patrick.net

I dunno.

You might think I was logical, but I either didn't know. or had forgotten, what our government did with gold in 1933. Maybe logical. But maybe flawed logic. Time will tell.

I guess that if you have a very robust set of statistics that you trust, you could store your value on anything that's liquid.

Including, Bay Area residential real estate.

Real property is a great place to store value with the caveat that you're not trying to buy in during a bubble.

After the bubble values are burned off a good bit (not all the way for me), I'll put a large portion of our wealth back into that and sleep well at night.

If the Bay Area continues to be stubborn, then I'll rely upon my family back in the Midwest for local knowledge of those real estate markets, and I'll buy there and rent them out. In a way, it's a race to see which happens first: the BA bubble pops or the Midwest's secular employment cycle starts recovering.

Randy,

They're not making anymore land.

RIch immigrants are stampeding here from Asia. Poor immigrants from Latin America are hot-bunking here. These trends have been going on long before you immigrated here from the Middle West for our elite public business school.

Decades before there was ever a Silicon Valley this, or tech that, we had an entrepeneurial business environment. It came with the Gold Rush. It stayed with all kinds of horticultural innovations after that.

As was proven in 1906, natural disaster here is a different term for urban renewal investment in new infrastructure. In the long view, the earthquake faults are bullish for the continued vitality of our region.

I'm bullish on residential real estate in these parts.

Just not right now.

But soon.

long before you immigrated here from the Middle West for our elite public business school.

I moved here eight years before going back to b-school.

Eight years ! Practically a native for these parts (no sarcasim intended).

diamond is just carbon. If you are going to deal with illiquidity and hoard anything useful, gold and silver are far more superior choices than diamond. Industrial-use diamond can already be manufactured and is dirt cheap.

Actually buying BA real estate is not a bad idea as a store of value except:
1) the current price has already priced in the future high inflation
2) residential property has to be supported by wage growth which is obviously lagging. Real estate price growth usually precedes high inflation and stays stagnant before such inflationary phase is over, food price growth typically signifies the last phase of inflationary growth.
3) A house needs more maintenance than gold, and is even less liquid

It makes sense to buy a house and live in it, it is downright stupid to buy a house purely for the store of value in BA right at this moment.

I don't feel like a native. But I certainly seem to have been here longer than lots of folks. Most of the wave I moved in with have since moved "back home" or to OR, WA, CO, NV, TX.

My point was I didn't move here for school. Actually my wife got a new job in 96 and her firm paid to move us here. I was pretty comfortable in Chicago. The move was pretty hard on my business. If I'd known how hard it would be I'm not sure I would have been so agreeable. I went many years never earning a single dollar of Bay Area income; I still drew my income from my Chicago based company for many years.

Not to sound like I am doing advertisement for the Perth Mint program, you can sell your gold back to the Mint any time at the spot price. Of course the market price may fluctuate a lot and your timing may be completely screwed up.

I am not sure if you can sell your house any time even at the so-called "market price". Try selling it a week ago when jumbo loan was yanked in the BA market.

Country risk, government risk, tax risk, these are all kinds of risks one needs to tackle when dealing financial assets internationally. I just don't think Canada and Australia have that high of a country risk, if any. Australia government became entirely debt free last year, and is in no hurry to raise money. It is moving towards lower taxation to encourage businesses and economic development, and such tax cuts are not funded by budgetary deficit, how refreshing. The biggest risks facing such countries endowed with rich resources will be the end of the commodity run.

I do not take pleasure in resorting to gold to store part of my "money". I am not a gold bug who believes that we should operate on a gold standard. However, with endless rounds of liquidity injection in sight (half a trillion to date), and our financial elites' reckless speculation style guaranteed almost no chance of failure, what else can I do to protect my savings from being diluted? As a responsible saver, should I be punished for being fiscally conservative?

If you can swear like Surfer-X then you understand plenty.

LOL.

Didn't someone earlier in this thread (or another) state that the problem with diamonds is that value is greatly depedent upon quality (color, clarity, et al.) and therefore you almost need a qualified appraiser at the time of exchange. This makes them hard to use in a "road warrior" scenario.

