Keeping My Emotions in Check

I am extremely bullish on silver. My research tells me that 2012 is going to be a good year for the white metal, not that it matters but my gut tells me the same(never invest because your gut tells you). We are investing in silver and I personally believe that it is going to be one of the best investments not only in the next 5 years but might be the best investment opportunity in my lifetime. Only time will tell, and it will be fun to look back and see this statement, because overall that is a pretty bold statement for someone in their 30's, and hopefully I will have a long life ahead of me.

We started looking into silver in 2008 when the price pulled back strongly to around 8-10 dollars. I watched it for six months regularly as it climbed up to $16. While I was watching the price I was doing research on the fundamentals of it. I was was also looking into the best way to purchase and store it. We finally pulled the trigger at the end of 2009 at around the spot price of $18, at this point I felt confident that it was worth putting some money into.

Over the last couple of years with investing in the PM market, I have done my due diligence and spent many countless hours studying and double checking the fundamentals to make sure that I/we had made the right decision.  All you hear is that silver is volatile and its for speculators(which it is), but you never hear the fundamentals. During this time not only have I confirmed that I have made the right decision, but that I believe in it more than when I initially looked into it.

During the last two years, we have been dollar cost averaging and not trying to time the market, just regular accumulations of the metal each month, no matter the price. I believe I have a done really good job keeping my emotions in check with not worrying about the price but focus on purchasing it not matter the price and knowing that in the next few years trying to save 2-5 dollars per oz isn't going to matter.

We are now sitting in a good spot with our investment now and have our core position. I believe with the market swings, that I can start to play this investment a bit different. I believe that we can stop buying every month and save some cash for when the price swings to the downside. Then we can pick up some more at cheaper prices...or buy the dips. We still want to purchase more, I would love to purchase all the way up to around $50. I will re-asset once the price hit that mark.

Last year we saw a run up in silver from around $28 to $48 dollar over the summer and then back to finish around $28 at the end of the year. We purchased at $28 and also at $48, which overall, doesn't matter, because we also purchased at $18 and other prices during the last two years.

So far this year, the price started at around $28 and so far it's around $36 around 30%, and honestly its hard to watch the price going up and not think that you have missed the boat.  I follow some blogs that follow the metal hourly and daily, most of the people on these blogs are as bullish, if not more bullish than myself. It is funny to read the comments about the price movements. You can  start to see this timing the market mentality and I am surely guilty of it (reason of this post).

*UPDATE*

Before I could finish this post, Wed, around 10am Silver dropped from around 37.50 to under 34 which is over 7% drop. This was exactly what I was talking about, silver had been on a tear since the beginning of the year(up 30%). The 2011 ending for silver, everyone seemed defeated and some even seemed bearish on the overall trend(including me). Now the night before(Tuesday) everyone on these blogs thought they had missed the boat and that silver was going to the moon without pulling back and taking a breather. I remember telling myself that I just need to relax and let the price come back down.

Anyways, I just need to remain level headed and keep my emotions in check. We have our core position and I think that we will be well rewarded come one, two, three, etc..years down the road. A lot can change during this time and I will be watching very closely and seeing if the fundamentals change or if it is time to move our money into something that is more undervalued than silver.

I have seen how the market trade on greed and fear, and experienced it first hand.

Here is a great presentation from David Morgan on silver:

The Truth About The Greatest: Warren Buffett

Brilliant!! QE II Explained

Tony Robbins Economic Warning 1-2

Greenspan, Summers and Economy

"One cannot fight this sort of evil with hatred and violence, or hysteria and intemperate accusations, for these are its creatures, and it uses them always to further its ends. The only worthy adversary of the darkness is transparency, openness, justice, and truth based on facts, in the light of reason, with the guidance of the light of the world. We are not sufficient of ourselves to stand against it, and if we knock down the law, the Constitution, to chase it with expediency and private justice, what will protect us when it turns around to devour us? But we should never be a willing victim, and even worse, a silent bystander or mocking accomplice. This is why were you born here and now, to stand witness to the truth, as you can find it and value it above all else.

