Pay Cash


By Patrick   Follow   Mon, 1 Oct 2012, 4:48pm   11,772 views   129 comments
In Menlo Park CA 94025   Watch (2)   Share   Quote   Permalink   Like (5)   Dislike (1)  

It takes less than half as long to save up enough money to buy outright for cash than it does to pay off a mortgage. About half the cost of a normal loan is interest payments. Not only does the saver get to skip paying all those, he gets interest while he's saving.

Paying cash also usually gets you a discount on the price, avoids all mortgage points and fees, and liberates you from all worry that the bank might take your house. Plus, when you've actually earned all the money upu front, you'll probably be understandably more cautious about how you spend it.

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  1. everything


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    90   7:24pm Wed 3 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Gold and silver are risky, that's why so many more are into the paper play vs. physical and the paper play drives the gold and silver market adding more risk due to the ease and quickness of getting in and out of the market. That's why a good PM player is able to think ahead and unload before a potential crash in prices. Some people buy and hold long term, but a good PM investor buys and sells making money on the way up and the way down.

    JSmarkets probably does not think nor believe interest rates could ever go back up, this alleviates many of his worries regarding the long term play of gold/silver.

    He is right about money being virtually free, this is an excellent time to pile into an affordable and common sense RE holding, live in it for at least 5-10 years and you can't really lose out all that bad on it vs. renting.

    With the kind of inflation we are going to see one of these days, it makes complete sense to borrow the money at only 3 thousand dollars per year on the 100 thousand and hedge your cash into something that will pay more than the inflation rate. Gold and silver are running ahead of inflation, equities, mutuals, etc. if you play them right are a good bet as well. You make the money somewhere else, then use that to pay off mortgage later, makes perfect sense.

  2. ELC


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    91   3:45am Thu 4 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    jsmarket says

    The worst beaten its dissent the most. Denominated in $USD it's risen some 600% (6x), but in Argentine Peso 2900% (29x) and Iranian Rial 4400% (44x). It nonetheless has breached new highs in all 75 major currencies on earth today.

    I would think each country has it's own story why currency is devalued. I assume in Iran it's because of sanctions by it's enemies. What would happen to gold prices in Iran if sanctions were removed? So what's the story in the US? The cause isn't that they're prining all this money, the cause is where is all this money going and what's going to happen to gold if the money stops being spent on defense and bailouts. I think that's really what you're betting on. That there will always be a war on terror or whatever threat they can sell to the American people, and there will always be bailouts. You're also betting that the possession of gold won't be made illegal again.

    If this country miraculously takes a turn toward sanity and honesty, I guess gold is liquid enough that you could cash out before you lose too much?

    What I don't like about gold is it's a bet on destruction. That's why I wouldn't put a dime into things like tobacco or nuclear energy. The people who do deserve to get cancer.

  3. ELC


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    92   3:53am Thu 4 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    If the government were lending people money at low interest rates to buy, say, baseballs, would you go out and buy baseballs?

    You can't rent out, grow marijuana, or produce meth inside a baseball silly!

  4. ELC


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    93   4:14am Thu 4 Oct 2012   Share   Quote   Permalink   Like (2)   Dislike  

    jsmarket says

    (3 years tax returns, recent pay stubs, copies of asset proofs, etc)

    In my 30 years of trying to get people financing your sort isn't easy to find. A real job with real numbers to the IRS and unprotected assets. I never thought the day would come when that would pay off! :)

    I'm beginning to rethink the, "own nothing control everything" ideal.

  5. everything


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    94   7:36am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    The Iranian hyper inflationary event is probably only 20% a result of sanctions. Iran also has a significant defense budget, as they are surrounded by about 40 U.S. military bases. They seem to have been using a barter system over the last year or so, using oil and gold for trade. Gold possession was never illegal, the U.S. government just wanted to scam people out of their gold. Gold is more of a bet on safety than it is destruction. Printing money and monetizing debt is destruction!

    To further comment on the pay cash theory. Sure it's cheap to borrow, say only about 3k on 100k, but where I live, that same 100-150K valued house costs 3-4k a year just in property taxes. I won't pay cash, or borrow to buy where I live as renting is guaranteed cheaper than owning long term or short term.

  6. 37108605


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    95   7:52am Thu 4 Oct 2012   Share   Quote   Permalink   Like (2)   Dislike  

    jsmarket says

    We live in interesting times.

    Ironic, THAT is the famous Chinese curse too.

