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Lepista

How Much Exposure Should You Have To Gold?

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OK, my situation: missed the boat renter. Shjold have 'bought' in ~y2k, but was moving around swo never settled down. When I was in a position to potentially buy (~2003), I thought there was a bubble, and held off.

A couple of crisis, and my house fund was wiped out, and have slowly build up a fund.

I currently have the following assets:

- ~50% fund in bullionvault

- ~25% in an index linked NS&I

- ~25% in physical - 50% gold, 50% silver.

I am seriously considering cashing in the NS&I and putting this into bullionvault.

Am I stupid for thinking this?

What risks are there at this stage?

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OK, my situation: missed the boat renter. Shjold have 'bought' in ~y2k, but was moving around swo never settled down. When I was in a position to potentially buy (~2003), I thought there was a bubble, and held off.

A couple of crisis, and my house fund was wiped out, and have slowly build up a fund.

I currently have the following assets:

- ~50% fund in bullionvault

- ~25% in an index linked NS&I

- ~25% in physical - 50% gold, 50% silver.

I am seriously considering cashing in the NS&I and putting this into bullionvault.

Am I stupid for thinking this?

What risks are there at this stage?

Hi Lep,

I think you've got a pretty good mix at the moment.

You're pretty well protected against most possible meltdowns and you're hedged against both inflation (NS&I) and deflation (NS&I). You also are using your PMs to preserve wealth in both inflationary and deflationary environments. Finally, if SHTF, you can at least leave the country with 25% of your wealth and hopefully recover 50% from BV (if hyperinflation takes off, that is).

Good skills.

NMH

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I think 75% is too much exposure and 100% would be an 'all your eggs in one basket' situation that should be avoided unless you're a keen gambler :P

Personally I'm at 25% and am not planning on expanding that but mine is more for protection than speculation. If gold rockets then 100% may have been the right decision, but as I said it's a gamble and is safer to have some other baskets to keep your nesteggs in.

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Hi Lep,

I think you've got a pretty good mix at the moment.

You're pretty well protected against most possible meltdowns and you're hedged against both inflation (NS&I) and deflation (NS&I). You also are using your PMs to preserve wealth in both inflationary and deflationary environments. Finally, if SHTF, you can at least leave the country with 25% of your wealth and hopefully recover 50% from BV (if hyperinflation takes off, that is).

Good skills.

NMH

NS&I is only tracking the government's RPI figures, if you believe it and that they have no vested interest in under reporting. As for the prospect of deflation, you might want to consider obtaining asteroid insurance as well, which is more likely to pay out than any deflation hedge.

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NS&I is only tracking the government's RPI figures, if you believe it and that they have no vested interest in under reporting. As for the prospect of deflation, you might want to consider obtaining asteroid insurance as well, which is more likely to pay out than any deflation hedge.

Not good skills at all - save in the tinfoil hat world of HPC.

You are ignoring two fundamental investment principles:

1 There is hardly any diversification in that portfolio

2 You are not matching your assets to your liabilities. Given your liabilities are are going to be in sterling - for UK rents, housing, taxes, food, widgets etc you could end up with a very poor result if the pound is strong at the time that you wish to spend your 'investments'. Even if the pound doesn't strengthen what happens if gold is at the top of a bubble already or Bullionvault turns out to be some kind of con?

Now HPC could be right - and in a high inflation scenario or house price deflation scenario you could do very well indeed (although not necessarily - dont make the same mistake as the bankers and traders and assume that obvious correlations will always emerge).

But most importantly don't kid yourself into thinking that a portfolio positioned almost 100% for economic melt down of one form or another is an investment portfolio. Its a speculative portfolio. And if this turns out to be just another recession you could find yourself doing very poorly as equities rise, inflation and interest rates pick up, savings flow back into equities and cash, houseprices flat line in nominal terms whilst gold deflates or crashes just as you get a payrise and think you see some value in housing some combination of this happened in the 70s, 80s and 90s). Its all very well positioning yourself for a black swan eventbut remember its defined as a low probability high impact event. Dont bet your life savings on it as though its an odds-on favourite at Newmarket.