It is not easy to find the truth, as it is a journey, a way that never ends. And without a proper guide and companionship, it may be all too easy to grow weary or panic, and lose one's bearings and one's heart. But sometimes it is easier to discover where and what is not the truth by its acts, its results, the fruit that it produces, and the darkness and secrecy in which it dwells."


via Jesse's Café Américain

Thoughts from Chumbawamba

Here is some thoughts from (Chumbawamba) poster over at Zerohedge.com:

In a nutshell (because my education took years, so you can't expect me to give you the important background to my argument in one posting, or even several) this system is f*cked. Our debt-to-GDP ration is well beyond what other empires experienced just before their collapse. Our central bank is monetizing thin air to pay off the financial blackholes created by unregulated/out-of-control over-the-counter derivatives that are valued at well over $600 trillion globally, and our government is planning to borrow every last unit of currency under the moon in order to keep from falling into a fiscal abyss. How the hell does anyone expect this is going to turn out anything but very, very badly?

There are now literally tens of trillions of dollars of liabilities stretching from here on decades into the future. Our debt-based monetary system means these liabilities will only increase in cost and interest as time goes on. From where are the revenues going to come? The pace of productivity and wealth creation in this nation will have to inflate accordingly. How is this going to be accomplished? Do you have any answers? Does anyone?

We took a quantum leap from billions to trillions--a thousand-fold increase--in our economic discourse. It follows then that our GDP will have track this increase to keep up with the new normal. Again, from where are the revenues going to come? Are they going to be conjured up again like magic, so that we go from trillions to quadrillions as the new new normal? Or are you going to be expected to magically increase your productive output 1000 times to make up the difference, along with every other American (including children 1 and older, since we’ll also be needing more manpower for the job, way more than we have even if you include the illegals)?

WHO IS GOING TO PAY FOR ALL OF THIS?

The answer never comes. Oh yeah, this is simple to solve, they say. They'll just "add liquidity" to the market, then "drain it", as if this was just a matter of doing the dishes, and all the complaining and fussing and fearing and loathing and hemming and hawing was all just a matter of no one wanting to pony up to the sink to actually do the deed. But no, that’s just a cheap distraction. So the question remains:

WHO IS GOING TO PAY FOR ALL OF THIS?

I’ll tell you who: Us. As in you. And I. Or at least those of us that are silly enough to file and pay taxes (I don't know about you two, but I do not submit to extortion, otherwise known by the letters I-R-S). And how many people like me do you think there are now? Probably just a relative few. We're the "out there" nutballs. We're the ones that make wild-eye predictions of economic collapse and social chaos to follow. We're the ones who get pooh-poohed. Until the government keeps pulling shit like this. Then we grow in numbers. The disgusted; the disenfranchised; the disaffected. We find each other, learn from each other, and spread the wisdom. We watch as the government creeps upon our God-given freedoms like a depraved predator, one after the other, picking them off until one day we’ll be left naked and defenseless. But we prepare, and in the meantime we keep introducing new people to the mouth of the rabbit hole. And if you’re courageous, and intelligent, you’ll go in. And the deeper down the rabbit hole you go, the more you realize that real money—gold and silver—is the answer.

As more people discover the answer, the dollar takes one step closer to irrelevancy. Once it reaches that point, you have hyperinflation. Once the dollar enters hyperinflation the game is over; or rather, it just begins. But then that's a matter of perspective :)

Will the dollar cross that line of confidence? After all of my study, I sincerely believe it will and am convinced beyond a shadow of doubt about that conviction. I’ve been waiting for someone to come along and explain how I’m wrong about this. Despite my rhetoric, my eyes and mind are open. Convince me. Anyone?

In short: follow Austrian school of economics. I'm not saying they have ALL the answers, but so far it seems they have pretty damn nearly all of them.

----------------------------------

Ask yourself these questions:

1) What system is collapsing? The one in the US? I.E. the dollar?

1a) If the dollar collapses, what does that mean domestically?

1b) What does it mean internationally?

2) Is the FDIC solvent?

2a) If not, how safe are your bank accounts?

3) Are the firms in which you have your various retirement accounts solvent?

3a) Really? Are you sure? Did you check their balance sheet?

3b) Including all their hidden liabilities?

3c) If not, how safe are you accounts with them?

4) Does America strike you as a financially strong country?

4a) If not, do you think America will remain the world's sole superpower indefinitely under these conditions?

