Investment and/or Personal Finance

[Eunos_Cosmo]

I can't name a single first world country that is in good economical shape, everyone has record lows or near record low interest rates which means their growth is slow or non existent as their country has been maxed out on debt and unable to take on any more, I will be very surprised if we get out of this one as good as 2008, the amount of stimulus required would basically wreck currencies world wide.

@Dotini I don't think at this present moment there is a better investment then Silver, all the stars are aligned, when you counter for inflation it's close to it's lowest ever price point and it's not that far above the mine price so it's risk factor for falling is minimal with the price rise potential limitless especially given the recession fears coming.

Alot of Bullion banks are already having supply issues with Silver and the price rise has been modest at best, the future markets manipulation has been overtly aggressive.

I could see holding large amounts of personal debt (on things like houses) being even more useful if inflation starts to get out of control as @Danoff suggested.

And now that some banks are paying you to borrow 'their' money (!!!!) for mortgages, there isn't a whole hell of a lot to lose!

 

[mustafur]

I could see holding large amounts of personal debt (on things like houses) being even more useful if inflation starts to get out of control as @Danoff suggested.

And now that some banks are paying you to borrow 'their' money (!!!!) for mortgages, there isn't a whole hell of a lot to lose!

It would be a very bad idea however if the Fed decides to protect the currency and let the economy fail, a real possibility given the US reserve Currency status.

 

[Eunos_Cosmo]

It would be a very bad idea however if the Fed decides to protect the currency and let the economy fail, a real possibility given the US reserve Currency status.

True. I'm going to hold cash until I get a more clear idea on which way its going to go. I feel somewhat more protected from normal inflation now, at least.

Things are getting weird. Europe might not be too far away from having negative interest rate savings accounts...you pay the bank to hold your money.

 

[mustafur]

True. I'm going to hold cash until I get a more clear idea on which way its going to go. I feel somewhat more protected from normal inflation now, at least.

Things are getting weird. Europe might not be too far away from having negative interest rate savings accounts...you pay the bank to hold your money.

Switzerland already has Negative I have no doubt more will Follow.

 

[Danoff]

I could see holding large amounts of personal debt (on things like houses) being even more useful if inflation starts to get out of control as @Danoff suggested.

And now that some banks are paying you to borrow 'their' money (!!!!) for mortgages, there isn't a whole hell of a lot to lose!

Somewhat obviously this is betting on inflation. Negative yield bonds are profitable if inflation outpaces them. I think it's a pretty safe bet too - that those bonds will outperform their associated currencies. Inflation seems like an absolutely foregone conclusion, and of course inflation is always bad.

I think I screwed this up. Somehow I was assuming that the bond was indexed for inflation, but I don't think that's the case here. What I was thinking was, you hand over cash now in exchange for something that isn't cash, and pay a fee for the privilege, and that way you're shielded from inflation (like holding any kind of property). But non-inflation-indexed bonds are not that, they're a contract to receive the equivalent in cash later. It's a loan. So when you buy a negative yield bond you're giving a negative interest loan. That's a prediction of deflation. The assumption being that tomorrow's dollars will be worth more than today's. And that's a terrible bet. Almost anywhere in the world.

Yea my advice would be to take out that negative interest loan and buy something with it that will hold its value (real-estate). Probably the thing to do with a negative interest loan is to borrow it and buy land. No structure, just land, in a desirable location.

 

[mustafur]

The last thing I would be doing is buying anything that has been propped up by a credit bubble, wait till the collapse then buy because the known floor would be established.

 

[Eunos_Cosmo]

I think I screwed this up. Somehow I was assuming that the bond was indexed for inflation, but I don't think that's the case here. What I was thinking was, you hand over cash now in exchange for something that isn't cash, and pay a fee for the privilege, and that way you're shielded from inflation (like holding any kind of property). But non-inflation-indexed bonds are not that, they're a contract to receive the equivalent in cash later. It's a loan. So when you buy a negative yield bond you're giving a negative interest loan. That's a prediction of deflation. The assumption being that tomorrow's dollars will be worth more than today's. And that's a terrible bet. Almost anywhere in the world.

My take was that its less a bet on deflation and more resigning to the fact that there is nowhere to hide, and the only fungible asset that isn't about to get completely hammered is bonds. You pay a fee to not lose everything.

I don't see how we can get out of the hole we are in now without some substantial amount of inflation in the next 5-10 years. I need a mortgage soon. Please collapse housing prices...pleeeeease.

@mustafur That is exactly what I'm trying to do. You can imagine the anxiety of being pushed by bubble asset values on one side and future inflation pressure on the other. I want to get the timing right, so I'm fighting the urge to jump in early.

