The Greek Financial Crisis – Which Country Is Next?
It seems to be only a matter of time before all the currencies of the world become worthless. As they say, history repeats itself, and paper currencies have never survived in the past, so what makes you think they will survive today?
In the midst of global upheaval, massive and growing indebtedness, low interest rates and more speculative bubbles on the way, the vulnerability of fiat money grows by the day. And the average person still seems to be unaware of the possible consequences of this.
As governments keep on bailing out the banks, as countries and states have to be bailed out, where will it all end? Whoever thought that governments would support the idea that banks are “too big to fail?” I can understand that in connection with the utilitarian purposes of banks which is to provide a service to people so that they can exchange goods and services more easily. It’s a bit like the utility companies so they say, where we need to have electricity and gas, so the government steps in and bails them out if they get into trouble.
However, what about the speculative ventures of these huge financial institutions? Should taxpayers really have to come in and bail out these so-called financial wizards who have continued to risk their investor’s money in huge speculative deals that have gone bad? This cannot be right, but again, the average person doesn’t have a deep understanding of what is going on and in some ways although we haven’t got a physical war in most western countries, there is a war going on against us which is about robbing us blind through inflation, which reduces our purchasing power, through luring us into more debt through low interest rates, through tempting people who rely on interest on their savings into more speculative investments…it goes on and on and whilst the sheeple are still asleep and listening to mainstream media to idiotic statements like “the jobless recovery” and believing that we are coming out of a recession, nothing much will change and millions of people will lose huge amounts of their wealth overnight.
It’s happening folks. I was a bit too young to see what went on in my own family. My father took out an insurance policy in the 1950’s which would pay out $2000 25 years later. This was enough money to buy a house outright. He paid in faithfully year after year, but he wasn’t savvy enough to see that there was high inflation on the horizon, and he continued to pay into his policy. When it came to maturity, that $2000 wouldn’t even give him a 10% down payment on a property. All his wealth had been eroded. He never really recovered.
And we have a similar situation today. We are on the verge of economic breakdown, the powers that be are frantically trying to hold everything together, but sooner or later, as we all know, there are consequences for our actions.
This is going to get much much worse. Try to prepare for it.
I have written a book “handbook for surviving the global financial crisis” – just a pocketbook sized publication to give you tips so you can not only survive but thrive in the coming changes.
Remember, get out of debt, don’t do anything speculative unless you really know what you are doing, get some physical gold and silver if you haven’t already done so, and store some supplies of food and water in case of an emergency.
It’s advisable to take action sooner rather than later – once a panic starts it will be much more difficult to get supplies. Prepare for the worst and hope for the best.
Sunday, March 14, 2010
Saturday, March 6, 2010
Understanding your finances
So much is written about our money, our economy, markets, productivity, wages, salaries, bankers, bonuses, riches and poverty – how do we wade through this quagmire of data to find the nuggets of information that can transform and help us in our everyday lives?
Who is right? Is anyone right?
In the midst of online arguments between such “greats” as Robert Kiyosaki of “Rich Dad, Poor Dad” and Suze Orman, a financial coach and author – criticizing one another’s approaches to money and finance; in the midst of countries like Iceland, Ireland and Greece being bankrupt to whole states in the US such as California and Michigan being on the verge of bankruptcy – what can you as the average person do?
Here are some simple rules of thumb which can help guide you through:
1. Don’t believe all you see and hear in the media. Most everyone has an agenda and you must analyse carefully the information they are giving. For example, recently, George Soros publicly announced that gold was in a bubble and was likely to fall in price soon. The minute he did this, the price of gold did fall and he was reported to have purchased a huge amount of gold at the cheaper price.
2. With any books you read, remember that no one person has all the answers, and what they are writing about – whilst it may appeal to the majority – may not be applicable or relevant to your personal situation.
3. Most of us don’t like change, but in the current economic climate, we need to be ready to turn on a dime. Governments around the world are bringing in new laws every week, laws are changing on taxes, employment…you need to stay abreast of these changes in order to be one step ahead of possible disaster.
4. Be conservative. Make sure you have planned for the worst. Ensure you have at least six months living expenses in cash, six months food and water stored up and some physical gold and silver. Pay off all your debts and only if you have some money left over after all this preparation, should you consider investing in more risky ventures such as stock markets or property. I have so many clients who want to be full time traders on the stock market. They seem to see it as a quick way to get rich. I see too many people losing more than they can afford and they unnecessarily put their families and homes in jeopardy. Best to play it safe. Life moves in cycles – as long as you are in tune with the cycle, then you can benefit from the changes. If you go against that trend, then you may end up in severe financial difficulties.
Who is right? Is anyone right?
In the midst of online arguments between such “greats” as Robert Kiyosaki of “Rich Dad, Poor Dad” and Suze Orman, a financial coach and author – criticizing one another’s approaches to money and finance; in the midst of countries like Iceland, Ireland and Greece being bankrupt to whole states in the US such as California and Michigan being on the verge of bankruptcy – what can you as the average person do?
Here are some simple rules of thumb which can help guide you through:
1. Don’t believe all you see and hear in the media. Most everyone has an agenda and you must analyse carefully the information they are giving. For example, recently, George Soros publicly announced that gold was in a bubble and was likely to fall in price soon. The minute he did this, the price of gold did fall and he was reported to have purchased a huge amount of gold at the cheaper price.
2. With any books you read, remember that no one person has all the answers, and what they are writing about – whilst it may appeal to the majority – may not be applicable or relevant to your personal situation.
3. Most of us don’t like change, but in the current economic climate, we need to be ready to turn on a dime. Governments around the world are bringing in new laws every week, laws are changing on taxes, employment…you need to stay abreast of these changes in order to be one step ahead of possible disaster.
4. Be conservative. Make sure you have planned for the worst. Ensure you have at least six months living expenses in cash, six months food and water stored up and some physical gold and silver. Pay off all your debts and only if you have some money left over after all this preparation, should you consider investing in more risky ventures such as stock markets or property. I have so many clients who want to be full time traders on the stock market. They seem to see it as a quick way to get rich. I see too many people losing more than they can afford and they unnecessarily put their families and homes in jeopardy. Best to play it safe. Life moves in cycles – as long as you are in tune with the cycle, then you can benefit from the changes. If you go against that trend, then you may end up in severe financial difficulties.
