Discussions of Mormons and Mormon life, Book of Mormon issues and evidences, and other Latter-day Saint (LDS) topics.

Tuesday, September 12, 2006

The Death Squeeze of Debt - Including the Foolishness of Investing on Margin


"Owe no man any thing" (Romans 13:8). Those inspired words of scripture could save tens of thousands of marriages and careers, help millions avoid poverty, and even save some lives. Debt is a killer. Debt initially deceives and pacifies, but, as shown in the adjacent photo of Bence Máté, it can quickly and suddenly put its victim into a death squeeze.

The photo, by the way, is used with the kind permission of Bence and his manager. Bence Máté has been honored in the International Wildlife Photographer of the Year exhibition and is one of my favorite photographers, a Hungarian who uses incredible patience and stealth to capture amazing wildlife scenes. His Website is www.matebence.hu. Also see this Wildlife Photographer of the Year page or this one from the Burke Museum.

I've often written on the need to save and invest for the future, and have discussed the strength of commodities like gold and silver as an important investment opportunity. Sadly, some people pursue their investments through debt. This can be disastrous and create an especially sudden and tragic death squeeze.

Jim Sinclair's commentary at JSMineset.com for Sept. 11 discusses the recent and amazing assault on commodities such as gold, silver, and oil, painting it as an orchestrated short-term attempt to placate the masses regarding the economy and the strength of the dollar, while taking vast amounts of money from those in debt. The latter part refers to those who take the dangerous risk of investing on margin; i.e., going into debt to purchase an investment (gold, silver, stocks, etc.). When the investment tanks, margin buyers may get a margin call, requiring them to come up with the money or sell the investment at a heavy loss. Here's what Jim has to say about all this:
The Fed is working overtime on the creation of a mass perspective of a non inflationary economy. The media is working overtime to call the end of the commodity market. Crude oil is being painted as a rotten apple ready to and in fact dropping from the tree.

The item that allows this game is not energy or metals of edibles, but rather the US dollar. . . .

The goldilocks economy is being repeated on the airwaves today. It claims the economy is slowing perfectly and the cooling of commodity prices proves the wisdom, timing and depth of intellect of the new Conan the Money Man, Professor Bernanke. Greenspan has, like an old soldier, just faded away.

The Fed'’s Poole has just come out and said everything the market wanted to hear to fit the Goldilocks economy. We are right back on the 1930 Plateau of Prosperity as the markets seem to have forgotten about the Cinderella Economy that was in play a few months ago. I guess Goldilocks with its implication of the 3 BEARS is even better than a Cinderella (she vanishes at midnight).

Right behind Poole was Cathy Minehan of the Fed repeating the perfect balance now existing economically by the FedÂ’s sage actions. This Monday 9/11 has got to be the best day ever in media reporting of the health of the US economy. There is hardly a challenge out there.

Geopolitically, both Iran and North Korea are ready to lay down their arms and beat them into plow shares.

Today Afghanistan and Iraq do not even exist.

Forgotten is every fundamental for which there is neither fix nor today attention. Every black box has gone bear oil and bear energy, yet the dollar remains the key. Gold is all in the US dollar.

It is inhumane to lecture people who are suffering. All I can say is damn margin, damn writing options, damn credit card use in investments and damn personal loans to speculate. They are the killer today as no one can stand pat and change the channel when the margin call person is banging on your front door looking for your first born.

If anything proves Wag the Dog is in action it is the concerted commentary from all corners of government and international banking TODAY concerning the miracle of the perfect Federal Reserve management of the economy with geopolitics falling directly into orderly control.

Gold is going to set the bear trap of all time, but those hanging on by a thumbnail might just be the means by which the wash out occurs. They always are.

As far as I am concerned:
  1. The "Formula" is absolutely correct [reference to the factors that will inevitably lead to the weakening of the dollar and the increased value of commodities].

  2. Gold [currently just under $600 an ounce] is headed for $1650.

  3. This is an attempt to break the back of inflationary psychology before October 1st.

  4. The amount of gold, silver and precious metals shares on margin is shocking. Even the most conservative I have spoken to has been nursing margin debt for the past month. I feel so deeply for their pain.
I try not to put too much of a secular nature on this blog, but let me throw out this free word of advice. Gold and silver are being knocked down sharply right now in spite of incredibly solid fundamentals. This is a fabulous opportunity to purchase some bullion and perhaps some gold and silver mining stocks (go for unhedged producers making a profit). Investing in precious metals rather than buying the next soon-to-be-outdated gizmo could make a huge difference in your future. Gold could very well double in the next 18 months, and silver may rise even more.

Similar advice applied to energy stocks. They've been knocked down sharply in the past few days. This is a great time to get invested in proven energy companies such as refiners, oil producers, coal producers, natural gas suppliers, etc.dividendvident-paying companies like the Canadian Royalty Trusts might be an especially good option. Just my secular two cents worth (but if those two cents are in the form of two solid copper pennies, there are worth about six cents right now, thanks to the sharp rise in copper prices - another area worthy of investment).

But first and foremost, don't go further into debt, and get out as much as you can.

5 comments:

endlessnegotiation said...

Don't forget that there are some commodities index funds out there as well. Some just invest in commodities producing companies while others invest in the commodities themselves while others are a mix of the two. One of the best investment choices I've made in the last two years was in a couple commodity index funds.

Anonymous said...

Interesting post and nice photo.

Anonymous said...

Collecting silver rounds can be an easy way to accumulate some commodities. Most coin shops sell them for a percentage over spot. Look for shops that charge the least per ounce, 5% or less. For example: I started buying silver when spot was $7 an ounce, I paid $7.35 an ounce.

-TB

Anonymous said...

Because of your blog, I've come out! I brought the bills, bank statements, budget, et cetera and put them on the table for my husband to see. I've not been hiding anything per se, but I've made a mess of the money my husband works hard for. Thanks to you, I'm being held accountable for my spending and I am on 'restriction' lol. I am so much more happy now, getting back on track is great. Thanks.

DEBTective said...

You said it, bub. People need to stay away from debt like the plague. The key to building wealth is to deep-six the debt and connect with the cash. Thanks for spreading the word! www.debtective.com