Category: Economics & Investing

The Bear Stearns Bears–The Near Collapse of Two Real Estate Hedge Funds Sends Economic Shock Waves Around the World

Last week’s big economic news was that two Bear Stearns hedge funds worth $20 billion are teetering near collapse. These two Collateralized Debt Obligation (CDO) funds–ironically named the “Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund” and the “High Grade Structured Credit Strategies Fund”–are in trouble because of their heavy exposure to sub-prime mortgages. A well-publicized rescue plan involving Merrill Lynch fell apart. At one point Merrill Lynch–one of Bear’s credit backers–said that they planned to seize about $850 million worth of collateral assets from Bear Stearns and sell them on the open market. Reuters reported Bear Stearns injected …


Two Letters Re: U.S. Treasury Bonds

James Wesley: I recently inherited several U.S. Savings Bonds, Series EE. Do you recommend that I keep them, or cash them in so I can get better prepared? (We only have about two months of storage food here at our house.) How do I find out if the bonds are still earning interest, and what they are currently worth? Thank you, – C.C. JWR Replies: You are right about recognizing priorities. You can’t eat bonds. If the bonds have fully matured, then by all means cash them in. You can check of the status of most bonds at the Treasury …


Letter Re: Request for Investing Advice from a U.S. Reader

Mr. Rawles: I’ve seen you mention precious metals, and silver in particular, pretty often in your blog. I’m new at this. What is your guidance on a safe (conservative) way to invest? What percentage in precious metals? Thanks, – TZK in Central Kentucky JWR Replies: I recommend that SurvivalBlog readers should put at least 25% of their portfolios into gold, silver, and barter goods, and roughly 50% into productive farm ground–a retreat to occupy year-round–in a lightly populated region that is well-removed major metropolitan areas. The exact ratio of investments will vary, depending on your age, indebtedness, risk aversion, and …


Letter from FerFAL in Argentina Re: Greenspan, Gold, and the Safe Store of Value

Dear James, Regarding the letter “Letter Re: Greenspan, Gold, and the Safe Store of Value” I can assure you that gold is just as valuable before, during and after a crisis. Gold has always been valuable, its safe to say that it always will be, it’s our alma mater currency, since the beginnings of mankind. Unless you are stranded on an island, or in a plane wreck in the middle of the Andes, gold is always a cherished form of currency, and no one is going to trade you an ounce of gold for a piece of bread. Generally speaking …


Letter Re: Greenspan, Gold, and the Safe Store of Value

Dear Mr. Rawles, Regarding the use of gold as a store of value, it’s important to realize that gold often functions as a fiat currency. It does have intrinsic value for jewelry, electronics, rust-proofing, and some chemistry applications but the vast majority of its value comes from the shared expectation that people will accept it as being valuable in the future. The only difference from fiat dollars is that it’s harder – but not impossible – to increase or decrease the gold monetary supply, and that supply isn’t controlled by any government. In a disaster situation things get even worse, …


Letter Re: Greenspan, Gold, and the Safe Store of Value

James, While I am sure that this has been covered here before, it demands review. I was searching for information on a “safe store of value” and I came across the following. On or about 1966, Alan Greenspan wrote a lucid note entitled, “Gold and Economic Freedom.” Greenspan’s essay ends with, “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in …


Letter Re: Why Food Prices are Soaring

Jim I enjoy your books (have bought two for others as gifts) and blog site. I came across this article [from Canada] describing another unintended consequence of the extreme liquidity the Fed is using to prop up our housing market/economy- high food prices. Aside from the new ‘miracle’ fuel – ethanol – our government policies are eroding our purchasing power in every sector of our lives. Here is an excerpt from the article: “After steamrolling through a laundry list of base metals, then oil and gas, the global commodity boom is finally hitting us in the gut: at the supermarket …