  7. 37108605


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    96   7:54am Thu 4 Oct 2012   Share   Quote   Permalink   Like (2)   Dislike  

    ELC says

    Patrick says

    If the government were lending people money at low interest rates to buy, say, baseballs, would you go out and buy baseballs?

    You can't rent out, grow marijuana, or produce meth inside a baseball silly!

    Sad but that for some is true. What a pathetic group this country has created.

  8. Raw


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    97   8:05am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    ELC says

    Patrick says

    If the government were lending people money at low interest rates to buy, say, baseballs, would you go out and buy baseballs?

    You can't rent out, grow marijuana, or produce meth inside a baseball silly!

    Now you tell me!

  9. jsmarket


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    98   10:13am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    woppa says

    jsmarket - Very curious as to what specific price you believe gold and silver are headed in the next year, 2 years, and 5 years. I have thought about what you are describing but am fearful of pulling the trigger. You leave out the fact that buying gold and silver at these prices right now is certainly risky.

    woppa: I try to stay away from projections....but, the gain in silver and gold will be at least equal to the debasement of the underlying currency ($USD, in most of our cases)

    http://www.bls.gov/data/inflation_calculator.htm

    Despite the 6x run up in costs for both metals in the past 12 years....I consider QE3-to-infinity in the US, with debasement efforts worldwide at the same time, we are in the highest inflationary or reflationary era in my lifetime (49 years).

    Look at the above calculator from the US Bureau of Labor Statistics...this is the OFFICIAL tracking of inflation. The stats were changed in 1980 and again in 1990 to make official figures lower than actual and this is not shown. According to John Williams of Shadowstats, using pre-1980 CPI calculations, the real inflation rate in the past 32 years (using pre-1980 calcs) is 5x higher than reported.

    Nonetheless, plug in the following to the BLS calculator:
    $612 = Cumulative yearly avg price for gold in 1980
    $16.40 = Cumulative yearly avg price for silver 1980

    1980 is chosen as this was a crest in silver and gold prices (the avg yearly cost for silver in 1979 was $21.79...but, for consistency sake we'll use 1980 numbers)

    (Official) Inflation adjusted prices 2012:
    $1711.00 for gold
    $45.85 for silver

    ....so today's price for silver and gold are fairly valued based on the USG's own CPI calculator.

    However, if you use the pre-1980 calcs...the inflation adjusted values are closer to 5x higher. Gold at $8500oz or silver for $226oz, anyone?

    Personally, I think the situation today to be far more dire than 1980. The open ended QE is something never employed 32 years ago to 'lift' the economy from it's doldrums. No government in debt can allow sustained deflation (lower prices) as it screws their tax calcs. In all tax scenarios laid out by the government, there is always a growth adder...it has to grow or tax revenues fall and deficits grow deeper. Inflation is often referred to as a stealth tax: it is heated up to raise revenues by governments to raise taxes stealthily.

    It's for that reason that you have to equally stealthy to avoid it's pinch. Paying cash for a house, if you have money to buy outright, is not optimal financial planning in this inflationary environment where interest rates are closer to 0 than ever before. For every Yin, you must find Yang to find the mutual whole...and for citizens in deep debtor nations debasing their currencies, our Yang is silver & gold.

    There's ONLY debasement in our futures. It may end up like Turkey 7 years ago - where a pack of gum cost 1,000,000 Turkish Lira. So, Turkey wicked off 6 digits from the old Lira to create new Lira - viola!: http://newlira.com/

    Or, the world is going back on a gold or bi-metallic standard. No more 'faith-based' crap because, clearly, the freedom it gives governments is subject to abuse. There must be constraints for governments to overspend as there is for it's citizens. The rules are no different for the micro than the macro.

    Personally, it makes more sense at any time in the past 12 years to buy heavier into gold & silver. I'm not a gold or silver 'bug'...it is simply an investment decision I consider wise. Ya'll gotta' live within your comfort range, however for me, there is NOTHING ELSE even remotely close to silver and gold that I want to be in for the next several years out.

  10. woppa


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    99   10:29am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    In terms of investment and not apocalypse, why buy physical over paper?

  11. FunTime


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    100   10:31am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    The key is that the median ownership length is only six years! Half of owners own for even less time than that! You may think you're different and you'll own longer, but statistically you're not, and you won't.

