Here are the latest items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of JWR. (SurvivalBlog’s Founder and Senior Editor.) Today’s focus is on Forever stamps sold by the U.S. Postal Service.
Precious Metals:
First, by way of the excellent The Daily Coin web site, we found this cross-post from The Daily Reckoning: The ONLY Gold Chart You Need
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Gold Steady Ahead Of US Data This Week, Weaker Dollar Supports
Commodities:
Next, there is this from Nick Cunningham: Déjà Vu: Shale To Kill Oil Prices Once Again
Global Stocks:
Moving on to stocks, former OMB Director David Stockman issued a warning. He predicts a government shutdown, “The Mother Of All Debt Ceiling Crises”, and a stock market collapse. All of this was in an interview with Russia Today (RT): Horrendous Storm to Hit Stocks. He judges the Dow stocks as grossly over-priced, citing the current prevailing 25-1 price-to-earnings ratio. He says that given current economic conditions, a 16-1 ratio is more realistic. If that normalization occurs suddenly, it would mean a huge drop in the DJIA.
Debt Bubble:
A cousin sent me this: Average Household Credit Card Debt in America: 2017 Statistics
Economy and Finance:
As reported by the leftist-statist biased Bloomberg news service: Some Trump Aides Want a New Leader at the Fed
Contrarian Inflation Hedging (Forever Stamps)
For a decade, the U.S. Postal Service has sold Forever stamps. Starting with the classic Liberty Bell design, most U.S. self-adhesive postage stamps no longer carry a denomination marking, and they have no expiry date. The “Forever” marking indicates that they represent one standard envelope’s First Class postage. (The Liberty Bell design has been retired, but they are still valid for use “Forever.”) I’ve been hedging into these stamps in a small way since their introduction in 2007. Back then, a single stamp was 41 cents and a 20-stamp booklet of Forever stamps cost $8.20. Now, with the inexorable march of inflation, a single stamp costs 49 cents and a booklet costs $9.80. So that is a decent hedge on inflation. And if consumer price inflation ever resumes with a vengeance, then these stamps will become a great hedge!
Also, I should mention that in celebration of the 10th Anniversary of the Liberty Bell Forever Stamp, I just did a test. I found that the adhesive on a 2007-vintage Forever stamp still works fine. There is only one major drawback to this hedge strategy: USPS regulations prohibit postal clerks from buying back or even trading stamps for different stamps, or for postal money orders. You must either use them or trade them to recoup your investment.
Provisos:
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News Tips:
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Preppers buying gold should IMHO ignore short term price fluctuations. We buy gold (and silver) for use in a SHTF situation. The metals’ value will at that point be off the charts. Fiat currency may not be around or may be useless. Thus, ignore headlines of “2,000 Gold!” Metals are survival money, not a short term investment. You can buy short-term dis in prices to be a bit more efficient, but even that will represent a very modest difference if/when we get to SHTF.
A further comment about gold, this one based on what you’re prepping for. If you believe the system is going down, you’ll want to hang on to your gold no matter what. If, however, you believe that what’s coming is a major financial crisis that we’ll ultimately get through, here are a few things to think about. During a crisis like that, precious metals will probably spike way up. After the crisis, they will spike back down. If your goal is to maintain or increase your wealth as we move through a crisis like that, you will have to sell your gold at the proper time. You’ll know the right time because it will be when there’s literal blood in the streets. When there are riots in major cities, possibly with the imposition of martial law, that will be the time to sell your metals and buy the assets that other people don’t want to own: real estate, stocks, land, businesses. This will position you for the period after the crisis.
Precious metals are just a hedge, so you don’t lose your entire portfolio when the market tanks. In a SHTF situation, you have a small window where precious metals may increase in value significantly, depending on the nature of the situation. There is no provision for maintaining the value of a forever stamp, and they can be debased straight to zero with even less regulation than fiat currency. They are not what I would consider a fungible asset in the least. Since they are not exchangable, and depend on the USPS functioning properly to even be of any intrinsic value, I would not recommend them for any sort of hedge, let alone a standard investment. As it is now, I use one stamp a month to mail my house payment, which I could just as easily deliver in person but for the fact that my landlord prefers using the postal service for now.
I would hold maybe a couple thousand in precious metals, preferably junk silver, as a hedge against a shtf situation. I don’t have enough of an investment portfolio to warrant holding PM against a market crash. I also have a couple thousand in fiat currency to burn through for emergencies. Beyond that, I stock real assets that can be readily traded/bartered for goods and services I may need someday. These are things that keep well and will be in high demand if our society/markets/government folds. My only caveat for investment is “everybody gotta die sometime”.