Tuesday, March 2, 2010
Economic Recovery or Economic Collapse?
The media would have us believe that we are just about to come out of recession and very soon we will be on the road to recovery. Yet, I speak to more and more people who are feeling very uneasy about the situation in their respective countries. From the US, to Europe, to Hong Kong, to China, India and Japan, to Russia, Australia and New Zealand, people all over the world are feeling the pinch and cannot bring themselves to trust their politicians and their bankers.
So what is the situation? Of course, there are extremes of opinion on both sides. From Gerald Celente who spoke of the Panic of 2008, the Collapse of 2009 and the Total Breakdown of 2010 to governments around the world who are talking up the economy and the end of the housing collapse and the bright future ahead of us. While at the same time, these governments are cutting costs as never before, we have states like California, Michigan and others that are bankrupt and having to issue IOU’s to their employees; in the UK the cost-cutting measures to public services are the most drastic for decades. The US promised to kerb their deficits, yet within a few months the deficit has gone from 9 trillion dollars to over 13 trillion.
So isn’t the writing on the wall? Shouldn’t we be taking notice and starting to prepare for a possible total breakdown of world economy and trade?
In my opinion, there is much worse to come and it is best to be prepared physically, emotionally and mentally. Even if things turn out to be much better than I outline here, then your preparations will not have been in vain – you will just have a store of goods that you can use at your leisure and you will probably have bought them at greatly reduced prices.
Here are my top tips:
- get yourself out of paper currencies. That means if you have all your money in a bank, make sure that you put some of it into gold and silver. That doesn’t mean paper gold and silver as in stocks and shares – it means the actual coins and bars.
- start storing up paper goods, toiletries, canned foods, dehydrated foods, water
- make sure you have at least one other form of heating and lighting that doesn’t depend on electricity
- get a wind-up radio. With the increased threats of tsunamis, earthquakes and tornadoes it is wise to have a radio that you can take with you so that if you have to evacuate your home, you can keep up to date with current events
- connect with people in your community and start to grow your own food and become as self-sufficient as you possibly can
Hold onto your hats because the economy is likely to tumble severely towards the fall of 2010. We haven’t seen the half of it yet. I wish you and your loved ones the best of luck. Take care.
So what is the situation? Of course, there are extremes of opinion on both sides. From Gerald Celente who spoke of the Panic of 2008, the Collapse of 2009 and the Total Breakdown of 2010 to governments around the world who are talking up the economy and the end of the housing collapse and the bright future ahead of us. While at the same time, these governments are cutting costs as never before, we have states like California, Michigan and others that are bankrupt and having to issue IOU’s to their employees; in the UK the cost-cutting measures to public services are the most drastic for decades. The US promised to kerb their deficits, yet within a few months the deficit has gone from 9 trillion dollars to over 13 trillion.
So isn’t the writing on the wall? Shouldn’t we be taking notice and starting to prepare for a possible total breakdown of world economy and trade?
In my opinion, there is much worse to come and it is best to be prepared physically, emotionally and mentally. Even if things turn out to be much better than I outline here, then your preparations will not have been in vain – you will just have a store of goods that you can use at your leisure and you will probably have bought them at greatly reduced prices.
Here are my top tips:
- get yourself out of paper currencies. That means if you have all your money in a bank, make sure that you put some of it into gold and silver. That doesn’t mean paper gold and silver as in stocks and shares – it means the actual coins and bars.
- start storing up paper goods, toiletries, canned foods, dehydrated foods, water
- make sure you have at least one other form of heating and lighting that doesn’t depend on electricity
- get a wind-up radio. With the increased threats of tsunamis, earthquakes and tornadoes it is wise to have a radio that you can take with you so that if you have to evacuate your home, you can keep up to date with current events
- connect with people in your community and start to grow your own food and become as self-sufficient as you possibly can
Hold onto your hats because the economy is likely to tumble severely towards the fall of 2010. We haven’t seen the half of it yet. I wish you and your loved ones the best of luck. Take care.
Friday, February 12, 2010
Silver - how and when to buy it? Will it go up in value?
Look in your change purse, do you see any gold coins? Chances are, the answer is no. Now look in your change purse and see if there are any silver coins. Chances are, you have lots of them. And that may be the difference between why gold looks more valuable than silver. Of course there are deeper issues why gold is more valuable than silver, but just on the surface, how frequently do we run across gold coins as opposed to how frequently we run across silver coins, silver looks almost inconsequential. But are we giving silver enough credit for being a valuable element? In our everyday life do we think about the innumerable uses for silver? When we look at the electronics in our homes, do we ever stop to think that silver is used in our laptops, our pc’s our cellphones, our stereo equipment, our medical devices, our mirrors, our silverware, our cameras and photographic equipment, for solar energy, water purification… chances are we don’t give this a thought. For utilitarian purposes, silver should be far more valuable than gold. The reality, however, is just the opposite. Historically, silver has been one twelfth the value of gold. In China, during the Ming Dynasty, silver rose to a quarter of the value of gold, and during Egyptian times, gold and silver were of equal value. In January 1979, gold was at $210.00 an ounce, while silver was at $5.90 an ounce. This meant that gold was 35 times the value of silver i.e. it took 35 silver coins to buy one gold coin.
In January 1980 both gold and silver peaked. Gold went to $850.00 an ounce while silver rose to over $50.00 an ounce. So by the beginning of 1980, it only took 17 ounces of silver to buy one ounce of gold.
Today, however, in February 2010, gold is at $1089 an ounce while silver is just over $15.00 an ounce – so it takes over 70 silver coins to buy just one ounce of gold.
Most silver supplies do not come from silver mining operations. Silver is generally a by-product of mining for gold, lead, zinc and copper. Silver producers actually only produce about 25% of the total silver production, so if you could freeze the demand for silver where it is today, and the silver producers were able to double their production capacity, it would take at least fifteen or twenty years to get the silver stocks back to the levels they were at in 1990.
