Tuesday, July 19, 2011

Estate Planning in the Neo-Feudal Age

The newsertainment programs this morning were obsessed with the new all time high set by gold yesterday which they attributed to fear over the debt crisis. They made much of gold being over $1600/oz but didn’t mention that it had been over 1600 a couple of months ago before falling back by more than a $100 and true to form it fell back by one percent today.

The investment analysts were out in force to tell everybody to sell gold and buy stocks as stocks have done so much better over the last 25 years. They didn’t mention that over the past ten years stocks are up only twenty percent and gold is up 500%. Keep in mind that the actual market for investment gold is very small. So small that just Glenn Beck convincing a relatively small number of paranoid millionaires to shift some part of their holding to gold would be enough to drive the market. The University of Texas has put a billion dollars of its portfolio into bullion that it keeps in a vault. (though they probably weren’t suckered by Glenn Beck and Goldline)

The truth is gold is a terrible investment although not as likely to fall through the floor as stocks. Stocks are just pieces of paper with no real tie to anything tangible. The replacement value of the companies’ assets in the DOW 30 at current prices are only worth half the value of their stock. You tell me if that’s a safe investment. Historically all stock market lows have gone down to ¼ of replacement value. (If you can’t do the math, that’s 1500 points or an eighth of what you think you have now).

Gold on the other hand will always have substantial value but it’s a commodity and no currency is tied to it anymore. There has also been a real mining boom especially in China so you can expect gold to drop sharply at some point. Most people don’t think that will happen anytime soon, but you’d need a crystal ball to that know for sure.

The Libertarians want to issue gold coins but to monetize all the USD in circulation into the available metal would require gold to be valued at something on the order $10,000/oz. This is how they rationalize that gold will keep going up and up and up. Don’t hold your breath. Did I mention gold fell sharply today?

So what do you put your money into? If you have a lot of money you could jump in on the farm land boom. Unlike gold they aren’t mining any new farm land and it does generate an income (and no you don’t need to become a farmer, most land is now rented to the local corporate backed farmer). In the long run though you can expect that all the land will be corporate owned so don’t make any real plans for financial security, they will get your wealth in the end. The founders warned against bankers and corporations using successive rounds of inflation and deflation to capture all the wealth. They passed laws 220 years ago and again in the New Deal to keep that from happening, but all of that has been repealed over the past 30 years.

So you aren’t in the top 1/10 of one percent and you want to leave some wealth to your grandchildren, what do you do? You can just do nothing and hope the popular revolution goes your way. You might better buy stocks.

Political action and educating the public are the only viable options. There are progressive candidates to work for. If you still have money then you need to get serious about contributing, hanging onto your money won‘t work in the long run. If the rich have already cleaned you out then you need to work for change. Work like the lives of your grandchildren depend on it.  www.prairie2.com


prairie2 said...

Some anonymous troll keeps leaving the very same talking point with slight variations "21% of America kids under age 18 live below poverty line the lefty welfare/nanny state great society war on poverty trillions of tax dollars spent -- lost. Utter failure"

What part of "DON'T YOU NOTICE WHERE THE WEALTH IS GOING" don't you get?

Anonymous said...

"Welfare queens, illegal brown people, those lazy 99ers, and Israel is where all our tax money is going."

That's what a tea bagger would tell you. I would not matter if you showed them numerical statistics, bar charts, pie charts, line graphs or any other material that would entails logic and reason. The trolls that come to you board don't want to hear the truth-rather, only what they want to hear. That is why FoxNews is so successful-and will continue to be regardless of what happens to Murdoch. They feed these numbskulls the candy they desire.

Blame the liberals, the Jews, the brown people, gays, NEA, ACLU, Acorn, Muslims and any other "non-Americans" (whatever that means). That is their Wonka Bars.

Anonymous said...

Those who think it is smart to move your savings and investments to gold need to think about what is going on. Gold is a commodity. Anyone who does not know what happens in commodity markaets are pawns for the pros to take advantage of. The pros make money when a commodity's value goes up or down. The pawns are taken advantage of because they end up buying high and selling low just the opposite of the pros. Gold buying is only for hedging and speculation and does not add a job or add value to the economy.

Anonymous said...

I agree. Gold is not an asset. It only produces income when "loaned out" and stored in a vault. A lot that will do you when the proverbial feces hits the fan. Watching Bernanke last week basically tell Ron Paul the same thing was amusing-not that I am a fan of Bernanke. However, Bruce is dead on right when he says stock up on canned goods. A garden in the backyard isn't a bad idea as well. Seeds will also be a better currency than gold when "armageddon" happens.

Anonymous said...

I will hold my 'worthless stocks' that have billions of cash and next to no debt. You can hold T-bills with no yield and backed by the biggest debtor nation in history. ... then went retirement beckons we will see who is playing golf and who is eating cat food. Game on.

Anonymous said...

"... Work like the lives of your grandchildren depend on it."

The world is overpopulated. Better not to have any grandchildren.

prairie2 said...

"...hold my 'worthless stock'..." look back at all the people who have been wiped out in the stock market. Stocks have nothing to do with the assets or the debt of the company. Stocks are only worth what somebody will pay you. You seriously don't understand the rules of the game. I'm not claiming T-bills are safe either. Only the top one percent are safe because they run the game.

Anonymous said...

Rules of the game? Where are these rules written? And who says I must follow them? F--- these rules. They must be for losers only. Way too much negative thinking here.

prairie2 said...

The rules are written down in the books on economics. They had this figured out by the mid 18th century. You're being scammed by people that tell you can ignore the F'n rules or that they have "new rules, just give us your money". This has happened over and over again and guys like you always lose.