4b) If not, what does that mean for the dollar, the world's reserve currency, and the unit of account upon which all other world currencies (except gold) are based (again, domestically and internationally)?

Mull that over.

But here's a spoiler. The answer to all the above is:

Don't wait until inflation eats away your savings. Every day you wait is like an ounce of silver slipping out of your hands, lost forever.

History is your teacher. All others are substitutes. Including me.

I am Chumbawamba.

This might seem extreme, but he does ask some tough questions...cannot say I disagree and yes I tend to ignore what he says but doesn't mean that I don't feel this way down deep within my beliefs.

Timing the Market

I feel like this sometimes, good thing my risk tolerance is strong...I am just praying that the game hasn't changed like some are saying because I have a lot riding on long term investments. This even while I hold my IRA in cash at the moment.

Your Wealth Being Destroyed Daily

Peter Schiff - Recession to Depression

Sorry, more doom and gloom, but I want all you to know that Autumn is coming...

Here is some of his solutions if you are interested:

Once the US's economy collapses we as a country will go through some hard ships, but we will become a better nation for it. I can see the winds changing right now, they are just slowly changing. I am guessing when the "real crisis" happens, the change will come rapidly and Americans will wake up to what's going on.

Am I wrong? Have we seen the bottom yet? The media and our government think that we have, the stock market is rising. I personally just don't see it? The numbers coming out are bad, really bad(and are not correct, out government is scared to let us know the truth about how bad the situation is)—they just do not look like the past numbers that were even worse. Leave me a comment and let me know!

David Rosenberg on the Recovery

"The government has its hands in 40% of the economy and when public sector officials can influence how banks can value their assets, how mortgage servicers should be doing their business, who shall fail in the financial industry and who shall not; and when we have a central bank that is not just the lender but the market of last resort, even for RVs, and a government willing to run up its deficit to levels that would have made FDR blush, then perhaps we can end up seeing a recovery occur sooner than we had thought." 

- David Rosenberg

The 4 different Scenarios: Keeping Your Money Safe

I had a conversation with a friend earlier this week about how he see the market playing out over the next 5 years. My friend works in the financial sector and has worked for companies such as GE Financial along with having a finance degree. Some of our discussion was around all the different scenarios that we might see and how bad is everything. 

I also mentioned earlier in a post this week that I was thinking about purchasing some shares in some ETF's that short the financials. After talking with him about this, these are some of his main points and what he is doing with his money*.

*I do not suggest anyone follow his or my advice, we are forming our own opinion and this was just part of our conversation:

Not to say there isn't a chance for deflation or shorting bank stocks or real estate is a bad idea. I also believe banks are in much worse shape than they are currently showing on their balance sheets. I still believe that the government will continue to prop them up and won't let the bankin system collapse. That doesn't mean there's not going to be huge implications for the governments actions.

I think it makes sense to spread your bets around. I see 4 different scenarios that could occur:

Hyperinflation = 10%
Stagflation = 40%
Deflation = 25%
Back to Normal = 25%

Hyperinflation:

Good Investments: Gold, most commodities, very little else. 

Bad investments: bonds, cash, most stocks

Stagflation:

Good Investment: gold & staple commodities (oil, gas, food), utilties (maybe, in the 70s utitilies weren't a good investment). 

Bad investments: most bonds, most stocks, cash

Deflation:

Good investments: Cash, treasuries, high grade corporate bonds, high yield staple stocks (utilities), even gold has done well in this environment in the past and could potentially outperfm here as well.

Back to Normal: 

Good investments:Industrials, Tech, Energy, Banking (although I still wouldn't go long here). 

Bad investments: Gold will do poorly here

So my opinion for long term investing is to spread your bets accordingly based off the above. My target portfolio with a 5 year time horizon is:

30% = Precious Metals (includes actual bullion/metal and stocks of PM producers)
30% = USD Cash, FX Cash, Short Term Bonds (this is to hedge by PM trade, have an allocation to cash if there is deflation, and to have as ammunition when the market tanks again (so I can buy what I like)
20% = Energy/Agriculture both the actual commodities through ETFs and stocks (domestic and int'l stocks)
20% = Industrial, Tech, Healtchare, Utilities (domestic and int'l stocks)

He has studies the stock market and his investments for at least 2 hours a day. He has been doing this since he graduated college so whether he is right or wrong, he has put in the research. Again take all this with a grain of salt because no one really know what is going to happen over the next few years. What about me? Well, I still trying to figure it all out...I have a percentage going into my 401k and some going to my Roth IRA(mostly index funds) and the rest right now is sitting on the sideline in cash for possibly a down payment on a home.