    What I'm wondering is how often that works out to an even better return and is the reason for a move. Between 1991 and 2006, it worked out pretty well in the Bay Area to "buy" and sell every 6 years, right? That returned much better than inflation in many cases.

    So even though it was fundamentally unsound, meaning financial devastation was around every corner and surely took a psychological toll on those participating, you could buy a house in the Bay Area and sell it for much more if you sold and moved in six years.

  12. jsmarket


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    101   10:38am Thu 4 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Define 'paper'?

    Paper can mean pooled accounts...not a good idea as the basis behind them is faith based. That is, that there really is all the precious metals they say are there.

    Paper can also mean ETF's....GLD and SLV are the largest in the world and the potential pitfalls of investing in them well addressed: http://www.gata.org/node/6992

    Personally, I do have some in SGOL and SIVR....which have audited and assayed bars with serial numbers assigned for transparency. This is the safest exchange traded gold or silver proxies that I can find.

    However, I have paper in the form of miners and have for 13 years now. I think the good choices in miners today are many. However, if we do have that apocalyptic event, good luck seeing active bourses (trading markets) open again to cash out.

    So, holding some portion of your material wealth in physical gold and silver is simply prudent. So, I do.

  13. ELC


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    102   11:53am Thu 4 Oct 2012   Share   Quote   Permalink   Like (2)   Dislike  

    everything says

    Gold is more of a bet on safety than it is destruction. Printing money and monetizing debt is destruction!

    While I agree there's nothing "free market" about real estate these days I also feel that gold is in a bubble state now. When scumbagos like Glen Beck, Ruch Limbaugh and Peter Schiff tell people on their programs that the sky is falling then peddle them gold there's something very unatural and creepy about that too. I don't think I've ever seen someone selling or buying gold that isn't using hype, greed or fear to increase their sales. It's a club I just don't want to be part of.

    Also you may think I'm crazy but I think dealing in short sales, tax deeds and foreclosures is also going to bring bad karma too. I walk into some of my friends houses and I can just feel the negative energy. Some of these places feel almost haunted. I'm sure vultures have a way of rationalizing that they're not part of the problem and aren't in a dirty partnership with the banks, but I don't buy it. Literally.

  14. SiO2


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    103   3:42pm Fri 5 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    RentingForHalfTheCost says

    SiO2 says
    We can now get a 2.75% 15 year mortgage.

    Just means you now overpay more for a crappy house. It is a sad day when you win 500K in a lottery and you still can't pay off your crap 2 bedroom mud hut. Monthly payments are for the weak. Plan to pay off your house as quick as you can. Debt means you are in debt to someone else. Not a great way to live.

    RFHTC,
    I could pay off the loan if I wanted. But, I believe that I can do better than 2.75% by investing. Just another choice.
    To some degree I do agree though; potentially I'd be better off by borrowing up to the 729k limit for 30 years for 3.125%, but by going to 15 years I reduce the interest rate. It's a form of diversification.

  15. woppa


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    104   8:05am Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Lol monthly payments are for the weak. Do the math. Period.

  16. snyderkv


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    105   11:10am Sat 6 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    jsmarket says

    It's near ludicrous to pay $hundreds of thousands when the government will lend you rates closer to 0 than ever before

    It's near ludicrous to NOT pay your mortgage off with your savings that are instead sitting in an account making .005% interest. You'll need to reinvest your current savings at a much higher rate than your mortgage to benefit even from current rates.

  17. Raw


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    106   11:21am Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    snyderkv says

    jsmarket says

    It's near ludicrous to pay $hundreds of thousands when the government will lend you rates closer to 0 than ever before

    It's near ludicrous to NOT pay your mortgage off with your savings that are instead sitting in an account making .005% interest. You'll need to reinvest your current savings at a much higher rate than your mortgage to benefit even from current rates.

    Paying off your own mortgage at lets say 3% is the same as investing risk free at a 3% return. Impossible to get this anywhere, and therefore the right thing to do.

  18. snyderkv


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    107   11:23am Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    SiO2 says

    It's a form of diversification

    Debt is a form of diversification?

    How when it only takes money away from your pocket?

    I've never seen a debt piece of the pie in my portfolio

    Show me a diversified portfolio with debt as a slice of the pie. Debt can't be leveraged, only equity in your house can.

    It would be considered gambling if you only "think" you can do better than your debt's interest rate and so far I see you have done nothing.
    How will you do better? CD's aren't even paying that. Annuities do but your money will be locked up tighter than the equity in your house and the stock market is a gian ponzi scheme.

