Tuesday, January 18, 2011

How does gold "get away" with paying no interest?

Question -- How does gold "get away" with paying no interest?

Answer -- Gold pays no interest because it is ultimately safe. Gold is the only currency that has lasted through the centuries, going back 6,000 years. Currencies have to pay interest so that they will be attractive enough for people to hold them. As a rule, the poorer and riskier the nation, the more its currency must pay in interest in order to attract investors. Normally, the dollar would be paying an attractive rate of interest, except for the manipulations of the Fed. Thus short rates in the US are around zero, courtesy of the Fed.

-Richard Russell

Source: King World News

Saturday, January 1, 2011

Year End Update: Net Worth and More

What a year...

End of last year our total net worth was 43k, this year we have more than double it. Partially because my wife and I combined finances. Another reason is that the stock market has had an incredible run(I believe I read somewhere the Dow was up 10%). Our investments have worked out really well across the board and are keeping on budget and saving money.

If 2011 is anything like 2010, we will be well on our way. That being said, I am still overall bearish and looking for another major crisis between now and 2015. Whether it be a debt crisis, dollar collapse or peak cheap oil, I will try and put ourselves in a position to hopefully not only survive the crisis but hopefully prosper. We remain blessed but our attitude remains to still prepare for the worst and prey for the best.

Lets break it down:

Cash & Savings: This grew this month based off a year end bonus along with saving. Which is really nice considering that December is money pit usually with Christmas and such. Our first goal remains to get about 50K in the bank(cash) for saving before we really start putting our money to work. This bracket holds the funds for insurance, auto maintenance, Roth IRA, and vacation. It also holds our monthly budget in it which is used on a daily bases for covering expenses, mortgage, food, auto, etc...

Stocks/Brokerage: Wow, what can I say...This is the first year I have been managing a stock portfolio outside my 401k. I have been studying and listening to financial sense (www.financialsense.com), I have been listening to analysts who are interviewed and when they throw out a stock I research a little and see if it is worth a purchase. I am absolutely floored how well I have done with these stocks. Maybe its beginners luck, maybe it real that I believe in these stocks that I purchase and I hope 2011 will be as good as 2010. My plan is to keep purchasing Mining and Energy companies, as I still believe that Gold, Silver, Rare Earths are in a bull market and I will ride the trend until I feel it is not undervalued.

Here are the gains/losses based of percentages this year. I am currently up 22%, I try and keep a level head and not get to excited. I keep reminding myself that I need to be nimble and be ready to sell if the trend changes. The latest stock we purchased was Lynas Corp and am thinking of selling off some of my Avalon Rare Metals based off the run up lately:

The list of stocks I currently own: (SLW)(FRG)(SVM)(EXC)(PWE)(PHYS)(EGO)(AUY)(AVARF)(RGLD)(ZQK)(XOM)(CVX).

*As you can see I am heavy in commodities in my brokerage account. This is all based on my thought that over the next decade the best investments are going to actually be in hard assets. My Roth/IRA/401k are in pretty common index funds and mutual funds so I figure I can go more risky with brokerage. I believe these will out perform equities in the next decade and if nothing else I feel more comfortable with my portfolio being diverse. I am bearish on the US Dollar and US Economy, I believe that trillion dollar deficits are not going bode well for the USA.

Retirement 401k: This bracket is just both my wife and my retirement, adding money to our retirement funds every month.

Retirement IRA's: (Same as last month) Still having some cash on the sideline and will figure out what this market wants to do and see if I can put it to work. In this bracket I have all Vanguard Funds (VTSMX, VGSTX, VEIEX, VGPMX)

Real Estate: So this is a new category, based off getting 100% financing, right now its not even an asset based of not having any equity in our home. The plan here is to keep our money that we were going to put down as a down payment in the bank or investments. We will try and hedge our payments with trying to pay off the home in 10-15 yrs depending on what comes our way. This might change along the way depending on kids, economy, jobs and so forth.

Debts and Liabilities -
Credit Cards: Debt from Christmas, will be paid off without any interest.

Car Loan: I am paying 4% APR on it so I am paying a little, but not a ton. Still looking to pay it off early-will probably be a goal this or next year. I was blessed enough to receive a pay raise and with this I will add to my monthly payment to my vehicle and see if I can get this paid off earlier than the end date.

Home Mortgage: Mostly paying interest on our home at the moment, so not much of a dent here.

Not only did we surpass 100k, we went beyond it by 6k. I just feel so blessed and we are thankful everyday to have a good jobs in this economy. It is nice to have the success that we have with our personal finances at the moment. I am not taking anything for granted and definitely not trying to get big headed, but I am certainly proud of us in 2010. We had a wedding, attended a few out of town weddings, traveled, honeymoon, and purchased a home all along while saving somewhere between 25-30% of our income. I cannot imagine, even though it is a goal, that we will be able to do this (kids and etc...) down the road, so we will try and remain saving and investing for our future.