Where are the gold bugs now?

[greenskeeper]

I totally agree with you JBinKC. Since ECB has not printed money as of yet. All the banks in Europe had to sell their assets including gold to cover their short term obligation. So price of gold is down for now but as you said, ECB will start printing money in massive scale along with the fed. Once this happens, price of gold and silver will go up as a result of money printing...

The gold/silver price ratio is also out of whack. So Silver has the potential to "catch up" to gold even without the inflation push (which is imminent)

Gold Versus Silver

[Kooshiball]

The gold/silver price ratio is also out of whack. So Silver has the potential to "catch up" to gold even without the inflation push (which is imminent)

Gold Versus Silver

Yes! I totally agreed Greenskeeper! Combined with gold silver ratio and Dow gold ratio, it would be very exciting times for the investors who hold gold and silver in long term horizon.

[kv968]

Yes one of them can be individual stocks and some ETF (I own some of those that making sense in this state of economy). I am also investing in various real estate deals and other alternative investments like hard money loan. I am also looking at investing in ATM machine (I have access to that kind of deals. Nowadays, banks in trouble so they increase in the ATM fee for non-customers. It is extremely great for us since we can increase the ATM fee on our side as well). Those deals are not advertised so need to find them but return is very lucrative.

So there's no opportunity costs incurred with real estate and ATM machines? You were worried about that with the mutual funds and these investments have none? Interest paid, taxes, etc..., they're all forms of opportunity cost. Granted they may be less and the return may be higher with different investments but there's always a cost of some sort.

[kv968]

Hi. Do you know what happened in Lehman brothers right? Lehman (and other investment banks and other big commercial banks) had credit default swap insure against default of insitution like AIG. Credit default swap is the financial derivative. It works like a insurance. In this case, AIG is paying the premium to the Lehman brothers and in turn, Lehman have obligation to pay the AIG in case of AIG default. In 2008, major insurance institutions like AIG went down so all the banks including Lehman brothers and Bear sterns and others needs to pay the massive amount to AIG. Since derivative market (Derivatives including credit default swap) was 30 - 40 times bigger than the US national debt, all the US financial system plunged dramatically...

New Lehman type crisis is coming on this horizon except this time is european sovereign debt. Size of this is much bigger than the 2008 (With stroid. times at least 5 times bigger).

CDS's aren't the reason Lehman went down. Losses in being over-leveraged in sub-prime mortgages, not being able to sell them, a deteriorating credit rating and having the repo market go illiquid for them caused them to go bankrupt.

AIG basically went down because, besides their own exposure to sub-prime and alt-a mortgages, they had to put up more collateral for the CDS's they wrote. They were the ones mostly getting the premiums on the CDS's and once they started declining in value and their own credit rating was cut, they were starting to get "margin calls" on them that they couldn't cover.

All in all though, like you said, pretty much everyone was WAY over-leveraged.

[Kooshiball]

So there's no opportunity costs incurred with real estate and ATM machines? You were worried about that with the mutual funds and these investments have none? Interest paid, taxes, etc..., they're all forms of opportunity cost. Granted they may be less and the return may be higher with different investments but there's always a cost of some sort.

Yes. Always have opportunity cost since we may be able to find better opporunities than possible investment we already found (After the fact). But, this is the exact reason why we need to increase the financial knowledge enough to find the best deals out there so that we can minimize the opportunity cost.

That's my take...