  19. snyderkv


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    108   11:34am Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Raw says

    Paying off your own mortgage at lets say 3% is the same as investing risk free at a 3% return. Impossible to get this anywhere, and therefore the right thing to do.

    Great point!. Paying off a mortgage is an instant ~3% return with no effort or risk.

    You'd have to reinvest your extra cash saved from obtaining a mortgage at a higher than current market rates. Big risk and gamble.

    Never understood the mindset that since interest rates are low, we must obtain debt and using 0% rate as a psychological way to justify it. They aren't zero to you, it's still 3.5% interest.

  20. ELC


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    109   12:19pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    snyderkv says

    It's near ludicrous to NOT pay your mortgage off with your savings that are instead sitting in an account making .005% interest.

    Your savings account is liquid and insured. Your mortgage isn't. With this kind of thinking though I am begining to see a bubble mentality forming. If only more than just a few were able to qualify at 3% we'd have a full blown bubble again. For now all we have is exuberance among investors, foreigners in some areas and low inventory stoking the flames. FHA buyers have no skin in the game so that will end badly very quickly. It still all stinks to high heaven. No traditional rules of economics will be able to predict what will happen. I just don't see how it can turn out well for mortgage holders. That 3% looks too much like sucker bait. Remember the saying "if it looks too good to be true..."

  21. jsmarket


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    110   1:39pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Raw says

    snyderkv says

    jsmarket says

    It's near ludicrous to pay $hundreds of thousands when the government will lend you rates closer to 0 than ever before

    It's near ludicrous to NOT pay your mortgage off with your savings that are instead sitting in an account making .005% interest. You'll need to reinvest your current savings at a much higher rate than your mortgage to benefit even from current rates.

    Paying off your own mortgage at lets say 3% is the same as investing risk free at a 3% return. Impossible to get this anywhere, and therefore the right thing to do.

    Impossible? Nope - if you understand the nature of money differently than has been presented by Keynesian eCONomic theory...than its actually unerringly easy in the current.

    First, throughout at least a 5000 year history there has only been GOLD as universally accepted as money. I'm not in love with it - I didn't make it so - but due to its multiple specific properties, gold was chosen as and has always been money. Because of its high value per weight, silver, its less expensive 1st cousin on the periodic table, has acted as proxy in coinage for the same 5000 years.

    As gold is money - so you relate all standins (various paper currencies issued by governments for convenience) for it against it. Ask yourself - why has gold risen nearly 7x over in price these past 12 years? Did the world suddenly become enamored with it again - nope. It rose because the $USD has been debased by at least that much. Gold rises when proxies for it are debased, ie., more money is printed and issued watering down value also referred to as debasement.

    We now have ESCALATED efforts by governments the world over to debase in a Keynesian inspired effort to stimulate moribund economies. It will absolutely work - when measured in $USD this economy will rise only up. However, gold will rise in at least lockstep with the efforts to debase the $USD (and most other paper currencies today)

    3% - a cinch. So long as governments continue to use all efforts to debase - 3% + rise in value for gold is assured. Silver, its proxy in many ways, has shucked off the drop in demand when std photography lost to digital photography and has so many more used in industry than ever before that its future price growth prospects are more terrific.

    Further, there are now many precious metals miners sporting 1%+ dividends already. So one gets the cap gains and some additional dividends along the way.

    My job pays me in enough soon-to-be-worthless federal reserve notes that all the expenses in my life are handled - including my mortgage at 2.9%. In fact I have extra now as my home costs are 20% lower than when I was renting. So more silver, gold and select miner stocks are bought regularly.

    In this era where government is giving away money as close to 0 as ever before, if you have assets to buy a home outright, if you have a steady job that pays well...then it's financially ludicrous to pay cash for a house today. Instead, invest in precious metals and the bank and government will be essentially buying you the (admittedly) overpriced house just bought

  22. jsmarket


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    111   1:45pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Btw, it was only a year ago I thought more like you, and Patrick and others on the issue of buying a home for cash or renting.

    But along the way of life, I began reading the free offerings of Daniel Amerman - a CPA based in Duluth. Go read his stuff. It's a thick read, but he really lays out the multiple reasons why folks who leave their savings in cash in inflationary eras are the worse off of all.