Your portfolio is about as risky as being 75% in BTls in 2005. Would have made a lot of money. But could have been a disaster. Could still be a disaster.

My advice would be to stop being a smart-alec trying to beat the market. Put 25-40% in a range of equities and bonds, maybe commercial property. No more than about 30% in PMs. If you are planning on using it towards a house you could do worse than putting it all in cash. FFS - RPI is only 3% and even in nominal terms houses look pretty weak for at least the next 12 months.

If you are really worried about high inflation, you will do well to beat a long term fixed rate mortgage on a property. Upside - free house. Downside lose your deposit, go bankrupt, hide your PMs for a rainy day. To be frank its a bloody good bet.

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Not good skills at all - save in the tinfoil hat world of HPC.

You are ignoring two fundamental investment principles:

1 There is hardly any diversification in that portfolio

2 You are not matching your assets to your liabilities. Given your liabilities are are going to be in sterling - for UK rents, housing, taxes, food, widgets etc you could end up with a very poor result if the pound is strong at the time that you wish to spend your 'investments'. Even if the pound doesn't strengthen what happens if gold is at the top of a bubble already or Bullionvault turns out to be some kind of con?

Now HPC could be right - and in a high inflation scenario or house price deflation scenario you could do very well indeed (although not necessarily - dont make the same mistake as the bankers and traders and assume that obvious correlations will always emerge).

But most importantly don't kid yourself into thinking that a portfolio positioned almost 100% for economic melt down of one form or another is an investment portfolio. Its a speculative portfolio. And if this turns out to be just another recession you could find yourself doing very poorly as equities rise, inflation and interest rates pick up, savings flow back into equities and cash, houseprices flat line in nominal terms whilst gold deflates or crashes just as you get a payrise and think you see some value in housing some combination of this happened in the 70s, 80s and 90s). Its all very well positioning yourself for a black swan eventbut remember its defined as a low probability high impact event. Dont bet your life savings on it as though its an odds-on favourite at Newmarket.

Your portfolio is about as risky as being 75% in BTls in 2005. Would have made a lot of money. But could have been a disaster. Could still be a disaster.

My advice would be to stop being a smart-alec trying to beat the market. Put 25-40% in a range of equities and bonds, maybe commercial property. No more than about 30% in PMs. If you are planning on using it towards a house you could do worse than putting it all in cash. FFS - RPI is only 3% and even in nominal terms houses look pretty weak for at least the next 12 months.

If you are really worried about high inflation, you will do well to beat a long term fixed rate mortgage on a property. Upside - free house. Downside lose your deposit, go bankrupt, hide your PMs for a rainy day. To be frank its a bloody good bet.

RPI is 4.5%, see here:

http://www.statistics.gov.uk/cci/nugget.asp?id=19

Taking a long term fixed mortgage is more of the same, eggs all one basket. It is depending on inflation eroding your debt. What if house prices slide initially, like in the States (I think this will happen sooner or later). Not to mention there are only two mortgage providers offering 10 year fixed mortgages now, the rest only offer 5 years, they're not dumb enough to be taken for mugs by savvy investors, they can see the inflation that is baked into the cake.

Personally I think the 25% in NS&I is better than cash in a savings account, after all it's a better return than the bank gives you, but we all know the government under reports inflation, so it's not really inflation proofing your money, just the best place to be in cash.

12.5% Gold, 12.5% Silver - Nice physical allocation, hold on to this.

50% Bullionvault - I've steered clear of this sort of thing, mainly because there is counterparty risk and even if they do have all the gold it is very easy for a nefarious govt. to freeze your account, confiscate your metal, or just levy a load of CGT on your account that you will not be able to liquify without paying, or at least it being tracked and HMRC catching up with you later on. So I have stayed purely 'black market-friendly' physical, myself.

