Category: Economics & Investing

Letter Re: Amassing Copper Pennies–By the Ton!

Jim, I read a recent blog of yours that was posted on “Gold is Money” regarding hoarding of 5 cent “nickels”. The penny is a much better deal (currently at just about 2.5 times their face value) and [as you’ve mentioned in SurvivalBlog, Ryedale has developed and sells a machine for under $500 that sorts by metal composition. [It sorts] 300 coins per minute. I have been amassing copper pennies for a little over one year now. Here is a summary of my plan that I’ve posted on the”Gold is Money” forums: I’ve got five tons of 95% copper and …


Letter Re: The Handwriting is on the Wall for the Big Three Auto Makers

Mr. Rawles, Anyone who is paying attention would have seen the mess that America’s “Big Three” auto makers are in. A smart Peak Oil [market] player would have shorted them a while ago. But consider this little fun fact – As of this last Friday, the market capitalization of General Motors (GM) was just over $5 billion. That’s all. Toyota has about 25 times that. So are several other healthy auto makers and they all know that times are tough yet GM expects sales to pick up later this year? But consider that $5 billion. It’s cheap yet no one …


Letter Re: California’s House Prices Plummet to Surprising Depths

Hi Jim, We’ve been good about our refinancing. As the house appreciated, we took a little here and there on two re-fi[nancing]s, to pay off most of our credit debt, and to start a business. At this time a couple of years ago, the house was worth $440,000, conservatively. In January, $351,000. Just last night, using a very good evaluation tool called Zillow.com, we were surprised to find that in the last six months, the house’s value dropped [still further,] to just over $250,000. That was a shock. Almost [a] $190,000 [on-paper loss] in less than two years, in an …


Letter Re: Economic Gloom and Doom is Justified

Jim, Ironically, just a day after I wrote an e-mail chiding you [for giving too much attention to economic gloom and doom in SurvivalBlog], I had a meeting with one of our clients that has been a very successful Wall Street trader. He gave me a laundry list of banks that he expects to fail before the end of the year and predicted a complete collapse of the financial sector. Worse [for us], since we are in Michigan, he said that some of the Big Three auto makers are in serious trouble. When I asked him where he saw the …


Letter Re: Advice on Getting Started in Precious Metals Investing

Jim, Your reader TheOtherRyan wrote asking about how to get started in precious metals investing, especially the challenge of purchasing only a small amount each month. First, Ryan is wise to realize that you want to buy in small amounts, and not wait until a big “buy,” which might be at an unlucky price spike. Investors call the process of buying a little each month with a disciplined approach “averaging in.” It means you’re buying more on the months when the price is low than when the price is high, lowering your average total cost. Unfortunately, it can be difficult …


Two Letters Re: The Five Minute Bank Run

Dear Mr. Rawles, Read the letter from W.D. in Texas with great interest. I have been a recent visitor to your blog and read the postings on the banking system with great interest – and shared them with immediate family. As a Florida resident, even though in the less vulnerable northeastern part of the state, it is prudent to be ready for adverse weather as the ATMs and banks could be closed in an emergency. Good luck trying to get cash at that point in time. I strongly suspect that most people nationwide have about as much cash on hand …


Letter Re: The Five Minute Bank Run

Dear Mr. Rawles: I wanted to tell you a personal experience I just had at the bank that scares me to death. If you think a bank can last a few days during a bank run, then you will be very surprised by my story. I wanted to withdraw $10,000 from a JP Morgan Chase Bank branch in a local Houston [, Texas] suburb. Chase is the second largest bank in the US and Houston is the fourth largest city in the US. I went in and said: “Can I please have my money?” The teller disappeared for 10 minutes …


Letter Re: The US Tax Giveaway Economic Stimulus Charade

Mr. Rawles, On June 27, 2008 the following Associated Press headline was on Yahoo Finance: After-tax incomes and spending show big gains. “The millions of economic stimulus payments gave a massive jolt to household finanances (sic) in May, sending after-tax incomes up by the largest amount in 33 years.” Q: Does borrowing money from the next two generations, while saddling our grandkids with principal and interest repayment obligations to foreign countries really now count as “after tax income”? A: Not to regular SurvivalBlog readers. Regards, – Kevin A. JWR Replies: Those with the Big Government mindset would answer: “Oh, but …