  23. Raw


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    112   2:46pm Sat 6 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    jsmarket says

    In this era where government is giving away money as close to 0 as ever before, if you have assets to buy a home outright, if you have a steady job that pays well...then it's financially ludicrous to pay cash for a house today. Instead, invest in precious metals and the bank and government will be essentially buying you the (admittedly) overpriced house just bought

    I'm just not a fan of precious metals and diamonds. For almost 25 years starting in 1980 gold had been the worst performing investment. In a low inflation environment gold is not supposed to go up, but is, because China and India with their rising standard of living have been buying gold for jewelry. Many Mid East countries have also been buying gold from fears of western sanctions.
    I like real estate, land, and stocks.

  24. mell


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    113   2:49pm Sat 6 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    jsmarket says

    In this era where government is giving away money as close to 0 as ever before, if you have assets to buy a home outright, if you have a steady job that pays well...then it's financially ludicrous to pay cash for a house today. Instead, invest in precious metals and the bank and government will be essentially buying you the (admittedly) overpriced house just bought

    You are mistaken here - buying an overpriced house is always a bad idea, sure if you pay cash you should demand 50%-70% below asking and just walk away and don't buy a house at all as long as you compete with people who will default in years to come. Not disagreeing with your cash investment strategies, although you should never just be in precious metals or worse just gold, but you should have a very diversified portfolio of assets which includes cash for a deflationary crisis which is more than possible if the only worse alternative becomes hyperinflation. If you buy an overpriced house you are stuck with it and stand to lose a lot of money. Sure, if you have enough cash that after your mortgage and other diversified investments you still have enough liquid emergency cash then go ahead if you love to be a house owner, but in that case you are wealthy enough anyways so you don't care about overpriced houses as long as they suit your status. But for the majority who can barely afford a mortgage and pay the bills which leaves no rooms for other investments you are giving very poor advice to get into debt. If you pay cash at a decent enough discount it beats a mortgage anytime.

  25. ELC


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    114   3:09pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    jsmarket says

    why has gold risen nearly 7x over in price these past 12 years?

    Hucksters like Glen Beck, Rush Limbaugh, Peter Schiff etc. Networks like Fox News. China

  26. jsmarket


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    115   3:31pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    If I can remember to find this topic in a couple years I'll try to re-visit it.

    That's about all the time that will be needed for gold and silver to be about double where they are today ($180 & $34.50, respectively). In an era of never ending quantitative easing worldwide, deflation is a myth no government in deep debt can afford.

    The house will have been well paid for in rich excess and, if I choose at the time, paid off with money made from government avarice and deceit.

    Because there is nothing stopping them, deep debtor central governments will ALWAYS print more currency - effectively swapping old debts drawn in the same currency, with less worthy currency later. That's the stealth tax of inflation at work. If they did not print, they would default - so its a virtual default that they will always choose.

    Such printing makes for higher prices in gold and silver in most major currencies going forward.

  27. Patrick


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    116   7:18pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    jsmarket says

    Such printing makes for higher prices in gold and silver in most major currencies going forward.

    I agree that governments like the ability to print, but gold and silver do not always go up relative to fiat currency even so.

  28. ELC


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    117   7:22pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    I agree that governments like the ability to print, but gold and silver do not always go up relative to fiat currency even so.

    Wow. What made it go so high in 1980? I thought these highs were a historical first. Looks like the real value is around $500.

  29. Patrick


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    118   7:27pm Sat 6 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    I think there was a lot of fear back then because Nixon broke the link between the dollar and gold in 1971, and there was serious inflation (double digits).

  30. snyderkv


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    119   11:11pm Sat 6 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    jsmarket says

    Impossible? Nope

    Impossible to get 3% risk free without being taxed? Yup! I have a condo returning 10% but is taxed twice and not guranteed.

    jsmarket says

    3% - a cinch. So long as governments continue to use all efforts to debase - 3% + rise in value for gold is assured

    Gambling, if I bought gold a few years ago, I'd be in the RED and historically, gold has averaged the rate of inflation. Sounds like you're new to gold and read just about every pro Gold website on the web. Gold is no different than a paper stock infact, I bet yours is paper GLD? It goes up, it goes down, you can't live in it or eat it and if you needed to, couldn't trade it for a loaf of bread in its physical form if that's how you bought it. Nevermind the horrible spread on 1 ounce bars. You'd instantly lose 20% value if you bought and sold a 1 ounce bar due to the spread. I''ve played the day trade game plenty of times in the stock market and what you're proposing sounds all too familiar with pumper and dumpers. It has all the marketing pieces, FEAR, generalizations, skewed facts exc. I'm not going to play that game again. Money Magazine I believe states 40% of Gold's value derived from "FEAR" alone. That means it's real value for semi conductors, wedding rings and factories is much much less which gives it plenty of room for downside.