When you look in your change purse and you see a lot of silver coins, you say to yourself, there’s a tremendous amount of silver in the world. And that’s why silver is so cheap. However, the reverse is true. It’s almost like an optical illusion where we think silver is so plentiful, but the reality is that silver is very scarce. In the United States until 1964, quarters and dimes were made of 90% silver. Starting with 1964, those same silver coins are now being made of copper, zinc and tin.
As of this writing, silver is being very seriously undervalued and the small investor can get in very very cheaply between and $15 and $19 an ounce before commission. But don’t expect silver to stay at these low prices. Due to the scarcity of this metal, it will probably soar in value in the not too distant future. And the investor can use it either as a hedge against the failing economy or to get a remarkable return on his investment.
So in what quantities should you buy your silver? The small investor would do better buying the one ounce silver coins rather than the 10 ounce or 100 ounce silver bars. If paper money becomes worthless and banks fail, the small investor has more of a chance of purchasing household necessities with one ounce silver coins than with 10 ounce or 100 ounce bars of silver.
The thing to watch out for with many of the dealers is their shipping times. If someone has a very long shipping time, be very careful. Coin dealers have been known to go bankrupt as they take risks. If they are sending you the coins by mail, make sure you tell the coin dealer to insure them and have you sign for the package. If possible, take out cash from your bank, go to your coin dealer, pick up the coins and have them in your hot little hand. If not, try to find someone who is reputable, ask around. There are websites that you can buy silver from – but you can never be sure, because the only way to have it is in your possession.
However, if you are buying silver over the internet, don’t buy everything from one dealer if you can help it. In smaller countries there are only a few dealers so your choice may be limited, but somewhere like the US, there are many dealers so you will have a choice. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. From generation to generation, to century to century, from civilisation to civilisation, to all parts of the world, to every culture, to all of humankind, gold and silver have been and always will be a negotiable commodity and a store of value.
The issue with silver is storage because it is bulky and heavy. Security may be an issue so think in terms of where you could hide that amount of coins. On a humorous note, there was an ad for a wooden box marked coins. In hard times, just visualise someone coming into your house, seeing the box marked coins and just walking off with it. If you’re going to store gold and silver coins, try to be a whole lot less obvious.
Financial advisor, Michael Maloney, says in his book “Guide to Investing in Gold and Silver”
“For 5000 years, gold and silver have been the only assets that have never failed. Because they are tangible assets of inherent value their purchasing power will never fall to zero. They are financial assets that can be completely private and not part of the financial system. Although you have to declare any capital gains on your tax return in many countries, it is still a private investment. Real estate, on the other hand requires the financial system to transfer title. Gold and silver do not.”
Financial advisors seldom advise their clients to buy gold and silver because they don’t make any commission as they do with stocks, mutual funds, unit trusts and pensions. For the small investor, this is a blessing. He gets to eliminate the middleman. At this writing, there isn’t a long way that silver can fall and the logical assumption is that it can only go up. If ever there was a need to protect yourself against a failing economy, the time is now. And if ever there was an optimum time to buy silver, that time is now.
In January 1980 both gold and silver peaked. Gold went to $850.00 an ounce while silver rose to over $50.00 an ounce. So by the beginning of 1980, it only took 17 ounces of silver to buy one ounce of gold.
Today, however, in February 2010, gold is at $1089 an ounce while silver is just over $15.00 an ounce – so it takes over 70 silver coins to buy just one ounce of gold.
Most silver supplies do not come from silver mining operations. Silver is generally a by-product of mining for gold, lead, zinc and copper. Silver producers actually only produce about 25% of the total silver production, so if you could freeze the demand for silver where it is today, and the silver producers were able to double their production capacity, it would take at least fifteen or twenty years to get the silver stocks back to the levels they were at in 1990.
When you look in your change purse and you see a lot of silver coins, you say to yourself, there’s a tremendous amount of silver in the world. And that’s why silver is so cheap. However, the reverse is true. It’s almost like an optical illusion where we think silver is so plentiful, but the reality is that silver is very scarce. In the United States until 1964, quarters and dimes were made of 90% silver. Starting with 1964, those same silver coins are now being made of copper, zinc and tin.
As of this writing, silver is being very seriously undervalued and the small investor can get in very very cheaply between and $15 and $19 an ounce before commission. But don’t expect silver to stay at these low prices. Due to the scarcity of this metal, it will probably soar in value in the not too distant future. And the investor can use it either as a hedge against the failing economy or to get a remarkable return on his investment.
So in what quantities should you buy your silver? The small investor would do better buying the one ounce silver coins rather than the 10 ounce or 100 ounce silver bars. If paper money becomes worthless and banks fail, the small investor has more of a chance of purchasing household necessities with one ounce silver coins than with 10 ounce or 100 ounce bars of silver.
The thing to watch out for with many of the dealers is their shipping times. If someone has a very long shipping time, be very careful. Coin dealers have been known to go bankrupt as they take risks. If they are sending you the coins by mail, make sure you tell the coin dealer to insure them and have you sign for the package. If possible, take out cash from your bank, go to your coin dealer, pick up the coins and have them in your hot little hand. If not, try to find someone who is reputable, ask around. There are websites that you can buy silver from – but you can never be sure, because the only way to have it is in your possession.
However, if you are buying silver over the internet, don’t buy everything from one dealer if you can help it. In smaller countries there are only a few dealers so your choice may be limited, but somewhere like the US, there are many dealers so you will have a choice. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. From generation to generation, to century to century, from civilisation to civilisation, to all parts of the world, to every culture, to all of humankind, gold and silver have been and always will be a negotiable commodity and a store of value.
The issue with silver is storage because it is bulky and heavy. Security may be an issue so think in terms of where you could hide that amount of coins. On a humorous note, there was an ad for a wooden box marked coins. In hard times, just visualise someone coming into your house, seeing the box marked coins and just walking off with it. If you’re going to store gold and silver coins, try to be a whole lot less obvious.