Personally I am lucky enough to own a modest 2 bed house outright, and have my cash assets 33% in cash (to live off and ready to move into other investments at the drop of a hat) 57% physical gold, 6% physical silver. I think they're both going straight up, even in the unlikely scenario I get burnt, I have a house, so no biggie. However, your situation is a bit more tricky. Would probably keep the NS&I as your cash allocation, sell out of bullion vault, put 25% of that into physical gold. Not sure about the other 25% though, would steer clear of equities, think the next down leg is starting, bonds can only go down (and will). Sorry I can't help you on that, but I would caution against 100% gold, I think it might actually be the best play out there, but if the govt. get nasty (VAT, CGT, confiscation) and they will when gold gets loose, you don't really want be all in, so would keep at least 25% back so you can manoeuvre more easily.

The only way I can see metals going down is if real interest rates rise. Read a great moneyweek article today. It plotted a graph of real interest rates versus gold price appreciation/depreciation over the last 30 years. It showed that pretty much without exception you needed real interest rates of 2% for gold to move negatively in a 12 month period and rates of near 6% for a serious pace of decline in the gold price. Currently real interest rates in the UK are -1.5% officially, and much higher unofficially.

Edited by General Congreve

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RPI is 4.5%, see here:

http://www.statistics.gov.uk/cci/nugget.asp?id=19

Taking a long term fixed mortgage is more of the same, eggs all one basket. It is depending on inflation eroding your debt. What if house prices slide initially, like in the States (I think this will happen sooner or later). Not to mention there are only two mortgage providers offering 10 year fixed mortgages now, the rest only offer 5 years, they're not dumb enough to be taken for mugs by savvy investors, they can see the inflation that is baked into the cake.

Personally I think the 25% in NS&I is better than cash in a savings account, after all it's a better return than the bank gives you, but we all know the government under reports inflation, so it's not really inflation proofing your money, just the best place to be in cash.

12.5% Gold, 12.5% Silver - Nice physical allocation, hold on to this.

50% Bullionvault - I've steered clear of this sort of thing, mainly because there is counterparty risk and even if they do have all the gold it is very easy for a nefarious govt. to freeze your account, confiscate your metal, or just levy a load of CGT on your account that you will not be able to liquify without paying, or at least it being tracked and HMRC catching up with you later on. So I have stayed purely 'black market-friendly' physical, myself.

Personally I am lucky enough to own a modest 2 bed house outright, and have my cash assets 33% in cash (to live off and ready to move into other investments at the drop of a hat) 57% physical gold, 6% physical silver. I think they're both going straight up, even in the unlikely scenario I get burnt, I have a house, so no biggie. However, your situation is a bit more tricky. Would probably keep the NS&I as your cash allocation, sell out of bullion vault, put 25% of that into physical gold. Not sure about the other 25% though, would steer clear of equities, think the next down leg is starting, bonds can only go down (and will). Sorry I can't help you on that, but I would caution against 100% gold, I think it might actually be the best play out there, but if the govt. get nasty (VAT, CGT, confiscation) and they will when gold gets loose, you don't really want be all in, so would keep at least 25% back so you can manoeuvre more easily.

The only way I can see metals going down is if real interest rates rise. Read a great moneyweek article today. It plotted a graph of real interest rates versus gold price appreciation/depreciation over the last 30 years. It showed that pretty much without exception you needed real interest rates of 2% for gold to move negatively in a 12 month period and rates of near 6% for a serious pace of decline in the gold price. Currently real interest rates in the UK are -1.5% officially, and much higher unofficially.

Dont get me wrong - I think there could be a lot of play in the PM bubble yet. Could be a great bet - and I find it astonishing that people dont have at least a little bit held in it. But 75% in PM strikes me as idiotic unless you are able to make that bet with someone else's money or unless you at least recognise that you are making a bet. Nothing wrong with gambling. But gambling whilst convincing yourself that you are investing your life's savings prudently is what has got us into this mess.

Fact is there's every chance real interest rates will rise. They certainly cant get any lower.

You could be right about the fixed rate mortgages however. Its a disgrace really.

