Stocks vs. Precious Metals vs. Bonds vs. Real Estate

re: stocks are high risk

...and any western stock index plotted again gold since about 2001 or so, show gold outperforming.

Remember in secular cycles of negative REAL interest rates, DJIA/gold ratio returns to 1 (or below). It is now around 9 and has been falling since the secular peak of stocks in 2001.

Diversification into a stock index won't help, just buy gold instead. And if you have a long term frame, silver is even better (silver is not better if you hold short-term, because the volatility can murder you). Traders who think they can trade silver better than a long-term hold of silver, are going to get an education into the value of gambling. One might be able to trade the gold/silver ratio effectively (one trade every year or two), but not the silver fiat price. You can prove this to yourself by comparing the increase of your networth since 2003, as compared to if you had purchased silver and held it with no trades.

Brian,

What would I do with 2 million lbs of beans in times of crisis? If there was really a crisis that caused food production to shut down, then many forms of transportation and distribution would also shutdown. My 2 million lbs of beans (or whatever mix of food stuffs) would be illiquid.

Ditto farm land, illiquid.

Yes enough unperishable food for 6months is not horrible idea. I have 500 lbs of beans stored, etc.. But that hardly helps me with the other $999,500.

Becoming a farmer is extremely inefficient. It is a waste of precious years, when I could instead be developing a new computer language, and potentially raking in another few $million. Look at Google Android sales growing 800% per year compounded since launched in 2009. In 2 years that has been 6400% sales growth to now the #1 market share smartphones in the 100s of millions of unit sales per year.

Besides there isn't going to be any shortage of food. There is going to be plenty of food, but most people won't have any money to buy it, because they didn't buy gold & silver.

All these Mathusians are going to be sitting in their bunker or farm waiting for the attack that never comes, and instead they will be watching gold go to $5000 and silver to $500 by about 2021 or so.

Life does not reward people who waste their talents or waste capital on things that don't help society become more productive. The most efficient thing to do now is to work hard in your area of talent, knowing full well the huge opportunities as 6 billion people are joining to the modern world. And taking your excess profits and buying gold and especially silver, in order to halt Bennie before he burns down all the Jets.

Lets sing a toast to that:

https://www.youtube.com/watch?v=QjUk3Bp16zs

P.S. I agree that money is not the answer to salvation. The globalists have too much of the gold, it won't hurt for us to call it back it in (as they did to us in 1934).

Cheers.

Harness the volatility, and you can consistently grow your accounts. Operate in a crisis that will last for decades with only with the gold stocks leverage tool is dangerous and could be financially fatal. The gold stocks leverage tool has failed to work properly because we are in a crisis, not a boom! All crises are about destruction of wealth through destruction of leverage, and that means destruction of “houses on a credit card” leverage, as well as destruction of “gold stocks to bullion” leverage. All leverage is hammered, with no exceptions.

shelby in 2008 wrote:Let's review the logic I presented in this thread. Is there a net divestment of capital from juniors along with a dilution as number of juniors proliferate? If yes, then when and why will that change?

shelby in 2011 wrote:If there is cash flow, agreed that won't be ignored. But you are likely to see P/E ratios fall to historic lows, as the boomers have no more leverage nor cash to invest. And imo we must factor in a $200 oil price and every thing 3 or 4 times more expensive too. And factor in increased taxation and nationalization of mines, possibly labor strikes, etc.

I think most of the moves in stocks will be liquidity based. When QE increases, stocks increase, and vice versa. Because the P/E ratios have always been sustained by leverage in the fiat system. What most people don't realize is that on a gold standard, there is no appreciation of stocks above the return on capital in a bond! Bam! It just hit me why stocks are failing!

The first real time stock index in American history was an index of rail stocks constructed by Charles Dow in 1885. This index moved sideways from 1885-1896, when it was replaced by the Dow Jones Averages. From 1896 to 1933, the Dow Jones Averages also moved sideways (the bull move of 1922-29 being offset by the bear move of 1929-32). That is, for almost half a century real time stock indexes moved sideways.

This is indeed what stock indexes do in a free market economy (which includes a gold standard). The wealth created by the productive geniuses of the country flows through to the average person. The large gains in the productive genius’ stock are offset by the declines in his competitors’ stocks. The people get richer, and the stock market goes sideways. The only reason that the stock market has gone up since 1933 is that F.D.R. introduced the printing of money and the easing of credit. As [REAL] interest rates go down, stock yields go down along with them, and this of course means that stock prices and P:E ratios have to go up. (F.D.R. knew this. His motive was to rob from the poor and give to the rich. So you see, pretty much everything you have been taught is a lie. And we are now very close to the point where that lie is going to cost you dearly.)