If we are faced with Road Warrior, it's too late. Bullion will only be good to use for shims when things start to fall apart.

OO

I agree, and a few years ago, voted with USD, that bullion can be a useful store of value for SAVINGS.

But who said you oughta be punished?

If we're in a Road Warrior scenario, the best thing to have is arable farmland with water rights, knowledge of old-school skills like carpentry and animal husbandry, and a talent for hunting. I doubt the U.S. would ever get violent like that (the military's weapons are far too good and we have way too much farmland to starve), but the Amish lifestyle might look pretty good at that point.

Brand, if it comes to that, what good will "water rights" be?

I'd say, water access, and an arsenal.

Like I said, the government isn't going to collapse, even in the mightiest calamity. I consider the arsenal to be highly optional.

Brand, just curious: are you a native (or "Native") American?

Why I am asking?

From that perspective, you might recognize that our federal system is chartered by the states. If Al Queda or others makes a decapitation, it only takes three fourths of the state legislatures to dissolve and/or reconstitute our national government.

It's not a whole lot different from what happened to another federal system with a seemingly invincable national government (USSR).

The irrigation water system here in Boise (built around 1900) is almost exclusively gravity-fed so it will still work if the power isn't there. One issue to consider is not just water rights but how that water gets to you.

sybrib: The U.S.S.R. was not a government of the people, by the people, for the people. If the United States populace was so dissatisfied with its form of government, people could pressure the Senate into amending the Constitution to provide the desired changes. Al Queda isn't going to change our opinion of our system of government. Al Queda could certainly cause a backlash against the politicians in charge (which is a proper functioning of a democratic republic).

We've had a civil war. It was ugly and I doubt that people want to repeat it. The country isn't divided like it used to be. I do believe a day is approaching when we will have a real third political party formed by moderates from the Democrats and Republicans. People won't put up with Republican imperialism or Democratic financial mismanagement for long.

But states moving to dissolve the federal government? I doubt it.

Brand,

the War of the Rebellion was different than a decapitation.

In the War of the Rebellion, some state militias were directed by their state governments to defy the rule of law and attack federal property. State governments ignored the tariffs. All the while the federal government, with all its resources and all the lobbyists of those days (and yes there were in those days), was mightily ensconced in the nation's capital, gearing up politically and economically and military to put down the Rebellion.

Do you really think our Mighty federal government is going to keep renegade nukes, probably by well financed terrorists, out of our country? It cannot even keep dirt poor Mexicans out of our country. Nor tons of contraband narcotics. Nor whole boatloads of tainted toys and tainted foods.

In a decapitation, much of the federal government would be vaporized in a few moments. There will not be a federal government to defy nor to rebel against.

But the state systems may very well be functional and intact. After getting down to the business of restoring order, (which unfortunately because of Bush's adventures in Iraq would be more difficult under the current circumstances of having many of our state militias isolated in Iraq), the states would have to do something about what it means to be a nation. Reconsitute the federal system, or rearrange it (like the USSR).

Killing off Washington, D.C. with a rogue nuke would not decapitate the country. We might be leaderless for a short period, but the federal government has thousands of offices across hundreds of cities. The bureaucracy would not cease to function. Not to mention that the state governments would not let the country fall into utter chaos.

If decapitating a country could be accomplished with a nuclear bomb, it would have been done decades ago by a Cold War faction. The very possibility of such an event during the Cold War means that measures are already in place to keep the bureaucracy shuffling along even in the face of an unthinkable catastrophe involving the (figure)heads of state.

Brand, I agree with everything you said.

Don'tcha think our enemies thought of that too?

I think just one of the giant nukes would take out a whole metroplex. If they couldn't manage that, it'd probably be multiple smaller ones all in the same "event", not too much unlike 9/11.

For good measure, the act would probably be carried out in some other major cities too. Not every major city in every state, but just enough to cause chaos.