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Dont get me wrong - I think there could be a lot of play in the PM bubble yet. Could be a great bet - and I find it astonishing that people dont have at least a little bit held in it. But 75% in PM strikes me as idiotic unless you are able to make that bet with someone else's money or unless you at least recognise that you are making a bet. Nothing wrong with gambling. But gambling whilst convincing yourself that you are investing your life's savings prudently is what has got us into this mess.

Fact is there's every chance real interest rates will rise. They certainly cant get any lower.

You could be right about the fixed rate mortgages however. Its a disgrace really.

I was recommending 50% in physical, 25% in NS&I and 25% cash/something else. So less than he has in PM's now (75%), but more physical.

Personally I see, paper as being the gamble here, but having said that, there could be a black swan event and metals may crash, i.e. governments will suddenly jack interest rates massively in real terms, stop QEing and end up with a crashed mortgage and consumer debt market and therefore crashed banks, plus national debts they can't service. Of course that would mean they'll outright default rather than stealth default via inflation, which means cash won't be a good place to be when that happens and metals will. See why I'm a metals bull?

Edited by General Congreve

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I was recommending 50% in physical, 25% in NS&I and 25% cash/something else. So less than he has in PM's now (75%), but more physical.

Personally I see, paper as being the gamble here, but having said that, there could be a black swan event and metals may crash, i.e. governments will suddenly jack interest rates massively in real terms, stop QEing and end up with a crashed mortgage and consumer debt market and therefore crashed banks, plus national debts they can't service. Of course that would mean they'll outright default rather than stealth default via inflation, which means cash won't be a good place to be when that happens and metals will. See why I'm a metals bull?

+ 1 to all of what he said. There are a few issues to make here. Other commodities will do reasonably well, but there is a limit to how much people can pay for food, grains, etc., so the upside is nowhere near as good as for PMs. (Having said that, I think oil has got to be a good medium-term bet).

The same may well apply to interest rates. The sort of interest rates that may be required in the future are limited by the ability of Joe Public to pay their mortgages. I remember the phone calls of horror as we were ejected from the ERM; 15% for a few days. That sort of interest rate would have most of the keys to mortgaged housing returned to their respective banks.

So unless some very courageous politicians exist - and they don't - we will see a gradual theft of assets by inflation to pay off the QE debt, and that debt is so enormous it may end up being defaulted on, anyway. Good mix as per Gen.Congreve's suggestions.

Last point. Look at the manipulative "smack down" on silver in the last few days. Normally (about a year ago) that would have beaten the silver market into a slow recovery. This time, silver bounced half-way back up in less than two days. It is getting more and more difficult to cover short positions, and the investment markets are coming closer and closer to the "Soros" moment (the ejection of the UK from the ERM) when Soros simply ignored anything the Chancellor did, knowing the bet was one-way. We aren't there yet, but the graphs are starting to resemble the famous parabola.

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Dont get me wrong - I think there could be a lot of play in the PM bubble yet. Could be a great bet - and I find it astonishing that people dont have at least a little bit held in it. But 75% in PM strikes me as idiotic unless you are able to make that bet with someone else's money or unless you at least recognise that you are making a bet. Nothing wrong with gambling. But gambling whilst convincing yourself that you are investing your life's savings prudently is what has got us into this mess.

Fact is there's every chance real interest rates will rise. They certainly cant get any lower.

You could be right about the fixed rate mortgages however. Its a disgrace really.

Shame on me for going 100% silver early 09 uh. I do feel like an idiot for taking it on that boating trip though.

Do you really think they can push interest rates up like they did during the Gold/Silver spike of 79?

I think not...too much Debt.

Do not invest in anything you do not understand. Things are about to get volatile.

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Shame on me for going 100% silver early 09 uh. I do feel like an idiot for taking it on that boating trip though.

Do you really think they can push interest rates up like they did during the Gold/Silver spike of 79?

I think not...too much Debt.

Do not invest in anything you do not understand. Things are about to get volatile.

Back in 1980, Volcker didn't have today's constraint. He could raise rates - but even so, he paid for it with a 4% increase in unemployment.