Financial advisor, Michael Maloney, says in his book “Guide to Investing in Gold and Silver”
“For 5000 years, gold and silver have been the only assets that have never failed. Because they are tangible assets of inherent value their purchasing power will never fall to zero. They are financial assets that can be completely private and not part of the financial system. Although you have to declare any capital gains on your tax return in many countries, it is still a private investment. Real estate, on the other hand requires the financial system to transfer title. Gold and silver do not.”
Financial advisors seldom advise their clients to buy gold and silver because they don’t make any commission as they do with stocks, mutual funds, unit trusts and pensions. For the small investor, this is a blessing. He gets to eliminate the middleman. At this writing, there isn’t a long way that silver can fall and the logical assumption is that it can only go up. If ever there was a need to protect yourself against a failing economy, the time is now. And if ever there was an optimum time to buy silver, that time is now.
Saturday, February 6, 2010
Gold Bullion and Numismatic Coins - How Should You Own Gold?
Today's blog will examine numismatic coins otherwise known as collectibles and the issue of how collectible is a collectible coin. The word numismatic is derived from the Greek numisma, meaning “current coin.” We are also going to be looking at the premiums that are connected with these coins. We’ll explore the issue of under what conditions gold coins could be confiscated, whether it’s too late to buy gold now and what are the warning signs to tell us when it’s time to sell our gold?
Under ordinary circumstances, I probably wouldn’t be devoting much time to the subject of numismatic coins, because it’s a very small part of gold collecting. But the main reason that I want to broach this subject is because thousands of people in various parts of the world have bought or inherited collectible coins.
This was brought home to bear when I was talking to one of my friends about the advantages of buying gold and she told me she had a very large collection of gold coins that go way back into the early 1800’s. They have been handed down from generation to generation in her family – and I said to her, are you going to be selling it? And she said – oh no – I’m going to be leaving it for my grandchildren. This was a very interesting concept to me because in the United States, gold bullion was confiscated from 1933 to 1971. These laws had no relevance in her life because she had no intention of selling her gold. If we wanted to do simple maths, based on what was paid for the gold in the early 1800’s to what it’s worth today, should she have decided to sell the gold now, she would be a millionaire many times over.
The downside of this is if my friend tried to sell these coins when there is a danger of imminent economic collapse, and many of these collections come on the market at the same time, she may be unable to sell them. But since she has no intention of selling them, this doesn’t apply to her. On the other hand, there are thousands of collectors throughout the world, who have in their collections coins that are not attached to sentimentality, and those collectors need to be aware that in a serious economic downturn, when people have to raise money very quickly, you may have hundreds of these collections on the market at the same time – and at this point, you might find they are not a very good investment, as you cannot sell them or you might have to sell them at a huge loss. There is a limited market for rare coins. …there is a saying that goes something like this: “The only thing rarer than a rare coin. ….is a buyer for a rare coin.”
With numismatic coins, you are paying many times the silver or gold content. You are paying for the rarity and for how much someone else covets that particular coin. So if you want to sell, you need to find the exact buyer for that coin, whereas with the bullion market which is worldwide and tradeable, you will always have buyers for your physical gold.
Let’s look at some of the reasons why numismatic coins may not be your best investment. While with gold bullion, you are just paying for the content of the metal and the dealer’s premium. With numismatic coins you are paying not only for the metal and the dealer’s profit, but on top of that you are also paying a numismatic premium, which is for the supposed rarity of the coin. Then you better keep your fingers crossed that that coin is really rare and will keep its value through the years.
If you have invested in gold bullion and the price rises by 5-10%, you are already close to being in profit. On the other hand, if you have invested in numismatic coins, the dealer has already charged you 15-100% on your purchase and the price needs to have gone up by at least 15-100% for you just to break even, which may be why, I read a quote that went something like this:
In numismatics, lots of money is made selling rare coins to noncollectors, and whenever a noncollector buys a collector’s items, the future loss of his capital is almost certainly guaranteed.”
There are many theories on investments. I’m going to take poetic license with one of Warren Buffett’s theories. He once said in reference to the stock market: “Put all your eggs in one basket and then watch that basket very carefully.” I took poetic license and decided that his theory works beautifully with the investment of gold. I would recommend putting all my gold in one basket, primarily because I wouldn’t have to watch it on a daily basis as carefully as you would the stock market. You can see more or less the gold trends before you actually have to make a decision, whereas with the stock market you really have to be paying attention each day. I’d recommend setting up an action plan that you can live with and then stick to it. If your action plan is to put most of your money into gold, stay with that plan. If your action plan is to diversify, then research carefully the areas in which you want to diversify and then stick to that plan. But whatever you decide to do, have a clear objective in mind and stick with it.
To summarise:
Numismatic coins
- limited market
- can be difficult to sell and make a profit
- attract high premiums from dealers from 15-100% or more
- you need to know what you are doing
Gold bullion
- worldwide market
- easy to buy and sell
- price only needs to rise by 5-10% and you are nearly in profit
Under ordinary circumstances, I probably wouldn’t be devoting much time to the subject of numismatic coins, because it’s a very small part of gold collecting. But the main reason that I want to broach this subject is because thousands of people in various parts of the world have bought or inherited collectible coins.
This was brought home to bear when I was talking to one of my friends about the advantages of buying gold and she told me she had a very large collection of gold coins that go way back into the early 1800’s. They have been handed down from generation to generation in her family – and I said to her, are you going to be selling it? And she said – oh no – I’m going to be leaving it for my grandchildren. This was a very interesting concept to me because in the United States, gold bullion was confiscated from 1933 to 1971. These laws had no relevance in her life because she had no intention of selling her gold. If we wanted to do simple maths, based on what was paid for the gold in the early 1800’s to what it’s worth today, should she have decided to sell the gold now, she would be a millionaire many times over.
The downside of this is if my friend tried to sell these coins when there is a danger of imminent economic collapse, and many of these collections come on the market at the same time, she may be unable to sell them. But since she has no intention of selling them, this doesn’t apply to her. On the other hand, there are thousands of collectors throughout the world, who have in their collections coins that are not attached to sentimentality, and those collectors need to be aware that in a serious economic downturn, when people have to raise money very quickly, you may have hundreds of these collections on the market at the same time – and at this point, you might find they are not a very good investment, as you cannot sell them or you might have to sell them at a huge loss. There is a limited market for rare coins. …there is a saying that goes something like this: “The only thing rarer than a rare coin. ….is a buyer for a rare coin.”