Letter Re: Advice on Getting Started in Precious Metals Investing

Dear Jim, I would like to build up a moderate sized collection of precious metals as a hedge against inflation and also in case of an Argentina like economic melt down. I do not have a whole lot of cash to spend and want small denominations so silver is what I am looking for. I got into the links section and found Eastern Numismatics but from there it got confusing. Different coins had different values which makes sense but I just want to get some “junk silver” so the difference between x coin and z coin is of no concern …


Letter Re: The US Stock Market–A Net Loss for Investors Since 1999

Mr. Rawles, In all the discussion about the [US] supreme court [Second Amendment] ruling, today’s stock market plunge may have been overlooked. The Dow Jones Industrial Average closed at 11453.42. That’s just over half a point gain to date for the millennium. On December 10, 1999, (8-1/2 years ago) the Dow closed at 11452.86. In the years since then, our country has grown by tens of millions of people, and the most optimistic estimates of inflation average 2-to-3% annually. But the market is up only 0.005%. As [the pop music singer] Prince might say, “Party like it’s 1929.” – Robert …


Letter Re: An Economic Observation on the Prices of Silver and Gasoline Versus Fiat Dollars

Jim, I hope all is well with you and yours! I am pleased to note that I have made faithful followers of your blog of many of my friends. The more the merrier! The blog has been an incredible source for enlightenment and inspiration. I now advise everyone that I can prove that since 1964 and based upon the 1964 monetary system, the gallon price of gas at the pumps and the relative price of consumer goods have not increased in cost or value. Only the Federal Reserve note has lost buying power. In my humble and simple observation, cost …


Letter Re: Huge Price Hikes by Dow Chemical are an Ominous Inflation Indicator

Jim, In the news today, Dow Chemical is announcing a 25% price increase, following a 20% increase three weeks ago. Since they produce the feedstock chemicals for almost every industry on earth, this should be a great indicator of what’s coming. – ZBM JWR Replies: Ay carumba! Dow produces a huge variety of chemicals and compounds that go into everything from fertilizers to plastics. This is an alarming indicator of consumer price increases in the near future. When paired with fuel price jumps, this becomes downright frightening for near-future food prices at the consumer level. At this point, precious metals …


Letter Re: Economic Impact of Increasing Gas Prices and Declining Real Estate Prices

Mr Rawles: I sent you a link awhile back about the old timer from Wall Street who is still working in the industry and lived through the first Depression – he was greatly worried about what was coming. I agreed with your assessment that he was wrong about staying in stocks. My own former husband is a Wall Streeter who has moved much of his money out of the country now. He manages part of my own retirement portfolio and has been saying that what’s coming is going to be horrific to bear. His grandparents arrived in the US at …


Two Letters Re: Tomorrow’s Headlines? — A Nationwide Banking Panic

Hi James, First, thanks for sharing Mike [“Mish”} Shedlock’s recent article with the SurvivalBlog.com community. Like you, I’ve grown to trust his observations and analysis and I read his work as often as I read yours – daily. I wanted to add a couple of comments, which will strengthen both Mish’s and your viewpoints concerning your observations on the potential for a nationwide banking panic. First – is that [as mentioned,] the FDIC is preparing for this crisis right now, by hiring back some retirees, with specific experience in dealing with bank failures, as they are expecting a large number …


Two Trillion Dollar Reduction In Credit Card Lines Coming Up, by Mish Shedlock

Credit is drying up everywhere. Banks are now concerned (finally), about rising credit card debt. They have every reason to be. The bankruptcy reform act of 2005, which encouraged such reckless lending is now blowing up in lenders’ faces. Banks and credit card companies wrote that bill. They got everything they wanted. It goes to show you two things: 1.) Be careful of what you ask, you might get it. 2.) Greed kills. Furthermore, I expect many of the debt slave provisions of the bill to be undone after Obama is elected. That will increase defaults. Even if an unwinding …