of that happening are much higher.
    Apr 1 10:15 AM | 1 Like Like |Link to Comment
  • Protecting Your Equity Portfolio For Less - Part XIII [View article]
    pondering - Thanks for the supportive comment and I am happy to hear that the series is helpful.
    Mar 30 05:46 PM | Likes Like |Link to Comment
  • Protecting Your Equity Portfolio For Less - Part XIII [View article]
    Troy - Thanks for commenting and I am glad this helps. Sorry it took me longer than planned to write and publish.
    Mar 30 05:45 PM | Likes Like |Link to Comment
  • Protecting Your Equity Portfolio For Less - Part XIII [View article]
    stratti - Thanks for the questions. When you short a stock or an ETF that pays dividends you borrow the shares and are responsible for the dividends for as long as you hold the position. Also, you have theoretically unlimited downside exposure if you are wrong because if the price of the underlying goes up you lose. Long-term things generally go up more than they go down. So I don't like shorting stocks or ETFs. It can be very costly.

    However, you could consider buying a put option not far out of the money on XLF. If banks get hit hard again the potential would be substantial. With buying the put, you limit your potential loss to the initial investment (cost of the put plus commissions). If you are heavily invested in financials XLF is a good choice. You may not be able to withstand a 30% loss but if you can stomach 10% you could consider buying the Jan 2015 put option contract with a strike of $20 (9.5% below the Friday closing price). The premium is $0.74 per contract. Use the calculations from previous articles and this one to determine if this is the best contract for you and to determine how much it would cost. Even if you need to roll the position over again next January should the market hold up that long I think that your costs will be less. Do the comparison using the monthly cost using put options assuming that the monthly cost when you roll it over will be 10% higher to be safe and then check that against what you would expect to pay through January 2016 to hold the short position if the market remains flat.

    We both may be pretty certain that the market won't remain flat during that time, but it is a good way to compare costs keeping the main variable steady. Then consider the potential (expected) gains if the market drops by 30% for each position. Finally, consider the cost of holding each position if the market continues to higher by 10% from current levels over the same time frame. I am fairly certain that the higher % gain potential will come from the options route and that the higher potential loss will come from the short position. Let me know if I am off.
    Mar 30 05:43 PM | 1 Like Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    haleiwahu - Thank you so much for your supportive comment. I do what I do and how I do it because I believe the platform was intended to build community and share ideas. We can all learn from each other and become better investors collectively and individually. Some authors may consider this site as a place to create a little extra income, to increase their networks or to sell services to others. I see SA as being much more than a tool for personal benefit. It is a community!
    Mar 28 12:59 PM | 5 Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Sal - Thanks for commenting and for the question. Where PMs bottom will depend greatly, imho, upon how well the FED performs in its battle against deflation. It hasn't won the battle yet as baby boomers are retiring in droves and the majority will have less to live on meaning less consumption. It will not happen overnight but rather in a slow grinding fashion. The FED has been able to counter the trend thus far, primarily with QE. Now it needs to reload (tapering) so that it has something with which to fight deflation in coming months and years. QE was losing its effectiveness anyway but the markets didn't seem to notice. Thus, if the current QE can be successfully ended without a major negative reaction by the economy or equities, the FED will feel like it has an effective psychological tool for future use.

    Also, as the federal gov't budget deficit narrows because of sequestration the FED does not need to buy as many T-bonds to keep rates low. It is a balancing act and so far so good (resulting low inflation, rising equities and slowly growing economy) from the FED's perspective. If it can maintain the equilibrium for another five years we could be out of the woods. There will be another market correction (probably fairly significant) but if that can be contained who knows how long the FED and Washington can keep kicking the can down the road. What makes it all feasible is that all major central banks are seemingly working in concert. So much for free markets!

    I haven't really answered your question yet. So, here we go. If the FED loses control and deflation takes over we could see silver down to $12 and gold could get down close to $800 (depending upon how severe and how long deflation lasts), maybe lower. If the FED can hold things together maintaining the balancing act we may already be close to the bottom in both.

    In the longer run, I don't see the FED being able to unwind all its stimulus successfully and that means we should see another bout of high inflation. I do not profess to know when to expect it, but with everything so dependent upon the banks sitting on all that cash, I can't imagine a good ending.
    Mar 27 12:47 PM | 1 Like Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Oxyman - I did not say that I thought SLW prices would be stagnant. I hope that is from another comment. My comment was "if silver prices remain stagnant." But selling OTM puts on SLW for income works for me. Thanks for the suggestion.
    Mar 26 04:50 PM | 2 Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    erryl - I agree and thank you for the insight.
    Mar 26 01:12 PM | 1 Like Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    OdysseusCA - Well, erryl beat me to the point I was going to make. I don't have anything against holding physical PM. I have some myself. I just like the potential SLW upside even if silver prices stagnate for a time. The business model is fairly transparent,also. That is something I have a hard time finding these days. Thanks for commenting and I wish you all the luck. After all, if you are right, then I make a bundle, too!
    Mar 26 01:11 PM | 2 Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    PM - Thanks for sharing your views.
    Mar 26 01:06 PM | 1 Like Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Big - Good point! Thanks for sharing the concept as it is one of my strategies that I rely on heavily to enhance my income.
    Mar 26 01:05 PM | Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Erik - Thanks for the comment. I also prefer SLW to SLV. As you can tell, I like the business model.
    Mar 26 01:04 PM | Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Moon - Thanks for commenting and sharing your thoughts.

    I stay away from small mining companies, too. I only have a relatively small position in a couple of large miners but will not add in the future until the commodity cycle bottoms. I like SLW as a streaming entity over mining companies though as the model holds much less risk and is much more transparent, imho.
    Mar 26 01:03 PM | Likes Like |Link to Comment
  • Low Risk Way To Use Silver As An Inflation Hedge [View article]
    Chappy - I do own some physical, too. And, as you say, it is to insure myself against temporary catastrophic events. Personally I like junk silver coins because the denominations and content are obvious and well known and because they are easy to transport if necessary. But I only have a small stash just in case. Thanks for the comment.
    Mar 26 01:00 PM | 1 Like Like |Link to Comment
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