With numismatic coins, you are paying many times the silver or gold content. You are paying for the rarity and for how much someone else covets that particular coin. So if you want to sell, you need to find the exact buyer for that coin, whereas with the bullion market which is worldwide and tradeable, you will always have buyers for your physical gold.
Let’s look at some of the reasons why numismatic coins may not be your best investment. While with gold bullion, you are just paying for the content of the metal and the dealer’s premium. With numismatic coins you are paying not only for the metal and the dealer’s profit, but on top of that you are also paying a numismatic premium, which is for the supposed rarity of the coin. Then you better keep your fingers crossed that that coin is really rare and will keep its value through the years.
If you have invested in gold bullion and the price rises by 5-10%, you are already close to being in profit. On the other hand, if you have invested in numismatic coins, the dealer has already charged you 15-100% on your purchase and the price needs to have gone up by at least 15-100% for you just to break even, which may be why, I read a quote that went something like this:
In numismatics, lots of money is made selling rare coins to noncollectors, and whenever a noncollector buys a collector’s items, the future loss of his capital is almost certainly guaranteed.”
There are many theories on investments. I’m going to take poetic license with one of Warren Buffett’s theories. He once said in reference to the stock market: “Put all your eggs in one basket and then watch that basket very carefully.” I took poetic license and decided that his theory works beautifully with the investment of gold. I would recommend putting all my gold in one basket, primarily because I wouldn’t have to watch it on a daily basis as carefully as you would the stock market. You can see more or less the gold trends before you actually have to make a decision, whereas with the stock market you really have to be paying attention each day. I’d recommend setting up an action plan that you can live with and then stick to it. If your action plan is to put most of your money into gold, stay with that plan. If your action plan is to diversify, then research carefully the areas in which you want to diversify and then stick to that plan. But whatever you decide to do, have a clear objective in mind and stick with it.
To summarise:
Numismatic coins
- limited market
- can be difficult to sell and make a profit
- attract high premiums from dealers from 15-100% or more
- you need to know what you are doing
Gold bullion
- worldwide market
- easy to buy and sell
- price only needs to rise by 5-10% and you are nearly in profit
Wednesday, February 3, 2010
Gold - is it too late to buy?
Today we’re going to be talking about the ABC’s of gold – how to buy it, how to sell it, the advantages, the disadvantages and why it is important to consider it as part of your portfolio.
From the earliest days of recorded history, what is that makes gold the most valuable commodity in the world?
According to Dr. Claude Mariottini, Professor of Old Testament in Illinois, in the US,
“It is a fact that in times of economic uncertainties, many people invest in gold as a way of dealing with the unforeseen problems caused by inflation or recession.
It is also a fact that in the ancient past kings and conquerors were fascinated with gold, not only as currency or as a means of commerce and trade, but for the beauty and splendor it conveyed to its owners.” One of the theories that he mentions is that in King Nebuchadnezzar’s time an ounce of gold was worth 350 loaves of bread and depending on the unit of measurement that was used at that time, and the unit of measurement that we use today, that same ounce of gold might still be worth 350 loaves of bread. If we use the current price of gold against the current price of a loaf of bread – so for example an ounce of gold at the time of this writing is $1100 an ounce and the price of bread is just over $3.00 a loaf, thus showing that the purchasing power of gold has not diminished since biblical times.
It’s astounding that in more than 2000 years, gold is still being used for the same things today as it was then – as a hedge against inflation, for commerce, beauty currency and insurance against the possibility of total economic collapse.
In the East, people are used to owning gold. In the West, governments and corporations own gold. In China for example, gold is sold nationally by the banks, in the West, however, you cannot just go into any bank and buy gold. It is sold and bought by bullion dealers and mints.
We know that major changes are taking place if a department store like Harrods in the UK is now selling gold coins and bars to the public.
So, should you own gold, how do you buy gold, what are the advantages what are the disadvantages?
The advantages
Coins and small bars are generally a liquid market, and you can find sellers and buyers when you need them. Easy to cash in.
They are relatively accessible to smaller investors
Insurance against collapse of economy
In volatile times it has always proved to be a safe haven
You are in control of your money and are not subject to a bank going bust or having to freeze your assets, the government being unable to guarantee your funds and thus lose all your money.
You have got cash if a good opportunity arises – you can move quickly
It is tradeable around the world
They are mostly recognisable, which makes them exchangeable for goods in some circumstances.
Just recently, I saw an advert on the internet for a landlord who wanted to rent out his house. He didn’t state the dollar amount, what he asked instead was for a certain number of gold coins as payment. If you will comb through the adverts on the internet, you might be surprised to see many of these adverts are now offering goods in exchange for gold coins. So as the expression goes, “these times are a-changing.”
Disadvantages of having gold
Hard to store safely
It may stay at the same price for years and years
Governments manipulate the price
If gold becomes really valuable gold coin usage is made illegal by governments, or is so heavily taxed and constrained that it is no longer a viable option. For example, the government may tax the sale of gold bullion at 50%. Bullion on a black market would be just as hard to sell without getting cheated. What you are unable to sell, you don’t really own.
(in April 1933, FDR forced US citizens to turn in their gold – it was under a threat of a 10 year prison sentence and/or a $10000 fine. Then in January 1934 just 9 months later he raised the price from $20.67 per ounce to $35.00 per ounce – an increase of 69%).
There can be a considerable premium to purchase the gold – anywhere from 4-10% or even more in times of scarcity – so you have to build this into your costs.