 

[Danoff]

My take was that its less a bet on deflation and more resigning to the fact that there is nowhere to hide, and the only fungible asset that isn't about to get completely hammered is bonds. You pay a fee to not lose everything.

I don't see how we can get out of the hole we are in now without some substantial amount of inflation in the next 5-10 years. I need a mortgage soon. Please collapse housing prices...pleeeeease.

I don't predict a big collapse in housing prices. Loans made recently have been pretty damned careful. And employment is high. Also mortgage deductions were rolled back and it didn't stop prices.

The last thing I would be doing is buying anything that has been propped up by a credit bubble, wait till the collapse then buy because the known floor would be established.

So bare minimum, it's a good idea to take that loan. Even if it's not for buying anything. If you could (I know, collateral, but assuming you could go further into debt on an existing property, like via a HELOC or something). Point is, if someone is paying you to hold dollars right now (or whatever currency basically) you probably should take that money. Because it's going to be worth a LOT less when you give it back. Even if you use it for nothing right now, you come out ahead.

Better though is to buy something that is somewhat protected from inflation. Real-estate generally does quite well against inflation.

 

[mustafur]

the only fungible asset that isn't about to get completely hammered is bonds.

Expect the obvious Gold and Silver that Historically goes up on any economic downturn.

I don't predict a big collapse in housing prices. Loans made recently have been pretty damned careful. And employment is high. Also mortgage deductions were rolled back and it didn't stop prices.



So bare minimum, it's a good idea to take that loan. Even if it's not for buying anything. If you could (I know, collateral, but assuming you could go further into debt on an existing property, like via a HELOC or something). Point is, if someone is paying you to hold dollars right now (or whatever currency basically) you probably should take that money. Because it's going to be worth a LOT less when you give it back. Even if you use it for nothing right now, you come out ahead.

Better though is to buy something that is somewhat protected from inflation. Real-estate generally does quite well against inflation.

All of which completely depends on what the Humans in the Fed decide.

All bets are off if the Fed raises the interest rates to protect the currency the rise could be multiple percent in one go which will wipe out alot of Mortgage Holders and jobs connected to credit growth which could create a domino effect.

America has geo political interests to protect remember.

 

[Eunos_Cosmo]

Expect the obvious Gold and Silver that Historically goes up on any economic downturn.

How fungible is gold, actually? Its a physical object, no? I don't know much about gold/silver to be honest.

@Danoff Probably not a widespread drop no. I think some specific markets have room to drop though, particularly if certain segments of the economy become weak if there is a recession. There is a lot of tech in San Francisco....and there is a lot of tech in San Francisco with shaky fundamentals and no immediate path towards profit. I keep wondering how they are going to do in a downturn if VC funding dries up.

 

[Danoff]

How fungible is gold, actually? Its a physical object, no? I don't know much about gold/silver to be honest.

You can buy a gold ETF (which is not physical). I used to have a fair amount, but it was waaaay more volatile than I expected. It's subject to rampant speculation. Gold and Silver trading are fairly wild areas, apparently driven more by emotional trading than I anticipated. Maybe platinum, or like a precious metal index or something.

As I get older, I've been driven more toward items with intrinsic value (like real estate), over more speculative items. I like cars for this too, and cars are somewhat predictable (at least for some models).

 

[mustafur]

How fungible is gold, actually? Its a physical object, no? I don't know much about gold/silver to be honest.

Most Bullion Banks that sell also rebuy at a spot price, Mine does I can do the entire transaction online(I'm Holding half with half in their storage).

I would stick to the bigger trusted ones though as they have more ability to handle large volume.

ETF is fungible but risky and honestly not connected to physical gold so it's incredibly risky if supply issues happen it could break the system, I wouldn't risk my Money on it tbh.

 

[Eunos_Cosmo]

For this point in my life, by far the most important thing for me is real estate for intrinsic reasons, as @Danoff mentioned. That's job 1 because without it, I have a lot less stability for the future. The investments I really care about are intrinsic to my life.

#1: Education - Done and paid for. It's already returned more than twice what I put in.
#2: House - Next on the list. Will hopefully establish a steady base (or at least a first base) to work from.
#3: Business - Eventual goal and what I want to put most of my effort into...for the sake of putting effort into it.

Yeah I have a scattering of other investments, but those are mostly to protect me from inflation and help build towards #2 and #3. Just have to weather what is coming up on the horizon without getting set back too far. I wish I was in a better position than I am. Really want to get into #2 while I still can...

 

[mustafur]

Real estate is an investment that you have no part of till you have it, I agree it's a good investment Historicly but if you don't have it your not part of it.

Gold and Silver in my view is a recession investment(only in physical form), kinda like a War chest to use to get you ahead when things go bad for everyone else.

