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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: jrhana who wrote (11694)	4/10/2004 11:41:21 PM
From: Little Joe	Read Replies (1) \| Respond to of 110194

I have a friend who retired exactly that way. He rode gold up, bought bonds at 12 - 14%, lived off the income and eventually sold (too early) and made great capital gains on the bonds. He has lost interest in trading the markets, but he has bought gold coins, Swiss annuities, Tbills and some foreign bonds. He said if he loses 90% of his wealth, which he won't, his standard of living won't change. I wish you luck. Great position to be in. Little joe

To: jrhana who wrote (11694)	4/11/2004 3:37:44 PM
From: Carlos Blanco	Read Replies (2) \| Respond to of 110194

Then we will see the coming of Son of Volcker. I hope I have enough sense to sell my miners when he appears on the horizon something to bear in mind: although stopping inflation in the 70s is usually credited to volcker's raising of interest rates, it will not be that simple this time around. more damage has been done and the situation is much worse. there are two factors which can create rising prices (i.e. a manifestation of inflation and loss of purchasing power). the obvious one is an ongoing increase in the number of dollars--this is the one factor that the fed can somewhat control via rates and policies. the other is a loss of confidence in the currency and its issuer which reduces its worldwide demand--this can be independent of liquidity or interest rates, and would especially affect the prices of imported goods (e.g. oil). you could have a short-term static or declining monetary base with high interest rates, but your money could lose purchasing power vs. other currencies or imported commodities because demand for your money inside (and especially outside) your contry is declining. in the extreme but not impossible case (e.g. argentina 2001) the demand can be 0% with interest rates at infinity because the probability of future default is 99.9%. interest rate policy or the fed will not by themselves fix a chronic loss of confidence or problems whose roots are political and where the damage has already been done (as is the case today in the US, in my opinion). you could find yourself trading in your miners for 20% treasuries only to be wiped out when rates subsequently rise to 50%. the fact that yields stopped at 20% in the 70s is not a guarantee that this time they won't go higher if a deep enough dollar confidence crisis takes hold. there are several very plausible scenarios for the next decade where interest rates and the fed become largely irrelevant in terms of encouraging a desire to hold dollars: a shift out of dollars to gold or other currencies for transactions and bank reserves a perception that fiat money, and/or the government, and/or the fed, and/or the political system have failed a perception that politicians will never reduce their spending and the budget will keep increasing forever, inevitably leading to inflations or defaults ongoning military campaigns that impact the budget security measures that negatively affect property rights and the safety of US investments realization that future commitments (e.g. social security) far exceed what can be collected via taxes social/political unrest and so on... this is kind of a long-winded post, so i think i can summarize its practical aspect like this: i would not let go of gold investments until there is both political and monetary evidence that the real problems will be solved. the appointment of a volcker-like figure would only be half of the equation.