I don't think Joe bureaucrat will be reporting in to his desk job at the federal building that day. More likely there will be chaos. Order will hafta be maintained by local authorities. LIke in lower Manhattan on 9/11, like in New Orleans after Katrina.

People, and the states, will realize that the federal government did not really help them sort out anything, but made matters more difficult by dispersing much of our militias in overseas adventures (jeez, they didn't even do that in the Vietnam War).

Restoring order and commerce will hafta happen at the local and state level, and whatever the states decide will facilitate this will be what happens. A constitutional convention, which could make for some radical changes, would follow (after all, we've only ever had just one of those).

Even if the president emerged from his bunker and tried to impose authoritarian rule, it will not be practical and the states will quickly recognize that situation.

Decapitation was a strategy during the cold war. It resulted in the dead-man's-switch (or automated launch protocol, in civilized terms). Decapitation was a strategy that involved not just one surgical nuclear strike, but literally hundreds of massive, h-bombs targeted at disabling the governing infrastructure. It included state government systems in strategic states, which was all states with significant populations.

A single single, a-bomb going off in DC would not come anywhere close to decapitating the US Government. For one, many of the leaders in DC itself would survive the type of suitcase nuke you're referring to. Suitcase nukes aren't that big. A suitcase nuke going off in a US city would forever alter the entire geopolitical structure of the world. But it would be because of the way the country would react, and the way the economy would react. But it would still be the US as a functioning federal system, not some odd constitutional convention of the states.

I'm pretty sure that the chain of command protocol still holds that at least one member of the primary succession is always out of position at any given time. The entire government can be run from Colorado, also. Last I checked the installations there aren't decapitatable by anyone other than Russia.

As for general order breaking down, if 9/11 is any example then order is automatic in non-affected areas following a catastrophic attack, not the opposite. After 9/11 there was almost no crime anywhere in the US for days -- something which hadn't happened since the attacks on Pearl Harbor. During that silence the federal systems outside of DC would activate and assure everyone the US still existed as a functional federal entity.

Randy,

I agree with everything you wrote. But it is not imaginative. Neither were we before 9/11.

The idea that our enemies will have is a contagion of fear. I agree that I doubt every big city will be hit. How many do you think will be, more or less on consecutive days, before people start to panic? Dismiss assurances from the federal government?

When that happens, a lot of un-hit places will look like New Orleans. But All the reassurances in the world from Washington did not ameliorate the situation. So it is a sort of a precedent.After a major terrorist attack the federal government won't have the resources to restore order.

There's really no telling how many mini nukes or whatever WMD might already be in our country. Considering I see scores of poor illegals standing on the curb when I drive past Home Depot on my way to work every morning, I don't have any confidence at all that the federal government has been effective at keeping them WMD out of our country.

This discussion was a tangent I went off on when thought that our military's weapons would maintain order here to prevent the Road Warrior scenario. I suppose they could, but I don't think they would if there's no paymaster.

sybrib, what exactly do you think people in the unhit cities would do? They might be upset, but the first thing on their minds would NOT be overthrowing the U.S. government. On 9/11, I never once thought, "Well screw this, let's just go back to every state for itself!"

Americans are an extremely resilient bunch. Our country is so huge that you couldn't bomb it into extinction without ending the entire world. In a nuclear attack of massive scale, people would follow the instructions of the government and the military. Even in the absence of direct instructions, the citizens would organize into groups and make the right things happen.

Do you remember the FEMA train wreck during Katrina? Bad, huh. So I have just one question: how many people starved to death in the aftermath of Katrina? I'm betting it was close to zero. Federal agencies are slow and klunky, but individual citizens will fill the gaps until order is fully restored. Americans might be apathetic and greedy lately, but the public is still amazingly level-headed in a crisis.

Brand,

I hope you're right.

Everyone knows when a hurricane is coming, and everyone knows that the hurricane is not set off deliberately by enemies who want to kill us.

Everyone knows that their city won't be next, unless its in the path of the hurricane, that everyone knows about.