Gold Historicly has gone up on inflation and on Average house prices though so it's not something I would say is risky, The problem for Gold is the Risk is in Holding it, that doesn't apply to real estate as someone can't simply steal your Property(unless they steal your identity I guess).

 

[Danoff]

Real estate is an investment that you have no part of till you have it,

Only if you don't live anywhere.

 

[mustafur]

Only if you don't live anywhere.

But as we have seen Rental prices are not always reflective of house prices, because people don't get a loan to rent they do if they buy which inflates the price.

 

[Danoff]

But as we have seen Rental prices are not always reflective of house prices, because people don't get a loan to rent they do if they buy which inflates the price.

People borrow to buy a rental property, and they don't rent at a loss. Purchase prices necessarily influence rental prices in another way too, it represents a return on money. If a house costs you $600k, and you can only rent it out for $1000/mo after expenses, you're looking at a return of $12k annually on $600k (with some risk to the property). 2% is not a sufficient rate of return for that kind of risk exposure.

 

[mustafur]

People borrow to buy a rental property, and they don't rent at a loss. Purchase prices necessarily influence rental prices in another way too, it represents a return on money. If a house costs you $600k, and you can only rent it out for $1000/mo after expenses, you're looking at a return of $12k annually on $600k (with some risk to the property). 2% is not a sufficient rate of return for that kind of risk exposure.

People Rent for a loss here all the time, under Negative gearing, but that is not the only reason why prices can exceed rental returns, alot of it is to do with price speculation and to me that's end game material.

I live in Sydney which probably has one of the most over inflated house prices in the world, there is no way you can rent a property out here and make enough off it to pay the loan that bought it, it's simply not possible on anything.

I would argue that Credit availability is the main cause for house price gains, unless the area becomes trendy with wealthy types, sure loans give you higher buying power but that applies to everyone that can get a loan which inflates the price.

 

[Liquid]

I haven't invested in bullion per say but as a coin (and banknote) collector I do have some precious metals in my collection, the most significant being a Canadian silver Maple Leaf (1 oz solid silver). It'll take a while to get any "return" on that though given that I paid €35 for it in 2013 and in 2019 silver price/ounce is currently €15.50.

The only other genuine "bullion" coin I have is a British £20 coin which is a small coin made from a quarter-ounce of silver; I paid face value for that so the price of the coin (its value is £20 no matter what) is inflated and can mask the price of the silver (approximately £3 worth).

Other silver coins I have aren't so much silver coins in the sense of bullion but they date from a time when commonly circulated coins were made out of 92.5% silver anyway. I haven't considered melting them down and I don't even see it as an investment. I enjoy the coins for their intrinsic numismatic value and cultural interestingness but perhaps one day they might become significant enough in precious metal value to be sold or melted down, if even for a small three-figure sum.

I have more banknotes that are valuable. They're a strange investment, banknotes. You're paying for something that you can still get (for example any discontinued Bank of England banknote can be replaced for its current equivalent) but you're paying a significant amount extra for the privilege of getting a specific design that cannot and is not printed any more and due to having no purchasing power has no other use other than looking nice in a booklet. Before the Euro banknotes were redesigned I kept as many of the old designs as I could and that includes the high denominations; the second a banknote is discontinued, its selling value is more than its face value.

I think the most I've paid above face value is 400%; I paid €90 (£80) for a particular £20 note I wanted. But again, I stress that this is merely a hobby or interest of mine and not an investment; a €500 banknote (no longer printed) is only worth more than its face value assuming that there is a demand for old, discontinued designs and given that that is not a fixed attribute or market property, it cannot be considered a safe investment. That said I've heard of worse investments, to be honest.

 

[mustafur]

I know in UK Bullion bars are taxed but coins are not so people get huge 10oz Coins.

 

[Dotini]

I know in UK Bullion bars are taxed but coins are not so people get huge 10oz Coins.

True also in the US. A pound of gold coins and a bag of silver coins enables a man to get a good night's sleep.



Wide implications as Germany teeters toward recession
By DAVID RISINGyesterday

FILE - In this Tuesday, Feb. 12, 2019 file photo, the sun sets over the city of Frankfurt with the buildings of the banking district. Germany, Europe's industrial powerhouse and biggest economy, with companies like Volkswagen, Siemens and BASF, may be entering a recession, according to a gloomy report from the country's central bank Monday, August 19, 2019. (AP Photo/Michael Probst, File)

BERLIN (AP) — Germany, Europe’s industrial powerhouse and biggest economy, with companies like Volkswagen, Siemens and BASF, may be entering a recession, according to a gloomy report from the country’s central bank Monday — a development that could have repercussions for the rest of the eurozone and the United States.

A technical recession is defined as two consecutive quarters of negative growth, and Germany saw a 0.1% drop in the April-to-June period. In its monthly report, the Bundesbank said that with falling industrial production and orders, it appears the slump is continuing during the July-to-September quarter.

