MasterPo says: This blog is about topics and issues that are of importance to me. I am not one of the countless blogging lemmings that are tripping over each other scurrying down the hill and off the cliff of blogging oblivion trying to write the greatest blog on the latest topic de'jour. Your comments are welcome.

November 16, 2010

Setting The Record Straight Part 2 – “Gold Bug” Is Bugging Me

In this second installment of trying to state MasterPo’s position on certain topics in such a crystal clear fashion that no one (not even you Apex) can misunderstand, MasterPo wants to tackle a point that has come up. It shouldn’t be in question but apparently is so it needs to be addressed.

Recently both on The Pofile and some other sites (notably financial) MasterPo has be accused of being a “gold bug”. Presumably that is a person who so loves gold as an investment over all else. This is usually based on the personal belief that gold, having been a means of trade currency for over 4,000 years of human history, will continue to be a vehicle for trade long after whatever happens to current paper currencies.
The truth is that MasterPo owns very little physical gold as a percentage of his overall investment portfolio. With the recent (as of writing this) run up in gold (and silver) MasterPo does wish he had the foresight to have bought more just a few years ago but hindsight is always 20/20. The same can be said for buying at $15/share or Walmart at $19/share.

It is no secret that MasterPo does have great (grave?!) concerns about the future prospects of the U.S. dollar as a national much less international currency. It is sooooooo clear that current (as of writing this) American national financial policy sooooooooo closely parallels the policy of the Weimar Republic it should concern (to put it mildly) any sane person. History shows what happened to Weimar so why would anyone think it can’t happen again this time to the U.S.?

As of writing this:

· $13 trillion dollar national debt and growing.
· $1+ trillion in national deficit until at least 2020.
· Individual states with hundreds of millions of dollars in debt.
· State and local pension planes also hundreds of millions of dollars underfunded.
· “Official” unemployment hovering at 9.6% (U6 unemployment at %17.1, several states including CA, NV, WI and MI with double digit unemployment).
· Costs and regulation from National healthcare sky rocketing
· Quantitative Easing #2 about to start.
· The Federal Reserve buying Treasury Debt even though Ben Bernake promised in 2009 under oath in front of a Congressional Committee the Fed would never do that.
· The Federal Reserve actively pursuing a policy of trying to raise inflation while devaluating the American dollar.
· Interest rates at near zero, having nowhere but “up” to go.

And none of this takes into account the inevitable unforeseen events that life throws at you.

For all these reasons and others MasterPo is taking a second hard look at gold (and silver) as both an investment and emergency currency alternative. Even at today’s lofty prices ($1,350/oz for gold, $24/oz silver as of writing this) if this is what is needed that’s the price to pay.

For this MasterPo has been called a “gold bug” and accused of being a “bomb shelter” loony. While Mrs. MasterPo may at times agree with the latter, facts are still facts. Closing one’s eyes to what is happening and parallels to history might make you feel better rather than dealing with the problem head on, but won’t change the outcome.

MasterPo doesn’t know if anything significantly bad will happen on our shores as a result of the above points.

MasterPo certainly does not want anything bad to happen!

Nothing would please MasterPo more than if in 5 years time everything is turned around – unemployment is below 5%, the Dow is over 15,000, S&P approaching 2,000, gold below $800/oz, national debt really cut in half (not just a 10-year projection), etc. But MasterPo isn’t holding high hopes for that scenario.

Each person has to do what they believe is best for them and their dependents. One person might say there’s nothing to worry about and go on with blissful dreamy eyes. Someone else may say this is potential for problems and choose to take at least some steps to be prepared if such happens.

This is not a question of who is right and who is wrong! “Right” and “wrong” are not the issue.

Prepared vs. unprepared is the issue.

Just as one person perceives it is prudent to buy a certain kind of insurance while someone else thinks it isn’t necessary, such as it is this case. MasterPo believes at this juncture of national events some measure of physical gold and/or silver is prudent to own while someone else may think not.

That’s your individual call.

Point of fact is that risk management professionals do not prepare for emergencies based on measuring the likelihood of them happening but rather the level of loose that would sustained if such an event ever did take place. For example, MasterPo has never known anyone who lost their home due to fire. Yet everyone who owns a house (and many renters too) also have fire insurance.

Just in case.

Whether or not you agree with MasterPo on this subject doesn’t matter.

You choose your level of preparedness (from nothing to everything) and live with the choice. Only time will tell which was a better call.


MBTN said...

Just as dollars are considered by some to be fiat currency, I consider gold to be fiat metal. What practical use does gold have? Almost none. Therefore, where does the value of gold come from. The value of gold comes from the fact that people believe that it has value. Just like dollars.

I know that in a doomsday scenario, if somebody wanted to trade something of mine for a hunk of useless yellow metal, I would laugh in their face and tell them that they are crazy. On the other hand, if they wanted to trade some diesel fuel, ammo, or some chickens, I would open negotiations.

MasterPo said...

MasterPo agrees in a "Mad Max" event gold (and silver) will probably be of less value than the items you describe.

However, short of some national or world wide cataclysm, MasterPo doesn't see that as a likely scenario.

Economies have collapsed before without nations necessarily falling into anarchy.