Letter Re: Advice on Buying Silver Dollars for Barter

Jim, In a recent SurvivalBlog post, you mentioned buying pre-1965 silver coins of the dime, quarter and half dollar type. What about silver dollars? My family and I are buying junk silver and including the silver Peace and Morgan dollars in our purchases. Should we concentrate on the smaller denominations? – Bill in KS JWR Replies: Unfortunately, the premium on silver dollars is considerably higher than on the smaller denomination coins. When four quarters ($1) would cost you $11 (11 times face value) a 1921 Morgan (the most common date) silver dollar in well-worn condition will cost you at least …


Letter Re: 1/20th Ounce Canadian Maple Leaf Gold Coins

Jim, I know your a fan of silver, but I noted that Canada is producing 1/20 oz gold bullion coins and it seems to be in .999 fine along with all their other Maple Leaf production this year. These are smaller than a US Dime, the 1/10 oz is about the same size as the US Dime. I do business (buy and sell) with these guys but also occasionally buy form a place for cash in the Financial District of SF for cash of course with no paper trail, they give me pretty good price over spot. Cordially, – Tim …


Gold and Silver: An Ounce in the Hand is Worth 77 Million Ounces “On Account”

The recent seizure of eGold’s gold bullion holdings by the U.S. Government may have some more far-reaching unintended consequences. I predict that it might trigger some panic selling of holdings at the various “virtual” precious metals institutions. And it might even spill over to the fairly new gold and silver ETFs. This situation also illustrates a key point that I often emphasize with my consulting clients: There is no substitute for personally holding your precious metals in tangible form. Don’t trust any individual outside of your immediate family or any institution to hold your precious metals for you–not even in …


Poll Results: Why are You Preparing to Survive?

Here is the first round of responses to this question: Those who are well educated enough to see a societal collapse of some sort or another in the making fall into two groups, the merrymakers and the preparers. The merrymakers don’t see life worth living post-SHTF, so they live it up now. We on SurvivalBlog are the preparers and have chosen to survive, but why? Our children? To rebuild civilization? Because the collapse will only be temporary? Because we can and we’re stubborn with a stronger than normal will to survive? The following is just the first batch of responses. …


Letter Re: Keeping Preparedness in Perspective

JWR I often have discussions with my friends and business associates concerning world events and how they will affect our future and I have also read countless statements from others with similar opinions. I have noticed that many people seem to be narrowly focused on only one aspect of possible future events and are not putting the whole picture into perspective. Many are unable to take the actions that are necessary to deal with the probable coming changes. I would like to offer some of my observations and hopefully contribute something that would help others to move in the right …


Letter Re: Stockpiling U.S. Pennies and Nickels

Hi, Jim,. I don’t remember this topic being brought up, so I’ll ask about it. According to www.coinflation.com, the current melt value of a pre-1982 [U.S.] penny (95% copper) is $.02, twice its face value. The melt value of a [U.S.] nickel (75% copper, 25% nickel) is $.09, nearly twice its face value. Melt value is, of course, dependent upon the metals markets, which fluctuate daily. While most metal prices have increased dramatically over the last few years, there’s no guarantee they’ll continue to rise (and prices might even fall), but at this point the long-term trend seems upward. With …


The Big Picture on Gold, Silver, Real Estate, and the U.S. Dollar

I have come to the conclusion that the nascent implosion of the U.S. residential real estate bubble is going to have some far-reaching macroeconomic consequences. We are just starting to see the beginning of the real estate collapse. The adjustable rate mortgage (ARM) reset clock is ticking, and the home foreclosure rate is just starting to spike. I predict that in just three or four months, the housing market collapse will be just as big a news story as the Savings and Loan crisis of the 1980s. There will be plenty of hand wringing and finger pointing. The lenders that …


Letter Re: A Source for Pre-1965 U.S. Silver Coinage

Jim, I love your blog, it’s the only one I read, really. I’m writing to recommend APMEX.com as a source of precious metals, and pre-1965 [U.S.] silver coinage. I took your advice, and the advice of others, and decided to begin a precious metals investing program, starting with pre-’65 coins, and a few 1 oz American Silver Eagles. I searched all over the net looking for a place that would take a small order from a beginner, and found few, They sold large amounts, and there was always a call from a sales rep involved to complete the order process. …