    jsmarket says

    Further, there are now many precious metals miners sporting 1%+ dividends already

    1% is less than 3%, what is your point here? Also, not only are dividens taxed, but some will see an additional 3.8% Obamacare tax on dividens and interest while your 3%+ guaranteed rate for paying off your mortgage is TAX FREE!

    jsmarket says

    In this era where government is giving away money as close to 0 as ever before

    This sounds like a huge psychological way to justify going into debt. Nobody is giving you money as your rate is NOT 0% it's 3.5%. And your over rating liquid, all you need is a years worth. And it's not like your equity is gone, it's not an annuity with huge federal taxes and early withdraw penalties, getting an equity line of credit is not difficult and probably cheaper than pulling money out of a stock like GLD or trading your physical Gold bars in and losing money due to spread, comissions and tax

    If you want to gamble, my BAC stock doubled in a few months. There's better plays out there than waiting two years to gamble on Gold as you stated. So don't look forward to coming back in two years saying "I told you so"

  31. jsmarket


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    120   2:29am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    ELC says

    Patrick says

    I agree that governments like the ability to print, but gold and silver do not always go up relative to fiat currency even so.

    Wow. What made it go so high in 1980? I thought these highs were a historical first. Looks like the real value is around $500.

    Patrick, see my post 109 above in partial answer of this question.

  32. jsmarket


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    121   3:08am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    snyderkv,

    In a thread with 125+ responses, the details can get lost. Your points above are realized, but many don't apply to me, specifically. I have about half a dozen, mostly long responses in this thread with specifics - but let me address:

    * I'm 49yo and have held gold (the real thing) since 1994. I specifically spoke about the errors many make thinking of gold as paper gold GLD and paper silver as SLV. Mine is not - it is physical - with some in ETF SIVR (vastly different than SLV). I only wish I had realized the even more potent power of silver - I began buying that, with gusto, in 2009.

    * I am NOT in hock. I sold my home in Washington DC in late 2002 for a very nice profit (dbl what we paid - factoring realtor fees and general maintenance into the equation). We rented for 10 years before the right combination of lower prices and absurd mortgage rates came up. We have assets to buy the house we just bought after 10 years for cash, but with rates this low it IS ludicrous to not take advantage of money close to 0 today and employ what's left in gold and silver, as well as quality miners.

    * Our mortgage, as disclosed earlier, is a JUMBO, 7 year and with First Republic Bank. This is all by design. The longest JUMBO I am aware of is 10 years...the sweet spot in most banks that offer JUMBO's is the 7 year.

    * The rate is indeed 2.9%. It requires an account with $3500 minimum in it at all times, that's all. We have 800 FICO's...partly a function of staying out of housing idiocy entirely 2000-2007.

    * I have far more in quality miners than physical silver and gold....as it is inconvenient, and probably less wise at this point in the inflationary era we live it to have only physical. Two of my favorites, Silver Wheaton and SilverCorp sport dividends of 1.5% today. I mention this because on dividend alone, it's already half of the money rate being lent...with cap gains assured as the value of $USD is debased.

    * Again, we're not anywhere near in hock. My business (Marketing, per my handle) is thriving so there are no savings being used for our life expenses.

    It really is ludicrous, in OUR case, to use our hard earned and pay all cash - tho we can. At a time when we can finance with only 20% down, employing 80% in virtually assured silver, gold and related miners in an era of unprecedented money debasement and worldwide debt over 7 years - buying on credit makes very good sense/cents.

    I have no inherent love for gold and silver - I simply see the level of deceit and avarice of the government and central banker cabal and realize it has the power to stop their attempts to strip me of hard fought savings thru inflation with it. It's not fear that motivates - its economic uncertainty going forward of paper currencies issued by 80% of the world today mired in such debt (US, EUROland, Japan and UK). Gold and silver, real money for 5000 years, will factor in prominence once again: it is money, and despite the need for central governments to suppress, it is gradually returning to its rightful place again in the world.

    The last 12 years of its rise is a a sneek peek into the future of currencies.