So what scenario do you think is going to play out over the next 5-10 years? How are you protecting your investments? Leave me a comment.

Dr. Doom & Gloom or Sunny Bono

I don't know, but lately I just have been Dr. Doom & Gloom. I have been reading and studying experts about how to keep my money and investments safe during these shaky economic times we are seeing. You listen to me write a lot about how our government is making all the wrong moves with interfering with banks, businesses, wall street, automobiles, and now energy and health care. I truly believe we are going through an extraordinary time in the history of America. I have talked with friends, family, and even strangers and no one can talk me into believing that what our government is doing is going to help out. 

One side I have been studying is the Ron Paul, Peter Schiff, and Jim Rogers outlook. If you are a regular reader of this blog you will know their outlook and their beliefs in that we are going to see hyperinflation and they suggest purchasing gold. I have the most confidence in these guys and I am sure we will see inflation at some point over the next 3-6 years.

Another side I have been studying is Harry Dent, Nick Guarino, and Joe Saluzzi who predict there is going to be another Great Depression and a run on the markets. Harry and Nick think that we are going through a deflationary period and that all the banks are completely broke. I agree with them as well that all the major financials are completely broke. If not, why would our government feel the need to step in and bail them out. Also, just wait till the commercial real estate bubble burst, we will be seeing more banks going under than we already are. They say, eventually it will all collapse and that is probably the case unless we go through a period of hyperinflation because of the government intervention.

I have also been been following a couple energy guys Chris Nelder and Gregor Macdonald that think we are going through a period of Inflation and Deflation. And I tell you what, these guys are thinkers and they factor in energy so I am not ignoring these guys for one second.

So as you can see I have no idea what to do. I think the best thing I can do is hedge against everything in hopes there is no big swing one way or another. I have been throwing around the idea of buying Gold, I just do not know enough about it. Also, lately I have been thinking of buying some shares of  SKF or FAZ (ETF's that shorts financials). I called a friend last night and talked to him about it and he doesn't like it because he thinks no matter how bad the shape of financials are, we do not know what the government is going to do which can ultimately effect the price of these. He mentioned SDS which is a ETF that shorts the S&P and he suggested that more so than the others. I would hedge by investing in money that I would be willing to lose if it did not work out.

As of right now I am still in limbo. I still have money going into my 401k, and Roth IRA. I am seriously thinking about pulling most of my money back into cash and let it sit on the sidelines if A) the market goes to 10,000 or B) if we are still stagnate mid to end of July. I think the market is going to take a long long time to correct itself and as long as the government is making moves I am going to be watching very carefully.

I do not suggest anyone follow my advice because I am forming my own opinion and even experts cannot agree on what is going to happen. How can I sit here though and post about how I think our government is going to do harm to our economy and personal finances without actually living by what I preach.

Again I am not making any drastic moves right now, and it could all change next week. I will keep you posted with the next moves I am going to be making.

Am I just over thinking? Should I be so concerned? What the hell do I do with my money? Who's right, inflation, deflation, or stagnation? Leave a comment

Vacation here we come!

Today we are headed to California on vacation for a week. Keep checking back as I am trying to get a couple guest writers from people who have inspired me to work hard and to be smart with money. I wrote a couple of post last night so that I can be posting through next week.

In the meantime, here is 10 Reasons to be a Long-term Bull that I got in my last Edward Jones statement. Here is a link to the whole PDF.

1. The economy is bruised, but it’s not broken. Last year, the value of all goods and services produced in the United States (gross domestic product, or GDP) was $14 trillion. Americans earned $10 trillion in disposable income.

2. It’s not the Great Depression. Though many people like to compare today to the Great Depression, there hasn’t been a run on the banks. There are no widespread bread lines or soup kitchens.

3. Debt/deficits won’t crush the economy. Currently, the deficit is expected to be no higher than 15% – which is the highest since 1943. If you’re concerned that higher taxes may be imposed to pay for higher spending, consider investments that could help reduce future tax payments.