However, unemployment today is already at 10% (17% to 22% in reality) and that's in a soft credit environment. So even if he didn't have the TBTF banks and the Federal Government on cheap money life support, Bernanke cannot raise rates in order to stop a run on Treasuries, stop a run-up on commodities, and stop incipient hyperinflation. The economy is too weak. Adding 400 basis points to the current unemployment situation - that would drive US unemployment to 14% (25% in reality, the same as the highest rate hit during the 1930's) or more. It would cause political pandemonium, not to mention riots.

http://www.gold-eagle.com/editorials_08/baltin111010.html

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Not good skills at all - save in the tinfoil hat world of HPC.

You are ignoring two fundamental investment principles:

1 There is hardly any diversification in that portfolio

2 You are not matching your assets to your liabilities. Given your liabilities are are going to be in sterling - for UK rents, housing, taxes, food, widgets etc you could end up with a very poor result if the pound is strong at the time that you wish to spend your 'investments'. Even if the pound doesn't strengthen what happens if gold is at the top of a bubble already or Bullionvault turns out to be some kind of con?

Now HPC could be right - and in a high inflation scenario or house price deflation scenario you could do very well indeed (although not necessarily - dont make the same mistake as the bankers and traders and assume that obvious correlations will always emerge).

But most importantly don't kid yourself into thinking that a portfolio positioned almost 100% for economic melt down of one form or another is an investment portfolio. Its a speculative portfolio. And if this turns out to be just another recession you could find yourself doing very poorly as equities rise, inflation and interest rates pick up, savings flow back into equities and cash, houseprices flat line in nominal terms whilst gold deflates or crashes just as you get a payrise and think you see some value in housing some combination of this happened in the 70s, 80s and 90s). Its all very well positioning yourself for a black swan eventbut remember its defined as a low probability high impact event. Dont bet your life savings on it as though its an odds-on favourite at Newmarket.

Your portfolio is about as risky as being 75% in BTls in 2005. Would have made a lot of money. But could have been a disaster. Could still be a disaster.

My advice would be to stop being a smart-alec trying to beat the market. Put 25-40% in a range of equities and bonds, maybe commercial property. No more than about 30% in PMs. If you are planning on using it towards a house you could do worse than putting it all in cash. FFS - RPI is only 3% and even in nominal terms houses look pretty weak for at least the next 12 months.

If you are really worried about high inflation, you will do well to beat a long term fixed rate mortgage on a property. Upside - free house. Downside lose your deposit, go bankrupt, hide your PMs for a rainy day. To be frank its a bloody good bet.

If I believed that there was going to be any advantage in staying in paper cash or transferring back, I would not hesitate to do so. However, the outlook for paper money is very bleak with low/negative interest rates, money printing and sovereign default.

I have no interest what so ever in having a "portfolio" of X amount of stocks, bonds or property.

I don't believe that my portfolio is as risky as a 2005 75% property portfolio. My PMs are bought with cash and there is no leverage involved, not unlike the majority property speculators. Also compared to the last decade and property investment, I don't know anyone with any meaningful amount of gold.

Cash savings have been very disappointing when compared to house prices, with gold I have seen a full-blown HPC, with an average UK house going from over 700 ounces to under 200 ounces and heading to 50+ozt

What has the stockmarket done of the last decade, as best sideways and has only gone up by default because of money printing.

UK_House_Prices_in_Gold_LOG_GUESS.png

The US the UK and Europe are bankrupt, why would one have anything tied up with someone who is insolvent.

Also I want to keep my options open and I am not sure I wish to remain in the UK.

How many, more bank bailouts, QE/money printing schemes and countries going bankrupt do you have to see before you realise that gold and silver are again the premier currencies?

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What if paper money crashes another 50%.

There is a small but finite possibility that paper may crash 99.99999999%, until we learn how to freely convert mass to energy and back again physical metals will always have some value.

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Ounces of PMs.

Paper money, with nothing backing it, has an intrinsic value of zero.

Belief in fiat,is what gives it value.

Pm`s can be exchanged for fiat and occasionally bartered for other things.

Both have value. One`s answer to the question, what is wealth, is what I find important.

Edited by GinAndPlatonic

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  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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