Thursday, June 30, 2011

Tim Geithner on US financial System is Ponzi

"If investors chose not to purchase a sufficient volume of new Treasury securities, the United States would be required to pay the principal on maturing debt, and not merely the interest, out of available cash. Yet the Treasury would be unable to make these principal payments without the continued confidence of market participants willing to buy new Treasury securities." Tim Geithner

This is full admission by our Treasury Secretary that the Us financial system is a Ponzi Scheme

Ultimate unraveling of a Ponzi scheme

The catch is that at some point one of these things will happen:

1. The promoter will vanish, taking all the remaining investment money (minus payouts to investors already made).

2. Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme will begin to collapse under its own weight as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.

3. External market forces, such as a sharp decline in the economy (e.g. Madoff and the market downturn of 2008), cause many investors to withdraw part or all of their funds; not necessarily due to loss of confidence in the investment, but simply due to underlying market fundamentals. In the case of Madoff, the fund could no longer appear normal after investors tried to withdraw $7 billion from the firm in late 2008 as part of the major worldwide market downturn affecting all investments.

Monday, June 27, 2011

Ferdinand Lips and "Gold Wars"

Listen to this video, I learned a great deal from this interview with Lawrence Parks of FAME.

Thursday, June 2, 2011

May 2011 Net Worth: Down -1.39%

Sorry I took last month off net worth even though it was one of best months we have had in 2011. That being said we came off last month and had our first down month of 2011 which was down -.97% on our assets and overall our net worth was down -1.39%. This was all because of the surge in silver the month before when it ran up from $36oz. to $49oz. and back down to $33oz. Needless to say that our portfolio has taking a wild ride over the last couple months. Hopefully it has stabilized, but I have a bad feeling that this summer is going to take us for an even crazier ride with all markets. Think we might be on the edge of another downturn and will wait and see what the Fed does once the market heads south.

Lets break it down:

Cash & Savings: Small growth in cash, we are going to start to raise a little more cash in the next coming months. I think there might be an opportunity to buy some cheaper stocks or that we could see a slow down with the economy. Still trying to get to that 50k mark...

Precious Metals: (Spot : Gold - $1542.00 / Silver - $36.29) (Gold/Silver Ratio: 42.56) Saw a huge hit to this bracket with the run up and then crash. This is good for us as I still believe over the next 3-5 years silver will break $100.00 and we want to keep dollar cost averaging in a lower prices (we are sitting at around $28.00 cost average). So we have done fairly well with this so far...

...we are currently investing mostly in silver which I plan to sell and purchase gold when the silver to gold ratio is 30/1 then 20/1 the finally 10/1 if it make it that far which I do believe it will at least reach 16/1(its historic ratio). I plan on always owning silver and gold bullion to pass along to my kids/grandchildren.

Stocks/Brokerage: Sitting tight with our brokerage accounts right now. Raising some cash to and watching some oil, gold and another rare earth company. Also looking a purchusing some Whole Foods.

Also looking to purchase some oil companies if we get a pullback. My plan is to keep purchasing Mining and Energy companies, as I still believe that Gold, Silver, Rare Earths, and Oil are in a bull market and I will ride the trend until I feel it is not undervalued. Gold and Silver mining stocks are so undervalued right now, my only concern is if we see a big stock market pullback then these stocks will get crushed. Once institutions come into this sector the gains could be huge, so we will have to wait and see which way the wind blows.

The list of stocks we currently own: (FVITF)(SLW)(SVM)(SSRI)(PAAS)(AAU)(DNN)(EXC)(PWE)(PHYS)(EGO)(AUY)((LYSCF)(RGLD)(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: Couple more units in our new development have sold so this is good. 6 out of 8 homes have sold and they are looking to break ground on a new set of town homes. 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 couple monthly purchases - will be paid in full.

Car Loan: I am paying 4% APR on it so I am paying a little, but not a ton. When it hits 3k I might just write a check and pay it off. Will see how the economy and money goes the next couple of months.

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

We are almost at the half way mark for the year. We are feeling pretty good about our situation. These summer months the wife will not be getting a pay check so the cash might be a tad bit tough to save as much as we have been. Battling between saving up 50k in cash vs. buying silver while the price is still relatively cheap. Still trying to figure all this out and will remain nimble and remain learning every month. Till next month...