4. 50% drops historically have been an opportunity. 

5. The government continues to support the financial system. While support for banks is controversial (and expensive), it’s designed to prevent the widespread panic and bank runs that occurred during the Great Depression. The Fed will continue to do more to support the credit markets and the economy, entering the market directly when necessary to lower mortgage and other rates if necessary.

6. Stock valuation is compelling. By almost any traditional measure of value, stocks have already priced in a lot of the bad economic news.

7. Inflation is under control. The Fed is keeping a close eye on inflation. However, if inflation does increase from its current level near zero to 2% – 3%, that’s probably a better scenario than deflation, or falling prices, which is a much tougher situation from which to recover.

8. When you feel bad, it can be good. High levels of fear and anxiety, which is often seen after the market has done most of its damage.

9. Good performance often follows bad. There have been only three negative 10-year periods since 1926, but the 10 years ended Dec. 31, 2008, were the worst (-1.4% per year). However, historically, good years have often followed bad ones. In each of the 12 10-year periods following those 10-year periods when market returns were less than 6%, the returns have averaged about 13%.

10. You still have long-term goals you are trying to achieve. A $100 investment that has fallen to $60 has lost 40%, but that investment must now rise 66% to break even. This can be difficult to achieve if the money is no longer invested.

Have a great weekend and even better week!

Online Trading Account - Adult Gambling?

Do you like to gamble? Living out in Los Angeles I saw a lot of people spend money and credit like it was going out of style. Part of living in Southern California was a lifestyle to go to Las Vegas (4hr drive or 45min flight) every quarter or so during the year. This again was during the boom where everything was going good in the economy. I have seen friends drop thousands of dollars while being drunk and spending their hard earned money. They might as well have been throwing money out the window on their way there.

I for one spent my fair share of money in Vegas too…and have to admit I enjoyed every minute of it. My friends and I had an on going joke with me every time we went to vegas. One night we were out and a friend turned to me on the way to the next casino and asked how much I was up. I told him 85 and he looked at me knowing I was not a huge gambler and said “Damn go ahead with your bad self”. I immediately stated that I was up 85 cents from playing the 25 cent poker at the bars. We all had a good laugh.

Now once again I am not a big gambler with my money but I will gamble if my fun vs time/money ratio is worth it. I rate this ratio based on if I spend $100.00 for 4 hours on blackjack- was my time worth it -$25/hr – I would say in Vegas $25/hr is about right for me which is why Vegas is rich and everyone else is not.

I am a huge sports fan and I enjoying watching sports. I got put onto sportsbook ,which is an online gambling service. You have to put money into the account before you can bet, so you cannot put a credit card down and go to town. I usually put $50.00 in and take the minimum($5.00)bets and put it on a Basketball or football game I am going to watch. I have to say it makes the game have more of an interest. I know I will probably get killed by a lot of PF bloggers about this, but it is something I like and it last 1/2 year?(unless I go on a cold streak) What can I say…I don’t do it make money but for entertainment value, is the $5.00 worth the 2hrs?, no doubt!!

So I have a friend who works really hard and makes a really good living. He seems very informed with finances, and makes more than he probably imagined he would at this point in his life. I recently visited him and asked if he is still gambling on sportsbook and he mentioned that he had graduated from it. He was putting a lot more money down, lets say $25-50 per game. He said he was gambling on the stock market and that he opened up a Sharebuilder account. He has about 4-5% of is paycheck going in that money market account where if he comes across a stock he likes or reads an article he will go in and buy some shares. He looked at me and said “its adult gambling son”…I got a good laugh.

But is he on to something? I know a lot of people will disagree, but both my friend and myself have high risk tolerances. Who doesn’t like buying stock when the prices are so low too. He told me straight up that he enjoyed watching his “play money”. He also is using it to learn about stocks and reading more about them and paying more attention to it. I know they say don’t spend your money trying to learn to play the stock market but instead learn the stock market and then play it.

First off I don't have that kind of money...so I am not doing it. That night as I was talking with him about it, he was in front of his computer and went and bought a few hundred dollars in a company stock. When we woke up the next day (PST) it had already lost 4%...he looked at me and laughed! Might seem like he is dumb with his money but after all can we live just a little?