In a nationwide event, the federal government will not be able to respond everywhere all at once. As you said, the help will be more local, and people (and governments) will have an awareness of that (on that topic- of people helping each other, - while we were watching the preparation of the hurricane on TV- how many relatively well off whites did you see pack their belongings and pets into SUVs, congesting the roads out of the path of the predictable hurricane? And how many of those SUVs belonging to relatively well off whites did you see where the belongings and pets were forgoed to make room for blacks who didn't have personal transportation?
Why wasn't the cops or deputies or whomever was directing the evacuation for the regional government turning them back, making them offload their stuff or pets to make room for poor blacks who got left behind in New Orleans?)

Do you remember how many cops abandoned their posts? Do you blame them? - they had families, too.

This is what happened in a relatively localized natural event that was predictable, was not caused by a fiendish enemy for maximum effect, and did not decapitate the federal government.

I'm not talking about a rebellion or backlash or rejection of the federal government, which is what you seem to think I'm talking about. I'm talking about, an irrelevancy.

And if that happens, I don't think the military's weapons will help maintain order. But they might be for sale to thugs.

And how is any of that different than the Cold War? We know that we have enemies armed with powerful weapons that cannot be stopped. For the last fifty years that has always been the case. The country got a preview of its enemies on 9/11; if anything, that simply hardened the resolve of your average citizen.

There is no such thing as decapitation of the federal government. It's a myth, the stuff of tin foil hats and cheesy horror movies. This country could be run from NORAD or dozens of other hardened locations, including battleships and hidden bunkers. If fanatic terrorists managed to blast a couple major U.S. cities, I think they would get in a couple weeks of celebration. That's how long it would take for the American citizens to take stock of the damage, call up their military reserves and get a few key infrastructure components working again. The federal government would be damaged, but it would not be ineffective.

As a matter of fact, I think the terrorists would be extremely disappointed at what happened next. When you get nuked, you don't abandon your status as the most powerful country in the world. Your citizens don't rush out, join militias and gangs and then turn on each other, fighting over scraps of food. Your citizens get angry and start a witch hunt for the bad guys, and at that point they're probably willing to accept scapegoats. I expect our nation would be so irrationally angry that our 2002 retaliation in Afghanistan and Iraq would look like kindergarteners with foam bats. We lost 3000 innocent people on September 11th, 2001. Our response was to topple two Islamic countries and inflict 100x that number in casualties. That's our idea of "fair".

If we got nuked, that attack would kill hundreds of thousands, possibly even low millions. There would be no retaliation off the table. The United States of America would probably turn half of the Middle East into a sheet of radioactive glass. The Crusades would seem tame by comparison.

sybrib

I think people overestimate the likelihood of real a-bomb attacks via suitcase/smuggled portable weapons. It could happen, but it's not a very efficient or low-risk path to their goal. There is a tremendous chance they'd get caught in the process...maybe they already have and we don't know it.

The sad thing is I can think of at least three major disruptions that could be caused to this country which wouldn't require much more than small, semi-organized groups of people with readily available everyday tools. I won't describe them here for the futile hope that somehow those who would consider such atrocities haven't thought of them yet. But I will tell you it doesn't require complicated disruptions of power grids, elaborate poisoning of transit systems or water systems. No biological weapons or dirty bombs needed. No aircraft, no trains, no truck bombs. I'm thinking of things many orders of magnitude simpler, impossible to disrupt entirely, and which would profoundly disrupt the daily life we take for granted nearly everywhere in this country.

Those are the things which keep me awake at night. But none of those events I'm fearing would result in the collapse of the US government. Instead, I imagine that Brand's notion of a response would be an underestimation of what the US would do. I know I would be hard pressed to not commit to an overwhelmingly indiscriminate and disproportionate response myself.

They’re not making anymore land.

No one needs more land. There is plenty of vacant land and buildings ...
Just look at the new high rise condos in SF not to mention all the other developments in the city and down south to gilroy.

LOL .. they are converting the SJ Flea market to condos and THs..
not to mention what will they do with Moffet field.>>>

sybrib said:
I think just one of the giant nukes would take out a whole metroplex.