There are fakes and these are usually only spotted by dealers
Currency fluctuations can affect the price in your country
To summarise:
Advantages of owning gold
- easy to sell and buy
- accessible to small investors
- insurance against collapse of economy
- you have control over your money
- tradeable around the world not only for cash, but also for goods and services
Disadvantages of owning gold
- hard to store safely
- may be confiscated or taxed by governments
- premium of at least 4% to pay to the bullion dealer when you buy
- there are fakes out there so buy from a reputable dealer
When it comes to buying gold, the average person doesn’t really know how to get started. There are a number of gold bullion coins in circulation in the world. The attraction of these is that they retain near full bullion value regardless of either change of government or being transported outside their country of issue.
So the starting point would be to know which gold coins are sold in your country.
Major bullion coins:
Issuing country Coin
Australia Nugget
Canada Maple
New Zealand Kiwi
South Africa Krugerrand
United Kingdom Britannia or Sovereign
United States Eagle
For simplicity’s sake, let’s look at the country in which you are living. For the moment, forget about buying coins from other countries. Let’s just concentrate on what will be the easiest way for you to start your collection. If you know someone who routinely buys gold and silver and has a reputable dealer, that would be your starting place. If not, I would strongly suggest that you start researching the dealers in your area and do some comparison shopping. Find out how long they have been in business, find out if they have ever gone bankrupt, if they have ever had any lawsuits against them, if they follow through on what they say. Find out how much of a premium they charge you for purchasing your gold. Most dealers charge you a premium up front when you buy the gold, but do not charge you at the other end when you sell it back to them. But since things have a way of changing rapidly, you should still question whether or not you are being charged at the other end too.
Other ways of buying gold: gold mining shares – too risky as the quantity of a mine’s reserves is never accurately known. There can be unforeseen engineering problems in extracting ore. These can increase production costs and thus eat into the mine’s profitability.
The mine can be all played out and there is no more gold there
They are traded on the stock market and can just as easily disappear off the boards and you can lose all your money.
Egold
Now, let’s take a look at buying gold over the internet – or otherwise known as E-gold. There are various companies who offer online purchasing and selling of gold bullion.
What are the advantages and disadvantages of this method of investing in gold?
Advantages
You can buy very small quantities of gold at relatively economic price– you do not have to buy in ounces, but you can purchase grams of gold which at the time of writing is $35.00 per gram.
You can buy and sell your gold 24/7 and are not limited to store opening hours of the bullion dealers.
The premiums charged for purchasing the gold are much lower than bullion dealers or mints. Typically you will pay between 2-3% of the purchase price.
You can either allow them to keep your gold in their depository or, depending on where you live in the world, you can take delivery of your gold. These companies are currently based in the northern hemisphere and they will not deliver gold to the southern hemisphere at present.
You do not have to spend your gold grams. You can sit on them or you can sell them in return for straight cash.
Disadvantages of e-gold account:
There is a degree of intermediation in the holding. Your gold is the legal property of trustees who have a fiduciary duty to you. This means that it is not quite the same as outright ownership of the gold in your hot little hand.
There could be security issues in that a hacker may get into your account and make an unauthorised payment. Similar to the risks of doing internet banking.
Other ways: gold futures, gold backed shares – e.g. ETF’s – too risky for the average investor
Jewellery
It is a profitable business for those who buy at wholesale and sell at retail. But it’s a poor way of investing in gold.
Advantages:
Enjoyment of wearing it
Very easy to buy
Disadvantages
Acquisition costs are high. Retail jewellery is often marked up by 300% or more in the shops
The real value of jewellery is in the gemstones, the design and craftsmanship. These greatly outrank the value of the gold
All pieces are different and their values are subjective. If you don’t have experience you probably won’t know a fair value.
It is easily stolen.
Ways of buying gold:
Bullion dealers and mints
Gold mining shares
Gold shares – ETF’s (Exchange Traded Funds)
Egold
Jewellery
In conclusion, make sure that whoever you buy your gold from is a dealer or a business that has been in operation for a long time, that they have a good reputation and that they are not fly-by-nights.
From the earliest days of recorded history, what is that makes gold the most valuable commodity in the world?
According to Dr. Claude Mariottini, Professor of Old Testament in Illinois, in the US,
“It is a fact that in times of economic uncertainties, many people invest in gold as a way of dealing with the unforeseen problems caused by inflation or recession.
It is also a fact that in the ancient past kings and conquerors were fascinated with gold, not only as currency or as a means of commerce and trade, but for the beauty and splendor it conveyed to its owners.” One of the theories that he mentions is that in King Nebuchadnezzar’s time an ounce of gold was worth 350 loaves of bread and depending on the unit of measurement that was used at that time, and the unit of measurement that we use today, that same ounce of gold might still be worth 350 loaves of bread. If we use the current price of gold against the current price of a loaf of bread – so for example an ounce of gold at the time of this writing is $1100 an ounce and the price of bread is just over $3.00 a loaf, thus showing that the purchasing power of gold has not diminished since biblical times.
It’s astounding that in more than 2000 years, gold is still being used for the same things today as it was then – as a hedge against inflation, for commerce, beauty currency and insurance against the possibility of total economic collapse.
In the East, people are used to owning gold. In the West, governments and corporations own gold. In China for example, gold is sold nationally by the banks, in the West, however, you cannot just go into any bank and buy gold. It is sold and bought by bullion dealers and mints.
We know that major changes are taking place if a department store like Harrods in the UK is now selling gold coins and bars to the public.
So, should you own gold, how do you buy gold, what are the advantages what are the disadvantages?
The advantages
Coins and small bars are generally a liquid market, and you can find sellers and buyers when you need them. Easy to cash in.
They are relatively accessible to smaller investors
Insurance against collapse of economy
In volatile times it has always proved to be a safe haven
You are in control of your money and are not subject to a bank going bust or having to freeze your assets, the government being unable to guarantee your funds and thus lose all your money.
You have got cash if a good opportunity arises – you can move quickly
It is tradeable around the world
They are mostly recognisable, which makes them exchangeable for goods in some circumstances.
Just recently, I saw an advert on the internet for a landlord who wanted to rent out his house. He didn’t state the dollar amount, what he asked instead was for a certain number of gold coins as payment. If you will comb through the adverts on the internet, you might be surprised to see many of these adverts are now offering goods in exchange for gold coins. So as the expression goes, “these times are a-changing.”