  33. Raw


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    122   9:57am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Look at this chart..

    jsmarket says

    I'm 49yo and have held gold (the real thing) since 1994. I specifically spoke about the errors many make thinking of gold as paper gold GLD and paper silver as SLV. Mine is not - it is physical - with some in ETF SIVR (vastly different than SLV). I only wish I had realized the even more potent power of silver - I began buying that, with gusto, in 2009.

    The gold you held has gone up four fold since you purchased it.
    The Dow Jones has also gone up four fold since then. With gold there is a carrying cost of storage and insurance, while stocks have no storage or insurance costs, but provide dividends.
    Stocks would clearly outperform gold in this time frame.
    If you use a time frame since 1980, gold has doubled in value, while stocks have gone up 15 fold and paid dividends.
    Why not sell gold and buy stocks?

  34. ELC


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    123   10:34am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Raw says

    Why not sell gold and buy stocks?

    Because gold is a no-brainer. Stocks require research, some skill and attention?

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    124   10:48am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    ELC says

    Raw says

    Why not sell gold and buy stocks?

    Because gold is a no-brainer. Stocks require research, some skill and attention?

    Just get the index funds like the S&P 500.
    95% of the money managers can't beat it, and you don't need to do any research.

  36. jsmarket


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    125   10:48am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    Raw,

    You perhaps missed the above where I mentioned I have MORE mining stocks than physical gold and silver. I do believe over the next 2+ years mining stocks will have additional earnings leverage over the price of gold itself. Past that, in a world where 90% of the worlds most widely held and circulated currencies are issued by countries mired in HUGE debts....I think we will have a full scale currency crisis and faith in all unbacked currencies will be broken.

    If and when that day comes - everyone will want to have physical gold and silver in their possession.

    There are effectively no carrying costs for gold. A shoebox can hold USD$1,000,000 and easily hidden. If you buy enough silver, at the current time some 50x more voluminous by cost, it does pose a certain carrying cost as its less easy to hide.

    As for premiums over the cost of the metal itself....Swiss refiners PAMP and Credit Suisse have 1oz gold less than 2% over spot. 90% silver US coins minted before 1965 often sell at spot. There's lotsa' generic silver choices at 2-3% over spot. On the selling end, a good, hi volume billion coin dealer generally charges 2-3% on the sale when its time to cash in.

    Unless, Soon-to-be-worthless FRN's are needed, buy and hold for several years is advised.

  37. Raw


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    126   11:00am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    jsmarket says

    You perhaps missed the above where I mentioned I have MORE mining stocks than physical gold and silver. I do believe over the next 2+ years mining stocks will have additional earnings leverage over the price of gold itself. Past that, in a world where 90% of the worlds most widely held and circulated currencies are issued by countries mired in HUGE debts....I think we will have a full scale currency crisis and faith in all unbacked currencies will be broken.

    If and when that day comes - everyone will want to have physical gold and silver in their possession.

    I was comparing the long term performance of gold vs stocks, which clearly show stocks a much better investment.
    I hope your mining stocks do well.
    If we have a currency crisis, yes, precious metals will sky rocket, but inflation or the perception of high inflation would precede that scenario.

  38. BoomAndBustCycle


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    127   11:08am Sun 7 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    snyderkv says

    Raw says

    Paying off your own mortgage at lets say 3% is the same as investing risk free at a 3% return. Impossible to get this anywhere, and therefore the right thing to do.

    Great point!. Paying off a mortgage is an instant ~3% return with no effort or risk.

    You'd have to reinvest your extra cash saved from obtaining a mortgage at a higher than current market rates. Big risk and gamble.

    Never understood the mindset that since interest rates are low, we must obtain debt and using 0% rate as a psychological way to justify it. They aren't zero to you, it's still 3.5% interest.

    3% returns are boring... I got 1000% return on mh apple stock since 2002... I only wish i would have maxed out all my 20% rate credit cards buying apple stock. If only!!!

  39. mell


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    128   2:20pm Sat 13 Oct 2012   Share   Quote   Permalink   Like (1)   Dislike  

    You can't get any good cash deals? Somebody begs to differ!

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    129   3:30pm Sat 13 Oct 2012   Share   Quote   Permalink   Like   Dislike  

    ELC says

    Patrick says

    I agree that governments like the ability to print, but gold and silver do not always go up relative to fiat currency even so.

    Wow. What made it go so high in 1980? I thought these highs were a historical first. Looks like the real value is around $500.

    No while a young guy I remember the early 80s all to well also.

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