“The overall economic performance could decline slightly once again,” it said. “Central to this is the ongoing downturn in industry.”

Deutsche Bank went further Monday, saying “we see Germany in a technical recession” and predicting a 0.25% drop in economic output this quarter.

https://apnews.com/7eeaa0b5fde44b98a4f8dc896da295a3

 

[mustafur]

It's funny when Deutsche bank comment on the German economy like they are not responsible for it, they are basically a Zombie bank that was only saved by a huge amount of US capital but the stock market doesn't buy it what so ever as their price is getting closer to Zero every Month.

This is a very big bank though with alot of Capital around the World, this could be the next Lehman brothers as far as I see it.

 

[Danoff]

People Rent for a loss here all the time, under Negative gearing,

The expectation is still to make money. It's never an expected overall loss.

but that is not the only reason why prices can exceed rental returns, alot of it is to do with price speculation and to me that's end game material.

I see the point you're making. But that's a temporary state, it's not something that can be maintained. Eventually renting has to come back in line with prices.

I live in Sydney which probably has one of the most over inflated house prices in the world, there is no way you can rent a property out here and make enough off it to pay the loan that bought it, it's simply not possible on anything.

That ultimately results in one of two things, prices coming back down or rent going up.

I would argue that Credit availability is the main cause for house price gains, unless the area becomes trendy with wealthy types, sure loans give you higher buying power but that applies to everyone that can get a loan which inflates the price.

I agree.

 

[Dotini]

German 30 year bonds are now available with a negative interest rate.

Germany for First Time Sells 30-Year Bonds Offering Negative Yields
Bond sale adds to the roughly $16 trillion of negative-yielding bonds outstanding world-wide

By
Paul J. Davies and
Patricia Kowsmann
Updated Aug. 21, 2019 3:41 pm ET

Germany sold 30-year debt at a negative yield for the first time, as investors desperate for safe assets bet that further falls in yields will boost the value of the bonds in the future.

https://www.wsj.com/articles/german...ar-bonds-offering-negative-yields-11566385847

 

[Danoff]

German 30 year bonds are now available with a negative interest rate.

Germany for First Time Sells 30-Year Bonds Offering Negative Yields
Bond sale adds to the roughly $16 trillion of negative-yielding bonds outstanding world-wide

By
Paul J. Davies and
Patricia Kowsmann
Updated Aug. 21, 2019 3:41 pm ET

Germany sold 30-year debt at a negative yield for the first time, as investors desperate for safe assets bet that further falls in yields will boost the value of the bonds in the future.

https://www.wsj.com/articles/german...ar-bonds-offering-negative-yields-11566385847

Terrible bet. That currency is better off in a bank account than it is in a negative yield bond.

 

[mustafur]

Imagine Geniunely wanting to loan money to the government and they charge you for the honor.

 

[Eunos_Cosmo]

The only possible way for that 'investment' to work in your favor is if the next guy pays even more despite the fact that he knows the investment is not worth what he is paying...and on and on. It's like a fully conscious, sober Ponzi scheme with everyone driving towards the cliff they know is there, pushing the pedal firmly down into the carpet.

Negative yielding bonds are approaching 3x the value of the Dow Jones index

 

[Dotini]

"The next recession will destroy the millennials, those between 22 and 38. Gen Z even more so."
https://www.theatlantic.com/ideas/archive/2019/08/millennials-are-screwed-recession/596728/

 

[Danoff]

"The next recession will destroy the millennials, those between 22 and 38. Gen Z even more so."
https://www.theatlantic.com/ideas/archive/2019/08/millennials-are-screwed-recession/596728/

I read that article earlier today. It's junk. It's a lot of statistics about how hard millenials have it, and how they had no choice but to saddle themselves with giant loans for crap degrees, and then just kinda hand waives and says recessions are harder on more vulnerable people. Bleh....

 

[mustafur]

There was a Video on YouTube I forget what it was called but it was a lady talking to a Homeless man who used to be a Multi Millionaire in South Africa running a jewelry Business in Johanasburg, he was making nearly 7 figures a year had a big house, Wife kids etc.

What he did with his money was reckless they had huge loans spent big on cars etc and when the GFC came along in 2008 they had no reserve capital to keep the business running, they had to sell everything, his wife left him with the kids and he got kicked out of the house as he was unable to pay it off, he couldn't find a job because he had no skills other then being a jeweller who he couldn't find a job with and within a half a year was on the street, by the time the economy recovered he had no way to get a job again as no one is going to allow a guy who smells of pee and unwashed clothes an interview so he was stuck in that situation till present day.

It shows just how Vulnerable anyone can be if they don't have any sort of future planning.