AuthorTopic: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered  (Read 994 times)

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile


Gold got hammered today. It was one of those quadruple witching days with stock market options expiring. With the Fed having raised rates,  one might have expected gold to react, but it sure looks like somebody wanted to make damn sure gold looks like a bad alternative to the strengthening USD.

As long as the Fed keeps raising, and there is no waterfall event in the world of unstable banking, and if war doesn't break out, I look for gold to have a tough time breaking out. But it has been range-bound for an awfully long time, and shit happens, as they say.

Gold and silver will look really cheap here, though, looking back from the future, in say 2028, if we get that far. That's what I think.

All the pundits are looking for a big unwind in 2020 or 2021. That's been a likely cusp for some time, by my way of thinking. If we can go longer without some kind of economic melt-down, I'll be surprised.

(The image above is from today, 6-15-2018. If you view it some time in the future, it will have been updated and changed.Just so you know.)
What makes the desert beautiful is that somewhere it hides a well.

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 39178
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #1 on: June 15, 2018, 05:54:08 PM »

Gold got hammered today. It was one of those quadruple witching days with stock market options expiring. With the Fed having raised rates,  one might have expected gold to react, but it sure looks like somebody wanted to make damn sure gold looks like a bad alternative to the strengthening USD.

It IS a bad alternative.  Buy PREPS!

I'm still waiting for Gold to drop to $700 before I buy any.

RE
Save As Many As You Can

Offline agelbert

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 11820
    • View Profile
    • Renewable Rervolution
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #2 on: June 16, 2018, 01:02:52 PM »


Gold got hammered today. It was one of those quadruple witching days with stock market options expiring. With the Fed having raised rates,  one might have expected gold to react, but it sure looks like somebody wanted to make damn sure gold looks like a bad alternative to the strengthening USD.

As long as the Fed keeps raising, and there is no waterfall event in the world of unstable banking, and if war doesn't break out, I look for gold to have a tough time breaking out. But it has been range-bound for an awfully long time, and shit happens, as they say.

Gold and silver will look really cheap here, though, looking back from the future, in say 2028, if we get that far. That's what I think.

All the pundits are looking for a big unwind in 2020 or 2021. That's been a likely cusp for some time, by my way of thinking. If we can go longer without some kind of economic melt-down, I'll be surprised.

(The image above is from today, 6-15-2018. If you view it some time in the future, it will have been updated and changed.Just so you know.)

My bank tried to talk me into opening a money market account. They kindly offer 0.45% inerest.

This Fed interest rate thing has always been composed of such a gamed numbers game that it is maddening.  :emthdown: When the Fed raises a rate, you've got rates from 0% to 20%, ALL going up, and NOT by the specific amount the Fed just raised.

The buying power deck is so stacked against savers like me that it is better to not play their game at all. So, I have no debts and will continue to avoid  debt like the plague.

The rent on my lot just wents up to $461 from $445 (up 3.4% plus a one dollar new Vermont government fee), but I consider that tame compared with the real inflation rate out there. If I actually owned the 1/3 acre lot where my home lives, I would probably pay more in property tax than I now pay in rent! And all that is due to the insane policy of the Fed from the year 2000 on to create and artificial "wealth effect" by putting home financing interest rates at or near to nada. They SHOULD have let prices fall to where people could buy a house with 2.5 times their annual income, as was the GAAP case for most of the 20th century. But, they opted for destroying the finances of everyone not in the upper class by babying those in the McMansions. 

Yeah, saving is stupid when you have a Fed that destroys your buying power on behalf of the upper 10%. Yeah, every penny I save is LOSING future value, thanks to the money printing maniacs at the Fed. But, being in debt is worse.


 
« Last Edit: June 16, 2018, 01:07:08 PM by agelbert »
Leges         Sine    Moribus      Vanae   
Faith,
if it has not works, is dead, being alone.

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #3 on: June 16, 2018, 01:33:52 PM »
If I actually owned the 1/3 acre lot where my home lives, I would probably pay more in property tax than I now pay in rent!

In your case, renting makes far better sense. Property taxes here are lowish compared to Vermont, but they are going up like crazy. Sometimes renting is really smart. My business saves a ton of money by renting, even though I don't love the space. Most dentists get conned into building some Taj Mahal building. I just decided it does not make sense for me. My practice takes on very little debt. I do have to finance big tech purchases. I was completely business debt free for many years. About three years ago I had to upgrade my x-ray to digital and buy some expensive LED lights and some good digital video cams, since careful documentation has become such a requirement to get paid. It's almost paid off, finally.

I need new treatment chairs, which I'll probably have to finance. Maybe not, if I replace them one at a time.

The older one is, the less leverage makes sense anyway. I am deleveraging, even though I have some debt still. When I quit work, I intend my leverage to be fairly minimal.

If real estate falls (and I do expect that, in the fullness of time) I need to own what I rent to my tenants, to cover those taxes and still make anything to fund my wife's old age.
« Last Edit: June 16, 2018, 01:48:45 PM by Eddie »
What makes the desert beautiful is that somewhere it hides a well.