There is a confusion between gold as a store of value and as a medium of exchange. In a situation where fiat currencies are no longer acceptable or available, gold and silver (after a time lag) will move into the vacuum. So will various other items (but to a lesser extent): boxes of ammunition, bottles of alcohol, etc. So in a real TEOTWAWKI situation, gold and silver will probably emerge as “money” again. In 2008 most people did not experience the crash as TEOTWAWKI. So it depends on what you’re prepping for. If it;s not too bad, you won’t need much gold/silver. If it’s pretty bad but not TEOTWAWKI, you can use a modest amount of gold/silver to maintain/increase your wealth as we come out the other side. If it’s TEOTWAWKI, after some time — maybe a year or two, you’ll be rich.
I ship a lot of packages from my home based internet business. Postage from USPS has slowly been increasing and are currently up 30% since 2009. Remember the small flat rate box at $4.95? Its currently up to $6.80, the 1 ounce first class postage has gone from $1.95 to $2.64.
2% inflation my a**.
The introductory rate advertised for U.S. Priority Mail was: “Two days, two pounds, $2.90.” Yes, stealth inflation is definitely with us.
1) Re gold, I would note that gold actually crashed in the 2008 crisis — falling from $950/oz to $720/oz. It then recovered but largely because of the massive bailout — which weakened the dollar because of the huge , multi-$Trillion debt incurred. STocks did the same.
2) The smart money moved into safe US Treasury BONDs — which had a guaranteed rate of return
of 5.2% in 2007, good for decades. A very sweet deal if prices collapse in a deflationary depression. The smart money’s move into long term Treasuries is what caused the inverted yield curve in January 2007. This is why the anomaly of an inverted yield curve is such a good warning of a recession hitting 9 months to 1 year into the future. While the lying news media broadcast Alan Greenspan’s bland assurances that the subprime housing problem was behind us, klaxons were sounding in the executive suites and Wall Street offices. Read ’em and weep, rubes.
3) I myself think Harry Browne was right decades ago when he suggested the 4 way hedge of 25% cash, 25% gold, 25% long term bonds, and 25% blue chip stocks. Like 4 outriggers on a canoe — no matter what happens, a decline in one asset will be offset by a rise in the opposite one. Inflation — gold and stocks to a lesser degree. Deflation — Long term bonds and cash to a lesser degree. Prosperity — stocks. Recession — long term bonds. Every thing has its season. You may not earn much profit but you shouldn’t lose much.
4) Since Oct 2008:
Gold $900 –> $1242 ; 38 percent gain over 9 years or 4.2% per year
S&P 500: 903$ -> $2439 : 170% gain over 9 years or 18.9% gain per year
Missing out on an opportunity — failing to make a good investment because your money is locked up in gold — is just as costly in the long run as losing badly on a poor investment.
The problem with bonds now is that they have been priced way up for years. US Treasuries have for a long time been considered the safest bonds in the world, and if a crisis does not involve the US gov’t defaulting, you can probably expect Treasury bonds to soar in value as people all over the world look for a safe place to park their money. Unfortunately, this will push yields way down, maybe below the rate of inflation. The best time to buy bonds is after a collapse in their prices, when yields are high. Then you can hold for decades and earn a good income. I believe there’s more risk in the bond market today than in the stock market. It’s highly likely that a financial crisis would start in bonds and then spread to other assets. As an example of what investors refer to as “contagion,” which means “everything’s connected to everything else, when Lehman Brothers went bust they defaulted on their commercial paper, which is very short term (overnight) loans. Money market funds invest heavily in commercial paper, because it’s very short term. The Reserve Funds, the largest money market fund family, had invested heavily in LB commercial paper, so when they defaulted the funds could not maintain the $1 per share price. When news broke, people started pulling money out of all money market funds, and the market for commercial paper started to freeze up. This is like oil leaking out of your car while driving at high speed. This is what caused the government to panic and take immediate action. These linkages between markets are everywhere. It’s like dominoes, but we never know which one will fall first and start the cascade. Not only that, the first domino to fall may be innocuous by itself — an event of little significance. It’s the cascade that matters.
Started buying pre-1965 US silver coins about 7 years ago. Set a goal to acquire $1k face value. It took 4 years to reach my goal. Bought through APMEX. Even though some was bought at $30 an ounce, I haven’t lost a dime because I haven’t cashed any of it in. Thank God and my employer for the overtime to pay for it all.