Disadvantages of having gold
Hard to store safely
It may stay at the same price for years and years
Governments manipulate the price
If gold becomes really valuable gold coin usage is made illegal by governments, or is so heavily taxed and constrained that it is no longer a viable option. For example, the government may tax the sale of gold bullion at 50%. Bullion on a black market would be just as hard to sell without getting cheated. What you are unable to sell, you don’t really own.
(in April 1933, FDR forced US citizens to turn in their gold – it was under a threat of a 10 year prison sentence and/or a $10000 fine. Then in January 1934 just 9 months later he raised the price from $20.67 per ounce to $35.00 per ounce – an increase of 69%).
There can be a considerable premium to purchase the gold – anywhere from 4-10% or even more in times of scarcity – so you have to build this into your costs.
There are fakes and these are usually only spotted by dealers
Currency fluctuations can affect the price in your country
To summarise:
Advantages of owning gold
- easy to sell and buy
- accessible to small investors
- insurance against collapse of economy
- you have control over your money
- tradeable around the world not only for cash, but also for goods and services
Disadvantages of owning gold
- hard to store safely
- may be confiscated or taxed by governments
- premium of at least 4% to pay to the bullion dealer when you buy
- there are fakes out there so buy from a reputable dealer
When it comes to buying gold, the average person doesn’t really know how to get started. There are a number of gold bullion coins in circulation in the world. The attraction of these is that they retain near full bullion value regardless of either change of government or being transported outside their country of issue.
So the starting point would be to know which gold coins are sold in your country.
Major bullion coins:
Issuing country Coin
Australia Nugget
Canada Maple
New Zealand Kiwi
South Africa Krugerrand
United Kingdom Britannia or Sovereign
United States Eagle
For simplicity’s sake, let’s look at the country in which you are living. For the moment, forget about buying coins from other countries. Let’s just concentrate on what will be the easiest way for you to start your collection. If you know someone who routinely buys gold and silver and has a reputable dealer, that would be your starting place. If not, I would strongly suggest that you start researching the dealers in your area and do some comparison shopping. Find out how long they have been in business, find out if they have ever gone bankrupt, if they have ever had any lawsuits against them, if they follow through on what they say. Find out how much of a premium they charge you for purchasing your gold. Most dealers charge you a premium up front when you buy the gold, but do not charge you at the other end when you sell it back to them. But since things have a way of changing rapidly, you should still question whether or not you are being charged at the other end too.
Other ways of buying gold: gold mining shares – too risky as the quantity of a mine’s reserves is never accurately known. There can be unforeseen engineering problems in extracting ore. These can increase production costs and thus eat into the mine’s profitability.
The mine can be all played out and there is no more gold there
They are traded on the stock market and can just as easily disappear off the boards and you can lose all your money.
Egold
Now, let’s take a look at buying gold over the internet – or otherwise known as E-gold. There are various companies who offer online purchasing and selling of gold bullion.
What are the advantages and disadvantages of this method of investing in gold?
Advantages
You can buy very small quantities of gold at relatively economic price– you do not have to buy in ounces, but you can purchase grams of gold which at the time of writing is $35.00 per gram.
You can buy and sell your gold 24/7 and are not limited to store opening hours of the bullion dealers.
The premiums charged for purchasing the gold are much lower than bullion dealers or mints. Typically you will pay between 2-3% of the purchase price.
You can either allow them to keep your gold in their depository or, depending on where you live in the world, you can take delivery of your gold. These companies are currently based in the northern hemisphere and they will not deliver gold to the southern hemisphere at present.
You do not have to spend your gold grams. You can sit on them or you can sell them in return for straight cash.
Disadvantages of e-gold account:
There is a degree of intermediation in the holding. Your gold is the legal property of trustees who have a fiduciary duty to you. This means that it is not quite the same as outright ownership of the gold in your hot little hand.
There could be security issues in that a hacker may get into your account and make an unauthorised payment. Similar to the risks of doing internet banking.
Other ways: gold futures, gold backed shares – e.g. ETF’s – too risky for the average investor
Jewellery
It is a profitable business for those who buy at wholesale and sell at retail. But it’s a poor way of investing in gold.
Advantages:
Enjoyment of wearing it
Very easy to buy
Disadvantages
Acquisition costs are high. Retail jewellery is often marked up by 300% or more in the shops
The real value of jewellery is in the gemstones, the design and craftsmanship. These greatly outrank the value of the gold
All pieces are different and their values are subjective. If you don’t have experience you probably won’t know a fair value.
It is easily stolen.
Ways of buying gold:
Bullion dealers and mints
Gold mining shares
Gold shares – ETF’s (Exchange Traded Funds)
Egold
Jewellery
In conclusion, make sure that whoever you buy your gold from is a dealer or a business that has been in operation for a long time, that they have a good reputation and that they are not fly-by-nights.
Saturday, January 16, 2010
Savings And Investments - How Can You Protect Yourself?
We are going to see vast fluctuations in the stock markets, in the housing markets, in the automobile industry, in technology, in the banking and financial sectors, in governments, and in international trade and currencies. And 2010 is just the beginning of these major changes. More and more people are starting to question whether their investments are solid and how they can best protect their assets.
For those of you who feel you don’t have assets to protect, you might be very surprised. Most people think of assets that need to be protected as millions or billions of dollars of pounds or euros or yen. The truth of the matter is that however much money you have, be it $100 or $100 trillion, they are your assets. And because they are your assets you need to be looking for ways to hold onto them and hopefully to make them grow.
With so many people being affected by the downturn economy and many having either lost substantial sums of money in financial institutions, banks, stocks and shares, or had their funds frozen, or had to take 60c or less on the dollar, it’s very difficult to know where to put your money and how to keep it safe.
After all, if the banks didn’t know how to look after our money, and they are supposed to be the experts, who can? In the old days, you used to be able to put your money into the bank and you knew it would be safe as houses.
Nowadays, with banks having behaved so irresponsibly – by lending to people who were not creditworthy – some were even on unemployment benefits, by lending them up to 100% or even more of the value of a property, and yet paying themselves millions if not billions of dollars in bonuses. This is one of the main reasons why we are in such a serious global financial crisis.