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #4 on: June 16, 2018, 02:19:21 PM »
When the Fed raises enough to cause the economy to finally tank, anyone over 70 should put any cash savings in CD's probably. The next peak might be the last one for a long time. Our pals at Goldman-Sachs have the highest rates as of yesterday, at  2.9%.  That's on a five year CD, but requiring only a $500 investment.  If they get to 3.9%, I'd be willing to lock that in for a long time, if I intended to hold cash savings.

I'd be surprised if we got there.

And if interest goes really high, then you have the risk of the bank failing as your primary risk, and not the normal risk of just making the wrong investment. We'd be in a real serious inflation, which could easily get out of control.

I still like tangible assets, but uncertainty in all asset classes because of bubbles means that leverage is getting riskier. So you have to use less. Or none.

What makes the desert beautiful is that somewhere it hides a well.

Offline agelbert

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 11820
    • View Profile
    • Renewable Rervolution
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #5 on: June 16, 2018, 02:59:02 PM »
If I actually owned the 1/3 acre lot where my home lives, I would probably pay more in property tax than I now pay in rent!

In your case, renting makes far better sense. Property taxes here are lowish compared to Vermont, but they are going up like crazy. Sometimes renting is really smart. My business saves a ton of money by renting, even though I don't love the space. Most dentists get conned into building some Taj Mahal building. I just decided it does not make sense for me. My practice takes on very little debt. I do have to finance big tech purchases. I was completely business debt free for many years. About three years ago I had to upgrade my x-ray to digital and buy some expensive LED lights and some good digital video cams, since careful documentation has become such a requirement to get paid. It's almost paid off, finally.

I need new treatment chairs, which I'll probably have to finance. Maybe not, if I replace them one at a time.

The older one is, the less leverage makes sense anyway. I am deleveraging, even though I have some debt still. When I quit work, I intend my leverage to be fairly minimal.

If real estate falls (and I do expect that, in the fullness of time) I need to own what I rent to my tenants, to cover those taxes and still make anything to fund my wife's old age.




When the Fed raises enough to cause the economy to finally tank, anyone over 70 should put any cash savings in CD's probably. The next peak might be the last one for a long time. Our pals at Goldman-Sachs have the highest rates as of yesterday, at  2.9%.  That's on a five year CD, but requiring only a $500 investment.  If they get to 3.9%, I'd be willing to lock that in for a long time, if I intended to hold cash savings.

I'd be surprised if we got there.

And if interest goes really high, then you have the risk of the bank failing as your primary risk, and not the normal risk of just making the wrong investment. We'd be in a real serious inflation, which could easily get out of control.

I still like tangible assets, but uncertainty in all asset classes because of bubbles means that leverage is getting riskier. So you have to use less. Or none.


You know, this whole money thing is lke a corral the banksters have put us in. It seems like there is nowhere to run. They have distorted price discovery for so many tangible assets that it has gotten downright crazy out there. The Federal Reserve Note is technically worth absolutely nothing at all. Yet whatever we do, they keep herding us to use it. Those legal tender Laws are the enemy of common sense and the friend of the bankster oligarchs.

I would love it if we could just count on something being a certain value and staying that way. Inflation is theft and should be illegal, but that is not the way the crooks that run this travesty want it. They are all about creating unhealthy dependence on THEIR "system" for THEIR benefit. They are also ready, willing and able to counter common sense with force. It's part of their "protection" racket.

The sooner those crazies crater, the better.

I agree that CDs, as long as you are pretty sure the bank is reliable, are probably the best way to go, at least for now.


 
« Last Edit: June 16, 2018, 03:11:26 PM by agelbert »
Leges         Sine    Moribus      Vanae   
Faith,
if it has not works, is dead, being alone.

Offline BuddyJ

  • Bussing Staff
  • **
  • Posts: 35
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #6 on: June 16, 2018, 06:00:34 PM »
Inflation is theft and should be illegal, but that is not the way the crooks that run this travesty want it.

How can inflation be illegal in a finite world?  Joe sells widgets built from cattails. Local supply and demand is balanced, but cattails only grow so fast. One day, Joe must send his workers farther afield to collect cattails for the days widget construction, and paying a fixed hourly wage, cattails for the same number of widgets costs him more. So he ups his price. No new supply has been created, demand is the same as always, but because Joe's cost goes up, he inflates his price. Isn't this just a natural result of a finite resource, and it costing more to round it up over time?

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #7 on: June 17, 2018, 08:39:12 AM »
You're not really describing what's going on today in our "state economy". In your example you are not looking at spreads, which is what you have to understand to see how this theft (and it is theft) works.

We have interest rates being deliberately fixed at negative real rates. It's the spread where the theft comes in. If interest rates could fluctuate freely, then the cost of capital would rise when inflation rises.

The theft occurs because savers are not compensated adequately for the use of their capital, basically. In 1981 we had high inflation (12%)but Volcker raised interest rates to 20%.. Savers did great. It was a good time to retire and live on a fixed income.

Now we have a 2% Fed funds rate and real inflation north of 5%.  Prime rate interest is at 5%, but the 5 year CD is only paying 2.9%.