Metro-busting weapons pose serious logistical challenges for delivery - ICBM or long-range bomber.

Al-qaeda has to rely on smaller, low-yield weapons - possibly purchased from ex-soviet stock, if reports (Lebed) of those are true. Even so, it would have to be at least 10 years old - and these things are sensitive mo-fo's, so the lack of maintenance would have degraded their reliability over time. And a device of 25 kg would yield about 20 tons of explosive force. The very best case (sophisticated core design, linear implosion, beryllium reflectors, etc.) would get you into the kiloton range, but this requires serious technology and adds weight.

The point is that a suitcase bomb of the kind available on the black-market to AlQ would flatten a few blocks, and cause nasty radiation (~500rems) in a 1km radius, but aside from the psychological hit I doubt it would have any kind of revolutionary impact on US governance. It would certainly trigger a huge blowback against the perpetrator/scapegoat, but that is not what you were worrying about.

Smuggling such a beast is not an easy task. And they cannot smuggle pieces and assemble it on the spot. The weapon by its very nature is susceptible to detection by radiation scanners. So, let us not get carried away too much by our imaginations.

SP

I don't think AlQ have the ability to do much with nukes, hence their very low-tech methods. Assuming it wasn't a false flag operation or that they weren't assisted by insiders without knowledge of the source of assistance.

You have to ask why they're so p*ssed off all the time, given 100 years of political interference in their own region, pretty much since industrialisation and the invention of the internal combustion engine. The West invading, instating puppet govts and selecting pliant leaders just leads to a cycle of overthrow and instatement of more and more radical alternative governments.

According to Gore Vidal, the US was well advanced in its plans to invade Afghanistan in October 2001 anyhow, after talks between Unocal and the Taliban broke down, thus denying a pipeline through Afghanistan and Pakistan to the Gulf and away. Join the dots, follow the trail of money, look at PNAC pronouncements of hegemony and 'global supremacy' and the Republican demands of the Clinton govt to invade Iraq going all the way back into the 1990s, etc etc to see why you might invade the wrong countries on a pretext. The propaganda onslaught, conflation of naming guilty parties and obfuscation of motives in itself should be enough to tell you something. The Oz Defence Minister recently said it was all about oil, and how regional stability was important in oil-producing countries, only to get promptly choked by the PM and a govt denial that it was ever about oil the same day.

Gold

Gold is a very good conductor of electricity. Gold's great virtues of malleability, ductility, reflectivity, resistance to corrosion and unparalleled ability as a thermal and electrical conductor mean it is used in a wide variety of industrial applications consuming close to 300 tonnes annually.

The prime use is in electronics. High technology finds it indispensable in everything from pocket calculators to computers, washing machines to television and missiles to spacecraft. The rocket engines of American space shuttles are lined with gold-brazing alloys to reflect heat, and the lunar modules of the Apollo programme that put men on the moon were shrouded with gold foil acting as a radiation shield. More commonly, the humble touch telephone in your home typically contains 33 gold-plated contacts. The production of plating salts accounts for 70% of the more than 150 tonnes of gold used annually in electronics.

Gold's malleability and resistance to corrosion render it eminently suitable for dental use, although its softness means that it must be alloyed to retard wear. The most common companion metals are platinum, silver and copper.

Gold's ability to reflect heat in summer and help retain it in winter has also led to the use of glass coated with a thin film of gold in several modern buildings, especially in North America; one ounce of gold covers typically one thousand square feet of glass. This reflective glass can cut cooling and heating costs by 40%.

World Gold Council - Industrial Uses of Gold

Silver

Demand for silver is built on three main pillars; industrial and decorative uses, photography and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2006, 430.3 million ounces of silver were used for industrial applications, while over 145.8 million ounces of silver were committed to the photographic sector, 165.8 million ounces were consumed in the jewelry market, and 59.1 million ounces were consumed in the silverware market.

Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges. Silver’s unique properties restrict its substitution in most applications.