So what are the various options available to you?
Let’s start with the banks.
What are the advantages and disadvantages of leaving your money in a bank?
The advantages:
You do not have to hold cash on your person or in your home where it might be stolen or destroyed, (e.g. I knew an old man who used to sew his cash into the hem of the curtains in his house. He thought this was safer than having all his money in the bank. Unfortunately, he had a fire and the curtains with all his money inside them went up in smoke. So if you are storing cash, try to put it somewhere it will not be easily discovered or damaged.
You earn at least a little interest on your money. However, with most countries on very low interest rates at the moment, you might be lucky if you earn 2% or more.
By using the bank’s credit card and debit card facilities, you have the flexibility to buy goods online and by telephone from anywhere in the world. You would not have that freedom if you didn’t have a bank account.
There are several disadvantages in this current economic climate:
Governments around the world have stepped in to guarantee bank deposits – this means that should a bank get into trouble and be unable to continue trading, the government will bail it out so that it doesn’t collapse and you don’t lose all your money. This has already happened to so many financial institutions: in the UK, Northern Rock had to be rescued, in the US, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, Indymac, AIG, to name but a few…
However, given the volatility of the world economy, there is no ultimate guarantee that the governments will be able to fulfil their promise to rescue all the banks that might need help. So I would advise you to spread your money around different financial institutions. At least that way, you don’t have all your eggs in one basket. Remember to trust your intuition if you feel that a particular bank is unstable and take your money out immediately.
Quite a few banks are persuading customers to tie up their money for 1 yr, 3yrs or 5 yrs or more in a term account or a cd. This generally pays a little more interest than if the money was immediately available. However, before doing this, calculate exactly how much extra money you will be making and whether it is worth the extra risk. When is your interest paid on the deposit – do you have to wait until the end of the term? Or is it paid on a monthly basis? What happens if interest rates go up and your money is tied in for several years? Will the bank increase the rate or could you be stuck on your original lower rate? Let’s say you go in at 3% and you’ve taken a 5 year term deposit or cd with the bank. It might be worth your while to withdraw your money and take the penalty and then reinvest at the higher interest rate.
To summarise:
Advantages of using a bank:
- you don’t have to risk holding cash
- you earn some interest on your money
- you get debit and/or credit cards which give you flexibility
Disadvantages of using a bank:
- in this downturn economy not all banks are safe
- government guarantees may not be honoured
Tips:
- try not to tie yourself into any deals even if it means you lose a little interest
- trust your intuition – if you don’t feel safe with a particular bank, take your money out sooner rather than later
For those of you who feel you don’t have assets to protect, you might be very surprised. Most people think of assets that need to be protected as millions or billions of dollars of pounds or euros or yen. The truth of the matter is that however much money you have, be it $100 or $100 trillion, they are your assets. And because they are your assets you need to be looking for ways to hold onto them and hopefully to make them grow.
With so many people being affected by the downturn economy and many having either lost substantial sums of money in financial institutions, banks, stocks and shares, or had their funds frozen, or had to take 60c or less on the dollar, it’s very difficult to know where to put your money and how to keep it safe.
After all, if the banks didn’t know how to look after our money, and they are supposed to be the experts, who can? In the old days, you used to be able to put your money into the bank and you knew it would be safe as houses.
Nowadays, with banks having behaved so irresponsibly – by lending to people who were not creditworthy – some were even on unemployment benefits, by lending them up to 100% or even more of the value of a property, and yet paying themselves millions if not billions of dollars in bonuses. This is one of the main reasons why we are in such a serious global financial crisis.
So what are the various options available to you?
Let’s start with the banks.
What are the advantages and disadvantages of leaving your money in a bank?
The advantages:
You do not have to hold cash on your person or in your home where it might be stolen or destroyed, (e.g. I knew an old man who used to sew his cash into the hem of the curtains in his house. He thought this was safer than having all his money in the bank. Unfortunately, he had a fire and the curtains with all his money inside them went up in smoke. So if you are storing cash, try to put it somewhere it will not be easily discovered or damaged.
You earn at least a little interest on your money. However, with most countries on very low interest rates at the moment, you might be lucky if you earn 2% or more.
By using the bank’s credit card and debit card facilities, you have the flexibility to buy goods online and by telephone from anywhere in the world. You would not have that freedom if you didn’t have a bank account.
There are several disadvantages in this current economic climate:
Governments around the world have stepped in to guarantee bank deposits – this means that should a bank get into trouble and be unable to continue trading, the government will bail it out so that it doesn’t collapse and you don’t lose all your money. This has already happened to so many financial institutions: in the UK, Northern Rock had to be rescued, in the US, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, Indymac, AIG, to name but a few…
However, given the volatility of the world economy, there is no ultimate guarantee that the governments will be able to fulfil their promise to rescue all the banks that might need help. So I would advise you to spread your money around different financial institutions. At least that way, you don’t have all your eggs in one basket. Remember to trust your intuition if you feel that a particular bank is unstable and take your money out immediately.
Quite a few banks are persuading customers to tie up their money for 1 yr, 3yrs or 5 yrs or more in a term account or a cd. This generally pays a little more interest than if the money was immediately available. However, before doing this, calculate exactly how much extra money you will be making and whether it is worth the extra risk. When is your interest paid on the deposit – do you have to wait until the end of the term? Or is it paid on a monthly basis? What happens if interest rates go up and your money is tied in for several years? Will the bank increase the rate or could you be stuck on your original lower rate? Let’s say you go in at 3% and you’ve taken a 5 year term deposit or cd with the bank. It might be worth your while to withdraw your money and take the penalty and then reinvest at the higher interest rate.
To summarise:
Advantages of using a bank:
- you don’t have to risk holding cash
- you earn some interest on your money
- you get debit and/or credit cards which give you flexibility
Disadvantages of using a bank:
- in this downturn economy not all banks are safe
- government guarantees may not be honoured
Tips:
- try not to tie yourself into any deals even if it means you lose a little interest
- trust your intuition – if you don’t feel safe with a particular bank, take your money out sooner rather than later
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