Savers are losing value every day, and the government gets the windfall.

What makes the desert beautiful is that somewhere it hides a well.

Online Nearingsfault

  • Sous Chef
  • ****
  • Posts: 1046
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #8 on: June 17, 2018, 09:35:32 AM »
You're not really describing what's going on today in our "state economy". In your example you are not looking at spreads, which is what you have to understand to see how this theft (and it is theft) works.

We have interest rates being deliberately fixed at negative real rates. It's the spread where the theft comes in. If interest rates could fluctuate freely, then the cost of capital would rise when inflation rises.

The theft occurs because savers are not compensated adequately for the use of their capital, basically. In 1981 we had high inflation (12%)but Volcker raised interest rates to 20%.. Savers did great. It was a good time to retire and live on a fixed income.

Now we have a 2% Fed funds rate and real inflation north of 5%.  Prime rate interest is at 5%, but the 5 year CD is only paying 2.9%.

Savers are losing value every day, and the government gets the windfall.
I have an old copy of the wealthy barber on the bookshelf. The bones of it are still true about controlling debt, living modestly, budgeting and paying yourself first but what is funny is where the barber suggested parking your money. You guessed it bonds and savings vehicles. At the time paying 6-10 percent... Perfectly good advice then, good for a chuckle now. As a saver I've been hammered for the last decade. Yeah yeah cry me a river right. I've never made the leap to gold. Its always seemed like a dead end. I just could not imagine anyone around here trading anything I need for gold. Tractors, paid for land, tools, food stores all are inflating so probably a good store of value for someone at my level. They are my hedge.
Cheers,  David
If its important then try something, fail, disect, learn from it, try again, and again and again until it kills you or you succeed.

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile
Re: Fed Raises Rates, Inflation Pressures Rise, Gold Gets Hammered
« Reply #9 on: June 17, 2018, 10:46:31 AM »
You're not really describing what's going on today in our "state economy". In your example you are not looking at spreads, which is what you have to understand to see how this theft (and it is theft) works.

We have interest rates being deliberately fixed at negative real rates. It's the spread where the theft comes in. If interest rates could fluctuate freely, then the cost of capital would rise when inflation rises.

The theft occurs because savers are not compensated adequately for the use of their capital, basically. In 1981 we had high inflation (12%)but Volcker raised interest rates to 20%.. Savers did great. It was a good time to retire and live on a fixed income.

Now we have a 2% Fed funds rate and real inflation north of 5%.  Prime rate interest is at 5%, but the 5 year CD is only paying 2.9%.

Savers are losing value every day, and the government gets the windfall.
I have an old copy of the wealthy barber on the bookshelf. The bones of it are still true about controlling debt, living modestly, budgeting and paying yourself first but what is funny is where the barber suggested parking your money. You guessed it bonds and savings vehicles. At the time paying 6-10 percent... Perfectly good advice then, good for a chuckle now. As a saver I've been hammered for the last decade. Yeah yeah cry me a river right. I've never made the leap to gold. Its always seemed like a dead end. I just could not imagine anyone around here trading anything I need for gold. Tractors, paid for land, tools, food stores all are inflating so probably a good store of value for someone at my level. They are my hedge.
Cheers,  David

I cut my teeth on that book and others like it.

The Richest Man In Babylon

The Seven Laws of Money

The Millionaire Next Door

So, all those books turned out to be fairly bad advice, once debt got cheap and the banks and the government decided to reward speculators and punish savers. The tide turned about the time I graduated college.

So when I read those books in the late 80's and took that advice, it probably did as much damage as it did good for me.

In the final analysis, it probably didn't matter that much. Why? Because when regular people can profit from leverage, they ususally can't get any. That's how banking works in the real world, for ordinary citizens.

At the time I should have theoretically really leveraged myself in the early 90's.....a guy like me could not borrow money very readily. In '89, when I bought my first house, I had to luck onto an owner-finance situation, because the banks wouldn't loan me the money. I could only borrow money for business against solid assets like equipment. The equivalent of a car loan. (At a 12% floating rate, with the notes coming due and having to be renewed twice a year.)

If I could have financed an office, for instance, in 1990, It would be a paid for asset now that would be worth maybe 5X the purchase price. But money for that was not to be had. Now I could get the money, but it's way too late. Humans don't live and work indefinitely.

Leverage is much more risky now, but easier to come by. It doesn't make sense, really.

One thing has stayed the same. If you stay out of debt, it makes your life simpler. Does it tend make you more affluent over time? Not as predictably as those old money books claim.

Debt can work for you or against you, depending on whether you use it to acquire assets, or whether you use it to finance a lifestyle you can't really afford. Most people do the latter.
« Last Edit: June 17, 2018, 10:50:18 AM by Eddie »
What makes the desert beautiful is that somewhere it hides a well.

 

Related Topics

  Subject / Started by Replies Last post
14 Replies
2557 Views
Last post September 09, 2015, 05:14:26 PM
by Ka
0 Replies
543 Views
Last post September 03, 2016, 11:28:17 AM
by Eddie
6 Replies
574 Views
Last post June 30, 2017, 12:25:36 AM
by Palloy2