Batteries | Bearings | Brazing and Soldering | Catalysts | Coins | Electrical | Electronics | Electroplating | Photography | Medical Applications | Jewelry and Silverware | Mirrors and Coatings | Solar Energy | Water Purification

The Silver Institute - Industrial Uses of Silver

Randy and Brand,

I hope you guys are right.

And, I agree with you about the response to other countries (wouldn't help with the suffering here, though).

You folks are discussing Al Queda. Well Al Greenspan can do more damage:

AP
NABE: Bad Credit Biggest Risk to Economy
Monday August 27, 7:54 am ET
By Dan Seymour, AP Business Writer
Bad Credit Tops Terrorism As Biggest Immediate Risk to Economy, Group Reports

http://biz.yahoo.com/ap/070827/nabe_bad_credit.html?.v=3

NEW YORK (AP) -- Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.

NABE, a Washington-based association, said 32 percent of its surveyed members cited loan defaults and excessive debt as their biggest near-term concern.

Only 20 percent of members cited defense and terrorism as their biggest immediate worry, down from 35 percent when the survey was last conducted in March. Credit risk also topped gas prices, inflation and government spending.

"Financial market turmoil has shifted the focus away from terrorism and toward subprime and other credit problems as the most important near-term threats to the U.S. economy," said Carl Tannenbaum, president of NABE and the chief economist at LaSalle Bank/ABN Amro.

===========

Please remember that Al Greenspan advised consumers to take ARM ...

http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm

Posted 2/23/2004 11:39 AM Updated 2/24/2004 2:13 AM

Greenspan says ARMs might be better deal

By Sue Kirchhoff and Barbara Hagenbaugh, USA TODAY

WASHINGTON — Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.
In a standing-room-only speech to the Credit Union National Association meeting here, Greenspan also said U.S. household finances appeared generally sound, despite rising debt levels and bankruptcy filings. Low interest rates and surging home prices have given consumers flexibility to manage debt, he said.

I received this email notification from New York FED today morning:

Temporary OMO: Fed adds $9.50 billion with 10 day RP

Can sombody take my comment out of moderation, please?

Euro Bulls Bloodied, Unbowed as Subprime Lifts Dollar (Update5)

http://www.bloomberg.com/apps/news?pid=20601087&sid=ap7HwAh2wUxY&refer=home

By Aaron Pan and Kim-Mai Cutler

Aug. 27 (Bloomberg) -- The euro, battered by the dollar since reaching a record a month ago, may climb to new highs this year as U.S. central bankers lower the cost of credit and European policy makers signal that interest rates will rise.

Goldman Sachs Group Inc., the world's most profitable investment bank, and Merrill Lynch & Co., the biggest brokerage firm, increased their year-end forecasts for the currency as much as 6 percent last week as concerns about the rout in subprime mortgages abated. Citigroup Inc., the largest U.S. financial services company, says the euro may rise to $1.42 by the end of the year from $1.3675 on Aug. 24.

While the euro tumbled as much as 3.5 percent since rising to $1.3852 on July 24, currency strategists now say faster economic growth in the region will prompt a recovery. The European Central Bank suggested last week that it's preparing to boost borrowing costs, five days after the Federal Reserve reduced the rate it charges banks for loans to keep money markets from seizing up.

The sheep on Long Island have discovered patrick.net

Denial, denial, denial!!!!

Allah, thanks!

Of course it won't affect LI. Do you suppose DH is "dear hubby"?

Allah, thanks!

Of course it won’t affect LI. Do you suppose DH is “dear hubby”?

Yes.

DH = "Dear Husband" or "Dear Hubby"
BIL = "Brother in law"
SIL = ""
FIL = "Father in law"
MIL = ""

Hasnt seemed to affect long island, houses are still selling and people are still buying.

No, just that inventories have almost tripled on Long Island since 1999.
...and there are over 12000 pre-foreclosures on Long Island
...and asking prices are dropping daily on Long Island
...and Jumbo loans over $417k are now requiring 8% interest
but it hasn't affected LI in any way; LI is immune!

If real estate crashed here, it would turn us sheep into lambchops; therefore it cannot happen here! Next topic please!