F. J. Taylor

Time to Buy Gold

I agree in most respects with the article and comments. I'd only add what a wise Jewish gentleman who had survived the Holocaust told me once when I asked him for advice; "Put 2% of what you're worth in gold - and hope you never have to use it."

IMO, gold is a hedge against disaster, not an investment in the traditional sense.

Global Precious Metals Correction: Healthy and Overdue

Re: the recent drop in gold and commodities prices - if you have been considering buying some bullion, now is the time.

I agree in general with the author and many of the posters - this drop is not a permanent down-turn, but a result of some "irrational exuberance" on the part of myopic investors who are reacting to the Fed's smaller than anticipated cut, and who cannot see what is clearly coming. Examples of the perspicacity of these individuals include investing in CDOs and the like which helped fuel the present debacle. I imagine their conversations ran like this;

"Oh boy! The Fed didn't cut the rate as deeply as expected! The economy is FIXED!! There won't be any more bank and investment firm failures! Our trade deficit and national debt will go away! Employment will go up! Oil will go down to $5 a bbl.! The Fed will quit printing money!!" (etc.)

Right. And we are winning the war in Iraq [or would be if we hadn't already won it in May 2003]. If you buy all that, the Tooth Fairy and Santa have lots of goodies for you - and I have some land in Hurricane Alley that is above water several hours a day [at low tide] for you to invest in...

The dollar will continue to sink like New Orleans in the long term for all the reasons I have outlined elsewhere - the US has NO savings (either as a nation or as individuals), and the continuing drain on our resources at approx. 12 BILLION a month by Mr. Bush's war of choice will soon make this a multi-TRILLION dollar debt), there is almost no heavy industry / manufacturing left to speak of. As but one example, Severstal, a Russian firm just bought one of the few remaining mainland steel plants, Sparrows Point, in MD, formerly a division of Bethlehem Steel (but owned by a German firm who divested because of anti-trust laws).

There are fewer and fewer good jobs outside of the (obviously over-paid, judging by results) upper management, as most of them were outsourced when they off-shored the industries concerned.

Someone recently said to me; "The government won't let the banks and the investment houses go down." This is proving true, and is a good example of why govt. intervention on behalf of stupid and greedy people is a BAD idea. (See here for reasons why the present contretemps occurred :

www.nytimes.com/2008/0...

Even if the devious little weasels in the Fed and other central banks continue to bail out these lousy investments and scams, as well as one another), remember - this is done with "money" that is no more inherently valuable than ours - it is all still fiat currency - and as with the S&L bail-out (which American taxpayers are still paying for!), the burden will fall on the shoulders of those people who are actually paying taxes - the working poor and the dwindling middle class, for the most part.

Speaking of which, the middle class is eroding at a fearful rate, and as they have been the ones "paying the freight" with their taxes ( along with foreign buyers of our treasuries, who are now showing a continuing and understandable reluctance to invest in a sinking ship of state), the situation as a whole does not bode well for the health or well-being of the economy or the country.

I might add that Federal "bail-out" units like FDIC (which "insures" your bank deposit up to $100,000) are quietly gearing up for what they expect to be a record number of bank failures (the former modern record was set during the S&L crisis). The PGBC (which "guarantees" pensions - see: www.pbgc.gov ) was already showing signs of stress in 2004, and if it gets saddled with more bad pension funds (as has happened in the past five years), could well reach the breaking point.

Don't count on the "election" (aka; "the illusion of inclusion" as a friend once called it) to change anything - you will only be getting one or another of the carefully vetted puppets the ruling class puts forward - all other "choices" - especially the few who stand for real change - are marginalized or eliminated. (If you still believe in the political process at this point, then see my advice above re: tooth fairies, Santa, and swamp land.)

In any case, this is an excellent opportunity to buy gold and silver, particularly if you were hesitating because of the price. I am planning to get some more. I would have even if the price hadn't come down a bit, as I see a long-term rise - but I don't buy gold as an "investment" per se - as one of my financial mentors, a wise old German Jew who had survived the Holocaust once said to me; "Put 2% of what you're worth in gold - and hope you never have to use it!" I would recommend considering as high as 5% or even a bit more. The author recommends 3% to 10% - and I wouldn't argue with that.

I favor coins. Gold Eagles and fractionals are easy to get, are "legal tender" have a known content, are widely known and accepted, and not as soft coins (such as the Maple Leaf) and therefore hold up better. Most US coins before 1964 were silver - they also make good "change." Remember - this is NOT an investment in the monetary sense - it is a hedge against disaster. (Of course, you can buy investment-grade gold and silver coins, and kill two birds with one stone).