So you are buying into a very overbought stock market. If Bernanke has to tighten, then it will drop like a stone.

• Free cash flow, or cash on hand after covering costs, of at least $250 million. Without strong free cash flow, a company would find it tough to expand its business, develop a new product, pay dividends, or reduce debt.
Net profit margin of 15% or better. Net profit is net income divided by revenue, and can indicate whether a company has control of its costs.
• Return on equity, which is the amount of profit returned as a percentage of shareholder equity, or a firm’s total assets minus liabilities, of at least 15% for the past three years and including the most recent quarter.
• A dollar’s worth of earnings creating at least a dollar’s worth of shareholder value over the past five years.
• Ample liquidity — meaning only stocks with a market capitalization of $500 million or greater, though the American Association of Individual Investors believes that number should be greater than $1 billion.

http://www.financialsense.com/contributors/lance-roberts/2012/01/26/why-home-prices-have-much-further-to-fall

As gold returns as money, if we assume Mortgage payment as $ of DPI must decline to pre-1971 level of 7% (before dollar was detached from gold), then house prices must fall -50%.

If we assume the interest rises return to norm, then house prices must fall another -50%. So that makes a -75% price decline possible. Interest rates must rise to finally arrest the rise in the gold price (as in 1980):

http://www.financialsense.com/contributors/bruce-krasting/2012/01/26/bernanke-goes-all-in

Tangentially, Fed targets the incredibly shrinking prices of personal products:

http://www.google.com/search?ix=heb&sourceid=chrome&ie=UTF-8&q=shrinking+size+of+grocery+products

To the extent that inflation raises the cost of materials (which is a small % of cost of home), it will be offset by declining wages and demand as UNemployment skyrockets.

Rising property taxes will further increase the mortgage payments and thus decrease the amount of available (7% of) DPI, thus further declines in house prices.

Thus I maintain the conclusion of\ the original title of the article on this page. See the link to the gold-to-house price charts in the article on this page.

House prices to decline -75% or more

Sorry couldn't find the following articles on marketoracle, so will link the versions that appeared at another site.

I understand that Nadeem thinks inflation will lift all boats including houses, but the math below is fairly convincing. Perhaps the only factor I didn't include below is Asians coming in to provide additional demand.

As usual, this is written in terse style, good for people with a high IQ that can connect the dots. Not good for people who have less than 130 IQ.

http://www.financialsense.com/contributors/lance-roberts/2012/01/26/why-home-prices-have-much-further-to-fall

As gold returns as money, if we assume Mortgage payment as $ of DPI must decline to pre-1971 level of 7% (before dollar was detached from gold), then house prices must fall -50%.

If we assume the interest rises return to norm, then house prices must fall another -50%. So that makes a -75% price decline possible. Interest rates must eventually rise to finally arrest the rise in the gold price (as in 1980):

http://www.financialsense.com/contributors/bruce-krasting/2012/01/26/bernanke-goes-all-in

Tangentially, Fed targets the incredibly shrinking prices of personal products:

http://www.google.com/search?ix=heb&sourceid=chrome&ie=UTF-8&q=shrinking+size+of+grocery+products

To the extent that inflation raises the cost of materials (which is a small % of cost of home), it will be offset by declining wages and demand as UNemployment skyrockets.

Rising property taxes will further increase the (total) mortgage payments (costs) and thus decrease the amount of available (from the historic 7% of) DPI, thus further declines in house prices.

Thus I maintain the conclusion of the original title of my article on this page. See the link to the gold-to-house price charts in the article on this page.

Martin Armstrong has also had a terrific track record. Here were his predictions he made in 1998 (see the [URL="http://www.martinarmstrong.org/files/1998%20fall%20Seminar%20Tour.pdf#page=38"]last slide of this presentation[/URL]):

1998 = Collapse of Russia
1999 = Low Gold & Oil
2000 = Technology Bubble (Like Railroads in 1907)
2002 = Bottom US Share Market
2007 = Real Estate Bubble, Oil hits $100
2009 = Start of Sovereign Debt Crisis
2011-15 = Japan Economic Decline
EURO begins to crack due to debt crisis
2015.75 = Sovereign Debt Big Bang

All of those predictions up till 2011 have come true. If the last one also comes true, then the above targets for Gold and Silver would become extremely likely as faith in paper currency would likely smelt like snow in the sun.

My thought from that interview is that being in debt and/or having liquid assets in any form other than physical gold, will lead to bankruptcy and enslavement at the time the elite complete their takeover.

Everything else is speculation.

A basic law is that "over a long enough timeline, every debtor and speculator loses everything" (this is similar to ZeroHedge's byline)......